By John Sodaro
Analysts explore some intriguing factors that may account for declining U.S. crime rates, and highlight one area of criminal behavior that gets little attention from cops on the beat.
Read full entry »Even if life for Wall Street firms gets easier with the Republican takeover of the House, they shouldn't expect any letup from New York's new top prosecutor, reports the Wall Street Journal. Eric Schneiderman, the Democrat elected as New York attorney general, said yesterday he was developing plans to investigate the debt and mortgage markets that target consumers. "Cracking down on bad apples is good for the market and the people on Wall Street who play by the rules," he said.
The six-term New York state senator from Manhattan's Upper West Side built his campaign for attorney general partly on a promise to continue in the footsteps of predecessors Andrew Cuomo and Eliot Spitzer, who aggressively prosecuted corruption on Wall Street. Schneiderman described the job as being the "sheriff" of Wall Street, and he is close to Cuomo, who was elected New York's governor. While federal prosecutors spend years building cases, the New York Attorney General is known for responding quickly and loudly. Unlike other state attorneys general, New York's can pursue both criminal and civil penalties with nationwide reach. The state law defines securities fraud broadly and doesn't require prosecutors to prove intent.
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Workplaces Respond to Domestic and Sexual Violence: A National Resource Center, was recently launched by a partnership of seven national organizations, with funding from the Justice Department’s Office on Violence Against Women (OVW).
The Center provides resources for those interested in providing effective workplace responses to victims of domestic violence, sexual violence, dating violence and stalking.
Access the Center here.
Use the Crime Report for more information on workplace violence.
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South Florida is not only a hub of the national medicare fraud problem; it is a business “incubator” for similar fraud elsewhere.
Read full entry »Since taking office at the height of the financial crisis, President Obama has promised to hold Wall Street accountable for the meltdown, says the Washington Post. "We will be relentless in our investigation of corporate and financial wrongdoing, and we will not hesitate to bring charges," said attorney General Eric Holder said as he launched a financial fraud task force. Nearly 1 1/2 years into Obama's tenure, despite cases against mortgage companies whose lending practices contributed to the crisis, the administration has not brought any charges against the big Wall Street banks that took those loans, converted them into toxic securities, and pumped them into the world's financial markets. Sources say no such charges are imminent.
The blunt words of administration officials have triggered debate over whether they have gone too far in appearing to promise difficult cases that critics say might never be filed, in part because they would essentially criminalize an entire business model in the financial industry. "The attorney general got out ahead of the facts and the evidence in saying, 'We're going to go down to Wall Street with a pitchfork and roust those fat cats out of their offices and put them in jail,' " said Tim Coleman, who prosecuted major fraud cases before leaving the Justice Department five years ago. "This was a case, in general, of people making business judgments and taking risks and having them go badly. That's not criminal misconduct."
Cybercriminals are using social networking websites like Facebook to gain backdoor access to business computer networks, reports USA Today. The intrusions can expose a company to theft of its most sensitive data. Such attacks illustrate a dramatic shift underway in the Internet underground. Cybercriminals are moving aggressively to take advantage of social networks in workplace settings, an unanticipated chink in corporate defenses.
This shift is gathering steam, tech security analysts say. The volume of spam and phishing scams — like the "LOL is this you?" viral messages sweeping through Twitter — more than doubled in the fourth quarter of 2009 compared with the same period in 2008, according to IBM's X-Force security research team. Such "phishing" lures — designed to trick you into clicking on an infectious Web link — are flooding e-mail inboxes, as well as social-network messages and postings, at unprecedented levels.
Read full entry »The Supreme Court hears arguments today on whether Enron executive Jeffrey Skilling’s conviction should be overturned because the prejudice against him in Houston was so strong and pervasive that he could not receive a fair trial, says the New York Times. It has been two decades since the Supreme Court has considered a major change of venue case. Its jurisprudence is rooted in cases based on small communities dominated by a single local newspaper and perhaps a few local television news outlets. "The law has been slow to adapt to a more general, more intense and yet more atomized media environment," the Times says.
How potential jurors become informed in the Internet era cuts in two directions. It may now be harder than ever for defendants to find wholly untainted jurors in their own communities. Still, a venue change in a high-profile case is less likely than ever to solve the problem. In a Supreme Court brief in the Skilling case, the federal government urged the court not to adopt an approach prompted by the proliferation of new media that would mean “no trial will be possible in the most nationally significant cases.”
Read full entry »A national survey last year showed that companies lost $18.7 billion in the 12 months ending in June because of worker theft — the largest single cause of retail "shrinkage," the Kansas City Star reports. A 2008 survey found that employees stole far more than shoplifters and that among 22 large retailers, one in 30 employees was caught stealing. "It happens from the top down to the bottom up," said Terrence Shulman, an expert.
Experts say that with hard times, more employees are stealing, but many have always done it anyway. The U.S. Chamber of Commerce has long said that 75 percent of employees steal from their employers at least once. They start small, get bolder and often get caught, said Casey Chroust of the Retail Industry Leaders Association. Allan Bachman, the education manager for the Association of Certified Fraud Examiners, last week called the situation “almost a perfect storm” as companies that are trying to weather the recession eliminate protective measures. Two years ago, the association estimated that American businesses lost 7 percent of annual revenue to fraud, but the group now suspects that figure has grown. “There is a possibility that schemes are being created right now that won’t be discovered for years,” Bachman said.
Read full entry »R. Allen Stanford has been in a Texas jail since he was charged last June with conspiracy, securities fraud and money laundering for running what prosecutors say was a $7 billion Ponzi scheme. When the Securities and Exchange Commission obtained an order freezing the company’s assets, Stanford could not afford to pay a defense attorney, so the federal public defender’s office has been representing him.
That may change soon, Wayne State University law Prof. Peter Henning writes in the New York Times. Federal Judge David Hittner in Houston ruled that under a company insurance policy Lloyd's of London is responsible for paying nearly $100 million for the for the defense of Stanford and other officers. Don’t be surprised if the legal bills exceed even that seemingly generous pool of money. White-collar crime prosecutions and related civil actions are enormously expensive to defend, and defense costs can reach the tens of millions of dollars fairly quickly. While it was almost unknown for leading Wall Street law firms to do criminal work 30 years ago, white-collar defense is now a major source of fees and one that appears to be largely immune to the recession that has hit the firms over the past two years.
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On April 1 and April 2, 2009, the Center on Media, Crime and Justice and McCormick Foundation hosted a specialized reporting institute, "How Do they get Away With it? Tracking Financial Crime in the New Era."
Twenty-One fellows from around the country joined panelists and speakers such as: Patrick Carroll, Supervisory Special Agent, FBI, New York Office, Sam Antar, Former CFO, Fast Eddie's, Peter Turecek, Senior Managing Director, Business Intelligence & Investigations, Kroll and Walter Ricciardi, Former SEC Deputy Chief, Division of Enforcement.
Access the program brochure here.
Researchers at John Jay College compiled a research guide of the most relevant contacts in the financial industry. Download a copy of the guide.
Before the sub-prime crisis captured national attention, a reporter for The Charlotte Observer noticed a strange pattern while compiling a list of foreclosed homes in North Carolina’s Mecklenburg County -- clusters were concentrated in new developments and they wondered if faulty loans were behind the trend.
The year-long investigation led to The Charlotte Observer’s four-part series, “ Sold a Nightmare.” Lawmakers in North Carolina passed new mortgage regulations in response to the series and federal and criminal investigations of Beazer are underway.
Understand how the reporters investigated this fraud. Read the case study here.
Read live blogging from the conference.
Articles by conference fellows:
MSNBC
"Regulators Struggle to Contain Foreclosure Fraud" by John W. Schoen
SACRAMENTO BEE
"Ponzi Schemes Flourish with Vulnerable Victims, Underfunded Watchdogs" by Andrew McIntosh
"Ponzi Scheme Perpetrators Exploit Some Common Misperceptions" by Andrew McIntosh
Graphic: "Red Flags for Ponzi Schemes" by Andrew McIntosh
"Massive real estate losses hidden at California bank " by Andrew McIntosh
"Jerry Brown donations tied to businessmen" by Andrew McIntosh
"$2 million settles kickback " by Andrew McIntosh
"Brown returns $52,500 to donors" by Andrew McIntosh
VOICES OF SAN DIEGO
"A Staggering Swindle: How Could it Happen in 2008?" by Kelly Bennett and Will Carless
BLOOMBERG
"Stanford Coaxed $5 billion as SEC Weighed Powers" by Alison Fitzgerald and Michael Forsythe
Appearances/Articles
Professor William Black (panelist) discussing financial fraud on the Bill Moyers Journal and interviewed in Barrons.
Panelist William D. Cohan, author of "House of Cards: A Tale of Hubris and Wretched Excess on Wall Street" interviewed by The Crime Report.
Conference Handouts:
Resource Guide: Reporting on Financial Crime
Case Study: The Charlotte Observer
Prof. William Black Power Point: Accounting Fraud
More Reporting Resources (generously submitted by panelist Elaine Carey, Senior VP of Control Risks)
The lobbyist database from the Center for Responsive Politics (OpenSecrets) is great and easy to use. It links directly to pdf filings and lets you see if someone is a registered lobbyist, who they are registered with, and who they lobby. You can also see how much they make from each client.
The Environmental Working Group’s farm subsidy database is a great way of calling out politicians who complain about “government handouts” and then take tons of money in farm subsidies for their ranches and farms.
People frequently don’t think about state donations, but they can be incredibly important when looking to see if someone is buy influence at the state level. The National Institute on Money in State Politics is a great way to start when looking to see if someone is giving a ton at this level. You should always check out the state’s own website too, as they sometimes have more complete information.
The Federal Register lets you see copies of notices and actions published by federal agencies - helpful when looking to see if someone has been sanctioned, for instance.
FedSpending.org lets you see what groups have received federal grants and contracts.
The EPA has a good website that lets you check to see if a company/facility is EPA compliant or if there have been any enforcement actions taken against it.
WikiFOIA is a website that compiles information about open records availability en each state. It can help you find out what information is available and links to a “letter generator” for each state that conforms to that state’s open records laws.
The Center for Public Integrity compiles financial disclosure statements for state legislators. This is a good way to see who they’ve worked for, where they hold directorships, what they hold stock in, etc. It also has a rundown of various disclosure requirements for different states.
Video from the Conference
Video 1: Did white collar crime and fraud trigger the economic meltdown?
Video 2: Were regulators asleep?
Video 3: Did journalists miss the story?
Read full entry »Turning its attention to bigger fish in the subprime mortgage scandal, the Justice Department is investigating whether lenders or Wall Street firms defrauded investors in the sale of risky mortgage securities, reports McClatchy Newspapers. "We absolutely are looking at the conduct of the securitizers themselves, and what did they say to those who purchased the (securities)," Assistant Attorney General Lanny Breuer told a commission created by Congress to investigate causes of the nation's economic collapse.
Breuer didn't identify any company under scrutiny. Wall Street's biggest investment banks bought many of the $2 trillion in home mortgages issued to shaky borrowers, converted them to high-yield bonds, and sold the bonds to investors including pension funds, insurers, and foreign banks. Many of the securities have since defaulted, and investors have lost billions of dollars.
Read full entry »Employee fraud involving gift cards appears to be growing sharply as retailers struggle to contain overall theft estimated at $36 billion a year, or 1.51 percent of retail sales, says a study reported by the New York Times. Even as total sales have been falling, employee theft and shoplifting have been rising, with occasional arrests making headlines. "Gift card fraud is spiking,” said Joshua Bamfield, author of the Global Retail Theft Barometer, an annual international survey of retailers. “To employees, this is like currency. It’s almost as good as the U.S. dollar.”
Many of the gift card crimes are straightforward, frequently involving young sales clerks. Cashiers often do fake refunds of merchandise and then, with the amount refunded, use their registers to fill gift cards, which they take. Sometimes when shoppers buy gift cards, cashiers give them blank cards and then divert the shoppers’ money onto cards for themselves. At the Saks flagship store in New York City, a sales clerk, 23, was caught ringing up $130,000 in false merchandise returns and siphoning the money onto a gift card.
How did Bernard Madoff get away with his Ponzi scheme for so long? Securities Industry News says one factor was his firm's Luddite approach to technology. Madoff Investment Services used antiquated computer systems that were expensive to maintain and difficult to adapt to new classes of securities. Had Madoff replaced the proprietary systems with more modern and open computers, they likely would have found the absence of data on countless stock trades that supposedly took place.
In a sense, the preservation of old computer technology helped Madoff successfully go undetected for years. A year after Madoff's arrest, the publication says the affair amounts to "a cautionary tale to information technology managers and executives at shops up and down Wall Street. If you think something is amiss, don't let it rest. Do your own investigation."
Read full entry »More than a year into the gravest financial crisis since the Great Depression, millions of Americans have seen their home values and retirement savings plunge and their jobs evaporate, but no Wall Street tycoons have been sent to prison, says McClatchy Newspapers. Those who have been prosecuted, like Ponzi scheme king Bernard Madoff and Stanford Financial Group chairman Robert Stanford, weren't among the causes of the meltdown, just poster boys for an era of lax enforcement, weak regulation and devout faith in free markets.
The FBI has more than 580 large-scale corporate fraud investigations under way. At least 40 of them are scrutinizing players in subprime mortgage lending, which was the first domino to fall and triggered a global financial crisis. "The investigations are very complex; it's not something that's going to turn overnight," said FBI spokesman Bill Carter. "They are labor intensive. They involve a review of records." The closest thing to a prosecution of a major actor in the meltdown so far is a civil fraud case that the Securities and Exchange Commission brought on June 4 against Angelo Mozilo, CEO of mortgage-lending giant Countrywide.
Read full entry »Bernard Madoff thought regulators had caught him in 2006 and was “astonished” U.S. Securities and Exchange Commission investigators never followed up on information he gave them, the agency’s internal watchdog said. Madoff told Inspector General H. David Kotz's office this year that after being questioned in May 2006, “I thought it was the end game," Bloomberg News reports. That never happened, and his Ponzi scheme continued for 2 1/2 years.
“This was perhaps the most egregious failure in the enforcement investigation of Madoff,” Kotz’s report said. The report detailed repeated missed opportunities by the SEC after being alerted to Madoff’s Ponzi scheme activities at least six times dating back to 1992. The SEC assigned inexperienced lawyers to the investigation, supervisors denied requests of examiners to expand their review, and staff withdrew a request for information from a third party on grounds a review of the data would be “too time-consuming,” Kotz said.
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