FraudBaron.com

reuters.com | 10/29/08 | $1 Billion | suspect:  Bear Stearns | victim:  Bank of America

Bank of America sued Bear Stearns and two former hedge fund managers on Wednesday who were indicted in the first major federal case stemming from the subprime mortgage crisis.

The lawsuit in U.S. District Court in Manhattan accused Bear Stearns, which was sold in March to JPMorgan Chase & Co and three of its officers of "egregious misconduct" in a $4 billion transaction structured and marketed by Bank of America and other financing transactions in 2007.

chron.com | 10/28/08 | $107,000,000 | suspect:  Andrew Maxwell Parker | victim:  Export-Import Bank

A businessman has been sentenced to nine years and nine months after pleading guilty to charges related to bilking $107 million from a taxpayer-funded bank.

Andrew Maxwell Parker was ordered by U.S. District Judge Fred Biery on Monday to pay $10 million in restitution, equal to his profits from the scheme, and $494,822 in back taxes. And the judge ordered him to serve three years of federal supervision after he's released from prison.

Parker, 41, pleaded guilty in August to wire fraud, conspiracy, tax evasion, money laundering and filing false tax reports and faced up to 10 years in prison, as part of a plea deal.

He downplayed his role in the fraud, which happened between February 2003 to November 2006.

"I was but a cog in this big machine," Parker told the judge. "The truth is I'm caught in a system that, like with many agencies in Washington, is defective," the San Antonio Express-News reported Tuesday in its online edition.

Bank officials testified Parker exploited Export-Import Bank's medium-term loan guarantee program, forcing the bank to make good on $107 million in loans that went into default.

Parker also allegedly caused another $10 million in losses to Vinmar Finance Ltd., a commercial lender in Houston that Parker turned to in 2005 when the Export-Import Bank stalled in issuing loan guarantees to Parker's clients.

Prosecutors said Parker bought expensive cars,  as many as 14 cars in less than three years, along with four mansions, all with taxpayers' money.

The government is keeping his Hummer and one of his mansions. The remaining cars have been leased, sold or registered to relatives or others. His other homes were sold or leased.

Posted by at 9:44 AM | Permalink

clevland.com | 10/28/08 | $3,800,000 | suspect:  Jenny and Jeff Hovinen | victim: St. Vincent Charity Hospital

A Russell Township couple fleeced St. Vincent Charity Hospital out of $3.8 million - about $1.6 million more than earlier estimates - before they committed suicide in July, police said.

Jenny and Jeff Hovinen used a small grill to kill themselves by asphyxiation in their home.

Beachwood police investigated the theft because the Hovinens used bogus companies with Beachwood post office boxes to carry out the scheme. Detective Mark Nelson said police did not identify any other suspects to charge in the case.

Over six years, Jenny Hovinen, the director of marketing at St. Vincent, submitted monthly invoices to the hospital from Ohio Directory Pages and Creative Services, as well as other companies, for advertising on cable TV.

The hospital then issued checks to the post office boxes, and Jeff Hovinen, an attorney, deposited them into bank accounts. Nelson said large amounts of money were regularly withdrawn from the companies and placed into family accounts.

On July 1, hospital officials confronted Jenny Hovinen to provide information about the accounts. When she didn't, she was suspended. On that same day, the couple withdrew $46,000 from an account.

The police report did not specify what the Hovinens did with the money, but detectives learned that the couple had minimum monthly credit card payments of about $20,000.

Attempts to reach a hospital spokesman were unsuccessful.

Posted by at 9:40 AM | Permalink

montereyherald.com | 10/29/08 | $600,000 | suspect:  Karen Benson | victim:  Keith Day

TruckingA Salinas woman was sentenced to nine years in prison Tuesday for embezzling more than $600,000 from Keith Day Trucking.

Karen Benson, 38, was remanded immediately into custody by Judge Timothy Roberts in a courtroom packed with the owners and employees of the trucking company. Her husband and teenage children were also present.

Benson was the accounts manager for the company for six years. According to prosecutor Todd Hornik, she established two fictitious businesses and accompanying bank accounts under company names similar to Keith Day companies.

She deposited payments from Keith Day customers into the fictitious business accounts, Hornik said, then withdrew the money and put it into her personal accounts. The two-year scheme unraveled when Benson went on vacation and another employee covered her job.

Hornik said business owners should never have an operation that doesn't require at least two signatures for bank transactions.

"Never entrust an operation to a single person, no matter how much you think you can trust that person," the prosecutor said. "People react to stressors in different ways."

Charged with multiple felonies, Benson pleaded guilty in July to one count each of embezzlement and money laundering.

In addition to a sentence of nine years and four months, she was ordered to pay $615,900 in restitution and will be required to pay the costs of the company's forensic investigation, which could exceed $15,000.

Posted by at 9:37 AM | Permalink

lawfuel.com | 10/24/08 | $2,300,000 | suspect:  Mark Thomas Paskewitz | victim:  Medicare

 A doctor has been indicted for fraudulently billing Medicare for approximately $2.3 million in physical therapy services. The indictment, which was returned Wednesday afternoon by a federal grand jury in Santa Ana, alleges that the “physical therapy” was performed by unlicensed individuals without any supervision by the doctor, consisted only of massages, and followed the payment of kickbacks to induce Medicare beneficiaries to go to the doctor’s clinic.

Posted by at 9:30 AM | Permalink

reuters.com | 10/23/08 | $100,000,000 | suspect:  UBS | victim:  Healthsouth

HealthSouth Corp said UBS AG would pay the provider of rehabilitative services $100 million in cash to settle investor claims that the investment bank knew about HealthSouth's multibillion dollar accounting fraud.

The derivative shareholder lawsuit against UBS was brought by HealthSouth investors on behalf of the company. It claimed that as its investment bank, UBS was aware of HealthSouth's accounting fraud.

bizjournals.com | 1/24/08 | $250,000 | supspect: Royal Adams | victim:  IRS

A Wildwood man was sentenced to a year and a half in prison and ordered to pay more than $250,000 in restitution to the IRS Friday for filing false tax returns about his business.

Beginning in1990, Royal Adams, 56, created the corporate entity, Royal Personnel, prosecutors said.

Sometime in 1998, he entered into an informal agreement with David Icke, a British author and public speaker to split the net profits from the sale of Icke’s books, with 75 percent going to Icke and 25 percent going Adams.

For the years 2001, 2002, and 2003, Adams understated his income and overstated his deductions on his tax returns, prosecutors said. The Internal Revenue Service identified income not reported on his personal tax returns for the years 2001 through 2003 in the amount of $581,868, prosecutors said. A substantial portion of these proceeds were generated by the sale of Icke’s books. The IRS calculated the total tax loss for those years as $252,219.

Adams pleaded guilty in June to three felony counts of filing false tax returns.

U.S. Attorney Catherine Hanaway commended the work on the case by Internal Revenue Service Criminal Investigation, and Assistant United States Attorney Matthew Drake, who handled the case for the U.S. Attorney’s Office.

Posted by at 9:23 AM | Permalink

bizjournals.com | 10/24/08 | $400,000 | suspect:  Javier J. Ortiz | victim:  Medicare

The plea, announced Friday by federal agents, resulted from an investigation into activities by Javier J. Ortiz, 36, who worked at Wachovia’s West Gables Financial Center on Bird Road between 2002 and September of this year.

Around 2005, Ortiz was introduced to Angel Castillo Jr., who has already been sentenced to 19 years in prison for his role in orchestrating a $48 million Medicare and money-laundering scheme.

Ortiz allegedly used his position at Wachovia to open new business checking accounts for Castillo’s medical companies.

Once the accounts were opened, Castillo and his accomplices would submit fraudulent claims to the Medicare program for reimbursement. Medicare would then issue payment checks, which Castillo’s accomplices would deposit into various medical companies’ accounts.

Ortiz would remove the computer holds on the checks, allowing Castillo’s accomplices to withdraw the money.

In exchange, Castillo would pay Ortiz lump sums of cash. Ortiz assisted Castillo in laundering more than $400,000 in fraud proceeds.

Sentencing is set for Dec. 12. Ortiz faces up to 20 years in prison.

Posted by at 9:17 AM | Permalink

newsday.com | 10/25/08 | $9,000,000 | suspect:  Rosa Abreu | victims:  FEMA

A former city official was sentenced to prison Friday for her role in stealing more than $9 million from the agency where she worked, including federal funds earmarked for Sept. 11 victim identification, according to the city Department of Investigation.

Posted by at 9:03 PM | Permalink

startribune.com | 10/25/08 | $3 Billion | suspect:  Larry Reynolds | victim:  Investors of Tom Petters

Larry Reynolds, who admitted in federal court Thursday to laundering money for Minnesota businessman Tom Petters in what authorities say is a $ 3 billion investment fraud scheme, is negotiating with prosecutors to be freed until he is sentenced.

Reynolds said that beginning in 2002, he set up a bank account at his Los Angeles firm, Nationwide International Resources, and used it to help convince Petters' investors into thinking that their money would be used to buy high-end electronics merchandise for sale through big box retailers.

About $12 billion flowed through the account, Reynolds said. Numerous wire transactions passed through the account each month, generally ranging from $2 million to $25 million. The money was not used to buy electronics, however.

After the money came in, Reynolds said, he forwarded it to Petters, less a commission. At first, he said, the commission amounted to five-hundredths of a percent of the amount transferred, but that was eventually reduced to about a hundredth of a percent. Reynolds, dressed in a black T-shirt and dark slacks, said he collected about $6 million this way.

Posted by at 8:55 PM | Permalink

abajournal.com | 10/22/08 | suspect: TBD | victim:  California State Bar

Missing rent money has prompted an embezzlement investigation into a former employee of the California State Bar Association.

Robert Hawley, the bar’s deputy executive director, reported to the Daily Journal that the amount of stolen money is believed to be “into six figures.” The person under investigation was fired in September, he said.

The stolen funds were rent payments by several tenants at the bar’s San Francisco headquarters, Hawley told the publication. The missing funds went undetected while the building was under renovation.  As som tenants were paying reduced rent rates it was difficult early on to identify the missing funds.

Posted by at 8:47 PM | Permalink

stljournal.com | 10/22/08 | suspect:  Geraldine Sanders | victim:  Prestige Pools

Geraldine Sanders, 67, of South County, was sentenced on fraud charges involving the embezzlement of $389,000 from her former employer, Prestige Pools, U.S. Attorney Catherine L. Hanaway said in a statement. Sanders was also ordered to pay restitution of $389,000.

Posted by at 8:44 PM | Permalink

bizjournals.com | 10/23/08 | suspects:  Ronnie and Kristi Wilson | victim:  Conyers Public Housing Authority

A husband and wife from Conyers, Ga., were indicted Wednesday by a federal grand jury for allegedly embezzling more than $130,000 from the Conyers Public Housing Authority and using the money for gifts, parties and a vacation.

Between 2000 and 2007, Kristi Wilson, who was the executive director, and Ronnie Wilson, who was the lease enforcement officer for the Conyers Public Housing Authority, allegedly embezzled more than $130,000 of housing authority funds that came through grants from the U.S. Department of Housing and Urban Development. The Wilsons allegedly misused Conyers Housing Authority credit cards for vacation expenses, local meals, and personal items for their homes, including a barn, perimeter fencing, outdoor Christmas decorations, a waterslide, and Christmas gifts and parties for Housing Authority employees.

Kristi Wilson also approved and paid bonuses for herself, and padded her and her husband’s salaries.

The Wilsons are charged with conspiracy, embezzlement of federal program funds, and honest services mail fraud. The indictment includes a forfeiture count in which the United States seeks the forfeiture of ill-gotten proceeds from the alleged criminal scheme.

Posted by at 8:39 PM | Permalink

mlive.com | 10/23/08 | suspect:  Susan Barno | victim:  DeWind Wells & Dewatering, Inc.

A bookeeper convicted of embezzling $99,000 is accused of embezzling $355,000 from another company, DeWind Wells & Dewatering, Inc.

A lawsuit filed in Kent County Circuit Court claims that Barno used the funds to pay for a new vehicle and home improvements and to pay off personal credit cards. 

Barno disputes the allegations, and her attorney, Kelly Lambert, said the company has yet to document that she took any money.

But troubles have worsened for the 40-year-old married mother of three, who lives in a neatly kept, modest neighborhood on Hazelwood Avenue SW. This week, she was arraigned in Hudsonville District Court on criminal charges connected with the case. She is charged with embezzlement over $100,000 and remained jailed, unable to post a $25,000 bond.

"The evidence indisputably shows that Susan Kay Barno surreptitiously diverted substantial amounts of DeWind Company's funds to herself under false pretenses, then attempted to conceal her scheme to defraud by removing or destroying evidence of her acts from (the company's) accounts payable vendor files or ... computer system," company attorney Robert O'Brien wrote in the civil suit.

The company said that unauthorized checks were issued to cover the costs of those personal expenditures.

State police records show Barno, formerly known as Susan Sleet, had four convictions for uttering and publishing since 1989 -- and was sentenced to three to 14 years in prison in 1990, and a shorter term in 1991. In 2002, she pleaded guilty to embezzlement of $20,000 to $50,000. She was put on probation for four years and ordered to pay $99,000 to her former employer, Leasing USA Inc., records showed.

DeWind said in its suit that Barno used false information, including incorrect Social Security and driver's license numbers, "to conceal her prior criminal convictions of uttering and publishing and embezzlement" to get the job as a bookkeeper.

Barno denied using a false identity. Lambert, her attorney, said the company hasn't provided proof his client stole money and said any transactions involving his client were legitimate. His client "denied all liability to plaintiff," records showed.

The company alleged that Barno forged signatures and used a signature stamp of Rebecca DeWind, and "otherwise abused her position of trust with the DeWind Companies for her own benefit."

Posted by at 8:27 PM | Permalink

nytimes.com | 10/18/08

With the onset of the country's current economic crisis and meltdown of financial institutions, the FBI is struggling to find to find enough agents and resources.  The main cause is the reallocation of agents from white collar crime activity to national security roles after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties.

The pressure on the F.B.I. has recently increased with the disclosure of criminal investigations into some of the largest players in the financial collapse, including Fannie Mae and Freddie Mac. The F.B.I. is planning to double the number of agents working financial crimes by reassigning several hundred agents amid a mood of national alarm. But some people inside and out of the Justice Department wonder where the agents will come from and whether they will be enough.

So depleted are the ranks of the F.B.I.’s white-collar investigators that executives in the private sector say they have had difficulty attracting the bureau’s attention in cases involving possible frauds of millions of dollars.

Since 2004, F.B.I. officials have warned that mortgage fraud posed a looming threat, and the bureau has repeatedly asked the Bush administration for more money to replenish the ranks of agents handling nonterrorism investigations, according to records and interviews. But each year, the requests have been denied, with no new agents approved for financial crimes, as policy makers focused on counterterrorism.

According to previously undisclosed internal F.B.I. data, the cutbacks have been particularly severe in staffing for investigations into white-collar crimes like mortgage fraud, with a loss of 625 agents, or 36 percent of its 2001 levels.

Over all, the number of criminal cases that the F.B.I. has brought to federal prosecutors — including a wide range of crimes like drug trafficking and violent crime — dropped 26 percent in the last seven years, going from 11,029 cases to 8,187, Justice Department data showed.

“Clearly, we have felt the effects of moving resources from criminal investigations to national security,” said John Miller, an assistant director at the F.B.I. “In white-collar crime, while we initiated fewer cases over all, we targeted the areas where we could have the biggest impact. We focused on multimillion-dollar corporate fraud, where we could make arrests but also recover money for the fraud victims.”

But Justice Department data, which include cases from other agencies, like the Secret Service and Postal Service, illustrate the impact. Prosecutions of frauds against financial institutions dropped 48 percent from 2000 to 2007, insurance fraud cases plummeted 75 percent, and securities fraud cases dropped 17 percent.

In addition to the investigations into Fannie Mae and Freddie Mac, the F.B.I. is carrying out investigations of American International Group and Lehman Brothers, and it has opened more than 1,500 other mortgage-related investigations. Some F.B.I. officials worry privately that the trillion-dollar federal bailout of the financial industry may itself become a problem because it contains inadequate controls to deter fraud.

Republicans and Democrats in Congress are pushing for a more aggressive response by the F.B.I. Representatives Mark S. Kirk, an Illinois Republican who sits on the House appropriations committee, and Chris P. Carney, a Pennsylvania Democrat, called on Congress to triple the F.B.I.’s financing for financial crimes investigations.

That number has grown to 177 agents, who have opened 1,522 cases. But the staffing level is still hundreds of agents below the levels seen in the 1980s during the savings and loan crisis.

In white-collar crime, they said the bureau has given up only lower-level cases of marginal significance that might have never been prosecuted anyway. They say they have focused the available criminal resources on public corruption and other difficult crime issues in which the F.B.I. can make a unique contribution.

The Justice Department is relying more than ever on the state and local authorities to pick up the slack through joint task forces. And private investigators say that companies victimized by fraud are turning to them in increasing numbers because they are unable to attract much attention from the F.B.I. anymore.

In some instances, private investigative and accounting firms are now collecting evidence, taking witness statements and even testifying before grand juries, in effect preparing courtroom-ready prosecutions they can take to the F.B.I. or local authorities.

“Anytime you bring to the F.B.I. a case that is thoroughly investigated and reduce the amount of work for investigators, the likelihood is that they will take the case and present it for prosecution,” said Alton Sizemore, a former F.B.I. agent who is a fraud examiner for Forensic Strategic Solutions in Birmingham, Ala.  (Excerpt)

Posted by at 8:00 AM | Permalink

reuters.com | 10/22/08 | $364,200,000 | suspect: Parmalat | victim:  Citigroup

Shares of Parmalat hit an all time low after a jury ruled that it could not receive damages from Citigroup relating to its 2003 collapse.

Instead, the New Jersey state court jury awarded Citigroup $364.2 million in damages after voting six-to-one that dairy group Parmalat committed fraud, negligent misrepresentation and conversion, also known as theft.

zwire.com | 10/21/08 | $28,500 | suspect:  Misty Dawn Edwards | victim:  Cowetta Chamber of Commerce

The former executive director fo the Cowetta Chamber of Commerce has been charged with embezzlement and a preliminary hearing has been set for November.

Misty Dawn Edwards, 36, has been charged with embezzlement and obtaining money by false pretenses.

She is accused of embezzling an estimated $28,500 from the Chamber over an approximate 18 month period between June 1, 2006 and Nov. 9, 2007.  She is also accused of falsely reporting payroll totaling an estimated $2,705.

In November 2007, the Coweta Police Department was alerted by Coweta Chamber Board members of a shortage of about $46,490.99 in the Chamber's bank account. Police reports indicate many of the missing funds were from the use of the Chamber's bank debit card. Board members reported to authorities the debit card was possessed by Edwards.

Edwards served as executive director of the Coweta Chamber of Commerce from March 2006 to November 19, 2007 when she resigned reportedly citing personal reasons.

Posted by at 9:10 AM | Permalink

coastlinepilot.com | 10/20/08 | $100,000 | Hotel Laguna

A longtime former employee is accused of stealing more than $100,000 from a landmark hotel located on the California coast.

Posted by at 9:06 AM | Permalink

palmbeachpost.com | 10/21/08 | $18,000  | victim: First Congregational Church

The Martin County Sheriffs' Office reported that 2 women who had access to a churchs finances are suspects in the embezzlement of $18,000 of church funds.

Dr. Charles Mory said he began asking to review the church's financial records after he took over as interim pastor in April and received several past due notices from vendors.

A congregation meeting was scheduled in September to discuss the church's financial condition but was postponed by one of two women suspected of the embezzlement, according to a sheriff's report.

Church officials sent notices requesting financial documents to at least one of the suspects, but these never garnered a response, the report states.

An internal audit revealed several discrepancies in the church's bank account statements, which included cash deposits and ATM withdrawals of more than $88,000, according to the report.

Posted by at 8:58 AM | Permalink

webcpa.com | 10/20/08 | $5,700,000 | suspect:  Security Protection Inc. | victim : United States

Security guard company Superior Protection Inc. and four of its executives were indicted for failing to pay employment taxes and other charges.

"A grand jury indicted the company for conspiracy to defraud the United States of employment taxes, bribery, failure to pay prevailing wages, tax evasion, filing false tax returns and causing a firearm to be present in a federal court facility. Also indicted were company president John Heard; two executives identified as controller and/or CFO, Gary Lambert and John Bailey; and operations manager William Lane."

"According to the indictment, Heard failed to pay employment taxes totaling more than $5.7 million since 1987. Heard and Lambert allegedly opened and closed companies and used the names of fictitious people on corporate documents and forms filed with the IRS in an effort to impede the IRS. Heard, Lambert and Bailey also allegedly filed false tax returns that significantly overstated the amount of employment taxes that had been paid by their security companies, including SPI. The indictment also charges John Bailey with four counts of willfully making and subscribing to false employer’s quarterly tax returns that he submitted for SPI.

Some of the executives have also been accused of failing to provide required firearms training to guards, failing to pay the guards correctly, and offering gratuities and bribes to a government official in exchange for favorable treatment in bids for government contracts.

The indictment further alleges that the company routinely failed to pay overtime, prevailing wages and other benefits to the security guards as required under federal contracts.

Each of the two conspiracy counts and each of the two tax evasions counts against Heard carries a maximum of five years' imprisonment upon conviction. Heard and Lane face a maximum punishment of 15 years' imprisonment upon conviction of the bribery charge. The gratuity and firearms charges each carry a maximum sentence of two years’ imprisonment. Bailey faces up to three years’ imprisonment on each of the four counts of filing a false return upon conviction. Each of the 11 charges alleged in the indictment also carries a maximum $250,000 fine upon conviction. Arraignment has been set for October 22. 

Posted by at 1:12 PM | Permalink

reporternews.com | 10/17/08 | $850,000 | suspect:  Laura Minor and Sheri Lynn Mitchell |  victim:  Hendrick Health System

The U.S. Attorney's Office in Lubbock provided more details Friday about the alleged embezzlement of more than $850,000 by two women from Hendrick Health System.

According to U.S. Attorney Richard B. Roper, 52-year-old Laura Minor -- a former Hendrick employee and Abilene resident -- and 48-year-old Sheri Lynn Mitchell -- owner of a physician recruiting business -- engaged in a fake invoice scheme and defrauded Hendrick out of "hundreds of thousands of dollars."

"Mitchell would submit invoices to HHS for physician recruiting services that were not provided," a news release from U.S. Attorney Richard B. Roper said. "Minor would cause the invoices to be paid by HHS. Mitchell would then kickback to Minor amounts ranging from one-third to one-half of the payment. Minor never disclosed her financial relationship with Mitchell to anyone at HHS."

Minor is alleged to have received $283,126 in kickbacks from Mitchell, who lives in Cleveland, Tenn.

The alleged embezzlement occurred between April 2002 and November 2007 while Minor worked as an assistant in physician relations and later as director of physician recruiting for Hendrick. Mitchell owned and ran Physician Source, a physician recruiting business.

Posted by at 1:05 PM | Permalink

news.yahoo.com | 10/17/08 | $116,000 | suspect:  Jocelyn Kirsch and Edward Anderton : victim:  many

A college student who with her boyfriend stole the identities of friends and neighbors was sentenced Friday to five years in prison and ordered to pay more than $100,000 in restitution.

Jocelyn Kirsch, a former Drexel University student, and then-boyfriend Edward Anderton used the money for expensive salon visits, exotic vacations and fancy dinners.

Federal guidelines called for a prison sentence of 70 months, but U.S. District Judge Eduardo C. Robreno credited Kirsch for her apparent remorse and for her July 14 guilty plea to aggravated identity theft and other counts.

Kirsch, 23, and Anderton acknowledged stealing the identities of friends and neighbors in the Philadelphia area in 2006 and 2007 to net more than $116,000 in goods and services.

The scheme unraveled when an employee at an upscale salon told police that a check for Kirsch's $2,250 hair extension job had bounced. About the same time, a neighbor of the couple told police a package she did not order had been sent to her.

Police released photos showing the two posing in matching red swimsuits by a luxury hotel pool and kissing near the Eiffel Tower.

Anderton, a 25-year-old University of Pennsylvania graduate originally from Everett, Wash., is to be sentenced Tuesday.

Posted by at 1:01 PM | Permalink

inrich.com | 10/16/08| $1,600,000 | suspect:  Patricia and Darryl Cheek | victim:  X-Ray Engineering

A Mechanicsville couple who embezzled $1.6 million from a Richmond company were sentenced to 46 months in prison yesterday for bank fraud and money laundering.

U.S. District Judge Henry E. Hudson Patricia and Darryl Cheek to each make $1,595, 010.32 in restitution to the X-Ray Engineering Co. of Virginia.

The money was taken from the firm from December 2004 to 2007. Patricia Cheek was a longtime employee in charge of purchasing supplies, maintaining accounts and managing the company's financial account records.

They used the money to pay their personal expenses, make charitable donations and to pay the operating expenses of Aurum Leo Productions, an audio and video company owned and operated by Darryl Cheek.

According to the Cheeks and the government, they donated $160,000 to the Richmond SPCA. In an Oct. 6 letter to Hudson, the Cheeks said they owned two dogs, seven cats and fish.

Reached by telephone following yesterday's sentencings, Robin Starr, chief executive of the Richmond SPCA, said the amount involved was less that $160,000 and said her organization was victimized by the Cheeks, too. She said the couple still owe over $80,000 in unpaid debts.

"Contributions" is a misnomer, she said. She said the Cheeks bought goods and services in charity auctions intended to benefit the SPCA.

Posted by at 12:54 PM | Permalink

nytimes.com | 10/18/08 | $1,000,000 | suspect:  Ellen Hauer | victim:  Hampton Management

A controller for a Harlem apartment building management company pleaded guilty on Friday to stealing more than $1 million from her employer.

The controller, Ellen Hauer, 52, of the Bronx, pleaded guilty in State Supreme Court in Manhattan to firstdegree grand larceny in exchange for a sentence of 3 ½ to 10 ½ years in prison.

Ms. Hauer admitted that she stole more than $1 million from January 2001 to March 2008. She used the money to pay credit card bills for Las Vegas trips, Caribbean cruises, jewelry, furs and Victoria’s Secret lingerie, prosecutors said.

Ms. Hauer, a Hampton employee for 30 years, became controller in 1997 and began stealing immediately, prosecutors said. They said the charges include thefts only back to 2001 because of the statute of limitations.

Ms. Hauer was authorized to sign checks for up to $10,000 for business purposes, prosecutors said. They said she made $110,000 a year, but used money from her own bank account just once since 2001, to pay a credit card bill.

Posted by at 12:49 PM | Permalink

augusta.com | 10/16/08 | $350,000 | suspect: Elizabeth Copeland | victim:  Cot Campbell

A 34-year-old Aiken woman, accused of stealing more than $300,000 from her employer's personal account, was sentenced Wednesday to serve four years of a five-year prison sentence.

Mr. Campbell hired Mrs. Copeland as an executive secretary in 2003. She was responsible for maintaining files, paying personal bills and mailing income tax returns and tax payments to the Internal Revenue Service.  Soon after being hired, Mrs. Copeland began writing checks on Mr. Campbell's personal checking account and depositing them in her account, Assistant Solicitor Steven Kodman said. She never mailed the tax returns and cashed payments meant for the IRS, he said.

In March, Mr. Campbell learned his tax returns had not been filed for four years and that he owed taxes. An investigation by Aiken Public Safety revealed that Mrs. Copeland had embezzled money on 67 occasions, spending it on a down payment for a house, an interior decorator, vacations, gifts, clothes, private school for her son, a Lexus, a nanny and day care. She also paid off her and her husband's student loans. (Excerpt)

Posted by at 12:36 PM | Permalink

mlive.com | 10/16/08 | $400,000 | suspect: Tina Ricotta | victim:  H.R. "Kelly" Calamari

A woman accused of embezzling more than $400,000 from a wealthy older man may have her conviction reduced from a felony to a misdemeanor.

Earlier this month, Tina Ricotta of Hadley Township in Lapeer County, Michigan accepted a plea agreement that would reduce 6 felony accounts against her to one count of attempted uttering and publishing of a $117,726 check  - a five year felony.

If she completes the term of her sentence, scheduled for January 26, 2009, she can appeal to have the conviction reduced to a misdemeanor.

Investigators say that the she forged 13 checks in 2005 and 2006 from H.R. “Kelly” Calamari, now 98, and the retired founder of the Eldorado Tire Company.  Investigators say that it appeared that the two had a personal relationship prior to July 2005.

Posted by at 9:49 AM | Permalink

register-herald.com | 10/15/08 | Christian Giggenbach

Legal documents filed by a defense lawyer for Kevin Scott O’Brien, the central figure in the multimillion-dollar Greenbrier County cattle and banking scandal, say it’s not the “typical fraud case” and many of his victims’ losses were “unintended.”

Posted by at 7:57 AM | Permalink

chron.com | 10/14/08 | ALICIA A. CALDWELL, AP

Three former executives of an El Paso charity accused of contract fraud were arrested Tuesday, authorities said, in a probe that has also ensnared local public officials.

FBI agents arrested Robert E. "Bob" Jones, Ernesto Lopez, and Patrick James Woods on various fraud charges alleged in a 37-count indictment issued Thursday. The indictment is sealed.

The three men waived arraignment Tuesday and filed not guilty pleas, said Mary Stillinger, Lopez's attorney. All were being held on bond Tuesday night.

Stillinger said she had not read the entire indictment but Lopez looked forward to the case moving ahead so he can defend himself.

"We don't think Pat Woods is guilty of anything," said Woods' lawyer, Jim Darnell. Darnell and Jones' lawyer, Joe Spencer, said they had not seen the indictment and could not comment on the allegations. Both lawyers said their clients had done nothing wrong.

The federal probe of businesses tied to Jones also sparked a continuing investigation into public corruption that has targeted several current and former public officials. Federal investigators won't detail the connection between the public corruption probe and that of Jones, but have said the raids on public officials' homes and offices were part of the probe into Jones' employees.

Several people, including a former El Paso County commissioner and chief of staff to current County Judge Anthony Cobos, have pleaded guilty to corruption charges. According to federal court records, that probe involves 12 separate investigations and has uncovered widespread abuses.

Details of the cases against those who have pled guilty have remained sealed under court order.

Jones is the former head of the National Center for the Employment of the Disabled, a clothing company that was once the primary supplier of chemical-warfare suits for the military. The company, which has since become Ready One Industries, was raided by federal officials in 2006 as part of a probe of the company's government contracts, which required that at least 75 percent of NCED workers filling government orders be blind or severely disabled.

Two civil oversight groups — the President's Committee for Purchase from People Who are Blind or Severely Disabled and a Virginia nonprofit that helps administer government contracts — concluded that only about 7 percent of workers were handicapped while Jones ran the company.

Jones, who is charged with all 37 counts, abruptly resigned amid the federal probe and has denied any wrongdoing.

Darnell said Woods left the company sometime in 2007.

Shana Jones, a spokeswoman for the U.S. Attorney's Office in San Antonio, said Jones, Woods, and Lopez, are accused of lying to the contract overseers about the number of disabled people employed to fill the lucrative government contracts and embezzling or stealing at least $5,000 from the company.

The indictment calls for the men to forfeit tens of millions of dollars.

Shana Jones said prosecutors want Robert Jones to forfeit $58.9 million and Lopez to give up $51.2 million. Prosecutors are asking that Woods forfeit just $4.2 million.

All three men were initially charged in a five-count indictment issued in late September.

Lopez, the former NCED chief operating officer, faces 17 counts of the new indictment. Woods is a former NCED officer and member of the board of directors and faces five counts.

According to federal investigators, the initial contract probe at NCED also revealed numerous financial issues, including management fees of about $14.5 million the company paid to Jones' family trust from 1999 to 2006.

The NCED contracts were worth more than $834 million

Posted by at 7:50 AM | Permalink

news.yahoo.com | 10/14/08 | Associated Press

Rather than face a second trial, the former chief executive of Enron Broadband Services pleaded guilty Tuesday to one count of wire fraud.

The plea deal requires Joseph Hirko, 52, of Portland, Ore., to serve up to 16 months in prison and make about $8.7 million in restitution to the government for Enron victims. He also agreed to cooperate with prosecutors in other pending broadband prosecutions.

Hirko's sentencing is set for March 3.

He admitted to allowing press releases to be distributed in 2000 that said a groundbreaking operating system had been embedded in Enron's broadband network that would allow users to pay only for bandwidth they used instead of a flat monthly fee.

The operating system was still under development and the bandwidth-on-demand feature never materialized. Hirko admitted that he knew broadband operating system, or BOS, hadn't been embedded and couldn't provide bandwidth on demand.

Per Ramfjord, one of Hirko's lawyers, said in Tuesday's online edition of the Houston Chronicle that the plea allowed him to "reduce the risk of going to trial and puts him in a position to be able to return to an active life as soon as possible."

A trial of Hirko and four other EBS executives ended in September 2005 with jurors unable to reach verdicts on most charges. Hirko was acquitted in the 2005 trial on 14 of the 27 charges against him, two of them for insider trading and 12 for money laundering. He was charged in a new indictment with wire fraud, securities fraud and insider trading.

Hirko had been set to go to trial in December alongside Rex Shelby, a former top software executive.

"Today's plea closes another chapter in the Enron scandal," Acting Assistant Attorney General Matthew Friedrich said in a news release.

Enron, once the nation's seventh-largest company, entered bankruptcy proceedings in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.

The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.

Posted by at 7:22 AM | Permalink

sanluisobispo.com | 10/14/08 | Julie Lynem

Big-money, fast-paced careers on Wall Street are not what most MBA students at Cal Poly’s Orfalea College of Business dream about.  But as the trouble in the nation’s financial capital continues, some Cal Poly business students and educators have given close attention to the drama unfolding 3,000 miles away.

Bradford Anderson, a law lecturer at the college who teaches ethics, said the recent meltdown provides a good learning opportunity for students earning master’s degrees in business administration.

Associate Dean Chris Carr said the problems at the highest levels of banking and finance are a reminder to this year’s group of 92 graduate students that “you have to be on top of your game” in learning new skills and thinking about the future.

“A lot of really smart people, some with graduate degrees, maybe MBAs and Ph. D. s, might have said that this could never happen. They couldn’t see it coming,’’ Carr said.

Business schools across the country saw a significant shift toward ethics in the early part of the decade, following the scandals that rocked the accounting world, said Tony Pals, spokesman for the National Association of Independent Colleges and Universities.

The recent financial shakeup could further push schools to stress ethics or de-emphasize curricula that promote immediate returns and risky behavior, he said.

The Orfalea College, with class sizes of about 50 each year, does not require its students to take a mandatory ethics course —an effort to provide flexibility in class schedules—but the business program has for years incorporated ethics education into the curriculum.

Most students participate in a national ethics competition at Loyola Marymount University in Los Angeles or take a class called “corporate governance in ethical organizations.”

In that course, students are asked to solve real-world, ethical dilemmas, said Anderson. The idea is to help students to maintain their integrity and credibility by identifying inappropriate and incorrect business practices.

Students are taught to steer clear of such behavior and poor decisionmaking.  “There are always good people doing good things and coming up with good, creative ideas, and there are always bad people coming up with creative ideas to take money away from other people,’’ Anderson said.

But Anderson noted that “making money can be done in an ethical way.’’

“It can be a positive sum game. You can make a contribution to better society, and you can make a profit,’’ he said.

Nicholas Miura, who entered the MBA program after being an engineer in the Air Force, believes business schools should focus more on ethics.

“Studying business ethics does not mean that an individual will be ethical,’’ he said. “But it will give them a framework to understand the ethical implications of their actions. I think more ethics should be taught because it is a lot harder to plead indifference than ignorance.’’

Cal Poly’s learn-by-doing philosophy and creating socially responsible managers were two things that impressed MBA student McKinnon. Aiming to pursue a career in marketing, McKinnon will take the ethics course and believes that he will be a more ef fective manager because of the college’s approach. “That (socially responsible) is the term that jumped out at me,” said

McKinnon, who comes from a family of MBAs and had researched several institutions before choosing Cal Poly.

Classmate Amy Cook also will take the ethics class this spring. So far, students in other classes have debated Congress’ rescue plan and whether it’s fair in a free-enterprise system. “It’s been a huge topic of discussion in all of our classes,” she said.

Cal Poly’s hands-on approach to learning may serve students well as they face increasing competition from those who seek a dif ferent kind of educational experience or want to work in industries other than finance.

Many Cal Poly MBA grads do not seek jobs in finance; rather they choose jobs in fields such as engineering, agriculture and architecture.

“It’s possible that you might see fewer students entering finance programs next year,” said Pals, adding that there’s a relationship between economic downturns and spikes in MBA enrollments.

“It’s difficult to predict if that would last longer than a year. So much of it depends on the direction of the economy and the fallout.’’

For Cook, this couldn’t be a better time to be in school. Cook hopes to return to marketing — her chosen field before graduate school — after she completes the one-year MBA program.  “I’m glad I’m furthering my education now,’’ she said. “I think next year, they’ll have a big influx of people trying to do this with their time.”

Posted by at 7:17 AM | Permalink

mlive.com | 10/14/08 | John S. Hausman

Jennifer Ann Prince, 37, of 1420 Porter on Tuesday waived her 60th District Court preliminary examination and was bound over for trial on the felony charge of embezzling $100,000 or more from Industrial Assemblies Inc., a retail equipment maker. Prince is accused of stealing $236,000 from the firm.

Scott Hanson, president of IAI, said earlier this month that Prince was in charge of the company's accounts payable and accounts receivable. She allegedly wrote checks to herself, then put a supplier's name in the ledger.

Hanson said the alleged embezzlement was discovered by his bank. The company manufactures retail fixtures such as displays and cash register stands.  Court records show that Prince also was convicted in 2007 on a misdemeanor embezzlement charge for stealing money from her previous employer, Details Landscape and Irrigation Co. of Norton Shores.

Her arrest in that case came after she had already started working for Industrial Assemblies. The allegation was that she stole $3,800 from the landscaping firm. She worked as a bookkeeper and paid bills for the company. Prince at that time lived at 1041 Vick in Norton Shores and worked from her home, according to the police report.

Details Landscape owner Douglas Staal contacted Norton Shores police on April 12, 2007, after being advised by his bank that his account was overdrawn.

Police obtained a felony warrant in early May charging Prince with embezzlement by agent or trustee of more than $200 but less than $1,000. After she failed to turn herself in, she was arrested at her home May 22 and arraigned in court.

In August 2007, the felony charge was dismissed and she pleaded guilty to a misdemeanor charge of embezzlement by agent or trustee of less than $200. In October 2007, 60th District Judge Michael J. Nolan sentenced her to probation and ordered her to pay fines and costs. Staal told The Chronicle in an email that he got his money back.

IAI owner Hanson said Prince started work for his company in April 2007.  The current court file lists the dates of the alleged embezzlement from IAI as beginning April 1, 2007, and continuing through Sept. 19 of this year.

Posted by at 7:09 AM | Permalink

smartbriefs.com | 10/10/08 | Press Release

 A jury today awarded $31.8 million against Big Four firm KPMG in an accounting fraud lawsuit. Cast Art Industries, LLP v. KPMG, LLP, Superior Court of New Jersey Law Division – Middlesex County (Docket No. MID L-3295-03). With interest, the verdict is over $41 million, an amount believed to be the largest ever awarded against KPMG.

Cast Art sued KPMG in 2003 for professional malpractice and negligence for failing to detect a massive financial fraud at Papel Giftware, Inc. prior to Cast Art acquiring Papel in December 2000. The Honorable Phillip Paley presided over the trial, which began on Wednesday, September 10, 2008.

“We applaud the jury for their unanimous verdict and their finding that KPMG made false representations. In times like these, the public must be able to rely on auditors,” stated Michael Avenatti, counsel for Cast Art. For three years prior to its acquisition of Papel, KPMG repeatedly affirmed that Papel’s financial statements were accurate when in reality KPMG knew the company’s management had engaged in a number of fraudulent schemes designed to inflate the value of the company to potential buyers. Cast Art was represented at trial by Michael Avenatti and Alex Conti of the California law firm Eagan O’Malley & Avenatti, LLP and Alan Wasserman of the New Jersey law firm Wilentz, Goldman & Spitzer, P.A.

Posted by at 11:57 AM | Permalink

reuters.com | 10/13/08 | Edith Honan

A former chief executive of the Duane Reade Holdings Inc drugstore chain pleaded not guilty on Friday to securities fraud, conspiracy and charges of making false statements to securities regulators.

Former CEO Anthony Cuti, 63, is accused of providing false information during negotiations over the purchase of Duane Reade, previously a publicly held company, by private equity firm Oak Hill Capital Partners in 2004.

Posted by at 11:54 AM | Permalink

tallahasse.com | 10/13/08 | Angeline J. Taylor

Rosanne Stone, former church bookkeeper arrested on charges of grand theft and money laundering, pleaded no contest to the grand theft charge this morning in Circuit Judge Kathleen Dekker’s courtroom.  Stone was originally arrested in February after being accused of embezzling more than $500,000 from Episcopal Church of the Advent.

Stone’s attorney, Robert Harper Jr., said, “We’re not contesting the facts to the grand theft charge. It’s going to be an issue of paying back the church and the people who have been hurt.”

Stone has also requested for the judge to give a departure sentence thereby forgoing a jury trial. The minimum sentence is 21 months. The maximum sentence is 30 years.

Back in February, investigators with the Leon County Sheriff’s Office said Stone, 50, took the money from three church accounts over four years. Sgt. James McQuaig said it was possibly the biggest embezzlement case the Sheriff’s Office has ever seen. He said Stone used the money to buy antiques, jewelry, silverware, lamps and glassware on eBay.

“We counted and literally have hundreds of items seized as evidence,” McQuaig said.

Posted by at 11:51 AM | Permalink

ap.google.com | 10/9/08 | Gene Johnson

Two former software executives grossly overstated their company's revenue to attract more than $50 million in private investment, prosecutors said Wednesday, adding that the fraud was uncovered late last month when a worker found a set of cooked financial books as she was cleaning out a desk.

Paul Thomas Johnston, a founder and chief executive of Entellium Corp., and Parrish L. Jones, its chief financial officer, resigned Sept. 30 and were charged Wednesday with one count of wire fraud in U.S. District Court. Johnston wrote in his resignation e-mail that he was "deeply shamed and sorry" about what he had done.

Prosecutors said they don't know where all of the money went, but believe the bulk of it was put into the company.

Entellium spokesmen did not immediately return a call or an e-mail seeking comment. Assistant U.S. Attorney Carl Blackstone said about 40 of its 60 employees in Seattle were laid off Friday. The fate of 75 workers at the company's office in Malaysia was not immediately known.

Johnston and Jones were arrested at their homes Tuesday night and made initial court appearances Wednesday. A magistrate judge released Jones on bond, but Johnston, a citizen of the United Kingdom, will remain in custody pending a detention hearing set for Friday. Prosecutors said they believe he poses a flight risk.

The two were each represented by court-appointed lawyers for purposes of Wednesday's hearing, but given their finances, the judge ordered them to hire their own attorneys for future hearings. Neither court-appointed lawyer spoke with reporters after the hearing.

The privately held Entellium makes Web-based programs that help companies track sales and customer information. Most of its clients are U.S.-based, and include small-to-mid-sized manufacturing, technology and construction firms.

"We have both made a grave mistake (in) misrepresenting our revenue to the board," Johnston wrote to two of the company's directors in his resignation e-mail, which was cited in the federal complaint. "Looking back at the time we thought we would be able to right the wrong and correct our representation, but we have not been able to do this."

He added: "Clearly this is devastating news and something we both regret and are deeply sorry for. Our families are not aware of this and we are telling them now."

Johnston and Jones founded the company in 2004 and almost immediately began overstating revenues by $400,000 a month, according to Johnston's e-mail.

Since 2006, they claimed revenue of nearly $15.5 million, when in reality the company took in less than $3.8 million, FBI Special Agent Patrick Garry wrote in the complaint.

Johnston and Jones presented the inflated revenue statements to the company's board to attract private investment, prosecutors alleged. Of the more than $50 million Entellium has raised, more than $19 million came from the Bellevue-based Ignition Partners — a venture capital firm started by former executives at Microsoft Corp. and McCaw Cellular Communications. The latter became AT&T Wireless.

Two of Ignition's partners serve on Entellium's board, and said they would not have invested had they known the true state of the company's finances, the complaint said.

Most recently, Ignition provided the company with $2 million in April.

Barry Abraham, a shareholder who said he left Entellium in 2005 after serving as vice president of sales, was indignant. He suggested an audit would have uncovered the misrepresentations, and people on the company's board — especially the Ignition representatives — must have known what was going on and let it happen while they waited for Entellium's business to take off.

A woman who answered the phone at Ignition said the firm had no comment. Ignition lawyer Steven Yentzer did not return a call.

"When you raise $50 million — $50 million — doesn't anybody ever do an audit?" Abraham asked. "You don't hand over $19 million on a hunch, because you feel like (Johnston) is a good guy. The reason there was no audit called was because there was a big white elephant in the room."

Prosecutors said the scheme was uncovered late last month when Melisah Wojtacha, Entellium's vice president of human resources, was cleaning out a desk formerly used by the company's head of sales. Wojtacha found five "board books" — compilations of financial data presented to board members — and turned them over to company controller Sonya Huntzinger.

Huntzinger saw the inflated revenue statements and brought them to the attention of a board member on Sept. 29, the complaint said. The next day, the board informed Johnston that a contract CFO would be coming to "check some things out," and Johnston and Jones quickly resigned.

Entellium's legal counsel brought the matter to the attention of the U.S. attorney's office.

"Truthful accounting and transparency are critical to our financial systems," U.S. Attorney Jeffrey C. Sullivan said in a written statement. "I want to commend Entellium for contacting law enforcement when it became aware of inflated revenue claims made by company executives. Corporations are on the front line in rooting out fraud, and we need and expect them to come forward."

One of the 40 people laid off Friday was Erik Krause, director of product management, who had been at the company since 2004.

"When you do work in a startup, that is one of the big risks, that the company doesn't make it," he said. "We knew it was an option, but it's still a big surprise for everybody."

Wire fraud is punishable by a maximum 20 years in prison and a $250,000 fine.

Posted by at 11:48 AM | Permalink

smdailyjournal.com | 10/11/08 Michelle Durand

A former Redwood City attorney transferred more than $800,000 from a client’s trust into his own account and swindled more than $100,000 from two other elderly clients through a home improvement loan and forged document, according to the District Attorney’s Office.

Edward Duff Hume, 59, of Solvang, resigned from the California Bar in September 2007. The request took effect in April and disciplinary proceedings are pending.

San Mateo County prosecutors meanwhile charged Hume with embezzlement by the executor of an estate, grand theft, forgery and second-degree burglary.

Hume was arrested last Friday and appeared in court yesterday for initial arraignment. He pleaded not guilty and asked for a court-appointed attorney. Hume remains in custody on $500,000 bail and returns to court Oct. 15 for Superior Court review conference and Oct. 21 for a preliminary hearing.

While practicing law in Redwood City, Hume allegedly took the money between July 6, 2004 and May 2006. Hume, who was a licensed attorney in Redwood City since 1975, represented Frederick Helversen in the family trust. After Helversen’s 2002 death, Hume acted as the trustee and prosecutors say he embezzled $824,361.28 over the course of 18 months.

In 2006, Hume allegedly asked two other clients to loan him $100,000 for home improvements on the condition the money was repaid by the end of the year. Hume did not repay the funds and in 2006 is accused of presenting a forged document to one victim’s Menlo Park bank asking for $6,000 from her personal account. The bank would not honor the document after learning from the woman she didn’t approve the transfer.

Of the amount stolen, Hume used approximately $200,000 on landscaping at his Solvang home, said Chief Deputy District Attorney Steve Wagstaffe.

If Hume is convicted, he faces seven years in prison, Wagstaffe said.

The criminal charges and pending disciplinary actions are just the latest in Hume’s resume, according to the State Bar of California.

In January 1998, Hume was found ineligible to practice law. He was switched back to active status that March but again found ineligible in October 2002. In November, he returned to active but in July 2007 was again ineligible. His status stayed as such until his resignation was recognized in April.

In 1998, according to the BAR, Hume received a stayed one-year suspension and two years probation for not responding to his client’s requests for information and failing to perform legal services competently.

In 2002, Hume received the same discipline plus an actual 30-day suspension for failing to comply with the probation conditions of the previous incident. He filed five quarterly probation reports late, failed to file five more and didn’t finish ethics school.

Posted by at 11:45 AM | Permalink

bizjournals.com | 10/6/08 | Kevin Kemper

Worried about the exposure of those in her department to criminal charges, a National Century Financial Enterprises Inc. finance executive kept copies of company documents in her basement to share with investigators if they ever came calling. Jessica Bily, the former associate vice president of funding at National Century, told jurors who will decide the fate of her former boss Lance Poulsen that she decided to copy documents that detailed allegedly illegal payments to clients so she and her employees would be protected in case a criminal probe was ever launched.

From her vantage point at the center of National Century’s finance department, Bily testified she watched as superiors directed employees to shift funds among accounts to hide shortfalls, make multimillion-dollar advances to some clients in violation of its agreements with investors, and change data in investor reports to avoid raising red flags.

Bily testified Thursday at the criminal fraud trial of Poulsen, the 65-year-old founder and former CEO of Dublin-based National Century. The government has accused Poulsen of running a nearly decade-long fraud at National Century that resulted in more than $2.84 billion in investor funds going missing when the company collapsed into bankruptcy in 2002.

Poulsen is standing trial in U.S. District Court in Columbus on securities fraud, wire fraud and money laundering charges. He has pleaded not guilty to all charges.

Bily, who began at National Century after college and rose to become a senior executive, testified that advances approved by Poulsen concerned her so much that she kept her own set of records on the advances at home. She guided the jury through several documents she had created to track the funding.

She showed jurors how one company, owned in part by Poulsen and National Century cofounders Donald Ayers and Rebecca Parrett, received more than $7.8 million for operating expenses and more than $7.8 million for its real estate investment trust in the span of less than a week.

Those transactions, Bily said, were not allowed under National Century’s master indenture agreement, a governing document that defined for investors how the company operated.

Bily said she knew of nearly $1 billion that had been illegally advanced to clients by August 2002, six of which were owned by Poulsen.

On cross-examination, William Terpening, Poulsen’s attorney, attempted to draw doubt in jurors’ minds by asking Bily about her education and her contact with Poulsen.

Terpening also asked Bily if she had ever read National Century’s governing documents, such as its master indenture agreement, sale and subservicing agreement and private placement memorandum. Bily admitted she had only read a sample sale and subservicing agreement, a document that governed how National Century worked with the health-care providers it financed. When she had questions about other aspects of the business, Bily said she would turn to her superiors for answers.

Bily said she was too intimidated to express her opinions on National Century’s allegedly illegal actions to Poulsen. Instead, Bily said she would relay her concerns to her immediate supervisors.

Terpening also questioned Bily about her cooperation with the government. She admitted that she reached out to help investigators in early 2003, but at the behest of her attorney. Bily also said she went through National Century’s computer network to find documents that would be helpful to the government. On some of those documents, Bily attached explanations of what Poulsen was trying to accomplish.

But Terpening reminded Bily that she and Poulsen didn’t talk together about strategy, and asked why she thought she knew what Poulsen’s intentions were. Bily said she thought it was obvious what Poulsen was trying to do.

Posted by at 3:18 PM | Permalink

recordonline.com | 10/7/08 | Staff Writer

A former Orange County Jail lieutenant who 10 years ago siphoned $130,000 from jail accounts and served time in prison is again behind bars.

William J. Stenson Jr. surrendered himself to authorities Tuesday morning after learning there was an outstanding warrant

for failing to pay $90,000 in restitution.

Stenson, who lives in Mexico, appeared before Orange County Judge Jeffrey Berry, who set bail at $90,000 cash or

$350,000 bond.

As he was being handcuffed and led out of the courtroom, Stenson turned to his lawyer, Brandon Ozman, and asked: “Will

you call my wife?”

In 1998, Stenson was a lieutenant at the Orange County Jail in charge of bail and inmate accounts.

The 15-year Sheriff’s Office veteran vanished Feb. 25, 1998, as questions swirled about his handling of a bail account.

Investigators patched together a paper trail of deceptive bookkeeping practices and Stenson was indicted on grand larceny

charges for stealing $130,000.

Stenson hid out in Mexico and remained on the lam for two years before turning himself into the FBI in Laredo, Texas. His

disappearance and indictment was one of a series of embarrassing incidents and scandals to rock the administration of

then-Sheriff H. Frank Bigger.

Stenson, now 66, was sentenced to two to 10 years in state prison. He was paroled in January 2004.

Ozman told Berry that his client had been stopped by the Department of Homeland Security twice, once in Houston and

once in Newark, and was never told that there was an outstanding warrant.

He still has friends in the courthouse and got a call that there was a warrant for his arrest, Ozman said.

Posted by at 3:16 PM | Permalink

prnewswire.com | 10/7/08 | Press Release

A loan broker from the Philippines has been charged in connection with a $15 million scheme to defraud the Export-Import Bank of the United States (the Ex-Im Bank), Acting Assistant Attorney General of the Criminal Division Matthew Friedrich and U.S. Attorney for the District of Columbia Jeffrey A. Taylor announced today.

A federal grand jury in the District of Columbia returned a nine-count indictment earlier today against Bettina Balderrama, a/k/a Bonnie Balderrama, 57, of Manila, Philippines. The indictment charges that Balderrama brokered approximately $15 million worth of fraudulent loan transactions between companies located in the Philippines and U.S. lending banks, in which the Ex-Im Bank acted as guarantor or insurer.

The Ex-Im Bank, an independent agency of the United States, is the official export credit agency of the United States and issues loan guaranties and insurance to U.S. banks on behalf of creditworthy foreign companies for the purpose of purchasing U.S. goods. Once the Ex-Im Bank issues a loan guaranty or insurance policy, if the foreign borrower defaults on its loan repayments to a lending bank, the Ex-Im Bank pays the amount of the outstanding loan to the lending bank.

According to the indictment, between December 2001 and October 2004 Balderrama identified companies in the Philippines that wanted to borrow money to purchase U.S. goods and lending banks in the United States that would lend money for the purpose of buying U.S. goods. Balderrama then assisted the borrowers in executing loan agreements with the lending banks and in obtaining loan guaranties or insurance policies from the Ex-Im Bank as part of the loan agreements. The indictment alleges that Balderrama recruited a U.S. exporter,

Cristina Song, for the purpose of purchasing U.S. goods and shipping those goods to the Philippine borrowers, and then instructed Song to prepare false shipping documents and submit those false documents to the lending banks to make it appear that she had purchased and shipped goods. The indictment alleges that Song did not purchase the goods called for in the loan agreements, and instead misappropriated a majority of the loan proceeds and sent large portions of those proceeds to bank accounts owned and controlled by Balderrama and other foreign bank accounts as directed by Balderrama.

Balderrama has been charged with one count of conspiracy to defraud the United States and to commit offenses against the United States; three counts of submitting false statements to the Ex-Im Bank; one count of conspiracy to commit money laundering; three counts of money laundering; and one count of obstructing a proceeding before a department and agency of the United States.

Posted by at 3:12 PM | Permalink

startribune.com | 10/7/08 | David Phelps

A federal judge Monday authorized the seizure of several billion dollars worth of assets related to an investigation of businessman Tom Petters and several of his businesses and associates, who allegedly carried out a massive investment fraud scheme.

U.S. District Judge Ann Montgomery appointed Minneapolis attorney Doug Kelley as a receiver to oversee Petters Group Worldwide, Petters Co. Inc. and related companies.

The order excluded Sun Country Airlines, which filed a Chapter 11 bankruptcy petition Monday.

The government said in court pleadings that it has probable cause to believe that the alleged fraud scheme has bilked "in excess of $3 billion" from investors since 1995.

Petters, who has maintained his innocence, is in federal custody on charges of mail and wire fraud, money laundering and obstruction of justice. He is scheduled to appear in court today.

Montgomery acted at the request of the U.S. attorney's office, which sought a temporary restraining order and a permanent injunction against Petters and his associates, at least four of whom have been charged in connection with the alleged scheme.

In her order, Montgomery said prosecutors had sufficient "probable cause" to believe that the defendants would continue to commit financial crimes without a restraining order.

To support their request, government attorneys filed a sworn statement from FBI Special Agent Eileen Rice in which she outlined the structure of the alleged fraud and revealed a number of large payments to individuals from Petters Co. Inc. The government contends that the payments were the proceeds of fraud.

Among the checks written on the corporate account was one for $500,000 to Petters "for personal use" on Sept. 29 -- five days after federal agents raided his companies and his home and four days before he was charged and detained as a flight risk.

And Deanna Coleman, vice president of operations at Petters Co. Inc., got $8 million over the past four years. She was charged Monday with conspiracy in a "felony information," a process that usually anticipates a plea agreement.

Jim Wehmhoff, a Petters accountant considered a "co-conspirator" by the government, got $1 million in December. He has not been charged.

The FBI's list of December payouts also includes former Sun Country CEO Jay Salmen, who received $250,000, and Polaroid CEO Mary Jeffries, who got $1 million. Neither has been implicated in court documents regarding the alleged fraud. Neither could be reached for comment.

"Clearly, some of those bonuses are suspect, but others are totally on the up and up," Kelley said Monday. "Mary Jeffries works for Polaroid, and her bonus was well deserved."

The FBI affidavit says the Nevada Gaming Enforcement agency reported that Petters has gambling losses exceeding $10 million. It says Petters "is the largest comped-room guest" at the upscale Bellagio Casino in Las Vegas. (Excerpt)

Posted by at 3:04 PM | Permalink

stltoday.com | 10/5/08 | Associated Press

The former treasurer of a southwest Missouri humane society is charged with embezzling almost $90,000 from the organization's building fund over a three-year period.

Newton County authorities say Patsy LeSueur, 55, of Noel, was freed on bond late Wednesday afternoon after being charged with one count of felony theft.

LeSueur is accused of writing herself 48 checks from the Humane Society for Newton and McDonald counties.

Neosho police Chief Dave McCracken said the money was to have been used to build a new animal shelter. LeSueur served as the group's treasurer and secretary, and also is the city clerk for Noel and the wife of former McDonald County sheriff's Deputy Mike LeSueur.

Society board member Duane Cooper said $120,000 had been raised toward the organization's $200,000 goal.

If you enjoy reading about interesting news, you might like the 3 O'Clock Stir from STLtoday.com. Sign up and you'll receive an email with unique stories of the day, every Monday-Friday, at no charge.

Posted by at 3:01 PM | Permalink

usatoday.com | 10/5/08 | Julie Appleby

Home health care costs charged to Medicare in the Miami area have risen 20 times the national average in the  past five years, prompting a federal investigation of suspected fraudulent billing.  Miami-Dade County is on track to cost Medicare a projected $1.3 billion for home health care services this fiscal year, up 1,300% in just five years, government data show.

Investigators suspect that fraud is helping to drive the increase because the population of Medicare beneficiaries in the county grew only 10.2% between 2004 and 2007, the latest government data show.

"You definitely have a problem down here," says Randall Culp, an FBI supervisory special agent who oversees a team that works with a Medicare Fraud Strike Force in Miami.

In South Florida, investigators say, some agencies are billing Medicare for millions of dollars in services that are unnecessary, overused or not provided at all.

Investigators elsewhere are paying attention because South Florida is a bellwether for scams that later surface in other large cities, such as Los Angeles and Houston. Scams involving fake AIDS treatments,

for example, popped up in Detroit and several other cities after a crackdown in Miami, Culp and others say. "Typically, Miami is ground zero. Then we see it move to the other high-fraud areas," says Suzanne Bradley, an investigator with the Centers for Medicare and Medicaid Service's field office in Miami.  Home health agencies send nurses and aides to assist homebound elderly and disabled beneficiaries.

Nationally, Medicare expects to spend $16.5 billion on home health care this year, up 65% from five years ago. Medicare spent six times more on home health care services in Miami-Dade County during the first five months of this year than in Los Angeles County, where the Medicare population is three times larger, agency data show.

"It jumps off the page as out of proportion," says Kirk Ogrosky, deputy chief in the Criminal Division's Fraud Section of the Justice Department.

Today, acting Medicare chief Kerry Weems says he will announce new anti-fraud efforts, some targeted at home care agencies in Miami.

"It does affect everyone because everyone is paying into Medicare," says Peggy Sposato, a nurse investigator with the U.S. attorney in the Southern District of Florida, who combs through data looking for unusual billings.

Posted by at 2:55 PM | Permalink

bloomberg.com | 10/6/08 | Andrew Harris

Countrywide Financial Corp., the home mortgage lender acquired by Bank of America Corp. in July, will offer interest rate and loan principal reductions plus other distressed borrower relief valued at $8.4 billion to settle consumer fraud complaints from 11 states.

Posted by at 1:04 PM | Permalink

investors.com | 10/3/08 | Steve Watkins

The financial flop has caused an erosion of trust in the industry. That makes leadership ethics more vital than ever. Keys to building trust:

Be consistent. "You have to set an ethical standard and you have to live by it," said Leigh Hafrey, an ethics lecturer at Massachusetts Institute of Technology's Sloan School of Management. "There's a fair amount of agreement that we're in the mess we are now because we were not more disciplined and more rigorous with our ethics several years ago."

Don't wait. You can't expect to push an ethics plan amid trouble, then dig your way out. "Your codes need to hold sway even if there is no crisis," Hafrey told IBD. "People say we need to pay attention to this now, and we do. But without making a fuss about it, companies need to apply ethical principles at all times, even when things are good."

Make change systemic. The problem is too big for individuals to have much impact, says Diane Swanson, a business ethics professor at Kansas State University.

Peers and the law have strong effects on most people's reasoning. "What is being revealed is executives need appropriate boundaries set for decision making," Swanson said. "For me, the big issue is the integrity of the system. I see the need for structural changes. An executive of utmost integrity still has to deal in the context of the system."

Watch what's accepted. When activities become standard, don't expect those in the business to operate differently. "You can't count on executives rising above that and operating outside of industry norms," Swanson said. "I'm suspicious of claiming that people can step in and be ethical when the system is not set up for that."

Beware how you boast. Companies and leaders can tell the world they're ethical. But that can mean a lot of things, Swanson says. "That's becoming so commonplace that I'm becoming cynical when I hear it. It's easily said, and it deserves more attention."

Back it up. When you do tout your ethical behavior, be specific. "People don't know what that means," Swanson said. Build a legacy. Once people know your firm's history of operating ethically, they'll turn to you in troubled times. "There can be a reputational advantage to being consistently ethical," Swanson said.

Find a role model. Leaders must look to others as examples that you can do things the right way and be a success, Hafrey says. "The mentoring piece has a real impact," he said. When the government hired Edward Liddy last month to turn around teetering American International Group, a colleague quickly touted Liddy's integrity. Tom Wilson, who succeeded Liddy as CEO at Allstate, said in a statement, "Brilliant, strong leader, unwaveringly ethical, Ed undoubtedly is the right person to lead AIG through these difficult times."

Work with others. In the case of the financial rescue plan, company leaders must show they'll cooperate with political leaders with an eye toward public confidence, Hafrey says. "Evidence of collaboration goes a long way toward regaining trust," he said.

Posted by at 1:01 PM | Permalink

muskogeephoenix.com | 10/2/08 | Donna Hales

Former Marble City School Superintendent Larry Duane Couch is to surrender himself Nov. 4 to start serving two concurrent 24-month federal sentences.  Couch pleaded guilty in May to embezzling up to $1 million from the school over 10 years and cheating on his income taxes.

After he leaves prison, Couch will have to serve 24 months supervised release and pay a $4,000 fine.

More than 25 taxpayers from his school district appeared at his sentencing Thursday in federal court in Muskogee.

They weren’t happy U.S. District Judge Ronald A. White opted for what he called a “downward departure” from federal sentencing guidelines. Those guidelines would have meant a sentence of from 37 to 46 months.

“I don’t think it’s good enough — look at what all he stole from the school,” said patron Bonnie Rider. “He didn’t just steal for one or two years — he stole it for 10 years.”

School board member Ramon Bolin said he thought the guidelines were a little low before the downward departure.

“I was disappointed — but at least he is going to jail,” Bolin said.

“How is he going to be treated (in prison) — Is he going to have a color TV in his room?” Marvin McCoy asked prosecutor Doug Horn. Horn is the first assistant U.S. attorney and chief of the criminal division in the U.S. Eastern District.

Marble City school board member Barry Spyres said Couch really isn’t suffering, that he has his ranch and some assets.

“The way you get a greedy guy is break him — that would be justice,” Spyres said. “How is he broke?”

Couch has made restitution of $979,000 to the school and paid $109,948.48 in court costs, which included paying for a state audit of the school.

Horn told the Marble City residents that Couch’s family and friends signed an $800,000 note on his land and assets in order for Couch to come up with restitution.

After the sentencing, Couch said he wouldn’t make a statement if someone gave him a $100 bill. Couch’s defense attorney, Donn Baker said he believes Couch is a really, really good man who deserved leniency.

“He’s done everything anybody could do to right the wrong,” Baker said.

The Sequoyah County school has 14 teachers, two more than it had before it was reimbursed the almost $1 million Couch embezzled. The school, which has 148 students, also has been able to set up a computer program for students, said Marble City Superintendent Bill London.

Horn said there is a possibility state and federal education departments will come back on the school and demand some of that restitution for state and federal funds Couch misspent while at the school.

Posted by at 12:57 PM | Permalink

cjonline.com | 10/2/08 | Staff Writer

A credit card manager at a Salina bank has been charged with one count of embezzlement and one count of unlawful use of a credit card, U.S. Attorney Eric Melgren announced Wednesday. According to the indictment, Kellie M. Schmitt, 35, embezzled approximately $122,000 when she worked as a credit card processing manager for Sunflower Bank in Salina.

She allegedly moved funds from an internal training account and dormant or closed accounts, created false account transactions and false cash advances, reversed finance charges, suppressed account statements, and opened and utilized unauthorized credit card accounts.

The crimes are alleged to have occurred at various times from June 25, 2005, to May 30, 2007.

If convicted, Schmitt faces a maximum penalty of 30 years in federal prison and a fine of up to $1 million on the embezzlement charge and a maximum penalty of 10 years and a fine of up to $250,000 on the credit card charge.

Posted by at 12:53 PM | Permalink

seattletimes.com | 10/2/08 | Mike Carter

A former Renton man accused of embezzling Social Security payments from hundreds of disabled clients will be returned to Seattle from San Antonio, where he was arrested last week, according to the U.S. Attorney's Office. Maurice D. Brooks, 46, through his nonprofit company Professional Payee Services, is accused of stealing more than $300,000 from the accounts of more than 300 disabled Social Security beneficiaries while acting as their personal representative and being responsible for seeing that their daily needs are met, according to the U.S. Attorney's Office.

Brooks worked as an "organizational representative payee," the designated gatekeeper for Social Security payments going to his clients who don't have family or anyone else to help them with their finances. The Social Security Administration allows ORPs to deduct a fee of up to $68 a month for each beneficiary the ORP represents, said Assistant U.S. Attorney Johanna Vanderlee. In return, the ORP ensures that the payee has adequate funds for food, lodging and clothing.

A two-count indictment handed down last week by a Seattle grand jury alleges that Brooks deducted "far more" than he was supposed to, according to a U.S. Attorney's news release.

In one instance, where a client had received a lump-sum back payment from Social Security, Brooks alleged took $36,800.  Brooks moved to Texas in July, the news release says.

"Using a conservative estimate ... investigators calculate that during the years 2003 through 2007, Brooks embezzled approximately $302,727.42 in ... benefits from his disabled clients and used those funds for his personal enjoyment," the news release says.

Posted by at 12:48 PM | Permalink

boston.com | 10/1/08 | Samantha Gross

First the bursting of the dot-com bubble in the 1990s, then the accounting scandals earlier this decade, forced ballparks and arenas around the country to change their names. Enron Field became Minute Maid Park, and names like PSINet Stadium and CMGI Field vanished.

Now, the Wall Street meltdown is creating its own identity crisis for arenas and teams that bear the names of financial companies that are suddenly disappearing or in distress.

Similarly, players on England's storied Manchester United soccer team wear the AIG name on their jerseys, advertising a company that fell so deep into financial trouble that the U.S. government took control of it.

Some corporate names -- Washington Mutual, for one -- could vanish from Wall Street altogether. In other cases, the public and stockholders could begin to wonder why these struggling companies are tying up scarce funds on multimillion-dollar sports sponsorship deals.

As a result, some arenas might see a name change.

"I would think that would be the top order of the day to get that switched over," said Rob Vogel, president of the Bonham Group, which helps broker sponsorship and naming-rights deals. "It's in everyone's best interests to get that rebranded as quickly as possible."

When Enron Corp. collapsed in a spectacular case of accounting fraud, the Houston Astros were quick to scrub the company's name from the team's ballpark, Enron Field. It was rechristened Minute Maid Park within months.

Most naming-rights contracts provide for such a switch. Although each agreement is different, the details -- and cost -- are usually left to whoever acquires the sponsoring company, said Dick Sherwood, president of Front Row Marketing Services, which helps negotiate such deals.

Any new name on the Wachovia Center would be the fourth since 1994, following a series of bank mergers.

"We've been going through this for years, because banks have been sold and bought at a pretty rapid pace anyway," said Sherwood, whose office is in the building.

After the cable TV company Adelphia filed for bankruptcy in a corruption scandal, the Tennessee Titans' Adelphia Coliseum became The Coliseum. Later it was named LP Field following a deal with Louisiana-Pacific Corp.

The Baltimore Ravens had to change the name of their stadium -- PSINet Stadium -- after the Internet company filed for bankruptcy. The stadium is now named after M&T Bank.

A message left for a Washington Mutual representative went unreturned. WaMu failed and was bought by JPMorgan Chase last week.

Vogel said companies will probably take some time to decide what to do with the naming deals, and some will probably try to buy their way out of the agreements.

Posted by at 1:55 PM | Permalink

bloomberg.com | 10/01/08 | David Glovin

Perched barefoot at a bamboo desk in his bedroom in the Bahamas, Viktor Kozeny spends 12 hours a day at his computer.  He writes to the lawyers who are battling his extradition to the U.S. on charges of bribery, helps map strategy in a London lawsuit brought by former investors and updates his Facebook page with ideas for inventions using alternative energy. To relax, he swims in the blue-green waters of the Caribbean that lap onto a beach in his backyard.

``Havel was jailed,'' he says of the former Czech president. ``People would have laughed if they saw him as a president.'' He rattles off the names of other famous figures who've been imprisoned: ``Nelson Mandela. Alexander Solzhenitsyn.'' Kozeny says he plans to clear his own name and run for the European Parliament by 2014.

Prosecutors would like to thwart Kozeny's political ambitions and send him to jail. New York District

bid to win control of an oil company in the former Soviet republic of Azerbaijan.

leaders to cement the acquisition. Czech prosecutors, meanwhile, are presenting evidence to a court that is trying Kozeny in absentia on charges of embezzling $1.1 billion from mutual funds he established in the early 1990s.

The U.S. came close to extraditing Kozeny: The so-called Pirate of Prague spent 19 months in a maximum security cell in the Bahamas' Fox Hill prison fighting extradition until a Bahamian judge ruled last year that Kozeny wasn't subject to American anti- bribery laws and ordered his release.

Now under a Bahamian court order not to leave the island nation, Kozeny says he's broke. He spends a lot of his time surfing the Internet for research to back his energy project.

``There's the science, there's the litigation, and that's pretty much it,'' he says, between sips of chilled water in his study.

Like other international fugitives, including the late Robert Vesco or Jacob ``Kobi'' Alexander, the former chief executive officer of Comverse Technology Inc. who fled to Namibia in 2006 rather than answer U.S. options-backdating charges, Kozeny is paying a price for his freedom.

``A lot of people end up spending all their money keeping their freedom,'' says Safir, who's now CEO of security consulting firm SafirRosetti, a unit of New York-based GlobalOptions Group Inc. ``There's constant pressure.''

Steven Tullberg, a GAP investigator, says he suspects the Czech stashed millions of dollars around the globe and secretly controls millions more through family-run trusts.

``He claims poverty, which makes everyone laugh,'' Tullberg says. GAP has spent two years tracking hundreds of offshore accounts in Cyprus, Liechtenstein, Grenada and a dozen other tax havens.  ``When you try to identify assets, you run up to dead ends,'' Tullberg says.

International banking laws have loopholes that Kozeny and others like him easily exploit, says Louis Clark, president of GAP, which is lobbying for changes in banking laws.

``Anyone can do it if they have a good memory and they're unscrupulous,'' says Clark, a lawyer and former Methodist minister. ``Only a very strong government might be able to get to the bottom of what this is all about.''

Kozeny's existence today is far less glamorous than the one he led a decade ago, when he spent 13,000 pounds ($22,950) on dinner at London's Le Gavroche and jetted around the world in a private Challenger 601-3R.

His blond hair is thinning and his 6-foot-2-inch (188- centimeter) frame has expanded to 230 pounds (104 kilograms).

``It's ruined the best, most productive part of my life -- professionally, socially, financially, family life,''  Kozeny says of the court cases. ``It's a little like being hit by a truck.''

Kozeny hopes the recent court rulings against U.S. prosecutors will lead them to dismiss criminal charges. For now, he says, his, his family's and trust assets are depleted, after losses in Russia's 1998 stock market collapse and in Azerbaijan and the Czech Republic.

His house, called Turnstar, is pledged to lawyers to cover vast legal fees, and his planes and homes in Aspen and London have been sold. The water in Turnstar's $13 million pool is murky.

``We took an enormous hit in Azerbaijan,'' Kozeny says. ``Through this litigation, we took another giant hit.''

Kozeny denies that he's concealing money. ``There's nothing to hide,'' he says. Asked what he's lived on for the past nine years, how he's paid an army of lawyers and how his mother, Jitka Chvatik, 68, can afford to spend half the year in Monaco, he says his mother has partially paid his way.

She used money from family trusts of which she is the beneficiary and which was earned legitimately in the Czech Republic.  ``There's no pot of gold,'' he says.

Kozeny, at age 19, moved to the U.S. in 1982 after fleeing communist Czechoslovakia as a teenager. He went to New Mexico to study physics, boarding with a family. He then ran off with the 37- year-old wife, whom he later married. They divorced in 1986.

He attended Harvard University in Cambridge, Massachusetts, and graduated with an economics degree in 1989.

The newly capitalist country had begun issuing vouchers for $35 that its citizens could exchange for shares of companies it was privatizing.

Using a Western-style media campaign, Kozeny convinced a million Czechs to deposit their vouchers with him so he could invest on their behalf. Kozeny's funds amassed enough vouchers to control more than 15 percent of the Prague stock market, with stakes in dozens of Czech companies including bank Komercni Banka AS and brewery Plzensky Prazdroj AS, maker of Pilsner Urquell.

``If you want to call me the architect of privatization, so be it,'' he says. ``I saw the hidden value.''

He says the Harvard funds earned hundreds of millions of dollars through management fees of up to 7 percent and a brokerage fee of 1 percent. He later earned around $50 million through investments in Russia and the Ukraine.

The market value of Kozeny's funds reached about 40 billion Czech koruna (then $1.4 billion) in December 1994, more than 30 times the original value of the vouchers he'd collected.

Czechs who cashed out after the first year made up to 18 times their investment, he says. Hundreds of thousands who waited didn't, and the funds collapsed, leaving them with hundreds of millions of dollars in losses.

In 1994, Kozeny left the country, took Irish citizenship and settled in the Bahamas, where there's no income tax. He says old- guard communists forced him to flee after he challenged their hold on the Czech economy.

``I am absolutely in exile,'' says Kozeny, who has renounced his Czech citizenship. ``I came here as a result of political pressures.''

Their trial in absentia is the largest white-collar crime case in Czech history, says Pavla Koppova, deputy chief of the Czech Republic's Havana embassy, which oversees the country's relations with the Bahamas. A Czech request for Kozeny's return hasn't been acted upon by Bahamian authorities.

He says it was Vostry and an accomplice who made off with much of the money lost by the Czech investment funds. Vostry, who lives in Belize, is charged with fraud and being tried in absentia with Kozeny. Vostry didn't respond to e-mails and phone messages seeking comment.

By 1997, Kozeny was again scouting Eastern Europe for investments when Azerbaijan, a former  Soviet republic that had pledged to sell state assets, caught his eye.

Foreigners were allowed to buy Azerbaijan's privatization vouchers if they also bought a corresponding number of options from the government.

Kozeny set up British Virgin Islands-registered, Baku-based Oily Rock Group Ltd. to invest. Besides Bourke, he signed on money manager Aaron Fleck and Bourke's friend, former U.S. Senate Majority Leader George Mitchell, a Maine Democrat.

Kozeny also attracted institutions that wanted help buying their own vouchers and options. Among them were units of Omega, which gave Kozeny $126 million, and AIG, the world's biggest insurer, and Columbia University, both of which put up $15 million.

Azerbaijan never sold Socar, and in late 1999 Omega, AIG and Columbia sued Kozeny in London for fraud, claiming he charged them $25 apiece for options that cost him 40 cents.

They said Kozeny used their investments to pay off loans to Russia's Alfa Bank and to a Cyprus-based company he partially controlled, Daventree Ltd., taking millions more for himself.

With losses topping $100 million, Omega and AIG won a U.K. judge's ruling freezing Kozeny's assets. A hearing is scheduled for January.

``We were stolen from,'' Bourke told the grand jury. ``A hundred million bucks.''

Kozeny admits the scheme was crooked, but not in the way the investors claim. In response to the London lawsuit, he said his investors knew he'd agreed to secure the deal by giving Azerbaijan's then president, Heidar Aliyev, and other Azeri leaders a secret two- thirds interest in Socar and millions of  dollars in cash that he'd been flying into the country.

Under U.K. law, the investors may lose their case if Kozeny proves they acted unethically by joining his bribery plot.

``All very well knew that the deal was corrupt,'' says Kozeny, who says he wasn't subject to the U.S. anti-bribery law in 1998. ``Who in their sound mind would otherwise fly $200 million in cash to the world's third-most-corrupt country?''

Transparency International ranked Azerbaijan 150th out of 179 nations on its 2007 Corruption Perceptions Index and third from the bottom in 1999. Azerbaijan's U.S. consul general, ElinSuleymanov, denies wrongdoing by the government in the deal.

Still, Kozeny denies stealing his investors' money. He says the options his investors were buying for $25 apiece were coming from the Azeri leaders' personal stock and the investors knew their cash served as payoffs. Money from the deal went into the Azeris' pockets, not his, he says.

``I strongly believe that right is on my side,'' Kozeny says.

Kozeny's problems mounted. After the London lawsuit, he was charged in 2001 in the Czech Republic over the Harvard funds' collapse. Manhattan prosecutors in 2003 filed charges accusing him of stealing from U.S. investors in the Socar deal. Federal prosecutors brought the bribery case in 2005.

Kozeny has also been ensnared in creditor lawsuits in Colorado, New York and Cyprus.

While a U.K. judge called Kozeny's account of the Socar bribery ``colorful,'' part of it has been proven true.

Thomas Farrell, who was Kozeny's American aide, pleaded guilty to conspiracy and bribe-paying in 2003, as did Clayton Lewis, the Omega executive who oversaw the firm's investments, in 2004.

Bourke and other investors deny knowing of bribes. ``We did our due diligence, and it didn't indicate that there was any wrongdoing,'' Fleck, 87, says.

Omega said the firm wasn't aware the Lewis had agreed to pay bribes. ``We were shocked and dismayed at Lewis's betrayal,'' Omega said in a statement. The firm paid a $500,000 fine to the U.S. government last year.

Mitchell's executive assistant, Ann Ungar, says the former senator had no knowledge of secret payments.

GAP investigators, whose Washington office is filled with flowcharts and files that track the various arms of Kozeny's companies, say their investigation is being bankrolled by Bourke.

The handbag entrepreneur, in New York criminal court documents from 2005, says it was he who first brought evidence of Kozeny's fraud to Manhattan DA Morgenthau, back in 2002. GAP's Clark and Tullberg say Bourke is a whistle-blower, not a criminal.

Kozeny illustrates how easily con men can hide their holdings, GAP says. He bought hundreds of shell companies, with prepackaged bylaws and nominal boards of directors, in locales where the law bestows secrecy on corporate owners, Tullberg and fellow investigators Kevin Kenety, Jesse Kotarba and  Beatrice Edwards say.

Kozeny would transfer assets between companies, pledge one company's holdings to guarantee a loan to another or put one firm under another's control, GAP says.

Everything Kozeny owned -- his homes, aircraft and even his telephones -- was held in the name of private companies such as Grenada-based Blue Lagoon Real Estate, Turks and Caicos Islands- based Landlocked Shipping and Cyprus-based Harms Holding.

That made the assets unreachable by creditors, the investigators say. ``The systems he used are astonishing in their impenetrability,'' Tullberg says.

On a Friday in July, Kozeny is behind the wheel of his brown 2005 Ford Mustang, the air conditioning blasting, to show a visitor his former home: Fox Hill prison. The Bahamian jail was criticized by Amnesty International in 2003 for overcrowding and violence.

``We call it Fox Hell,'' says Paul Moss, Kozeny's lawyer. Cells in the maximum security wing, where Kozeny was held, lack plumbing, ventilation and adequate light, Moss says.

Kozeny says he sometimes spent four straight days inside his cell, which measured 6 feet by 9 feet. He says he contracted pneumonia and nearly died while there. ``You can't imagine the heat,'' he says.

Fox Hill Superintendent Elliston Rahming says Kozeny was treated humanely. Kozeny was allowed out in the yard daily and had a large electric fan in front of his cell.

``This is not a hotel,'' Rahming says. ``It is a long walk from Lyford Cay to Fox Hill.''

Kozeny passed his days by reading or by writing to his lawyers, penning some 4,000 pages. In his isolation, he began exploring a theory of why prosecutors are after him: Investors in his Socar deal were using some money from U.S. government officials, whose identities he doesn't yet know, he says. He says those officials are using the criminal cases to exact retribution for the deal's collapse.  ``It's payback,'' Kozeny says.

Kozeny also conceived his next business venture while behind Fox Hill's walls. He wants to produce

appliances, paint and wallpaper that have microscopic energy converters embedded in them.

Billions of such converters will transform sunlight, heat and vibrations into nanowatts of electricity, which will be conveyed via wireless transmissions to a household ``smart grid.'' The grid will power coffee makers, washing machines and computers.

He says the nanoconverters could be embedded in highway surfaces, generating power for whole communities. ``Each appliance is going to be a micropower plant,'' he says.

Lacking a lab, Kozeny says he researches the science behind his plan on the Web sites of Stanford University in Palo Alto, California, and other schools. He sketches out concepts on his Facebook Inc. page on the Internet and hopes to attract corporate partners.

``Physics is my life,'' he says. ``I know more mathematics and physics than any businessman, and I know more law and business than any scientist.''

For now, though, micropower is only a theory, just like Kozeny's allegation that U.S. politicians are behind his troubles. The former Pirate of Prague, hounded and exiled to a gilded cage, has plenty of time to elaborate on them.

``I could be sitting here any number of years,'' he says.

Posted by at 4:39 AM | Permalink

bizjournals.com | 10/01/08  | Staff Writer

Matt Burghoff, a developer who has completed commercial projects in Kirkwood and downtown St. Louis, pleaded guilty Wednesday to bank fraud and violating the Clear Air Act.

He now faces a maximum of 30 years in prison and $1 million fine for the bank fraud and five years in prison and a $250,000 fine for the environmental violation, according to the U.S. Attorney’s Office for the Eastern District Of Missouri.

Burghoff, 45, is principal of St. Louis-based Mambo Development and Matt Burghoff Valuation and Consulting, a real estate appraisal firm.

Burghoff is also charged with failure to notify the EPA at least 10 days before asbestos removal at the Ford building and negligently causing asbestos to be released into the air. An anonymous letter sent in September 2007 notified the City of St. Louis Air Pollution Control Division of the asbestos removal at the Ford, according to the indictment.

Posted by at 4:32 AM | Permalink

currypilot.com | 10/01/08 | Valliant Corley

Three cases of employees embezzling from their employers have been filed in Curry County Circuit Court in September – the number that usually reach the county court system in a year.

"We usually have two to three a year come to light," District Attorney Everett Dial said Tuesday.

Lisa Marie Orozco, the former executive assistant of the Brookings-Harbor Chamber of Commerce, was arrested by Curry County Sheriff's officers Sept. 8 on charges she had taken more than $10,000 from the chamber since January.

Orozco, 38, of Brookings, had been employed by the chamber for nine years when she was fired Sept. 5, chamber officials said. She is charged with aggravated theft in the first degree and is to make her next court appearance Oct. 16.

A Curry County Circuit Court Grand Jury in September indicted former employee Barbara Joann McFarland, 41, of allegedly taking $6,911.64 from Chetco Pharmacy and Gifts between Oct. 1, 2007 and July 2, 2008. She faces two charges – each theft of merchandise valued at $750 or more. She is scheduled to be arraigned at 9 a.m. Oct. 20.

The biggest case was filed last week when Gary Alan Green, 50, the former chief financial officer at Tidewater Contracting, was accused of embezzling anywhere from $350,000 to $1 million from his employer.

Court appointed attorney John Spicer waived arraignment on Tuesday on an amended information which lists 13 charges of first-degree aggravated theft, each charge accusing Green of taking at least $10,000 from Tidewater each month, beginning in September 2007. Associate District Attorney Travis Elder said earlier that Green is suspected of taking no less than $30,000 in any one of those months. Elder said more charges are likely.

Judge Cynthia Beaman set Oct. 7 as the date for Green's preliminary hearing.  Bail has been set at $10 million. Dial said Green was convicted in 2003 in Jackson County on three counts of aggravated theft and one of racketeering and spent two years in jail.

"As the economy gets worse, we can expect more cases of theft and embezzlement," Dial said. "I think last year, we only had about three of them."

The largest recent case of embezzlement in Curry County ended in January, 2007.  Then, Stacy Ann Warren, a former employee of Brookings-Harbor Ford, was sentenced to six months in Curry County jail for embezzling nearly $168,000 over a two and a half-year period. She was also ordered to make full restitution.

Elder said that embezzlement began in January 2002 and continued up through her departure in May 2005.  Elder said Warren, then 34, increased the amount of direct deposit of her salary, she changed the value of trade-in cars, and she wrote checks to herself.  Dial said businesses should do what they can to protect themselves from embezzlement.

Embezzlement can go from simple overloading of expense accounts to payments made to nonexistent companies. Watch for the following:

•Records are rewritten so they'll look "neater."

•Stock shortages increase in frequency or size.

•Employees refuse vacations or promotions.

•Business patterns change when a certain employee is absent.

•Customers complain about errors in monthly statements.

•Collections decline.

•Employees seem sensitive to routine questions about procedures.

Posted by at 9:11 PM | Permalink

dispatch.com | 10/1/08 | Jodi Andes

The former CEO accused of turning the nation's largest buyer of health-care receivables into the nation's largest case of private fraud is about to take center stage.

Lance K. Poulsen, founder of Dublin-based National Century Financial Enterprises, is scheduled to go on trial today in U.S. District Court in Columbus for fraud that left investors with losses in the billions.

Poulsen will be the only defendant in the room, but his defense attorneys have made it clear that the 65-year-old won't be the only one on trial.

Some of the nation's biggest banks, which served as trustees for the company, and powerhouse auditing firms are also likely to face attack, the attorneys have indicated in their court filings.

The Securities Exchange Commission found Bank One and JPMorgan Chase, which now owns Bank One, culpable for negligent conduct while serving as National Century's bank trustees.

The SEC has made similar findings with accounting firms PricewaterhouseCoopers and Deloitte & Touche while auditing National Century.

Documents from the SEC's case "could arguably support any theory that JPMorgan Chase or Bank One shared responsibility for any purported wrongdoing or was fully responsible," Poulsen's attorneys have said in court filings.

Pete Anderson and William Terpening, Poulsen's principal defense attorneys did not respond to calls yesterday seeking comment. Fred Alverson, spokesman for the U.S. attorney's office, said prosecutors do not comment on cases before trial.

National Century bought health-care providers' uncollected debt owed by insurance companies or programs such as Medicaid and gave the providers cash to cover expenses.

The providers didn't have to wait for insurance reimbursement, and National Century kept a fee or percentage of what it collected.

National Century amassed funds to pay the health-care providers by selling bonds to investors. The business model was designed with safeguards: keeping 17 cents in reserve for every dollar loaned and a pledge to purchase only receivables that had a high probability of being paid off.

But that is not what happened, federal prosecutors say.

Poulsen paid himself and his executives handsomely and offered millions in unsecured loans to companies National Century executives partly owned. Investors were none the wiser because false numbers were reported to show the company was financially strong.

All the while, the company's reserves shrank and new business was used to simply pay off old debt, prosecutors proved in a trial of five other National Century executives earlier this year.

Donald H. Ayers and Rebecca S. Parrett, who founded the company with Poulsen, along with Roger S. Faulkenberry, Randolph H. Speer and James E. Dierker Jr. all were convicted of fraud that led to the company's November 2002 implosion.

Parrett, who was freed pending sentencing, took off and remains on the lam. The rest were given sentences of between 5 and 15 years.

This is Poulsen's second trial this year. He was sentenced in August to 10 years in prison for obstruction of justice and witness tampering for trying to get the government's key witness in the fraud case to fake amnesia.

If convicted of the fraud charges, Poulsen could get life in prison.

Posted by at 7:42 AM | Permalink

ap.google.com | 9/30/08 | Alan Zibel

Adding to their woes, mortgage finance giants Fannie Mae and Freddie Mac are facing a federal grand jury investigation into their accounting practices.

The mortgage finance companies said Monday that a federal grand jury in New York is investigating accounting, disclosure and corporate governance issues at Washington-based Fannie and McLean, Va.-based Freddie.

Fannie and Freddie said they received subpoenas Friday from the U.S. Attorney's office in Manhattan as well as requests from the Securities and Exchange Commission that they preserve documents. Fannie Mae and Freddie Mac were taken over by the government earlier this month as their mounting defaults and foreclosures threatened the entire mortgage market.

The government investigation focuses on activities starting in 2007, Freddie Mac said in a statement.

Critics have long questioned the companies' bookkeeping. Last November, for example, a Fortune magazine story said new accounting procedures at Fannie Mae masked potential losses on bad loans.

And several years ago, both Fannie and Freddie were forced to restate billions in earnings after federal regulators discovered accounting irregularities at both companies.

The scandals led to the replacement of the companies' top executives. Freddie Mac's former CEO, Gregory Parseghian was ousted in December 2003. Fannie CEO Franklin Raines and chief financial officer Timothy Howard were swept out of office a year later.

Both companies said Monday they would cooperate fully in the investigations, but their spokesmen declined to comment. Representatives of the SEC and Justice Department also declined to comment.

Three weeks ago, the government seized control Fannie Mae and Freddie Mac, the two biggest U.S. mortgage finance companies, with a rescue plan that could require the Treasury Department to inject as much as $100 billion into each to keep them afloat.

A spokeswoman for the Federal Housing Finance Agency, which controls the companies said the housing agency, "will work with the companies to assure a smooth and efficient process and will work with the government agencies as they undertake their inquiries."

Law enforcement officials said last week the FBI is looking at potential fraud by Fannie, Freddie, and insurer American International Group Inc. Additionally, a senior law enforcement official told said failed investment bank Lehman Brothers Holdings Inc. also is under investigation.

The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official told the Associated Press last week.

Officials said the new inquiries bring to 26 the number of companies connected to the mortgage crisis under investigation over the past year.

Over the past year as the housing market cratered, the FBI has opened a wide-ranging probe of companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors. FBI Director Robert Mueller has said the FBI's hunt for culprits in the U.S. mortgage crisis focused on accounting fraud, insider trading, and failure to disclose the value of mortgage-related securities and other investments.

Additionally, the FBI is investigating failed bank IndyMac Bancorp Inc. for possible fraud. Countrywide Financial Corp., formerly the largest U.S. mortgage lender and now owned by Bank of America Corp., is also under scrutiny.

Posted by at 7:32 AM | Permalink

ap.google.com | 9/30/08 | Larry Neumeister

Opening statements have been made in the fraud trial of an operaloving philanthropist accused of lying to clients of his investment company while gambling their money on risky technology stocks.

Lawyers for Alberto Vilar and co-defendant Gary Alan Tanaka said they welcomed the trial to redeem the reputations of their clients against overzealous prosecutors who filed criminal charges in a dispute they believe belongs in civil court.

Monday's opening statements offered wildly different portrayals of the 67-year-old, Cubanborn Vilar, who started a San Francisco-based investment company, Amerindo Investment Advisors Inc., in 1980.

Assistant U.S. Attorney Benjamin Naftalis said the men repeatedly lied to clients from 1986 to 2005 by promising safe and steady returns even while they invested much of their portfolio in risky technology stocks that ultimately lost most of their value.

Naftalis, who said Vilar's promise to clients that their money would be safe was an "absolute sham, a complete lie," accused Vilar of spending $500,000 of $5 million entrusted to him by investor Lily Cates to catch up on a pledge for donations to his alma mater, Washington & Jefferson College.

He said another $650,000 of Cates' investment was spent on Amerindo expenses and $3 million was used to pay back another investor who demanded her money.  Both men are charged with conspiracy to commit securities, mail, wire and investment adviser fraud and money laundering. They could face more than 10 years in prison if they are convicted.

Vilar's lawyer, Herald Price Fahringer, said his client was innocent. "There was no intent to steal anyone's money, to defraud anyone's money," he told the jury. Fahringer said Vilar, who was once worth nearly $1 billion, has contributed more than $200 million to entities including opera and medical organizations around the world.

He said Amerindo was ranked first among 7,500 investment companies in the 1980s for its performance and second in the 1990s. He credited Amerindo for investing early in companies such as Microsoft Corp. and Google Inc., and said Amerindo's clients included the Los Angeles police and fire departments, the Chicago police department, Cornell University and large corporations.

Fahringer said Vilar met Cates in 1987 or 1988 and agreed to invest $1.2 million on her behalf, making her as much as $7 million in profits over the next four years. He said another client who prosecutors claimed lost her entire $74,000 life savings with Amerindo actually made $139,000.

Tanaka's lawyer, Glenn Charles Colton, said his 65-year-old client was battling cancer in 2003 and could not have been actively involved in some of the paperwork prosecutors say they will use to prove their case.

"A man battling for his life is not directing simple money transfers," Colton said.

Colton said the way the money invested by Cates was used for other purposes was no different than when a bank accepts a $100 cash deposit and then immediately gives that cash to the next person who walks up to the teller to cash a check.

"Has the bank stolen my money?" he asked. "Of course not."

Posted by at 7:27 AM | Permalink

lawfuel.com | 9/30/08 | Staff Writer

The Securities and Exchange Commission today charged East Coast supermarket operator and wholesale food distributor The Penn Traffic Company with fraud  for orchestrating multi-million dollar accounting schemes that inflated its operating income and overstated its after tax net income.

The SEC’s complaint, filed in the U.S. District Court for the Northern District of New York, alleges that Syracuse, N.Y.-based Penn Traffic carried out the accounting fraud over multiple reporting periods, and failed to file certain required financial reports with the SEC or filed reports that did not fully comply with SEC regulations. Penn Traffic agreed to settle the SEC’s charges without admitting or denying the allegations.

“Penn Traffic’s fraudulent conduct lasted several years and distorted the company’s financial reports,” said David Rosenfeld, Associate Director of the SEC’s New York Regional Office. “The Commission continues to focus on accounting improprieties and will take action when a company engages in fraudulent conduct that falsifies the company’s true financial condition.”

According to the SEC’s complaint, Penn Traffic intentionally inflated its operating income and other financial results by prematurely recognizing promotional allowances in a scheme that lasted from approximately the second quarter of Penn Traffic’s fiscal year 2001 through at least the fourth quarter of its FY 2003. Promotional allowances – also referred to as rebates, slotting fees, or vendor allowances – are fees paid from vendors in exchange for various marketing and promotional activities, such as inclusion in a supermarket’s weekly circular.

As a result of Penn Traffic’s willful misconduct, the company prematurely recorded a total of approximately $10 million in operating income and reported these false results in financial reports filed with the Commission.

The SEC’s complaint also alleges a separate scheme from at least the first quarter of Penn Traffic’s FY 2000 through the first quarter of its FY 2003. Penn Traffic recorded fraudulent entries to the books and records of Penny Curtiss, its wholly-owned bakery manufacturing subsidiary that has since closed. For example, Penny Curtiss fabricated accounting records to overstate inventory and reduce cost of goods sold. As a result, Penn Traffic overstated after tax net income by more than $7 million and reported these false results in financial reports filed with the Commission.

The SEC’s complaint further alleges that Penn Traffic failed to file financial reports or filed non-compliant reports with the Commission between the fourth quarter of its FY 2003 and the fourth quarter of its FY 2008.

Penn Traffic has consented to the entry of a permanent injunction against future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder, and to certain undertakings that require it to employ an independent examiner, among other things. The settlement is subject to the court’s approval.

The SEC previously charged two former senior Penn Traffic executives and one Penny Curtiss executive for their roles in the fraudulent schemes alleged in the complaint. The Commission’s case is pending against Leslie H. Knox, Penn Traffic’s former Senior Vice President and Chief Marketing Officer, and Linda J. Jones, Penn Traffic’s former Vice President of Non-Perishable Merchandising. In 2005, the Commission obtained a consent judgment against Michael J. Lawler, the former Director of Manufacturing at Penny Curtiss, permanently enjoining him from violating the antifraud and books and records of the securities laws.

Posted by at 7:22 AM | Permalink