Posts Tagged ‘financial fraud’
Friday, June 25th, 2010

A conference committee reconciling differences between the House and Senate versions of a sweeping financial regulatory bill included a provision in the legislation that would extend the statute of limitations on some securities fraud offenses and seek to improve whistleblower protections.

Under the amendment, a person could face charges for certain securities fraud violations up to six years after the offense occurred. Under current law, the statute of limitations is five years.

The amendment would apply to the following securities violations:

18 U.S.C. 1348  — Securities and Commodities Fraud

15 U.S.C. 78ff(a) — False Statements/Failure to File Information Pursuant to the Securities Exchange Act of 1934

15 U.S.C. 77x — Willful violations of Securities Act of 1933

15 U.S.C. 80b–17– Willful violations of the Investment Advisors Act of 1940

15 U.S.C. 80a–48 — Willful violations of the Investment Company Act of 1940

15 U.S.C. 77yyy — Willful violations of the Trust Indenture Act of 1939

The amendment also would ask the U.S. Sentencing Commission to revise and increase the sentencing guidelines for securities and bank fraud offenses. According to the Senate Judiciary Committee, sentences for securities and bank fraud are often shorter than those for other white collar crimes. The amendment does not offer specific ranges for sentences but instead would ask the Sentencing Commission to make changes so the sentences are more in line with those for other forms of white collar crime.

According to the committee, the amendment also would seek to ensure that proper incentives are in place to reward whistleblowers who step forward to report fraud and abuse.

“Often the best way to deter the kind of reckless and outrageous conduct that can bring down financial institutions and harm so many Americans is to ensure that those who commit these crimes actually go to jail,” Leahy said in a statement. “The provisions included in the Wall Street reform legislation will lead to increased sentences for those who commit securities fraud and bank fraud, and strengthen protections for whistleblowers, who often serve as an early warning system to stop fraud before it damages financial institutions and the economy.”

The Leahy amendment was added during a 20-hour marathon meeting to hash out differences between the House and Senate bills. Rep. Howard Berman (D-Calif.) was a lead supporter of the amendment during the Senate-House conference, according to the committee.

Congress is expected to finish up work on the bill before the July 4 recess.

The text of the amendment is embedded below.

HEN10584 (Fraud Conference w House Changes)

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Tuesday, May 4th, 2010

Assistant Attorney General Lanny Breuer told members of a Senate Judiciary panel Tuesday that the Justice Department has deployed an “aggressive, comprehensive and well-coordinated law enforcement response” to Wall Street fraud.

Lanny Breuer (photo by Andrew Ramonas / Main Justice)

In testimony before the panel’s crime and drugs subcommittee, Breuer, who leads the DOJ Criminal Division, said the DOJ will use all of the tools at its disposal — including the pursuit of jail time for fraudsters — to fight economic crimes. He said the DOJ will also work with the Securities and Exchange Commission and other agencies to effectively prosecute fraud cases.

“No matter how important or high up you are, we will look into conduct,” Breuer said.

Last month, the DOJ opened a criminal probe into the investment firm Goldman Sachs. The DOJ is investigating whether the investment firm — which also faces civil charges from the SEC — broke criminal securities fraud laws.

“Every month, we learn of more scandals in the financial industry, as leading financial institutions and money managers, like some of those in charge of Goldman Sachs, are charged with participating in multimillion dollar fraud schemes,” Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) said in his prepared statement for the hearing Thursday. “It is time to hold people accountable.”

Breuer said in his prepared remarks that there are more than 2,200 pending corporate and securities fraud probes, several with losses in excess of $100 million. He said there were 473 convictions in corporate and securities fraud cases in fiscal year 2009.

“We will look at all allegations of financial fraud closely, follow the facts where they lead and bring our resources to bear to prosecute those who have committed crimes and seek appropriately tough sentences for individuals and corporations alike,” Breuer said.

Also on Tuesday, several members of the Senate Judiciary Committee introduced an amendment to financial regulatory bill that seeks to aid the DOJ in its fight against financial fraud. The amendment would extend the statute of limitation for securities fraud violations and ask the U.S. Sentencing Commission to increase sentences for securities and bank fraud.

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Friday, March 19th, 2010

Hassan Nemazee

Democratic fundraiser Hassan Nemazee on Thursday pleaded guilty to defrauding three banks of more than $290 million, according to a news release from the U.S. Attorney’s office in the Southern District of New York. SDNY Assistant U.S. Attorneys Daniel W. Levy and Michael D. Lockard are charge of the prosecution.

Nemazee, the national finance co-chairman of Hillary Clinton’s 2008 presidential campaign, used loan proceeds from one bank to pay off another over an 11-year period from 1998 to 2009. Nemazee misrepresented to the banks how much he owned in collateral and used fake documents and forged signatures to obtain the loans, prosecutors said.

The banks defrauded in the scheme include Bank of America, Citibank and HSBC Bank USA. Nemazee was charged with aggravated identity theft and three counts of bank fraud, each of which carry a sentence of up to 30 years in prison and a maximum fine of $1 million or twice the gain or loss resulting from the crime.

Nemazee entered his guilty plea before U.S. District Judge Sidney H. Stein. As part of his guilty plea, Nemazee agreed to forfeit his interest in various real properties, corporate entities, hedge funds, securities accounts, bank accounts, a 2008 Maserati Quattroporte and a 2007 Cessna aircraft.

He is scheduled to be sentenced by Stein on June 30.

Nemazee’s brother-in-law, Shahin Kashanchi, is separately charged with aiding and abetting Nemazee’s fraud scheme.

“Working with our partners at the FBI to investigate and end schemes like Nemazee’s is central to this office’s mission of aggressively policing white-collar crime,” SDNY U.S. Attorney Preet Bharara said.

Tuesday, February 2nd, 2010

The U.S. Attorney for the Eastern District of Virginia has announced the creation of two leadership positions within his Alexandria, Va.,-based office, the Richmond Times-Dispatch reported today.

Neil MacBride (DOJ)

Neil MacBride (DOJ)

U.S. Attorney Neil MacBride promoted Assistant U.S. Attorney Mark Lytle to be the office’s public integrity coordinator and Assistant U.S. Attorney Charles Connolly to be the deputy chief of the Alexandria division’s fraud unit.

Lytle prosecuted former Rep. William Jefferson (D-La.), who was convicted last year of taking bribes. MacBride said he created the public integrity coordinator position as part of an effort to better handle cases involving corruption by government officials, according to the newspaper. The number of corruption cases filed in the Eastern District of Virginia rose from  from 11 in 2005 to 21 in 2009, according to the Times-Dispatch.

“The Eastern District of Virginia must play an integral role in ensuring that those who hold public office live up to the public’s trust,” MacBride said in a statement to the newspaper.

Connolly, who has served as a federal prosecutor since 2002, was promoted to help expand the office’s efforts to prosecute economic crimes, according to The Associated Press. MacBride is also in the process of hiring three additional Assistant U.S. Attorneys to handle financial crimes including mortgage and securities fraud, the Times-Dispatch said.

Friday, January 15th, 2010

Attorney General Eric Holder and Justice Department Criminal Division chief Lanny Breuer testified yesterday before the Financial Crisis Inquiry Commission to outline law enforcement’s commitment to fighting financial fraud.

Although the inquiry has been touted as a way of getting to the bottom of the financial industry practices that led to a severe recession, it so far hasn’t made any breakthrough headlines. Its two days of hearings this week were eclipsed in the news by reports from Haiti, devastated by a major earthquake.

The hearings opened Wednesday with, as the New York Times put it, the “four bankers of the apocalypse” (Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JP Morgan Chase, John Mack of Morgan Stanley, and Brian Moynihan of Bank of America) giving testimony that boiled down to why they weren’t to blame for the collapse of the financial industry.

The regulators and law enforcers came Thursday, and also delivered no surprises. Holder, who rearranged his schedule to appear at the hearing, appeared on a panel with Assistant Attorney General Lanny Breuer, Securities and Exchange Commission Chair Mary Schapiro, and Federal Deposit Insurance Corporation Chair Sheila Bair.

Holder said in his prepared remarks that the FBI is probing 2,800 mortgage fraud cases and he noted that the DOJ recently received more funds to combat economic crimes.

“We will succeed in restoring the integrity of our markets, preserving taxpayers’ resources and protecting the vast majority of hardworking Americans, investors and businesses who play by the rules and adhere to the law,” Holder said.

Breuer added in his prepared remarks that the DOJ “has and will continue to be aggressive, comprehensive and well coordinated.”

But the 10-person bipartisan commission created by Congress to study the causes of the economic crisis raised concerns with how the DOJ handled financial crimes in the past.

Commission Chairman Phil Angelides, a Democrat and former California state treasurer, asked Holder about a 2004 warning from a senior FBI official about “an epidemic of mortgage fraud coursing across this country” and the serious problems it could cause if the DOJ didn’t dealt with it, The Associated Press reported. In 2008, the failure of some of the nations biggest financial firms devastated Wall Street.

The Attorney General said he didn’t know about the warning and would look into it.

“We are constantly in the process of reviewing that which we can do better,” Holder said, according to the AP. “When we find businesses or individuals whose disregard for the law has hurt the pocketbooks of average Americans, we will use every available measure to hold them accountable.”

The commission chairman also asked if moving 500 DOJ investigators from economic crimes to terrorism cases after the Sept. 11 attacks makes it difficult to probe financial fraud, the AP reported.

Holder said he understood why resources were moved to terrorism probes, but he said “fighting white-collar crime is a real priority,” according to the AP.

Wednesday, January 13th, 2010

Bill Lerach was one of the most prominent trial lawyers in the United States before he pleaded guilty in 2007 in connection with allegations he’d paid kickbacks to plaintiffs. He served 16 months in federal prison in Arizona and now lives in a half-way house in San Diego.

After finishing his sentence on March 8, Lerach is planning to celebrate big time. He wants to take a 44-day vacation to 18 European cities in Europe along with up to 18 family members and friends, Josh Gerstein at Politico reported.

Just one problem: Lerach will be on supervised release, and the Department of Justice doesn’t approve of his travel plans.

The department cites public statements by Lerach in which appears to minimize the severity of his crime, according to court papers filed in Los Angeles on Monday, Politico reported. Prosecutors noted a recent interview Lerach gave to the California Lawyer in which he said, “I’m not ashamed of myself in any way.”

The government is also concerned that Lerach may back away from a community service pledge to give talks to other attorneys about the consequences of his actions, Politco reported, citing the court records.

Meanwhile, Lerach’s attorneys defend the trip and argue that it needs to be taken soon, as he plans to take some elderly relatives along with him, Politico said. In their request to the court for permission to travel, they also note Lerach’s son’s “special interest in the Holocaust and WWII.”

Also, the lawyer whose net worth was once estimated to be $900 million now “needs extra time to try to negotiate travel discounts,” as a 44-day European trip for 18 people will be costly, his request said.

Politico predicts an unfavorable outcome for Lerach as U.S. District Judge John F. Walter gave him the maximum sentence possible under his plea agreement and recently rejected Lerach’s attorneys’ request to file the itinerary for the Europe trip under seal.

A former partner in the firm once known as Milberg Weiss Bershad Hynes & Lerach, Lerach pleaded guilty in 2007 to one count of conspiracy to commit obstruction of justice and making false statements under oath.

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Wednesday, January 13th, 2010

Barbara and Jeffry Picower. (Getty Images)

Investor and philanthropist Jeffry Picower, who was reportedly under criminal investigation in connection with the Bernard Madoff Ponzi scheme before his death in October, drowned accidentally, a final autopsy report has concluded, according to The Palm Beach Daily News.

Picower was found dead at the bottom of his pool at his mansion in Palm Beach, Fla., on Oct. 25. The Palm Beach County Medical Examiner’s office initially ruled that Picower had drowned after suffering a massive heart attack.

Newly released results of toxicology reports confirmed the initial finding, according to The Daily News.  The reports found caffeine and a sleep aid in Picower’s body at the time of his death, The Daily News said. The autopsy report said Picower had no substance abuse issues and that he had been “upbeat and exhibited no signs of depression or changes in sleeping, eating, or drinking patterns.”

The Palm Beach billionaire had a history of heart disease, the autopsy report said, according to The Daily News. A spokesperson for the medical examiner’s office told Main Justice the autopsy report is “complete” but would not discuss its details.

Picower was alleged to have taken more than $7 billion from the Madoff scheme, according to a civil lawsuit filed by Irving Picard, the court-appointed bankruptcy trustee seeking to recover assets for the Madoff victims. The lawsuit says Picower was the “biggest beneficiary of Madoff’s scheme.” The Wall Street Journal reported in May that Picower was under criminal investigation in the matter in the Southern District of New York.

In October, the SDNY’s criminal chief, Richard Zabel, recused himself from the Madoff investigation because his father, New York estate lawyer William D. Zabel, was Picower’s long-time attorney and close advisor. Read our previous report here.

Friday, January 8th, 2010

Attorney General Eric Holder today told the wealthy Florida community where Bernard Madoff’s Ponzi scheme hit hard that financial fraud is among the “greatest and most glaring threats” to the U.S. economy.

Eric Holder (DOJ)

Palm Beach was “ground zero” for Madoff’s $65 billion scam,  Holder said in a speech at the Forum Club of the Palm Beaches in West Palm Beach. The Madoff scheme is the biggest investor fraud in U.S. history.

“The simple truth is that financial crimes have become all too common,” Holder said in prepared remarks. “And the consequences of these schemes and scams are real, as this community knows all too well. ”

Late last year, President Barack Obama signed an executive order that created an interagency task force to fight financial crime. The Attorney General said the Financial Fraud Enforcement Task Force is the “cornerstone” of the Justice Department’s efforts to combat mortgage fraud, securities fraud, financial discrimination and Recovery Act and rescue fraud.

“To those who see victimization of others as an avenue to wealth, take notice: If you fabricate a financial statement, if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail,” Holder said.

The fiscal year 2010 DOJ budget signed into law last month includes funds for 43 positions in U.S. Attorney’s offices to help combat financial fraud. Congress set aside $7.5 million in the budget for U.S. Attorney’s offices to pursue bankruptcy, mortgage fraud, affirmative civil enforcement and other white collar crimes.

The U.S. Attorney’s offices received $2.4 million through the fiscal year 2009 omnibus budget to fight economic crimes, according to a DOJ spokesperson. Congress allocated an additional $10 million to the U.S. Attorney’s offices in the fiscal year 2009 supplemental budget to fight financial fraud, the spokesperson said. The supplemental funding does not expire until fiscal year 2011. DOJ was able to hire 76 new Assistant U.S. Attorneys to handle financial fraud cases with the fiscal year 2009 funds, according to the spokesperson.

The budget also includes money for 50 new FBI agents to fight mortgage fraud and work on economic recovery investigations. The FBI received almost $75.2 million from Congress to combat white collar crime, an increase of about $25.5 million.

“This budget represents the largest-ever, single-year enhancement to support and expand the Justice Department’s financial fraud programs,” Holder said. “This will allow for additional FBI agents, prosecutors and support staff to aggressively pursue mortgage fraud, corporate fraud and other economic crimes.”

This post was updated from an earlier version.

The simple truth is that financial crimes have become all too common.  And the consequences of these schemes and scams are real, as this community knows all too well.
Thursday, December 3rd, 2009

Carmen Ortiz (Adelphi Univ.)

Carmen Ortiz (Adelphi Univ.)

Carmen Ortiz, the new U.S. Attorney for Massachusetts, on Wednesday said she will step up efforts to prosecute financial fraud, the Associated Press reports.

The 53-year-old Ortiz was confirmed by the Senate Nov. 5 and sworn in three weeks ago. She replaced Michael J. Sullivan, who resigned April 19 to join the Ashcroft Group after eight years in the U.S. Attorney’s post.

Ortiz  had worked as an assistant U.S. attorney in Boston for the last 12 years, mainly prosecuting economic crimes, including embezzlement, tax evasion, investment fraud and telemarketing schemes.

During a meeting with reporters, Ortiz said her efforts to root out financial fraud — in part by reaching out to government agencies and business — will help prevent another financial situation like the one caused by Bernie Madoff’s Ponzi scheme, according to the AP. “What happened with Bernie Madoff, we should make every single effort to prevent that from happening again,” Ortiz told reporters, adding, “Victims should know that we’re open for business.”

She said another priority will be catching long-sought fugitive James “Whitey” Bulger, who is the alleged leader of the Winter Hill Gang, a crime family in Boston, The AP reports. He has been charged in connection with 19 murders and is on the FBI’s “Ten Most Wanted” list.

Ortiz said she plans to meet with the FBI and other law enforcement agencies and hopes to come up with “creative ways” to generate publicity and aid the search for Bulger, now 80.

“If he is present in people’s minds, then perhaps it could be that one tip that … could lead to his capture,” she said.

The Worcester Telegram and Gazette reports that Ortiz also told reporters she plans to expand the U.S. Attorney’s office’s presence in Worcester, increasing the number of assistant U.S. Attorneys in the office from two to four. “There is a lot of business” in Central Massachusetts, Ortiz told reporters

The Worcester newspaper also reported that Ortiz did not back off the office’s commitment to continue prosecuting gun and gang violence cases even though they could also be prosecuted in state courts, where sentences are usually less severe. “Not all of those cases belong in federal court,” but “we do have an impact on the communities that are suffering due to gun and gang violence,” she said.  “We make a real effort to select the cases that belong in federal court,” she said. However, with some people disagreeing, she said, the policy will be reviewed.

Monday, November 30th, 2009

Forbes magazine last week released its list of the top 10 CEOs who “showed enough greed, hubris and chutzpah” to give confessed Ponzi schemer Bernard Madoff “a run for his (stolen) money.”

We’ve added some information that Forbes left off its list — the top federal prosecutors who get to go after these alleged financial fraudsters, even though some of the investigations began before their time.

Preet Bharara in his first major news conference Nov. 5.  The Manhattan U.S. Attorney announced the arrests of 14 people in an alleged insider trading ring around hedge fund billionaire Raj Rajaratnam. (Getty Images)

Preet Bharara in his first major news conference Nov. 5. The Manhattan U.S. Attorney announced the arrests of 14 people in an alleged insider trading ring around hedge fund billionaire Raj Rajaratnam. (Getty Images)

Winning a conviction in a high-profile financial case adds a notch to a U.S. Attorney’s belt. A prosecutor might even get to step out at a news conference or two, as Southern District of New York U.S. Attorney Preet Bharara did on Nov. 5 when announcing insider trading arrests related to the Galleon hedge fund run by billionaire Raj Rajaratnam.

To be sure, not everyone on the Forbes list is accused of an actual crime. With that caveat, we present Forbes’s “Biggest CEO Outrages of 2009″ list:

1. Lloyd Blankfein. The chairman and CEO made $73 million in 2007 and $25 million in 2008, as the economy entered a deep recession. Although his salary is not a legal offense, Forbes deemed it practically criminal.

2. John Thain. The former CEO of Merrill Lynch approved $3.62 billion in bonuses for his executives last December as the company was being taken over by Bank of America and reporting a fourth-quarter loss of $15.3 billion.

3. Raj Rajaratnam. The founder of the hedge fund Galleon Group was charged with insider trading which allegedly helped him earn more than $33 million in illicit profits. He is being prosecuted in Manhattan by Bharara’s office.

4. Byrraju Ramalinga Raju. The founder of the Indian outsourcing company Satyam Computer Services in January confessed to overstating the company’s profits and fabricating its cash balance of more than $1 billion. He hasn’t been charged.

5. Thomas Petters. The former CEO and chairman of Petters Group Worldwide was charged with orchestrating a $3.5 billion pyramid scheme fraud. He is being prosecuted by the office of Minnesota U.S. Attorney B. Todd Jones.

6. Edward M. Liddy. The former CEO of American International Group (AIG) faced criticism this year for high salaries and bonuses in addition to expensive retreats the company funded after receiving a considerable sum as part of the bank bailout of 2008.

7. Danny Pang. The founder of Private Equity Management Group was accused of running a Ponzi scheme that defrauded his investors of hundreds of millions of dollars. Pangdied of an apparent suicide in September at age 42. Had he lived, he would have been prosecuted by the U.S. Attorney’s office in Los Angeles, currently headed by acting U.S. Attorney George S. Cardona.

8. R. Allen Stanford. The Texas financier allegedly sold $7 billion worth of certificates of deposit through his Stanford International Bank and misappropriated most of the money. He is being prosecuted by the U.S. Attorney’s Office for the Southern District of Texas, currently headed by interim U.S. Attorney Tim Johnson. UPDATE: Stanford also is being prosecuted by the fraud section of DOJ’s criminal division.

9. David Rubin. The head of CDR Financial Products was indicted in October on charges of conspiracy and fraud related to rigging auctions to help determine which banks would assist governments in raising money. He will be prosecuted by Bharara’s office in Manhattan.

10. Robert Moran. The CEO of Moran Yacht & Ship pleaded guilty to tax fraud to avoid indictment. He also promised to pay back taxes and penalties and cooperate with the Internal Revenue Service. He was prosecuted by the office of  R. Alexander Acosta, then-U.S. Attorney for the Southern District of Florida.

the Criminal Division’s Fraud Section.