FraudBaron.com

sciam.com | 8/18/08 | Herbert Thompson

The author asked some of his acquaintances for permission to break into their online banking accounts. The goal was simple: get into their online accounts using the information about them, their families and acquaintances that is freely available online.

As a professor, a software developer and an author I've spent a career in software security. I decided to conduct an experiment to see how vulnerable people's accounts are to mining the Web for information. I asked some of my acquaintances, people I know only casually, if with their permission and under their supervision I could break into their online banking accounts. After a few uncomfortable pauses, some agreed. The goal was simple: get into their online banking account by using information about them, their hobbies, their families and their lives freely available online. To be clear, this isn't hacking or exploiting vulnerabilities, instead it's mining the Internet for nuggets of personal data. Here's one case. I share it here because it represents some of the common pitfalls and illustrates a pretty serious weakness that most of us have online.

Setup: This is the case of one subject whom I'll call "Kim." She's a friend of my wife, so just from previous conversations I already knew her name, what state she was from, where she worked, and about how old she was. But that's about all I knew. She then told me which bank she used (although there are some pretty easy ways to find that out) and what her user name was. (It turns out it was fairly predictable: her first initial + last name.) Based on this information, my task was to gain access to her account.

Step 1: Reconnaissance: Using her name and where she worked, I found two things with a quick Google search: a blog and an old resume. Her blog was a goldmine: information about grandparents, pets, hometown, etcetera (although it turns out I didn't need to use most of this). From the resume I got her old college e-mail address and from her blog I got her G-mail address.

Step 2: Bank Password Recovery Feature: My next step was to try the password recovery feature on her online banking site. The site didn't ask any personal questions, instead it first sent an e-mail to her address with a reset link which was bad news, because I didn't have access to her e-mail accounts. So e-mail became my next target.

Step 3: G-mail: I tried to recover her G-mail password, blindly guessing that this was where the bank would have sent its password-reset e-mail. When I tried to reset the password on her G-mail account, Google sent its password reset e-mail to her old college e-mail account. Interestingly, G-mail actually tells you the domain (for example, xxxxx.edu) where it sends the password reset e-mail to, so now I had to get access to that…ugh.

Step 4: College E-Mail Account: When I used the "forgot my password" link on the college e-mail server, it asked me for some information to reset the password: home address? (check—found it on that old resume online); home zip code? (check—resume); home country? (uh, okay, check—found it on the resume); and birth date? (devastating—I didn't have this). I needed to get creative.

Step 5: Department of Motor Vehicles: Hoping she had gotten a speeding ticket, I hit the state traffic courts' Web sites, because many states allow you to search for violations and court appearances by name. These records include a birth date (among other things). I played around with this for about 30 minutes with no luck when I realized that there was probably a much easier way to do this.

Step 6: Back to the Blog: In a rare moment of clarity I simply searched her blog for "birthday." She made a reference to it on a post that gave me the day and month but no year.

Step 7: Endgame (or How to Topple a House of Cards): I returned to the college e-mail password recovery screen and typed in her birth date, guessing on the year. Turns out that I was off on the year of birth but, incredibly, the university password reset Web page gave me five chances and even told me which field had inaccurate information! I then changed her college e-mail password, which gave me access to her G-mail password reset e-mail. After clicking the link, Google asked me personal information that I easily found on her blog (birthplace, father's middle name, etcetera). I changed the G-mail password, which gave me access to the bank account reset e-mail, and I was also asked for similar personal information (pet name, phone number and so forth) that I had found on her blog. Once I reset the password, I had access to her money (or at least I would have).

Needless to say, Kim was disturbed. Her whole digital identity sat precariously on the foundation of her college e-mail account; once I had access to it, the rest of the security defenses fell like a row of dominoes. What's striking about Kim's case is how common it is. For many of us, the abundance of personal information we put online combined with the popular model of sending a password reset e-mail has our online security resting unsteadily on the shoulders of one or two e-mail accounts. In Kim's case some of that information came from a blog, but it could just as easily have come from a MySpace page, a sibling's blog (speaking of their birthday, mom's name, etcetera) or from any number of places online.

Battling this threat requires us to make better choices about how we prove who we are online and what we make available on the Internet. Go and do a self-check. Try to reset you passwords and see what questions are asked to verify your identity. Some questions are better than others. Date of birth, for example, is bad. In addition to the DMV, there is a wealth of public records available online where folks can track down when you were born. Most account reset features give you a choice of questions or methods to use. Go for questions that ask about obscure things that you won't forget (or can at least look up), like your favorite frequent flyer number. Avoid questions that are easy to guess, such as which state you opened your bank account in. All of these are, of course, stopgap measures until we find better ways to prove our identities online.

It's also critical to remember that once you put data online, it's almost impossible to delete it later. The more you blog about yourself, the more details you put in your social networking profiles, the more information about you is being archived, copied, backed up and analyzed almost immediately. Think first, post later.

As for Kim, she's still blogging, but now she's a little more careful about the information she volunteers and has cleaned house on her old passwords and password reminder questions. Next time I do this, I'll have to figure out the name of her favorite primary school teacher.

Posted by at 12:21 PM | Permalink

ap.google.com | 8/28/08 | Gillian Flaccus

Broadcom Corp. co-founder Henry Samueli has apologized for lying to the Securities and Exchange Commission during its probe of stock options backdating at the chip maker.

Samueli's two-page written apology, filed Monday with U.S. District Judge Cormac Carney, stands as the first public comment on the case by the billionaire philanthropist and owner of the NHL's Anaheim Ducks.

Samueli is scheduled for sentencing on Sept. 8 on a felony count of lying to the regulatory agency.

Prosecutors have recommended that Samueli get five years probation and pay at least $12 million in penalties, but Carney must sign off on the deal.

Samueli wrote that his first instinct was to fight the case because he didn't want to have a felony on his record. Then, he said, he talked with family and friends and decided to own up to his wrongdoing.

"I have spent days and nights thinking about why I said what I did in front of the SEC on May 25, 2007," he wrote. "My statement before the SEC was completely out of character for me. I have tried to live my life in a way that showed that hard work and honesty were their own reward."

The plea agreement is part of a larger federal criminal probe into stock-options backdating at Broadcom, which was ultimately forced to write down $2.2 billion in profits — the largest accounting restatement to date because of illegal backdating.

The Irvine, Calif.-based company also agreed in April to pay $12 million to settle similar charges without admitting or denying the allegations.

In June, a federal grand jury returned criminal indictments against Broadcom's other billionaire co-founder, Henry T. Nicholas III, alleging conspiracy and securities fraud, as well as drug charges.  Nicholas, who pleaded not guilty, is set to go to trial next year.

Broadcom's former vice president of human resources, Nancy Tullos, pleaded guilty to obstruction of justice this year in exchange for her cooperation in the case.

Backdating involves retroactively setting an option's price at a low point in the stock's value, so as to increase profits 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.

Court records indicate Samueli told SEC officials during an interview that he was not involved in granting stock options, even though he had exchanged e-mails with Tullos helping her select a specific date to award stock options to certain company officers.  The plea deal would not require Samueli to aid prosecutors, but he would forfeit his right to appeal.

Posted by at 12:12 PM | Permalink

portfolio.com | 8/28/08 | Elizabeth Olson

There will be little satisfaction and much anger when some of Barry R. Stokes's former clients meet tomorrow in Nashville. Sure, Stokes has agreed to serve 14 years in prison for embezzling $16 million of their retirement funds. But many of his victims contend that he's still getting off too easily.

Stokes won't be there. He's been jailed since the end of 2006 awaiting trial

on a 78-count indictment accusing him of embezzlement, wire fraud, mail

fraud, and money laundering. He was scheduled to go to trial next month,

but has agreed to plead guilty in return for a shorter sentence.

This doesn't sit well with many of the people who entrusted their 401(k)

savings to Stokes, and now face the prospect of never being able to retire.

Particularly galling ishow Stokes spent a big chunk of their hard-earned

money: amassing a collection of some 200 Japanese woodblock prints.

Federal investigators tracked down his collection of prints squirreled away

at his second home in Austin, Texas. Some of the art has been sold to

satisfy creditors who invested their money in 1Point Solutions, the firm he

founded. These include the Louisiana state retirement fund, Metro

Nashville government, and employees of the Tennessee Democratic Party.

They'll be commenting, at the invitation of U.S. Attorney Edward M.

Yarbrough, on the pending deal for Stokes to plead guilty to 29 counts of

embezzlement and other charges. His deal could shave off some of the

estimated 21 years in prison he could face if convicted by a jury. A trial had

been set to begin Sept. 9.

In return for less jail time, prosecutors say, Stokes has agreed to repay as

much as he can and to waive his right to appeal. He's also given up the

woodblock prints, which could be worth anywhere from hundreds to

millions of dollars, depending on whether he had a discerning eye for art.

Posted by at 12:06 PM | Permalink

tulsaworld.com | 8/28/08 | Staff Writer

Cherokee County authorities arrested a local woman Tuesday on charges that she embezzled more than $200,000 from her employer over the past three and a half years.

Ronda (Taulbee) Crow was arrested when she came to the sheriff's office at Undersheriff Jason Chennault's request to speak about the embezzlement. She refused to talk with Chennault and requested an attorney.

Cornerstone Home Health Administrator Kent Rountree and the company's attorney, Wayne Bailey, went to Chennault Aug. 21 with a report that Cornerstone's office manager, Crow, had taken $220,000 from the business. Rountree provided investigators with bank statements showing the embezzlement.

Chennault's report states it appears Crow started embezzling money by writing checks from the business's checking account on Aug. 31, 2004. The first check was written to R&R Sales, a feed supply company co-owned by Crow and her husband. Rountree alleges his signature was forged on the check.

When the bank statement was received, R&R Sales was whited out and Gulf Sales entered as the payee. Gulf South is a regular vendor for Cornerstone.

Chennault's report states Crow wrote 126 checks to herself, ranging from $459.36 to $3,878.28. Each time she allegedly whited out the payee and inserted the name of a regular vendor.

Rountree learned of the embezzlement when Clyde Enlow, of Armstrong Bank, alerted him that Crow was trying to get a loan for Cornerstone using her personal property as collateral.

Before telling Chennault she wanted an attorney, Crow was informed of Rountree's report, and she claimed she was doing what she was told to do. She was booked into the County Detention Center.

Posted by at 12:02 PM | Permalink

MARTINSBURG, W.Va. - A Hagerstown man is accused of embezzling more than $31,000 from a state-funded agency while acting as a transportation contractor for Berkeley County School students with special needs.

Marc Allen Porreca, 50, of 479 Links View Drive, was arraigned Wednesday by Berkeley County Magistrate Joan V. Bragg on one count of obtaining money by false pretenses, according to court records.

Bragg set a $10,000 bond for Porreca, who police allege obtained the money from Regional Education Service Agency (RESA) VIII between June 2004 and September 2005.

Porreca was under federal indictment for criminal fraud, money laundering "and a host of other charges," according to a complaint filed by West Virginia State Police Sgt. D.E. Boober.

"... Mr. Porreca had led everyone associated with RESA VIII to believe that his wife had a terminal illness and was out of state receiving treatment when in actuality she was serving a five-year federal prison sentence in connection with the same criminal improprieties for which Mr. Porreca stood indicted in federal court," Boober said.

Records provided to investigators by RESA VIII alleged that the defendant opened unauthorized accounts, including personal mobile phone accounts, a clothing merchandise account and vehicle service accounts, also for personal use, Boober said.

The defendant allegedly used the agency's tax identification number to set up the accounts, and authorities documented 15 fuel purchases at Spring Mills gas station, Boober said.

The fraudulent activity resulted in RESA VIII having to pay off the debts or the agency having been sent to collections for the debt, Boober said.

Porreca's relationship with RESA VIII began in August 2003 when he was classified as a private contractor while working for First Student Inc. He then established a direct business relationship with RESA VIII through the creation of his company, Child Transportation Services, after the 2003-04 school year, Boober said.

Posted by at 11:56 AM | Permalink

torontosun.com | 8/28/08 | Staff Writer

SASKATOON -- The former president of a rural Saskatchewan library was jailed yesterday for operating a phoney book-buying scheme.   Bruce Cameron, 65, admitted to embezzling $500,000 from the Wheatland Regional Library. He was sentenced to two years for fraud.

Saskatoon provincial court Judge Barry Singer said that Cameron was motivated by greed. Cameron was also persistent. He stole the money over a period of 14 years. Crown prosecutor Gary Parker described the scheme as "sophisticated and elaborate." He said Cameron set up a fake company called Desert Rose Books based in Carson City, Nev., and ordered publications that didn't exist, then pocketed the money.

Defence lawyer Andrew Mason told the court Cameron gave up his pension and sold his house to pay back the money after a civil lawsuit was settled in 2005.  Arlene Pederson, the new president of the library board, said outside court that nearly $1 million actually disappeared while Cameron was employed. But officials could only prove about half that was stolen.

Posted by at 10:57 AM | Permalink

ap.google.com | 8/28/08 | Tini Tran

BEIJING (AP) — Chinese government auditors have uncovered the misuse of millions of dollars in disaster assistance as part of an embezzlement probe spanning 10 central government departments, state media reported Thursday.

A total of $3.7 million in disaster relief funds were diverted to construct government buildings or spent on administration last year, the official Xinhua News Agency said.

China is trying to rebuild from a 7.9-magnitude quake that struck Sichuan province on May 12, killing nearly 70,000 people and leaving 5 million homeless.

Beijing has in recent years sought to tighten government budgets to rein in spending and eliminate waste while boosting assistance for victims of floods, earthquakes and other disasters. Such emergency funds are not always carefully accounted for, making them susceptible to misuse or embezzlement.

The corruption was relatively minor, however, given the total of 4.52 billion yuan ($660 million) in abused funds Xinhua said was cited in Auditor-General Liu Jiayi's annual report to the National People's Congress, China's rubber stamp parliament.  Liu said 117 cases of official embezzlement were uncovered in 2007, and 14 top officials detained.

A total of 88 people were arrested, prosecuted or sentenced, and another 104 people were given administrative punishments over the violations, the official China Daily newspaper said in a separate report Thursday.

China's ruling Communist Party calls corruption a major threat to social stability and a serious challenge to its continuing grip on power. China's leadership has attempted to reign in graft through periodic anti-corruption crackdowns, though it has balked at subjecting party officials to outside supervision.

The 10 agencies audited included the education and commerce ministries, the National Bureau of Statistics, State Administration of Taxation, and the State Administration of Radio, Film, and Television.

After auditing the 2007 state budget spending, expenditures of 29.38 billion yuan ($4.32 billion) were found to be "problematic" at the ministerial level, Liu said, according to Xinhua. The problems included falsifying budget accounts, fund appropriation and embezzlement, underreporting revenues and over-reporting expenditures.

The office also noted "managerial irregularities" in the handling of 41.7 billion yuan ($6.09 billion) of government funds, China Daily said.

Audits in 2006 found 7 billion yuan ($1.02 billion) in misused funds, though more than half of the funding was retrieved later, the paper said. In 2005, misused funds amounted to 5.51 billion yuan ($805.73 million).

Investigations into land use fees in 11 major cities, including Beijing, Tianjin, and Shanghai last year showed 8.4 billion yuan ($1.22 billion) had been misused.

Auditors in 133 cities found that 2 billion yuan ($292.4 million) was misappropriated from housing funds and another 2.2 billion yuan ($321.7 million) had been loaned out improperly.

An audit of nine major financial institutions, including the Agricultural Bank of China, showed 14.2 billion yuan ($2.07 billion) was used illegally, the report said, and 140 suspects from those institutions were turned over to judicial departments.

Last December, a Web site started by China's new anti-corruption bureau crashed after barely a day because too many visitors tried to log on to register complaints. Nearly 2,000 local government officials were either disciplined or charged with crimes last year, Xinhua reported in late December, citing the Communist Party's organization department.

Posted by at 10:53 AM | Permalink

webcpa.com | 8/27/08 | Staff Writer

A self-proclaimed priest has been convicted of tax fraud after his accountant and girlfriend pleaded guilty.

Earl R. Wolfe, 59, was convicted Aug. 21 on charges of conspiring to defraud the United States and six counts of filing a false tax return. He was remanded to the custody of the U.S. Marshals Service. Sentencing is scheduled for Oct. 18.

Wolfe's co-defendants - his girlfriend, Linda C. Edell, 60, and Fort Lauderdale CPA Lawrence W. Legel, 61 - pled guilty earlier this month. Sentencing for them is scheduled for Sept. 29.

From 1999 through 2004, Wolfe reported $600 of income on his federal tax returns, but evidence at trial established that he earned more than $750,000 as an unlicensed architect, according to the Justice Department. Wolfe attempted to conceal his income by cashing more than $600,000 at a local check-cashing store using nominee entities. Evidence presented at trial showed that Wolfe had not paid any income taxes since 1989.

Wolfe also attempted to hide his assets from the IRS. In October 2003, falsely claiming to be a priest, he created the Office of the Presiding Overseer of the Domicile Creators Service Ministry, which purported to be a tax-exempt religious entity. Wolfe then transferred ownership of his personal residence and two Harley Davidson motorcycles to the so-called ministry.

Posted by at 10:35 PM | Permalink

suburbanchicagonews.com | 8/26/08 | Joe Hosey

Alleged partners in crime Frank Panice and Brian Jines were out on bond and facing one federal case when prosecutors say they hatched their next scam.

Panice last week took a 30-year prison sentence in exchange for a guilty plea on all counts in both cases, said Maria Suarez, the public information officer for the IRS Criminal Investigation's Chicago field office.

"I attended Panice's sentencing," Suarez said. "You know, anyone contemplating a life of defrauding people should look at 39-year-old Frank Panice. His sentence range was between 30 years and life in prison. He will be 70 years old when he is released from prison."

The 39-year-old Hillside man also must pay $4,822,494 in restitution. Jines, 36, of New Lenox, pleaded guilty to two charges and is due for sentencing in September. 

According to Suarez, Panice and Jines utilized a business called Bank Watch to run their scheme. Panice sought clients to invest in FDIC-insured CDs through ads in newspapers across the country, including in Arizona and Florida, "areas with a large number of retirees,"  Suarez said. "It looks quite predatory."

Panice and Jines allegedly induced 87 victims to invest more than $5 million with Bank Watch by falsely representing to them that the victims' funds would be invested in CDs maintained at FDIC-insured institutions. But rather than investing their funds in the CDs, Panice and Jines turned millions of dollars worth of investor funds into their own by making cash withdrawals on nearly a daily basis from financial accounts into which the Bank Watch investors' checks had been deposited.

The withdrawals were in amounts below $10,000 to avoid bank reporting requirements and IRS detection, Suarez said.

"In the end, they weren't offered jobs," Suarez said. "Because there were no jobs."

Posted by at 10:03 PM | Permalink

idahostateman.com | 8/26/08 | Bethann Stewart

A local non-profit group will not be deterred from its commitment to the community to fight breast cancer by the arrest Monday of its executive director on theft and forgery charges, a tearful board president said Monday

"We're survivors," Linda McGraw said. "We're going to survive."

Mary Guinard was terminated as executive director of the Susan G. Komen for the Cure Boise Affiliate on Sunday for breach of policy,  McGraw said. Guinard had led the organization for about 2 years.

Boise police arrested Guinard on Monday on charges of grand theft and forgery in an investigation of the embezzlement of approximately $74,000 from the nonprofit organization.

This is not a lot of money for the organization, McGraw said, and it won't affect operations this year or next year's Race for the Cure.  The Boise affiliate plans to bring in auditors from the national office to go over the books for the length of Guinard's employment, McGraw said.

Detectives arrested Guinard, 35, at her Meridian home Monday afternoon. She was booked into the Ada County Jail and is scheduled to be arraigned Tuesday at 1:30 p.m.

The board found out about the possible embezzlement on Friday, McGraw said, and worked over the weekend to try to find out what happened. Members of the board of directors contacted police Monday morning.

The foundation provided detectives with evidence reportedly uncovered during internal bookkeeping that showed multiple instances of possible misappropriation of checks beginning in June, Boise police said.

"Most embezzlement cases build up over months, but this foundation caught it quickly, and their books were very organized," said Boise police spokeswoman Lynn Hightower. "Detectives saw immediately what they needed to see."

McGraw will serve as interim executive director while the organization searches for a new director.

"This is an organization founded on a promise," McGraw said. "And we'll keep that promise to the community."

Posted by at 9:58 PM | Permalink

ap.google.com | 8/26/08 | J. W. Elphinstone

Reported incidents of mortgage fraud jumped 42 percent nationwide, with Florida reporting the highest number of cases, according to industry data released Monday.

Properties in the Sunshine State accounted for nearly a quarter of all mortgage fraud incidents, the Mortgage Asset Research Institute said. California ranked second, followed by a three-way tie for third among Illinois, Maryland and Michigan.

The report is based on data submitted by MARI subscribers about loans that were originated in the first quarter of this year and have since been classified as fraudulent.

The most common mortgage fraud cases included misrepresenting income, employment history, and debt and assets. Maryland, for example, had an unusually high percentage — 69 percent — of its cases involved tax return and financial statement misrepresentation.

Mortgage fraud has represented about $1 billion in losses over the past decade, the Mortgage Bankers Association has said.  The increase in reported incidents comes as lenders raise credit standards to curb rising foreclosures. Critics charge the industry for being too lax in qualifying risky borrowers during the boom, which fueled an overheated housing market.  But the stricter requirements have done little to curb fraud.

"Tightening credit standards by itself doesn't eliminate fraud," said Merle Sharick, vice president and national manager of business development for MARI, especially in markets that typically attract a lot of speculators like Florida and California.

Posted by at 9:54 PM | Permalink

ap.google.com | 8/26/08 | Adam Goldman

The last of four defendants charged in the prostitution scandal that brought down former Gov. Eliot Spitzer pleaded guilty Monday to arranging trysts between high-priced escorts and clients.

Tanya Robin Hollander, of Rhinebeck, N.Y., admitted she conspired to violate the travel act, which prohibits crossing state lines to further an illegal business.

Hollander, who worked as a booker for the Emperors Club VIP, told the court she began looking for work early last year to supplement her job as a holistic health counselor.

She said she began working for the service in June 2007, arranging dates between prostitutes and customers at various locations in the United States and Europe.

U.S. District Judge Deborah A. Batts asked Hollander if she knew what she was doing was against the law.  "It became apparent," Hollander said.

With the plea, Hollander became the last of four club employees arrested in March to admit a role in the illicit business. Prosecutors haven't revealed whether Spitzer will be charged in the probe, which began last summer after a series of suspicious banking transactions.

Spitzer resigned March 12 after he was identified as Client 9, whose meeting with a prostitute in a Washington, D.C., hotel the night before Valentine's Day was outlined in an affidavit filed in connection with the case.

In June, Emperors Club VIP operator Mark Brener, 62, of Cliffside Park, N.J., pleaded guilty to conspiracy to commit a prostitution offense and conspiracy to commit money laundering.  That month, Brener's former girlfriend, Cecil Suwal, 23, pleaded guilty to money laundering, conspiracy and conspiring to promote prostitution, admitting her role as a manager of the company.

In May, Temeka Lewis, a booking agent for the escort service, pleaded guilty to promoting prostitution and money laundering.  All three are awaiting sentencing.

Hollander does not have a cooperating agreement with the U.S. attorney's office. Her lawyer, Michael Farkas, said that she tried to cooperate but that the government wasn't interested.

Farkas called Hollander "a good and decent person" but a little naive. He said Hollander played a minor role in the scandal.  Hollander, 36, is scheduled to be sentenced Nov. 25. She remains free on a personal recognizance bond.

Farkas said Hollander could receive a maximum of five years in prison, but sentencing guidelines call for six to 12 months. The guidelines also allow the option of probation, he said.

"We're seeking the absolute minimum possible — anything to avoid jail time," Farkas said.  "We think we have a very strong argument. ... She's been honest and upfront since the beginning."

Brener faces between two and 2 1/2 years in prison when he's sentenced next month. Under federal sentencing guidelines, Lewis could do 16 months in prison, and Suwal's plea bargain calls for her to get between 21 and 27 months in prison.

Spitzer has not commented on the possibility of charges against him, and a spokeswoman declined to comment Monday.

Posted by at 9:49 PM | Permalink

investors.com | 8/22/08 | Gary Stern

You're eating lunch at a restaurant when you overhear two colleagues loudly discussing privileged, confidential information about a client. In response to this action, do you: a) do nothing, b) confront them and explain why it's wrong to publicly disclose it, or c) notify HR?  Tacks differ. But most experts advise that doing nothing is unacceptable.

Linda Trevino, co-author of "Managing Business Ethics: Straight Talking About How to Do It Right" and a professor at Penn State's Smeal College of Business, says the two colleagues' behavior might damage the business. She suggests going to HR.

Bruce Weinstein, author of "Life Principles: Feeling Good by Doing Good" and a keynote speaker on ethics, suggests another tack.

He says you should go directly to your colleagues and explain why their actions could damage the company. At the same time, he says going to HR is too severe. In fact, Weinstein recommends using this question during hiring to determine if a job applicant will act ethically in such a situation.

Whatever the right course of action, it's clear that companies are taking the issue of business ethics more seriously these days.

After Enron, WorldCom and Arthur Andersen were ruined in 2001-03 due to ethical lapses of CEOs and senior executives, many companies responded by putting more teeth in ethics training. It's too soon to tell if the upshot will be more ethical behavior by business staffers. But the issue is definitely on the table.

"There's more of a recognition by top management that they need to be proactive in managing business ethics," Trevino said. Expanded regulations like Sarbanes-Oxley that compel CEOs to sign financial statements and increased protection for whistle-blowers are all contributing to this enhanced focus on ethics.

Most companies are making cultural assessments of their ethical climates, says Keith Darcy, executive director of the Waltham, Mass.-based Ethics & Compliance Officers Association, which has 1,400 members.

Ethics officers design programs and survey employees about whether the firm is living up to its ethical standards. The Big Four accounting firms ask senior managers if the CEO is ethical. If they get any adverse feedback, they follow up on it, Darcy says.

Ethical training is taking place across the board for senior managers and their subordinates, and "the board must be perfectly fluent in what's going in. They have a fiduciary obligation for oversight," Darcy said.

To ensure that ethics seeps into an organization's culture, ethics must become part of performance management.  People need to be rewarded for their ethical actions, not just how many widgets they sell, Trevino says.

In one case, Ron Covais, a vice president in business development, was nudged to pay a bribe to win a contract by an executive of an overseas company. He notified the exec's firm, which halted the bidding process, fired the person and restarted the process with a clean slate due to Covais' actions.

The firm stresses ethics because "we're in a relationship business, and relationships are built on trust," said Doug Scrivner, its general counsel who runs the ethics program and is based in San Jose, Calif.

Accenture's robust ethics program includes training, reminders and refresher courses and includes specific courses on insider trading, anti-corruption and data privacy. Decision Point, a bimonthly newsletter distributed to employees, explores ethical dilemmas to reinforce the training.

Moreover, ethics are incorporated into Accenture's performance management. Staff is evaluated not just on sales and performance but ethical behavior, Scrivner says.

Though he notes that Accenture split off from Andersen 20 years ago (first as Arthur Andersen Consulting and renamed Accenture in 2000 before the Enron scandal), Scrivner says Andersen forgot what it was about, focusing on getting bigger and neglecting its duties to investors and the public.

Weinstein says stressing ethics and holding staff accountable is a "profitable strategy." Operating as an ethical company promotes positive word of mouth, which helps retain customers.

Ethical practices also avoid lawsuits and transgressing the law, which can be costly. For example, a company might gain short-term revenue from selling its clients' confidential information but still suffer long-term by damaging its reputation, Weinstein says.

Had companies acted ethically in the subprime mortgage crisis and not offered credit to people who were considered bad risks, many financial services companies might have avoided suffering massive losses. In subprime lending, "taking the high road would have resulted in being more profitable and meeting the needs of its clients," Weinstein said.

Creating an ethical culture has several long-term business benefits. Companies attract and retain better employees. "If you get caught and face huge fines and end up on the front page of the Wall Street Journal, it hurts your reputation," Trevino said. In the Internet age, any company that acts unethically finds the video splashed on YouTube in nanoseconds.

When several mutual funds in 2003 were accused of unauthorized late trading or illegally buying fund shares after the closing bell, those companies lost $900 billion in assets in a matter of weeks, Darcy noted. "There's a flight to integrity," he said. "Who wants to do business with a firm you don't trust?"

Acting ethically is about succeeding in business in the long term. You can get away with some misleading actions short-term, but eventually it catches up with you, Trevino says. If you don't believe her, ask the former execs and stakeholders of Enron, WorldCom and Arthur Andersen.

Posted by at 10:06 AM | Permalink

buffalonews.com | 8/24/08 | Brian Meyer

When a new hotline was set up six months ago to take calls about possible waste, fraud and abuse in City Hall, no one had a clue how many whistle-blowers might call with credible tips.  The phones haven’t exactly been ringing off the hook. The hotline has received 46 calls — less than eight calls a month.

Of these tips, 17 merited investigation.  Only one call involved abuses that could be documented — and those involved problems that city officials were already probing in a unit that cleans up  neighborhood blight.

City Comptroller Andrew A. San- Filippo said the hotline he created in February proves Buffalo doesn’t need an $80,000-a-year inspector general. Mayor Byron W. Brown proposed creating the new office to be headed by a highly experienced investigator.

“At this point, I don’t know if it’s necessary to create another layer of bureaucracy,” said SanFilippo. “We’ve done the job for $300.”

“I still think it makes sense to have someone dealing with these issues on a full-time basis,” said Brown. “The office could be proactive and not just wait for calls to come in.”

But the mayor added that he’s open to further discussing the issue with SanFilippo and the Common Council.

The mayor proposed creating the new office last year, shortly after two former public works officials appointed by the previous mayor pleaded guilty to criminal charges stemming from trips they took from companies that did business with the city.

Darryl McPherson, the city’s chief auditor, who oversees the fraud hotline, said very few calls have produced a shred of evidence involving wrongdoing. A lot of people are calling about personal beefs or perceived slights, he said.

“Perceived injustices don’t always mean abuse,” he said.

Posted by at 10:02 AM | Permalink

 journalrecord.com | 8/22/08 | Staff Writer

Walter Pavlo lived a life of crime. He just doesn’t look like a criminal. Wearing a long-sleeve, button-down shirt and neatly pressed tie, Pavlo on Thursday described life in prison.  In 2001, Pavlo was convicted of embezzling $6 million from his employer and sentenced two years in prison. 

He said he went from respected manager to convicted felon by a gradual descent of poor decision making.  “I started bending the rules and it became easier and easier,” he said. 

“It seemed like I was getting away with it and it seemed like other people approved, so I lost my bearing. It doesn’t mean that everyone does it; it just means that I did.” 

Universities across the country invite Pavlo to speak about an issue he has come to understand: ethics in business. The Collins College of Business at the University of Tulsa sponsors an ethics seminar every  year and this year presented Pavlo as its guest speaker.

Mark Collins, associate dean at Collins College, said in the last 15 years universities have made teaching ethics a priority due to the rise in corporate scandals.  “I think most of us are in the middle,” he said. “We would like to do the right thing, but sometimes certain circumstances make it difficult to do the right thing. That’s why we teach ethics as an analytical tool, a design tool that complements other business decision models.”

Pavlo said the speaking engagements allow him to share his experience in an upfront, candid matter. “I think it’s important people know I was punished,” he said. “I think too often people think white-collar felons just get a slap on the wrist. I paid a significant price for what I did. It ruined me financially and it impacted my family and my children.”

In the mid-1990s, Pavlo was a senior manager at MCI, where he was responsible for the billing and collecting of nearly $1 billion in monthly revenue for the company’s career finance division.  Pavlo said during that time a large number of customers were not paying their bills, and he was finding a considerable amount of fraud. When a customer wasn’t paying, employees of MCI were supposed to report it, but Pavlo said they didn’t.  “We didn’t disclose anybody for a number of reasons, but the main thing is we didn’t think we were doing anything wrong, or it would last very long,” he said. “There is subjectivity that comes with pronouncing something as uncollectable and bad debt, we just chose not to do it, and after awhile it really did become a problem and we were hiding things.”

Pavlo said the events started to snowball once he became jaded and tainted by customers that he saw defrauding MCI and he wanted to find a way to strike back. Starting in March 1996, Pavlo, a member of his staff and a business associate outside of MCI began to commit fraud involving several MCI customers. Over a six-month period, seven MCI customers were defrauded, resulting in $6 million in payments to a bank in the Cayman Islands.

“So I was doing stuff for the company and doing something for me,” he said. “In the end I wasn’t a very good criminal. I was nervous and was very scared of getting caught, and knew this wouldn’t end well.”

In 2001 Pavlo pleaded guilty to wire fraud and money laundering. While in prison, Pavlo wrote a book as a personal confession, and when the managing editor of Forbes magazine got wind of his story, he decided to help.

Since getting out of prison in 2003, Pavlo has turned his darkest time into profit with speaking engagements and promotion of his book. Though Pavlo is seeing a new kind of success from telling his tale, he said he is ready for the day when he won’t have to relive the story. Until then, he’s trying to warn future members of the business community about the temptations that await them.

“I think they (business students) have gotten a bit jaded about business and my goal isn’t to scare them as much as it is to say, ‘you are going to be tested, so be ready,’” he said. “There are a lot of things that happen in business and there are a lot of reasons why people cross the line, but I think they need to know the consequences are dire.”

Posted by at 9:57 AM | Permalink

thenewstribune.com | 8/22/08 | Sean Robinson

For three years, Lindy Robertson took her boss’s phone calls, arranged his calendar and slowly robbed him blind.  On Thursday, the 28-year-old mother learned the price: four years and nine months in prison for embezzling an estimated $1.6 million from Milgard Manufacturing, where she once worked as assistant to the company president.

“One of the largest embezzlement cases in Pierce County history,” said deputy prosecutor Bertha Fitzer, who argued for a sentence twice as long.  Robertson stood silently as her sins were tallied.

She drained the money from Milgard’s accounts via her company computer, using intricate maneuvers to cover her trail. She spent it on clothes, televisions and home improvements. In one month alone, she stole $152,000 from Milgard. As her crimes were being discovered, she took one more chunk – $20,000 – and used it to pay her defense attorney.

There was no need, no excuse, Fitzer said. No drug habit, no alcohol problem, no gambling addiction. Robertson and her husband made good money on their own. She came from a good family. It was just greed.  “She was having the time of her life,” Fitzer said.

Robertson pleaded guilty in June. She has settled with Milgard after repaying an estimated $1.2 million. Until she was charged with 28 counts of theft and money laundering, she’d never been accused of a crime.

Those factors supported leniency, according to her attorney, Spencer Freeman. He argued for a first-offender waiver: 90 days in jail, perhaps with electronic home detention.

Superior Court Judge Bryan Chushcoff let the attorneys have their say – they argued over the sincerity of Robertson’s remorse – then listened as Robertson’s family spoke.

“I have made no excuses for what I did,” she said. “What I did was wrong. I’m ashamed of myself. I’m  sorry, not because I got caught, but because it’s a moral wrong.”

She said she’d betrayed people who trusted her. She said she damaged her family – her parents, her husband and her children.

“All I ask is for the opportunity to rebuild the life that I’ve destroyed,” she told the judge. “You hold my future in your hands. Yes, it’s my actions that have caused me to be in this place. I’ve given back everything I can. I’ve done all I can do. Please, sir.”

Chushcoff weighed the choices.

The crimes were committed without force or violence, he said. But they were sophisticated and long-running. The money was big.  Robertson’s psychological evaluation said she might have a personality disorder. There was an outsized sense of entitlement. She knew she was wrong, but she didn’t seem to understand why she was wrong. Treatment would help. Her remorse seemed sincere.

“If she’s fooling us all, she’s fooled me, too,” Chushcoff said. “I think she’s remorseful.”

Robertson had repaid her victim – not completely, but a lot. The judge couldn’t remember a case where so much stolen money was returned. Still, it was serious. Some crimes were too big to ignore, even for a first-time offender.  “So this is what I’m going to do,” he said.

He ruled down the middle – top of the standard range, 57 months in prison: more than Freeman hoped, less than Fitzer wanted. (Excpert)

Posted by at 9:52 AM | Permalink

dailycamera.com | 8/24/08  | Heath Urie

A woman accused of embezzling more than $30,000 in an elaborate series of scams aimed at her former Longmont employer was arrested Thursday.

Sandra Faye Mauro, 48, of Berthoud, was booked into the Boulder County Jail after Longmont officers arrested her on a felony warrant on suspicion of identity theft and theft of more than $20,000.

According to a police report, Mauro -- who until recently worked for Western Disposal in Boulder -- was formerly the bookkeeper for Longmont-based MetalTech and ID Communications.  Mauro worked for owner Bill Hickey overseeing the businesses' finances from August 2005 until she was fired in January when a $12,000 discrepancy was first noticed, according to police.

Longmont detectives said Mauro wrote herself unauthorized payroll checks and money orders, made fraudulent transactions from company accounts to her own credit cards and a health care savings account, and stole petty cash and altered company invoices.  In total, detectives estimate more than $33,000 was taken over a series of several months.  Messages left at a phone listing for Mauro were not immediately returned Friday.

Tracie Pape, an accountant who was hired to replace Mauro and help track down all the missing money reported, said Friday she never expected to find such a complex series of transactions.  "I was surprised at all the avenues taken," Pape said of the paper trail she handed over to police.  MetalTech, a metal fabrication company located in Longmont, and ID Communications, an Internet Service Provider offices in Centennial and Longmont, are close-knit companies that were "shocked" by the accusations against Mauro, Pape said.

"You put so much trust into your accountant," she said. "(The owner) is trusting that she's doing it ethically and correct. Here she was stealing from him left and right."

Longmont Cmdr. Tim Lewis said both the ways the money went missing and the amount of money  involved make the case unique.

"Most of the time the people, if they're doing it, use one or two ways" to embezzle money, he said. "This woman was really taking advantage of her knowledge of the bookkeeping system." Lewis said the involvement of bookkeepers in similar types of thefts are on the rise.

"We're finding the people who are doing the identity theft and the bookkeepers who go bad are doing (serious) damage to their employer," Lewis said. "They can carry it on for years if the trust goes on long enough."

He said police generally recommend that employers, especially small businesses, perform simple background checks on potential employees.  Mauro, for example, was arrested by Fort Collins police in December 2001 on suspicion of seconddegree burglary and domestic violence, Lewis said.

"The small businesses really need to be aware of who they're hiring," Lewis said.  On Friday, Mauro was released from the Boulder County Jail on $20,000 bond, officials said.  Bryce Isaacson, vice president for sales and marketing at Boulder's Western Disposal, said Mauro no longer works for the company and an internal investigation into her employment there revealed no suspicious activity.

Posted by at 9:49 AM | Permalink

blueridgenow.com | 8/22/08 | Staff Wrtier

Christian Supply owner Chuck Wallington told police an employee embezzled about $750,000 between Jan. 1, 2007, and Aug. 19 of this year.

Cheri Burnett Abraham, 50, of 105 Sheldon Drive, Moore, on Wednesday was charged with breach of trust by the Spartanburg Public Safety Department. The arrest warrant states that Abraham took more than $5,000, but the incident report states that the figure was 150 times that amount, nearly threequarters of a million dollars.

Lt. Ron Cantrell said the amount of money "ranks very high" compared with other embezzlement cases the city has investigated.

Wallington told police he was contacted by Arthur State Bank regarding a negative balance on the company's account. Wallington told police that some checks had been forged by using the name Linda Wallington; others had been signed by Cheri Abraham.

The incident report states that checks had been written to "Domestics Ltd." and "Living by Design." A message left Thursday afternoon for Chuck Wallington was not returned.

The company's Web site says it has done business in Spartanburg for about 55 years and moved to its current location at 1600 John B. White Sr. Blvd., No. 1010, in September 1997. The Web site says the company serves more than 76,000 churches worldwide.

Abraham, who was reached at her residence Thursday night, hung up the phone when a Herald-Journal reporter identified himself seconds into the call.

Posted by at 9:43 AM | Permalink

mercurynews.com | 8/22/08 | Karl Fischer

An El Cerrito man went to jail Wednesday after his father found $37,000 in counterfeit traveler's checks in his mail — from a Nigerian penpal who police say used the suspect to defraud people selling things via classified advertising.

The checks would exceed the cost of the items, ostensibly to cover shipment costs. The buyer always appeared to be in a hurry, and would ask the seller to wire back the difference.  The checks invariably bounced, Keith said.

"(Sherwood) actually thought all the money was going to help this woman move to the United States," Keith said.

Police went to Sherwood's home, which he shared with his parents, Wednesday afternoon after getting a call from Sherwood's father, who was suspicious of his son because of some past incidents and had intercepted his mail, Keith said.

Detectives found further evidence at the house and, after interviewing Sherwood, booked him into County Jail in Martinez on suspicion of forgery and possessing counterfeit checks. Police estimate he participated in three to four scams monthly, using more than $1 million in counterfeit checks sent to him from overseas.

"He had never actually spoken to (his accomplice)," Keith said. "She'd sent him some pictures of herself, that was it."

Posted by at 11:19 AM | Permalink

labusinessjournal.com | 8/22/08 | Deborah Crowe

Herbalife Ltd. appears to have convinced former fraudster-turned-consumer advocate Barry Minkow into retracting his accusations about the safety of Los Angeles nutritional supplement maker’s products.

The Los Angeles supplement maker and Minkow, who reinvented himself into a consumer advocate several years ago after his release from prison on charges he defrauded investors of his ZZZZ Best carpet cleaning company, released a joint statement Friday.

The statement said that Minkow, who has admitted shorting the stock, retracted the claims to “avoid litigation.” It goes on to say that Minkow no longer believes Herbalife’s products are harmful.

“Upon further investigation, (Minkow’s) Fraud Discovery Institute became convinced that Herbalife employs systematic internal controls, including the use of outside, independent laboratory testing, which ensures their products are manufactured safely and in compliance with California law,” said the release.

“It is evident to the Fraud Discovery Institute that Herbalife produces products that are safe, and that the company strives for continuous improvement in product quality,” the statement continued, noting that Minkow’s group also retracted criticisms about the alleged unfairness of Herbalife’s multi-level marketing business model.

Minkow earlier this year hired an independent lab to test several Herbalife products and said it found levels of lead in several products that he alleged should require product safety labeling under California’s Proposition 65. Herbalife countered with its own third-party testing that it said showed the products to have safe levels of lead.

The Web site of the San Diego-based institute has been scrubbed of any mention of its investigation.

There also was no mention of the status of a lawsuit filed by a Rosemead woman in June, which blamed Herbalife products for her lead-related liver problems. The woman’s attorney is a San Francisco consumer advocate who has assisted Minkow in past investigations.

Minkow has acknowledged shorting Herbalife stock but claims he needed to do so to fund his investigation. He could not be reached for comment early Friday. Minkow served more than seven years in jail for stock fraud, but since his release has become a minister, started the fraud institute and served as a consultant to law enforcement agencies.

Shares of Herbalife were up $1.67, or 3.6 percent, to $48.32 in morning trading on the New York Stock Exchange.

The share price is up 33 percent from where it was in June at the height of Minkow's media campaign, but is still down 6 percent from its 52-week high in early April. Herbalife earlier this month reported second quarter earnings and gave guidance that beat Wall Street expectations.

Posted by at 11:16 AM | Permalink

marketwatch.com | 8/21/08 | Press Release

The Construction Industry Ethics and Compliance Initiative ("CIECI"), founded in late April 2008 by the CEOs of thirteen of the leading U.S. construction industry contractors, will hold its first Forum on October 16/17 at the Marriott Metro Center Hotel, in Washington, D.C.

The theme of the Forum is "Building public trust in the U.S. construction industry through transparency and accountability -- leading the way." This theme reflects the core value of the Initiative, which is business based on integrity. The vision of the Initiative is an ethical construction industry, with transparent business practices, accountability, and absence of conflicts of interest. The Initiative is open to all companies in the construction industry, regardless of size, including architect/engineers, general and sub contractors, and suppliers.

Highlights of the program include:

-- A CEO panel discussion on how ethical business conduct enriches the bottom line.

-- A panel showing examples of the essential elements of an effective ethics and compliance program.

-- A presentation on how smaller companies may build an effective ethics and compliance program on a budget.

-- A Government panel consisting of federal agency debarring officials and the DOJ Criminal Division addressing effective programs to avoid prosecution and debarment.

-- A luncheon address by the Deputy Chief of Engineers, U.S. Army Corps of Engineers.

FOUNDING MEMBERS: Austin Industries Inc., Balfour Beatty, Atlanta and Dallas, Clark Construction Group, LLC, Granite Construction Inc., Kenny Construction Company, Kiewit Corporation, Lane Construction Corporation, Lusardi Construction Company, Suffolk Construction Company, Sundt Construction, Inc., Traylor Bros., Inc., The Walsh Group, Ltd., Zachry Construction Corporation

Posted by at 11:12 AM | Permalink

sj-r.com | 8/22/08 | Sarah Antonacci

A veteran state treasurer’s employee admitted Wednesday she embezzled $750,000 from the state, but her plea could mean she will get a break when sentenced later this year.

Debra Kay Kirby, 54, of Taylorville was told by U.S. Magistrate Judge Byron Cudmore that she faces a maximum of 20 years in prison on a wire fraud charge and up to 10 years’ imprisonment for money laundering.

Kirby pleaded guilty without having first arranged a deal with federal prosecutors. That can lead to fewer years in prison because authorities often look at such a plea as a sign that the accused is taking responsibility for his or her crime and working toward rehabilitation.

She also will have to pay back $263,000 she is accused of stealing and spending.

Assistant U.S. attorney Gregory Gilmore said Kirby, who had risen through the ranks in her 33 years with the treasurer’s office, opened an account at U.S. Bank under the name of Debo Kraft.  She then transferred $750,000 from the state to that account by way of a bank in Texas.

Kirby returned about $480,000 to the state in a complicated effort to cover up the theft. But she kept the remainder of the money and spent it on vacations, household and personal expenses, her son’s college and her husband’s business.

Sara Wojcicki, spokeswoman for Treasurer Alexi Giannoulias, said Kirby will lose her state pension as a result of the conviction. More restrictions have been placed on financial transactions since Kirby’s theft, and the treasurer is looking forward to the sentencing, Wojcicki said.

“We’re glad the process is moving forward and she’s admitted she stole money from the state,” Wojcicki said. “As we move toward the sentencing, we hope the judge imposes a sentence that is very strong to send a message about the severity of such illegal activity.”  Kirby is set to be sentenced Dec. 8. Her attorney is Robert Scherschligt.

Posted by at 11:06 AM | Permalink

tricities.com | 8/22/08 | Michael Owens

Jimmie Clark’s voice cracked when explaining to his children that “daddy ... did wrong.”  Minutes earlier, he had pleaded guilty to six counts of embezzlement and apologized for pocketing $91,426.90 worth of donations while executive director for local Christmas charity Santa Pal.

“I always thought I’d be able to cover the money,” he said Wednesday afternoon in Bristol Virginia Circuit Court. “I will do everything in my power to repay Santa Pal as soon as possible.”  His voice wavered seconds later as he sought forgiveness from his family.

“I’m sorry for what I have done,” said the 33-year-old from Watauga, Tenn. Family members cried when bailiffs led Clark from the courtroom. He will serve two years and eight months in prison as part of a plea agreement reached with prosecutors.

Bristol Commonwealth’s Attorney Jerry Wolfe dropped four additional embezzlement charges as part of the plea deal.

“That was part of the negotiation and an encouragement to have the defendant raise as much restitution ... as soon as he could,” Wolfe told Judge Larry B. Kirksey.

Santa Pal officers watched and waited to learn how much Clark would have to repay. Judge Kirksey surprised them by ordering Clark to repay the entire amount.

“We are glad that we are going to get full restitution,” Santa Pal board secretary Tammy Henkel said outside the courtroom.

Clark has to devise a repayment plan within four months of his prison release, Kirksey ordered. Already, Clark has scraped together $30,300 for a trust account created for restitution.

Police investigators initially suspected Clark of pilfering $75,000. The total climbed as investigators pored through five years of receipts. Clark’s dual role as the charity’s executive director and treasurer afforded him unfettered access to the group’s bank account.

Clark took over the leadership role at Santa Pal in 2002. At the time, it was a paid position, but a year later the job became a volunteer role when one of the charity’s top financial sponsors declared bankruptcy.

The United Way of Bristol now provides the checks and balances missing under Clark’s tenure by controlling all Santa Pal finances.

Santa Pal was founded by the Bristol Herald Courier 81 years ago to provide needy children with Christmas gifts and food for local families. The Herald Courier ended its role as overseer in 1998, but newspaper employees continue to serve on its board of directors.

Posted by at 10:35 AM | Permalink

washingtonpost.com | 8/21/08 | Brian Krebs

For businesses, positively identifying someone online - by name, or physical location - is extremely difficult. Many Internet firms seek to verify the identity of customers by requesting scanned copies of their driver's licenses, passports, or utility bills. But what if services aimed at creating counterfeit versions of these documents became widespread? How long would businesses continue to rely on this method of identification?

Unfortunately, there are several such services. Among the most active is a site called scanlab.name. For roughly $35 USD, you provide the site with the type of document or credential you're seeking and the identifying information you want to appear on it and scanlab will produce a very authentic-looking digital image that appears to be a scanned copy of said item.

For example, let's say I'm a scammer and I've just gained access to someone's online account and I want to move their funds to my own account. The victim's institution says, "Hold on there, cowboy. In order to prove you are who you say you are, we'll need to see a scanned copy of your driver's license and a utility bill with your name and address on it." At scanlab, those images would cost me about $60 total (albeit payable only through Webmoney, a virtual currency unknown to most Americans but quite popular in Russia and many parts of Eastern Europe.)

From the chatter about this service on certain online criminal forums, it appears scanlab does a fairly brisk business. Security Fix was able to register an account at the service and take a few screen shots of the options available to scanlab members.

Why would someone need to use this service? In most cases, companies request scanned documents when they're trying to combat fraudulent activity. PayPal has been known to freeze users' accounts if it suspects them of being used for  fraud, often demanding a copy of the user's utility bill to unfreeze them.

U.S. based bank accounts protected by the FDIC. All that is required are certain scanned documents.

Posted by at 9:01 AM | Permalink

James Halstead of Santa Ana must repay $22 million to more than 100 people whose money he used to support a Las Vegas mistress and buy Ferraris rather than investing in the equities he had advertised, a federal judge in Santa Ana said in a ruling released today.

U.S. District Court Judge David O. Carter, in a rare summary judgment issued before

a full trial in the case, concluded that Halstead should be held liable for securities

fraud, elder abuse and breach of fiduciary duties, among other allegations. The order

spares plaintiffs the need to demonstrate their case before a jury, said William Buus,

an attorney who represented 45 clients claiming Halstead owed them $14 million.

“I think the judge’s decision reflects how strong not only our cases are, but how strong

the judge felt about this case,” Buus said. “Getting the money is a different situation.”

Halstead did not appear at a hearing in Carter’s courtroom on Monday and did not

respond to requests for comment.

In an unrelated case in June, Halstead was accused of slipping a date rape drug into

the drink of a former Russian Olympic skater, Oksana Grishuk, during a date at the

St. Regis Monarch Beach. But the Orange County District Attorney dropped the drug

charges for lack of evidence.

The complaint in the investment lawsuit said Halstead had told investors he would put

their money in instruments known as PIPES, which stands for Private Investment in

Public Equity financing, promising a steady cash flow. Instead, the complaint says,

Halstead used funds from new investors to pay off early investors in a classic Ponzi

scheme. The scheme fell apart when Halstead failed to attract new investors for new

cash infusions, the complaint said.

In court papers, Halstead blamed his business partner, Jeanne Rowzee of Irvine for

misleading investors. Rowzee, was arrested in May on federal criminal charges for

bilking 150 investors of more than $20 million in the scheme. Rowzee, an attorney

who formerly worked for the prestigious Washington, D.C., law firm of Williams &

Connolly, was released on bond and is scheduled to go to trial in June of next year.

Carter’s 27-page ruling said Rowzee gave Halstead 10 to 25 percent of investors’

proceeds. The ruling said that Halstead failed to properly account for his investors’

funds while using much of their cash to support his “lavish lifestyle” — Porsches,

Ferraris, jewels, a deferred compensation plan for his wife and gifts for his mistress.

“In 2006, Halstead transferred more than $750,000 to his mistress,” the ruling said.

“The icing on the cake, perhaps, is that on Christmas eve 2005, Halstead bought her

a brand new Ferrari convertible. This token cost $201,005. Halstead’s wife, Susan

Halstead, learned of this purchase within hours, when the dealership sent an errant

fax to the Halsteads’ home fax machine.”

Neither Halstead nor Robert Harvey, another partner named in an FBI affidavit about

the investment scheme, have been charged criminally in the case.

Posted by at 8:48 AM | Permalink

phillyburbs.com | 8/20/08 | Christopher Ruvo

A Bedminster man used his position as CEO of a New Jersey payroll firm to embezzle more than $720,000 from the company over three years, authorities said. 

Brian McGuire was jailed in Monmouth County, N.J., after turning himself in Monday, a week after a grand jury issued a 19-count indictment against the 39- year-old and his wife, Benedette McGuire, also 39.

From 2004 to 2007, Brian McGuire stole from Kaibobo Enterprises Corp. by writing unauthorized checks to himself and his wife from the firm’s account, the Monmouth County Prosecutor’s Office said.

Kaibobo Enterprises Corp., which does business under the name Resources Payroll Co., is a payroll tax processor, authorities said. It withholds employee taxes and pays them to appropriate governmental entities for various clients.

McGuire, president and CEO of the firm, wrote checks to pay for personal expenses and car payments, prosecutors said.

The McGuires failed to report the income to authorities and did not pay taxes on it, resulting in New Jersey being shortchanged about $120,146 in state taxes.

In all, Brian McGuire is accused of stealing $724,432 from Kaibobo Enterprises, a company based in Wall in Monmouth County.

“The serious charges that are alleged in the indictment involve multiple victims ranging from innocent clients of Brian McGuire’s employer to the state of New Jersey,” said prosecutor Luis A. Valentin.

Brian McGuire faces numerous criminal tax offenses and a second-degree charge of misapplication of entrusted property. The latter could keep him imprisoned for up to 10 years, authorities said.

Benedette McGuire faces multiple third-degree taxrelated offenses. She could face up to five years behind bars if convicted of even one of the charges, authorities said.  On Aug. 11, a Monmouth County grand jury issued a 19- count indictment against the couple following an investigation by the county’s prosecutor’s office and the  New Jersey Division of Taxation.

“The investigation revealed that (McGuire) used his financial control to write unauthorized checks to his wife and himself,” a news release said.

Posted by at 8:40 AM | Permalink

bizjournals.com | 8/20/'08 | Staff Wrtier

The owner of Captain Jack's Marine in St. Charles County was sentenced Wednesday to two years in prison on bank fraud charges involving false loan applications to St. Louis banks.

John "Jack" Gorecki, 56, of St. Charles, must also repay more than $603,000 in restitution to the banks he defrauded, said U.S. Attorney Catherine Hanaway and St. Charles County Prosecuting Attorney Jack Banas.

To fund his business endeavors, Gorecki, who also owned several rental properties, often obtained loans from 1st Advantage Bank, Truman Bank and Southwest Bank (formerly Missouri State Bank), prosecutors said.

While experiencing financial difficulties Gorecki submitted false information on loan applications at all three banks between February and November 2006.

The false information included false lease agreements, false tax records and false information about his financial situation. As a result, 1st Advantage Bank, Truman Bank and Southwest Bank made substantial loans to Gorecki, who defaulted on several of them, resulting in more than $600,000 in losses to those three banks.

Gorecki pleaded guilty in April to one felony count of bank fraud.

Posted by at 8:35 AM | Permalink

forbes.com | 8/20/08 | Staff Writer

A federal judge has sentenced a Meriden, Conn., woman to a year of house arrest for embezzling nearly $95,000 from Wachovia Bank.

Thirty-eight-year-old Carrie Quinon had been charged with stealing the money during a four-year period in which she worked for the bank as a service technician specialist. She worked for the bank from May 2003 through November 2007.

In addition to house confinement, Quinon has also been sentenced to two years of probation and will have to pay restitution to the bank.

Court documents show Quinon stole the money while working in branches of the bank throughout Meriden.  Officials say Quinon got the money by posting false entries in the company's general ledger, labeling the stolen money as customer fee refunds.

Posted by at 1:56 PM | Permalink

lompocrecord.com | 8/19/08 | Glenn Wallace

Thousands of dollars embezzled from the nonprofit association that organizes Lompoc's biggest festivals has left citizens, sponsors and volunteers in disbelief and questioning how it could have happened.

It has also left the association with $45,000 in bills, and in need of an investigative audit to document the damage.

The Lompoc Valley Festival Association announcement of the theft of $62,000 by one of its own employees, and an ensuing investigation by Lompoc police stunned some community members who work closely with the organization that organizes the annual Spring Arts Festival, and the Flower Festival.

“It's just a shock to everybody,” Flower Festival parade float committee chairman Speed Walton said Monday.  Like virtually all of the nonprofit association's staff, Walton works as a volunteer to ensure the Flower Festival's success.

“To have something like this happen, it just sets you back so far,” Walton said. The $45,000 in current debts is only the start of the association's financial troubles, according to its board members. The missing money, which began disappearing in December, was to support the association until the festivals of 2009.

Festival Association Board President Sue Beltran, and Treasurer Tina Mercer, said the missing money was discovered Aug. 5. They contacted police on Aug. 6. They both identified the association's only paid employee, Office Manager Lacey Porter, as the culprit. Porter withdrew the money from the association, using an ATM credit card that had been reserved for emergency purchases, according to Beltran and Mercer.

They said Porter admitted to police that she took the money. Porter could not be reached Monday. The withdrawals, as much as $2,000 a day, began about two months after Porter was hired, according to the board.  The board members both said a decision about how to deal with the association's debt would be made at a later board meeting.

“I'm surprised there wasn't more oversight. It surprises me that it took that long for the board to find out.” (Excerpt)

Posted by at 1:53 PM | Permalink

edmondsun.com | 8/19/08 | Staff Writer
A former Edmond reisdent has been sentenced for defrauding banks and his former employer by forging more than $5.8 million worth of checks drawn on his employer’s bank accounts.

Michael Lloyd Lee, 50, formerly of Edmond, now of Dallas, Texas, has been sentenced to 80 months in prison, according to the U.S. Attorney’s office.

In February, the U.S. Attorney’s Office charged Lee with bank fraud and money laundering. The counts alleged that during his employment with Raven Resources LLC, an Oklahoma City oil and gas company, Lee forged the name of a principal of Raven Resources on 203 checks at three banks for a total of $5,800,103.96.

The charge alleged further that Lee deposited some of the funds into his personal bank account and used these funds to buy personal goods and services, including a silver 2003 Mercedes-Benz for $39,795.08. On March 17, Lee pled guilty to both counts.

Lee’s sentence of 80 months in federal prison is to be followed by three years of supervised release. Lee will begin service of his sentence on or before Oct. 22. Pursuant to a plea agreement, the court entered a restitution order in favor of Raven Resources in the amount of $5,800,103.96.

The government has seized available assets, including the Mercedes and numerous pieces of jewelry, to assist in providing restitution.

Posted by at 1:51 PM | Permalink

bizjournals.com | 8/18/08 | Staff Writer

Six South Florida residents have pleaded guilty in connection with a mortgage fraud scheme that defrauded several financial institutions out of more than $17 million.

They were among 15 arrested last month after a 10-month investigation.

The defendants faced charges of racketeering, conspiracy to commit racketeering,

mortgage fraud, grand theft, identity theft and money laundering.

Authorities believe the scheme involved the use of two separate title companies in Miami-

Dade County and worked this way:

The title agents would prepare fraudulent HUD-1 statements on behalf of the other coconspirators,

which then would be provided to the lender. (A HUD-1 settlement statement

is a document that informs the lender how disbursements will be made after a loan is

funded.)

Many of the HUD-1 statements involved in this case contained fraudulently inflated sales

contract prices. For example, a seller might believe his or her property sold for $1.6

million, but a fraudulent HUD-1 statement might reflect the contract sales price for the

property as $2.25 million.

The lender would fund the loan believing the property sold for the inflated sales price. The

title agent, acting on behalf of the other co-conspirators, would then transfer the

fraudulently obtained profits into a bank account of either a third party or a shell company

controlled by one of the co-conspirators.

Monica Fergusson, 37, and Diana Diaz, 40, pleaded guilty to conspiracy to commit

racketeering. They face up to five years in prison and must pay $20,000 to the task force,

as well as costs of prosecution and investigation.

Mari Matilde Leony Rodriguez-Triana, 44, and Raisa Diaz, 34, pleaded guilty to

conspiracy to commit racketeering. They face up to three years in prison and must pay

$10,000 to the task force, as well as costs of prosecution and investigation.

Marlene Norono, 47, pleaded guilty to conspiracy to commit racketeering. She faces up to

three years in prison and must pay $15,000 to the task force, as well as costs of

prosecution and investigation

Mario Lubian, 47, pleaded guilty to mortgage fraud and was sentenced to one year of

community control, to be followed by four years of probation, including 90 days of county

jail. He must also pay $10,000 to the task force, as well as costs of investigation and

prosecution.

Charges against nine defendants are still pending.

Posted by at 1:49 PM | Permalink

GREENVILLE, S.C. (AP) — A Montana woman pleaded guilty Tuesday to stealing the identity of a missing South Carolina woman to attend an Ivy League school in what her lawyer called a bid to escape a painful past.

Esther Elizabeth Reed, 30, pleaded guilty to fraud and identity theft charges in federal court in Greenville. She faces up to 47 years in prison and $1 million in fines for ID theft, mail fraud, wire fraud and loan fraud charges.

Reed's lawyer Ann Marie Fitz said that her client wanted to apologize in court for her scheme, but that request was denied. U.S. District Judge Henry M. Herlong said it should wait for sentencing. A date for that was not set and prosecutors said it could be in several months.

Reed was indicted last year for using Brooke Henson's identity to get into Columbia University. The Travelers Rest woman has been missing since 1999, and investigators have said they do not think Reed was involved in her disappearance.

Prosecutors have said that, starting in March 2001, Reed juggled six false identities to attend California State University at Fullerton and Columbia. She concocted various stories about herself, including that she earned her living as a chess champion and had to change her name because she was in a witness protection program.

In 2004, she began attending Columbia, using Henson's name to get student loans and submitting an SAT score of 1400, which prosecutors say she earned on her own merits.

When authorities caught up to her in New York two years later, Reed insisted she was Henson and even answered some personal family questions correctly. But she stopped cooperating and disappeared when asked to take a DNA test, according to prosecutors.

Officials tracked her down more than a year later and arrested her in February in suburban Chicago.

After the hearing, Fitz said her client had wanted to tell Henson's family she was sorry for getting their hopes up when she was discovered in New York.

"She never, ever had the intent to cause any harm to anybody," Fitz said. "She feels horrible about giving them false hopes that their daughter was still alive."

Asked why her client stole others' identities to attend college, despite her own academic abilities, Fitz said her client, who is from Townsend, Mont., did so to shed a painful past but would not elaborate.

"It was more of a way of life for her. It was surviving her life. It was trying to move past Esther Reed and who she was in reality," Fitz said. "She has a lot of things in her background and a lot of bad family relationships that she was trying to get away from."

Reed's trial had been scheduled to begin next month. After the hearing, U.S. Attorney Walt Wilkins said he was pleased with her decision to plead guilty.

"We're certainly satisfied," he said. "We're glad to see this case to this resolution. ... I hope this gives the family some sort of resolution."

Reed will remain in the Anderson County jail, in federal custody, until her sentencing, Wilkins said.

Posted by at 1:46 PM | Permalink

herald-dispatch.com | 8/18/08 | CHRISTIAN ALEXANDERSEN

HUNTINGTON -- A Kenova woman outlined in court Monday how she took more than $700,000 from the Guyan Conservation District while she was its administrative officer.

Marcia L. Masters of Kenova pleaded guilty in U.S. District Court to embezzling $704,606 from the conservation district between May 2004 and September 2007.

The 43-year-old woman now faces up to 10 years in prison and a fine of up to twice the amount she embezzled, or possibly more than $1.4 million.

The plea agreement says Masters will forfeit any property that derived from the proceeds of the embezzlement. Masters also must forfeit money obtained from the sale of two sport utility vehicles and a pet store in Huntington.  U.S. District Judge Robert C. Chambers asked Masters to explain how she stole the money.

As administrative officer, Masters said she had access to the checks that came to the district for various projects. She deposited it into the agency's bank account, then skimmed part of the money by redepositing the funds into her own bank account.

"I defrauded money that wasn't mine," Masters said. "I used the profit off of the projects for my own personal gain."

The Guyan Conservation District is under the control of the West Virginia Conservation Agency and receives federal funding through the state agency.

Those funds are used to implement various conservation projects in the district's six-county region, which encompasses Boone, Cabell, Lincoln, Logan, Mingo and Wayne counties. The district's projects include soil and watershed conservation efforts.

According to budgetary information obtained by Herald-Dispatch by use of the Freedom of Information Act in early August, the district's annual budget increased from $1.89 million to $7.9 million between July 2001 and June 2008. A majority of the increase has been allocated for floodwall projects in Milton and Logan, according to the budget.

The prosecutors want Masters to forfeit two vehicles and proceeds from the sale of Pet Palace, her former business at the corner of 4th Avenue and 9th Street in Huntington. Masters, along with her daughter, bought the store in July 2007. Masters sold the business in April 2008.

The plea agreement stipulated that her daughter and son be immune from conspiracy of embezzlement charges.

Masters' sentencing hearin