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Previous Posts Archives
6/29/2007
Siemens Anti-Corruption Chief Forced Out After Six Months
On the eve of Peter Loescher's takeover of the Siemens C-suite the company's newly appointed anti-corruption officer is calling it a day. Daniel Noa, a former state prosecutor and the current head of Siemens compliance group, has apparently been forced out by unfriendly forces within the company. The FT mentioned something cryptic about him not trusting the Siemens legal department... Noa will remain as a consultant for the next eighteen months. Despite all this, the company insists tat its internal clean-up is proceeding apace.

-- MDT

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Lerach and Weiss Turned Down Plea Agreement in Kickback Probe
So says the Los Angeles Daily Journal. Reportedly Melvyn Weiss and Bill Lerach, the federal government's two biggest targets in their kickback probe of Milberg Weiss lit igation practices, both turned down a potential plea agreement that would have seen them each serve three to four years in prison. For further details, start with this post from CNNMoney's Roger Parloff and from there you can get to the original article.

-- MDT

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6/28/2007
South Africa Awash in Corporate Espionage?
Follow this one from the Legal Brief summary on through to the Sun Times article and to the International Bar Association website for their comments. Preliminary info is available now, with a full report expected in November 2007. South Africa currently has no laws protecting businesses from espionage activities.

-- MDT

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Philippe Jabre Update
Judging by the search words that bring people to The Daily Caveat, big time hedge funder, Philippe Jabre is someone you'd like to hear more about. Information about the former star trader at GLG (and the target of one of the biggest financial investigations in European history).

Bloomberg has an update on the doings of Mr. Jabre since his dodging regulator bullets and setting up his new shop, Jabre Capital Partners - including actual quotes from teh man himself. If you're a bit behind on this particular tale, the same Bloomberg article also has a handy (and obligatory) overview of the scandal that was...

-- MDT

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6/27/2007
U.S. To Investigate BAE Arms Trade Scandal
In the course of their investigation of the BAE / Saudi Arabia arms dealing, the UK's Serious Fraud Office uncovered a Riggs Bank slush fund stocked with millions of pounds by BAE and from which Sauid Arabia's Prince Bandar regularly withdrew funds. All of this opens the door to a U.S. Department Department of Justice investigation and potential prosecution under the Foreign Corrupt Practices Act.

-- MDT
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Health South Sentencing Underway
Tuesday marked the start of the sentencing process of former Health South exec, Richard Scrushy and former Governor Don Siegleman.

Both were convicted last year on charges of bribery, mail fraud and conspiracy. Siegleman was also convicted on an additional count of obstruction of justice.

Final ruling should take place on Friday. Further details @ The Houston Chronicle.

-- MDT

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10b-51 Plan Manipulation the Next Executive Stock Scandal
So says The Business Pundit (and the SEC is apparently investigating).

-- MDT

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6/26/2007
IPOC, Diligence, Kroll -- Oh My!
We've written extensively in the past on the Bermuda-based end of the scandal surrounding the IPOC investment fund, KPMG and investigative firm, Diligence. Diligence got caught with its mits in the cookie jar trying to pry sensitive information about an IPOC audit out of KPMG. Kroll, probably the most prominent investigative firm around, was also at least implicated in the back-and-forth clandestine activities between the two sides in the IPOC dispute.

Kroll WAS also active in the matter but not in Bermuda - in Europe. The EU-based accusations (dumpster diving, attempting to access private bank accounts) come from Bernard Meyer-Hauser, chair of a Geneva audit panel charged with making decisions about whether IPOC or the competing Alfa Consortium would end up with the rich prize of OAO MegaFon telecom shares - worth about $2.5 billion. Kroll is currently under investigation by Russian authorities due to their activities in the case.

The back-story here is, well.....complicated. Law.com has an excellent overview of the entire affair, from start to finish. This is required reading.

-- MDT

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6/25/2007
LOUIS Searchable Federal Docs Depository
Electronic Ephemera has a link to the Beta release of LOUIS - the Library Of Unified Information Sources. LOUIS offers free full text searches of federal documents, which are returned in an easily printable format and combines: congressional reports, hearings, bills and resolutions, the congressional record, the federal register, presidential documents and GAO Reports. For anyone who has used the myriad access points for these types of govt. docs this sounds like a welcome upgrade.

Check out LOUIS right here.

-- MDT

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6/22/2007
Stonridge Reckoning For Securities Industry
Stoneridge v Scientific-Atlanta - what The Economist is calling the most important securities litigation clash in a generation. The SEC's has come out in favor of investors, the President not so much. What will ultimately happen when the Supreme Court gets involved, although their predilection (in the court's current incarnation) for siding with business is not exactly a secret, is anyone's guess. But they ARE guessing. And guessing. And guessing.

-- MDT

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Telemarketing Fraudster Indicted
Between 2001 and 2002 Kyle Kimoto and his co-horts at telemarketer Assail, Inc. (also operating as First Financial Solutions, First Choice Solutions and other generic names) bilked some $43 million from 300,000 or so unsuspecting credit-seekers.

Kimoto and co. made phoney credit offers to hundreds of thousands, collecting an application fee in the process. Kimoto was indicted on one count of conspiracy as well as mail fraud, wire fraud and money laundering. Further details here.

-- MDT

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6/21/2007
French regulator levies million dollar fines against hedge funds
French regulator, Autorite des Marches Financiers this week lay down fines against various banks and investment firms for, well, I believe the French term is shenanigans, in relation to the AMF's insider trading probe of the 2002 Vivendi Universal securities. 

Amongst the financiers being hit are: Deutsche Bank AG and four hedge funds including GLG Partners, UBS O'Connor, Ferox Capital Management and Meditor Capital Management.

-- MDT

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6/20/2007
TXU Insider Trading Hunt Goes World-wide
The International Herald Tribune provides a great background piece on Ajaz Rahim. Rahim, the former head of investment banking for Faysal Bank Ltd. in Pakistan, is one of the individuals at the center of the TXU insider trading investigation.

While he has currently exited the U.S. for his home country of Pakistan (Rahim's lawyer is not revealing the exact location), Rahim is facing prosecution on 26 counts for suspect trades that took place in advance of the leveraged buyout of TXU Corp., a Texas-based utility company.

Rahim purportedly received his tips from Credit Suisse banker, Hafiz Naseem, also profiled in the IHT article, who has already been arrested in connection with the case.

-- MDT

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Enron Broadband Executive Sentenced
Former CEO of Enron Broadband Services, Kenneth Rice was sentenced yesterday to two years and change for his role in the energy trader's widespread fraud. Rice plead guilty three years ago and awaited sentencing while a steady stream of his former company colleagues faced prosecution - many with the help of his testimony. Further details on the Rice sentencing can be found here, via CFO.com.

-- MDT

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6/19/2007
24/7 Wallstreet Lists Top 20 Financial Blogs
I'm sure that not including The Daily Caveat was a simply oversight...we'll hold out hope for next year. All the same, lots of our favorites made the list including Footnoted, Paul Kedrosky's Infectious Greed and Seeking Alpha.

Check out the full 24/7 Wallstreet list here.

-- MDT

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Hedge Fund Strategies in Box
Interesting article from the FT about how plug-and-play quant models are allowing investment managers to replicate hedge fund-style returns without the high management fees (and occasional scandal) typically associated with hedge funds. Some heavy hitters are getting into the replica game including Goldman Sachs, Merrill Lynch and JP Morgan - more here.

-- MDT

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Researching Companies Online (For Free)
Lifehacker recently linked to a tutorial for researching companies online put together by the site LearnWebSkills. Pretty good set of resources for doing this kind of thing on the free and cheap. Worth bookmarking...

-- MDT

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6/18/2007
Ponzi Fraudster Linked to Ferris Baker Watts, Advest Brokers
Accused Ponzi Fraudster, David Dadante, ripped off more than 100 people who altogether invested tens of millions with him, thinking they were placing their money in a blue chip stock fund. In the end, they were only really placing their cash into Dadante's pockets.

Between 1999 and 2005 he blew through nearly $30 million and when he wasn't busy gambling away investors money, prosecutors say that Dadante and two brokers - one from Advest (now part of Merrill Lynch) and one from Ferris Baker Watts - were busy manipulating the stock price of the Georgria-based Innotrac Corporation.

Late last week Dadante was charged with two counts of securities fraud. His two apparent accomplices have not yet been charged or publicly named. Details here.

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Russell Mokhiber's 20 Things You Should Know About Corporate Crime
You may recognize Mr. Mokhiber as the editor of the long-running Corporate Crime Reporter. He's been on the white collar crime beat for at leas 20 years and knows a thing or two about its perpetrators.

This list of 20 Things You Should Know About Corporate Crime is derived from the text of a speech he gave a few days ago at a conference on corporate accountability in Washington, DC.

Do check it out.

-- MDT

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6/17/2007
Google Needs to See a Doctor
QUESTION: Who is the absolute least likely Googler to visit The Daily Caveat?

ANSWER: The one seeking information on the following query: "Is there a website to advise ex-mistresses how to make a living?"

Suffice to say, I have no idea...There probably is such a site, but it sure isn't this one, even though I am, ridiculously, the NUMBER ONE (seriously??) result for this query.

-- MDT

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6/15/2007
For Your Reading List - LA Business Observed
Business news from a tinsel-town perspective - Mark Lacter's LA business blog is good reading. Check it out.
-- MDT

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The Good-Guy Guidebook
The same spirit as The Ethical Corporation comes Ethisphere magazine. Same beat, similar idea. Check out their list of 2007's ranking of the "World's Most Ethical Companies."

-- MDT

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File Under: I'm Getting too Old for This Shit
Two bars, two nights, six bands. The Daily Caveat is...groggy.

But you should know that Erika Wennerstrom and Scott Miller are, each in their own way, the future of rock and roll.

-- MDT

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6/14/2007
Barry Minkow Rides Again
Giddy-up.

And for some background on the Minkow /Usana feud, try here kemo sabe.

-- MDT
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Washington Post Profiles Richard C. Breeden
As we've discussed before, former SEC Chair Richard C. Breeden has been busy turning his talents toward money management. The Washington Post offers an update on what's up one year in for Breeden's $1billion investment fund.

-- MDT

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EU Gives New Powers to Shareholders
While one might argue that efforts are underway to curtail shareholder rights in the United States, the European Union appears headed in the opposite direction. One Tuesday EU government ministers approved new rules that would allow a variety of new voting powers for shareholders.

Specifically, the new regs will allow shareholders to vote electronically as well as by proxy on board elections, takeovers and other corporate actions. According to Colin Melvin, head of corporate governance and responsible investment at Hermes Pensions Management in London, ""We believe that this will enable shareholders to call directors to account more effectively and so enhance value at companies."

Get more detail via the IHT.

-- MDT

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6/13/2007
Bush Administration, SEC at Odds Over Enron Shareholder Suit
The Bush administration has opted not to second the SEC's supportive position regarding a pending class action lawsuit that has former shareholders of defunct energy trader, Enron, pursing several investment banks for damages arising from their role in obscuring Enron's house of cards.

The SEC had asked for a brief of support to be filed by the Justice Department's Solicitor General Paul Clement. As of Monday's deadline, no such amicus brief had been filed by the DOJ and no support, at this point is expected. Not entirely surprising given the cozy relationship between Enron and the current administration.

In fact President Bush (who The Daily Caveat usually avoids discussing) chimed in with his own comments on the case, which gave a hint which way the winds were blowing at DOJ. The President decried the notion of unnecessary lawsuits, which we can assume to include those brought by Bill Lerach.

The SEC had voted at a 2 to 3 margin to support the suit, with Bush appointee, SEC Commissioner Christopher Cox siding with two democrats in support of the case. The U.S. treasury has taken the opposite stance, arguing that the case could set a precedent that would harm U.S. Competitiveness.

For more on the conflict between the Justice Department and the SEC, check out this article from the China Standard.

-- MDT

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6/12/2007
Insider Trading in the UK, No Penalties Mean No Problem, Right?
Well...not exactly.

-- MDT

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6/11/2007
Speaking of Insider Trading...
Good linkage from Steven Silvers's Scatterbox... Check out this post regarding a weekend NYT article describing a research project that aims to calculate how much school ties come into play in making investment decisions at mutual funds.

Short answer, they do....from the NYT:
"The authors of the study offer two possible explanations — one benign and one decidedly not. Fund managers may simply know more about their old classmates, including which ones are likely to make good executives. The alternate explanation is that those executives may be passing along inside information to the fund managers. The researchers do not take a position about which explanation is more likely."
Anyone not a scientist that would like to take a stab at which is the more likely explanation? Check out Scatterbox and click on through to the NYT to read the rest of the article.

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French Regulators Investigate Deutsche Bank on Insider Trading
Did Deutsche Bank pass on inside information to hedge funds when brokering the sale of Vivendi Universal securities in 2002? That is the question French regulator, the Autorité des Marchés Financiers aims to answer in their ongoing investigation. This would not be the first time the AMF has come calling on Deutsche Bank for this kind of apparent infraction.

In fact, DB seem to have a bit of a gossip problem when it comes to how inside information is shared with investors. This would be the second time the AMF has taken aim at Deutsche Bank this year on the issue. British and Spanish regulators have also made similar accusations.

The four hedge funds potentially involved in the Vivendi Universal case have not been identified yet. Along with Deutsche Bank they face a combined $12 million in potential fines. With penalties that low and the stakes in these transactions so high, it is no wonder that Deutsche Bank is a repeat offender. It's just good business...

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6/08/2007
Lerach Partner Confirms Retirement By Year's End
Well there it is...

"I anticipate that Bill will retire before the end of the year," said Patrick Coughlin, a co-founder of the San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins LLP.

Details...SanLuisObispo.com.

-- MDT

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6/07/2007
Best Buy Attorney Caught Altering Documents in Class Action
File this under evil empire - consumers are suing Microsoft and Best Buy for being forcibly (and covertly) signed up to trials of Microsoft MSN's internet service in the course of making purchases at Best Buy.

Microsoft, in turn paid Best Buy a fee for every subscriber signed up.

This alleged shady practice got a lot shadier when Best Buy attorney, Timothy Block, was forced to admit that he altered emails and a company memo before turning the documents over to plaintiffs. Naughty, naughty...

The lawsuit agaisnt Mircosoft and Best Buy was filed in 2003 and involves over 100,000 Best Buy customers. The attorney in question has been put on Medical leave and the case has been paused while Best Buy locates new counsel.

-- MDT

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6/06/2007
Former Enron Exec Sentenced to Jailtime
Kevin P. Hannon, a former officer in Enron's broadband division and one of the government's instrumental witnesses in the conviction of Jeffery Skilling, has been sentenced to two years in prison.

Hannon plead guilty in 2004 to one count of conspiracy in connection with the rampant fraud at the former energy trading firm. Skilling himself, a key player in the fraud, was sentenced to his own two-year prison term earlier this month.

More on Hannon, here, via Forbes.com.

-- MDT

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6/05/2007
Your Daily Milberg...
You know you want it...

WSJ's Peter Lattman shines some light on David Bershad, former Milberg partner who held the firm's purse strings. Bershad has been facing an indictment but has recently made a deal with prosecutors, touching off specualtion about exactly what sort of information he might be sharing with them about his former associates.

Larry Ribstein at Ideopblog ponders the Ironies of Lerach. Worth mentioning if only for the reference to Mr. Lerach's hair as daunting. From seeing it in person (in a mall parking lot in Honolulu - yes, I have seen Lerach in flip-flops.) I would have gone with hypnotizing, but daunting fits too. I don't often see eye to eye with Ideoblog, but Ribstein's punditry is to be reckoned with. Daunting, even.

Also from the WSJ, the SEC will apparently side with shareholders when it comes to the legitimacy of filing suit against third parties for the actions of the shareholders' company. While the issue arose from an unrelated case, the apparent outcome is sure to help Lerach Coughlin's current case pursing compensation from investment banks on behalf of former Enron shareholders.

-- MDT

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Louisiana Representative William Jefferson Indicted
Authorities recently announced a long expected indictment of current Louisiana congressman, William Jefferson. You may recall Jefferson as the individual who, post Katrina, was caught with nearly $100,000 wrapped in tinfoil in his freezer.

Now, knowing Louisiana as I do, I would expect that most politicians have upwards of five figures socked away somewhere in small bills...

What made Jefferson's nest egg particularly notable, was its apparent origins as bribe money relating to Nigerian telecom deals and presidential candidates. The subsequent investigation of Jefferson included a controversial search of Jefferson's congressional offices and the political balance-of-power power squabbling that ensued has remained at a low simmer for months now.

Fueling the Jefferson indictment is evidence from two former associates - Brett Pfeffer, a former congressional aide and Vernon Jackson a telecom exec. Pheffer and Vernon Jackson allegedly funnelled approximately $1million to Jefferson to secure his support for various deals amongst African businessmen and politicians.

Pfeffer and Jackson both struck deals with prosecutors in exchange for dirt on Jefferson, who, as you might imagine, continues to protest his innocence, despite .

-- MDT

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6/04/2007
Lerach Retirement - The Speculation Continues
The New York Times continues to ponder what exactly we can discern from the purported retirement of famed plaintiff attorney, Bill Lerach. The bane of the Overlawyered set, Lerach made his name at securities class action juggernaut, Milberg Weiss. After a falling out with Milberg's founder Melvin Weiss, Lerach broke out on his own in 2004 four.

Obviously the last few months haven't been stellar for Milberg, what with partners under indictment and a firm-wide investigation ongoing into the use of kickback payments to compensate lead plaintiffs for participating in the firm's class actions. Speculation is well under way that Lerach's departure may mean that the seven year investigation into his former firm is finally catching up to him.

While no one in the know is talking just yet, the NYT speculates that a Lerach resignation could be a signal of a looming deal with federal prosecutors, one that would spare his firm should indictments start raining down. For sure, deals are being thrown around left and right at the moment, but none so far that seem to favor Lerach.

Last week, former Milberg partner David Bershad struck his own deal with federal prosecutors, pleading guilty to some of the charges against him. The question is, in exchange for what - and whether the second indicted Milberg partner, Steven Schulman follow suit. There is even word that Milberg Weiss is seeking a firm-wide deal.

Whatever the outcome, no one is calling any of these maneuverings good for Lerach and many are linking the dealings to talk of Lerach's retirement...and while the former partners threaten to do each other in, rival securities firms are moving in to pick up the slack.

--MDT

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6/01/2007
Labor Leader Admits Taking Siemens Bribes
Wilhelm Schelsky, the former head of the German union, AUB has admitted that he took money from Siemens in exchange for acting as an "undercover lobbyist" for the company.

The comments from Schelsky, which appeared Thursday in a German magazine, would seem to add credence to the lawsuit brought against Siemens by rival union IG Metall which alleged just this type of shenanigans. Schelsky, who has been in police custody since February, reportedly received more than $45 million dollars from Siemens.

The Siemens board member who made the payments to Schelsky, Johannes Feldmayer, was also arrested on charges of conspiracy but has since been released on bond. His ultimate fate, as well as Schelsky's is still unknown, but none of this is particularly good news for Siemens.

-- MDT

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