FraudBaron.com

insurancejournal.com | 9/29/08 | Staff Writer

The Center for Auto Safety, Consumer Action and Consumers Union are united in urging California Gov. Arnold Schwarzenegger to sign Assembly Bill AB 2825, designed to protect motorists from auto body repair fraud. The legislation was passed by a strong bipartisan legislative vote and is awaiting action by the Governor.

Clarence Ditlow, executive director of the Center for Auto Safety. "By signing AB 2825 the Governor will be taking a giant step

toward smashing parts switching, deterring auto repair fraud and saving California consumers hundreds of millions of dollars

annually."

Current law requires consumers be provided an itemized written estimate prior to work commencing and a final invoice listing

work completed and parts provided. Under AB 2825, consumers would be notified at the time of the initial estimate and again

on the final invoice, that parts switching is illegal and constitutes fraud. The legislation also requires auto body shops to

provide customers with copies, if requested, of the invoices for installed parts.

"AB 2825 will better educate consumers and provide customers with an important new right to receive actual copies of

invoices for all crash parts installed on the vehicle," added Ditlow. "Some car dealers support the bill because they lose

business to dishonest body shops."

The insurance industry pays out more than $3.2 billion annually for collision repairs in the state with the average claim

approaching $3,000, according to the Center for Auto Safety. About 1 million accidents occur in California each year -- or

about one every thirty seconds. As a result, most Californians will find themselves in need of collision repair services at one

point or another. It is estimated that 40 percent of these motorists are likely to become victims of fraud, the group said.

Posted by at 8:30 AM | Permalink

startribune.com | 9/29/08  | Paul Walsh

A 51-year-old Eden Prairie man has admitted in federal court that he conspired with his wife and another person to commit health-care fraud involving about $1.5 million.

Mohamed Essa pleaded guilty Friday in Minneapolis to cheating Medica, which administers the Medicaid public health care benefit program in Minnesota.

According to Essa's plea agreement, he admitted that from Jan. 1, 2001, through December 2004, he conspired with his wife, Indadeeq Omar, and Tou Chaiker  Vang, of Maplewood, to defraud Medica out of about $1.5 million.

Essa also admitted that the scheme involved submitting claims for translation services that had not been rendered to Medica members, and that he and the others prepared and submitted false claims to Medica.

Vang was employed by Medica in the State Public Programs customer service department.

Essa and Omar owned and operated Global Interpreter Corp., which contracted with Medica to provide translation services to members as they were being treated by health care providers.

On July 17, Omar, 45, was sentenced to six years in prison, along with three years of supervised release on one count of health care fraud conspiracy, 12 counts of health care fraud, one count of money laundering conspiracy, 19 counts of concealment money laundering and seven counts of promotion money laundering. She was convicted by a federal jury in December 2007.

On April 11, Vang, 39, was sentenced to one year and one day in prison, three years of supervised release, and was ordered to assist Omar in paying more than $1.7 million in restitution. Vang pleaded guilty to one count of money laundering conspiracy and one count of health care fraud conspiracy.

Essa was indicted on March 13, 2007, while out of the country. He failed to return to face the charges, and was apprehended on April 10, 2008, in South Africa. His sentencing has yet to be scheduled.

Posted by at 8:27 AM | Permalink

ap.google.com | 9/29/08 | Matthew Barakat

A former high-ranking CIA official pleaded guilty Monday to abusing his influence within the agency to direct lucrative contracts toward an old friend who showered him with tens of thousands of dollars worth of gifts.

Kyle "Dusty" Foggo, 53, of Vienna, Va., struck a deal in U.S. District Court, pleading guilty to a single count of wire fraud for "depriving the United States and its citizens of their right to his honest services."

As part of the plea, prosecutors dropped 27 other counts against him and agreed to seek a prison term no longer than three years and a month.

Foggo was the agency's third-highest ranking officer from 2004 to 2006 and responsible for its daily operations. He will be sentenced on Jan. 8 and faces up to 20 years in prison.

However, it is far more likely that U.S. District Judge James Cacheris will impose a sentence more closely in line with the three-year term recommended by prosecutors.

Foggo was not charged with taking bribes, but prosecutors said in court papers that he received up to $70,000 worth of gifts from his friend Brent Wilkes, a defense contractor. The gifts included expensive dinners at gourmet steakhouses and free vacations for Foggo and his family in Scotland and Hawaii.  He and his lawyer declined comment after the hearing.

The case against Foggo resulted from an investigation of former congressman Randy "Duke" Cunningham, R-Calif., who admitted taking bribes from Wilkes. Cunningham pleaded guilty and was sentenced to more than eight years in prison. Wilkes was convicted and sentenced to 12 years.

Prosecutors said Foggo had a standing offer of high-paying employment with Wilkes if he ever left the CIA. In return, prosecutors said Foggo helped Wilkes' company obtain multiple contracts from the CIA and conceal the contractor's connections to the deal.

According to court papers, one contract was for the delivery of bottled water overseas where Foggo was a supervisor. The contract amount was not disclosed, but prosecutors said the price reflected a 60 percent markup.

Among the charges dropped were allegations that Foggo pulled strings to get his mistress hired by the CIA and stationed close to him.  Foggo was subdued in court Monday when he entered his guilty plea and answered questions from the judge acknowledging that he understood the consequences. He remains free on bond pending his sentencing.

The plea comes three weeks after prosecutors complained that Foggo was threatening to expose the cover of practically every agent with whom he had contact as part of his defense.

CIA spokesman Mark Mansfield said the agency cooperated with investigators but declined to comment on specifics of the case.

Posted by at 8:24 AM | Permalink

herald-mail.com | 9/27/08 | Ahdrew Schotz

A nutritionist convicted of fraudulent Medicaid billing was sentenced to five years of probation and ordered to pay back about $178,000.

Olusola Idowu of Sani Lane in Hagerstown, whose business was called SSS Nutrition Services, also was sentenced to six years in prison, but the time was suspended, court records show.

Washington County Circuit Judge Donald E. Beachley sentenced Idowu on Sept. 16, but the Maryland attorney general's office, which prosecuted the case, didn't announce the outcome until Friday.

Idowu, 55, who practiced in Hagerstown and Silver Spring, Md., said in a phone interview she is not guilty of fraud.

"It was a contractual issue ...," she said Friday. "I didn't do anything outside the contract."

In July, a jury convicted Idowu of one count of defrauding state health care, one count of theft-scheme of more than $500 and three counts of false or misleading information-fraud of more than $300.

An attorney  general's office press release says Idowu "routinely billed Amerigroup, a Medicaid agent, and three private insurers using the highest paying office visit billing code reserved only for doctors performing consultations."

Using that code "hundreds of times" from 2002 to 2006, Idowu told insurers she saw each client for 80 minutes even though each visit was generally 30 minutes or less, the press release says.

With that code, she collected between $177 and $186 per 15 minutes instead of $15 for 15 minutes under a proper code for nutritional services, the release says.

Idowu must pay $107,331 to Maryland Department of Health and Mental Hygiene recoveries; $53,228 to CareFirst; $13,256 to Aetna; and $4,512 to Great West.

Idowu said she treated obese people through a contract with Amerigroup. She said she didn't claim to be a doctor and the code she used wasn't fraudulent.

She faxed a copy of a letter from J. Craig Busey, a general counsel for the American Dietetic Association, to her lawyer that says the use of some Medicaid codes "has often been imprecise and problematic."

Some codes specified for physicians have been used by other health care providers, "especially where there were gaps in the coding system or where particular insurance plan payers have been slow to specify or accept codes that might be more appropriate," the letter says.

Citing one particular code, Busey wrote that its use by dietitians doesn't appear "wrongful or inappropriate, let alone fraudulent."

Posted by at 8:17 AM | Permalink

nytimes.com | 9/27/08 | LYNNLEY BROWNING

A Treasury Department panel issued final recommendations on Friday meant to encourage auditing firms to catch corporate fraud before it happens — and to protect them from going under when it does.

A Treasury Department panel issued final recommendations on Friday meant to encourage auditing firms to catch corporate fraud before it happens — and to protect them from going under when it does.

But the nonbinding recommendations, from the agency’s advisory committee on the auditing profession, did not suggest that auditing firms be insulated from lawsuits stemming from their work for clients who engage in fraudulent activities — a hotly debated issue in the profession.

The final report, based nearly entirely on a recent draft that is publicly available, will say that the panel “considered testimony regarding the variety of potentially catastrophic risks that public company auditing firms face.”

“These include the intrinsic risks associated with the auditing of public companies and risks relating to failure in the provision of audit and nonaudit services,” according to the report. “They encompass civil damage claims, regulatory actions, and the loss of customers, employees, and units of multinational affiliates due to financial instability or loss of reputation. The committee believes these risks are real.”

The final recommendations also urge the industry “come up with a way to preserve and rehabilitate troubled public company auditing firms.”

That does not mean resurrecting an auditing firm that has already collapsed, like Arthur Andersen, a Treasury official said on Friday, but rather saving a struggling auditing firm from going under as it confronts a client’s fraud.

“It’s designed to help a firm whose management is unable to,” said a member of the advisory panel. He spoke on the condition of anonymity, saying that different panel members disagreed on certain recommendations.

The final report will preserve a recommendation that the S.E.C. be given the power to appoint a courtapproved trustee “to seek to preserve and rehabilitate” struggling auditing firms.

Other final recommendations from the Treasury panel called for larger auditing firms, which are private companies, to provide public annual reports containing “relevant firm information,” as well as nonpublic audited financial statements, to the oversight board.

The panel also recommended requiring that the senior partner in charge of auditing a big corporate client’s books be required to sign those final reports.

Posted by at 8:14 AM | Permalink

Twin Cities businessman Tom Petters, thrust into the spotlight earlier this week when his business and home were swarmed by federal agents, is the central figure in what authorities suspect is a multi-billion dollar fraud scheme that lured investors with empty promises, according to documents unsealed Friday in federal court.

Posted by at 10:39 PM | Permalink

webcpa.com | 9/26/08 | Staff Writer

The demand for CPAs who provide forensic accounting services has accelerated in the past year, according to a survey by the American Institute of CPAs.

Sixty-eight percent of the 5,400 members of the AICPA's Forensic Valuation Services Section who were polled say their forensic practices have grown over the past year.

Of those respondents who reported increased demand, 67 percent cited computation of economic damages as the leading reason, followed by marital disputes (56 percent) and investigations of financial statement fraud (54 percent).

AICPA research shows that CPAs represented 94 percent of forensic experts hired over the past two years.

"The survey findings tell us that not only are forensic accounting services in demand, but specifically that CPAs with this expertise are in high demand," said AICPA director of firm practice management and specialized communities Stephen Winters in a statement.

The results were released in connection with the 2008 AICPA National Accounting Conference on Fraud and Litigation Services in Las Vegas. The conference marks the official launch of a new credential for CPAs, Certified in Financial Forensics, encompassing specialized skills that CPA practitioners can apply in service areas such as bankruptcy,

insolvency, computer forensics, fraud investigations, family law and litigation support.

Posted by at 11:08 AM | Permalink

sacbee.com | 9/26/08 | Dale Kasler

A small Rancho Cordova biotech company was accused by regulators Thursday of defrauding investors out of $6.5 million by making grandiose claims about its progress in finding cures for cancer.

In a lawsuit filed by the Securities and Exchange Commission, 3-year-old Telomolecular Corp. and two of its former officers were accused of telling investors the company had a staff of 50 scientists and was "on the verge" of major scientific breakthroughs. In fact, the company employed just five scientists and its business consisted mainly of selling cosmetic skin cream over the Internet.

The case has already been settled, and the privately held company has ousted the two officers named in the suit: Chief Executive Matthew Sarad and director of investor relations Jeremy Jobe.

"Virtually no one is there who was involved in the activities that the charges are based on," said the company's lawyer, Gerald Niesar.

The company's new chief executive, Robert Sexauer, said his main objective is to generate "a generous return on investment" for shareholders.

In settlement papers filed along with the lawsuit, Telomolecular, Sarad and Jobe pledged not to violate the securities laws again. There were no admissions of wrongdoing.

Sarad, 35, of Folsom, also agreed to pay a $100,000 fine and is prohibited from serving as an officer or director of a public company for five years.

Niesar said he wasn't aware of any criminal investigation.

The lawsuit, filed in U.S. District Court in Sacramento, said Telomolecular sold $6.5 million in stock to 300 investors in 25 states.  The shares were never registered with the SEC.

On one conference call with investors in 2006, Sarad said the company hoped "to eradicate and cure the problem of cancer within 2.5 years," the lawsuit said.

SEC lawyer Michael Dicke said the company made emotional appeals to investors based on the cancer claims. "Here's a company that's trying to cure cancer," he said. "Wouldn't it be great to invest in this company because they're doing great things?"

The suit said the company repeatedly told investors that it was going to go public within weeks or months, and was about to secure $10 million in funding from an investment bank.

Sexauer, a 30-year veteran of the drug industry who became CEO in late May, said the company will still work on cancer treatments but is putting more emphasis on heart attack, stroke and other products that can be brought to market more quickly.

Sexauer is based in England but spends one to two weeks a month in Rancho Cordova. He said the company will maintain a strong presence in the area. Telomolecular employs about a dozen workers, he said.

Sarad, in a statement, said he is "extremely proud of the cutting edge medical work I did while at Telomolecular and I think it is unfortunate that an enforcement action was viewed as necessary.

"In the current heightened regulatory environment company executives must be much more diligent about the words they (choose) to use to express their holdings and prospects to investors."  Jobe, 31, who lives in Dallas, couldn't be reached.

Posted by at 11:04 AM | Permalink

cfo.com | 9/25/08 | Stephen Taub

Penny stock company Video Without Boundaries, its auditor, and two executives are charged by the SEC of inflating revenues.

The Securities and Exchange Commission settled civil charges against an accountant in connection with his audits of the financial statements for a tiny penny-stock company.

Norman Stumacher agreed, without admitting or denying the allegations in the complaint, to disgorge $25,000 plus prejudgment interest of $8,749.11, and to pay a $20,000 civil penalty in the amount of $20,000, to settle the case involving consumer electronics company Video Without Boundaries Inc.

According to the complaint, Fort Lauderdale, Fla.-based VWB, also known as China Logistics Group Inc., recorded fictitious revenue and assets through a number of accounting schemes, including improper revenue recognition, in violation of generally accepted accounting principles (GAAP). The company was described in a separate SEC complaint as an electronics and entertainment technology company.

The complaint also alleges that Stumacher audited VWB's 2002 and 2003 annual financial statements and issued audit reports containing audit opinions representing that the financial statements were presented in conformity with GAAP. The SEC said that the accountant also allegedly conducted his audits in accordance with generally accepted auditing standards (GAAS).

The SEC claims that the representations made in the financial statements were false because VWB's results contained numerous departures from GAAP that "materially overstated" the company's revenues and understated its net losses. In addition, contrary to Stumacher's audit reports, his audits were not conducted in accordance with GAAS because he failed to comply with professional standards related to field work and general standards in the performance of his audits.

In a related administrative and cease-and-desist proceeding, the commission also issued a settled order against Stumacher finding that he engaged in improper professional conduct and violated certain securities rules. According to the settlement documents, he was suspended from practicing before the SEC and required to cease and desist from committing or causing any further violations of the provisions charged.

Furthermore, in a related civil action, the SEC charged VWB and two other individuals with accounting fraud related to the company's annual and quarterly filings and the issuance of false and misleading press releases.

The two individuals are former CEO and principal financial and accounting officer, Vernon Jeffrey Harrell and VWB's largest shareholder, David J. Aubel.  Harrell and Aubel could not be reached for comment.

According to the commission's complaint, from at least April 2003 to November 2005, VWB — at the direction of its then sole officer and director, Harrell — purportedly filed annual and quarterly reports with the commission that, among other things, materially overstated its revenues, improperly accounted for a failed acquisition, and understated its net losses.

Harrell maintained VWB's books and records, created its financial statements and certified the company's annual reports for 2002 and 2003, as well as its quarterly reports for 2002 to 2004, while knowing he knew, or was severely reckless in not knowing, contained material misstatements and omissions.

The complaint also alleges that from November 2003 to September 2006, Harrell and Aubel issued a series of false and misleading press releases about VWB. They then allegedly took advantage of the company's artificially inflated stock price; Aubel purportedly dumped millions of shares of VWB stock into the market,

reaping millions of dollars. Harrell allegedly participated in the scheme by signing bogus stock issuance resolutions that allowed Aubel to sell the shares immediately after he received them. Throughout this time,

neither Harrell nor Aubel reported their ownership of VWB stock, or changes in their ownership, according to the complaint.

The commission's complaint seeks permanent injunctions against VWB, Harrell, and Aubel, enjoining them from future violations of the provisions charged, an order requiring that VWB and Aubel disgorge their illgotten gains, with prejudgment interest, and imposing civil penalties against Harrell and Aubel. The SEC also seeks a penny stock bar against Harrell and Aubel and an officer and director bar against Harrell.

Posted by at 10:59 AM | Permalink

tampatrib.com | 9/25/08 | Elaine Silvestrini

TAMPA - David Haas, the former chief executive of Crispers restaurants, was sentenced this morning to two years in federal prison for embezzling more than $400,000 from his company.

"In my view, in this day and age, we need to send a clear message for those who are responsible for overseeing the financial well being of corporate America that criminal fraud will not be tolerated," U.S. District Judge Richard Lazzara said.

Before he was sentenced, Haas apologized for his crimes, saying, "I am remorseful. …What I did was wrong. There's no doubt about it. What I did was wrong, and I take full responsibility for it."

Haas pleaded guilty in June to three counts of interstate transportation of stolen money in the form of wire transfers and a check from the restaurant chain owned by Lakeland-based Publix supermarkets.

Dennis Wamsley, director of loss prevention for Publix, asked for the maximum sentence, telling the judge Haas' actions "led to operational decisions that were wrong for Crispers and led to tangible negative results. …The good names of Publix supermarkets and Crispers were tarnished."

As part of a plea agreement, the prosecution recommended a sentence at the low end of the guidelines range. When Lazzara ruled against the prosecution's arguments over how the range should be calculated, Zitek stood by the government's promise and recommended an 18-month sentence.

But the judge said a high-end sentence was warranted because of the seriousness of the crime.

Haas will also have to pay restitution of $153,000, an amount Publix has not recovered.  Haas served as interim chief executive officer of the Crispers chain in 2007.

According to the plea agreement, beginning that August, Haas three times directed a Crispers financial officer to transfer funds to accounts in New Jersey. In two of the cases, he maintained the transfers of $250,000 and $100,000 were connected with the purchase of a Crispers restaurant.

Once, he directed the financial officer to process a check for $53,750 to "HC, LLC." Haas explained that was the executive search firm Hill & Cutler, which was assisting in the search for a permanent CEO. The check was deposited into an account in the name of Haas Consulting LLC, which is controlled by Haas. Hill & Cutler never existed, according to the plea agreement.

In a sentencing memorandum filed with the court, Haas' attorney described the defendant as suffering from post-traumatic stress syndrome as a result of his personal experiences with the attacks on the World Trade Center in New York on Sept. 11, 2001. Haas was on a train that was entering the station under the building as the attacks happened and witnessed the devastation in person. In addition, he lost five friends in the attack and saw fellow workers lose their jobs, the memorandum states.

Haas became dependant on the drug Ambien, but never sought counseling that was available, the memo states.

"Ironically, this was the second World Trade Center bombing he was involved in," the memo continues. "He was present on February 26, 1993, in the WTC for an interview during the first terrorist incident. The memory of making his way down smoke filled stairways still remains."

However, Zitek said the government had interviewed five witnesses who said Haas was not at the World Trade Center on Sept. 11. Instead, he was at home in New Jersey, the prosecutor said.

Questioned under oath, Haas stood by his statement that he was at the trade center that day.

Posted by at 10:54 AM | Permalink

minnesota.publicradio.org | 9/26/08 | Tim Pugminre

St. Paul, Minn. — Gov. Tim Pawlenty's office has confirmed that federal authorities are investigating an employee of the Minnesota Department of Human Services in the suspected embezzlement of nearly $1 million.

Pawlenty spokesman Brian McClung issued a brief written statement saying the allegations are very serious, but that data privacy rights prevented further comment.

Sen. Linda Berglin, DFL-Minneapolis, says the case involves the state and federally funded Medical Assistance Program, which serves poor children, the disabled and the elderly.

Berglin, who heads the committee that oversees state health care funding, said the embezzlement stretches back more than six years and began before current anti-fraud measures were put in place.

Berglin said she suspected that the employee invented a fictional health care provider to skim payments.

"If this would have happened today it would have been discovered right away," said Berglin, who heads the Senate Health and Human Services Budget Division. "The systems that are in place today were not in place when this began."

Berglin said she didn't know how the fraud was detected, but called it a huge breach of trust.

"I'm sure many of the other state employees that work in that department feel betrayed, because they're all trying to serve people who obviously need health care services," said Berglin. "To have a co-worker betray the program in this way is very disturbing."

Berglin said the loss poses no threat to those who get their health care coverage through Medical Assistance because the government is required to pay their medical bills.

Republican House Minority Leader Marty Seifert, who has focused on welfare fraud, said the report of embezzlement was "a huge concern."

"We want to make sure we have accountability on everything across the board," said Seifert, R-Marshall.

Posted by at 10:51 AM | Permalink

investors.com | 9/25/08 | Sheila Riley

Think you're too smart to fall for a Nigerian e-mail scam? So did a Long Beach, Calif., attorney recently tricked into sending $193,000 to a bogus client via wire transfer.

The unnamed lawyer, whose story appeared recently in the California Bar Journal, is one of a growing number of well-educated professionals who have found themselves lured into the popular ruse.

It's not clear how widespread the trend is, because victims are, not surprisingly, reluctant to come forward; seeming so gullible doesn't exactly inspire the confidence of potential clients.

But according to the California Bar Journal, at least six attorneys have fallen for such tricks, which have duped hundreds of ordinary Internet users out of untold thousands of dollars.

Commercial insurer CNA Financial (CNA) warned its legal clients about the scam earlier this year. 

In one version, fraudsters go to a firm's Web site, claiming to be in a contract dispute with Company X in another state.

After the law office signs them up as clients, they quickly announce that the dispute has been settled. That's followed by the news that a cashier's check from the previously uncooperative company is in the mail to the attorney.

When the check arrives, the client asks the law firm to transfer the money to Company Y in another country to close out a deal there.

The attorney contacts the bank to see that the funds from the check are available and then transfers the cash. Only later does the bank realize the check is fake. By the time the bank informs the law firm, it has already transferred the money to the scammer, meaning the money could be gone for good.  And the attorney could be looking at professional liability.

When a customer deposits a check, funds must be available within a few days, even though the check may not clear for a couple of weeks. The interim provides opportunity for financial mischief.

E-mails making it past an initial screening can land in an attorney's inbox, where they're mistaken for legitimate client correspondence.

While his firm hasn't been conned, Hendricks says, he understands how the ploy could fool even smart attorneys.

"Lawyers fall for it because they're anxious to have new clients, and new clients come from unexpected sources sometimes," Hendricks said. "So it's not out of the realm of possibility that you might get a client from a Web site."

A lack of understanding of banking terms is part of the problem, says CNA Financial's warning: "The perpetrators,

relying on their target's ignorance of banking jargon and regulations related to check-cashing and availability, have managed to con the attorneys into transferring funds."

Scammers count on confusion over the difference between having funds "available for use" and having a check "clear," CNA states.

Probably every law office has been approached, Hendricks says.

Tom Zych, an attorney with law firm Thompson Hine, says his firm has received several of the scam attempts but wasn't fooled.

Simple economic principles work in the scammer's favor, he says.

"The cost of trying is so low," said Zych, who heads the firm's privacy and information security team. "You only need to succeed a couple of times to make it worthwhile. If they didn't succeed, they'd stop."

The problem isn't fundamentally one of technology, he says, but more a matter of good business practice.

The cyberspace con game doesn't surprise Secret Service spokesman Ed Donovan. The agency investigates financial crimes, including so-called 419 crimes, named for the Nigerian penal code section addressing "advance fee fraud."

"It's a volume business for them," he says. "They cast a wide net."

All professions can use a healthy degree of skepticism in evaluating potential new clients, Donovan says. Public education is critical, too, he says.

"Don't underestimate these people," Donovan said. "They're very skilled at what they do."

Posted by at 10:43 AM | Permalink

cfo.com | 9/25/08 | Stephen Taub

Bally Technologies said it has settled with the Securities and Exchange Commission over an investigation of its historical revenue accounting. However, the SEC filed a civil injunctive action against two former accounting executives of the gaming machine maker.

Under the settlement, no fines, civil penalties, or other monetary sanctions were imposed on Bally, formerly known as Alliance Gaming Corp. The company consented, without admitting or denying the SEC's findings, to a cease and desist order requiring it to remain in current compliance with federal securities laws and regulations relating to its reporting, record keeping, and internal controls.

Bally stressed that the SEC made no allegations of fraud against the company.

"We are pleased with this resolution of the SEC investigation, which allows us to put these matters behind us as we continue to execute our strategies for the long-term success of our business," said Richard Haddrill, Bally's president and CEO.

Not so fortunate were former CFO Steven Des Champs and former vice president of finance Martha Vlcek. The SEC accused them of fraudulently and artificially inflating the company's reported revenue and giving misleading information to investors about the company's earnings.

The SEC's complaint alleges that from the fourth quarter of fiscal year 2003 through the second quarter of the following year, the pair fraudulently recognized revenue on bill-and-hold transactions, made misleading disclosures and omissions regarding revenue recognition, and made materially false statements to the company's outside auditors when they represented the transactions were proper under generally accepted accounting principles.

The improper bill-and-hold sales led to a 25 percent overstatement of Bally's reported earnings per share for the fourth quarter of fiscal 2003 and to 33 percent and 27 percent overstatements of Bally's quarterly EPS numbers in the first and second quarters of 2004, respectively, the SEC added.

The complaint also alleges that in the second and third quarters of 2005, Des Champs fraudulently recognized revenue on transactions where he knew that the company could not reasonably expect that it would be paid and again made materially false statements to the auditors about his knowledge of the improper accounting, among other things.

As a result, the SEC alleges that Bally was later required to reverse $6.3 million of the $10.6 million of revenue originally recognized.

The SEC charged the two individuals, among other things, with aiding and abetting Bally's violations of securities rules. In addition, Des Champs was charged with falsely certifying the accuracy of Bally's financial statements. The Commission's complaint seeks permanent injunctions, disgorgement of ill-gotten gains, third tier civil penalties, prejudgment interest, and an officer and director bar against both defendants.  Neither Vlcek nor Des Champs could be reached for comment.

Posted by at 8:59 AM | Permalink

webcpa.com | 9/24/08 | Staff Writer

Testifying before the Senate Committee on Banking, Housing and Urban Affairs about the financial industry bailout package, Federal Reserve Chairman Ben Bernanke defended fair value accounting, but recommended that banks should be able to sell their assets at the "holdto- maturity" value to the federal government.

"I believe that under the Treasury program, auctions and other mechanisms could be designed that will give the market good information on what the hold-to-maturity price is for a large class of mortgage-related assets," he said.

Bernanke (pictured) noted that the assets have both a "fire sale" price and a "hold-to-maturity" price. As the fire sale price falls in comparison to the banks' traditional hold-to-maturity price, it is leading to huge writedowns, sending the fire sale prices even lower. However, he objected to the notion of eliminating mark-to-market accounting and just relying on banks' internal estimates.

He believes that the government's auction plan would provide an adequate market price if the Treasury bids for the assets at close to the hold-to-maturity price, and contends that this strategy should help the overall market. Banks will be able to revalue their own assets and attract more investors. Taxpayer losses would also be minimized, Bernanke argued, if the assets are purchased at their true hold-to-maturity prices.

Despite opposition from accounting regulators, banking groups have been calling for scaling back fair value rules. The Financial Services Roundtable is asking the Securities and Exchange Commission to issue a temporary order to "negate the negative impact" of fair value rules when the economy slumps, according to Bloomberg News. The American Bankers Association has also called for suspending fair value rules, with ABA president Edward Yingling calling them a "complete disaster." The ABA plans to meet with the SEC to discuss the matter and is sending a letter to the SEC with its recommendations.

"The fair value accounting rules are problematic in the current market, are not providing useful information to shareholders or regulators, and are having a strong pro-cyclical impact in the marketplace," wrote Yingling in his letter. "Our suggested solution: We would recommend that, given current market turmoil, the SEC provide immediate guidance that intrinsic value or economic value are appropriate proxies for fair value."

Yingling also expressed concern about proposals from the Financial Accounting Standards Board that might change the accounting for securitizations or require further use of fair value accounting. He said the ABA recommended that "there be a temporary stay on issuing any new accounting standards unless there has been a thorough analysis as to whether the proposed standards are clearly to the benefit of users of financial statements, whether fair value is pro-cyclical, and whether the impact of the proposals on the marketplace has been adequately taken into account and provided for."

Posted by at 8:56 AM | Permalink

fbi.gov | 9/25/08 | Press Release

French national Bernard Jean Ternus was sentenced today. Ternus had previously pled guilty to conspiring to transport in interstate and foreign commerce four stolen paintings knowing that they were stolen, and also to visa fraud.  The conspiracy charge stems from the August 5, 2007 armed robbery at the Musee des Beaux-Arts, also known as the Museum of Fine Arts, located in Nice, France. The armed robbers stole the following four original paintings: “Cliffs Near Dieppe,” by Claude Monet; “The Lane of Poplars at Moret,” by Alfred Sisley; “Allegory of Water” and “Allegory of Earth,” both by Jan Breughel the Elder.

Ternus previously admitted in open court during a plea hearing that, from August 2007 through June 2008, he and his co-conspirators worked to sell the stolen paintings to undercover agents of the Federal Bureau of Investigation and an undercover officer of the French National Police. According to documents filed with the court, Ternus had several meetings in the fall of 2007 with undercover FBI agents during which he negotiated with them for the sale of the four stolen paintings. During these meetings, Ternus told the undercover FBI agents that his associates stole the paintings, and that he needed to find a buyer for the paintings which were then located in southern France. On January 5, 2008, Ternus arranged with undercover FBI agents to meet in Barcelona, Spain with the people in France who were holding the stolen paintings.

On January 19, 2008, Ternus met in Barcelona, Spain with undercover FBI agents and with an unindicted coconspirator who had traveled from France to Barcelona for this meeting. There, Ternus and his unindicted coconspirator negotiated a two-part transaction with the undercover FBI agents. They would sell all four stolen paintings to the undercover agents for a total of €3 million (Euros). Two of the paintings would be transferred in exchange for €1.5 million (Euros), and the remaining two paintings would be transferred on a separate date for €1.5 million (Euros). The Defendant and his unindicted co-conspirator structured the two-part transaction to create leverage with law enforcement in the event anyone was arrested upon the sale of the first two paintings. If this occurred, they intended to use the remaining two paintings to bargain for the release of anyone who was arrested.

After the January 19 meeting in Barcelona, Ternus returned to South Florida and had several more meetings with undercover FBI agents to discuss the terms, structure, and logistics of the transactions. Then, on April 16, 2008, two of Ternus’ unindicted co-conspirators arrived from France via Madrid, Spain. Two days later, on April 18, during a two-hour meeting with undercover FBI agents aboard a boat docked in Broward County, Ternus and the two unindicted co-conspirators reviewed the details of their sale of the stolen paintings to the undercover agents. One of Ternus’ unindicted co-conspirators said he hid the Monet and the Sisley paintings separately from the two Brueghel paintings, and suggested that they could threaten to tear up the Monet and the Sisley if police surrounded them after the first transfer. Following a second meeting on April 20, 2008, involving Ternus, the two unindicted co-conspirators, and undercover FBI agents, the two unindicted co-conspirators returned to France. Shortly thereafter, one of Ternus’ unindicted co-conspirators arranged to have the transfer of the stolen paintings and the transfer of the purchase money occur in southern France.

On May 16, 2008, one of Ternus’ unindicted co-conspirators met in Carry le Rouet, France with an undercover officer from the French National Police who was believed to be a representative of the undercover FBI agents.

On June 4, 2008, when the final transaction was to occur, the French National Police arrested Ternus’ coconspirators in southern France; FBI and ICE agents arrested Ternus in Cooper City, FL; and the French National Police located and recovered all four stolen paintings from inside a van in Marseilles, France.

In addition to the conspiracy charge relating to the stolen artworks, Ternus also previously pled guilty to a visa fraud charge before U.S. District Court Judge Cecilia A. Altonaga in Miami, FL. During the plea, Ternus admitted that he fraudulently concealed his French criminal history in order to obtain a United States visa, which he then used to enter into and remain in the United States. Ternus’ arrest history in France begins in 1966.

Posted by at 8:52 AM | Permalink

reuters.com | 9/24/08 | Svea Herbst-Bayliss

Former hedge fund manager Michael Lauer, who stole money from Morgan Stanley and other investors to buy a plane and race car, was convicted of having committed fraud in a U.S. court, regulators said on Wednesday.

Lauer committed "egregious, pervasive, premeditated" fraud that "resulted in the loss of hundreds of millions of dollars in investors' funds," Kenneth Marra, U.S. District Judge for the Southern District of Florida ruled.

The U.S. Securities and Exchange Commission sued Lauer, who ran hedge funds Lancer Management Group and Lancer Management Group II, in 2003.

The court found that Lauer lied about the hedge funds' valuations, manipulated prices in seven securities, lied to investors about his holdings in fake portfolio statements and falsely represented his holdings in newsletters.

Hedge funds are loosely regulated portfolios that have become hugely popular with institutional investors who helped assets nearly double to $1.9 trillion in the last three years.

Lauer, who also faces criminal charges for the same matter, could not be reached for comment.

Posted by at 8:49 AM | Permalink

ohio.com | 9/25/08 | Marilyn Miller

A former chief financial officer of Hartville Homes, who admitted embezzling nearly $2 million from nonprofit agencies, has been sentenced to nine years in prison.

Sporting a crew cut and wearing a light gray business suit for his sentencing in Stark County Common Pleas Court on Wednesday, Craig Rohr said he was sorry for his actions and promised to make restitution.

''I apologize,'' he said in a courtroom filled mostly with representatives from Hartville Homes, an operator of group residences for disabled people and the primary target of his embezzlement. '' . . . It shouldn't have happened. . . . I want to make it right.''

Rohr of Tuscarawas Township pleaded guilty last month to charges of engaging in a pattern of corrupt activity, money laundering, misuse of credit cards and aggravated theft.

Assistant Stark County Prosecutor Fred Scott said Rohr abused his authority as chief financial officer when he wrote checks totaling $1.7 million on Hartville Homes accounts and funneled the money through businesses that he owned or had a controlling interest in.

Those businesses included the now-defunct Falls Consumer Credit, which provided counseling and repayment plans for consumers with credit card debt, and Rohr's Billing and Specialty Services.

''You are guilty of very serious crimes,'' Judge John Haas said. ''The reality in this case is that from Jan. 1, 2001 through December 2007, not just once or 10 times, but on many, many occasions you made a conscious decision to steal money and wrote checks on behalf of your own benefit.

''Hartville Homes is not just a name or corporate entity — it's people. Many who didn't have a say or voice, but who rely on people such as you. About 100 individuals were let down by you.''

Haas said Rohr stole $1,702,000 in cash and property, and $104,600 in credit card debt from Hartville Homes and $21,937 from St. Barbara's rental property clients.

Jeffrey Haupt, the attorney for Rohr, said his client has already paid $220,000 in restitution.  Speaking on Rohr's behalf were his wife, Kristine M. Rohr, and mother Janice. Janice Rohr told the judge that her son was ''an excellent husband and a wonderful father who helps anyone he can.''

Norman Wengerd, the CEO of Hartville Homes in Jackson Township, also spoke. He accused Rohr of taking advantage of the agency and its residents while using the money ''for personal gain to live a lavish lifestyle.''  Some of the money Rohr stole was used to take vacations and purchase two Mercedes Benz vehicles.

''He gave the appearance that the organization was financially solvent and funds were available to construct three facilities,'' Wengerd said. ''His actions were deceptive, methodical and calculating.''  Wengerd said Rohr left the organization with a $5 million tax debt.  ''He threatened our financial integrity,'' Wengerd said.

Posted by at 8:45 AM | Permalink

chicagotribune.com | 9/23/08 | Associated Press

A former administrative assistant and bookkeeper for Cass Elementary School District 63 in Darien has been sentenced to five years in prison for embezzling funds.  Renee Spuhler apologized Monday for stealing $78,000 from the school district, blaming job-related stress and a drug problem for her actions.

Spuhler's apology didn't impress DuPage County Circuit Judge Robert Anderson, who rejected the probationary sentence sought by her lawyer and imposed the prison time.

In handing down the sentence, Anderson pointed out Spuhler looted public funds on a systematic and calculated basis. DuPage County Assistant State's Attorney Helen Kapas-Erdman said the thefts occurred during a fouryear period when Spuhler claimed she was working 90 hours a week.

Posted by at 8:42 AM | Permalink

ft.com | 9/22/08 | Emma Byrne

A new technique for the forensic analysis of text messages may soon be used in court, according to research to be released on Monday at the BA Festival of Science in Liverpool. The technique, which can also be applied to e-mails, chatroom conversations and other electronic messages, makes it possible to determine the likelihood that two messages were written by the same person.

Tim Grant, deputy director of the Centre for Forensic Linguistics at Aston University, described how linguistic analysis is used in police investigations such as the one triggered by the disappearance of Jenny Nicholl in 2005. Analysis of text messages sent from Jenny Nicholl’s phone showed that they were more likely to have been written by murder suspect David Hodgson.

Dr Grant analysed the characteristic abbreviations used in the messages. For example, Jenny Nicholl consistently wrote “I am” and “myself”. The texts sent from her phone after her disappearance instead contained “im” and “meself”, features that were common in messages sent by Hodgson from his own mobile phone. The evidence helped to secure Hodgson’s conviction for murder in February this year.

These techniques have also been applied in the workplace, in cases where employees are suspected of sending malicious e-mails anonymously. “New technologies have created an antisocial phenomenon of mass anonymity. The ability to identify the writer can only be beneficial for society,” said Dr Grant.

Spelling, abbreviations and even the type of message sent can indicate whether a message is likely to have been written by a particular author.

Working with biologist Andrew Price from the University of Warwick, Dr Grant has adapted statistical techniques previously used to measure populations of sharks. The new measures place forensic linguistics on a firmer methodological foundation. “We’re moving from opinion based expertise towards a method that makes it easier to discuss issues like error rates and variance,” he explained.

Dr Grant is already using these techniques to support his analysis of text but in court he still presents extracts from the text. He believes that the new measures must be more widely understood before they can be used as evidence in court cases.

Asked about the possibility of mass screening for suspects using text messages, Dr Grant urged caution and said that other forms of evidence would always be needed to determine likely suspects. The new method is not able to discriminate reliably between large numbers of subjects.

Dr Grant stressed that language was much more complex and variable than either DNA or fingerprints.

Posted by at 9:31 PM | Permalink

signonsandiego.com  | 9/19/08 | J. Harry Jones

A former bookkeeper who was later promoted to executive administrative personnel officer of the Borrego Springs Fire Protection District has pleaded guilty to having embezzled $276,874 and will be sentenced Dec. 18.

Cynthia Rena Parker, 45, entered her pleas Wednesday in San Diego Superior Court to charges of embezzlement of public funds and misappropriation of public money, said Deputy District Attorney Richard Monroy.

Parker admitted to having falsified overtime claims totaling $276,874 over a four-year period, between Jan. 1, 2003 and Dec. 31, 2007.

Monroy said she faces up to two years in prison when she is sentenced.

Parker has already repaid $45,000 of what she stole from the small fire department, Monroy said, and Judge Stephanie Sontag indicated the more money Parker can come up with between now and her sentencing will weigh heavily on her eventual punishment.

“Any time one person is in charge of the books and all the financial records of a group they have the opportunity to steal,” Monroy said.

Details have not come out in court about the scope of the thefts. Monroy said there are a lot of “twists and turns” to the case.

Posted by at 9:27 PM | Permalink

lansingstatejournal.com | 9/22/08 | Kevin Grasha

People entrusted Jeffrey Sadlak with their IRAs and their life savings.  Instead of investing the money in things such as real estate as he promised, Sadlak is accused of using it for other purposes. Authorities have not been specific.

"They trusted him," said attorney Andrew Goldstein, who is representing four of six people Sadlak is accused of embezzling from over the last few years.

"He spent it in places they didn't think it was going. And when they asked for it back - it wasn't there or it had gone someplace else," Goldstein said.

Sadlak, 53, of Delta Township, was charged this week with one count of racketeering as well as six embezzlement counts involving five people.

He already was charged with an embezzlement count in a separate case involving a Delta Township woman. The total amount is about $500,000, but authorities said that figure could rise as more victims are identified.

Sadlak registered more than two dozen corporations at the address of his Lansing Township office. Sadlak, who served prison time in the late 1980s and had his broker's and insurance agent's licenses revoked, faces up to 30 years in prison if convicted of the racketeering charge and being a secondtime offender. He is being held at the Ingham County Jail on a $1 million bond.

Sadlak's attorney, Patrick Cole, did not respond to e-mail or phone messages seeking comment.  Goldstein said his clients did not know Sadlak's history.  "He was held out to be a trusted investment adviser," he said.

A preliminary hearing, which determines if Sadlak will stand trial, is set for Oct. 2.

"We just can't believe we bought into this," said David Huntington, one of the investors Sadlak is accused of defrauding.

Huntington did not want to comment further because he feared jeopardizing the case against Sadlak.  Certified financial planner Ted Feight, who runs Creative Financial Design in Lansing, found the case saddening.

"People depend on what we do," he said, adding that the most of his clients are retired or nearing  retirement age.

"When somebody does something like this, they completely destroy the rest of (people's) lives," he said.

Posted by at 9:20 PM | Permalink

inlandnewstoday.com | 9/22/08 | Staff Writer

A former communications manager pleaded guilty Monday to embezzling as much as $2 million in cash and equipment from the Riverside County Fire Department.

Michael Burton faces a 7-year, 4-month prison term at his sentencing in November.

Burton had overseen the purchase of millions of dollars’ of radio and computer equipment before he retired in 2005.

Retired sheriff’s Lt. Steven Vaughn is also charged and faces a preliminary hearing October 1st. Vaughn operated a now-defunct company that sold communications equipment to the fire department.

Vaughn has denied five charges ranging from receiving stolen property to conflict of interest and embezzlement.

Posted by at 9:15 PM | Permalink

investors.com | 9/19/08 | Steve Watkins

Does integrity really pay off on the bottom line? Tony Simons says it does, and he has hard data to back it up. Simons, a professor at Cornell University's School of Hotel Administration, surveyed employees at 76 hotels. He found that hotels where workers say their bosses keep their word and do what they say they'll do turned a higher profit than those where workers are leery about their bosses' integrity.

How does that difference translate into money? Each hotel happier with management's integrity drew $250,000 more in profit a year, he found. "It was the single biggest predictor of profitability among the things you can control," said Simons, who wrote the new book "The Integrity Dividend."

Ways to reap that dividend:

Know integrity's role. "It's not all it takes to lead, but no leadership takes place without it," Simons told IBD. People who trust their boss are more willing to go the extra mile, and they won't waste time questioning a boss' motives.

Make it a priority. "When I joined Applebee's, I wanted to build a culture where people were standing in line to join the company because of the integrity culture," said Lloyd Hill, former chief executive of Applebee's.

Hire for it. Carl Camden, CEO of staffing firm Kelly Services, asks interviewees which tough decisions they had to make and when they've walked away from sales wins for a principle. "When your culture is known, it attracts other people who share those values," he said.

Reward it. Managers should get incentives tied to their employees' perceptions of their integrity, says Simons.

Get the word out. "It doesn't do any good to live it if you don't talk about it," Camden said. That tells employees how important doing what's right is to leaders, and it holds the leaders up to more scrutiny as integrity gets more publicized.

Be truthful in evaluations. People trust their bosses less when their reviews aren't fully honest, which happens too often, Simons says.

Stay consistent. Give feedback often and celebrate your successes, Simons says.

Accept losses. When Camden took over as Kelly's sales chief, he learned one big-money customer was unhappy.

Kelly wasn't filling the number of temporary jobs it promised to do for the customer. On top of that, the account was losing money, so Kelly's staff wasn't running extra ads to make sure those jobs got filled. Camden told his people they had to live up to the contract, even if they decided not to renew it later. Kelly met its promises. It later dropped the contract, but Camden says it strengthened Kelly's reputation for keeping its word. "You have to be willing to take the hit," he said. "If you're seen as willing to preach one thing and then look the other way, you'll never build the culture."

Set an example. You can't play favorites, Hill says. "I've had people who I loved and who met all their goals, but maybe they cheated on inventory or took advantage of an employee," he said. "Then they have to go. That shows that leadership means business."

Posted by at 9:06 PM | Permalink

bloomberg.com | 9/22/08 | Erik Matuszewski

Mariano Rivera was like a kid in a sandbox after the final game at Yankee Stadium, down on his hands and knees digging up dirt from the pitcher's mound for a memento.  His keepsake just isn't officially recognized by Major League Baseball.

Posted by at 9:01 PM | Permalink

seattletimes.com | 9/22/08 | JOHN GITTELSOHN

In July 2007, Vijay and Supriti Soni of Corona del Mar, Calif., paid $440,000 for a home at 2129 W. Civic Center Drive in Santa Ana.  Five weeks later, they resold the house to Javier Hernandez, the family gardener and handyman, for $660,000. That's a 50 percent gain in 38 days — at a time when real-estate prices in Santa Ana were plunging.

But the lender that financed both mortgages, Washington Mutual, took a bath. Last March, Hernandez's loan went into default and in July the bank foreclosed. On the trustee's deed, the bank listed the home's value at $377,137 — $220,000 less than the outstanding loan.

Records show WaMu, America's largest savings and loan, financed at least 43 mortgages worth $24.5 million on properties bought and sold by members of the Soni family since 2007.

Of the 22 homes sold in that period, at least six have become problems for WaMu: Four were foreclosed, one received a notice of default and another was listed for sale at a $260,000 loss. Total value of WaMu's mortgages on the troubled properties: $2.7 million.

The Seattle-based thrift's lending practices resembled those of many other institutions that have run into trouble. They all offered complex adjustable-rate and subprime mortgages, approving many with limited scrutiny.

WaMu's $310 billion in assets, its diverse loan portfolio, its large base of depositors and conservative risk management were supposed to protect the thrift from collapse. Now it appears to be the next domino in the row.

WaMu said it is investigating the Soni deals as part of a fraud scheme and maintained that those loans are not a symptom of larger problems.

"We have extensive controls in place to protect the integrity of our portfolio and loan processes," spokeswoman Sara Gaugl said. "We are continually enhancing our efforts to identify and prevent any potential illegal activity."

"This is a quality-control problem," said Paul Leonard of the Center for Responsible Lending's California office.

"It certainly is curious WaMu's fraud-detection system didn't pick this up. It looks very bad and it is bad. The question is how widespread it is."

Leonard and others said the Sonis' deals probably escaped notice because WaMu, like many other lenders:

• Allowed financing of property flips that occur less than 90 days after purchase. The Federal Housing Administration banned financing 90-day flips in 2006. It also required a second appraisal for homes sold at a 100 percent gain less than 180 days after purchase.

• Relied heavily on imperfect fraud-detection software. Computers are good at flagging things like unrealistic income statements but can be deceived by determined insiders.

• Did not check criminal backgrounds. The Sonis had been convicted in 2003 of numerous felonies for a realestate- fraud scheme. WaMu checks criminal backgrounds of loan originators, such as outside mortgage brokers, but not borrowers.

WaMu declined to answer questions about the Soni case.

"This is an active investigation and we are fully cooperating with local law enforcement regarding this matter," Gaugl said.

The Soni family's transactions with WaMu indicate it continued making risky loans long after its underwriting standards were supposedly tightened in mid-2007, said James Barth, a senior finance fellow at the Milken Institute in Santa Monica.

"Lending institutions had an obligation to do due diligence to make sure the borrower can repay the loan, especially in 2007 and 2008 when they knew there was a mortgage meltdown taking place," Barth said.

Santa Ana home prices peaked in 2006 and have slid more than 40 percent since.

While those prices were plummeting, members of the Sonis family never sold for a loss. A Register analysis of 22 Santa Ana properties flipped by the family in the past two years shows a total gain on sale of $3.7 million.  Average gain: 48 percent. Average time between purchase and sale: 92 days.

Todd Lackner, a San Diego mortgage-fraud investigator who has examined the transaction records, said the common thread of WaMu funding makes the Sonis' transactions even more disturbing. "Any idiot can see these sale prices are excessive," he said.

The FBI says mortgage-fraud reports increased 31 percent nationally in fiscal 2007. "During declining markets, mortgage-fraud perpetrators may take advantage of industry personnel attempting to generate loans to maintain current standards of living," the FBI's annual fraud report said.

In August 2003, an Orange County Superior Court jury found Vijay and Supriti Soni guilty of forgery, falsifying real-estate documents, identity theft and grand theft. Vijay Soni was sentenced to a year in jail. He also surrendered his real-estate license. Supriti Soni was sentenced to three years in prison.

Brannan said their scheme "took advantage of their clients' trust when they exploited the unsuspecting customers' information for their own financial gain. They left these families with large financial liabilities, goods and property purchased in their name without their knowledge, many hidden costs, and a huge amount of grief to clean up their credit."

Last month, investigators from the Orange County District Attorney's office and state Franchise Tax Board served search warrants on nine locations, including the homes of the Sonis, her mother, Sushama Lohia, and the family of her sister Suniti Shah plus four family companies. They carted out 154 cardboard boxes and 40 computers filled with evidence.

Family members declined to comment for this story, citing the advice of attorneys. "I'm confident that the facts will reveal that Mr. Soni has not engaged in any wrongdoing," said Vincent LaBarbera, Vijay Soni's attorney.

In the past two years, the Soni family essentially created their own market in Santa Ana by flipping enough homes in a small area, said Lackner, the appraisal-fraud specialist. In at least three cases, homes flipped from one family member to another — sales later used by appraisers to give credibility to high asking prices for other properties.

One example: Lohia bought the bank-owned house at 827 S. Flower for $249,500 on Jan. 4. She sold it 20 days later for $575,000 to her daughter, Suniti Shah, who financed the purchase with a $488,750 WaMu mortgage.

"Selling to each other, that's something an appraiser should definitely discover," said Mike Sanders, a Laguna Beach real-estate appraiser. "If the appraiser finds all the same people's names on transactions, then that's something suspicious."

In an interview with the India Journal in Southern California, Vijay Soni provided another clue to his success at selling homes in a falling market: He said his company made the down payments for the buyers.

Soni said his "liquidation company" bought foreclosed properties in Santa Ana, Riverside and Corona and sold them by offering "10 percent down free money to any qualified buyer. With this big burden out of the way, they only have to worry about coming up with their monthly mortgage."

That would be the equivalent of 100 percent financing, experts said. If loan documents do not fully disclose who made the down payment, it would misrepresent the purchaser's stake in the property and potentially is a form of criminal fraud or theft, said Ann Fulmer, vice president for Interthinx, an Agoura Hills fraud detection company used by lenders.

"Unfortunately, the bank doesn't know it's 100 percent financing," she added.  Documents show that all of the family's sales through Washington Mutual indicated that the buyer paid a down payment of 10 to 20 percent.

But Elijio Servin Rojas said he never made a down payment on the home he bought in November for $640,000 from Sushama Lohia. Records show he paid at least $64,200 before closing.

Servin Rojas said he was renting when Lohia persuaded him to buy last year. He said he has fallen behind on payments on WaMu's $575,800 mortgage. He received a notice of default in July.

The Sonis were positioned to escape detection if in fact no money changed hands — because Lohia, a licensed real-estate broker, also served as escrow agent.

Posted by at 8:30 PM | Permalink

orlandosentinel.com | 9/22/08 | Rene Stutzman

Frank Amodeo, the Orlando financial wizard who built Mirabilis Ventures Inc. into a financial powerhouse, is to appear in federal court at 2 p.m. today and is expected to plead guilty to tax fraud.  Amodeo, 48, is charged with cheating the Internal Revenue Service out of $182 million. It is one of the biggest employment tax-fraud cases in IRS history.

Mirabilis controlled several payroll-service companies that worked with small- and medium-sized employers.

Those Mirabilis subsidiaries withheld from employees the appropriate amount of tax but didn't forward the money to the IRS, according to federal officials.

Amodeo is charged with 27 counts: conspiracy, wire fraud, failure to pay taxes and obstructing a federal investigation. They carry a maximum penalty of 370 years in prison and fines of $6.8 million.

Amodeo is free on $500,000 bond and is wearing an electronic monitor. If he's sentenced to prison time, it's not clear whether he'll be taken into custody at today's hearing.

Posted by at 8:22 PM | Permalink

boston.com | 9/19/08 | Jeannie M. Nuss

The former chief financial officer and deputy director of the Fruitlands Museum in Harvard embezzled more than $1 million with the help of three of her children, according to a civil lawsuit filed by the museum.

Peggy Kempton of Hollis, N.H., - along with her children, Bunker, Kristen, and Robert M. Kempton Jr. - allegedly stole the money over seven years, according to the lawsuit, which was filed Tuesday in Worcester Superior Court.

In the early 2000s, Kempton obtained credit cards in the name of Fruitlands to make personal purchases, the suit alleges. She also paid for purchases on personal credit cards with money from Fruitlands, the museum contends.  Peggy Kempton did not return calls yesterday seeking comment.

According to the suit, Kempton rented a cottage from Fruitlands on Prospect Hill in Harvard beginning in October 1999 for $1,400 per month plus utilities. She did not make any rent payments and instead allegedly sent checks and electronic transfers from a Fruitlands' bank account to pay for her utilities.  Kempton was hired by the historical outdoor museum in July 1997.

When her daughter, Kristen, began volunteering in 2001 at Fruitlands, Kempton paid her $10 per hour directly from a Fruitlands' bank account.

In 2007, she paid $18,598.59 to her son Bunker for 1,800 hours of work and $10,522.50 to Kristen for 1,000 hours of work, but no Fruitlands staff member witnessed their work, the museum's suit says.

In addition to her $67,000 salary in 2007, Kempton withdrew more than $40,000, according to the allegations. "The museum has contacted the donors," spokesman Lynn Kettleson said.

"Everybody was obviously concerned that the trust was violated," he added.

The suit maintains that Kempton also adjusted financial books and records to conceal fraudulent charges and payments.

Kempton abruptly left Fruitlands in February, without providing a reason, the suit states. Attorney General Martha Coakley's office is investigating, according to Kettleson.

In the suit, Fruitlands also has accused its financial consultant, Solar & Kilcoyne of Leominster, with negligence for not noticing the altered books.

The museum has since appointed a new financial officer, Tim Firment, Kettleson said.

Posted by at 10:50 AM | Permalink

marketwatch.com | 9/19/08 | Press Release

Surety One ( http://www.SuretyOne.org), a member of The Poindexter Group of Companies, announces the national roll-out of its specialty fidelity bond product for coffee/teahouse and cafe owners.

Available in $5,000 to $50,000 coverages,

Surety One's specialty coffee business fidelity bond provides inexpensive

protection against embezzlement, internal theft and conversion by baristas,

servers and other cafe employees. The coverage is available for full- and parttime

employees regardless of the size of the operation, in all fifty states, Puerto

Rico, and the U.S. Virgin Islands.

Surety One's bond is a sensible and cost-effective option for coffee/teahouse risk

management strategy.

Posted by at 10:47 AM | Permalink

azstar.com | 9/20/08 | Jamar Younger

A woman was arrested Thursday after a Pima County Sheriff's Department investigation showed she embezzled more than $300,000 from her employer, a sheriff's spokeswoman said.

Rhonda McCommons, 48, was arrested on suspicion of theft, forgery, fraudulent schemes and  computer tampering after her boss discovered she had forged his name on several of his business checks to pay off personal credit-card accounts, said Deputy Dawn Hanke.

The investigation began in April when the owner of Griggs Products Inc. received information from his financial institution that his checks were used to pay off the credit-card accounts.  The checks totaled $16,000, Hanke said.

In the following months, detectives from the department's Financial Crimes Unit received records from five financial institutions.  The investigation revealed she had embezzled $304,000 before she was fired in April, Hanke said.

McCommons worked for the company, which sells cultured stone products and other construction materials, for almost 15 years.

Posted by at 10:42 AM | Permalink

marketwatch.com | 9/18/08 | Press Release

Miami physician's assistant Thomas McKenzie pleaded guilty today to defrauding the Medicare program in connection with a $119 million HIV infusion fraud scheme, Acting Assistant Attorney General Matthew Friedrich of the Criminal Division and U.S. Attorney R. Alexander Acosta of the Southern District of Florida announced.

McKenzie, 53, pleaded guilty before U.S. District Judge Alan S. Gold in Miami to one count of conspiracy to commit healthcare fraud and one count of submitting false claims to the United States. In his plea, McKenzie admitted that beginning in approximately December 2001 and continuing through approximately April 2004, he trained physicians at 11 Miami medical clinics how to make medical records appear to support medically unnecessary HIV infusion services allegedly administered to patients. McKenzie also admitted to overseeing the documentation of fraudulent services at these clinics to make it appear that legitimate services were being provided at those facilities.

According to information contained in plea documents, beginning in approximately December 2001, McKenzie entered into an agreement with brothers Carlos, Luis and Jose Benitez to assist them in operating a series of fraudulent HIV infusion clinics throughout south Florida.  The Benitez brothers allegedly referred HIVpositive Medicare beneficiaries to these clinics and directed clinic staff to pay cash kickbacks to the patients. McKenzie admitted that his role at the Benitez owned clinics was to train and oversee the physicians working there, ensuring that the medical records appeared to support the expensive HIV infusion treatments being billed to Medicare by  the clinics. McKenzie admitted to knowing that the infusion treatments being billed at the clinics were medically  unnecessary and/or never provided. In his plea, McKenzie admitted that the HIV infusion clinics where he worked submitted $119 million in fraudulent claims to the Medicare program for medically unnecessary HIV infusion therapy.

McKenzie's co-conspirators, Carlos, Luis and Jose Benitez, were indicted with McKenzie on June 11, 2008, for their role in the HIV infusion and money laundering scheme. The indictment alleges that Carlos, Luis and Jose Benitez were the masterminds of a massive HIV infusion fraud operation throughout

South Florida, involving at least 11 clinics, and that they laundered the proceeds of their crimes. According to the indictment, Carlos and Luis Benitez were the true owners of AH Medical, Best Medi, PHMC, PMC, Saint Jude, Global, CNC, G&S, Karla Medical and Best Medicare, while Jose Benitez was the owner of Advanced Medical. All three Benitez brothers remain fugitives.

Posted by at 10:38 AM | Permalink

lcsun-news.com | 9/18/08 | Associated Press

Embezzlement charges have been dropped against a woman who had been accused of forging checks from a client of her personal accounting company.

The charges were dismissed against Lorna Havel, 38, following her acceptance into the preprosecution diversion program, court records said. Havel, who unsuccessfully ran for the San Juan County Commission earlier this year, was accused of stealing almost $8,000 from Accurate Construction & Development Inc.

A criminal complaint alleged 15 checks, ranging in value from $100 to $1,500, were forged since September 2007.   The funds were drawn from a business account and made out to Havel Accounting Services and Havel personally, the complaint alleged.  Havel was arrested July 3.

Havel qualified for the pre-prosecution diversion program because the crime was not violent, she had no previous arrests and is able to repay the money,  Chief Deputy District Attorney Dustin O'Brien said.  "The benefit to them is that they don't have a felony conviction, but they have to jump through more hoops than they would if they were placed on regular adult probation," O'Brien has said of the program.

The program required Havel to sign a statement admitting to the crime and to repay at least half of the stolen money before she was accepted into the program.

Posted by at 10:31 AM | Permalink

detnews.com | 9/18/08 | Shawn D Lewis

The Oakland County Prosecutor's Office has charged a former Berkley High School records secretary with embezzlement in a case involving nearly $28,000 missing from student activities accounts, clubs and fundraisers.

Eleanor Holmes, 62, of Berkley worked for the district for 29 years. She could not be reached Thursday evening. School district Superintendent Michael Simeck sent an e-mail to parents Wednesday informing them of the charges.

"We are seeking full prosecution and the full restitution to the fullest extent of the law," said Simeck. "The missing money did not come from the general fund, so it does not involve taxpayer dollars. As far as we're concerned we would like to see restitution not through our insurance, but through a court order."  Simeck said Holmes was placed on administrative leave and has retired from the district.

Holmes has a pre-exam conference before Judge William Sauer of the 45A District Court in Berkley on Sept. 30. Her preliminary exam is scheduled for Oct. 7, said Robert Novy, assistant Oakland County prosecutor.

Parent Terri Bailey has a daughter in middle school and one in elementary school in the district. She said she is disappointed about the missing funds.  "I think the Berkley School District acted responsibly and should be commended for letting parents know instead of letting us find out about it in the newspapers," she said. "I think it's a shame. Money in the school districts is so tight and now we've lost $28,000. I think it's a sign of the desperation of people in this economy."

Simeck said the district noticed the problem after seeing discrepancies in deposit slips. "There were things like defaced deposit slips with erasures," he said. "There was nothing to indicate there had been a problem before March 2006."

Sharon Crouchman has two children at Anderson Middle School. She expressed surprise at the news.

"It's so hard to get money out of people, and then someone uses it for their own benefit," she said. "Was she desperate? I don't understand it. It takes so much time to raise that kind of money."

Posted by at 10:27 AM | Permalink

ap.google.com | 9/18/08 | Staff Writer

Robin Hood may be a figure from English folklore, but police said Wednesday they had uncovered a modern-day variant: a banker who took from the rich and lent to the poor.

Benedict Hancock, a 39-year-old manager at the Royal Bank of Scotland, used millions from wealthy clients to make unauthorized loans to needier customers, police said. Hancock was arrested last year but the case only came to light Wednesday, in a report in the Daily Telegraph newspaper.

Hancock funneled money from cash-rich clients to struggling companies out of concern for their financial well-being, his lawyer claimed, according to the newspaper.

"The only explanation he gave was that he wanted the companies to do well," the Telegraph quoted the lawyer, Andrew Lloyd-Eley, as saying. "He got on well with them and he wanted to make sure that they succeeded for their sake rather than his."

The newspaper reported that Hancock — who is from Nottinghamshire, the home of Sherwood Forest — plundered more than 7 million pounds (US$12.7 million) from wealthy clients to aid the beleaguered businesses. Royal Bank of Scotland had to write off more than 6 million pounds (US$10.9 million) of the money, according to the Telegraph.

Hancock was arrested in February 2007 and found guilty of 14 counts of false accounting and one count of abuse of position on Aug. 19, 2008, City of London Police said in a statement. He was sentenced Tuesday to 18 months in prison at Blackfriars Crown Court in central London, police said.

RBS spokesman Andy Cameron-Smith said he could not immediately confirm the amount of cash Hancock misappropriated or how exactly the scheme was uncovered. He confirmed that Hancock was fired in May 2007.

"Obviously he was dismissed from the bank," Cameron-Smith said.

Posted by at 11:55 AM | Permalink

macaudailytimesnews.com | 9/18/08 | Staff Writer

The former head of a Chinese investment bank has lost his appeal against a two-year suspended death sentence for his part in one of China biggest financial corruption scandals, state press said yesterday.

Shi Xue, who headed the Hainan Huayin International Trust and Investment Company, was sentenced in January, and his appeal was turned down by the high court in Hainan, southern China, in "recent days," Xinhua news agency said.

Shi, who also headed the now defunct Dalian Securities Company Ltd in the northeast of China, was found guilty of illegally amassing 2 billion yuan in deposits from clients and embezzling 260 million yuan, the report said.

The case was part of a crackdown at up to 10 investment banks that came to light in March 2002 and involved up to 26.4 billion yuan, one China's biggest-ever investment fraud cases, the report said.

Shi was arrested in September 2002 and charged with corruption, embezzlement, financial certificate fraud, stealing state funds and illega raising money through fake contracts, it said. 

His two-year reprieve means that the death sentence will likely be commuted to life in prison.

In the same case, Shi's accomplice Liang Yong, the director of the Beijing Liyang Real Estate Development Co Ltd was given a life sentence for stealing and embezzling with Shi more than 27 million yuan from Dalian Securities.

Posted by at 11:51 AM | Permalink

sfgate.com | 9/16/08 | Associated Press

A hedge-fund swindler accused of faking his own death is not yet competent to enter his long expected guilty plea for skipping out on a 20-year prison term, his attorney said Tuesday.

A federal judge postponed Samuel Israel III's hearing until Oct. 22 after defense lawyer Barry Bohrer told him drug therapy is affecting Israel's "ability to perceive and actively understand what's going on."

Israel's previous attempt to plead guilty was postponed last month when he told Judge Kenneth Karas that he was operating at "about 70 percent" because he was being treated with methadone to wean him from an addiction to a painkiller prescribed after back surgery.

Israel, 49, was sentenced in April for conspiracy and fraud after he fleeced investors of nearly a half-billion dollars by making it appear his hedge funds were profitable.

He was supposed to go to prison on June 9, but authorities say he faked his suicide on a Hudson River bridge by leaving his SUV there with the words "Suicide is Painless" etched into the dust on the hood. He went on the lam in an RV until surrendering on July 2.

Bohrer told the judge that he was basing his assessment of Israel on interactions including "a lengthy conversation this morning." After the court session, Bohrer told reporters, "In my mind he's less able to proceed this time than last time."

"I think in order to proceed Mr. Israel should be clearheaded and able