Labels: Apple

Mudlark: Who keeps an eye on private eyes?

By Clay Harris
April 27 2005 21:05

On the website of Incepta, the public relations and advertising company that is merging with Huntsworth, the section for Citigate Global Intelligence, its corporate security arm, is "under construction".

These things happen. But might something bigger be afoot? The industry website Intelligence Online reports that Incepta has suddenly closed CGI in the US. And Ernest Brod, one of the ex-Kroll Associates executives who started the operation, is understood to have told industry contacts of the closure and who his new employer will be.

Read the rest at FT.com, but note - a subscription is required.

More on Citigate's shutdown and business history can be found at the above-mentioned Intelligence Online new site, but a subscrip. is required there as well. Previews of their Citigate-related articles can be found here.

-- MDT

FBR proposes settlement in trading investigation

Jeff Clabaugh
April 27, 2005

Friedman Billings Ramsey has offered to pay $7.5 million to settle a Securities and Exchange Commission investigation and a separate National Association of Securities Dealers investigation into a private stock placement four years ago. The Arlington-based company also acknowledged that one of its co-founders was involved in the questionable trades.

Under the proposed settlement, FBR, without admitting any wrongdoing, is offering to pay a civil penalty of $3.5 million and consent to a review by an independent consultant to settle the SEC case. It is also offering to pay a $4 million fine to settle a similar NASD investigation.

Bristol-Myers agrees to settle shareholder suits

April 27, 2005

NEW YORK (Reuters)—Bristol-Myers Squibb Co. on Wednesday said it reached an agreement to settle shareholder lawsuits related to an accounting scandal and accusations that the company had misled investors about the safety of an experimental drug.

Bristol-Myers said that under the agreement to settle federal derivative lawsuits, it would adopt "certain governance enhancements," including the election of all directors to one-year terms instead of staggered terms. The settlement covers six lawsuits that had been consolidated into a single suit. Bristol-Myers continues to face a number of other shareholder lawsuits and two government investigations, a spokesman said. A federal court has given preliminary approval to the settlement.

The New York-based drugmaker, which previously admitted it boosted earnings over a three-year period by inflating revenue by $2.5 billion, said a final settlement hearing is scheduled for May 13 before Judge Loretta Preska of the U.S. District Court for the Southern District of New York.

The suits also accused the company of misleading investors about the safety of its experimental blood-pressure drug Vanlev, whose development was stopped after safety problems emerged, and by Bristol's investment in biotechnology company ImClone Systems Inc., whose former chief executive was later jailed in an insider-trading scandal. The suits also accused the company of trying to thwart generic competition for drugs to treat anxiety and cancer.

Labels: insider trading

BankAtlantic: Gov't has subpoenaed for compliance issues

April 20, 2005
South Florida Business Journal

In its statement disclosing a slight first quarter earnings drop, BankAtlantic Bancorp said Patriot Act, anti-money laundering and Bank Secrecy Act compliance problems at its banking division have led to government subpoenas....

In its most recent statement, though, the Fort Lauderdale-based holding company said it cannot predict whether or to what extent regulators or other federal agencies will pursue civil or criminal regulatory action or monetary or other penalties against it or its bank.

Labels: money laundering

School Districts Consider P.I. for Background Checks

April 25, 2005
By Sarah Thomsen

Both the Green Bay and Oconto Falls school districts are considering using a private investigative firm to conduct their background checks. The school districts are looking at their options after the Green Bay public school district's background check failed to show out-of-state felony convictions against student liaison Frank Smith, who resigned last month after his arrest on charges of drug possession and domestic abuse.

A year-and-a-half ago, Oconto Falls started running checks through a Department of Justice web site, the same one that Green Bay school district officials say failed them. When Oconto Falls superintendent Dave Polashek realized that, he started considering a private investigator. Though it only takes a minute for Oconto Falls administrators to pull up a criminal history on the DOJ web site, the district says it's not good enough any more.

"Has to do with people coming in from out of state. That's more of a challenge trying to get those databases that may exist in other places, so that's something we may refer to a private investigator," Polashek said. The district says its two Internet searches have limited databases and a private investigator could find a lot more than it could. "It's the issue of balance of time, cost, and really how much more do they provide compared to what you get right now," Polashek said.

Craig Warrick is a retired assistant principal-turned-private investigator. He says schools need outside help. When new teachers apply for a license, the Department of Public Instruction runs a check on them but by law only crimes related to children are reported to the district; the district has to find out the rest themselves. "The law, statute, says 'substantially related to welfare of children,' therefore DPI is doing their job in not reporting some crimes that they're not supposed to but that also puts the onus back on the school district," Warrick said.

If the schools go ahead with this option, both Green Bay and Oconto Falls administrators tell us they would probably go through a private investigation firm, get a subscription to the national databases, then pay about $20 for each person they put through checks on those databases.

Labels: background checks, database

Adelphia to pay $715M to settle accounting allegations

Pittsburgh Business Times
April 25, 2005

Adelphia Communications Corp. will pay the government $715 million to settle allegations of accounting fraud, the U.S. Securities and Exchange Commission said Monday.

Adelphia will deposit the money in a fund that the government will use to compensate investors hurt by the fraud, the SEC and the U.S. Attorney's Office said. As part of the settlement, members of the Rigas family, the company's founders, have agreed to forfeit more than 95 percent of their assets, which is in excess of $1.5 billion, according to a news release on the SEC's Web site.

""This settlement agreement presents a strong, coordinated approach by the SEC and the U.S. Attorney's Office to resolving one of the most complicated and egregious financial frauds committed at a public company," said Mark Schonfeld, director of the SEC's Northeast Regional Office. "The settlement provides an expedient and effective way to provide victims of Adelphia's fraud with a substantial recovery while at the same time enabling Adelphia to emerge from Chapter 11 bankruptcy."

Weida Communications to Cooperate with SEC Investigation of CFO and Stockholder in Connection with Other Activities; Company Announces Board of Directors Resignations

April 25, 2005

Weida Communications, Inc., a U.S. managed telecommunications operator in China, stated that the SEC is investigating whether Joseph Zumwalt, chief financial officer of Weida, and Anthony Giordano, one of Weida's largest stockholders, engaged in alleged illegal activities in connection with an independent investment entity that they were involved with, which is also a stockholder of Weida.

As a result of the investigation, the SEC temporarily suspended trading of Weida's securities. This suspension is expected to expire on May 6, 2005 at 11:59 p.m. EDT and trading of Weida is expected to resume on May 7, 2005. The SEC also froze Weida's bank accounts. Additionally, the SEC has not provided any specific information with respect to the charges against Mr. Zumwalt or Mr. Giordano, or its actions with respect to Weida. At this time, no charges have been asserted against Weida.

Labels: China

Huntington offers $7.5M fine to settle SEC investigation

Business First of Columbus
April 25, 2005

Huntington Bancshares Inc. has offered to pay a $7.5 million fine to end a Securities and Exchange Commission investigation into its accounting practices.

The proposed deal also includes separate civil fines to be paid by Thomas E. Hoaglin, the bank's chairman, president and chief executive officer, Michael J. McMennamin, its former vice chairman and chief financial officer, and former Controller John D. Van Fleet.

The SEC has to agree to the deal, but Huntington said investigators have recommended the five-member commission accept it.

The Columbus-based company has been under SEC investigation since June 2003 over its accounting practices related to auto leases from 2002 and earlier. It reached agreements in March with the Federal Reserve Bank of Cleveland and the U.S. Comptroller of the Currency to settle their investigations into the bank's accounting practices.

WorldCom Auditor Arthur Andersen Settles Fraud Suit

April 25, 2005

Arthur Andersen LLP, the lone remaining defendant in the three-year investor lawsuit stemming from WorldCom Inc.'s 2002 collapse, agreed to settle its liability in the case, U.S. District Judge Denise Cote said.

The settlement, announced in an order issued by the judge today, also ends a four-week trial in New York federal court at which a jury of five women and four men heard evidence suggesting that the accounting firm overlooked accounting manipulations and fraud at the long distance company.

``That fraud could have been stopped dead in its tracks if Arthur Andersen had been looking to do its job instead of looking to line its pockets,'' lead investor lawyer Sean Coffey said during opening arguments.

The settlement ends the largest securities fraud class action in U.S. history. Lawsuits against former WorldCom officers, 12 ex- directors, 17 investment banks and Andersen were first filed in Spring 2002 after the U.S. Securities and Exchange Commission requested documents from the company.

Labels: Sean Coffey

GM to recall 2 million-plus vehicles

By Shawn Langlois
April 25, 2005

SAN FRANCISCO (MarketWatch) -- General Motors, at a time when it's in dire need of good news, said Monday that it will recall more than 2 million vehicles, including some of its most popular cars and trucks.

Of the overall total, about 1.5 million full-size sport utility vehicles and pickup trucks mostly sold in the United States, are being called back to the shop to fix the seat belt positioning in the rear seats.

Burnham Securities analyst David Healy predicted the move could cost General Motors between $100 million and $200 million.

San Diego Mayor Dick Murphy Resigns

By Jeff Dillon
SIGNONSANDIEGO

April 25, 2005

Amid demands by the city attorney that he quit and a week after being named by Time magazine as one of the three worst big-city mayors in the United States, Mayor Dick Murphy announced he will resign effective July 15...

...Murphy's announcement follows a spate of bad news for San Diego government.

The Securities and Exchange Commission is investigating city finances and allegations of securities fraud. The U.S. attorney and the FBI are conducting a criminal investigation into possible public corruption.

SEC Investigating BearingPoint

Stephen Taub
April 22, 2005

The Securities and Exchange Commission has launched an informal investigation of BearingPoint, according to the company formerly known as KPMG Consulting.

The consultancy stated that the SEC staff had requested documents concerning internal control deficiencies identified on March 18, prior restatements, and other matters, and that it is cooperating in the inquiry.

Labels: KPMG

Charter execs sentenced for fraud charges

By Cheryl Wittenauer
Associated Press Writer
APR. 22, 2005

Four former executives of Charter Communications Inc. -- each expressing remorse and regret -- were sentenced Friday for their roles in schemes that artificially inflated revenues and subscriber numbers at the nation's third-largest cable television provider.

Calling their crimes "serious" and their ethical slippage "troubling," U.S. District Judge Carol Jackson imposed sentences ranging from two years probation to 14 months in prison for fraud charges dating to a July 2003 indictment.

The sentencing, in a federal courtroom packed with the men's families, friends and business associates, closed the final chapter of an accounting scandal that has nagged the suburban St. Louis-based company...

... All four men had pleaded guilty to felonies related to one of two schemes. Charter, which was not accused of wrongdoing, is controlled by Microsoft Corp. co-founder Paul Allen and has more than 6 million subscribers in 37 states.

Hynix is fined $185m for role in chip plot

By Stephanie Kirchgaessner and Edward Alden in Washington
April 22 2005

Hynix, the world's second biggest semiconductor maker, agreed on Thursday to pay a $185m fine for its role in what the US Justice Department said was an international conspiracy to fix the price of chips used in everything from computers to electronic games.

The fine on the Korean company is the third biggest in a US antitrust investigation. It follows a $160m penalty agreed in 2004 by Infineon, the German maker of dynamic random access memory (D-Ram) chips.

The full article can be found here (with subscription).

-- MDT

Jury Awards $43 Million in Flaming Lincoln Case

April 20, 2005

An Illinois jury has awarded $43 million to the severely-injured widow of a man killed in a fiery crash two years ago for which the plaintiff's attorneys say Ford Motor Co. was primarily to blame.

Dora Jablonski's husband, John Jablonski, was killed after a car driven by Natalie Ingram, then a 21-year-old college student, slammed into the rear of Jablonski's Lincoln Town Car, which had stopped for construction on Interstate 270, near the Illinois 203 exit, in downstate Illinois.

Jablonski's attorney, Brad Lakin, argued that Ford ignored warnings from its own engineers that designing the 1993 Lincoln Town Car with a vertical fuel tank behind the rear axle was unsafe. Later, the company chose not to spend $9.95 per car to relocate the fuel tank to a safer location.

In his closing statement, Lakin asked the jury to award Jablonski and her family $32 million for medical expenses, pain and suffering, and other expenses but left it up to them to decide on punitive damages. The jury decided on $15 million in punitive damages after deliberating for less than six hours.

Covansys documents subpoenaed as part of SEC investigation

By Andrew Dietderich
April 21, 2005 3:24 PM


Covansys Corp. has received a subpoena for the production of documents, the company has disclosed in a U.S. Securities and Exchange Commission filing. The Farmington Hills-based company said it had received the subpoena April 14.

Covansys did not specify what documents were requested but said the request involves an SEC investigation of the company.

The subpoena seeks documents from Jan. 1, 2002, to the present.

In its filing, Covansys said it “intends to cooperate to the fullest extent possible in the production of the requested documents.”

As Crain’s first reported in its April 4 issue, a lack of internal controls since at least 2001 has the company scrambling to change accounting methods. Also, the story reported that the SEC requested information from the company’s former auditors, PricewaterhouseCoopers L.L.C., last fall.

Covansys has restated financial results for 2002, 2003 and part of 2004, resulting in a cumulative decline in net income of about $3.2 million.

• Oversize truck tires: They go down smooth and easy. Like sliding gently into swirling metal quicksand.

• Whole computers: Note, PCs only in this vid...no one would want to do this to a Macintosh.

• A washing machine: Respect the wash-tub. This is the only thing to seemingly give the shredder any trouble.

• Loose paper: I'm in love. Trying really hard to talk my partners into this one. But where the heck would we put it?

• A couch: This one is the best, if only because of the tenacity with which the couch seems to fight for its life.

• Medical waste: Includes a horrifying scene of some guy running his hands through the debris. Ick.
  

LexisNexis Launches Japanese Legal Database

Dayton Business Journal
April 18, 2005

The Japanese subsidiary of LexisNexis is launching an online legal information service in the Japanese language.

Miami Township-based LexisNexis announced late Sunday that LexisNexis Japan Co. Ltd. is starting the service that offers legal case information and commentaries, as well as information on statutes codes and laws using a standard Web browser. The site is legal.lexisnexis.jp.

The initial coverage of the Japanese database includes 206,000 judgments dating from 1862; 42,000 case commentaries published from law journals; and all 7,200 current Japanese statutes, codes and laws. LexisNexis has plans to expand the offering to include a broad range of Japanese legal and regulatory information, along with business news considered relevant for customers in law firms, academic institutions, government organizations and corporate legal departments.

Labels: database

...TIAA-CREF hired one Sonia Radencovich for a tech position without checking her background. It seems that Sonia came from a "preferred vendor" and TIAA-CREF assumed the vendor had checked her background.

Unfortunately, under her other name, Sonia Howe, less than two weeks before starting at TIAA-CREF she was sentenced to four years in prison for her part in the Martin Frankel insurance fraud that landed Frankel in jail for 16 years after he disappeared amid smoking documents in a fireplace in his Connecticut mansion....

Tek Systems used a unit of Kroll Inc., a well-known consulting firm, to conduct its background checks. A copy of its report on Howe -- obtained by Newsweek -- shows that she had used many different names over the years, including her real name. A spokeswoman for Kroll said Tek ordered only a "standard criminal background procedure" to search records over seven years just in the counties where she lived. The search didn't include Connecticut, where Howe was convicted in federal court (a Google search of "Sonia Howe" turns up many hits that include government filings citing her sentencing and her ties to Frankel, who's serving 16 years).

Labels: background checks, Peter Henning

Labels: FOIA

NY Attorney General Spitzer Targets Identity Theft

Apr 18, 2005

NEW YORK (Reuters) - New York Attorney General Eliot Spitzer on Monday said he is seeking stronger state laws against identity theft and computer hacking.

Spitzer's office, together with several consumer advocate groups and crime victim organizations, are asking legislators to give consumers better control over personal information, enhance the state's ability to prosecute crimes that lead to identity theft, and boost penalties.

Spitzer, known for his sweeping probes of Wall Street research, the mutual fund and insurance industries, said he submitted a package of bills to the state legislature.

Labels: Eliot Spitzer, identity theft, New York AG

Labels: identity theft

By Harry R. Weber, AP Business Writer
Posted 4/18/2005

ATLANTA — Coca-Cola (KO) said Monday that the Justice Department has decided to close its two-year-old investigation into accounting irregularities at the beverage giant raised in a whistleblower lawsuit.

Separately, the company said it has reached a settlement with the Securities and Exchange Commission over its business practices in Japan.

"We are pleased that today's settlement with the Securities and Exchange Commission, and the decision by the Department of Justice to close its investigation, mark an end to the U.S. government inquiries initiated in 2003," chief executive Neville Isdell said in a statement.

The Justice Department probe involved allegations raised in a 2003 lawsuit filed by former Coke manager Matthew Whitley, who said he was fired in retaliation for reporting to senior management allegations of fraud and accounting irregularities.

"Dynegy engaged in some of the same types of off-balance-sheet transactions that Enron did, and when the whole thing got exposed, its stock plummeted," said William S. Lerach, lead attorney for the shareholders. "They engaged in secret transactions to artificially boost cash flow."

Labels: Enron

Where the rich turn to protect their wealth

By Sophia Banay

April 14, 2005

Was 2004 good for you? Chances are it was. The economy was the strongest it had been in years — the growth rate was 4.4 percent, salaries edged up and the IPO market revived. If you were a chief executive, it was even better. In 2004 CEO bonuses rose 46.4 percent and the median CEO bonus stood at $1.14 million, according to a study by Mercer Human Resource Consulting.

Of course, this is the only time of year when you might find yourself wishing that maybe you had left a little more money on the table. That, maybe, a couple of losses wouldn't have been so bad to offset your gains after all. Because tomorrow is the Ides of April — the day when all that lovely money you made lies vulnerable and unprotected from the clutches of the Internal Revenue Service, no matter how hard you may try to shelter it.

And that is becoming harder to do these days, as your accountant has no doubt been explaining to you. It's no longer possible to avoid the tax man by unloading those assets in a hidden offshore fund or an unnumbered account in the Caymans. As the IRS has made efforts to become “nicer,” like Madame Lafarge, it has also been steadily knitting up all those loopholes while the poor taxpayers trundle off to the tax guillotine....

For more on corporate tax tactics, and a wistful look at tax havens past, click over to MSNBC for the rest of the Forbes piece.

-- MDT

Wall Street Needs A New Cop

Liz Moyer
04.14.05

NEW YORK - As Stephen Cutler prepares to step down as the top cop at the U.S. Securities and Exchange Commission, he leaves behind an intensifying investigation into the insurance industry but a sense that an era of corporate scandal is winding down.

Cutler said today he would leave in the next month after three and a half years as director of the SEC's enforcement division, which acts as the watchdog of Wall Street. It has been among the most tumultuous periods in corporate America. As director, he levied more than $6 billion in penalties and disgorgement, targeting Enron, Adelphia Communications (otc: ADELQ - news - people ), Qwest Communications (nyse: Q - news - people ), Tyco International (nyse: TYC - news - people ), WorldCom (nasdaq: MCIP - news - people ), Time Warner (nyse: TWX - news - people ) and others.

Earlier this week, Cutler finalized a multiyear investigation into trading practices by specialists on the New York Stock Exchange, bringing civil charges against 20 individuals and scolding the NYSE for failing to police those traders, who are supposed to make efficient markets in listed stocks.

Already today, there was speculation that Linda Thomsen, a highly regarded longtime SEC prosecutor and Cutler's deputy, would be named interim enforcement director, if not his outright successor. An SEC spokesman declined to comment.

Naming Thomsen would "send a powerful signal that the chairman wants continuity," says Joel Seligman, a professor of corporate law at Washington University's School of Law. "It would be seen as disquieting to bring someone in from the outside."

Cutler joined the agency as deputy director of enforcement in 1999. Before that, he was a partner in the Washington firm Wilmer, Cutler & Pickering. He has not said where he is headed, though the announcement said he planned to return to private practice.

Just weeks after he became director in 2001, Enron, a Houston energy firm that was once the seventh-largest U.S. company, collapsed into bankruptcy amid allegations of massive accounting fraud.

Cutler worked often in tandem with New York State Attorney General Eliot Spitzer. Two years ago this week, the SEC and Spitzer announced a $1.4 billion settlement with ten Wall Street firms, including Citigroup (nyse: C - news - people ), Merrill Lynch (nyse: MER - news - people ) and Morgan Stanley (nyse: MWD - news - people ), and ordered them to put better controls on avoiding conflicts of interest between bankers and research analysts.

"It's been one of the most amazing times in the agency's history," says Charles Elson, a professor and corporate governance expert at the University of Delaware.

An investigation into transactions and accounting at American International Group (nyse: AIG - news - people ) is just under way, but observers said they didn't believe Cutler's departure from the SEC would interrupt that probe.

Cutler's departure "is certainly not sending us a signal that we can discern anything with regards to the AIG case," says Roy Smith, a professor at New York University's Stern School of Business.

A steady stream of earnings restatements in the last year will ensure that there is plenty of work for the SEC's enforcement division, but even Cutler suggested a lot of the heavy lifting is over.

In a speech last month, he said, "I do believe our enforcement approach is about where it needs to be--and is producing real results... I don't think we'll be seeing an enforcement docket three to five years from now that looks anything like the enforcement docket we have today."

Labels: AIG, Eliot Spitzer, Enron, Morgan Stanley, New York AG, Tyco

Some MasterCard holders exposed to data theft

By Reuters
April 14, 2005

Global bank HSBC Holdings is notifying at least 180,000 people who used MasterCard credit cards to make purchases at Polo Ralph Lauren that criminals may have obtained access to their credit card information, and that they should replace their cards, The Wall Street Journal reported on Thursday.

The situation involves a General Motors-branded card, the Journal reported.

Japanese firm in £1bn accounting scandal

Accountancy Age
14 Apr 2005

Japanese cosmetics company Kanebo admits to declaring £1bn of false profits

Japan has been hit by one of its biggest accounting scandals after cosmetics company Kanebo admitted it had booked £1bn of fictitious profits in its accounts.

The company is now planning to file criminal complaints against former management and will sue for damages, The Times reports.

The details emerged when Kanebo released corrected financial reports, where it was revealed that the company had hidden a negative net worth from 1995 to 2003 by inflating sales and under-reporting expenses.

The Tokyo Stock Exchange suggested it may review the company's listing in the wake of the scandal and Kanebo shares plummeted 13% to reach a four-month low.

The original article can be found here.

...67 years later, Edward Korman, a federal judge in the New York borough of Brooklyn, approved a $21.8 million award to surviving members of the two families, the Bloch-Bauers and Picks, which owned the sugar company with other investors. The decision blamed their losses on the Swiss bank, which was not named.

The award is believed to be one of the largest ever in the $50 billion restitution programs that have taken place since World War II. It is by far the largest in a claims process that is currently distributing $1.25 billion paid by Swiss banks in 1998 to settle a vast class-action suit that accused the banks of wholesale violation of the trust of their Holocaust-era depositors to gain favor with the Nazis.

But in a way, to the descendants of those two families, and to a world where the numbers of those victimized by the Nazis and their collaborators are dwindling, the huge award is more than that. It is a detailed trip back to a dark time, showing how the banks' actions helped the Nazis, how lifetimes' achievements were lost in days and how the process was masked in the arcane language of ledgers, legalisms and banking.

The ruling Wednesday said the story of the Bloch-Bauers' sugar company was an example of what it called the Swiss banks' "widespread betrayal" of their depositors during the Holocaust.

And it is quite a tale, one that includes duplicity, a visit by the Gestapo, coercion, a sham tax investigation and what the decision referred to as the bank's "active participation in the confiscation" of the sugar company by the Nazis.

"Having marketed themselves to the Jews of Europe as a safe haven for their property," the decision said, "Swiss banks repeatedly turned Jewish-owned property over to Nazis in order to curry favor with them."

The 1998 settlement, in Brooklyn federal court, followed a heated international debate about the role of the Swiss banks during the Holocaust.

The banks said that they did not help the Nazis in the widespread seizure of their depositors' assets and that much of the evidence was ambiguous about what happened to depositors' accounts.

Roger Witten, a lawyer for UBS and Crédit Suisse, said Wednesday that the assertions of systematic appropriation of the assets of Holocaust victims and other wrongdoing by the Swiss banks had been rejected by several commissions.

"These allegations are false," he said.

Under the settlement, though, more than $250 million has been returned to more than 3,000 bank depositors or their heirs by the claim tribunal set up by Korman.

Until Wednesday, the largest award was one issued in 2002 for $5.9 million to the family of a concert singer who was killed in a concentration camp and had left behind several large Swiss accounts.

The huge award announced Wednesday stems from a claim filed for the extended Bloch-Bauer and Pick families, who are related by marriage.

Mamma.com under formal SEC investigation

An informal probe of Canadian search engine company Mamma.com, by the US Securities Exchange Commission (SEC) has become a formal investigation according to a press release sent out earlier this week.The release stated, “The company believes that as part of its investigation, the SEC may consider matters related to trading in the company’s securities and whether an individual and persons acting jointly or in concert with him may have had a significant influence on the Company in the past as a result of undisclosed shareholdings.”

Read the rest here.

-- MDT

Ex-Citigroup Brazil Fund Manager Dantas Charged in Kroll Probe

April 13 (Bloomberg) -- Citigroup Inc.'s former manager of a $728 million fund in Brazil, Daniel Dantas, was charged with racketeering in connection with a Brazilian probe into whether he hired U.S. security firm Kroll Inc. to spy on the government and business rivals, police said.

Dantas, 50, fired by Citigroup on March 9, was also accused of breach of confidentiality, Brazilian federal police spokesman Clovis Franco said in an interview in Rio de Janeiro. The investigation may lead to more charges against Dantas, Franco said. The charges are preliminary and must be confirmed by a Brazilian court.

Dantas denied all the charges in statements today to police, Franco said.

...to provide the American people -- and institutions of oversight such as Congress, news organizations, public interest groups, businesses, scholars and lawyers -- with comprehensive information about federal staffing, spending, and the enforcement activities of the federal government.

• On an annual basis, less than one in five of the large corporations falling into the IRS's financial services category were audited during FY 2002, 2003 and 2004 (affected industries).

• For the big communication, technology and media corporations, more than three out of five were audited (affected industries).

• When it came to the very large businesses in the retailing, food, pharmaceuticals and health care businesses, four out of five faced IRS audits (affected industries).

• But for those corporations engaged in either agriculture, mining, and construction (affected industries) or in heavy manufacturing and transportation (affected industries), the audit burden was even heavier, 100 percent.

The very low attention being given to the financial sector by the IRS is particularly surprising in light of the leading role this industry plays in the country's economy, including the level of income subject to federal corporate income taxes. A comparison of the economic activity carried out by these large corporations by most any measure shows that the financial sector is at the top or close to the top. For example, measured by the total dollars of receipts or by net income after expenses, the financial sector ranks number one (graph) or two (graph) against other major economic sectors, according to data from the IRS' own analyses.

In setting up the LMSB (Large and Medium-Sized Businesses) Division, the data show the IRS decided to create five roughly similar-sized staffs for each of the five industry sectors. As a result, the sectors that have fewer companies in them are audited a lot more, and those with more companies get audited a lot less. In fact, the smallest sectors -- natural resources/construction and heavy manufacturing and transport -- are the ones with the highest audit rates. And the sector with the most corporations, financial services, has the lowest audit rates. (See Figure 5 and supporting table.)

While the IRS over the years has undertaken a number of special studies aimed at tracking the compliance levels of taxpayers with various incomes, it has not undertaken such research in relation to major corporate industry groups. Therefore, the possibility that the different audit rates are based on any sort of research showing that one of the sectors is more or less law abiding than the others can be ruled out.

Much, much more of interest to be found in the full report, which can be read here.

-- MDT

...for those who want to search medical, legal, and other potentially sensitive sites but don’t want anybody to know what they’re looking for, computer researchers at Ben-Gurion University of the Negev, in Beer Sheva, Israel, have developed a new search system.

When a user conducts a search ... the system generates extra, decoy queries...to mask the user’s true interests. That may sound suspiciously like Internet saboteurs’ methods for flooding websites.

“Yes, it does generate more traffic,” says Yuval Elovici, who created the system with Bracha Shapira, “but with no malicious intent. That is the price you pay for privacy.”

Elovici and Shapira are currently using the U.S. Patent and Trademark Office website to test their system, which could be available for public use later this year.

15 Big Board traders are indicted

By Terence Neilan and Colin Moynihan
The New York Times
Wednesday, April 13, 2005

NEW YORK Fifteen current and former New York Stock Exchange specialists, who match buyers' and sellers' orders on the exchange floor, were indicted Tuesday on charges that they traded to benefit themselves and their firms at the expense of their customers in deals worth millions of dollars....

...In a separate action, the 15 and 5 others face civil charges in an enforcement action brought by the Securities and Exchange Commission, an agency official said Tuesday. The 15 defendants in the criminal case, who worked for five leading specialist firms at the exchange, had a duty to investors "to execute their trades fairly and to put the investors' interests above their own," U.S. Attorney for the Southern District of New York, David Kelley, said at a news conference.
"Instead, these defendants are alleged to have systematically cheated the investors by putting their own interests and the interests of their firms before the interests of the unwitting investors"....

...The criminal case grew out of a civil action against seven firms, in which they agreed last year to pay $247 million for profiting from unnecessary trades that shortchanged clients from 1999 to 2003. The traders, a number of whom were later fired, were said to have taken advantage of their knowledge of which way the market was moving.

Labels: identity theft

Labels: identity theft

U.S. Seeks Access to Bank Records to Deter Terror

By ERIC LICHTBLAU
New York Times

WASHINGTON, April 9 - The Bush administration is developing a plan to give the government access to possibly hundreds of millions of international banking records in an effort to trace and deter terrorist financing, even as many bankers say they already feel besieged by government antiterrorism rules that they consider overly burdensome.

The initiative, as conceived by a working group within the Treasury Department, would vastly expand the government's database of financial transactions by gaining access to logs of international wire transfers into and out of American banks. Such overseas transactions were used by the Sept. 11 hijackers to wire more than $130,000, officials said, and are still believed to be vulnerable to terrorist financiers.

Government officials said in interviews that the effort, which grew out of a brief, little-noticed provision in the intelligence reform bill passed by Congress in December, would give them the tools to track leads on specific suspects and, more broadly, to analyze patterns in terrorist financing and other financial crimes. They said they were mindful of privacy concerns that such a system is likely to provoke and wanted to include safeguards to prevent misuse of what would amount to an enormous cache of financial records.

The provision authorized the Treasury Department to pursue regulations requiring financial institutions to turn over "certain cross-border electronic transmittals of funds" that may be needed in combating money laundering and terrorist financing.
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The plan for tracking overseas wire transfers is likely to intensify pressure on banks and other financial institutions to comply with the expanding base of provisions to fight money laundering, industry and government officials agreed. The government's aggressive tactics since the attacks of Sept. 11, 2001, have already caused something of a backlash among banking compliance officers - and even some federal officials, who say the effort has gone too far in penalizing the financial sector for lapses and has effectively criminalized what were once seen as technical violations.

The initiative, still in its preliminary stages, reflects heightened concerns by administration and Congressional officials about the government's ability to track and disrupt financing for terrorist operations by Al Qaeda and other groups - an effort identified by President Bush as a top priority in the campaign against terrorism.

Terrorist money has been difficult to identify, much less seize, in part because terror operations are conducted on relative shoestring budgets. Planning and operations for the attacks on Sept. 11, 2001, were believed to have cost Al Qaeda $400,000 to $500,000, with no unusual transactions found, according to the 9/11 commission, and the 1998 embassy bombings in East Africa cost only $10,000.

While counterterrorism officials have made some inroads in tracking terrorist money, clear successes have been few and sporadic, experts say, and a number of recent reports have pointed up concerns about the government's ability to deter and disrupt such financing.

"I don't think we really have a full grasp of how to deal with the problem yet," said Dennis M. Lormel, the former head of the Federal Bureau of Investigation's terrorism-financing unit, who is now in the private sector. "The framework is certainly getting better, but in general, we don't have the full capability yet to get at the money."

The federal government has taken a number of aggressive steps since the Sept. 11 attacks to disrupt terrorist financing. It has expanded its list of terrorist-related groups banned from financial dealings with the United States, it has set up new investigative offices to track terrorist financing, and it has required more financial data and tighter compliance from financial industries as part of the antiterrorism law known as the USA Patriot Act and other measures.

Senior officials throughout the administration have emphasized repeatedly that they want the financial sector to be a full partner in the stepped-up efforts to deter terrorist financing.

But in a letter in January to Treasury Department officials, 52 banking associations around the country said that a "lack of clarity" by the government in explaining what is expected of them in complying with regulations to deter terrorist financing and money laundering has "complicated, and in some cases undermined" those efforts.

The result, banking officials say, is that many banks, now in a defensive mode, are sending the government far more reports than ever before on "suspicious activities" by their customers - and potentially clogging the system with irrelevant data - for fear of being penalized if they fail to file the reports as required.

Some smaller community banks have sold out to larger companies for fear of increased liability, banking officials say, and banks have dropped some money-transmittal businesses that do significant business overseas because of the risk. Some executives, meanwhile, are steering away from serving on bank boards, concerned that they will be hit with punitive measures, banking industry officials say.

"It seems like the rules keep changing on us, and there's a lot of confusion and anxiety in the industry about what constitutes a proper compliance program," said John Byrne, who oversees compliance issues for the American Bankers Association.

Of particular concern to industry officials are five criminal enforcement actions in the last several years against banks for failing to comply with laws to combat money laundering. None of the cases involved terrorist financing, but prosecutors say most centered on egregious lapses by banks in turning a blind eye toward possible money laundering, for instance, by accepting duffel bags from drug dealers with hundreds of thousands of dollars in cash.

Tensions over the issue broke into public display last month in Hollywood, Fla., at a conference sponsored by Money Laundering Alert, an industry newsletter, as even some federal officials expressed sympathy for the bankers and criticism of what they characterized as overly aggressive tactics by the Justice Department.

By sharply increasing prosecutions against banks over compliance failures, "law enforcement is shooting the messenger," said Herbert A. Bierne, a senior enforcement official with the Federal Reserve System's board of governors. "You shoot the messenger, you stop getting the messages."

The Federal Reserve System has begun meeting with Justice Department officials to resolve internal friction over the enforcement actions, and it is seeking changes that would require such prosecutions to be overseen by Justice Department officials at headquarters in Washington, rather than at the discretion of federal prosecutors in the field, officials said.

Lester Joseph, a Justice Department official who oversees money-laundering cases, told the conference that the department, despite its keen interest in tracking terrorist financing, had no interest in singling out banks for technical violations and had begun no concerted crackdown.

But he added, "When we detect evidence of what we perceive as a crime, we're going to pursue that."

The Treasury Department's Financial Crimes Enforcement Network, or Fincen, which is leading the effort to gain access to international wire transfers, has created a working group with about 20 employees; begun meetings with the Federal Bureau of Investigation, the Department of Homeland Security and other agencies; and developed a general concept for how to proceed. Officials also have begun looking at similar models in Canada and Australia.

A final plan is not expected until the end of the year, and a senior official at Fincen, speaking on the condition of anonymity because the plan is still in development, acknowledged in an interview that numerous logistical and legal issues must still be worked out.

For instance, although some rough estimates cited by Fincen suggest that there are at least a half-billion international wire transfers a year totaling trillions of dollars, officials want to develop clearer data. The financial data demanded by Fincen is likely to total several hundred million records, and the agency wants to minimize the logistical and financial disruption to banks, officials said.

Officials are looking at whether to give higher priority to wire transfers from the Middle East or other regions considered high risk, but they said they want to avoid provoking a public outcry over charges of ethnic profiling or driving terrorist financiers out of banks and into underground markets.

Advocates see the international transfers as a vital tool in tracking terrorist financing.

"The idea is for the government to make it more difficult and more risky for terrorists to move money, and right now international wire transfers provide the fastest, cheapest and most reliable way for the terrorists to do that," said John Roth, a former staff member for the Sept. 11 commission and a co-author of its terrorist financing report.

But some within the financial industry are skeptical.

"This strikes me as a fruitless exercise, an impossible task," said Charles A. Intriago, a former federal prosecutor who runs Money Laundering Alert. "This risks further burdening the industry, and it's tough to see how it will produce much if any useful data for the government in tracking terrorist financing."

Labels: database, money laundering

Labels: Morgan Stanley

Outsourcers Steal Personal Data

(7 Apr) Police in Pune, India arrested 12 people, including 3 former employees of an outsourcing company hired by the New York-based Citibank N.A. to run its call center. The twelve "are charged with collecting and misusing account information from customers they dealt with as part of their work at the call center." They used the personal information they obtained to transfer funds from the Citibank customers' accounts to their own accounts.

Labels: identity theft

...there are probably some good economic reasons for tech companies to be more susceptible to accounting fraud lawsuits, reasons that would account for some (though probably not all) of the observed difference.

1) Tech companies are much more likely than average to have outsized valuations tied to perceptions of revenue growth;

2) Tech companies are somewhat more likely than average to have executive compensation heavily tied to stock options;

3) Tech companies are more likely than average to be acquisition targets (or acquirers) in stock deals where short-term fluctuations in the stock price have long-term effects on the company's prospects;

4) There was also a stretch of time in the boom years where tech company executives were more likely to be fly-by-night and/or inexperienced. (See, for example, Lori Gottlieb's Inside the Cult of Kibu.)

If these perceptions are true, there would be a greater incentive for tech company executives to fiddle with the books, both in terms of expected benefit from the fraud and, in at least some cases, decreased costs of exposure (compared to the opportunity cost of being a failed tech company executive), which one would expect to increase the real fraud worthy of suit.

To ensure continued compliance with the privacy provisions of the federal Gramm-Leach-Bliley Act, and the subsequent regulations adopted by the Federal Trade Commission ("GLB"), the permissible purpose screens presented as part of the AutoTrackXP log in process have been changed. These industry specific screens contain new language that will now correspond to exceptions under the law.

To maintain compliance with GLB, a user must now select only a single purpose from the presented list. Misrepresenting your access purpose is a violation of our subscriber agreement and federal and state laws. Any use of ChoicePoint information other than for the selected permissible purpose is grounds for account termination and may be referred to the Federal Trade Commission or to the appropriate state investigative agency.

Designated permissible purpose changes can be made at any time after log in by clicking the link marked "PERMISSIBLE USE" on the top of each page.

• For use by a person holding a legal or beneficial interest relating to the consumer.
  

• For use as necessary to effect, administer, or enforce a transaction requested or authorized by the consumer, including location for collection of a delinquent account.
  

• For use in complying with a properly authorized civil, criminal, or regulatory investigation, subpoena, or summons by federal, state, or local authorities.
  

• For use to protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability.

• For any other use permitted or otherwise not restricted by law and which may reasonably be expected to be part of the normal course and scope of your business or profession.

Labels: background checks

The Ziggs Index includes public profiles of user-generated content already available on the Web today. It includes corporate profiles that companies have submitted to Ziggs for inclusion, leveraging their investment in existing profiles on their own website. And equally important, the Ziggs Index includes professional profiles created by individuals like you.

Labels: database