Archive for January, 2007
Tue 23 January 07 · Filed under Uncategorized
A story in the Wall Street Journal tells how an 89-year-old survivor of Nazi concentration camps stayed alive because of his ability to counterfeit money. Adolf Burger and 140 other prisoners forged so much British currency, that 12% of all pound-sterling bills in 1945 were fake.
The goal at the time was to break the trust in British currency, and ultimately damage the country’s economy. However, the quest was unsuccessful as German agents skimmed millions of dollars off the counterfeiting operation.
Burger originally began counterfeiting to save Jews. He printed false papers for them, and was eventually arrested by the Gestapo. He and his wife were sent to Auschwitz, and his wife died there in a gas chamber.
Burger was later transfered to the Sachsenhausen concentration camp, and there he was in charge of a group of counterfeiting prisoners who were never seen by other prisoners. They had better food and clothing at this camp, and were allowed things like cigarettes, books, and games.
The prisoners in Burger’s group were former atrists, printers or bankers, and the main product they produced was the British pound. Burger was later charged with figuring out how to forge an American $100 bill.
Inmates involved with the forgery were supposed to be killed after the project ended. However, the Soviets were onto the operation, and the Nazis ran off with the machinery and Burger and his men. The men were to be killed, but pressure from American forces caused the guards to flee, and the men were all free.
Burger has written two memoirs about his experiences during the war, and is a collector of photos and documents from the time period. He travels around Germany to tell young people about the Holocaust.
Mon 22 January 07 · Filed under Fraud News Stories
Welcome to another week at the Carnival of Fraud. I almost forgot to put this up this week! Never fear… I will always get to it sooner or later.
On with the Carnival!
Matthew Paulson once again visits one of my favorite topics: multi-level marketing scams! Matt likes to pick on the oldest and baddest MLM, Quixtar (formerly known as Amway but they are trying soooo hard to distance themselves from that name and everything it stands for). He got roped inot a recruiting session for Quixtar (which he calls a “sell to yourself” program) and walked away unimpressed.
Amy Lin discusses another favorite topic of mine: diamonds. She has an interesting post about the supply and demand in the diamond market and several of the reason why we may want to avoid them.
Chris Dolley treats us to part of his story “Nous Sommes Anglais”. It is the true story of his first eight months in France, which included his identity being stolen, life savings seized and, abandoned by the police forces of four countries, had to solve the case himself.
Fred Fry presents the 2006 disciplinary actions against stockbrokers who abused their clients’ money.
Wenchypoo treats us to an interesting read about the fiber scam and good bowel health.
This week I had a couple of posts related to Enron: an interview with whistleblower Sherron Watkins, and a report of the first Enron executive to be released from prison.
Sun 21 January 07 · Filed under Fraud News Stories
On Friday, Ben Glisan, Enron’s former Treasurer was released from home confinement. He was sentenced to 5 years in prison, but was released from prison and put under home confinement in September. He has served about 2/3 of his original sentence for his guilty plea to charges of conspiracy to commit wire and securities fraud.
Initially, Glisan did not cooperate with prosecutors in the Enron case, but he later became a government witness againt Kenneth Lay and Jeffrey Skilling.
Glisan was the first Enron executive to go to prison, and is the first to be released from serving time.
Tags: prison, plea, conspiracy, securities fraud, Enron
Fri 19 January 07 · Filed under Fraud News Stories
Bryan Wagner, the investigator contracted by Hewlett-Packard to help find the source of information leaks, has been charged in federal court with crimes of aggravated identity theft and conspiracy. The conspiracy charge carries a maximum penalty of 5 years in prison and a $250,000 fine. The identity theft carries a penalty of up to 2 years in prison and a $250,000 fine.
While working for Action Search Group, Wagner is alleged to have obtained the names, addresses, Social Security numbers, telephone call logs, and telephone records of the HP board members and reporters. He is further accused of using a reporter’s Social Security number to create an online account to get the reporter’s telephone records.
In November, the former CEO of HP, Patricia Dunn, was charged in state court with four felonies related to the spying scandal. She has pleaded not guilty to charges of: using false or fraudulent pretenses to obtain confidential information from a public utility, wrongful use of computer data, identity theft, and conspiracy to commit each of those crimes.
The charges stem from her alleged orders to have an investigator identify the board members who may have leaked information from their private meetings to the press. Also charged with the same crimes are Kevin Hunsaker, a former senior lawyer for HP, Ronald DeLia, a private detective, and Bryan Wagner.
Tags: identity theft, conspiracy
Thu 18 January 07 · Filed under Auditing & Regulations
Announced by the AICPA (American Institute of CPAs):
ASB Issues SAS No. 114, The Auditor’s Communication with Those Charged with Governance
The Auditing Standards Board (ASB) issued Statement on Auditing Standards (SAS) no. 114, The Auditor’s Communication With Those Charged With Governance, which replaces SAS no. 61, Communication With Audit Committees, as amended. The new SAS establishes standards and provides guidance to an auditor on matters to be communicated with those charged with governance. SAS No. 114 applies to audits of the financial statements of all nonissuers and establishes a requirement for the auditor to communicate with those charged with governance certain significant matters related to the audit, including the auditor’s responsibilities under GAAS, an overview of the planned scope and timing of the audit, and significant findings from the audit. The SAS is effective for periods beginning on or after December 15, 2006. It is summarized here.
Tue 16 January 07 · Filed under Fraud Detection & Prevention
Fraud Magazine editor Dick Carozza did an interview with Sherron Watkins, the internal whistleblower who started raising hell at Enron when she started discovering problems with the numbers. He asked Sherron why the Enron fraud happened… whether management lost its way or whether the company was destined for problems. Sherron’s answer:
Many experts summarize “what happened” at Enron using two words, greed and arrogance. An accurate summary, I agree, but it fails to help others learn from Enron’s demise. How did greed and arrogance run amok at Enron? How did a company’s culture breed not only corruption from its own employees but also disreputable behavior from the outside auditors, lawyers, consultants, and lenders?
…
What happened? It was a complete breakdown in moral values. But the scary part is that the breakdown was not done by outright intention but more by small steps in the wrong direction.
…
Enron’s leaders set the wrong tone, so did Arthur Andersen’s leaders. [Arthur Andersen was Enron's external auditor.] In the end, both companies put revenues and earnings above all else - the means by which those earnings were generated did not matter. Were laws broken? Yes. Were lives devastated by it? Yes.
Tags: whistleblower, Enron, fraud
Mon 15 January 07 · Filed under Entertainment
As I mentioned in last week’s post about the A&E television show Flip This House, Richard Davis and Trademark Properties have sued A&E. Richard claims that A&E essentially stole his idea for the show and never paid him either for the idea or for the first season in which he participated.
A&E had the case removed from state court to the Federal District Court for South Carolina. Naturally, A&E denies nearly every allegation made by the plaintiffs. The network denies that any agreement similar to the one alleged by Richard and Trademark in the complaint was ever reached. They instead say the following occurred: [Read more...]
Mon 15 January 07 · Filed under Fraud News Stories
Do you get as annoyed as I do with spam emails? Spam and scam emails, for that matter. You can report them, although I suspect it doesn’t really do any good. I am so sick of the emails that claim your data has been compromised and you need to respond immediately with every snippet of personal information you’ve ever had, or your account will be closed.
Did you know that email tax scams happen in Canada too?
Growing in popularity is the eBay “second chance” scam. A seller of an expensive item that you bid on (but did not win) sends you an email saying that the winning bidder never paid for the item. Would you be interested in purchasing it at that bid price? You agree, and the seller directs you to use a service called MoneyGram, rather than the usual PayPal. Apparently MoneyGram doesn’t have many controls in place to prevent fraud, and the transaction goes south from there.
If you travel a lot, you might be interested to know that new U.S. Passports contain RFID (Radio Frequency Identification) chips that may one day be used to store information about travelers, such as fingerprints, face recognition, or retina scans. But how secure is this? It sounds like hackers are already having their way with the passports.
The investment world is rife with scams and swindles too. Sam Antar, a convicted felon and former CFO of Crazy Eddie, Inc. is questioning the Public Company Accounting Oversight Board and their examination of public accounting firms that audit public companies. Mr. Antar has an interesting story in general, as he masterminded a huge securities fraud while CFO of Crazy Eddie.
Companies have spent a lot of time and effort creating “loyalty” programs that are supposed to encourage their customers to shop with them instead of competitors. These programs have included things like frequent flier miles, cash back programs, members-only discounts, and special rebates. Believe it or not, these programs may have actually resulted in lower customer loyalty.
Insurance companies get a bad rap, don’t they? They provide a service, which is essentially paying big bills if we’re in the hospital, or a car accident, or if our house burns down. For that service, you pay insurance premiums. What’s wrong with that? It’s a business, plain and simple.
Life insurance gets criticized too. The bottom line is that you are paying money, the insurance company takes that money and invests its while you’re alive, and when you die, they pay out money to whomever you designate. The insurance company is hoping you don’t die before you’ve paid in enough to cover what they have to pay out. However, the unfortunate reality is that there are different kinds of life insurance, and whole life pays insurance agents some of the highest commissions, while whole life insurance is very expensive for the purchaser and provides little benefit for the increased cost.
Speaking of insurance, Hurricane Katrina lawsuits are finally starting to go to trial. State Farm recently lost a case in Mississippi. The results of these cases will be interesting because the insurance companies were denying claims largely based upon uninsured water damage, while the policyholders are claiming that their houses were damaged by other means.
Thanks for playing. Get your submissions in for next week’s Carnival of Fraud.
Tags: tax, hackers, securities fraud, Insurance, Fraud
Sun 14 January 07 · Filed under Fraud News Stories
In late November, I announced that I had been appointed to the Board of Advisors of Pyramid Scheme Alert (PSA). PSA is an organization dedicated to educating consumers about multi-level marketing companies and pyramid schemes. While MLMs are technically legal in the United States, the vast majority of them are nothing more than product-based pyramid schemes which depend upon an endless chain of recruitment of new members.
I bring to the Board of Advisors my expertise as a fraud investigator, as well as in-depth knowledge of Mary Kay Cosmetics, a multi-level marketing company that’s been around for over 40 years. The founder of PSA, Robert FitzPatrick, is very selective in his appointments. Those who are on the board must have expertise relevant to MLMs and the mission of the organization. I’m honored to be a part of such a credentialed group.
I’ve been working to pull together information on Mary Kay for PSA. Mary Kay Inc. has been flying under the radar for years! The company has generally enjoyed a good reputation in the business community. Mary Kay Ash was well-respected because she was a shrewd businesswoman who developed this company from the ground up. Unfortunately, that has overshadowed the abusive nature of the business opportunity. People haven’t recognized that the MLM system utilized by Mary Kay is very profitable to the corporation itself, but very detrimental to the individual business owners.
PSA never really considered Mary Kay to be a company that they should look into. It just wasn’t “out there” as a recruiting scheme or product-based pyramid scheme. That’s where I come in. I’m putting together materials on the pay plan and recruiting, as well as some of the “official” and “unofficial” materials distributed by Mary Kay and its representatives.
My website Pink Truth strives to educate consumers and potential recruits about the grim reality of this pyramid scheme. I present daily posts about realities of Mary Kay, examining the real earnings of representatives, why the plan is abusive, and how millions of women a year are conned into putting money into this losing proposition.
Additionally, I’ve been working on some other things related to MLMs, and generally enjoying playing an active role in PSA. More to come…
Fri 12 January 07 · Filed under Fraud News Stories
State Farm policyholders Norman and Genevieve Broussard of Biloxi, Mississippi have been awarded $2.5 million in punitive damages in their case against State Farm Fire and Casualty Co. The judge in the case also awarded the couple $223,292 for damage caused to their home by Hurricane Katrina.
The lawsuit was started because State Farm refused to pay for any damage to the Broussards’ home, which was completely leveled in the storm. State Farm said that the home was destroyed by an uninsured storm surge, while the Broussards claimed that is was destroyed by a tornado during the hurricane.
Insurers of homeowners caught in Hurricane Katrina typically provide policies that cover damage from wind, but not water. They also exclude damage that is cause by a combination of both wind and water, even if hurricane-force winds occur before water damage.
The judge in this case ruled that State Farm could not prove that a storm surge was responsible for the damage to the Broussards’ home, and that the testimony in the case didn’t prove how much was caused by wind versus water.
State Farm is likely to appeal.
See my pictures of hurricane damage here and here.
« Newer Posts ·
Older Posts »
