Justice Served Up November 26 2013

Mon, 2013-11-25 21:37 -- walt

Here is what we are reading today:

Starting A Discussion On White Collar Crime And Recovery (Forbes) - There are too many stories, false stories I might add, about the cushy lives of white collar offenders behind bars.  While prison is indeed a punishment, it is the least of all the punishments an offender receives ... but for their families it is the ultimate punishment.

When Good People Do Bad Things (DealBook) - At the sentencing hearing for Kareem Serageldin, a former senior executive at Credit Suisse, Judge Alvin K. Hellerstein of the Federal District Court in Manhattan pointedly asked why someone in such a position would engage in misconduct. As DealBook reported, the judge asked, “Why do so many good people do bad things?”

The Global Fraudster Profile (KPMG) - Fraud specialists have long debated whether it is possible to develop a profile of a fraudster that is accurate enough to enable organizations to catch people in the act of fraud or even beforehand. The prediction of a crime before it occurs is, at least for now, the subject of science fiction. But an analysis of the constantly changing nature of fraud and the fraudster can help organizations stiffen their defenses against these criminal activities. Forewarned is forearmed.

Ex-Bank Austria Head Investigated In Madoff Case: Prosecutors (Reuters) - he Vienna prosecutor's office said on Monday it had widened its investigation into Bank Austria's dealings with convicted fraudster Bernard Madoff to include the bank's former Chief Executive Gerhard Randa.

Hollywood, FL Doctor's Staffer Accused Of Theft (SunSentinel) A trusted former employee of a Hollywood dermatologist is accused of forging a check and using a business credit card to steal more than $10,900 in cash advances and to buy furniture.  Lyndsay Ann Westcott, 33, of Plantation, is charged with larceny and fraud, uttering a false instrument, court records show.


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Justice Served Up November 13 2013

Wed, 2013-11-13 06:56 -- walt

Here is what we are reading today:

New York Gallery Owner Pleads Guilty To Role In Gambling Ring (Bloomberg) Manhattan art gallery owner Hillel “Helly” Nahmad pleaded guilty to participating in a high-stakes gambling ring catering to celebrities and the very rich, calling it a hobby that developed into an illegal business.  “Judge, this all started as a group of friends betting on sporting events, but I recognize that I crossed the line and I apologize to the court and my family,” Nahmad told U.S. District Judge Jesse Furman today in Manhattan.

Madoff Employee Testifites 'I believe him' (ABC News) -  In the many years he spent as a trader at Bernard L. Madoff Investment Securities LLC, David Kugel learned that investments that Madoff claimed to be making for clients were fiction.  Kugel, 68, knew that because he was instrumental in concocting the phony trades. But he always kept his mouth shut.

The SEC's New Tool For People - Deferred Prosecution Agreement (DealBook) -  The Securities and Exchange Commission has for the first time employed a new tool to encourage individuals involved in fraud investigations to cooperate by deferring their prosecution.  On Tuesday, the regulator announced that it had reached a deferred prosecution agreement with Scott Herckis, the former administrator for Heppelwhite, a $6 million hedge fund. The S.E.C. said that Mr. Herckis had given it enough information about accounting discrepancies at the hedge fund to allow it to shut down the fund last year and file an emergency enforcement action against Berton M. Hochfeld, the fund’s founder.  The S.E.C. accused Mr. Hochfelt of misappropriating over $1.5 million from the hedge fund and overstating its performance to investors.

Mother of Ananymous Hacker Gets Probation (Las Vegas Sun) - A federal judge declined to order jail time for the mother of a writer and activist with ties to the hacking collective Anonymous, after she pleaded guilty to helping her son hide laptops from federal agents.

U.S Attorney Bharara Channels 'Pulp Fiction' (NY Post) - Who knew Preet Bharara’s a Quentin Tarantino fan? The Manhattan US attorney stunned attendees at the DealBook conference when during a Q&A when he reeled off a “Pulp Fiction” speech.

Bank Fraud In Vietnam May End With Death Penalty (Bloomberg) -  A Vietnam court will consider the death penalty for two former executives if they’re convicted in a $25 million fraud scheme, signaling an aggressive stance as leaders seek to clean up the banking system.  The People’s Court of Ho Chi Minh City may hand down the death penalty for Vu Quoc Hao, the former general director of Agribank Financial Leasing Co. (FLKO) No. 2, who is charged with embezzling 531 billion dong ($25 million) of state property, the official Vietnam News reported yesterday. Dang Van Hai, the former chairman of a construction company, also faces the death penalty in the case.

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Justice Served Up May 1 2013

Wed, 2013-05-01 06:33 -- walt
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{| style="width:100%; border:1px solid black; background:#ffe0e0; padding:0; text-align:center;" |- | This photo is of Wikipedia Takes Manhattan location code 174, Foley Square. |} Daniel Patrick Moynihan U.S. Courthouse at 500 Pearl Street. (Photo credit: Wikipedia)

Here's what we are reading:

Heads Up  - On May 2 the sentencing of convicted insider trader Todd Newman will take place in Manhattan ... .he's looking at over 6 years.  Also in Manhattan, Sky Capital's Ross Mandell is having his appeal heard by the 2nd Circuit.  Mandell is out of prison awaiting the outcome of this decision .... he was sentenced to 12 years in prison.  I'll be attending both events and will blog on them for tomorrow!

Diamondback Says It Was Victim of Fraud (Bloomberg) - The now defunct Diamondback Capital has asked a U.S. Court for restitution of $39 million from one of its former portfoliio managers, Todd Newman.  Newman, who was convicted of insider trading in December is set to be sentenced to prison on Thursday.

Level Global to Pay $21.5 Million Fine Related to Insider Trading (DealBook) -  Level Global Investors, one of the largest hedge funds ensnared by the government’s insider-trading crackdown, has agreed to pay more than $21.5 million in fines and penalties to resolve its role in the investigation.  The Securities and Exchange Commission announced on Monday that Level Global, which closed in 2011 shortly after a raid by the F.B.I., had settled a lawsuit accusing the firm’s co-founder and an analyst of illegally trading in the shares of the technology companies Dell and Nvidia while in possession of secret information about them.

PNC Investment Broker Sentenced to Prison (Times Tribune) - For more than a decade, Nicholas Polito Jr. was a trusted investment broker for PNC Bank, then financial problems brought on by his addictions to alcohol and gambling led him to do things he once deemed unthinkable, his attorney said Monday. Over a six-year period, he used his knowledge of banking to pilfer more than $500,000 from clients by secretly transferring money from their accounts to his own.

Aluquerque Real Estate Developer Sentenced to Prison -  Albuquerque real estate developer Vincent J Garcia, 61, was sentenced this afternoon to 27 months in federal prison followed by five years of supervised release for his bank fraud conviction. Garcia also was ordered to pay $722,543.76 in restitution.

Is Wall Street Full of Crooks?  YES says Top Economist (Independent) - In a cutting attack on America's financial hub, one of the world's most respected economists has said Wall St is full of "crooks" and hasn't reformed its "pathological" culture since the financial crash.  Professor Jeffrey Sachs told a high-powered audience at the Philadelphia Federal Reserve earlier this month that the lack of reform was down to “a docile president, a docile White House and a docile regulatory system that absolutely can’t find its voice.”

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The Sentencing of Ross Mandell - Does He Deserve Life in Prison

Wed, 2012-05-02 08:35 -- walt
London Stock Exchange

London Stock Exchange (Photo credit: Wikipedia)

White-Collar criminals are being sentenced to longer years in prison than at any other time in the history of American justice.  Insider trading cases, which were routinely settled in the past with SEC fines and no prison time, are now yielding years in prison (Raj Rajaratnam was recently sentenced to 11 years in prison for insider trading).  These prison terms are often given to people who are committing their first felony .... One Strike And You're Out.

In June 2011, Ross Mandell (Sky Capital) went on trial with another Sky employee, Adam Harrington.  After a 5-week trial, both men were found guilty of multiple felonies associated with investors losing money in stock/investments the two men pitched.  The stocks/investments in question were primarily traded on the London Stock Exchange and pitched to investors in the U.K.  Though no charges nor any investigation was undertaken in the U.K., the U.S. Justice Department got involved  when they raided the Sky Capital offices in Manhattan in November 2006.  It would take almost 3 years to put enough information together to arrest Mandell and Harrington.  Their arrest came after a number of former Sky employees admitted to various crimes including lying to investors and misusing investor funds.   At the time of Mandell's indictment, the government stated that investors had lost over $140 million on investments ranging from caffeine infused candy to an armed security agency.  In the end, only a few of the investments went public on the London Exchange and many investors lost money.

After a number of delays, the sentencing for Mandell and Harrington has been set for May 3rd and 4th, respectively...almost a year after the gulty verdict.  Both have been free pending sentencing wearing an ankle bracelet and posting huge dollars/assets to post bail.  The government has asked for a 30 year sentence, a departure from the sentencing guidelines which said that a LIFE sentence should be imposed.  The driving factors for this harsh sentence are the dollar amount (governments says over $50 million) and the number of investors/victims (over 250).  Both men plan an appeal but may have to enter prison before that appeal is heard.  The government is asking that both men be immediately led to prison upon pronouncement of the sentence.

Their appeal will be based on the 2010 Supreme Court ruling on Morrison vs. the Australia National Bank.  In that case, the highest court in the U.S. ruled that the U.S. does not have jurisdiction on securities cases that involve foreign stock exchanges.  However, the Morrison decision was based on civil litigation, not criminal, which is part of the Sky Capital case.  Sky's investors were primarily in the U.K. and the stocks that it promoted were on, or intended to be on, the London Stock Exchange.  The only other litigation pending against Mandell and Harrington is from the Securities & Exchange Commission and those charges relate to the criminal charge.  There are no shareholder lawsuits outstanding in the U.S. or in the U.K.

Mandell arrived in New York from Florida on Tuesday with his wife.  At a mimimum, he wants to return home to say goodbye to his children.  That will be determined in court on Thursday afternoon.  I'll be there and will post on and again here on some other thoughts about the sentence.


Expert Network Bad Boy, John Kinnucan, Arrested

Fri, 2012-02-17 11:18 -- walt

John Kinnucan, founder of Broadband Research, gained a lot of notoriety when the FBI showed up at his Portland, OR home in late 2010 to ask whether he would cooperate with authorities in their investigation of insider trading on Wall Street.  Broadband was in the business of supplying information to hedge funds from experts that Kinnucan had in his network (thus the name "expert network").  After the FBI visit, Kinnucan sent an email to all of his Broadband customers telling them about the incident and stated, "Today two fresh faced eager beavers from the FBI showed up unannounced on my doorstep thoroughly convinced that my clients have been trading on copious insider [I] have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web."  The FBI also got a copy of this email.  One has to wonder at the mental state of Kinnucan....I wrote about it on Forbes wondering if he thought of himself as a hero or con man.  Well, today he is under arrest.

According to Bloomberg, FBI agents arrested Kinnucan at his home late yesterday and is being held in Multnomoah County jail ....he'll eventually make his way to New York to face formal charges.  During this arrest, the FBI sent 10 "eager beavers" to take him into custody and they were not there to ask any questions or favors.  Kinnucan has been outspoken about his innocence since the beginning, even going on CNBC to be interviewd and giving numerous interviews to the media about his experience.  It got more out of control when the WSJ reported earlier this year that Kinnucan had threatened two Manhattan prosecutors on the insider-trading case, Avi Weitzman and Katherine Goldstein, by making harassing phone calls.

Broadband went out of business shortly after the initial visit by the FBI (guessing the clients were not happy), and the U.S. has moved forward with over 60 people being charged with insider trading in the 5-year probe called "Perfect Hedge".  The biggest fish caught so far has been Raj Rajaratnam, billionaire co-founder of Galleon Group, who is now serving an 11 year prison term in a Massachusetts federal prison.

Some of Kinnucan's clients have already had run-ins with the feds.  Donald Longueuil, a former SAC portfolio manager was arrested and pled guilty to security fraud charges.  Longueuil is currently in federal prison serving a 30 month prison term.  Another Broadband customer, Anthony Chiasson of Level Global Investors, was arrested earlier this year and he has pled not-guilty.  His case will play out during 2012.  Kinnucan has not formally entered a plea yet....but expect a very loud "Not Guilty".


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