Archive for December, 2006
Mon 18 December 06 · Filed under Fraud News Stories
Fifteen weeks and counting for the Carnival of Fraud. Every Monday we feature posts from around the blogosphere… focused on scams, swindles, frauds, and shady business of all types. On with the show!
- Wenchypoo follows up last week’s post about parents who don’t know enough to feed their children, with a post about people begging at roadsides. In my former life I was a probation officer, and I can attest to the vast array of programs available to people who are willing to help themselves.
- This week’s Stock Market Beat submission focuses on Plantronics and Oracle, two companies that have been singing each other’s praises.
- Gena at Sacramento Real Estate Voice offers an awesome post on real estate fraud. You know the kind. Someone goes to a “get rich quick” seminar that tells them how to make a gazillion dollars flipping real estate.
- SOX First comments on the fraud committed against Hollinger International (parent company of the Chicago Sun-Times) by its “interesting” former chief executive Conrad Black.
- We swing back around to identity theft and Wenchypoo, who explains why Scotch tape can be an identity thief’s best friend (and the banks who cooperate in the scam).
- Clint at BlueHat Security mentions a cool tool that may help internet shoppers avoid phishing attacks.
- My contribution to this week’s carnival is about PCAOB’s report on audit firm Deloitte & Touche. It seems each of the big public accounting firms will take a turn getting flogged.
Sat 16 December 06 · Filed under Auditing & Regulations
The recently passed Pension Protection Act of 2006 puts in place some new rules that will affect many filers of 2006 tax returns. The legislation was geared at stabilizing corporate pension plans, but other provisions will have an affect on individuals. Some of the changes include:
- 401(k) enrollment is now automatic. Whereas new employees previously had to affirmatively sign up for the programs, now employers can automatically enroll them in the plans.
- The IRS will now offer taxpayers the option of having their refund deposited directly to an IRA.
- Starting in 2008, you may roll money from a traditional 401(k) into a Roth IRA if you meet certain requirements. You will have to pay tax on the amounts rolled (since 401(k) contributions are made with pre-tax money and Roth IRA contributions are made with post-tax money).
- Lower-income workers who contribute to retirement accounts continue to receive tax credits up to $1,000.
- Charitable donations of clothing and household items must be in good condition or better to qualify for a deduction.
- All cash donations now require documentation, such as a canceled check, a receipt, or a credit card bill to substantiate the amount.
Fri 15 December 06 · Filed under Fraud News Stories
Apple Computer Inc. still hasn’t filed its annual report with the Securities and Exchange Commission, saying that it is still investigating the backdating of stock options. Apple needs to restate some historical financial statements to record additional compensation expense, and says it can’t file its 10-K for the fiscal year ended September 30 until the investigation is complete.
According to Apple, the problem with backdating stock options occurred between 1997 and 2002, and CEO and founder Steve Jobs was aware of some of it.
Wed 13 December 06 · Filed under Fraud News Stories
Today Jeffrey Skilling, the 53-year-old former CEO of Enron, reported to prison in Waseca, Minnesota. He begins his sentence of 24 years and 4 months in a low-security Federal Correctional Institution. Skilling’s conviction includes federal charges of fraud, conspiracy, and insider trading.
Skilling had hoped to put off his prison sentence while pursuing an appeal of his conviction, but a judge denied that request. He will have access to recreational facilities at the prison, but may be required to work a prison job which pays 12 to 40 cents per hour.
Tags: Enron, prison, fraud, conspiracy, insider trading
Tue 12 December 06 · Filed under Fraud News Stories
Did you know that under the Sarbanes-Oxley Act of 2002, each registered public accounting firm providing audit report for more than 100 companies (issuers) must undergo an annual Public Company Accounting Oversight Board (PCAOB) inspection?
The PCAOB examines selected financial statement audits and internal control reviews done by each public accounting firm. If the board finds deficiencies in that work, they notify the accounting firm. If there are enough deficiencies and they are significant enough, PCAOB will summarize these problems in the public portion of the report.
PCAOB recently reported on the deficiencies identified in their inspection of Deloitte & Touche. The deficiencies included:
- Failure to identify or address errors in the issuer’s application of GAAP
- Failure to perform certain necessary audit procedures
- Failure to obtain significant competent evidential matter to support its opinion on the issuer’s financial statements
- Work papers containing unsupported and unreconciled amounts in accounts that included accounts receivable, prepaid expenses, miscellaneous prepaids, other current assets, accounts payable, other deferred credits, and foreign currency translation
- Identification of known errors that were dismissed without further investigation or discussion or adjustment
- Passed audit adjustments included items that appeared to be intentional, were clear departures from GAAP, were capable of precise measurement, or could be corrected with little cost or effort
Naturally, Deloitte & Touche disagreed with several of the problems identified by the board and objected in a letter to PCAOB.
Mon 11 December 06 · Filed under Fraud News Stories
ViAnna Jordan is seeking to unseat criminal and Milwaukee Common Council member Michael McGee (Jackson). ViAnna’s supporters circulated petitions for a recall of McGee/Jackson.
McGee/Jackson signed one of those petitions, and is now claiming that he was told it was a petition to keep Malcolm X Academy open, according to the Milwaukee Journal Sentinel.
Does he mean to tell us that he didn’t read the petition before he signed it? What an embarrassment to our community.
Mon 11 December 06 · Filed under Fraud News Stories
Welcome to the 14th week of the Carnival of Fraud. Thanks to everyone who sent in their blog posts about scams, schemes, and frauds. On with the carnival…
The Stock Market Beat blog discusses misleading financial reports. Highlighted are problematic accounts such as allowance for doubtful accounts and warranty reserves, which are ripe for abuse by executives looking to meet or beat earnings estimates. Analysts are now questioning how Dell accounts for its warranty reserves.
Corporations have a seemingly neverending fight with Sarbanes-Oxley. SoxFirst discusses how the U.S. Department of Justice views cooperation by corporations under investigation, as part of what DOJ considers cooperation, includes waiver of attorney-client privilege.
It seems Acme Anvil has been had by Columbia House. (I didn’t even know they still existed!) Sure enough, he signed up for their service and quickly canceled. But they sent him a couple more DVDs and charged him for them. Now he’s got to send the DVDs back and hope Columbia House refunds his money.
The author of DigeratiLife got an up-close look at the potential for identity theft as a villain stole her garbage in the dark of night. She reinforces the need for safeguarding your data with paper shredders, as clever thieves are looking for treasures in your trash. Here’s my two cents on how to recover from identity theft.
My all-time favorite contributor to the Carnival of Fraud, Wenchypoo, authors an excellent post about parents who ought to be responsible enough to properly feed their kids. I completely agree!
My contribution this week relates to the ongoing saga of the Michael McGee (Jackson) recall drive. McGee/Jackson is a criminal who is on the Milwaukee Common Council, and an upstanding citizen, ViAnna Jordan, is trying to win a recall election. She is much more fit to represent the citizens of the city, yet certain “leaders” within the community are coming to the defense of this thug who is an embarassment and detriment to his district. (Go ViAnna!!!)
Submissions for next week’s Carnival of Fraud can be made here.
Sat 9 December 06 · Filed under Fraud News Stories
A group of so-called community leaders have come out publicly to defend Michael McGee (Jackson), Milwaukee criminal and city council member. They claim he is very involved in the community, and that should overshadow his criminal behavior, which includes:
- Perjury
- Resisting arrest
- Threatening to kill the mother of his child
- Disorderly conduct
- Fraudulent use of two names and social security numbers
In addition, he encourages bad behavior on the part of community residents. One good example is his “no snitching” campaign, where he encouraged witnesses to crimes to not cooperate with police.
Yet there are people who are supporting him instead of the leader of the McGee recall effort, ViAnna Jordan. The supporters include State Senator Lena Taylor, former alderman Fred Gordon, newspaper editor Mikel Holt, and Journal Sentinel Columnist Eugene Kane (Does anyone take him seriously anymore?).
They claim he has strong community involvement and he represents his district’s poor residents well. Really? Exactly what has he done for them besides embarass them?
Taylor cites McGee’s organization of protests after the verdicts in the Frank Jude Jr. trial. How does that help his residents? Gordon says he has shown a commitment to those who are disenfranchised, and cites McGee’s creation of a “rapid response team” that investigates crimes in his district. And we really want a criminal and his criminal friends investigating crimes, right? Gordon also mentions how McGee handles conflicts bewteen residents and police. Would that be the no snitching campaign?
On Charlie Sykes’s Sunday morning television show, Mikel Holt called McGee/Jackson “one of the most effective, articulate champions of the downtrodden in Milwaukee.” Mikel, if that’s the best example you can provide of someone who is effective and articulate, the community has more problems than I ever imagined.
What a shame that so-called “leaders” in our community would come out in support of such an irresponsible criminal. Is that the best we can offer the “downtrodden”? Surely these people don’t really think McGee and his criminal friends and staff can do a better job than an upstanding citizen like ViAnna Jordan?
Thu 7 December 06 · Filed under Fraud News Stories
Jospeh Stromei, a Milwaukee police officer who was fired because of his involvement in the Frank Jude Jr. beating case, has admitted to a federal judge that he lied to investigators and during the trial.
At a hearing for Stromei’s guilty plea to a federal charge of obstruction of justice, he said he did not cooperate with investigators. He also said he lied during the Milwaukee County trial of former officers Jon Bartlett, Andrew Spengler and Daniel Masarik. Spengler and Masarik were acquited, while the jury was deadlocked on one count against Bartlett.
Stromei previously said that he did not see anyone punch Jude or threathen him with a knife. However, he confessed to the FBI about two months ago, saying he did in fact see one officer punch him and another threatening him with a knife. The plea agreement acknowledges that Stromei held down Jude during the beating.
Stromei could be sentenced to a maximum of 10 years in prison and a $250,000 fine. His guilty plea was given in exchange for not being charged with perjury in state court. He could, however, still be charged with other crimes if the authorities find evidence to suggest that he actually beat Jude.
Thu 7 December 06 · Filed under Fraud News Stories
Home Depot, one of the many companies involved in the “options backdating scandal,” has announced that the company has been routinely backdating options for its executives since 1981.
An internal investigation revealed that this practice went on from 1981 until 2000, and it caused Home Depot to understate its compensation expenses by about $200 million. The practice stopped in 2000 when current CEO Bob Nardelli was appointed.
Home Depot is one of the largest companies to admit to backdating, with fiscall 2006 sales of $81.5 billion. The company’s investigation found that the stated grant date of options was regularly earlier than the actual date the grants were approved by the board of directors. The stock price on the approval date was also almost always higher than the price on the date to which the options were backdated.
This discovery will cause Home Deopt to reduce retained earnings by $200 million and increase paid-in-capital by the same amount.
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