FraudBaron.com

sec.gov | 6/25/08 | Press Release

The Securities and Exchange Commission today announced a Fair Fund distribution totaling more than 5.6 million to 534 investors who were victims of a fraudulent pump-and-dump scheme involving the stock of tool maker Spear & Jackson, Inc.

The Fair Fund distribution represents a 100 percent return of losses to defrauded investors who bought Spear & Jackson stock during the fraudulent touting period from February 2002 through April 2004.

"The SEC's quick action enabled us to stop an ongoing fraud in its tracks and freeze significant funds that we were ultimately able to return to innocent investors," said David Nelson, Director of the SEC's Miami Regional Office. "I am particularly gratified that the action has resulted in a 100 percent return of investors' losses through this Fair Fund."

Under the Fair Fund provisions of the Sarbanes-Oxley Act of 2002, the SEC gained new authority to distribute directly to injured investors the financial penalties paid by securities law violators. The SEC already has distributed more than $3.9 billion in Fair Funds using this new authority, and earlier this year the agency created a new office to further expedite Fair Fund distributions to harmed investors.

Dick D'Anna, Director of the SEC's Office of Collections and Distributions, said, "The SEC staff is working hard to successfully achieve our goal of returning the ill-gotten gains of wrongdoers back to harmed investors as quickly as possible, and we look forward to continuing this pursuit and distributing more Fair Funds in the future."

In April 2004, the SEC charged Spear & Jackson, its then-chairman and CEO Dennis Crowley, and two stock promoters in connection with the fraudulent scheme. The complaint alleged that Crowley secretly acquired hundreds of thousands of shares of stock of Spear & Jackson and its predecessor through three nominee companies based in the British Virgin Islands that he clandestinely controlled. The complaint further alleged that Crowley then hired stock promoters to distribute false and misleading information about Spear & Jackson to the brokerage community in order to drive up the company's share price while he dumped his shares on the market.

In a follow-up action that arose out of this same case, the Commission last year instituted public administrative proceedings against Orlando, Fla. broker-dealer Park Financial Group, Inc., and its principal, Gordon Cantley, alleging that they aided and abetted Crowley's violations of the securities laws by allowing him to buy and sell Spear & Jackson stock through the nominee companies' accounts at Park Financial. Park Financial and Cantley also were charged with failing to file Suspicious Activity Reports (SARs) in connection with Crowley's transactions, marking the first time that the Commission had brought a case against a broker-dealer for failing to file SARs.

In December 2007, the Commission issued an order by consent against Park Financial and Cantley. Without admitting or denying the SEC's allegations, Park Financial and Cantley were ordered to cease and desist committing securities law violations and to pay disgorgement and civil penalties. In addition, the Commission censured Park Financial and barred  Cantley from association for a broker or dealer with the right to reapply in two years.

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news.cnet.com | 6/30/08 | Steve Tobak

Corporate fraud didn't start with Enron, Tyco, and WorldCom and it didn't end with them, either. Fraud is rampant in the technology industry. What most employees, investors, and consumers don't realize is how much it costs them.

Excuse me for stating the obvious, but you'd be surprised how many people think there's some magic pile of dough somewhere that pays for companies to comply with investigations, contest charges, and remedy issues. In fact, the costs are born primarily by the corporation. That means it comes right out of shareholders' and employees' pockets. Consumers also pay, albeit indirectly.

How much does this all add up to? Well, let's see.

There are also recent allegations against former Broadcom and AOL Time Warner executives, plus ongoing international investigations into Nortel's ex-CEO and CFO, Samsung's chairman, and executives of Siemens AG.It's hard to quantify the carnage, but it's clearly material on a company by company basis, and over  a trillion dollars in aggregate if you include loss of market capitalization.  Whenever I write about fraud at technology companies, I get the sense that there's ambivalence among the IT audience. Frankly, I think that's sad. I'm outraged. In fact, the risk is so high that I no longer invest in individual company's stock, only in

In any case, whether you're an investor, an employee, or a customer of any company involved in a fraud investigation, like it or not, know it or not, you're paying a corporate fraud tax. 

Posted by at 11:36 AM | Permalink

mailtribune.com | 6/29/08 | Sanne Specht

The ex-wife of a convicted embezzler has admitted to stealing more than $20,000 from a local dental office.

Cassandra Sam on Monday pleaded guilty to two counts of first-degree theft and two counts of second-degree theft before Jackson County Circuit Court Judge William Purdy.  Sam, 36, embezzled the money over a period of several years from her previous employer, Dr. Todd Holton. She received 64 hours of community service and 18 months' probation and was ordered to pay more than $20,000 in restitution to the dentist, said Senior Deputy District Attorney Tim Barnack.

Sam initially blamed other employees for the missing cash, Barnack said. "She was pointing her finger at everyone else, but it was her," he said.  It was Sam who helped Barnack successfully prosecute Wesley Pettegrew, 38, for stealing from the now-closed Medford sporting goods store, McKenzie Outfitters, in 2004, he said.

"She assisted me in the prosecution of her husband, and the whole time she was stealing from the dental office," said Barnack.  "Maybe they were learning how to do it from each other," he added.

Pettegrew pleaded guilty in July 2004 to six separate charges for his actions after police found canoes, boots, sunglasses and other goods stored at their home, Barnack said.

"Everything you could think of that might be at a sporting goods store, he had in his garage and his shed," said Barnack.

Pettegrew was sentenced to 19 months in jail and paid more than $30,000 in restitution, he said.  Sam followed in the path of her former husband when she opted to plead guilty to the theft charges rather than face a jury trial, he said.

Sam wept in court and said just one word before hearing her sentence, Barnack said.  "She looked over at the Holtons and said, 'Sorry,' " he said. Sam's sentence did not include jail time as it was her first offense, Barnack said. But pleading guilty to 

the felony thefts puts her in line for prison time if she offends again, he added.  "The next time she commits a theft, she goes to the penitentiary," he said.

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upi.com | 6/28/08 | Staff Writer

An Israeli banker has pleaded guilty to a tax fraud conspiracy charge in Los Angeles and a New York rabbi is to follow suit, federal prosecutors said. Joseph Roth, 66, of Tel Aviv, who worked for United Mizrahi Bank, pleaded guilty Friday to the federal conspiracy charge, admitting he was part of a scheme to defraud the U.S. government out of millions of dollars in tax revenues by setting up secret bank accounts in Israel for bogus trusts, prosecutors said. Rabbi Moshe E. Zigelman, 60, of New York has agreed to plead guilty to conspiracy at a hearing set for Tuesday. Under the deal announced Friday, Zigelman acknowledges his role in the decade-long scheme. The accounts involved "charitable contributions" to organizations set up under Spinka, an orthodox Jewish group that refunded most of the money back to "contributors," authorities said. The contributions to Spinka-related entities totaled $8.5 million in 2006 alone, of which $7.75 million was returned to contributors. The two defendants are among eight individuals -- including Naftali Tzi Weisz, the grand rabbi of Spinka -- and five charitable entities indicted last year. The remaining defendants face trial Sept. 9 and Roth is to be sentenced Oct.20.

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detnews.com |  6/28/08 | Mike Martindale

Amy McDonald, a former accounting manager at the sports-entertainment complex, allegedly used a company credit card to buy personal items, firearms, high-tech electronics, vehicles,

household utilities -- even pay court-ordered child support owed by her husband, Erik. Both 36, they are named in arrest warrants for embezzlement of $20,000; embezzlement of $100,000 or more; and conspiracy to commit embezzlement, said Auburn Hills Police Lt. Tom Hardesty.

Erik McDonald, who has a 1989 armed robbery conviction, is also charged with being a felon in possession of a firearm. The crimes, felonies punishable by up to 20 years in prison, occurred between January 2006 and May 2008, when The Palace confirmed the improper use and fired McDonald, police said.

The Detroit News reported earlier this month that The Palace had filed a lawsuit against the McDonalds in Oakland Circuit Court seeking return of $1.8 million in unauthorized credit charges. Amy McDonald had been confronted about the charges at one point and denied having made any inappropriate or personal purchases, according to the complaint. The Palace has declined comment on the matter.  The McDonalds had possession of at least four vehicles police have been unable to locate,Hardesty said, including: a white 2002 Ford Excursion; a red 2008 Dodge Charger; a white 2006 Ford Mustang; and 1998 Ford Explorer.

Erik McDonald has numerous tattoos on his right arm and shoulders and Amy McDonald has possibly altered her hairstyle, police say.

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delconews.com | 6/26/08 | Cindy Scharr

UPPER CHICHESTER - An arrest warrant has been issued for a Delaware woman who allegedly embezzled about $80,000 from her employer.

Tara Hodges, 36, is believed to be staying at the apartment of a friend in the 2600 block of Philadelphia Pike,Claymont, Del. Hodges allegedly pilfered checks from her employer, Mike's Foreign and Domestic Auto on Keystone Road, where she worked as an accounts  receivable clerk.

"He trusted her," said Detective Thomas McNichol. "When she went to the bank for him, she put some money in for him then put some money into her own account."

According to McNichol, Hodges stole 51 checks totaling about $80,000 from October of 2007 through May. "Basically, she drained the account," McNichol said.

Hodges is facing 51 counts of theft. She is also wanted by Delaware authorities in an unrelated matter. She had been living in the 1500 block of Seton Villa Lane, Wilmington, Del., but has since moved out and is believed to be staying with a friend in an apartment in the 2600 block of Philadelphia Pike. Hodges may be driving a black 2000 Chevy Blazer with a temporary Delaware tag.

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centralvalleybusinesstimes.com | 6/26/08 | Staff Writer

Hundreds of unopened boxes from the cable TV shopping channel QVC were crammed into Jennifer Marie Sites’s Chico-area home when investigators came knocking on her door.

Ms. Sites, 38, bought so much stuff from the shopping channel that she didn’t have time to open the boxes after they were delivered.

She had no trouble paying for it, prosecutors say, thanks to embezzling more than $500,000 from her employer, Hamre Equipment Co. of Chico, which also does business as AmeraMex International Inc. (PINKSHEETS: AMMX), a company that leases or sells heavy equipment to shipping, construction, logging and mining companies.  She was the trusted bookkeeper.

but now she has now pleaded guilty to embezzlement and other charges, including an enhancement for a white collar crime, Butte County Deputy District Attorney Kit Carson says.

Ms. Sites is to be sentenced Aug. 18. The penalty could range from probation to more than eight years in prison.  The QVC inventory might be sold at auction to help reimburse Hamre.

Earlier this month, AmeraMex reported net income for the quarter ended March 31 was just $24,657 even though its revenues hit a record of just under $5.5 million for the quarter.

The profit would have been larger but for one thing, it says – the embezzlement.

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baltimoresun.com | 6/26/08 | Brent Jones

A Baltimore judged yesterday ordered the business partners of Michael McCrary to pay the former Raven about $33 million in damages for a fraudulent insurance claim involving a condominium project in New Orleans, according to McCrary's lawyer.

Judge Paul E. Alpert awarded the retired McCrary $15 million in punitive damages, one of the highest judgments on record, according to attorney Kenneth B. Frank, and about $16 million in compensatory damages. An additional $2 million came from prejudgment interest.

Frank said the judge, during his ruling, called the scheme one of the most egregious cases of fraud he had ever seen. McCrary joined Stuart C. "Neil" Fisher and Edward Giannasca in buying a 45-story office building, which was to be converted into condominiums called Crescent City Estates, according to Frank.

The project was halted after Hurricane Katrina damaged the building in 2005. According to court testimony, Fisher, Giannasca and other entities collected about $12 million worth of insurance money from the damage caused by the storm but told McCray that the insurance claim was denied. The partners then sold the building, giving McCrary about $2 million of the $3.5 million he originally invested.

None of the defendants showed up for the trial. McCrary, a defensive end, played six seasons with the Ravens and is in the team's Ring of Honor.

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ap.google.com | 6/26/08 | Staff Writer

NEW YORK (AP) — A father and son who built Adelphia Communications into a cable television powerhouse before they were accused of ruining it have been resentenced to lesser prison terms.

Federal prosecutors announced Wednesday that Adelphia founder John Rigas had his 15- year sentence reduced to 12 years. His son, Timothy, had his 20-year sentence reduced to 17 years.

In reducing the sentences, Judge Leonard Sand in Manhattan writes that "a minimal adjustment is appropriate" but also notes the seriousness of the crimes.  Adelphia collapsed into bankruptcy in 2002. At the time, it was the country's fifth-largest cable TV company.

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ap.google.com | 6/25/08 | Staff Writer

An Italian businessman who once dated actress Anne Hathaway was arrested Tuesday on charges he posed as a representative of the Vatican to fleece wealthy investors in a real estate company that sought to buy and redevelop Roman Catholic Church

property.

Bail was set at $21 million for Raffaello Follieri. Federal prosecutors said they have "overwhelming" evidence that he improperly spent up to $6 million from investors, much of it on a lavish lifestyle, including privately chartered jet travel with his girlfriend and others, expensive meals and clothing and a posh Manhattan apartment.

The girlfriend was not identified but it has been widely reported that Hathaway, the star of films including "Get Smart," "The Devil Wears Prada" and "The Princess Diaries," had until recently dated Follieri, 29.

An angry Follieri repeatedly interrupted his lawyer at a court appearance to tell her what to say. He shook his head at times and, as a prosecutor accused him of owing various debts, called out: "We paid that."

Prosecutor Reed Michael Brodsky said Follieri, of Foggia, Italy, boasted of tight Vatican connections to entice investors to give millions of dollars so he could "live the lifestyle of a multimillionaire." He said Follieri had duped one investor as recently as last month.

"In short, your honor, he is a con man, and he was able to defraud a lot of people out of a lot of money over a long period of time," Brodsky told Magistrate Judge Henry B. Pitman. "The evidence in this case is overwhelming because he left a trail of evidence."

Brodsky had asked Pitman to deny bail, saying Follieri had the money, the connections and the incentive to flee charges that could send him to prison for up to nine years if he is convicted. He said Follieri lost between $2.5 million and $6 million of investor money.

Pitman said Follieri must secure bail with $16 million in cash or property and must endure home detention, except for legal meetings, medical treatment or religious services.

After his court appearance, Follieri, who had been fighting a sinus infection, had "some sort of attack" and was taken to a hospital, said his publicist, Melanie Bonvicino. She said she did not have further information on his condition.

The complaint filed in U.S. District Court in Manhattan alleges that Follieri duped a partner into investing millions of dollars in a real estate scheme to buy properties at bargain prices from the Catholic church in the United States and redevelop them.

The partner, a private equity firm in California, was not identified in court papers. However, a division of supermarket billionaire Ron Burkle's Yucaipa Cos. has settled lawsuits accusing Follieri of misappropriating more than $1 million to support a fancy lifestyle.

Follieri was charged with a dozen counts of wire fraud conspiracy, wire fraud and money laundering.

His lawyer, Flora Edwards, told The Associated Press, "We're going to move forward and hope for a speedy resolution to this matter."

Outside court, she called the bail package one of the stiffest she had seen.   Edwards told the judge her client was no threat to flee just because he had access to millions of dollars and his family is in Italy. She noted that his mother was being treated at a hospital in Manhattan.

According to the FBI, Follieri claimed the Vatican had formally appointed him to manage its financial affairs and that he had met with the pope in person in Rome.

He is accused of keeping various ceremonial robes, including the robes of senior clergymen, in his Manhattan office, and of hiring two monsignors to accompany him during his business dealings.

Once, according to the complaint, he even asked a monsignor to change out of his robes and put on the robe of a more senior clergyman to create the false impression that Follieri had close ties to the Vatican.

The monsignors are not accused of any crimes. Messages for comment left for Archbishop Pietro Sambi, the Vatican's U.S. ambassador, and the U.S. Conference of Catholic Bishops, were not immediately returned Tuesday.

Prosecutors allege that Follieri's scheme unraveled when the principal investor sought an audit of the partnership and demanded an explanation for expenditures unrelated to administrative overhead or business expenses.

Earlier this month, the New York attorney general's office said it was investigating a foundation operated by Follieri that vaccinates children in Third World countries.  The Follieri Foundation has not filed U.S. tax disclosure forms required from charities, according to a review of records by the AP.

Hathaway's publicist, Stephen Huvane, has previously stressed that she is not part of any probes and is no longer a board member of the Follieri Foundation.

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news.yahoo.com | 6/27/08 | Matthew Bigg

A high-profile Mississippi lawyer, who became unpopular on Wall Street for battling powerful companies, was sentenced to five years in prison on Friday after pleading guilty to conspiring to bribe a judge.

Richard "Dickie" Scruggs made millions through landmark lawsuits against tobacco, pharmaceutical and construction companies. He also sued insurance companies after Hurricane Katrina devastated New Orleans.

U.S. District Judge Neal Biggers ordered Scruggs to pay a $250,000 fine as well as for the cost of his incarceration, which was due to start on August 4, according to a local television journalist who attended the hearing.  It was the maximum sentence possible under a plea deal worked out with government prosecutors.

"I cannot be more ashamed. I've disappointed everyone in my life," Scruggs told U.S. District Court in Oxford, Mississippi, adding that his conduct was a "scar and stain" on his soul.

Scruggs appeared to cry at one point during the hearing and left the courtroom without speaking to reporters. The judge told him he should continue to cooperate with prosecutors over the case.

The indictment said Scruggs and four co-conspirators planned to pay Circuit Judge Henry Lackey $50,000 to return a ruling favorable to the Scruggs Law Firm.

The case involved a lawsuit brought against the firm regarding the division of $26.5 million in attorney's fees in Katrina-related insurance litigation.

After the bribe offer in March 2007, Lackey reported the encounter to the FBI and cooperated with its investigation, the U.S. attorney's office said.

Scruggs' most famous lawsuit against tobacco companies formed the basis of a 1999 movie "The Insider."

Scruggs was a leader of a group of law firms that successfully sued major cigarette makers on behalf of U.S. states and won a landmark $206-billion settlement in 1998.

Legal fees ran into the billions. An arbitrator awarded $8 billion to the lawyers who worked on the lawsuits in Florida, Mississippi and Texas alone. Scruggs' firm got nearly $900 million of that.

Sidney Backstrom, a member of the same firm as Scruggs, also pleaded guilty to count one of the indictment -- conspiracy to commit an offense against the United States. He was due to be sentenced later on Friday.

In Backstrom's case, the government agreed to recommend a sentence that would not exceed one half of the sentence imposed on Scruggs or 30 months in jail, documents showed.

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yonkerstribune.com | 6/26/08 | Staff Writer

Over a twenty month period from September 1, 2005 to May 9, 2007, the defendant, who was employed as a secretary/administrative assistant by the Yonkers South Broadway District Management Association Inc., stole approximately $71,098.09 from the Association by hand writing and/or cutting and cashing unauthorized checks.

Westchester County District Attorney Janet DiFiore announced that Maria Maquilon pleaded guilty today to one count of Grand Larceny in the Second Degree, a class “C” Felony.

Additionally, to cover up the thefts, the defendant intentionally altered and/or falsified business records, including, but not limited to, Quick Book Account entries, Check Requests, purported payees and check stubs.

Yonkers Tribune was first to divulge the circumstances behind this situation too long hidden from view by its Executive Director Jose Velez and its Board of Directors.  Maquilon’s bail was continued at $1,000.  She faces a minimum of five to a maximum of fifteen years in state prison. She will be sentenced on October 8, 2008.

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NPR.org  | June 20, 2008  | Dina Temple-Raston

 The Justice Department appears to have officially opened the penalty phase of the mortgage debacle in this country.  On Thursday, the FBI paraded two indicted Wall Street executives before TV cameras. That same day, the bureau announced the arrests of hundreds of people who allegedly perpetrated mortgage scams nationwide.

The arrests came as part of the FBI's sweeping Operation Malicious Mortgage. In this phase alone, FBI officials said they arrested more than 400 real estate agents, brokers, appraisers and developers. People from just about every aspect of a real estate transaction ended up in the FBI's cross hairs.

The 406 people arrested between March 1 and June 18 included everyone from alleged straw buyers — who allow scammers to use their names and credit histories on mortgage applications — to run-of-the-mill real estate agents, mortgage brokers, appraisers and developers.

While the word "mortgage" appears in some form on all these sketchy transactions, FBI officials said that mortgage fraud was just like any kind of bank fraud: People are after money and have thought of ingenious ways to get it.

Recently, for example, officials have started arresting people for scams tied to home equity lines of credit. It is identity theft with a real estate twist.

Instead of stealing an identity to secure a credit card, scammers have been zeroing in on people they think have a lot of equity in their homes. They steal their identities, then go online and get a home equity line of credit on that person's house and take the money. The FBI said the possibilities seem to be endless, and even in a down market, there are many opportunities for scam artists.

Many of the recent arrests have been related to something called a Foreclosure Rescue Scam. The schemers prey upon people who are about be foreclosed on. They promise the homeowners that they can live in their houses mortgage-free, and then buy their houses back after a year if they just sign a few papers. What their victims don't know is that the scammers work with straw buyers to take out a bigger mortgage that essentially cashes out any equity in the house. In many instances, the homeowners end up losing their homes anyway.

These kinds of scams involve plenty of players: from bogus mortgage brokers to appraisers who are on the take.

Even lawyers may be in on the scam, encouraging people to sign the papers, misrepresenting what the papers actually say. Those are the types of people arrested under Operation Malicious Mortgage.

The operation was a massive one. The FBI said more than 80 percent of their offices were involved. In all, more than 406 defendants were charged. A little less than half of those have been convicted so far, and more than 80 of them are already serving sentences.

It is no coincidence that the arrest and indictment of two Wall Street executives — hedge fund managers Ralph Cioffi and Matthew Tannin — came on the same day that the FBI announced the results of Operation Malicious Mortgage.

The FBI is sending a specific message: If you are involved with mortgage fraud — whether on Wall Street with high-level investors, or on Main Street with ordinary homeowners — the bureau intends to catch and prosecute you.

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appeal-democrat.com | 6/23/08 | Rob Young

A south Sutter County woman is scheduled to be arraigned July 21 on a charge she embezzled $156,000 while working as the office manager of a Rio Oso construction company.

Deborah Diane Moore, 41, was arrested Friday and booked into the Sutter County Jail. She was freed the next day on bail, according to jail records.

Reached at a construction site near Visalia, Eric Nelson, owner of E.C. Nelson Inc., called the theft "very painful, financially and emotionally. I'm a very small operator."  The loss is not covered by insurance, he said.

Moore stole money "in a variety of ways," said Sutter County Assistant District Attorney Fred Schroeder.   The investigation began in 2006.

"It took awhile to figure out how she did it," said Schroeder. Nelson said most of the money was taken through electronic transfers.

Nelson said he noticed Moore was making lot of purchases, including a laptop computer and trip to Mexico, but assumed the money came from her boyfriends.

Moore served as office manager for a farming operation as well as the construction company, which specializes in building food-processing facilities, said Nelson.

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newsok.com | 6/24/08 | Ann Kelley

HARRAH — A former court clerk is accused of embezzling more than $33,000 from the Harrah Chamber of Commerce while he served as the organization's president.

Jeffrey Lee Wall of Harrah was charged Friday in Oklahoma County District Court with five counts of embezzlement.

Wall resigned from his job as Harrah's court clerk in January when police began questioning him about credit cards issued in the chamber's name and unpaid bills, Harrah Police Chief Eddie Holland said.

Holland said Wall is believed to have spent most of the money remodeling his home and paying his property taxes.

From January 2007 to January 2008, Wall obtained credit cards from Sears, Builders Warehouse and Staples in the chamber's name, according to court records. Building materials and electronics were among the items purchased with the credit cards.

There were several chamber of commerce checks issued to Wall to pay bills associated with chamber events.

Holland said bills were never paid and overdue invoices were discovered in Wall's desk at work.

A portion of a $7,800 check that should have gone to pay bills associated with the Harrah Heritage Festival went to pay Wall's taxes, according to court records.

Wall pocketed more than $3,000 cash from the same check, according to court records.

Holland said his investigation did not reveal that any money was missing from city hall while Wall was court clerk.

Holland said arrangements have been made with Wall's attorney for Wall to turn himself in.

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chicagotribune.com | 6/24/08 | Staff Writer

A former Darien school employee pleaded guilty Tuesday to embezzling as much as $100,000 in district funds as compensation for working extra hours.

Renee Spuhler, 48, of Montgomery, a former administrative assistant and bookkeeper for Cass Elementary School District 63, faces a sentence ranging from probation to 15 years in prison when she is sentenced later this year. She remains free on $200,000 bail.

A sentencing date will be set after the DuPage Probation and Court Services Department completes a presentencing report. School district officials are expected to testify at the sentencing hearing about the amount they contend was stolen, before asking Judge Robert Anderson to order restitution.

After the funds were discovered missing in 2005, school officials interviewed Spuhler, who said she had worked many extra hours for three years and deserved more money, DuPage County Assistant State's Atty. Helen Kapas-Erdman said. 

"She said she felt guilty and that she wasn't getting the support from school officials that she needed," Kapas-Erdman told Anderson.

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fdlreporter.com | 6/24/08 | Staff Writer

A 39-year-old Oshkosh man accused of embezzling more than $40,000 from Alliance Laundry Systems in Ripon where he was employed as the plant's controller made an initial court appearance Tuesday.

Timothy Sabatke, formerly of Fond du Lac, was released on a signature bond after he was charged in Fond du Lac County Circuit Court with five felony counts of theft from a business setting.

Sabatke was fired from Alliance in May 2007. The investigation into the embezzlement started in April 2007, according to the criminal complaint.

After sifting through company documents and interviewing Alliance employees, investigators concluded that Sabatke, while working as plant controller, would request more money from his supervisors than he would provide to employees for reimbursement of travel expenses, according to the complaint.

The advances were meant for employee expenses, such as meals, while they were traveling, according to the complaint. Alliance manufactures and distributes coin operated and commercial washers and dryers.

If convicted as charged, he could spend up to 39 years in prison. Sabatke’s next court appearance is July 25.

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cchwallstreet.com | 6/24/08 | Staff Writer

The SEC has shut down Irvine, California boiler room. It has also closed its case against five unregistered brokers who sold $50 million worth of unregistered securities and pocketed millions in illegal commissions.

The men have agreed to surrender ill-gotten gains, but a California federal court has waived pre-judgment interest payments because of the financial situation of the defendants.

According to the Commission’s complaint, Donald Ryan and his sales force of Richard McGill, William Saunders, Michael Tuchman and Danny Rayburn were hired by Real Estate Partners, Inc. (REP) to raise money for real estate investments using any and all methods.

Ryan and his staff cold-called hundreds of potential investors each day with scripts full of lies. The sales force would tell investors about lucrative returns based on the revenue generated from real estate investments. REP, Ryan and other boiler room operators promised quick profits on no risk investments. From 2003 to 2006 REP and its teams of unregistered brokers raised over $50 million from 1600 investors across the country, according to the SEC.

The boiler room teams used sales materials that falsely projected yearly returns of 54% and five-year returns of 270%. But according to the SEC, there was no basis for making any such  projections.

The brokers used the example of nonexistent past investors who enjoyed dividend payments from the hugely successful company. In reality, any payments that investors received did not come from profits, but from money raised from new investors, in Ponzischeme fashion.

REP and its associated companies never made any money, according to the SEC. In fact, REP lost nearly $3 million. REP is now in bankruptcy, its website is offline and its phone number is no longer connected. The company paid Ryan $3 million for helping to perpetuate the fraud. It paid McGill nearly $700,000 in commissions, Sanders more than $1 million, Tuchman $450,00 and Rayburn $336,000.

The way they operated their boiler room was standard for the industry. They employed "fronters" and "closers." The fronters cold-called potential investors and

mailed them sales materials. The closers, McGill, Sanders, Tuchman and Rayburn, followed up with prospective investors and made the final sales pitches.

The fronters were paid an hourly wage plus approximately a 5% commission, and the closers were paid between 15% and 20% commissions, minus what they paid their fronters, according to the SEC.

Ryan and the closers in his salesroom expected the fronters to cold-call as many as 300 people a day from investor lead lists provided by REP. REP spent thousands of dollars each week purchasing the leads.

The sales scripts were often authored by the closers, including Ryan. Along with making the standard promises of fast, no-risk cash, the scripts emphasized REP's purported affiliation with Coldwell Banker, claiming that in the last eight years REP was the thirdlargest Coldwell Banker franchise in the country. According to the SEC, Coldwell Banker has nothing to do with REP.

The scripts also touted REP'S purported track record of successful real estate purchases and the possibility of investors making up to ten times return on their initial investment.  The brokers would also send potential investors glossy pamphlets describing REP and projected earnings that were invented by REP management, according to the SEC.

The pamphlet had a graph that showed how a $20,000 investment would turn into $194,000 after 5 years. According to the SEC, the pamphlets were mostly lies.

The Commission’s litigation against other participants in the scam continues.

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rep-am.com | 6/23/08 | BY JONATHAN SHUGARTS

A Middlebury man and former employee in the Southern Connecticut State University bursar's office was arrested last week and accused of bilking the university out of more than $10,000, state police said.

Gregory D. Johnstone, 39, of 156 Bioski Road, surrendered to state police at the Troop I barracks in Bethany after a warrant was issued for his arrest, police said. He was charged with first-degree larceny, first-degree computer crime and 35 counts of forgery.

Police said the thefts took place in 2004 and 2005 while Johnstone was employed in the bursar's office of the New Haven university, which has about 12,000 students and 700 faculty members, according to its Web site.

According to Sgt. Chris Johnson, a state police spokesman, Johnstone used a university computer to falsely credit students' accounts. Johnstone would then print out a check for the credited amount and cash it, Johnson said.

He said he did not know how much was stolen, but that it was more than $10,000. State police were called after a routine, internal university audit was conducted, police said. Detectives investigated the forgeries for several months and pieced together a paper trail of checks that Johnson said was "pretty much like a puzzle."

A woman who answered the phone at Johnstone's home said the family did not want to comment on the arrest. Messages left for university personnel were not returned Sunday.  Johnstone is scheduled to appear in New Haven Superior Court on July 3. He was released on a $1,000 bond.

Posted by at 5:18 PM | Permalink

mercurynews.com | 6/24/08 | Associated Press

The former head of a postal workers union will be doing time in federal prison for embezzling more than $170,000 from the union.

After pleading guilty earlier this year to embezzlement and other charges, Graham Paul Vane has been sentenced to 15 months in prison.

Vane had served as the president of the National Association of Letter Carriers, AFL-CIO, Branch 1280 from January 2002 to March 2006.  Prosecutors say while Vane served as the head of the union he used a union-issued credit card and falsified union expense records to pay for more than $170,000 in personal expenditures.

As part of his sentence, the 60-year-old Vane was also ordered to pay $150,000 in restitution.

Posted by at 5:15 PM | Permalink

money.cnn.com | 6/23/08 | Kathy Schwiff

A former director of Samsung America Inc.'s Korea Export Department pleaded guilty in connection with a plan to embezzle more than $1 million from the company from 2002 through 2007.

John Y. Lee, also known as "Yong Kook Lee", 44, of West New York, N.J., pleaded guilty to charges of wire fraud and subscribing to false individual income tax returns. He faces up to 23 years in federal prison and fines of $500, 000.

The charges are related to a scheme to embezzle from Samsung America, a Ridgefield Park, N.J.-based subsidiary of Korean electronics giant Samsung Electronics Co. Ltd. (005930.SE).  Lee is free on a $500,000 bond until sentencing Oct. 6.

He admitted that his scheme resulted in a loss to Samsung of $1 million to $ 2.5 million, and that his federal income-tax return failed to include about $ 339,138 that he embezzled from Samsung America.

Lee said that in September 2000, he created a fictitious entity called Engelhard Supple Co. to make it appear as though that entity was Engelhard Corp., a New Jersey-based catalyst maker later acquired by BASF SE (BAS.XE). He admitted creating false financial documents that made it appear that a joint venture of Samsung and Corning Inc. (GLW) had ordered services from Engelhard, while no services had been ordered or provided.

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smartpros.com | 6/23/08 | Staff Writer

Chief executives across the United States view the Sarbanes-Oxley law as reactionary and over-burdensome. Yet they still cite "improper accounting practices" as the number one ethical issue facing business today, according to a survey conducted by ethics centers at Georgia State and Clemson universities.

The National Survey of CEOs on Business Ethics, by Georgia State's Center for Ethics and Corporate Responsibility and Clemson's Robert J. Rutland Institute for Ethics, polled 293 chief executives at both private and public companies in 48 states.

Among its findings, 62 percent of executives agreed that the Sarbanes-Oxley Act strengthened public and investor trust in corporate America, but 74 percent said it had done nothing to improve ethical standards at their businesses. Sixty-eight percent agreed that the act was an overreaction to the ethical failures of a handful of executives and has proven burdensome and unnecessary.

"Basically, [Sarbanes-Oxley is] a really unpopular piece of legislation and it's unpopular because people have real doubts about whether the good that it's done can justify the costs," said John Knapp, the director of the Center for Ethics and Corporate Responsibility at the J. Mack Robinson College of Business.

CEOs were also asked about the often-controversial topic of executive compensation. More than 60 percent of private company CEOs said CEO pay at most large public companies is excessive. And 31 percent of CEOs at public companies agreed public company CEO pay is excessive.

Public company CEOs seemed split over whether their pay was properly aligned with company performance. Forty-two percent said it was properly aligned while 45 percent said it wasn't.

The arrests and conviction of key figures in the Enron and WorldCom scandals also appeared to have a damaging effect on the public's perception of CEOs, the survey respondents said. Sixty-six percent said the convictions show "the system works," but about the same number said the convictions also "further erode public trust and confidence in business leaders" and "reinforce a negative, unfair stereotype of CEOs."

Nearly 90 percent said the scandals, which shook the business world in the early 2000s, have made corporate leaders more attentive to ethical concerns.

"People pay more attention to the speed limit when they see people pulled over to the side of the road," said Daniel Wueste, the director of the Rutland Institute for Ethics at Clemson.

Survey respondents were asked whether holding to high ethical standards would improve their company's competitive position over the long term and the short term. While 94 percent said ethical standards would be beneficial in the long run, just 70 percent said high standards would help in the short term. Fifty-one percent agreed business executives are more likely to make ethical compromises during economic downturns.

Respondents to the survey include chiefs of corporations with minimum annual revenue of $10 million in a range of industries, including manufacturing, hospitality, banking, utilities, construction and healthcare. Most have between 100 and 1,000 employees and about 23 percent are publicly-held companies.

Posted by at 6:11 PM | Permalink

chron.com | 6/21/08 | Erik Larson and Carlyn Kolker

Messages allegedly sent by two former Bear Stearns Cos. hedge fund managers indicted for fraud show even sophisticated professionals disregard the dangers of putting sensitive information in e-mails, ex-prosecutors said.

"It is pretty dumbfounding that people still use e-mail in such a casual way," former federal prosecutor Carol Bruce said. "But they do — and they will into the foreseeable future."

Ralph Cioffi, 52, and Matthew Tannin, 46, were charged this week with misleading investors by saying two funds were thriving while knowing subprime-mortgage investments threatened their collapse. Investors in the funds lost $1.6 billion. The indictments cited e-mails from business and personal accounts in which they described looming problems.

The men were each charged in federal court in New York with conspiracy, securities fraud and wire fraud. Cioffi also was charged with insider trading.

The indictments brought to light e-mail conversations that allegedly took place between the two men and others about the health of the funds, including a March 15, 2007, message from Cioffi to a team economist with the subject line "Fear."

"As we discussed it may not be a meltdown for the general economy but in our world it will be," the indictment quotes Cioffi as writing.  Prosecutors often make e-mails the centerpiece of evidence at trial, said Joshua Hochberg, a former prosecutor.

While e-mails can be easily retrieved from business or commercial Internet serviceproviders, many defendants use the medium with the belief that it's private communication, prosecutors said. Just using e-mail itself can be used by the government as evidence of guilt, one former prosecutor said.

"If you have one or a handful of damning e-mails on a personal account, prosecutors will argue that use of e-mail is consciousness of guilt because they took a route to communication that they thought wouldn't be discovered," said Daniel Horwitz, a former assistant district attorney in Manhattan.

"People lose their judgment because they've become e-mail addicts, just like crack-heads lose their judgment," said Bruce. "When you write a good old fashion formal letter, everyone behaves better."

Posted by at 6:03 PM | Permalink

ap.google.com | 6/21/08 | Staff Writer

LOS ANGELES (AP) — A woman accused of embezzling more than $700,000 from Charlton Heston and television writer and producer Stephen J. Cannell pleaded no contest and was sentenced to more than five years in prison Friday.

Sharon M. Walker, 56, pleaded no contest to two counts of grand theft and one count of tax evasion in Los Angeles Superior Court. A judge immediately sentenced her to prison and ordered her to repay nearly $82,000 in back taxes.

According to prosecutors, Walker stole nearly $568,000 from Cannell, whose writing and producing credits include "The A Team," "21 Jump Street," and "The Rockford Files." Heston and his wife were bilked out of $158,000, prosecutors said in a news release. Walker worked as an account manager at a business management firm, which allowed her access to Heston and Cannell's financial info. Prosecutors accused her of forging signatures to pay credit card debts between 1999 and 2005.

Jail records show Walker remains in custody at a Los Angeles-area jail. No attorney information was listed and she could not be reached for comment.

Posted by at 5:52 PM | Permalink

iht.com | 6/20/08 | Associated Press

Refco Inc.'s former chief executive is pleading with a judge not to impose the maximum 25-year sentence that prosecutors are seeking, saying the 59-year-old would effectively be behind bars for life.

Defense lawyers acknowledged in court papers filed Thursday that Phillip R. Bennett, a British citizen, deserves to go to prison and face public humiliation, loss of income and deportation in connection with the $2.4 billion fraud to defraud investors.

Bennett pleaded guilty in February to conspiracy and fraud charges that carry a possible prison term of more than 300 years. During the tearful plea, he admitted he knew he was wrong to hide large losses in the 1990s at the one-time commodities brokerage giant.

The government contends Bennett engaged in fraud because he knew that telling Refco's creditors, customers and others that the company had lost more than $300 million would lead to its downfall and leave his nearly 25 percent ownership worthless.

Prosecutors asked that Bennett, whom they described as a "thoroughly dishonest human being," be sentenced to up to 25 years in prison for fraud, like other former executives convicted of financial crimes involving large sums of money.

The government says Bennett became a billionaire as a result of the crimes, acquiring a New Jersey mansion, Park Avenue penthouse, $20 million plane, 15 different expensive sports and racing cars worth more than $11 million, and more than $29 million in art.

Bennett is scheduled to be sentenced in July.  Refco went public in August 2005. It filed for bankruptcy just weeks later, after disclosing that a $430 million debt, owed to the company by a firm controlled by Bennett, had been concealed. The disclosure caused Refco's stock value to plummet.  Refco once employed 2,400 workers in 14 countries.

Posted by at 5:44 PM | Permalink

rgj.com | 6/20/08 | Jaclyn O'Malley

After more than three weeks on the run, a Washoe County executive with an alleged gambling problem surrendered Thursday at the sheriff's office to face charges of stealing up to $2.2 million from Washoe County through bogus purchases of water well capacity rights.

Paul Constantine Orphan, 54, was booked on a warrant charging him on five counts of grand theft related to embezzling about $2.2 million.

Authorities said in court documents the total could be up to $6.4 million based on transactions they have been reviewing. More charges are possible, authorities said.  An independent forensic audit also is being done, county officials said.

Orphan was held in lieu of $2.25 million bail. An FBI fugitive warrant was issued June 11 charging him with unlawful flight to avoid prosecution.  Through a jail official, he declined to be interviewed.

Sheriff Mike Haley said Orphan told detectives he drove to Chicago to contemplate his situation and took a bus back to Reno. He took a taxi cab to the sheriff's office where he asked to speak to Detective William Engelmann.

Engelmann said Orphan appeared calm and was cooperating with detectives questioning him Thursday afternoon.

Engelmann said he went to Orphan's home May 28 and asked him to come to the sheriff's office for an interview about the alleged embezzlement. He said he would drive himself there.

Detectives watched him drive to various bank ATM machines and gas up his BMW. Once he appeared to be driving towards the sheriff's office, they stopped watching him.  But he never showed up. His bank accounts were frozen the same day.

Haley said there was no legal reason May 28 for deputies to detain Orphan or force him to be interviewed. A warrant was issued for his arrest June 6 after search warrants were executed on his home, bank accounts and John Ascuaga's Nugget.

Chief Deputy District Attorney Dan Greco said his office would not allow a plea agreement. Greco said if Orphan does not plead guilty to the charges and pay full restitution, he will increase the charges to 41 counts of grand theft, the number of bogus transactions deputies said are linked to Orphan. Each count carries a maximum prison term of 10 years.

County Manager Kathy Singlaub has said she gave the sheriff's office a "heads up" call May 20.  Officials formally told detectives of their suspicions May 25. Two days later, county officials presented law enforcement and Greco with the evidence they had against Orphan.

"I'm interested in justice, not playing the blame game," Greco said. "I'm going to do all I can to get justice in this case." Greco and Haley declined to discuss actions or investigations by county officials before reporting their suspicions. Greco said what transpired before the sheriff's investigation was launched would be revealed during the trial.

Orphan is accused of creating two dummy companies and generating fake correspondence to appear that he was purchasing water well rights for the county. Orphan allegedly "hijacked" the identities of his supervisors to override a computer system to approve the transactions.

Authorities said his transactions were typically just below $25,000, which would have caused the county purchasing board to review it.  Orphan worked for the county Department of Water Resources since 1988 and was the Utility Division's engineering manager.

Posted by at 5:36 PM | Permalink

newsok.com | 6/20/08 | Associated Press

WAGONER -- A former Coweta Chamber of Commerce executive and ex-beauty queen faces a July 8 preliminary hearing for allegedly helping herself to more than $30,000 in chamber funds.

Wagoner County prosecutors have filed 10 felony counts against Misty Dawn Edwards, who remains free on $10,000 bond.

Edwards, of Porter, was charged June 3 with seven counts of embezzlement totaling $28,500 and three counts of obtaining cash by bogus check or false pretenses totaling $2,705.

The crimes were committed over several months through November, court documents allege.  A former Miss Coweta Fall Festival, Edwards resigned Nov. 19 citing personal reasons after serving as the chamber's executive director since May 2006, reports show.

Edwards surrendered to police after a warrant for her arrest was issued the day prosecutors charged her.  Edwards' hearing will be before Special District Judge Holli Pursley.

As for the chamber, members of the board say they want to restore public confidence in the organization. "I don't know how long that will take, but I do know we had a successful and fun banquet," board President Greg Miller said. "We had over 200 there. We had a great response."

The board has hired former Executive Director Martha Sewell to replace Edwards.

Posted by at 5:32 PM | Permalink

bloomberg.com | 6/19/08 | Robert Schmidt

Federal prosecutors have charged more than 400 people across the U.S. in a crackdown against mortgage fraud, as the government stepped up efforts to address the subprime loan crisis.

``The Department of Justice is determined to detect and to punish mortgage fraud and to help restore the stability and confidence in our housing and credit markets,'' Filip said at a press conference in Washington.

Separately, the government today unsealed an indictment against two former managers of Bear Stearns Cos. hedge funds whose collapse helped ignite the subprime meltdown. The crisis has forced hundreds of thousands of people from their homes through foreclosures and triggered almost $400 billion in losses and writedowns on Wall Street.

While the government has been probing mortgage fraud for years, today's announcement underscored it has become more widespread.

The roundup announced today began three months ago and authorities estimate victims lost more than $1 billion as a result of the frauds. The schemes include cheating lenders, swindling those facing foreclosure and filing fraudulent bankruptcy claims, officials said. Among those indicted were real-estate agents, lawyers, appraisers and borrowers.

While the operation focused on individual cases and smaller crime rings, officials said they are also probing 19 companies, including investment banks and hedge funds, that may have engaged in accounting fraud or other white-collar crimes related to mortgage securities.

``We recognize that these corporate fraud cases will increase in numbers due to an enhanced level of regulatory and internal audit reviews by many of these Wall Street firms, and we will address these cases as they are identified,'' Mueller said.

The FBI has struggled to keep pace with the growing number of mortgage cases and earlier this month ordered 26 of its 56 field offices to stop opening some financial fraud investigations so agents could focus on the subprime crisis.

Still, Filip said that the Justice Department wouldn't ask Congress for more money to fight mortgage fraud.

``We think we give enormous value to the taxpayers with the resources that we're given,'' he said. ``We're going to work as hard as possible with what we have.''  The cases announced today include a 51-count indictment in Dallas where 11 people were accused of using phony buyers to obtain inflated loans. The alleged fraud ring, which included appraisers and mortgage brokers, would then deliberately default on the loans and keep most of the money.

In Chicago, U.S. Attorney Patrick Fitzgerald announced charges in about a dozen new mortgage fraud cases. In one case filed June 17, a local businessman was accused of stealing about $1.9 million, also by getting loans for purchasers who didn't intend to occupy the properties.

Posted by at 5:22 PM | Permalink

forbes.com | 6/20/08 | Tara Weiss

Two Bear Stearns executives learned a hard lesson this week: If you're going to say something inappropriate, don't write it in an e-mail.

An online exchange between fund managers Matthew Tannin and Ralph Cioffi questioned the performance of certain funds in which they were investing clients' money. But their public comments told a different story, and now those e-mails are the smoking gun in the civil and criminal cases against them. If convicted of conspiracy and securities fraud, the two could face jail time and heavy fines.

Will employees ever learn that anything they write in an e-mail can and will be used against them?  "This stuff is obtainable, and it's difficult to deny once it's printed out," says Josh Bowers, a labor lawyer in Washington, D.C.

Of course, we're not encouraging you to behave illegally offline, either. But the risk of getting caught online is high. Employees send hundreds of e-mails daily from their work computer, and experts say they too often broach subjects that should be avoided. The most common? Sex.

Many employees write e-mails or forward jokes with sexual overtones. On the one hand, forwarded jokes are usually meant to be harmless. The danger comes, however, if a complaint against the sender is filed that may have nothing to do with the inappropriate e-mails. For example, a manager who is unhappy with her employee's ability to meet deadlines might ask IT to monitor his e-mail transactions. It's only then that the sexual e-mails come to light, which provide reason enough to fire an employee or even prompt legal action.

"Those e-mails can be used to show a pattern of harassment," says Matthew Blit, a labor lawyer with Levine & Blit in New York City.

Discrimination is another dangerous topic. Blit recalls a case in which a female employee filed a lawsuit against her employer, claiming it didn't protect her from sexual and racial discrimination. As part of the discovery process, the employer examined her outbox, and what they found seriously hurt her case. She forwarded dozens of jokes containing sexual and racial content to her brother and mother from her work computer.

"The attorney said, 'You're complaining you were discriminated against, but here you are sending them out yourself. Isn't that correct?' " Blit says.

It's an important message: Nothing written from your work computer--even if it was sent from a personal e-mail address--is private. Most employee handbooks include an electronic communications policy stating that any correspondence sent from an employer-owned computer belongs to the company. Before starting a job, most companies require new employees to sign the handbook and return it to human resources to prove that they've read and agree with it.

And technology allows employers (and prosecutors) to retain messages sent years ago. Some employers periodically scan employees' e-mail for certain key words, like profanities, or other vocabulary that could denote violence or harassment.

Labor lawyer Patrick Boyd encourages all employees to implement what he dubs "the grandmother test." If a topic is too embarrassing to share with your grandmother, don't send it. It's a tough guideline to follow, since our work and personal lives are so intertwined. We receive e-mails from family members while at the office and respond offhandedly between assignments. A lax attitude toward e-mail seeps into our interoffice communication, too.

"That's dangerous," Boyd says. "When you communicate something, even though you did it after giving the topic 30 seconds of thought, it can be used in a court of law years later. E-mail is perceived as casual, and it should not be."

Even a confidential exchange between an attorney and a client isn't protected if an e-mail is sent from a client's work computer to her lawyer.  The Bear Stearns executives are just the latest in a long line of employees who've drawn negative attention--and legal trouble--for inappropriate e-mails.

Take Frank Quattrone, the investment banker from Credit Suisse First Boston who sent an e-mail to his staff with the subject line: "Time to clean up those files." The note referred to the firm's practice of discarding certain files and memos. Quattrone's conviction was later overturned.

In 2002, Merrill Lynch paid $100 million to settle a lawsuit because its analysts were making certain statements about stocks in public but whispering others behind closed doors. The private comments didn't stay that way after analyst Henry Blodget's e-mails were uncovered. He had given stocks "buy" ratings, but his correspondence showed he actually thought they were a "piece of junk."

More recently, the head of mortgage lender Countrywide, Angelo Mozilo, intended to send a colleague a note deeming a borrower's plea for help "disgusting." Instead, he directed the e-mail back to the borrower. When the borrower went public with the news, the company was forced to confirm that the e-mail was indeed from its CEO.

It's unlikely that particular e-mail would have passed the grandmother test. But everyone else's definitely should.

Posted by at 3:17 PM | Permalink

heraldtribune.com | 6/20/08 | Staff Writer

SARASOTA COUNTY A single mother told police that she embezzled nearly $100,000 from a foundation because she did not want to lose her home to foreclosure, authorities say.

For two years, Teresa Finehout deposited counterfeit checks into her bank account, according to arrest documents. She was a bookkeeper at the International BodyTalk Association, an alternative medicine group based in Sarasota County.

BodyTalk reportedly lost about $97,000 during the scam. Officials there declined to comment. Finehout surrendered Tuesday and was released on a $15,000 bond. Reached at home on Wednesday, she declined to comment. She has not hired an attorney, Finehout said.

Posted by at 8:36 AM | Permalink

portfolio.com 6/18/08 | Staff Writer

A man at the center of a $683 million fraud of nearly two dozen banks, including J.P. Morgan Chase, to obtain loans for a fake metals trading scheme, won't face additional prison time because of his cooperation with the government, federal prosecutors say.

Anil Anand, former chief financial officer of Allied Deals, Inc., a New Jersey metals-trading company, was sentenced this week to time served, which amounted to about seven months in prison, for his participation in swindling the banks.

While he avoided another prison stint, Anand, 46, of Plainsboro, New Jersey, is not off the hook financially. U.S. District Judge Richard M. Berman ordered Anand, who now works as a chief financial officer for a pharmaceutical company, to forfeit $600 million and pay $683.6 million in restitution.

Anand was one of 15 people who were charged with obtaining loans by telling banks they needed financing for shipments of metals for customers in India and other locations. They used fake purchase orders and invoices to dupe banks and used new money to pay off old loans in what the government called a "sprawling, international Ponzi scheme."

Anand was integral to the scheme, helping to establish fake credit histories for sham customers, supplying them with false financial data to convince banks they were actual metal trading customers and soliciting bank loans, according to prosecutors.

The complex scheme also involved establishing a fake credit-reporting agency, to generate false credit reports to lend credit worthiness to sham companies. Also, the same metal was shipped between multiple customers at different ports around the world, using each transaction to obtain another loan.

Anand was arrested in May 2002 then pleaded guilty in December of that year, agreeing to help prosecutors in return for a reduction of a possible sentence of 22 years in prison. He later outlined the fraud for prosecutors, and provided testimony at one trial.

Among the other banks who were fleeced by the Piscataway, N.J.-based Allied Deals were PNC Financial Services Group Inc.; FleetBoston Financial Corp., which Bank of America acquired in 2004; Dresdner Bank of Germany, and China Trust Bank.

Along with Anand, 14 other people were charged. One was acquitted but the others pleaded guilty or were convicted either at trial in the United States or in Britain.

Narendra Rastogi, the former chief executive officer, was sentenced a seven-year prison term and ordered to pay $683.6 million in restitution. He also cooperated with prosecutors and received credit for the nearly six years he had already spent in jail.

His brother, Virendra Rastogi, who owned London-based RBG Resources, which cooperated with Allied Deals, was convicted in Britain last year and sentenced to a nine and one-half year sentence.

As for Mr. Anand, he must turn 20 percent of his annual income over to the federal government, for at least five years, said his lawyer, Kerry Lawrence.

It's unclear how much that will be, but even with at elevated executive pay levels, it isn't likely to be anything close to $1.2 billion.

Posted by at 8:32 AM | Permalink

fresnobee.com | 6/18/08 | Pablo Lopez

One of the longest and costliest cases in Fresno County history ended Wednesday when two founders of a nonprofit agency admitted to embezzling money meant for abused and neglected children.

With their pleas, Elaine Bernard, the chief executive officer of the child-welfare organization Genesis, and her sister, Carol Dela Torre, the nonprofit's clinical director, likely will spend time in jail and lose their social-worker licenses, lawyers said.

Their attorneys said Bernard wiped tears from her eyes as she pleaded no contest in Fresno County Superior Court to two felony charges -- theft by embezzlement and tax evasion. Dela Torre, appearing stoic, pleaded no contest to a misdemeanor charge of theft by embezzlement.

A no-contest plea is equivalent to a guilty plea in criminal proceedings.  Judge John Vogt told them to be prepared for jail when they are sentenced Aug. 4. 

The plea agreement essentially ends the 61/2-year-old case and puts the brakes on what was sizing up to be another long, costly trial, requiring dozens of witnesses and enough exhibits to fill a room.

District Attorney Elizabeth Egan had spared no expense in prosecuting the defendants. But in the end, Egan backed down on her demand that Bernard, 48, and Dela Torre, 47, be sentenced to state prison time.

The deal was carved out on Tuesday. Defendants and lawyers for both sides were in the second day of pretrial hearings when Assistant District Attorney Jon Skiles came to the courtroom to discuss plea deals.

In the judge's chambers, both sides agreed to let Vogt determine whether the sisters should go to prison. Vogt said they wouldn't do time in prison but might be sentenced to county jail time, Skiles said.

In court Wednesday, Bernard shook Skiles' hand.  "Thank you for showing mercy," she told him.  "I'm glad we were able to work things out," Skiles replied.

Court records show that Bernard has repaid Genesis $132,434 and Dela Torre repaid $48,533 for using Genesis credit cards and bank checks for their own use.  As part of the plea deal, Bernard will pay an additional $100,000 in restitution to Genesis and about $7,000 to the state Franchise Tax Board, which investigated the tax charges. Vogt also could fine her up to $20,000 for the two felony counts when she is sentenced.  Dela Torre does not have to pay additional restitution but faces a fine up to $1,000.

Bernard makes $155,000 a year, and Dela Torre earns $145,000. Bernard declined to discuss the plea deal. But Foster said she was satisfied because it didn't include prison time.

"She admitted to criminal wrongdoing," Foster said. "She wants to put this behind her. But her life will never be the same as it was before."

Dela Torre also declined to comment. Her lawyer, W. Scott Quinlan, said: "She feels it is a good result."

Because of the pleas, the sisters face the grim prospect of losing their state license to run the business, which provides services to foster children, their lawyers said.  Quinlan said a felony or misdemeanor conviction would put their social-worker licenses in jeopardy.

The case against them began in late 2001 when two former employees told authorities that money earmarked for abused and neglected children was being used to finance the defendants' shopping sprees and vacations.

The Genesis case, however, turned out to be one of the most complex investigations in Fresno's history, with documents filling 500 boxes.  After a lengthy investigation, prosecutors Michael Elder and Regina Leary determined that Bernard and Dela Torre embezzled more than $500,000 of Genesis money between 1996 and 2001, but they never could prove that amount.

The first trial ended in a mistrial in May 2007 when 11 out of 12 jurors said they were guilty of a 16-count indictment that charged them with theft, tax evasion and filing false state income taxes.  To reach a verdict, all 12 jurors must vote for guilt or innocence.

Foster said he planned in the second trial to attack the prosecution for spending "a ton of money on the case." He filed a public-records request to learn how much money has been spent by prosecutors, but the only document made public, so far, was a bill for $220,000 from Stuart Harden, a certified fraud examiner and key prosecution witness.

Quinlan and Foster said it would have been difficult for the prosecution to get a conviction because Bernard, as chief executive officer, had authorized the use of the Genesis credit cards and checks. The Genesis board of directors also has consistently supported them, the lawyers said.

"Elaine has admitted to making mistakes in running the business," Foster said. "She never thought her actions would amount to criminal conduct."

Posted by at 8:26 AM | Permalink

chicagotribune.com | 6/17/08 | Ryan J. Foley

A former health care executive was sentenced Tuesday to five years in prison for helping his Philippines-based company swindle $100 million from the U.S. military health insurance program.

Thomas Lutz, 41, said in federal court he took responsibility for the six-year scheme in which Health Visions Corp. bilked $99.9 million from the military's Tricare program through inflated and fraudulent claims.

U.S. District Judge Barbara Crabb said the five-year sentence was modest given the extent of the fraud but the longest she could impose for the single count to which Lutz pleaded guilty under a plea deal. She said he deserved punishment for "repeated acts of fraud and concealment."

"It's just horrifying that you were able to take as much money as you did," Crabb told Lutz.  The scheme deprived Tricare, which insures 9.2 million current and retired service members and dependents, of money it could have used to provide care for others, Crabb said.  In April, Crabb ordered Health Visions to pay $99.9 million in restitution.

Under her order, the company must sell all of its assets, including land, hospitals and office buildings, within 10 months. She said Lutz would be responsible for paying the remainder, including at least 25 percent of his income once he is released from prison.

Crabb gave Lutz until March 18 to report to prison. Prosecutors asked for the nine-month delay so Lutz could help the government recover as much money as possible from the company.

Formed in 1997, Health Visions owned and operated hospitals and clinics in the Philippines and billed Tricare on behalf of other health care providers. The company served thousands of U.S. military retirees living in the Philippines, where bases were located until the early 1990s.

As president of the company in 2003 and 2004, Lutz oversaw the work of employees who prepared hundreds of fraudulent and inflated claims billed to U.S. taxpayers, Crabb said. Lutz also signed an illegal agreement in 1998 in which he referred patients to a medical clinic in exchange for kickbacks, she said.

Health Visions and Lutz were charged in a 75-count indictment in 2005. Lutz pleaded guilty to conspiracy to pay kickbacks in December 2006 and agreed to cooperate with prosecutors under a deal that Crabb said gave him "a huge break." The company was reimbursed $163 million by Tricare between 1998 and 2004, and prosecutors believe at least $99.9 million of that was fraudulent. Pentagon auditors have criticized Tricare program managers for moving slowly to uncover and stop the fraud.

The scheme by Health Visions is the biggest in a long-running investigation of Tricare fraud in the Philippines handled by prosecutors in the Western District of Wisconsin, where Madison-based WPS Health Insurance is the subcontractor that pays overseas Tricare claims. About three dozen U.S. military veterans and Philippine workers have been charged.

"This conviction, along with the conviction of the corporation, furthers our goal to protect the Tricare program," U.S. Attorney Erik Peterson said in a statement. "Our veterans deserve quality health care, and our nation deserves a program free from fraud. We will continue to vigorously investigate and prosecute these cases."

Crabb blamed Lutz for encouraging others to join the fraud who later ending up in legal trouble. The "consequences of your very, very selfish actions" were enormous, she said.  Lutz, an American citizen whose wife and four young sons have moved to Missouri from the Philippines, read a brief statement in which he took full responsibility for his company's actions.

"I would like to apologize to the Department of Defense," he said. "I am truly sorry for all those who have been affected."

Posted by at 8:22 AM | Permalink

nj.com | 6/17/08 | Randall Clark

SALEM -- The former payroll coordinator of Ranch Hope Inc. is being sued by the Christian-based organization after allegedly embezzling thousands in funds from its coffers over the past two years.

Jennifer Benton allegedly forged 83 checks from March 14, 2006 to March 5, 2008 with the signatures or name stamps of the directors there, taking a total of $60,496.53, according to a lawsuit filed in Superior Court here.

Benton, 35, of Franklin Street, in Bridgeton, is currently under investigation by the New Jersey state police after the alleged embezzlement was reported in April by Ranch Hope officials. No charges were filed as of Friday morning, authorities said.

The alleged embezzlement began almost immediately after she began employment in the payroll department of the non-profit group, according to Ranch Hope Executive Director Dave Bailey Jr. She also spent one year as a secretary for the ministry.

This is one of the most serious breaches of trust the organization has seen since it was founded by Rev. Dave Bailey Sr. and his wife Eileen in 1964.  "The entire Ranch Hope ministry is deeply saddened," Bailey Jr. said Friday. "We are in shock that a member of our family has acted in this way ... She was part of our culture, our mission."

Ranch Hope, with headquarters on Sawmill Road, in Alloway, provides religiously-grounded behavioral healthcare, counseling and educational services to children and adults from throughout New Jersey and the Delaware Valley region.

According to the lawsuit, filed by Pennsville attorney Donald Masten on behalf of Ranch Hope, there was at least one check per month cashed by Benton in that two-year period, and sometimes as many as seven.  Amounts started at $400 and progressed to $1,500 per check by last November.

Masten said it appeared Benton increased the checks later in the alleged taking period, showing that her bravado grew as the conversion continued to go unnoticed.  It is unclear what she used the money for. Bailey Jr. said there were no outward signs that led anyone to believe she allegedly was stealing from the organization.

Copies of every check Benton drew on the Ranch Hope account without permission are listed as exhibits within the lawsuit, filed in state Superior Court, in Salem.

Bailey explained that she apparently took money as payroll advance checks and did not deduct the money from the account software. He said by the time that Ranch Hope officials realized the money was missing, The payroll account had lost over $60,000.

The total amount of conversion actually totaled $71,421.53, though Benton had put $10,925 back into the account at some point, officials said.

Benton's activity was discovered in April during an internal audit of Ranch Hope's bank statements by an outside party, Bailey Jr. said. Benton was released from employment immediately, and the state police were notified.  He added that the payroll structure has been modified since these allegations came to light.

A 501(c)3 non-profit, the organization relies heavily on donations from the community. It has faced several setbacks in recent years -- a devastating fire that destroyed the administration building on the main Alloway campus in September 2006 and another in a Camp Edge office building during October of last year.

In a telephone interview from the 25th Annual Wrangler's Golf Classic, which benefits Ranch Hope, Bailey Jr. said Friday he hopes this incident does not diminish people's faith in the ministry.

"It is an entrusted operation that we rely on others to be a part of and support," Bailey said. "I think that's what makes this so much more unbearable."

Posted by at 8:18 AM | Permalink

nj.com | 6/17/08 | Brian T. Murray

The former business agent of a Trenton-based union local for asbestos and insulation workers faces a federal prison sentence after pleading guilty yesterday to embez zling about $829,000 in union funds, which he gambled away.

John DaBronzo, 57, of Hamilton Square had been an official with Local 89 of the International Association of Heat and Frost Insula tors and Asbestos Workers of the United States and Canada from 1989 until 2007.  He pleaded guilty to embezzlement charges in U.S. District Court in Trenton in a two- count federal information.

The U.S. Attorney's Office contends he pilfered funds from two union funding sources between January 2005 and April 2007. Asked by U.S. District Judge Joel A. Pi sano what he did with the money, DaBronzo told the court he gambled it away.

The U.S. Attorney's Office contends about $396,000 of the pilfered funds came from the union's Joint Apprenticeship and Training Committee Fund, or JATC, while Da Bronzo was administrator of the fund. The other $433,000 was pilfered from remittance checks that the union local received from employers that held contracts with Local 89.

JATC accounts are common among trade unions, and are used to train novice and apprentice workers in their specific field. Employers holding contracts with unions and the workers themselves pay into the fund through payroll deductions.

The employer remittance checks received at Local 89, which also operated out of Atlantic City, contained additional funds for other Local 89 operations, and the checks were supposed to be deposited into a union distribution ac count.

DaBronzo, in a question-and- answer period during his federal court plea, said his embezzlement began when he wrote checks payable to himself out of the JATC checking account. When the ac count balance became significantly depleted, he turned to stealing the remittance checks, according to federal authorities.

Each count of the information to which DaBronzo pleaded guilty carries a possible penalty of five years in prison and $250,000 in fines. DaBronzo is slated to be sen tenced Sept. 16. He is being permitted to remain free on a $50,000 bond pending his court date.

Posted by at 8:15 AM | Permalink

bloomberg.com | 6/16/08 | Oliver Biggadike and Takehiko Kumakura

June 16 (Bloomberg) -- LTT Bio-Pharma Co., a Tokyo-based biotechnology company, said police in Japan arrested two of its former employees as part of a fraud investigation.

The four people who were arrested raised about 108 billion yen ($996 million) from companies and individuals as part of the fraud, Kyodo News and the Asahi Shimbun said. Some of the money has seen recovered and 50 billion yen has not yet been retrieved, Kyodo said, citing police.

Lehman Brothers submitted a complaint against Marubeni Corp. in a Tokyo court on May 28, kicking off a trial in which the New York-based firm is seeking to recover 35 billion yen for alleged fraud involving two of the Japanese trading company's former employees. Marubeni has said it was also a victim of fraud that involved forged documents, and that the two employees were fired.

The two LTT employees were Yuzuru Yamanaka, a former president, and Shigenori Saito, former president of medical consultancy firm Asclepius Ltd. Yamanaka was also a Marubeni employee, Kyodo and the Yomiuri newspaper said.

Police also arrested Shingo Yamaura, a contract worker at Marubeni when the alleged fraud occurred, and Fumihiro Takahashi, president of a Tokyo-based building planning compan