Ex-Lawyer Is Indicted on Kickbacks in Lawsuits

By JOHN M. BRODER
June 25, 2005

LOS ANGELES, June 24 - A federal grand jury here has indicted a retired 78-year-old Palm Springs lawyer for allegedly receiving at least $2.4 million in kickbacks from one of the nation's most prominent plaintiffs' law firms.

The indictment charges that the defendant, Seymour M. Lazar, and members of his family served as plaintiffs in dozens of class action and shareholder lawsuits filed by the New York law firm of Milberg Weiss Bershad & Schulman, perhaps the country's most aggressive filer of lawsuits against corporations.

Milberg Weiss has won billions of dollars in claims on behalf of shareholders against corporations, including lawsuits filed on behalf of investors in Enron, Halliburton, Lucent Technologies, HealthSouth and Tyco. President Bush and many other Republicans consider the firm and others like it to be enemies of business who use courts to enrich themselves at the expense of consumers.

The indictment, handed up by a federal grand jury here on Thursday, charges Mr. Lazar with mail fraud, money laundering and conspiracy to obstruct justice, among other charges. Milberg Weiss is not a defendant in the indictment and is not named anywhere in it. It is referred to only as "the New York law firm" with whom Mr. Lazar did business. But a spokesman for Milberg Weiss confirmed that it was the law firm cited throughout the indictment...

...According to the indictment, Mr. Lazar, as a shareholder in the sued companies, would have been entitled to a prorated portion of any settlement won by Milberg Weiss. Instead, it said, the law firm illegally paid him part of its lawyers' fees, frequently funneled through a second defendant, Paul T. Selzer, 64, a lawyer in Palm Springs.

Mr. Lazar's lawyer, Thomas H. Bienert, said he believed that the government was trying to pressure his client to take a plea deal and testify against Milberg Weiss. "It appears this is an effort to get Mr. Lazar to say negative things about his class action counsel and become a government witness," Mr. Bienert said...

..."Milberg Weiss has cooperated with the government's investigation, which has continued for more than three years," it said. "Although the indictment does not name Milberg Weiss, it unfairly implicates the firm in the wrongdoing alleged against Lazar. We are outraged that the allegations have been made against the firm and reject them as baseless."

Labels: Enron, money laundering, Tyco

Jury Acquits Scrushy in HealthSouth Fraud Trial

Jay Reeves
The Associated Press
June 29, 2005

Jurors acquitted HealthSouth Corp. founder Richard Scrushy on Tuesday of all charges in a surprise setback for federal prosecutors who had scored victories over a string of big-name CEOs accused of fraud.

The case against Scrushy, involving a $2.7 billion earnings overstatement at the rehabilitation and medical services chain he created and ran, had been widely considered among the strongest. He was the first CEO charged under the Sarbanes-Oxley corporate reporting law.

Yet when it finished 21 days of deliberations, the jury decided to acquit Scrushy of all 36 counts of fraud, false corporate reporting and making false statements to regulators.

Labels: 2006, Health South, Peter Henning

Labels: Enron, Grant Thornton, Parmalat

Jackson sues over 'Lord of the Rings' - Director Peter Jackson takes studio to court over millions in allegedly missed fee opportunities.

June 27, 2005: 10:54 AM EDT

NEW YORK (CNN/Money) - Oscar-winning director Peter Jackson has filed suit against the movie studio behind his "Lord of the Rings" film trilogy, claiming the studio may have cost him tens of millions of dollars.

Jackson has accused New Line Cinema, which financed and distributed the "Lord of the Rings" film franchise, of committing fraud in the way it dealt with ancillary revenues generated by "The Fellowship of the Ring," the 2001 movie and the first of the J.R.R. Tolkien novels that Jackson brought to the big screen.

"We don't agree with plaintiff's allegation and intend to contest the case vigorously," a spokesman from New Line told CNN/Money.

Lawyers for Jackson told The New York Times, which first reported the lawsuit, that the director was underpaid by as much as $100 million.

New Line and CNN/Money are divisions of Time Warner (down $0.03 to $17.07, Research).

Jackson's lawsuit shines a spotlight on conflicts between major media companies like Time Warner and Walt Disney Company (Research) and Hollywood's creative talent.

In his lawsuit, Jackson accuses New Line of granting the licensing rights to "Lord of the Rings" books, DVDs, and merchandise to other Time Warner companies without allowing bids from other entertainment companies. As a result, the total revenues related to the film were lower than they would have been had there been open bidding for these ancillary rights, Jackson claims.

Because Jackson's compensation from the movie was tied to gross revenues, he says New Line's alleged self-dealing cost him money.

"That allegation is untrue, most (licensing rights) did not go to companies in the Time Warner family," New Line's spokesman said in response.

Kozlowski urges jail time - for himself

1995 letter from ex-Tyco CEO calls for "maximum term" in incarceration of ex-employee.

June 23, 2005: 12:49 PM EDT

NEW YORK (CNN/Money) - A letter written 10 years ago by convicted Tyco CEO Dennis Kozlowski that condemns stealing from stockholders could play a role in determining the length of his sentence, according to a news report released Thursday.

Prosecutors in the trial of Kozlowski, who was convicted last week on charges that he pocketed in excess of $150 million dollars from Tyco, say they may use the letter during their sentencing recommendation for the former exec, the Wall Street Journal reported.

Kozlowski's 1995 letter, written to a Houston sentencing official over the trial of Girish P. Shah, recommended that the former assistant controller at Tyco "be sentenced to incarceration for a maximum term," and stated that stealing from a company is "a particularly egregious crime."

In the letter obtained by the Journal, Kozlowski also went on to censure Shah for stealing from stockholders and breaching his fiduciary duty, writing the "wrongdoing of this nature against society is considered a grave matter."

Shah was sentenced to 20 years in prison but was released four year later in 1999, the paper reported.

Kozlowski, 58 and co-worker Mark Swartz, 44, who were both convicted last Friday in Manhattan Supreme Court, now face sentences of 15 to 30 years. Their sentencing is tentatively scheduled for August 2.

Labels: Dennis Kozlowski, Tyco

Welcome to the murky world of Kroll Inc - the private CIA

By Ben Hills
June 25, 2005

They helped track down billions of dollars of treasure looted from Kuwait by Saddam Hussein. They finally proved that "God's Banker", Roberto Calvi, found hanging under London's Blackfriars Bridge with bricks in his pockets, was murdered. They were hired by Prince Charles to find the "Princess Di tapes".

Move over James Bond, this is the real-life fantasy world of the thousands of former cops and spooks, bodyguards, forensic accountants, journalists and criminal lawyers who made up what claims to be "the world's foremost independent risk consulting company", Kroll Inc.

Not for nothing did a former executive of the company describe Kroll as "like a private CIA".

"Of course, there's lots of boring stuff too - corporate profiles, background checks on employees, data recovery," says a rival in the business, "But these are the ones that get the adrenaline going."

In the process, inevitably for a company employing large numbers of former CIA, FBI and Special Forces people, the company has occasionally been accused of misconduct - the bugging scandal in Brazil is just the latest in which Kroll Inc has been embroiled.

Founded in 1972 by a New York assistant district attorney, Jules Kroll, the company expanded aggressively across America and internationally into 60 countries. In Australia, Kroll formed an ongoing partnership with the accountancy firm Ferrier Hodgson.

Its customers were a who's who of the business world: Ford, Citibank, Hilton hotels, drug company Pfizer and Nestle among them. It has also worked for the US government.

Although its bread and butter work was legal corporate intelligence, such as profiling takeover targets, in countries such as Brazil, and now Iraq, where kidnapping is rampant, Kroll also specialised in "close body work" - bodyguards, protection and ransom.

In May last year, Julius Kroll received an offer he could not refuse. Marsh & McLennan, the New York insurance broker which claims to be the world's largest, took over Kroll for an eye-popping $US1.9 billion ($2.46 billion), more than $US100 million of which was pocketed by its founder.

Capitalised at $US6 billion, and with 60,000 employees in more than 100 countries - including Australia - Marsh & McLennan was the colossus of the industry, claiming a 40 per cent share of the global market for insurance broking.

But the company saw insurance as a mature market and wanted to expand into the related risk-management industry. No one could have foreseen when the takeover deal was signed in May last year that the sky was about to fall in.

Last October, New York's crusading district attorney, Eliot Spitzer, filed suit against Marsh & McLennan, accusing the company of having, for years, colluded with big insurance companies to "cheat customers in an elaborate charade of price fixing and bid rigging".

The three insurers he named were the giants American International Group, Zurich America Insurance Company and Ace Ltd. Adding spice to the story was the relationship between them: AIG was headed by the 79-year-old insurance industry legend Maurice "Hank" Greenberg; his son Jeffrey ran Marsh & McLennan, and; another son, Evan, was boss of Ace.

Spitzer claimed that Marsh & McLennan jacked up insurance premiums - thus increasing its commissions, and the profits of the insurers - with "fake bids, collusion, improper steering of business, payments by insurers to avoid solicitation of competing of competing quotes, and threats against those resisting participation in the fraudulent schemes".

The company "acted, in short, less like a broker with a fiduciary obligation to its clients than as the linchpin of a racket", Spitzer said.

Marsh & McLennan's shares tumbled more than 25 per cent, despite pledging it was "committed to getting all the facts, determining any incidence of improper behaviour and dealing appropriately with any wrongdoing".

Jeffrey Greenberg was forced to resign. His replacement was a man the company had inherited a few months earlier when it took over Kroll Inc, Michael Cherkasky, who was uniquely placed to steer the company through the scandal which threatened to destroy it.

For 16 years, Cherkasky was a white-collar crime buster for the New York District Attorney's office; Spitzer, now prosecuting Marsh & McLennan, was his protege. In 1994, Cherkasky joined Kroll - gamekeeper become poacher - working his way up to the chief executive's office.

Within three months, Cherkasky had overseen a clean-out of Marsh & McLennan's board, and the sacking of most of the executives deemed accountable for the corruption. In January, he persuaded Spitzer to drop the civil charges against the company by pledging to pay $US850 million to clients around the world - including Australia - that Marsh & McLennan had defrauded.

Criminal charges are still pending against 10 former executives of Marsh & McLennan and the insurance companies. In February, Kathryn Winter, the 50-year-old managing director of Marsh Inc, pleaded guilty to fraud in the Manhattan State Superior Court. She faces up to four years' jail, depending on how keenly she co-operates with Spitzer's investigators.

Cherkasky personally apologised to 120 of his biggest clients, and showed thousands of staff the door in a bid to restore the ailing giant to profitability.

He is now engaged on an even greater challenge - to convince outraged clients who had been deserting the company in droves, that Marsh & McLennan is serious about its reforms.

Labels: AIG, background checks, Eliot Spitzer, Kroll

Labels: Morgan Stanley, Parmalat

On Monday, the US District Court in New York sentenced the 80-year-old Rigas for conspiracy and fraud that eventually drove the nation’s fifth-largest cable provider to bankruptcy. His son and former Chief Financial Officer, Timothy Rigas, was sentenced to 20 years in prison for his role in the case. Judge Leonard Sand ordered both men to be surrendered to prison by September 19...

...In one of the harshest sentences for white-collar crime, prosecutors are sending a clear message to corporate executives that the US government is serious about maintaining the integrity of its financial markets. This case will likely mean a lifetime sentence for the elder Rigas, who, at 80 years of age, is suffering from bladder cancer.

Rigas’ attorneys had asked for leniency during the trial, citing philanthropy, to which Judge Leonard Sand replied, “To be a great philanthropist with other people's money really is not very persuasive.” However, John Rigas’ age was taken into consideration for this sentence, and his prison time may be cut short if his health continues to deteriorate.

"This is a tragedy lacking in heroes," the judge said. Adelphia prosecutors had accused the Rigases of using complicated cash-management systems to spread money around to various family-owned entities and as a cover for stealing about $100 million for themselves.

They were accused of spending the money on a lengthy list of personal luxuries. Prosecutors said John Rigas had ordered two Christmas trees flown to New York for his daughter at a cost of $6,000, ordered up 17 company cars and had the company buy 3,600 acres of timberland at a cost of $26 million to preserve the view outside his Pennsylvania home.

Worse still for investors, the company collapsed into bankruptcy in 2002 after it disclosed a staggering $2.3 billion in off-balance-sheet debt that prosecutors said was deliberately hid by the Rigases.

Labels: 2006, Dennis Kozlowski, Enron, Health South

"We ran thousands of Social Security numbers," said a former senior F.B.I. official who insisted on anonymity because the files involved internal cases. "We got very useful information, that's for sure," the former official said. "We recognized the value of having that information to track leads, and, to their credit, so did the Social Security Administration."

Some privacy advocates and members of Congress, although sympathetic to the extraordinary demands posed by the Sept. 11 investigation, said they were troubled by what they saw as a significant shift in privacy policies. Representative Carolyn B. Maloney, a New York Democrat who has sought information from the Social Security agency on the issue, said the new policy had "real civil liberties implications for abuse." Ms. Maloney questioned whether Congress was adequately informed. "If we don't know when the Social Security Administration decides to change its rules to disclose personal information," she said, "I think Americans have a right to be skeptical about their privacy."

The director of the Open Government Project at the Electronic Privacy Information Center, Marcia Hofmann, acknowledged the need for investigators to have access to vital information. "But an ad hoc policy like this is so broad that it allows law enforcement to obtain really sensitive information by merely claiming that the information is relevant to the 9/11 investigation," Ms. Hofmann said. "There appears to be very little oversight."

In addition to easing its rules, the Social Security agency agreed to waive normal privacy restrictions for information related to the F.B.I. investigation of the sniper shootings in the Washington region in 2002, the internal memorandums show. It does not appear that any information was ultimately turned over. The agency agreed two days after the Sept. 11 attacks to give the F.B.I. access to material from its files to obtain information on the hijackers, anyone with "relevant information" on the attacks and victims' relatives.

Under Social Security Administration policy, which goes beyond federal privacy law, such information cannot typically be shared with law enforcement officials unless the subject has been indicted or convicted of a crime. The loosening of the policy was updated and reauthorized last year, the internal documents show, and Social Security officials said Tuesday that it remained in place.

Read the full story.

Meanwhile on Monday, the Transportation Security Administration owned up to collecting information on airline passangers even thought Congress had previously instructed the agency to do no such thing. The TSA

A Transportation Security Administration contractor used three data brokers to collect detailed information about U.S. citizens who flew on commercial airlines in June 2004 in order to test a terrorist screening program called Secure Flight, according to documents that will be published in the Federal Register this week. The TSA had ordered the airlines to turn over data on those passengers, called passenger name records, in November.

The contractor, EagleForce Associates, then combined the passenger name records with commercial data from three contractors that included first, last and middle names, home address and phone number, birthdate, name suffix, second surname, spouse first name, gender, second address, third address, ZIP code and latitude and longitude of address.

Labels: HP, identity theft

Anita, a former $38,000-a-year audit and custodial officer with the Bank of Montreal's Calgary Securities Centre, was being investigated by police for defrauding retired Mexico City oilman Salvador Casanova of $13.5 million in an elaborate multi-year banking swindle. At the time, the sensational fraud was called an isolated incident by Bank of Montreal spokesman Ralph Marranca.

It was always believed that the Koos had fled to southeast Asia, most likely Hong Kong, but law enforcement officials never confirmed it. RCMP have recently received information from Hong Kong police that a body identified as Yuk Chun Anita Mak -- a name used by Anita Koo -- was found earlier this year. "An investigation is continuing in order to confirm whether the deceased was in fact Anita Koo," said RCMP Sgt. Phil Tawtel. Mak died on Jan. 4, 2005, as a result of "impact from height," according to the coroner's report, Tawtel said.

Hong Kong media reports say security discovered a woman's body lying on the ground outside her highrise apartment in Tung Chung at 10 a.m. on Jan. 4. Officials at the Seaview Crescent development in Tung Chung confirmed a person died under those circumstances on that date... According to the article, police called to the scene determined Mak had died instantly from the fall. Police searched her residence and found a relative, who was not identified in the article, and a suicide note.

Jan. 4 is the date of a Hong Kong postmark on an envelope received by the Calgary Herald. The envelope contained a letter signed by an Anita Koo claiming sole responsibility for the fraud. She also said she was going to end her life. The letter to the Herald surfaced as RCMP were finalizing their submission to the Crown regarding evidence to support the laying of charges against Anita and Tony Koo. The Herald alerted RCMP to the existence of the letter. The RCMP would later receive similar correspondence purported to be from an Anita Koo.

As a result of the surprise developments, the Commercial Crime Section of the RCMP, which had been on the lookout for the Koos, switched gears and began investigating the possible death of the Calgary socialite. But investigators say they won't close the file on Anita Koo without iron-clad proof of the corpse's identity... It's not unusual for individuals hoping to escape prosecution to stage their own deaths -- for example, reports recently said former Bre-X geologist Michael de Guzman may still be alive. De Guzman was said to have flung himself from a helicopter over the jungles of Indonesia in 1997, shortly before his company imploded in one of the biggest mining scandals in modern history. His body was cremated before a positive identification could be made.

Tawtel is hoping for a positive identification now that Hong Kong police are reviewing their original investigation into Mak's death. In her letter to the Herald dated Dec. 30, 2004, Anita writes: "Just to let you know that I am totally responsible for the fraud. Both my son and my husband are innocent. You have already done enough to destroy them even though most of them are untrue and unfair comments. "I am going to end this whole thing and my life together. As a dying woman's last wish, please do not publish any more and let them go back to their lives. Thanks a million and may God bless you, your staff and their families."

It's signed Anita Koo and followed by the following post-script in longhand: "Please put yourself in the position of a wife and mother. Please do that. I beg of you." The Herald hired Kenneth J. Davies, a certified graphoanalyst -- or handwriting expert -- to verify the authenticity of the handwriting and signature on the letter it received. As part of the Herald investigation, Davies was provided with the envelope and letter, and copies of court documents bearing Anita Koo's known signature as well as copies of her handwritten correspondence to Casanova for comparison. After comparing the documents, Davies confirmed the authenticity of the handwriting and signature....

...Anita, the sole supervisor of Casanova's U.S. dollar term deposits at the Bank of Montreal for more than a decade, bilked the former oilman, now 92, of $9 million US in an elaborate scheme that started in 1995 and continued through to January 2002 -- a full year after she retired from the bank. Casanova, a Bank of Montreal customer since the mid-1980s, held more than $5 million US in term deposits with the bank in 1992. Koo issued official Bank of Montreal receipts and documentation to Casanova as part of her guise, leading him to believe that the significant deposits he was making into his U.S. dollar fixed-term deposits in her care were building his wealth.

Instead, it's alleged the Koos used Casanova's cash -- money he'd intended as an inheritance for his six children -- to support a lavish lifestyle...The couple also gained a reputation within Calgary's Chinese community for opulent dinner parties, where they would wine and dine influential business leaders and politicians -- including Premier Ralph Klein . As certified fraud examiner Robert Taylor concluded in his 2002 affidavit after reviewing thousands of pages of the Koos' bank records and related financial records: "Their combined appetite for cash is very significant and has almost depleted all of the Casanova funds."

...Ironically, it was Casanova, not the Bank of Montreal, who uncovered the fraud in January 2002. The wealthy patriarch became suspicious when Anita, a woman he'd trusted for more than a decade, repeatedly failed to honour his request to return his money to him in Mexico City, and instead offered up excuses why the withdrawal couldn't occur. Anita told Casanova he hadn't paid withholding taxes on his deposits and therefore would face sizeable fines and penalties upon withdrawal. She recommended Casanova leave the funds alone. Worried and embarrassed, Casanova confessed his anxieties to his son, Salvador Enrique Casanova Rosellon, who contacted bank officials only to learn that Anita had retired a year earlier and his father's investment accounts, which should have totalled more than $9 million US, were empty...

...While questions about Anita remain, the Department of Special Prosecutions, a unit within the provincial Crown that handles major fraud investigations, is reviewing the RCMP's submission for criminal charges. The Crown is proceeding with its review on the assumption that Anita Koo is alive, but Tawtel said the Crown will not recommend charges be filed until the identity of the body in Hong Kong is verified.

Labels: data breech, database

TYCO INTERNATIONAL LTD. -- Former Chief Executive L. Dennis Kozlowski and Chief Financial Officer Mark H. Swartz were convicted Friday on 22 of 23 counts of grand larceny, conspiracy, securities fraud and falsifying business records. Prosecutors accused the two of conspiring to defraud Tyco of millions of dollars to fund extravagant lifestyles. The two executives each face up to 30 years in prison.

HEALTHSOUTH CORP. -- Former CEO Richard Scrushy could spend the rest of his life in prison if convicted on all 36 counts of conspiracy, false reporting, fraud and money laundering for allegedly orchestrating a $2.7 billion earnings overstatement at the rehabilitation and medical services chain for seven years beginning in 1996. A Birmingham, Ala., federal jury has been deliberating in the case since May 19.

WORLDCOM INC. -- Bernard Ebbers, former chief of the one-time telecom giant, was found guilty of fraud, conspiracy and making false regulatory filings in WorldCom's $11 billion accounting scandal. The case against him was largely based on the testimony of former CFO Scott Sullivan, who agreed to testify against his boss as part of a plea deal. Ebbers is due to be sentenced next month and faces up to 85 years in prison.

ENRON CORP. -- Enron founder Kenneth Lay, former CEO Jeffrey Skilling and former top accountant Richard Causey are scheduled to go to trial in January on federal fraud and conspiracy charges. Former CFO Andrew Fastow pleaded guilty in January 2004 to two counts of conspiracy, admitting to orchestrating schemes to hide the company's debt and inflate profits while pocketing millions of dollars. He agreed to serve the maximum 10-year sentence, which will begin in July 2006, after he testifies against his former bosses.

In addition, Fastow's wife will complete a year-long sentence next month on a misdemeanor tax charge for failing to report her husband's kickbacks. Former Enron treasurer Ben Glisan Jr. is serving a five-year sentence for his role in the scandal. And two former Merrill Lynch & Co. executives were sentenced to short prison terms for their roles in a bogus Enron sale of power barges.

ADELPHIA COMMUNICATIONS CORP. -- Founder John Rigas and his son Timothy were convicted in federal court last year of conspiracy, bank fraud and securities fraud. The two are to be sentenced Monday. Another Rigas son, Michael, was acquitted of conspiracy charges before the case ended in a mistrial with jurors deadlocked on 17 counts against him. A fourth executive, Michael Mulcahey, was found not guilty of conspiracy and securities fraud.

CREDIT SUISSE FIRST BOSTON -- The company's former investment banking star, Frank Quattrone, was convicted in May 2004 on federal charges of obstruction of justice, after his first trial ended in a hung jury. Quattrone, who made a fortune taking Internet companies public during the dot-com stock boom, was sentenced to 18 months in prison. He is free on bail and appealing the conviction.

MARTHA STEWART: The founder of the homemaking empire was released March 4 after serving five months in prison, and is serving an additional five months confined to her home. She was convicted in federal court last year of conspiracy, obstruction of justice and making false statements related to a personal sale of ImClone Systems Inc. stock. Her former broker at Merrill Lynch, Peter Bacanovic, began serving a five-month sentence in January, and still faces five months of home confinement. Stewart's conviction was not related to the company she founded, Martha Stewart Living Omnimedia Inc.

Labels: 2006, Andy Fastow, Dennis Kozlowski, Enron, Health South, money laundering, Tyco

[The National Archives] is a public trust upon which our democracy depends. NARA enables people to inspect for themselves the record of what government has done. NARA enables officials and agencies to review their actions and helps citizens hold them accountable for those actions. And NARA ensures continuing access to essential evidence that documents the rights of American citizens, the actions of Federal officials, and the national experience.

According to NARA's specifications, the system must ultimately be able to absorb any of the 16,000 other software formats believed to be in use throughout the federal bureaucracy--and, at the same time, cope with any future changes in file-reading software and storage hardware. It must ensure that stored records are authentic, available online, and impervious to hacker or terrorist attack.

...managing growing data collections is already a crisis for many institutions, from hospitals to banks to universities. Tom Hawk, general manager for enterprise storage at IBM, says that in the next three years, humanity will generate more data--from websites to digital photos and video--than it generated in the previous 1,000 years. "It's a whole new set of challenges to IT organizations that have not been dealing with that level of data and complexity," Hawk says...

...Still, NARA's problem stands out because of the sheer volume of the records the U.S. government produces and receives, and the diversity of digital technologies they represent. "We operate on the premise that somewhere in the government they are using every software program that has ever been sold, and some that were never sold because they were developed for the government," says Ken Thibodeau, director of the Archives' electronic-records program. The scope of the problem, he adds, is "unlimited, and it's open ended, because the formats keep changing."

The Archives faces more than a Babel of formats; the electronic records it will eventually inherit are piling up at an ever accelerating pace. A taste: the Pentagon generates tens of millions of images from personnel files each year; the Clinton White House generated 38 million e-mail messages (and the current Bush White House is expected to generate triple that number); and the 2000 census returns were converted into more than 600 million TIFF-format image files, some 40 terabytes of data. A single patent application can contain a million pages, plus complex files like 3-D models of proteins or CAD drawings of aircraft parts. All told, NARA expects to receive 347 petabytes (see "Definitions") of electronic records by 2022.

Currently, the Archives holds only a trivial number of electronic records. Stored on steel racks in NARA's 11-year-old facility in College Park, the digital collection adds up to just five terabytes. Most of it consists of magnetic tapes of varying ages, many of them holding a mere 200 megabytes apiece--about the size of 10 high-resolution digital photographs. (The electronic holdings include such historical gems as records of military psychological-operations squads in Vietnam from 1970 to 1973, and interviews, diaries, and testimony collected by the U.S. Department of Justice's Watergate Special Prosecution Force from 1973 to 1977.) From this modest collection, only a tiny number of visitors ever seek to copy data; little is available over the Internet.

Because the Archives has no good system for taking in more data, a tremendous backlog has built up. Census records, service records, Pentagon records of Iraq War decision-making, diplomatic messages--all sit in limbo at federal departments or in temporary record-holding centers around the country. A new avalanche of records from the Bush administration--the most electronic presidency yet--will descend in three and a half years, when the president leaves office. Leaving records sitting around at federal agencies for years, or decades, worked fine when everything was on paper, but data bits are nowhere near as reliable--and storing them means paying not just for the storage media, but for a sophisticated management system and extensive IT staff.

Academic departments coast to coast - from the San Diego Supercomuting Center to the Massachusetts Institute of Technology have been set to work on how to manage and convert data from literally every format ever invented into an archival standard practical for preservation, cataloging and continuing access.

The the problems whith a technological challenge of this scale are mammoth, but what is at stake in this "moon shot" level project is at least as significant, argues KenThibodeau, director of the National Archives Electronic Records program, "there's every reason to say that in 25 years, you won't be able to read this stuff." Without their work, warns Thibodeau. "Our present will never become anybody's past."

Labels: database

N.Y. official sued over bank probe

By Larry Neumeister
The Associated Press
Jun. 17, 2005

NEW YORK - An association of leading commercial banks and a federal agency sued New York Attorney General Eliot Spitzer on Thursday, saying his probe into the lending practices of national banks violates laws ensuring that banks are not subject to supervision by state authorities.

The suit asked the U.S. District Court in Manhattan to block Spitzer from demanding information to enforce federal and state discrimination-in-lending laws against banks belonging to the Clearing House Association. The Manhattan association said it was protecting the rights of its 11 members, eight of which are federally chartered national banks already subject to federal regulation.

The bank association said at least three members -- HSBC Bank USA, JPMorgan Chase Bank and Wells Fargo Bank -- have been subjected to the inquiry.

The suit by the Office of the Comptroller of the Currency seeks to block what it said was Spitzer's interference in the agency's fair-lending supervision.

The agency "is absolutely committed to assuring that the national banking system is free of lending discrimination of any sort," acting comptroller Julie Williams said in a statement. "This issue is vital and it is complex, and it must not be politicized."

Spitzer has questioned some of the nation's biggest banks in an investigation of potentially discriminatory mortgage practices. Community groups have said blacks and Hispanics are more likely than Anglos to be given higher-cost mortgage loans and are much more likely to be turned down for mortgages.

Labels: Eliot Spitzer, New York AG

Investigating The Executives

FORBES
April 21, 2005
Penelope Patsuris

NEW YORK - The search for new CEOs will never be the same. Everything from Dennis Kozlowski to Sarbanes-Oxley has seen to that.

The biggest winners in this brave new and very litigious world: private investigation outfits. "There's a big trend in doing due diligence on high-level executive job candidates," says James Rowe, vice president of the investigative firm the James Mintz Group. A lifetime ago, Rowe was an investigator for the U.S. Senate Watergate Committee. "And we're also vetting lots of potential board members. This has really boosted our business; it's a real growth area."

Rowe says his firm's bread-and-butter used to be deal-related due diligence work, checking out executives ahead of mergers, acquisitions and partnerships. "Now we do as much work on CEOs and board members as we do on deals." These background checks can cost anywhere from $2,000 to as much as $20,000, depending on how extensive they are.

The clients that come to James Mintz are generally the executive search firms such as Spencer Stuart and Heidrick & Struggles. "They talk to colleagues about the person's capabilities," says Rowe, "while we look for a criminal past or financial troubles like bankruptcies or tax liens."

Spencer Stuart partner John Wood says his company now uses outside investigative firms to vet all of its senior-level hires. "That didn't used to be the case," he adds.

And you'd be amazed at what firms such as James Mintz and Kroll sometimes turn up. "We find that in 10% to 15% of C-suite searches we see red flags, like fake degrees and criminal filings," says Peter Turecek, a managing director at Kroll's business intelligence and investigations practice. "We came across one guy once with a child-rape conviction, and an executive at an acquisition target company who turned out to have been a bagman in a murder. We also discovered a CFO that stole his neighbor's sod because he couldn't wait to finish his lawn. What's he doing if he can't meet his quarterly numbers?"

Thanks to Sarbanes-Oxley, investigators are also now on the hunt for matters that sound more mundane but are just as critical in picking a new executive. "Now a major focus for us is corporate stewardship," says Rowe. "Were there any securities issues during this person's tenure that would raise issues about their judgment? We look for filings with the Securities and Exchange Commission, OSHA, the Environmental Protection Agency and the Federal Trade Commission, depending on the person. Companies want a much more comprehensive look."

What's more surprising than the skeletons that these investigations turn up is that they've stayed hidden in the first place. That's why the folks at Verified Person, a startup co-founded by former Apple (nasdaq: AAPL - news - people ) and Pepsi (nyse: PEP - news - people ) CEO John Scully, conduct continual screenings of existing employees every few weeks. The New York-based outfit also checks out C-level candidates as well.

"If it's your first offense you generally don't go to jail," says Verified Person CEO Tal Moise. "Only 5% of felons get prison time. Most just get probation or community service. People use vacation or sick days to go to court."

And he says there is no law that says employers must be notified when a staffer runs afoul of the law. "Employers assume that they'd be aware of something like that," says Moise. "But for every 1,000 employees we check, we find one or two felonies or major misdemeanors--like assault and battery or drug possession--in that population."

To be sure, such transgressions are far less common among the executive ranks. "By and large these people are so busy doing their jobs that they don't have much time to get into trouble," says Spencer Stuart's John Wood. But for those who do, it's now a lot harder to keep their misdeeds under wraps.

Labels: background checks, Dennis Kozlowski, Mintz Group

Labels: Enron

Pods open backdoor for data theft - UK firms still ignore dangers of portable media drives

Robert Jaques
vnunet.com
13 Jun 2005

The majority of UK firms are leaving their networks open to malware and data theft by turning a blind eye to widespread employee use of removable media devices such as iPods, MP3 players and USB flash drives. Research published today claims that a staggering two-thirds of IT professionals who use USB flash drives at work admitted that they did not protect them with encryption even though they are aware of the associated dangers.

According to the survey of 300 UK IT professionals, most UK organisations have yet to address the problem of removable media. The poll found that such devices are being used in 84 per cent of companies and, on average, a third of employees are using them in the office. Some 90 per cent of those surveyed said they were aware of the potential danger that removable media presents, and a third of organisations admitted that removable media is being used without authorisation.

"With removable media plummeting in price, soaring memory capacity and more people using them at work, companies need to be aware of how easy it is for staff to use them, lose them or take competitive information away on them, all in the palm of their hands," the study, commissioned by mobile security firm Pointsec, warned...

Martin Allen, managing director at Pointsec UK, added "There seems little point in companies spending vast sums of money on information security if they're letting staff use these devices at work which allow unhindered access to vast quantities of sensitive company information."

Labels: Apple, database

The Earth Is Ready For Its Close-Up

By Steven Levy
The Technologist

Newsweek
June 6, 2005

Not long ago we were instructed to think of cyberspace—the digital realm that opens when you go online—as a territory of its own. But these days you don't hear much about cyberspace as a foreign country. Instead, as the Net becomes more and more geographically aware, we're using it to enhance our experiences in the realm of terra firma. The metaphor for this, as well as the potential center for such activity, is the literal mapping of our Earth, delivered piece by piece by piece to our screens—along with the location of the nearest pizzeria.

Google was first among search leaders to integrate high-resolution space photos into its service. After acquiring a satellite-imagery company named Keyhole, it introduced Google Earth, allowing you to toggle between a traditional cartographic view and the actual picture from space. Google sightseers can zoom in close enough to see airplanes parked in the desert, the baseball diamond at Wrigley Field and cars in the Mall of America parking lot.

Not to be outdone, Microsoft last week announced its own satellite mapping function for its MSN Search. Microsoft Virtual Earth adds a new twist: an additional 45-degree-angle view of every location in a major city, as seen by a small, low-flying plane. This side-on view "gives a more recognizable image and lets you see what it's like there," says Microsoft's Steve Lawler.

Other sites take a more grounded approach to the virtual Earth. A9, the search business launched by Amazon.com, sent a fleet of SUVs into more than 10 major cities to snap photos of every storefront (when you search for a business in its Yellow Pages you see the building). And InfoUSA is in the process of taking still shots of every business in every American city.

Some Immigrants Are Offering Social Security Numbers for Rent

By EDUARDO PORTER
June 7, 2005

TLALCHAPA, Mexico - Gerardo Luviano is looking for somebody to rent his Social Security number. Mr. Luviano, 39, obtained legal residence in the United States almost 20 years ago. But these days, back in Mexico, teaching beekeeping at the local high school in this hot, dusty town in the southwestern part of the country, Mr. Luviano is not using his Social Security number. So he is looking for an illegal immigrant in the United States to use it for him - providing a little cash along the way.

"I've almost managed to contact somebody to lend my number to," Mr. Luviano said. "My brother in California has a friend who has crops and has people that need one." Mr. Luviano's pending transaction is merely a blip in a shadowy yet vibrant underground market. Virtually undetected by American authorities, operating below the radar in immigrant communities from coast to coast, a secondary trade in identities has emerged straddling both sides of the Mexico-United States border...

...The number of people participating in the illegal deals is impossible to determine accurately. But it is clearly significant, flourishing despite efforts to combat identity fraud. Hundreds of thousands of immigrants who cross the border from Mexico illegally each year need to procure a legal identity that will allow them to work in the United States. Many legal immigrants, whether living in the United States or back in Mexico, are happy to provide them: as they pad their earnings by letting illegal immigrants work under their name and number, they also enhance their own unemployment and pension benefits. And sometimes they charge for the favor.

...Demand for American identities has blossomed in the cracks between the nation's increasingly unwelcoming immigration laws and businesses' unremitting demand for low-wage labor. In 1986, when the Immigration Reform and Control Act started penalizing employers who knowingly hired illegal immigrants, most employers started requiring immigrants to provide the paperwork - including a Social Security number - to prove their eligibility to work...

...These days, most immigrants working unlawfully buy a document combo for $100 to $200 that includes a fake green card and fake Social Security card with a nine-digit number plucked out of thin air. "They'll make it for you right there at the flea market," said David Blanco, an illegal immigrant from Costa Rica who works as an auto mechanic in Stockton, Calif.

This process has one big drawback, however. Each year, Social Security receives millions of W-2 earning statements with names or numbers that do not match its records. Nine million poured in for 2002, many of them just simple mistakes. In response the agency sends hundreds of thousands of letters asking employers to correct the information. These letters can provoke the firing of the offending worker.

Working with a name linked to a number recognized by Social Security - even if it is just borrowed or leased - avoids these pitfalls. "It's the safest way," said Mario Avalos, a Stockton accountant who every year does tax returns for dozens of illegal immigrants. "If you are going to work in a company with strict requirements, you know they won't let you in without good papers"...

...Done skillfully, the underground transactions are virtually undetectable. They do not ring any bells at the Social Security Administration. Nor do they set off alarms at the Internal Revenue Service as long as the person who lends the number keeps track of the W-2's and files the proper income tax returns.

In a written response to questions, the audit office of Social Security's inspector general acknowledged that "as long as the name and S.S.N. on an incoming wage item (i.e., W-2) matches S.S.A.'s record" the agency will not detect any irregularity. The response noted that the agency had no statistics on the use of Social Security numbers by illegal immigrants. It does not even know how many of the incorrect earnings reports it receives every year come from immigrants working unlawfully, though immigration experts estimate that most do.

Meanwhile, with the Homeland Security Department focused on terrorism threats, it has virtually stopped policing the workplace for run-of-the-mill work violations. Immigration and Customs Enforcement arrested only 450 illegal immigrants in the workplace in 2003, down from 14,000 in 1998. "We have seen identity fraud," said John Torres, deputy assistant director for investigations. But "I haven't heard of the renting of identities."

AIG executive rolls for Spitzer

June 9, 2005

A former American International Group senior executive may spill the beans on the controversial reinsurance deals of Warren Buffett's company. Joseph Umansky was once known inside the company as a troubleshooter. In the sprawling, multi-tiered investigation of AIG and former top executives, he may be a source of trouble.

Mr Umansky was a senior vice-president in the corporate division of the insurer AIG and president of AIG Reinsurance Advisers, a reinsurance unit. Part of the inner circle of executives who dealt closely with the former chief executive, Maurice Greenberg, he was intimately involved in many of the deals that regulators and AIG itself have found to be improper.

Mr Umansky is to co-operate with New York attorney-general Eliot Spitzer in exchange for immunity. That complicates a parallel investigation by the Justice Department and the Securities and Exchange Commission.

Labels: AIG, Eliot Spitzer, General Re, New York AG

Defense Lawyers Pleased With Nomination of Cox to SEC Post

Justin Scheck
The Recorder
06-08-2005

Securities lawyers know what they're getting with Christopher Cox, the Orange County Republican congressman President Bush nominated Thursday to be the Securities and Exchange Commission chairman. But how they feel about the former Latham & Watkins partner depends on their side of the aisle.

Defense lawyers hail the longtime plaintiff bar foe as a savior for companies squeezed by the tight regulatory regime of current Chairman William Donaldson, who announced his resignation Wednesday. Plaintiff lawyers are less sanguine.

"It's putting the fox in the chicken coop. He's the worst possible nominee imaginable," said plaintiff-side securities lawyer William Lerach. "He's blindly pro-business and anti-investor." The partner at Lerach Coughlin Stoia Geller Rudman & Robbins said he expects Cox to roll back enforcement of Sarbanes-Oxley provisions, reduce penalties for violating SEC regulations and give companies more leeway to delay compliance with corporate responsibility laws.

For the most part, the defense bar agrees. "[Judging] from his background, Cox is going to be more reluctant to impose fines that would be borne by innocent shareholders," said W. Hardy Callcott, a partner at Bingham McCutchen and a former SEC assistant general counsel.
"The SEC may not be pushing the envelope as it was before," said Jahan Raissi, a defense lawyer at Shartsis Friese and a former SEC enforcement attorney.

The defense bar tends to see that as a good thing. "It is pretty clear the regulatory environment, in many ways, has swung too far, said Jordan Eth, a partner at Morrison & Foerster. "In an effort to punish the Enrons and WorldComs of the world, other companies have incurred huge compliance costs."

Raissi said Cox is a classic small-government, regulation-wary conservative, and predicts a "slower approach to regulation, perhaps rolling back some of the requirements that are in place, and some of the ones Donaldson was championing." This irks Lerach and other plaintiff lawyers, who for years have been arguing for greater transparency and tightened regulation of corporate boards and accounting firms. Furthermore, tighter SEC enforcement has meant a closer relationship between the plaintiff bar and government lawyers, especially in recent years, Callcott said.

"Enforcement staff has worked very closely with the securities plaintiff bar," he said. "Cox is very suspicious of the securities plaintiff bar, and it may be that some of those leads are going to dry up." That suspicion was most evident in his sponsorship of the Private Securities Litigation Reform Act, a 1995 law that hogtied securities lawyers' suits over alleged stock fraud.

But Lerach says he's more worried about consumer issues than how plaintiff firms will fare.
"I'm not worried about the plaintiff bar," he said. "Don't worry about us. I'm worried about investors. I'm worried about Sarbanes-Oxley." And Solomon Cera, a partner with the plaintiff firm Gold Bennett Cera & Sidener, said he was more concerned when Cox was mentioned as a potential judicial nominee several years ago.

"I guess it's good that he's in a big federal bureaucracy in Washington rather than on the bench," he said.

Ohio Sues DSW Over Customer Data Theft

June 7, 2005

Ohio Attorney General Jim Petro has asked a court to order shoe retailer Designer Shoe Warehouse (DSW) to individually notify each customer whose personal information may have been stolen recently from DSW computer files. Ohio is the first state to sue the retailer over one of the biggest security breaches of its kind in the nation.

"DSW has acknowledged that a security breach led to the loss of more than one million customers' checking and credit information, yet the company has not individually notified each customer to warn them about this mishap," Petro said.

"As we have said repeatedly, we see no reason why DSW, working with the credit card companies and the underlying issuing banks, cannot arrange for direct notification of every affected consumer."

Labels: data breech

Personal Data for 3.9 Million Lost in Transit

June 7, 2005
By TOM ZELLER Jr

In one of the largest breaches of data security to date, CitiFinancial, the consumer finance subsidiary of Citigroup, announced yesterday that a box of computer tapes containing information on 3.9 million customers was lost by United Parcel Service last month, while in transit to a credit reporting agency.

Executives at Citigroup said the tapes were picked up by U.P.S. early in May and had not been seen since. The tapes contained names, addresses, Social Security numbers, account numbers, payment histories and other details on small personal loans made to millions of customers through CitiFinancial's network of more than 1,800 lending branches, or through retailers whose product financing was handled by CitiFinancial's retail services division. The company said there was no indication that the tapes had been stolen or that any of the data in them had been compromised...

...Citigroup executives say the box containing the tapes was handed over to U.P.S., along with other items for shipping, on May 2, under "special security procedures" that the bank required of the courier. One of those special procedures, said Citigroup's chief operations and technology officer, Debby Hopkins, included scanning the bar code on each package, rather than scanning only the single bar code on the shipment manifest, which is a summary document listing all the packages being moved in one shipment.

According to Ms. Hopkins, just the summary document was scanned for the box, which was picked up in Weehawken, N.J., so U.P.S. was unable to track where in the delivery chain the box was lost. It was not until May 20 that an employee of Experian, the credit reporting agency that was to receive the tapes, called CitiFinancial to report that they had not arrived at Experian's data-processing center in Allen, Tex. An investigation by U.P.S. failed to locate the package.

CitiFinancial has notified the Secret Service, which is called whenever there is a compromise of financial data. The agency is investigating the incident, and CitiFinancial has begun sending letters to all 3.9 million customers advising them of the loss and offering them 90 days of free enrollment in a credit-monitoring service. Other institutions with data-loss problems have also offered free credit-monitoring services, some for as long as a year.

A spokesman for U.P.S., Norman Black, would not go into specifics on where or how the security system broke down, but said the courier was continuing its investigation. Mr. Black said blame ultimately lay with his company. "They tendered us a package and expected it to be delivered in the reliable way that we always do," he said, "and we had to go back to them and tell them that we can't find it." Mr. Black said that an exhaustive search of all U.P.S. facilities nationwide had turned up no sign of the package. "It's rare that it gets to the point where we can find no trace of it," he said.

A spokesman for Experian, Donald A. Girard, said he had never seen an instance of a shipment of this kind simply disappearing, although he added that he and other credit agencies had been encouraging financial institutions to convert from tapes to encrypted electronic delivery of data. "Experian has been actively working for quite a while with all major data contributors to convert to electronic data transference," Mr. Girard said, "to mitigate risk in this process."

Ms. Hopkins of Citigroup said that most of the company's divisions already did this, and that the CitiFinancial unit is scheduled to convert to such electronic transfers in July. She also said that the missing tapes, which were not encrypted, were created using mainframe-type computers and highly specialized hardware and software that would make.

Full article here.

-- MDT

Labels: data breech

A spokeswoman confirmed that the two resignations reduce board membership at Hollinger to nine, but she declined to comment further.

The reason for Black's resignation wasn't immediately clear, although it came one day after the Canadian-born investor was dealt a legal setback in a Hollinger-related court case under way in Toronto.

Black faces several civil lawsuits, and is the subject of a federal criminal investigation, all in connection with a scandal that began to emerge in 2003.

At that time, Black was chairman and chief executive of Hollinger International. After an internal investigation turned up evidence suggesting Black and investing partner F. David Radler had been defrauding the company, Hollinger International's board forced Black out of the top job. The ousted executive later resigned as board chairman but remained a director.

The board later filed a lawsuit against Black and Radler, alleging they misappropriated about $400 million through various schemes.

Labels: Conrad Black

The improper contracts are a disturbing discovery because the company has had two months since the end of the quarter to locate such issues but only found them now. Moreover, the discoveries continue to keep in focus the accounting scandals that rocked this company and put four executives on courtroom dockets last year. Computer Associates says it found that it had entered into a swap deal with third parties that had no valid commercial purpose, serving merely to allow it to book revenues early. The new management team says it was former managers who were responsible for the deals, and it has referred the findings to the government.

CA digs deeper into financial scandal

Tom Sanders in California
Jun 02, 2005

Computer Associates has been forced to further restate its revenues for 2000 to 2005, opening the latest chapter in its financial accounting scandal. The company admitted in a newly published filing with the Securities and Exchange Commission (SEC) that a further review of its accounts for the period reveals that it wrongly booked deals as revenue that should have been booked as barters. 'These transactions appear not to have been negotiated on an arm's-length basis and to have no valid commercial purpose,' the filing stated.

CA also identified some deals that required it to reach certain targets. Those revenues should not have been booked until those target dates, CA said. The company expects to reduce recorded sales from 2000 to 2004 by $95m (£52m) to $125m. The restatement will add $7m-$10m to 2005's revenues.

Senior managers who were responsible have since left the company, the filing said. CA fired chief executive Sanjay Kumar in June 2004. He has since been charged with securities fraud and obstruction of justice. The vendor hired former IBM executive John Swainson as his replacement. Kumar was closely associated with CA founder Charles Wang, who retired in 2002 amid increasing calls for a management overhaul within the company.

The SEC said last September that CA had prematurely booked more than $3.3bn in revenue from 1998 to 2000.

Michael Dortch, principal analyst with the Robert Frances Group, told Accountancy Age sister website vnunet.com that, although the latest restatement adds yet another chapter to CA's ongoing bookkeeping scandal, it will not have much of an impact on how users view the company.

'If the transactions had been more recent, it would have been more damaging. Given that they relate to 2000 and 2001, most customers will look at this as the final stages of house cleaning,' he said. The filing coincided with the publication of financial results for the quarter ending 31 March. CA reported $910m in revenues, up seven per cent over last year, but profit fell 81 per cent to $17m.

Labels: CA

In a two-and-a-half-year tenure Donaldson pushed through tough new rules for mutual funds, hedge funds and stock trading and pricing that set a high-water mark for the SEC's reform effort following the Enron scandal.

"I have been honored to serve as chairman," Donaldson said in a statement. "Although there will always be more work to be done to preserve and enhance the integrity and strength of our nation's corporations and markets, I believe the time has come for me to step down and return to the private sector and my family."

The 73-year-old former investment banker has led the SEC since early 2003, drawing criticism from both business lobbyists, who called him too heavy-handed, and investor activists, who called him too gentle.

Cox, 52, is chairman of the House Homeland Security Committee, and a veteran of the Financial Services Committee. The holder of a business and a law degree, he has voted for legislation to make it easier for companies to defend against securities fraud lawsuits.

Cox supported the Sarbanes-Oxley Act of 2002, Congress' response to financial scandals at Enron Corp., WorldCom Inc. and other large companies. The law ordered the most far-reaching changes in corporate accountability since the Depression, imposing stiff new rules on companies and their top executives. He also is a longtime advocate of repealing taxes on capital gains as well as on dividends.

Labels: Enron