FraudBaron.com

fbi.gov | 4/30/08 | Press Release

SACRAMENTO, Calif.—United States Attorney McGregor W. Scott announced that JOEL NATHAN WARD, 49, of Turlock, California, was sentenced today by United States District Judge Garland E. Burrell, Jr. to nine years in prison for masterminding a Ponzi scheme in which nearly 100 investors lost over $11 million. WARD was also ordered to pay restitution in the amount of $11,275,501.53 and to serve three years of supervised release after the completion of his prison sentence. He was remanded into custody immediately following the sentencing hearing.

This case is the product of an extensive joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division.

According to Assistant United States Attorneys Benjamin B. Wagner and Ellen V. Endrizzi, who prosecuted the case, sentencing documents filed in the case show that WARD offered investors the opportunity to invest in the foreign exchange interbank “spot” market through his fund. Between early 2003 and November 2006, WARD took in over $15 million from investors. Of that, about 85% was diverted to other purposes, including promoting WARD’s business interests, salary, travel and other expenses, and purchasing a foreign exchange trading school in Sacramento called Learn:Forex. WARD also used about $3.7 million to make “Ponzi” payments back to investors who sought to withdraw funds. According to trading records, he only actually traded about $2 million, and lost virtually all of it in the foreign exchange market. WARD concealed his diversion of funds by sending false account statements to investors purporting to show trading profits. He also defrauded investors in a second scheme relating to a purported real estate investment project in Mississippi. Nearly 100 investors lost a total of over $11.3 million.

Several victims spoke during the sentencing hearing, telling the judge about the financial devastation caused by WARD’s conduct, and their hopes for restitution. In sentencing WARD today, Judge Burrell stated that WARD “defrauded many people. He caused losses over $11 million, and many investors suffered devastating losses.”

The defendant had proposed that he be allowed to remain out of prison while he attempted to generate funds to repay investors. In rejecting that plan, Judge Burrell stated that the “magnitude of his crimes, the manner in which the economic crimes were committed and concealed, and the duration of the criminal activities” required a lengthy prison sentence.

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The SEC alleges that while Langford served as president of the County Commission of Jefferson County, he accepted more than $156,000 in undisclosed cash and benefits over the course of two years from William Blount, the chairman of Blount Parrish & Co, Inc.

David Nelson, Director of the SEC's Miami Regional Office, said, "These defendants engaged in misconduct that defrauded Jefferson County and municipal bond investors. By failing to disclose the payment scheme, they deprived Jefferson County and investors of an objective and impartial bond underwriting process and swap agreement negotiations."

According to the SEC's complaint filed in the U.S. District Court for the Northern District of Alabama, Langford selected Blount Parrish to participate in every Jefferson County municipal bond offering and security-based swap agreement transaction during 2003 and 2004, enabling the firm to collect more than $6.7 million in fees.

Moreover, the SEC alleges, Langford and Blount concealed the payment scheme by using their long-time friend, Albert LaPierre, an Alabama registered political lobbyist, as a conduit.

The case is the SEC's first enforcement action involving security-based swap agreements. A swap agreement is a financial derivative instrument where, for example, an issuer such as Jefferson County agrees to exchange periodic interest rate payments on a specified principal amount of debt with a counterparty. A security-based swap agreement is a type of swap agreement in which a material term is based on the price, yield, value or volatility of any  security, group or index of securities.

The SEC is charging Langford, Blount, and Blount Parrish with antifraud violations of the federal securities laws. LaPierre is charged with aiding and abetting Blount and Blount Parrish's violations.

The SEC's complaint alleges that prior to Langford's election to the County Commission, Blount Parrish had not received any municipal bond business from Jefferson County for years. After Langford won his primary election for the County Commission, however, the SEC alleges that Blount began making payments and conferring other benefits to Langford, funneling funds through LaPierre. The SEC alleges Blount's efforts were rewarded because Langford, who served as president of the County Commission from November 2002 to November 2007, selected Blount Parrish to participate in $6.4 billion worth of Jefferson County bond offerings and swap agreement transactions from March 2003 to December 2004. Blount Parrish's fees for these transactions comprised over 70 percent of the firm's annual revenue during the relevant period, according to the SEC's complaint.

The SEC alleges that of the five municipal bond offerings at issue, Blount Parrish participated as lead or co-underwriter on three municipal bond offerings, and as a remarketing agent on a fourth bond offering. In connection with all five bond offerings, Langford signed the official statements, which were intended to disclose material information to investors, on behalf of Jefferson County. In its role as underwriter or remarketing agent of four of the bond offerings, Blount Parrish reviewed the official statements and distributed those materials to investors in connection with its sale of these securities. The official statements did not disclose Blount's payments to Langford.

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fool.com | 4/30/08 | Seth Jayson

An understatement: We are living through a time of considerable market and economic turmoil. Since we stand to see trillions of dollars' worth of assets vaporize in the ensuing mess, we ought to take a look at history to see how we got into it, and how investors can get out.

In the end, we learned that Enron's accounting was pretty much mark-to-fairy-tale, with the company booking enormous gains from assumed future profits on schemes (like bandwidth trading) that sounded great, but had little chance of producing anything besides headlines.

But more dangerous yet was the way this mania also infected millions of aspiring real-estate moguls. The most widespread mark-to-model fantasies were actually committed not by some easy-to-blame Wall Street suit, but by Fred and Ethel down the street.

It was flawed models (and the habit of booking earnings on these models) that enabled financial companies to concoct the elaborate securities that funded the bubble. And yes, the bank CEOs who paid themselves handsome bonuses ahead of the hurricane deserve a public flogging. But they weren't the only ones making out like bandits.

While Wall Street was booking fantasy profits on bad assumptions about real estate, Fred and Ethel down the street were operating under their own mark-to-model dreams.

This is not so different from what Enron was doing. Fred and Ethel were marking up the value of their assets (the home) to a model (their belief that real estate prices always go up) and then spending the "income" immediately, on iPods, Hummers, $250 jeans, and fancy vacations. This happened all over the country, and millions of people behaved the same way. In fact, the American Fantasy of owning a home (for no money down) that would provide leveraged, 10% annual returns for a decade, is precisely what enabled those Wall Street suits to do what they did.

It takes two to tango, folks. And this was the biggest dance party in economic history.

Alas, this dream's "income" wasn't actually matched by real cash flows, just bank loans -- precisely the problem at Enron. The "income" was all hot air. And now that the "income" from home appreciation has turned negative, it must be supported by cash mortgage payments. But many people can't pay those bills, the mortgages are defaulting in huge numbers, and now we are all paying a price, even those of us who didn't throw our money into a flimsy, overpriced McMansion.

And if they can't afford their beloved pricey clothing, what will they buy? That's the thinking that has crushed other trendy togs-sellers like American Eagle Outfitters (NYSE: AEO) and pummeled the companies behind big-ticket

items, such as hotel operators like Marriott International (NYSE: MAR). Consumers are spending less, and we appear to be headed directly into a recession.

By now, it ought to be clear that I have been, and remain, one of the most vocal econo-bears you will find on these pages. I am certain that systemic failure has steered us into a terrifying run at the ditch, to be followed by a painful, protracted rough patch. It was all spawned by greed gone amok on Wall Street and Main Street. Yet I believe history will prove this to be one of the best times to have invested in stocks, especially attractive-priced small caps. Here's why:

● The market is in panic mode, and when markets panic, no one's thinking.

● Small caps have been crushed more than the rest of the market, as investors seek "safe" large caps.

● Over time, value-priced small caps produce some of the most amazing returns in the market. Really.

is pricing them as if they are dead and buried.

At Gems, we're on the dig, 24-7, for solid small caps with the capital to survive the downturn, and the superior  businesses destined for major growth once things turn -- and they always do. In the next issue, we'll be reviewing the recommendations and finding the best bargains for new money.

If you'd like to take advantage of the market's panic and lay the groundwork for some great future gains, a free trial is just a click away.

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digtriad.com | 4/30/08 | Staff Writer

Thomasville, NC -- The former treasurer of a Davidson County church is facing embezzlement charges. Teresa Swartz of Thomasville was arrested Tuesday in connection with the disappearance of $104,521 from the Mt. Pleasant United Methodist Church.

Church leaders and investigators from the Davidson County Sheriff's Department reviewed the church's accounting records. They discovered a discrepancy and found unauthorized checks being written by Swartz between January 2002 and December 2007.

Swartz turned herself into detectives on Tuesday and has been charged with one count of Embezzlement In Excess of $100,000. She has been released on bond and is expected in court on May 28.

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marinij.com | 4/29/08 | Gary Klein

A 34-year-old bookkeeper was sentenced to one year in jail for embezzling more than $180,000 from a Novato construction company, the district attorney's office said.

Kristy Lynn Gordon, a Napa resident, was also sentenced to five years of probation and restitution, said Deputy District Attorney Shawn Spaulding.

Gordon was arrested in February after her employer, Tarrant Construction Inc. of Bel Marin Keys, told police it suspected the bookkeeper of stealing company funds. Police said the embezzlement started in 1999.

Gordon pleaded guilty last month to two counts of embezzlement and one count of identity theft, Spaulding said. Gordon was sentenced Monday before Judge John Sutro.

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reuters.com  | 4/29/08 | Kim Dixon

WASHINGTON, April 29 (Reuters) - A U.S. judge on Tuesday ordered lawyers representing a former chief financial officer of HealthSouth Corp to turn over documents to investment bank UBS AG. 

Michael D. Martin, a former chief financial officer at HealthSouth, has said he told UBS employees of a massive accounting fraud, which later prompted a federal investigation and a management upheaval at the rehabilitation health chain.

The U.S. District Court for the District of Columbia granted UBS's motion to force Martin's lawyers at the firm of Steptoe & Johnson to provide certain documents to the bank. UBS is seeking notes from Martin's lawyers about meetings with agents from the Federal Bureau of Investigation.

As HealthSouth's investment bank, UBS has been accused by investors are knowing about the multibillion dollar accounting fraud. Bondholders and shareholders have sued UBS in securities class action suits.

The court said UBS had argued that the civil litigation claims rest on Martin's testimony, and he is the only witness who has testified to personal knowledge that anyone from UBS was aware of any aspect of the HealthSouth accounting fraud.

HealthSouth is still recovering from a multibillion-dollar accounting fraud that led to the ouster of its founder and chief executive, a Securities and Exchange Commission probe and restatement of several years of earnings.

Founder Richard Scrushy was acquitted in 2005 in a criminal accounting case, but was ordered to pay $10 million last year to shareholders.

He had already agreed to pay $71 million to settle charges that he directed the company to overstate revenues by at least $2.6 billion.

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nationalmortgagenews.com | 4/29/08 | Thomas Inserra

The last mortgage crisis in the U.S. occurred from 1980 to 1995 and involved the failure of 2,912 federally insured financial institutions with combined assets of $924 billion.  In an FDIC report prepared afterward, the agency noted that most of the assets of the failed financial institutions were “… secured by real estate mortgages and their disposition was hampered by a nationwide decline in real estate markets.”

Congressional testimony and hearings concluded that fraud and abuses in the appraisal process were a contributing factor to the last crisis.

Among the worst losses at that time were incidents where lenders were found to have bribed, coerced or improperly influenced appraisers in property flipping scams where parties repeatedly sold property back and forth to artificially inflate its true value. These incidents demonstrated a breakdown in the appraisal process and compromised appraiser independence.

To address the earlier crisis, a new corporation was formed in 1989, funded by the government and given the name of the Resolution Trust Corp. The mission of the RTC and its 8,614 employees recruited from the private sector was to recover as much money as possible for taxpayers, and resolve the crisis. The RTC managed 747 financial institutions with $402.6 billion in assets. In comparison, Citicorp the largest U.S. bank had $162 billion in assets at the time.

Currently, Congress is now debating measures and attempting to determine if similar action will be necessary to solve this current mortgage emergency.

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 created the RTC and established new mortgage lending policies. Armed with new legislation, federal regulators required all lenders, including those that sold mortgages on the secondary market, to observe new policies known as the Federal Interagency Appraisal Regulations.

These new regulations required that appraisals be prepared by an independent and unbiased licensed or certified appraiser. All 50 states were required to adopt new appraiser licensing laws and all appraisals were required to be prepared in accordance with the Uniform Standards of Professional Appraisal Practice.

In a recent 2007 investigation on appraisal practices, New York attorney general Andrew Cuomo discovered “… serious questions of conflicts of interest, negligence and errors [and] new policies safeguarding appraisal independence and bona-fide valuations must be established.”

Look for more on this in future editions, which will summarize sweeping new appraiser independence policies affecting all lenders.

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smartpros.com | 4/29/08 | Staff Writer

April 29, 2008 (SmartPros) — Skills-based volunteerism is a powerful and cost-effective professional development tool, yet very few companies are leveraging volunteer programs for this purpose, according to a survey by Deloitte.

Fully 91 percent of respondents agree that skills-based volunteering (which involves the contribution of business knowledge and experience to help nonprofits increase their capacity) would add value to training and development programs, particularly as it relates to fostering business and leadership skills.

However, only 16 percent make it a regular practice to intentionally offer these opportunities for employee development, suggesting a missed opportunity to boost learning in a way that offers substantial benefits.

"Talent development is one of the most critical priorities facing corporate America today," said Barry Salzberg, chief executive officer, Deloitte LLP. "By intentionally linking two often unconnected areas like community involvement and training, innovative companies can meet strategic business goals, save money and, at the same time, release new resources for the community. It's powerful."

According to the American Society of Training and Development, corporate America invests heavily in training and development, spending more than $100 billion a year.

"Skills-based volunteer programs provide valuable experiential learning opportunities for employees that build business and leadership skills without the expense often associated with traditional corporate training programs," said Evan Hochberg, national director of community involvement, Deloitte Services LP. "As leading companies become adept at leveraging their community investments to drive key business goals, corporate community involvement programs will be positioned to deliver more business value and social impact."

However, the benefits of incorporating skills-based volunteerism into corporate training and development programs remain largely unrealized. The survey found that even in those companies that do offer skills-based volunteer opportunities, they are generally not viewed as a strategic business tool. In fact, among HR professionals who agree that skills-based volunteering is an effective way to further develop leadership skills, only 13 percent offer it to all employees.

"Corporate America has yet to fully tap the benefits of integrating skills-based volunteerism into talent development strategies and programs," said Susan Burnett, national director of talent development, Deloitte Services LP. "With a focus on learning and development, a volunteer role can become a stretch assignment that develops leadership and client service skills that benefit the volunteer organization, the employee and their company. This will be a priority for Deloitte as we ‘refresh' our talent development agenda."

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smartpros.com | 4/28/08 | Mark Davis

April 28, 2008 (The Kansas City Star, Mo.) — Regulators dismissed 3.5-year-old civil fraud charges today against the brokerage business of H&R Block that arose from its sales of Enron Corp. bonds to investors shortly before its spectacular 2001 failure.

"Today's decision fully vindicates our firm and financial advisers," Block said in a statement. The 56-page dismissal came from the Financial Industry Regulatory Authority, successor to the NASD that had brought the charges in November 2004.

Those charges claimed H&R Block Financial Advisors Inc. had failed to disclose the bonds' risks, including credit ratings downgrades, Enron's earnings restatements, a Securities and Exchange Commission investigation of Enron, and Enron's warning that it might not be able to continue as a going concern.

Block had denied the charges at the time and requested a hearing, which took place in three states over 24 days from May 2006 and August 2007.  A Financial Industry Regulatory Authority statement today said a hearing panel found that enforcement officials failed to show "by a preponderance of evidence" that Block brokers had "misrepresented or omitted material facts" when selling the Enron bonds to investors.

The Financial Industry Regulatory Authority also dismissed its charges that H&R Block Financial Advisors had failed to implement adequate supervisory systems and procedures.

The NASD brought the charges after reviewing consumer complaints in 2003.

More than 800 Block Financial customers had purchased $16.4 million of Enron bonds in the month before the company's Dec. 2, 2001, bankruptcy filing. Enron failed amid one of the nation's largest corporate scandals, which helped trigger new accounting and financial reporting requirements.

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latimes.com | 4/27/08 | Stuart Glascock

Help wanted: public servants willing to disclose major sources of income, business interests, real estate holdings and the names of their adult relatives.  Sayonara and good luck with that, said some 150 elected and appointed Oregon officeholders who walked away from their public service gigs this month rather than disclose personal data. Many said they were particularly disturbed by the new requirement -- apparently unique to Oregon -- that they name so many family members.  Resignations struck dozens of cities.

In rural eastern Oregon, the revolt against the state's new conflict-of-interest disclosure law obliterated some city governments.

In Elgin, the mayor, all six City Council members and all five planning commissioners opted to quit rather than file. Lexington lost its entire council, Enterprise its five-member Planning Commission. Banks lost four council members, North Powder three; Rogue River, Umatilla and Stanfield lost two each.

Roger Stover, a 14-year Elgin councilman, cited privacy as his reason for resigning. The required forms, he

said, would have tied his "whole family together" in one place like no other easily available public record.

Triggering the upheaval is this change in Oregon law: For nearly 35 years, many public officials had to

file Statements of Economic Interest that disclosed officeholders' sources of income, property holdings

and business interests. But 97 communities had been exempt from it. Last year, the Legislature voted to end

those exemptions -- and expanded the law to include a provision calling for the naming of all adult relatives.

The law now applies to about 5,000 officeholders -- mayors, city council members, planning commissioners,

school district superintendents and financial officers -- said Ron Bersin, executive director of the

Oregon Government Ethics Commission. The deadline for submitting information was April 15, and 150 officials

had not filed, in effect notifying the agency that they were resigning, Bersin said.

"This law reflects the public's concern for transparency and accountability in government," he said. "The

public wants to know if decisions you are making benefit you personally."

Still, no other state's disclosure laws sweep as broadly, said Peggy Kerns, director of the National Conference

of State Legislatures' Ethics Center in Denver.

"The purpose of these financial disclosure laws is so the public knows where a lawmaker's income comes

from," Kerns said. "Every locale has to decide how deep it goes into a family. Some states require just

the lawmaker. Others require the lawmaker and spouse. In comparison to what other states do, [Oregon's]

is broader."

Robert Stern, co-author of California's Political Reform Act and president of the Center for Governmental Studies

in Los Angeles, also said Oregon's requirement to name family members reaches further than other states.

Stern said that California requires the same degree of financial disclosure that Oregon does, but not the naming

of relatives. "You have to disclose assets of one's spouse and dependent children, but you don't have to

name them," Stern said.

By far, those officials who resigned objected most stringently to being asked to list their adult relatives, said

Scott Winkels, an intergovernmental relations associate at the League of Oregon Cities.

"We support a strong ethics policy, but our concern is that the requirement to report names of family members

is simply intrusive," Winkels said.

No one anticipated the widespread resignations, he said. Oregon law designed to maintain local

governments during emergencies is being tested for the first time, he said.

"Business in some cities has ground to a halt," Winkels said

His organization is working with the governor and the Legislature to "ameliorate some of the

unintended consequence of ethics reforms," he said.

Bersin thinks it's still too soon to judge.

"It's premature to say how long the effect [of the vacancies] is going to be," Bersin said. "There may be

several applicants standing in line to take the positions."

Basic city services -- water, power, police, and fire -- are being managed as usual, but no new decisions can

be made until council majorities are formed. To fill voids, county commissioners will appoint enough

council members to make quorums.

New public servants are needed all over the state -- from the coast to the Cascades to eastern farm and

logging communities. Public officials resigned over the disclosure forms in Canyon City, Keizer, Sweet

Home, Harrisburg, Monmouth, Tangent, Pilot Rock, Prairie City and Summerville.

Officials are scrambling. City managers are circulating ads for replacements.

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bizjournals.com | 4/25/08 | Staff Writer

The three people who organized a $37 million mortgage fraud scheme surrounding condominiums in South Beach were sentenced to prison time on Thursday, the U.S attorney's office said.

U.S. District Judge Jose E. Martinez sentenced Richard Weldon Chowder II, owner of America's Best Mortgage Services in Coconut Creek, to nine years in prison; former title attorney Gary Mills, who owned Deerfield Beach-based Four Star Title, to 46 months; and former Wachovia loan officer Karen Lynn Sullivan to 50 months.

The U.S. attorney's office said Crowder recruited buyers for residential  properties, including 17 luxury condos in South Beach, telling them he could obtain no-money-down financing for their purchases. He then would apply for equity lines of credit with Wachovia on their behalf.

To induce Wachovia to issue the credit, Crowder and Mills prepared fake HUD-1 settlement forms, stating the buyers already owned the properties and significantly understating the amount of the first mortgages on the properties. The fraudulent forms were then given to Sullivan, who used them to facilitate the credits.

The defendants are scheduled to appear in court on May 29 for a hearing to determine the restitution they must pay to the victims.

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cfo.com | 4/25/08 | Staff Writer

A former financial executive has admitted her role in a fraud that resulted in the bankruptcy of a now-defunct bottled drinks maker.  Tammy Andreycak, who was director of accounting for Le-Nature's Inc., pleaded guilty in federal court in Pittsburgh to charges of bank fraud, wire fraud, conspiracy, and preparating false income tax returns, all between 2003 and the company’s bankruptcy in late 2006. She is the first to be prosecuted in the scheme.

Andreycak was accused of creating false accounting records at the direction of Le-Nature's CEO.

Fictitious sales, expenses, and assets creating the appearance that the company was financially robust were recorded in books kept separately from those used for actual business activity. The false records were supplied to accountants and used to prepare the company's audited financial statements and tax returns.

According to a press release, Le-Nature's management used the phony financial data compiled by Andreycak to defraud lenders, including Wachovia Bank and AIG Capital Equipment Finance.

Between these two, losses amounted to approximately $305 million.

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chicagotribune.com  | 4/26/08 | Becky Yerak

MB Financial Inc. stock closed down 8.6 percent Friday after the Chicago-based bank holding company was socked by a fivefold increase in the amount of money set aside to cover potential loan losses, contributing to a 68 percent drop in first-quarter earnings.

The parent of MB Financial Bank cited two commercial loans where it believes fraud occurred. But after an internal review, the $8.09-billion asset company found that a commercial and industrial loan unit hadn't followed the bank's monitoring and reporting procedures, and that caused MB to identify three additional commercial credits as "potential problem" loans.

In the latest quarter, MB made a loan-loss provision of $22.5 million, up from the year-ago quarter's $3.8 million set aside for potential bad loans. That provision comes right off the lender's pretax earnings.

"An otherwise good quarter was severely impacted by what we believe is a onetime event," Chief Executive Mitchell Feiger said in a conference call Friday.

The larger fraud was discovered in mid-March.

"We learned that a customer was falsifying various reports submitted to our bank," he said.  Typically, a bank has procedures in place to prevent or detect such occurrences.

"Investigation into this fraud revealed that personnel in our loan division knew or should have known that the report submitted was incorrect," he said. "If the loan division followed procedures, this customer deception would have been discovered early, or at least earlier, and the loss incurred would likely have been less or perhaps even non-existent."

Alarmed by the two fraudulent loans, MB did a more thorough review of all that particular unit's loans, which total about $200 million, and found that monitoring and reporting procedures weren't followed "on only three additional credits, allowing those loans to deteriorate to potential problem loan status," Feiger said.

The three loans total $42.5 million and are current on their interest and principal.

"These are significant companies and there is good reason to believe that all three will work out fine," he said. But "we felt that because of the sequence of events and the current financial status of the borrowers, caution and conservatism are in order," and so the three were added to the list of potential problem loans.

"We had difficulty because our underwriting process presumed that this division was performing the appropriate monitoring when in fact they were not, either intentionally or unintentionally," Feiger said.

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cfo.com | 1/30/08 | David M. Katz

With recession looming larger with each passing day, fraud is ever more likely to rear its ugly head. Unlike the last recessionary period beginning in late 2001, today's fraudsters are more likely to come from middle management than the C-suite. What happened to change things in the intervening years? Section 404 of the Sarbanes-Oxley Act of 2002.

Since then, chief executives, CFOs, and other managers have learned that their jobs are on the line if they violate the famed internal controls-provision of Sarbox, says Yigal Rechtman, head of the forensic accounting department for Buchbinder, Tunick, and Company, an audit firm. As a result, corporations have become saturated with "a false sense of security because c-level executives and the board are trained to talk Sarbanes-Oxley."

What's more, the compensation of top management of many companies has risen so strongly since the last recession that they have simply too much to lose to commit the kind of fraud that the top execs of Enron, WorldCom, and so many other companies committed around the turn of the century, the fraud sleuth reasons. Not so for middle management, where compensation has remained stagnant and recession and decreasing home prices represent serious threat. "Middle management is the first place where management overrides will happen," he says.

Thus, the focus of frauds will shift from earnings per share and stock options — the typical obsessions of top managements — to productivity and commissions, more the province of the mid-level worker, Rechtman says, noting that inventory and payroll misdeeds may soon be on the rise. How senior executives take a bite out of crime? The forensic investigator offers the following 10 suggestions:

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businessweek.com | 4/22/08 | Moon Ilhwan

It was one of the most stunning scenes in the history of South Korean business. Standing in front of reporters packing a basement conference room at Samsung's Seoul headquarters on the morning of Apr. 22, Lee Kun Hee, for decades the most powerful businessman in the country, announced his resignation as chairman of Korea's largest conglomerate, the Samsung Group, and chairman and co-CEO of Samsung Electronics, the world's largest maker of memory chips, liquid-crystal-display panels and TVs, and the second-largest cell-phone maker only after Nokia (NOK). Bowing deeply, Lee apologized to the nation for corporate governance problems that have been the focus of investigators for more than three months. "I'll take responsibility for all the flaws of the past," said the disgraced chairman, who was charged last week (BusinessWeek.com, 4/17/08) by a special prosecutor with tax evasion and breach of fiduciary trust.

Yet investors and longtime watchers of Korea's chaebol, or conglomerates, responded with a relative calm over the unexpected resignation. "I don't think there will be a fundamental change in Samsung," said Ahn Young Hoe, chief investment officer at Seoul-based fund manager KTB Asset Management, which owns some  $500 million in Samsung Electronics. "Lee Kun Hee will remain as a major shareholder and his family will wield influence in one way or another."

Perhaps reflecting such sentiments, Samsung Electronics shares stayed little changed, closing 0.1% higher at $678 on Apr 22. In fact, the stock has risen 20.5% so far this year against a 5.8% fall in the benchmark Kospi index on the Seoul bourse, as investors have believed the probe into Samsung could improve the company's independent management from the group while not affecting its finances. Although Lee Kun Hee is the chairman, management of the electronics unit has been firmly in the hands of respected Vice-Chairman and Chief Executive Yun Jong Yong and his team of talented professional managers who have steered  the company's rise.

Shareholder activists have criticized the 66-year-old Lee and his relatives for what the activists assert is the Lee family's near-absolute control of Samsung's 59 affiliates ranging from insurance and credit-card services to shipbuilding and chipmaking, even though the Lees only have a sliver of shares of the group. The family managed to retain the tight grip because reforms in the past decade have tackled accounting and governance in listed companies but have done little to limit the founding family's control via tangled cross-shareholdings of affiliates, some of them held privately.

Critics of Samsung acknowledge Lee's resignation and other reform steps could open the way to improving Samsung's governance system. Samsung will disband the powerful Strategic Planning Office, or SPO, which prosecutors have alleged arranged illegal business deals to benefit the Lee family at the expense of other shareholders. Chairman Lee's son, Lee Jae Yong, an heir apparent, will step down as Samsung Electronics' chief customer officer and will stay overseas for building up experiences, according to Samsung officials.

Special prosecutor Cho Joon Woong on Apr. 17 accused the SPO of arranging an illegal 1996 transaction to give the junior Lee, who turns 40 in June, and his sister a combined 64% stake in Samsung Everland, which was later made a de-facto holding company of Samsung Group. Lee Jae Yong and his three sisters paid $9.9 million to exercise warrants converting bonds they held into shares of Everland, an unlisted amusement park and real estate company, at just one-eleventh of the market value.

Cho also accused Lee Kun Hee of owning some $4.5 billion worth of stock in Samsung Life, Samsung Electronics and other companies that were hidden in nearly 1,200 brokerage accounts in the name of former and current executives. Such holdings, prosecutors say, were kept secret to avoid paying hefty taxes.

Samsung officials say those shares, which were held that way to help Lee protect his management rights, will now be held under the name of Lee, who will pay taxes that were avoided.

Samsung execs say the reform measures announced Apr. 22 are "just the beginning" to make group companies more transparent and independent. "We will actively pursue changes if there are such needs in the future," says Vice Chairman Lee Hak Soo, head of the SPO, who also vowed to step down by the end of June.

Some activists argue the reforms fall short of guaranteeing the prevention of the family's return. "The problem is the son can always be elevated to the chairman and assume near-absolute control unless a system is built to guard against such practices," says Korean National Open University economist Kim Ki Won, who has studied the chaebol for two decades. "My hunch is that there's only a 30% chance of Samsung achieving a good governance system in view of the lack of reference to the son's illegally earned benefits."

Others, though, are more hopeful. "I respect today's move by Chairman Lee, who unlike other chaebol chiefs, personally took responsibility for wrongdoings," says Jang Ha Sung, dean of Business Administration College at Korea University and a longtime promoter of shareholder rights. "What's still needed is to build a sustainable system enforcing transparency and accountability."

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ap.google.com | 4/26/08 | Ryan J. Foley

MADISON, Wis. (AP) — The U.S. military's health insurance program has been swindled out of more than $100 million over the past decade in the Philippines, where doctors, hospitals and clinics have conspired with American veterans to submit bogus claims, according to prosecutors and court records.

At the center of the case is Tricare, a Pentagon-run program that insures 9.2 million current and former service members and dependents worldwide. The United States closed its military bases in the Philippines in 1992 and withdrew its active-duty forces, but thousands of retirees remained. Some saw an opportunity to pry easy cash from Tricare.

Health care providers in the Philippines filed claims for medical services never delivered, inflated claims by as much as 2,000 percent and shared kickbacks with retirees who played along, court records reviewed by The Associated Press show.

"There just seemed to be so many possibilities for abuse of the system, and there were so few controls in terms of monitoring," said former U.S. Attorney Peg Lautenschlager, who oversaw prosecutions in the late 1990s.

Pentagon auditors say Tricare moved slowly to uncover and stop the fraud.

And a February audit warned that the program is still vulnerable to rip-offs because of lax controls and that similar fraud schemes are starting to emerge in Latin America.

Tricare paid $210.9 million in overseas claims in 2006, the latest year for which figures were available. At the height of the fraud in 2003, Pentagon officials say, two-thirds of the $61.8 million paid to Philippine providers — about $40 million — was fraudulent.The fraud in the Philippines was so extensive that the number of claims filed there skyrocketed nearly 2,000 percent between 1998 and 2003 even as beneficiaries there

"I know this is illegal and wrong to submit fraudulent claims to get money, but I did it for fun," U.S. Navy retiree Romulo Estoesta told investigators. He died in 2002.

Austin Camacho, a spokesman for the Pentagon's Tricare Management Activity, which runs the program, said the fraud has been hard to prove because of language barriers, a lack of cooperation from providers and limited law enforcement resources. But he said the agency added numerous controls and is making every effort to stop fraud.

Its former president, Thomas Lutz, has pleaded guilty to his role in a kickback scheme and could get five years in prison. He could be sentenced in Madison as early as Thursday. The company has also reached a plea agreement, but it is sealed.

Prosecutors say Health Visions executives instructed billers to inflate every claim by at least 233 percent and falsify diagnoses. Lutz refused to comment when reached by telephone in Columbia, Mo., where he is living with relatives.

The company's lawyer had no comment.

Pentagon officials received fraud allegations against the company in 2000 but waited until late 2005 to move to cut off payments, according to an internal audit report. The company reaped tens of millions of dollars in payments in the meantime.

In a 2005 memo, William Winkenwerder, then assistant secretary of defense for health affairs, complained that his requests to send additional investigators to the Philippines were ignored.

The fraud went well beyond Health Visions. A Pentagon official warned in 2004 that the Philippine schemes were costing U.S. taxpayers $40 million a year.

In all, those convicted have been ordered to pay back only about $1.8 million.

Claro de Castro, chief of the Philippine National Bureau of Investigation's Interpol division, insisted Philippine authorities have cooperated with the U.S.

Nevertheless, federal agents have resorted to trying to capture defendants when they step on U.S. soil.

Dr. Diogenes Dionisio, who ran a clinic near Manila, was arrested earlier this year after he arrived in Guam for a vacation. He has pleaded not guilty to submitting $2 million in fraudulent claims. His lawyer, Charles Giesen, said his client was never notified he was facing indictment.

"He was getting off the plane with his golf clubs and they put him in handcuffs," Giesen said. "It was a complete surprise and somewhat baffling."

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law.com | 4/23/08 |The National Law Journal

The past decade has seen a significant rise in lawsuits brought by bankruptcy trustees or receivers against an insolvent company's former accountants and attorneys. Trustees and receivers presiding over the estate of a failed company victimized by -- or, more often, utilized for -- fraud or other misconduct are now routinely looking to causes of actions against the debtor's professionals as the estate's primary, if not the only,  assets.

Questioned about the recent rise, one often-appointed federal receiver, Lewis B. Freeman, offered two explanations in a recent discussion with the author: "That's where the money is" and, in the recent years of "growth at any cost, some lawyers and accountants have put growth and billing before quality and ethics."

This article reviews a sample of such actions and considers how courts and litigants are responding to them -- including the in pari delicto doctrine against plaintiffs recovering for their own wrongdoing, and the mixed reviews being given to "deepening insolvency" as a cause of action. The article also will look at the ways professionals (and their insurance companies) are dealing with the potentially increased exposure.

PROTECTING ONESELF

Given the number of actions against professionals by bankruptcy trustees and the uncertainty that exists as to the viability of causes of action and affirmative defenses, what should professionals do to protect themselves from being targeted for such an action?

The Attorney's Liability Assurance Society Inc. (ALAS), a leading mutual insurance company for law firms, has advised that "the key is to look for red flags" during the course of the engagement. Brian J. Redding and Deborah G. Shortridge, "The "Zone of Insolvency," "Deepening Insolvency" and "Lawyer Liability -- Where Are We and Where Might We Be Going?" ALAS Loss Prevention J. (Fall 2004).

For example:

• Is there anything that suggests that there might be something wrong here?

• Is this transaction with an affiliated entity?

• Is the author of the appraisal or fairness opinion someone closely connected to the transferor?

• Are outdated financials being used?

• Are relevant factors not discussed in the fairness opinion?

• Is the transaction one that qualifies as self-dealing on the part of the controlling shareholder?

If these or other indications of problems exist, the lawyers need to stop and ask questions, if not as a matter of law, then at least as a matter of prudence and good loss prevention.

In short, the best protection for the professional seems to be continued ethical vigilance, and a steadfast enforced commitment to avoiding risk, even at the cost of losing a client. Particularly in today's litigious climate and the economic downturn, losing a client because of a commitment to high professional standards may benefit the law firm or accountant in the long run. Even if the professional would ultimately prevail against a claim by the trustee, the economic, business and reputational costs of defending such a claim are likely to be significantly greater than the business of any single client.

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rutlandherald.com | 4/22/08 | Staff Writer

A former postal worker from Readsboro has been sentenced to six months of house arrest in an embezzlement scheme, according to federal prosecutors.

Rita Bolognani, 48, was sentenced Monday in U.S. District Court in Burlington to three years probation, with six months house arrest to be served. She was also ordered to pay $46,395 in restitution for misappropriation of postal funds, federal prosecutors said in a release Monday. 

According to court records, Bolognani worked as a part-time postal employee inthe Readsboro post office. Beginning in November 2006, and continuing until May 2007 she issued postal money orders to pay personal bills without paying for the money orders, prosecutors said.

Investigation by the postal service determined that she issued 76 money orders without making corresponding payments to the postal service over six months.

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The Irvine-based company agreed to pay $12 million to settle the charges without admitting or denying the allegations, the U.S. Securities and Exchange Commission said in a statement.

"The backdating scheme at Broadcom went on for five years, involved dozens of option  grants," Linda Chatman Thomsen, director of the SEC's enforcement division, said in a statement. "The scope and magnitude of the fraud warrants the significant penalty imposed on the company."

The agency accused Broadcom of using the backdated options to recruit and retain the most highly qualified staff without paying them higher salaries.

The agency alleges that a two-member option committee approved up to 88 grants between 1998 and 2003, in many cases without meeting on the dates the grants were supposedly approved. The committee members were co-founders Henry Samueli, Broadcom's chairman and chief technology officer, and Henry T. Nicholas III, then the company's chief executive.

Brian Marshall, an attorney representing Nicholas and Samueli, referred calls to Nicholas' spokesman, Mark Saylor. In an e-mailed statement, Saylor said Nicholas "at all times ... believed he was complying with company rules, as well as accounting and legal requirements."

Broadcom spokesman Bill Blanning said in a statement: "This is a major step in the process of closing this chapter as we remain focused on the company's business today and for the future."

Scott McGregor, Broadcom's chief executive officer, said he was pleased to announce the settlement but did not elaborate during a conference with analysts to discuss the company's firstquarter results.

The U.S. attorney's office has also launched a probe into stock-option backdating at Broadcom.

In a court hearing in January, federal prosecutors told a judge that Nicholas and Samueli were "unindicted potential coconspirators" in the probe.

In the SEC case, a complaint filed in U.S. District Court alleges Broadcom's top officers misrepresented the dates on which stock options were granted to its executives and  employees.

Backdating stock options involves retroactively setting the exercise price to a low point in the stock's value to increase profits for an executive or employee when shares are sold.  If companies backdate options without properly disclosing and accounting for the move, it can cause profits to be overstated and taxes to be underpaid.

Broadcom also reported after markets closed that its first-quarter profit rose 21.8 percent to $74.3 million, or 14 cents a share, from $60.9 million, or 10 cents a share, during the same period of 2007.

Revenue rose 14.5 percent to $1.03 billion from $901.5 million in last year's first quarter. That's well above an average estimate of $992.3 million among analysts polled by Thomson Financial.

Broadcom's shares slid 1.1 percent, or 27 cents, to $23.55 during regular trading, then surged $2.11 to $25.66 after hours.

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chapelhillnews.com | 4/23/08| Jesse Deconto 

HILLSBOROUGH -- The former bookkeeper for the Inter-Faith Council for Social Service pleaded guilty Tuesday to two counts of misdemeanor larceny after facing charges of embezzling more than $13,000 from the agency.

Assistant District Attorney Jacqueline Perez said that Pamela Futrell had been writing checks from the IFC accounts to pay her own bills.

"She felt that she hadn't done anything against policy because she was in need and that was the service they provided," said Perez.

Futrell later said she was sorry and that it was a stupid thing to do. She has agreed to pay $200 a month to reimburse the IFC'S insurance company. She must also pay $100 in restitution to cover the IFC's deductible and will be on supervised criminal probation for the next year.

She must also serve 30 hours of community service and pay a $200 community service fee.

Posted by at 12:31 PM | Permalink

webcpa.com | 4/22/08 | Staff Writer

Harry Willner, a former Internal Revenue Service agent, was sentenced last week to a year in jail for a tax fraud scheme. Prosecutors charged him with fraudulently attempting to sell to other taxpayers, and using on his own personal income tax returns, tax losses belonging to a separate company that he controlled.

Judge Gerald Lynch sentenced Willner in Manhattan federal court for the scheme. The sentence included one year in jail, one year of supervised release, a $10,000 fine, and the payment of any taxes, interest and penalties owed to the IRS.

Willner was employed by the IRS as a revenue agent assigned to the Large and Midsize Business unit of the IRS in the Southern District of New York. As an LMSB revenue agent,

he was responsible for audits of large financial institutions and served as a team coordinator of other revenue agents.

At various times, he was also an officer of a corporation known as NIA Advertising, whose address was the same as his home in New Jersey. He did not request approval from the IRS to serve as an officer of NIA, as required by IRS regulations.

He did, however, request approval for outside, part-time employment as an instructor with schools located in Manhattan and to hold an unspecified position with a company known as Royal Magazine.

Between 2003 and 2004, Willner attempted to, in effect, sell NIA’s net operating loss to other  taxpayers, which would enable those other taxpayers to use the NOLs to offset the income on their own tax returns and thereby to fraudulently reduce their tax liabilities. He proposed to accomplish this by having other taxpayers, who were owed income, direct the fee payment to NIA, which would report it as income. NIA would not pay tax on the payment because the income would be offset by the NOL. Willner would then remit the money, minus a fee for himself, to the other taxpayer disguised as a loan repayment.

Willner explained the fraudulent steps attendant to the sale of the NOLs in a tape-recorded conversation made by the IRS during its investigation. During the conversation, between Willner and an accountant from whom Willner was attempting to recruit participants in the scheme, Willner stated that he had “about $700,000 worth of losses” in NIA and explained that the accountant’s clients could use the NOL if they diverted their income from their own tax returns to Willner at NIA.

Posted by at 1:06 PM | Permalink

bloomberg.com | 4/21/08 | Sarah Gay Forden

April 21 (Bloomberg) -- Parmalat SpA Chief Executive Officer Enrico Bondi said he would ask for as much as 14 billion euros ($22 billion) from Citigroup Inc. after a court said his company could seek civil damages in a criminal trial against the U.S. bank in connection with the foodmaker's 2003 bankruptcy.

Parmalat was admitted as a civil party in the trial in the Italian city of Parma, the company said in an e-mailed statement today. The claims would be in addition to a lawsuit filed against Citigroup for damages in the U.S. Citigroup said in an e-mailed statement that all charges against the bank were "unfounded.''

Parmalat collapsed in December, 2003, in Italy's largest bankruptcy, later disclosing more than 14 billion euros of debt, about eight times the amount reported by its former management.

Prosecutors filed charges after discovering that the company had never earned a profit after its stock market listing in 1992, though it reported earnings every year.

Under Italian law, individuals can request civil damages during criminal proceedings. Bondi made the filing in his role as the court-appointed administrator who oversaw Parmalat's bankruptcy reorganization. Parmalat was relisted on the Milan stock exchange in October 2005. Bondi won his second mandate as CEO on April 8.

Parmalat lawyer De Luca said he'd requested the ``entire amount of the fraud, equivalent to 14 billion euros, precisely because of the exceptional seriousness and causal effect that these matters had on the entire Parmalat fraud.''

Bondi on April 18 was excluded from making civil claims in a Milan trial against four banks, including Citigroup, for market manipulation. Citigroup is facing trial in the U.S. May 5 on claims by Parmalat that it aided and abetted larceny by corrupt insiders at the Italian dairy company.

Bondi filed the lawsuit against Citigroup in New Jersey in July, 2004, accusing the U.S. bank of disguising debt and inflating cash flow from operations at Parmalat including raising money through a unit called Buconero, which means black hole in Italian. The cash was subsequently represented as equity on Parmalat's balance sheet. Bondi also accused Citigroup of knowing that Parmalat falsified invoices and of laundering misappropriated funds through its accounts.

``Judges both in the U.S. proceeding and the trial in Milan have radically reduced the requests advanced by Parmalat,'' Citigroup said in the statement. ``In the U.S. the damages requests have been radically reduced and in Milan Parmalat was excluded from the trial altogether.''

Investors have bought Parmalat shares on speculation they may benefit from legal settlements and have demanded the company loosen its limits on dividend payments. Bondi has collected more than 1 billion euros in settlements to date after filing charges against the dairy company's former lenders.

``The bottom line is that Citigroup is going to be taken to court and Parmalat could get several billion dollars from them,'' Alessandro Frigerio, a fund manager at RMJ Sgr in Milan, told Bloomberg Television. Frigerio does not hold Parmalat shares but is considering adding them.

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mlive.com | 4/21/08 | Shannon Murphy

Genesee County Prosecutor David Leyton said Ashlock, the FWBA manager, told the court she took the money between 1998 and 2007. It is believed she stole $120,000 from the group to buy scratch-off lottery tickets.

Ashlock is expected back in court June 2 for sentencing in front of Circuit Judge Richard B. Yuille.

Posted by at 12:58 PM | Permalink

chicoer.com |  4/19/08 | Greg Welter

CHICO -- An Orland woman is accused of embezzling more than $200,000 from her former employer, a Chico-based heavy-equipment distributor.  Detectives from the Butte County Sheriff's Office allege that Jennifer Marie Sites, 38, used funds stolen from Hamre Equipment Co. to pay her mortgage and purchase a large number of items from a home-shopping television network.

Investigators said they found many of the purchases still in their shipping containers, filling her living room and spilling out onto a porch.

Last Saturday, the owner of Hamre reported that the woman, a bookkeeper there for only 18 months, was suspected of embezzling an estimated $100,000 from the company.  By Monday, company officials said the estimate grew to more than $200,000.

Hamre was founded in 1989 and operates a large facility on Three Sevens Lane north of Chico. According to its Web site, the company specializes in the sale and distribution of large-capacity lift trucks, logging trucks, excavators and forklifts.

Posted by at 12:55 PM | Permalink

palmbeachpost.com | 4/20/08 | William Cooper Jr.

Colleen Janette Christopher got a break Friday when County Judge Paul Moyle placed her on house arrest rather than make her pay $581,000 bail after a tearful plea from her mother.  But Moyle's generosity came with a stern warning: "Don't let me down and make me regret my decision." 

Christopher, a single mother of a 9-year-old daughter, was charged with 193 counts of fraud and embezzlement after allegedly writing 93 checks to herself from her employer's bank account, Lake Clarke Shores police said.

Christopher's mother, Mary, told the judge that her daughter is addicted to painkillers and that may have driven her to conduct illegal actions. According to authorities, Christopher, of West Palm Beach, doctored financial statements and used an assumed name in the scheme.

Under the conditions of her release, Moyle ordered her to stay at her mother's home. She is prohibited from having visitors until after her case is resolved.

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delewareonline.com | 4/19/08 | Ira Porter

An administrative assistant and bookkeeper for the town of Newport confessed to embezzling more than $100,000 over a threeyear period, police said.  Cynthia Reynolds, 48, of the 100 block of W. Thomson Drive, Elkton, Md., turned herself in Friday, according to Newport Police Chief Michael J. Capriglione.

The thefts began in 2004 and continued through 2007, totaling more than $128,000, police said. Reynolds started working for the town in 2003.

"That number is probably not going to be a final number," Capriglione said. "This investigation is ongoing."

Reynolds worked as a town bookkeeper and administrative assistant, enabling her to handle accounts for Alderman's Court 42. Reynolds falsified entries into the town's books and was discovered on March 27 after an official from the Delaware Office of Pensions noticed there had been no contributions from Newport into the state pension plan for several months, police said.

When they heard about the irregularities, Town Manager Rita Shade and Solicitor Stephen Robinson sent Reynolds home pending the outcome of an audit, according to a statement by Mayor Michael Spencer. A criminal investigation was launched March 28 and Reynolds was fired on March 31.

"Although the town commissioners are extremely disappointed by Ms. Reynolds' actions and her failure to honor the public trust, we take comfort in the fact that once the irregularity was uncovered, the town manager and solicitor moved swiftly to the audit and asked for a criminal investigation," Spencer said.

Capriglione also said payments to the town or court were accepted in cash or check. However, Reynolds kept the cash and documented only check payments, Capriglione said.

"When we realized there was a problem with the bills we didn't think it was going to be theft. We thought it would probably be bad bookkeeping," Capriglione said.

In his statement, Spencer said that "depending on any amount of restitution, the town has employee fidelity insurance to cover some or all of the loss."

Robinson was unavailable for comment.

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magicvalley.com | 4/20/08 | Cassidy Friedman

It's impossible for a family member to gain hundreds of thousands of dollars, start lavishing her family with gifts and still have her family not question where the cash came from, said an administrator for a local women's health clinic that is suing its former bookkeeper.  "When you have half a million dollars that you didn't have before, it's pretty obvious," said Rob Harding, an administrator for the Magic Valley Women's Health Clinic.

The clinic claims the former bookkeeper's fraud fed a family racketeering, and names five family members spread over three generations as defendants. In addition, the lawsuit alleges Karie Eldredge and her husband have used the embezzled funds to fuel their heating and air conditioning company, K&K Services.

The county prosecutor, who charged Eldredge with embezzling more than $400,000 from the clinic, portrayed the former bookkeeper's alleged activity as a one-woman operation. Laird Stone, a Twin Falls attorney representing all the family except Eldredge, denied the family knew anything about any alleged fraud. "What I've told them is, 'No, that's not true'," Stone said. "And you, the plaintiff, haven't shown me anything that shows that my clients knew the alleged acts by Karie or got anything. They didn't know and they didn't benefit."

Eldredge was charged Oct. 23, 2007 with writing checks to herself from February 2004 until she was fired Oct. 1, 2007. After writing the checks to herself, she recorded them in the clinic's electronic register as being paid to others.

Eldredge told police she first embezzled money to help family members but ended up lavishing herself with gifts to ease her own depression, according to court records. Nowhere in an affidavit does a police officer accuse family of knowingly participating in an embezzlement scheme.  The clinic, however, assumes some of the family knew.

At the very least Eldredge's husband Kent knew, it says. And possibly her elderly father and mother, along with her two children were privy to the game, according to the complaint.

Family members "knowingly received, concealed, obtained control over, possessed, and/or disposed of property obtained by Karie Eldredge's fraudulent and criminal behavior," the complaint states, "knowing such property to be stolen or under such circumstances as would reasonably induce them to believe the property was stolen."

The emotion toll on the clinic has also been great, said Rob Harding, an administrator for the clinic, which is housed at St. Luke's Magic Valley Medical but operates independently from the hospital.

He said the goal of the lawsuit is to recuperate lost funds. But he said the clinic's loss has not affected its services. "It was more of a trust issue," he said. "(But) we have tightened up the checks and balances in the office."

In the discovery phase, which is just beginning, Stone expects to learn Tolman's grounds for accusing the family of knowingly accepting embezzled money.  Eldredge's criminal trial on four counts of felony grand theft is scheduled for four days starting July 22.

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Two former Arthur Andersen auditors have settled charges with the Securities and Exchange Commission accusing them of failing to exercise due professional care and skepticism in their 2001 audits of bankrupt telecommunications giant WorldCom.

The SEC instituted public administrative proceedings against former Andersen audit

The SEC noted that WorldCom improperly removed approximately $3 billion in line cost expenses from its balance sheet in 2001, fraudulently characterizing the expenses as assets on its balance sheet. Andersen had assigned the maximum risk classification to WorldCom in prior audits, and the SEC said the auditors knew that WorldCom CEO Bernard Ebbers owed substantial personal debt that was secured by the WorldCom stock he owned.

They were also aware that in 2000, WorldCom's former controller had directed a post-closing journal entry that had no documentary support to reduce line cost expenses at WorldCom's United Kingdom subsidiary by approximately $33.6 million. The SEC said the auditors failed to exercise due professional care in the planning and performance of the audit, or to exercise an attitude of professional skepticism throughout the audit.

They also failed to obtain sufficient evidence to afford a reasonable basis for their opinion of WorldCom's financial statements, and failed to plan and perform the audit to obtain reasonable assurance about whether the financial statements were free of material misstatement, according to the SEC. The auditors issued an audit report that falsely stated that the audit was conducted in accordance with generally accepted auditing standards, said the SEC, and that WorldCom's financial statements were presented in conformity with generally accepted accounting principles.

Posted by at 8:34 PM | Permalink

ap.google.com | 4/16/08 | Staff Writer

LOS ANGELES (AP) — Los Angeles police have arrested an account manager on charges of embezzling more than $725,000 from the accounts of Charlton Heston and producer Stephen Cannell.

Deputy District Attorney Marisa Zarate says Sharon M. Walker is charged with grand theft, forgery and filing false tax returns and was to be arraigned Tuesday. Zarate declined to name the business firm where Walker had worked.

Zarate says Walker is accused of stealing more than $157,000 from Heston, the Oscar-winning actor who died April 5, and more than $567,000 from Cannell, an Emmy-winning writer and producer.

The 56-year-old Walker is being held on $700,000 bail. She faces up to 11 years in prison if convicted.

Posted by at 8:31 PM | Permalink

media-newswire.com | 4/14/08 | News Release

Baltimore, Maryland - A criminal complaint has been filed charging Karen L. Baer, age 46, of Westminster, Maryland, with embezzling money from the bank where she worked, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Baer allegedly embezzled more than $1 million. She was arrested today.

According to the complaint, Baer used the money for living expenses, vacations and college tuition for her children.

Baer faces a maximum sentence of 30 years in prison and a fine of $1 million for embezzlement. Baer is scheduled to have her initial appearance in federal district court at 3:00 p.m. today.

A criminal complaint is not a finding of guilt. An individual charged by criminal complaint is presumed innocent unless and until proven guilty at some later criminal proceedings.

United States Attorney Rod J. Rosenstein thanked the Federal Bureau of Investigation for its investigative work. Mr. Rosenstein commended Assistant United States Attorney Jonathan Biran, who is prosecuting the case.

Posted by at 8:27 PM | Permalink

churchexecutive.com |  4/20/08 | Ronald E. Keener

 The headline shrieked across the second section of The Arizona Republic last September 1: “Accountant Held in Church Theft.”  “Police have arrested a church accountant they say stole more than $400,000 while working at Cornerstone Christian Fellowship in Chandler,” ran the lead paragraph. Actually it was closer to $521,000 as far as the megachurch of 5,200 in attendance can tell today, says senior pastor Linn Winters, of the incident which is still pending a court date.

Unfortunately, Winters and his church are in good company. Many churches have experienced theft and embezzlement; it’s just that only a few prosecute or report the events.  Worse still, the church’s insurance coverage last fall maxed at $50,000. As the church and its budget grew over its 12 years, the coverage had not been changed.

“We were shocked at how many letters we got from churches in the immediate area who said, ‘We are praying for you. This happened to us.’ The reality is that church theft is much more prevalent than people know,” says Winters, “it’s just that we are larger and the amount that was stolen was larger.”

In fact, some people in Winters’ congregation approached him and said, we’re not going to prosecute, are we? “They said we don’t know that’s what Jesus would do,” he shared.

“We had to explain that there’s a difference between forgiving and with asking someone to respond to what they’ve done criminally,” he says. “Scripture is pretty clear about those who have stolen and repaying.”

Winters agreed to an interview about the embezzlement six months later in hopes that other churches might recognize the dangers of employee theft and know what to