Hennessee Group Fined on Bayou Hedge Fund Due Diligence Failures
Federal Government Background Screeners Admit Fraud
, a New York-based investment adviser is facing a $800,000 fine from the SEC due to the firm's failure to perform promised due diligence of the Bayou Group hedge fund, once run by eventual death-faking, scooter-riding fugitive from justice, Sam Israel
Bayou, of course, was one of the biggest hedge fund flame-outs of all time
, with many of the fund's major players doing jail time
. The SEC complaint details about 40 Hennessee clients who altogether has about $56 million invested inthe Bayou fund.
Hennssee head, Charles Gradante has neither confirmed or denied wrongdoing in the matter. While he hasn't commented on the specifics of his own case, Gradante has submitted a letter to the SEC with a variety of recommendations for how other migh avoid Hennessee's fate.
Amongst Gradante's recommendations - increased reguation of hedge fund borrowing and requiring that third parties, such has Kroll, be hired to conductforencic audits of hedge fund financial statements. More here, via Bloomberg.
Labels: Bayou Group, Fraud, hedge fund, Hennessee, Kroll, Sam Israel
In Case You Were Looking for a Way to Feel Worse About Bernie Madoff
Government reps are making it sound like no big deal - according to a recent report in the Washington Post
, since 2007 six investigators working on behalf of the Office of Personnel Management, the agency that heads up background screening for federal jobs, have been charged with making false statements.
Three of the investigators were OPM employees. The three others were employed by government contractors: USIS and Kroll. One of these folks was convicted as recently as last week in Federal court in the District of Columbia. Dozens, if not hundreds of background checks have been admittedly falsified in these cases alone. Tip of the iceberg?More at the Washington Post.
Labels: background checks, Fraud, Kroll, USIS
Elie Weisel unloads on him in the New York Times.
R. Allen Standford Chief Investment Officer Tagged for Obstruction
“ ‘Psychopath’ — it’s too nice a word for him... Sociopath,’ ‘psychopath,’ it means there is a sickness, a pathology. This man knew what he was doing. I would simply call him thief, scoundrel, criminal."
Weisel, who probably needs no introduction
, lost his life savings to the Madoff fraud. His charity lost millions as well.
Labels: Bernie Madoff, Fraud
Financial Crime Suddenly an FBI Priority
Raul Weil Still a Fugitive
Laura Pendergest-Holt catches the first criminal charge in the Standford fraud probe. Her arrest comes based on charges of fibbing to the SEC in a February 10th interview. She was also named in the SEC civil suit against various Stanford holdings that was filed earlier this month. Details at The Chron - where else.
Labels: Fraud, Laura Pendergest Holt, R. Allen Stanford
Your Kroll Global Fraud Report For January 2009...
In case you were wondering...
Meanwhile, legal woes for UBS keep getting deeper.
Labels: Fraud, Igor Olenicoff, Raoul Weil, tax evasion, UBS
Rash of Disappearing Money Managers Continues with Arthur Nadel
Is available here
(PDF), for your reading pleasure.
Labels: Fraud, Kroll
Bernie Madoff and Fraud as Boom-Time Crime
Recently charged with fraud, Florida hedge fund manager Arthur Nadel has conveniently gone missing. Nadel, late of Scoop Capital, was facing down a $50 million payout due to investors when he opted to bail. Last week he left his wife and the world a note referencing his guilty conscience and a potential suicide. Of course, the suicidal don't often transfer $1.25 million to a secret swiss bank account. Here's the latest on Nadel via the Associated Press.
Labels: Arthur Nadel, Fraud, Swoop Capital
Here's a great piece from James Surowiecki in the New Yorker
Mark Dreier Does Not Pass Go
Quarterly Kroll Fraud Report Forthcoming
(sent in by a regular reader /tipster), which gives a bit of perspective on Bernie Madoff's bad acts and how they fit into the history of those who have taken advantage of investor exuberance.
And when I say history, I mean like the year 1700. Good stuff.
Labels: Bernie Madoff, Fraud
Massachusetts Hits Merrill Lynch With Fraud-Related Charges
Showing that the average company's losses to fraud are up 22% compared to the previous year. Watch this space
for the download.
Labels: Fraud, Global Fraud Report, Kroll
Auction rate securities fraud charges
BAWAG Trial Sees Nine Sentenced on Charges Stemming from Billions in REFCO-Related Losses
, to be exact. According to the Massachusetts AG, Merrill continued talking up ARS to analysts and - worse - advising its customers to buy into ARS, even as Merrill itself was ditching.
Labels: auction rate securities, Fraud, Merrill Lynch
Those sentenced notably include
Sam Israel, Undead Fugitive
former BAWAG CEO, the former hedge fund manager who made the epically ill-advised trades (those Yen derivatives can be a bitch), a former finance chief for an Austrian union and a KPMG auditor.
Labels: BAWAG, Fraud, hedge fund, Refco
The Feds seem all but certain
Michigan-Based Web Fraudster Faces Commuppence
that the Bayou hedge fund founder's suicide was mere window dressing to a disappearing act.
I must confess... I love it when they run. As to why he'd run? If you need a reminder, try Bloomberg
. Something to do with starting a 20 year prison sentence, I'd think.
Labels: Bayou Group, Fraud, fugitive, hedge fund, Sam Israel, suicide
P.O. Box Hedge Fund Crumbles
SEC Puts the Kibosh on San Diego Hedge Fund Manager
No really, I am begging you - stop giving these people your money
Gregory McNight is not really going to produce those 10-15% monthly returns - and yes, his company Legisi Holdings is really just a scam.
Don't believe me? Ask the SEC
. They'll tell ya the same.
I just wish we'd been here sooner so we could have helped these poor chumps
. I'd really like to hear from SCAM.com forum Junior Member 5Blade
to see how he's doing.
If you're out there 5Blade
, give us a holler...
Labels: Fraud, Gregory McKnight, Legisi Holdings
Herbalife CEO Forced to Admit Resume Padding
FBI Directory Says Sub-Prime Investigation Leads to Hedge Fund Doors
is not exactly a name that would inspire me to invest millions. Sounds like a shady payday loan company and shady
it definitely is. The SEC has jumped on Plus Money
proprietor, Matthew La Madrid freezing his assets while they sort through his $30 million dollar hedge fund investment fraud
Labels: Fraud, hedge fund, Matthew La Madrid, Plus Money
FBI director Muller's comments
Disgraced Bayou Hedge Fund Boss Gets 20 Years
, made the annual American Bar Association Litigation Section conference in Washington, D.C. are sure to ruffle features in some quarters. Like say, BloggingStocks
, for one.
Labels: FBI, Fraud, hedge fund, sub-prime mortgage
SEC Sues Headstart Advisors
Sam Israel presided over the spectacular $40 million flame-out of the now defunct hedge fund, Bayou Group. Bayou was the hedge fund fraud and failure that really put the subject on the front page - not just the business pages. This week Israel got his comeuppance
- a sentence of 20 years and an order to forfeit $300 million to compensate his former investors for their losses.
Now if Israel had that kind of money at hand, doubtless Bayou would still be in business, so who knows whether those bilked by Bayou have any realistic chance of reclaiming their money. Still, the knowledge that Israel (and his previously convicted Bayou co-horts) will be spending a significant number of years behind bars might provide some small solace.
Labels: Bayou Group, Fraud, hedge fund, James Marquez, Sam Israel
Churchgoers Make the Best Victims
Between 1998 and 2003, through late trading and deceptive market timing
, UK-based Headstart Advisors netted illict profits totalling $198 million according to a recently filed SEC suit
. Also named in the suit was Najy Nasser, chief investment adviser for Headstart during the time of the bad acts.
Labels: Fraud, Headstart Advisors, hedge fund, Najy nasser, SEC
FBI Mortgage Fraud Probe Expandeth
At least that is what Hamilton Alan Bird had to be thinking when he used his religiously themed "hedge fund," XL Capital Partners swipe their money.
If these investors had done their homework they might have noted that Bird was previously convicted on criminal charges, had a 1991 bankruptcy to his credit and was once busted for practicing an insurance business without a license.
So not only was Bird a known criminal - he was a bad one that kept getting caught. No change to that pattern this time. He's been nicked again and this Friday plead guilty for his hedge funs shenanigans, small solace that might be to the trusting folks whose money he stole.
Already a Bird accomplice, the right reverend pastor pastor Doug Scott of Colorado Springs has been sentenced to 15 years probation and a sizable chunk of community service.
Let's hope that the recidivist, Mr Bird gets substantially more when he goes back before the judge in June.
For More on Bird's guilty plea, click here.
And for a little background on the XL mess, try this article
Labels: Doug Scott, Fraud, Hamilton Alan Bird, hedge fund, XL Capital Partners
Enzyte Maker Lives On, Despite Fraud Prosecution
Hedge Fund Fraudsters Prey on the Faithful
are now in the line up for further scrutiny from Langley. Meanwhile, California also busts some mortgage fraud heads
Labels: Fraud, investigation, sub-prime mortgage
Uta-based Thompson Consulting, Inc. managed to lost $60 million dollars of investor money through its pathetic mismanagement of two hedge funds. Already down, deep in the red based on what the SEC has called "a strategy inconsistent with its representations to investors," Thompson's managers went all in on a complex options trade on the Chicago Board Options Exchange. Needless to say, that blew up in their faces, wiping out 100 well intentioned investors. A slew of civil charges are pending against Thompson and fund managers, Kyle Thompson, David Condie and Sherman Warner. We'll see how it goes from here.
Wharton Biz School Reflects on Corporate Fraud
Lancer Hedge Fund Crew Charged With Fraud
Labels: David Condie, Fraud, hedge fund, Kyle Thompson, Sherman Warner, Thompson Consulting
UBS Issues No Comment on Mortgage Investigation
Michael Lauer, Martin Garvey, Eric Hauser, Laurence Isaacson and Milton Barbarosh are all facing an assortment of fraud charges in relation to their roles at Lancer Group, a now-bust hedge fund. For more on their, literal, shell-game, check out the South Florida Business Journal.
Labels: Fraud, hedge fund, Lancer, shell companies
National Century Fraud Trial Set for Monday
Reportedly, the US Attorney in New York's Eastern District is investigating UBS
to determine whether the bank misled investors by inflating the prices of its mortgage bonds. Just the latest firm to be targeted coming out of the sub-prime mess.
Labels: Fraud, sub-prime mortgage, UBS
Now Available - Hedge Fund Fraud Insurance
Bayou Financial Co-Founder Gets Four Years on Fraud Charges
Call it the sleeper corporate fraud...National Century Financial Enterprises
never got the publicity of a WorldCom, Health South or Enron. But there's nothing minor about the $1.5 billion fraud allegedly perpetrated by company executives prior to National Century's fall in 2002 (the firm declared bankruptcy in 2004).
Two former National Century owners and three execs go on trial Monday in Columbus, Ohio
. One exception is former CEO Lance Poulsen
. His fraud trial starts in August. But before then he'll have to answer to charges of witness tampering. That trial starts in March.
Here are a few more case-related stats via the AP
Labels: Fraud, Lance Poulsen, National Century, trial
The Ethical Corporation Takes Aim at Samsung
Conrad Black Gets 6 and a Half Years
James Marquez, co-founder of Bayou Financial, plead guilty in December of 2006 to participation in the $400 million fraud arising from his former firm (Marquez left Bayou in 2001).
Sentenced just this week, Marquez, in addition to spending a little over four years in prison and another two years under supervised release, Marquez is expected to pay over $6 million in restitution.
Two other former Bayou executives, Sam Israel and Daniel Marino have also plead guilty in relation to the fraud.
For further details on the Marquez sentencing, check out CNNMoney
Labels: Bayou Group, Daniel Marino, Fraud, hedge fund, James Marquez, Sam Israel
Details via AFX
New Federal Charges in Coupon Company Case
And as always, background via the tags below.
Labels: Conrad Black, Fraud
Add wire fraud
Man Group Hedge Fund Pays $75 Million Settlement to End Fraud Probe
to the $250 million fraud tab of former executives at International Outsourcing Solutions
, the largest coupon company in the U.S.
The alleged fraudsters are facing somewhere in the neighborhood of 525 years in prison if convicted. Those kitty litter coupons really add up, right? Get the latest details on the case via Yahoo.
Labels: FBI, Fraud, International Outsourcing Solutions
Portos Chief Takes Surprise Plea
MF Global, the NY based hedge fund offering from the Man Group has agreed to pay $75 million
to settle charges that the fund helped to hide the $180 million Philadelphia Alternative Asset Management (PAAM) hedge fund fraud
(in which founder Paul Eustace was recently charged). The CTFC shut down PAAM in 2005 for hiding its own losses from investors.
Labels: CTFC, Fraud, hedge fund, Man Financial, Man Group, MF Global, PAAM
Sentencing Delayed on Bayou Hedge Fund Co-Founder
Michael Mendelson entered an unexpected guilty plea at what was supposed to be a preliminary hearing relating to allegations of fraud at his now collapsed Toronto-based hedge fund, Portus Alternative Asset Management.
Apparently he is, as the judge in the case believes, a changed man and accepted a two year sentence as well as responsibility for his actions.
Mendelson will also be testifying against his former (and quite literal) partner in crime, Boaz Mason. But Mason, perhaps a less transformed individual, won't be showing up any time soon. He fled Canada for Israel to avoid prosecution.
The disintegration of Portus left about 26,000 wondering what had become of the $750 million they had placed in the care of Mendelson and Mason.
The good news is, in this case, investors expect to get back more than 90% of the funds. We'll see how that goes. More on Portus, Mendelson and Mason right here, via the National Post
Labels: Boaz Mason, Fraud, hedge fund, Michael Mendelson, Portus
Man Prosecuted for Baywatch Fraud
Bayou Hedge Fund co-founder, James Marquez saw his sentencing hearing was moved to today, November 20th due to "disputed issues of fact
." As of this evening nothing notable has come across the wire. But we'll keep an eye out.
If you'd like to recap, here's Marquez's guilty plea
from late last year. Bayou, of course, was one of the more notable hedge fund flameouts of the past few years and the one that started putting these stories on the front page, not just the front page of the business section.
Labels: Bayou Group, Fraud, hedge fund, James Marquez
Haligiannis Facing Extradition to the U.S., Additional Charges in Greece
Even fraudsters should have some pride, right?This is lame
, even by criminal standards.
Labels: Baywatch, David William Port, Fraud
Hedge Fund Fugitive, Haligiannis, Back Behind Bars
is really coming home this time, it seems. But before he returns to the states to do his time, Greek authorities apparently have a few new books to throw at him
Labels: Angelo Haligiannis, Fraud, hedge fund
Bayou Hedge Fund Sentencing Update, Also Investor Suit Dismissed
is a colorful characters. He, until recently, was also a fugitive, on the run from fraud charges
in New York state. Of course, for Haligiannis, on the run included more yachts, cocktails and fancy hotels
than your average fugitive.
The former president of hedge fund Sterling Watters, Haligiannis had been arrested just recently
by Greek authorities, only to be released prior to extradition to the U.S. Haligiannis was picked up again this week
in Greece while passing through a tollbooth. We'll see if he makes it back to the U.S. this time.
Labels: Angelo Haligiannis, Fraud, fugitive, hedge fund
Hammer Drops on National Century
A Bayou-related investor suit filed against Hennessee Group, a financial advisory firm has been dismissed. Hennessee was being sued for breach of fiduciary duty by South Cherry Street, LLC, which on Hennessee's say-so had invested $1.5 million with Bayou.
While proprietors of Hennessee, Lee and her husband Charles Gradante claim to have a thorough five-step due diligence process, the folks at South Cherry Street claimed that this was never conducted in the case of Bayou.
The judge found differently, deciding that Hennessee was just another sucker in a group that included the IRS and the SEC. Ouch...
Also, it appears that Bayou badguys Sam Israel and Daniel Marino will be sentenced for their roll in the hedge fund fraud as soon as September.
Further details on Bayou via Reuters
Labels: Bayou Group, Fraud, hedge fund, Hennessee, South Cherry Street
Economan Breaks Down, Hedge Fund Ponzi Scheme Probed
With a new, revised indictment in play, things are looking increasingly bad for the eight former executives of National Century. Bumping up the 27 charges in the initial indictment to a round count of 60, a Columbus, Ohio grand jury things are looking increasingly dark. Before you feel too terribly bad for these folks, keep in mind that the FBI calls National Century the largest corporate fraud case involving a private company that they have ever investigated.
Further details via the Columbus Business Journal
Labels: Fraud, National Century
Bayou Hedge Fund Advisor Pleads Guilty to Tax Evasion
Albert E. Parish is the Economan.
His website is a must-see
. He's also the target of a government investigation
into his financial management practices, which ended up costing his clients millions. Parish's assets are currently at auction
in an attempt to make back some of the money he lost. You can view the items here.
Labels: Albert E. Parish, Fraud, hedge fund, ponzi scheme
KL Hedge Fund Operator Plead Guilty
Bayou would be the hedge fund whose collapse brought questions about hedge fund transparency from the business page to the front page. The reverberations from the Bayou collapse continue, most recently with the guilty plea on tax evasion
from former Bayou financial advisor Burt Kozloff. You can get a look at the terms of Kozloff's plea deal right here
, courtesy of the fine folks at the U.S. Attorneys Office, Souther District of New York.
Labels: Bayou Group, Fraud, hedge fund
MDL Capital Management Founder Has Trial Date Set
Yung B. Kim one of the three principles of KL Financial, a Florida-based hedge fund plead guilty last week to bilking investors our of $195 million. Kim ran the show along with his brother, John Kim and another man, Won S. Lee. John Kim is already behind bars on a contempt of court charge. Won Lee is still at large. Sentencing for Yung Kim is scheduled for November.More on the case from the Palm Beach Post
Labels: Fraud, hedge fund, KL Financial
Telemarketing Fraudster Indicted
Hedge fund (fiend?) Mark D. Lay
, who lost a whole bundle of the Ohio Bureau of Worker Compensation's money now has a trial date. Indicted by a federal grand jury just last month, Lay will face the music on September 4th, when he'll get a chance to tell his side of the "I pissed away $216 million of your money" story. And good luck to him. Further details on the trial here
Labels: Fraud, hedge fund, Mark Lay, MDL Capital Management, Ohio
Ponzi Fraudster Linked to Ferris Baker Watts, Advest Brokers
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
Labels: Assail, Fraud, Inc., Kyle Kimoto, telemarketers
The Case for David Stockman
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
Labels: Advest, David Dadante, Ferris Baker Watts, Fraud, ponzi scheme, securities
CA Fingers Founder on Corruption
Reagan-era public official and former Collins & Aikman
CEO, David Stockman
isn't taking his recent indictment
on fraud charges lying down. Calling the prosecution "amateur hour," Stockman spoke with the New York Times
about how he plans to fight the fraud charges against him, charges that had loomed for months
before a formal indictment was finally handed down.
Labels: Collins and Aikman, David Stockman, Fraud, indictment
Menu Foods CFO in a Selling Frenzy Right Before Recall Ammouncement
Ahhhh, Charles Wang
, the innovator of the 35 day month... While other CA top brass have already gone down for the count
in relation to the wide-spread fraud at the company. Wang, however, has managed to keep bobbing and weaving since retiring in 2000
, earning him teflon don
status amongst the Silicon Valley set. But that may be changing as CA - the company he founded (but currently hungry to shake off the stink of corruption) comes gunning for him
Labels: Charles Wang, Computer Associations, Fraud, Sanjay Kumar, SEC
Very naughty indeed
Currency Trader Faces Maximum Sentence on Fraud Charges
. Dumping his stock before the announcement of the pet food recall... Illegal? Well, given the amount of press this story has received, I'm sure we'll find out soon enough.
Labels: Fraud, Menu Foods
International Outsourcing Services Faces Fraud Charges
received a five year sentence this week for his role in defrauding clients of his firm, Princeton Economics International, out of millions of dollars. Armstrong will also pay $80 million in restitution to the victims of his ponzi-style scheme. Armstrong had already been in jail based on a civil contempt order from 2000 relating to his failure to turn over Princeton's assets.
Armstrong's lengthy jail time on the civil contempt charge adds an extra layer of interest to the case as there is apparently no limit to the amount of time he could be forced to remain incarcerated on the contempt charge. Moreover, his fraud sentence will not actually begin until he finishes serving his time for contempt. Quite the pickle, and one that has found Armstrong some support
, despite his crimes.
Further details on Armstrong's sentencing and fraudulent activities can be found at the White Collar crime Prof. Blog
Labels: Fraud, Martin Armstrong
Hedge Fund Dinner Scammers Face Charges
A Federal grand jury in Wisconsin has returned a 25-count indictment against International Outsourcing Solutions
, along with 12 individuals charging the group with with a conspiracy to defraud IOS's manufacturer customers.
IOS is the largest coupon clearinghouse for grocery store retailers and manufacturer coupons in the U.S. If you've clipped coupons from your Sunday paper, you know IOS. What you probably didn't know is that coupons are a billion dollar industry.
The Indictment charges that the defendants participated in a multi-million dollar fraud that victimized five Wisconsin companies as well as other companies located throughout the country," said United States Attorney Biskupic.
This IOS indictment alleges that between 1997 and 2006, nine of IOS employees and and two associates of coupon brokerage, Riya Coupon Services, participated in a scheme to submit fraudulent coupons to manufacturers for payment, a $25 million swindle.
Read more on the IOS indictment via the Muncie Free Press, which names all eleven of the indicted folks... See also the FBI press release, from which the MFP article is largely drawn. IOS has responded to the suit, here, on their website.
Labels: FBI, Fraud, International Outsourcing Solutions
Shady Hedge Fiend Kirk Wright to Pay $20 Million
You get some junk mail that offers above-market investment returns and an invite to a steak dinner. You figure, why not. After all, you like steak. But if the guy you dined with was John H. Williams, odds are he conned you into giving him your money, which instead of multiplying as promised he might as well have set a'fire right there at the table.
You see Williams, your host, was funneling your funds to Stephen Chesnowitz, a Canadian hedge fund trader with assets in the Cayman Islands and Canada. Now, actually disclosing that you have no idea how to run or manage a successful investment fund would sort of...impede the cashflow situation. So, rather than inform investors when deals went sour, these guys simply followed the tried and true falsify your financials
model while maintaining rich salaries for themselves.
All told, the pair bilked about $9 million out of 150 or so unwitting investors. Williams is facing fraud charges
in Maryland, while Chesnowitz is so far sitting pretty north of the border. Maryland is currently reviewing William's financial records, trying to determine where the money when and if any has been squirreled away that might be recoverable for investors.
Further details at The Washington Post
Labels: Fraud, hedge fund, John H. Williams, LaJohn Capital, Stephen Chesnowitz
Refco Indictment Update, Tone Grant
Kirk Wright made white a name for himself. Having found his way on to the NFL Player's Union's list of recommended money managers, Wright, as my grandmother would say, fell in butter.
He had it good. Only one problem...he was a total phony
(well, that diploma from Harvard was real).
Between 1997 and 2006 Wright raised $185 million for his International Management Associates hedge fund management company. The money came from a pool of 500 investors, including many NFL players. Wright lived the high life
on their money while giving vague assurances of amazing returns. Later he filed bogus financials to cover his tracks.
When it was clear he was busted, he took flight
and played fugitive
for a few weeks before coming to his current berth at an Atlanta-area detention center. Wright is awiating trial on multiple fraud counts and could face some lengthly time behind bars.
In the interim U.S. District Court Charles Pannell has levied over $20 million in fines and restitution to be paid back by Wright.
Further details via HedgeCo
Labels: Fraud, hedge fund, Kirk Wright, NFL
Former Homegold CEO Gets 20 Years
Tone Grant, former owner of Refco, plead not guilty in January
to charges of conspiracy, fraud and money laundering. Grant stands accused to of helping to hide the collapsed derivatives trading firm's enormous losses and assisting those who wanted to pass off the company to unwary investors.
The activities that lead to Refco's final, scandal-ridden explosion weren't exactly uncharted territory for a company that had for years walked close to the edge. According to the Chicago Tribune:
Refco was the subject of 142 regulatory actions, the most of any futures trading outfit, according to a Bloomberg News analysis. The Commodity Futures Trading Commission came after it repeatedly, in some of its most prominent administrative cases of the 1980s and 1990s.
Fellow trading executives say Refco flouted industry standards like no other firm, tossing aside the rulebooks, taking on the diciest accounts and fighting back against regulators that tried to intervene.
Refco traces its origins to a one-time poultry wholesaler who served time in prison for selling substandard chickens to the military. Ray Friedman eventually won a pardon and with his stepson, Thomas Dittmer, opened the forerunner of Refco around 1969.
For a full accounting of Tone Grant's tenure at Refco (1981-1998), his legal woes and how he fits into the scandal that followed the company's demise, check out the full article from the Tribune.
Grant was followed at Refco by Phillip Bennett, who managed to convert the $300 million in losses under Grant's tenure into $720 million in debt, which he managed to hide rather effectively for a time. In 2005, Refco actually seemed poised to go public with an enormous public offering, but reality intruded. The gig was up and the house of cards came crashing down
Labels: Fraud, indictment, money laundering, Phillip Bennett, Refco, Tone Grant
Siemens Division Pleads Guilty in Fraud
The former chief executive of bankrupt mortgage lending company, Homegold, one Ronald Sheppard was sentenced this week
to 20 years on charges of conspiracy, securities fraud and obtaining property by false pretenses. He had faced a potential maximum of 25 years in the case.
Homegold had attempted to cover large losses by funneling in cash from a subsidiary. $275 million and 8,000 defrauded investors
later the company collapsed. Four other Homegold execs have already been convicted. Former chairman John Sterling Jr. has been indicted and is awaiting his turn at bat.Check here for further details on Sheppard
, who claims to be a victim in all this. That's a hard pill to swallow when you picture him shredding all those documents
to cover his own ass.
Labels: Fraud, Homegold, John "Jack" Sterling. Jr., lending, Ronald Sheppard
CFTC Files Complaint Against Cornerstone Capital Management
No, not THAT Siemens division
. In this instance we're talking about Siemens Medical Solutions, USA, which has of late been embroiled in its own share of scandal. The Siemens unit has agreed, as a part of a plea deal, to pay $2.5 million in fines and restitution in penance for shady dealings surrounding Siemens Medical's acquisition of contract to supply radiological equipment to Illinois' John H. Stroger Jr. Hospital. Details on Siemen's scam here
Labels: Fraud, minority owned company, Siemans Medical, Siemens
Wood River Capital Hedge Fiend to Face Criminal Charges
New York-based hedge fund, Cornerstone Capital Management
and company executive Joseph Profit (oh come on
- he made that name up!) are facing fraud charges from the Commodity Futures Trading Commission
. The CTFC complaint, filed in the Georgia Northern District Court accuses Profit and Co. of concealing material information from the National Futures Association and defrauded investors by missrepresenting potential rates of return.
Further details via Hedgeweek
. You can check out Cornerstone's NFA suspension here
as well as the CTFC press release here
Labels: CFTC, Cornerstone Capital Management, Fraud, hedge fund, Joseph Profit
Actor's Mom (and Hedge Fund Manager) Busted in Fraudulent Trading Scheme
John H. Whittier, the former head of defunct hedge fund Wood River Capital Management was arraigned in New York this week
on charges stemming from the $88 million securities fraud he perpetrated on investors
in 2004 and 2005. The SEC originally filed civil charges
against Whittier and WRC back in October 2005
. Whittier could serve as much as 20 years on each count.
Labels: Fraud, hedge fund, John Whittier, Wood River Capital
Directors Financial Group
Cendant Execs Skirt Jailtime
, an Illinois hedge fund operated by Sharon Vaughn has been ordered to distribute its assets to investors - some $25 million - based on an SEC complaint filed last March
The SEC accused Vaughn of defrauded clients in the by investing in a fraudulent prime-bank trading scheme, noting that Vaughn failed to perform adequate due diligence and neglected to disclose her trading strategy to investors. She followed this up by withholding and then submitting fraudulent documents to the SEC.
In addition to the order to dispense DFG's assets Vaughn will also pay a $200,000 penalty. The U.S. Attorney's Office for the Northern District of Illinois has also put forth indictments for the two promoters who sold Vaughn on the dodgy bank trading scheme in the first place.
Interestingly, Sharon Vaughn is the mother of actor Vince Vaughn
More here on Vaughn, via Financial Alternatives.
Labels: Directors Financial Group, Fraud, hedge fund, homeland security, Sharon Vaughn, Vince Vaughn
Commodities Manager Faces Charges on Phoney Reports
Anne Pember and Casper Sabatino, both former Cendant financial execs received sentences this week
based on their their prior pleas. Both were spared jailtime and instead received probation, two years apiece. Apparently they were quite contrite (and helpful to the prosecution). Another helpful fellow, former Cendant CFO, Cosmo Corigliano, is expected to be sentenced later this week. Look for another wrist slapping, as Corigliano was a key source for the prosecution.
Labels: Anne Pember, Caspar Sabatino, Cendant, Cosmo Corigliano, Fraud, sentencing
HMC International Fraudsters Agree to Pay Restitution
The Commodity Futures Trading Commission
has filed a case against Anthony Ramunno, Jr., CEO of Roswell, Georgia-based Renaissance Asset Management. Ramunno and Renaissance have been barred from destroying any documents.
Investors had become suspicious that the pool of investment dollars under Ramunno's care wasn't quite the $32 million Renaissance claimed. An audit of the firm only identified about $4million and according to the CFTC complaint, Ramunno subsquently contacted the FBI offices in Atlanta and admitted committing fraud.
Further details here
You can aslo read the CFTC press release
or check out the online complaint
Labels: Anthony Ramunno, CFTC, Fraud, Rennaisance Asset Management
The SEC has announced that Bret Grebow and Robert Massimi, the dynamic duo behind the defunct Philadelphia-based HMC International hedge-fund-slash-ponzi-scheme have agreed to pay restitution to their former investors in order to settle pending charges relating to their misuse of investor funds. Details here.
Recapping Bayou: Analysis of a Hedge Fund Fraud
Labels: Bret Grebow, Fraud, hedge fund, HMC Internationa, ponzi scheme, Robert Massimi
Peregrine Executives Sentenced in Fraud Probe
Lets go back to last fall and recall the implosion of hedge fund, Bayou Group
. The failure of this multi-million dollar fund sent shockwaves through the business media and was one of the key factors in raising the profile of hedge fund fraud in the press. Heck, it even prompted Risk Magazine
to give a call to The Daily Caveat
for a brief interview
Law.com has a post-game analysis of the Bayou collapse
from Jeff Marwill, a partner in the bankruptcy practice of Jenner and Block
. Marwill charts the organization of the Bayou entities, what went wrong and how investors were made to eat the losses. Bayou Group subsequently declared bankruptcy and Marwill is uniquely qualified to comment on the aftermath as, in April '06 , he was appointed the federal equity receiver
responsible for aiding investors in recouping some of the $450 million lost in the Bayou Fraud.
Interesting reading. And as always, when it comes to investing - do your homework
Labels: Bayou Group, Fraud, hedge fund, Jeff Marwill, Jenner and Block
Michael Danny Whitt
BLX Exec Charged with Defrauding Government of $76 Million
makes eight Peregrine Systems
execs who've plead guilty in relation to the accounting fraud that afflicted the one-time jewel fo the San Diego-area software industry. Peregrine first acknowledged its problems back in 2002
and before the year was out the troubled firm was on the road to bankruptcy. Its remnants were purchased by Hewlett Packard
. In case you are keeping score the other seven guilty pleas in the Peregrine case belong to:
Douglas Stephen Powanda
John Burnham Benjamin
Richard T. Nelson
Several other Peregrine execs (some big fish among them) have plead NOT guilty, but you can look those up y'selves!
Labels: Fraud, Jeremy Crook, Peregrine Systems, SEC
Fannie Mae Execs Facing Suit from Government Oversight Office
Patrick J. Harrington, former executive vice president of the now defunct Business Loan Express is facing charges that he, along with 18 others, defrauded the Federal government of $76.8 million in small business loans. Taxpayers (that's you and me) are likely to end up paying the tab. Harrington's indictment, issued last month was unsealed earlier this week.
The Detroit Free Press
has more on the scheme, and their article
alludes to six earlier indictments involving Harrington that lead into the current investigation and pending prosecution. While Harrington's attorney is claiming that his client is taking more than his share of the blame, the U.S. Secret Service and the Inspector General's Office of the Small Business Administration have i.d.ed Harrington as the common denominator is all six indictments.
Labels: BLX, Fraud, Patrick Harrington, Small Business Administration
In Corporate Scandal, The Road Less Travelled
A suit of this kind had been expected since at least September. The Office of Housing Enterprise Oversight
, in a fit of holiday cheer, filed 101 charges
against Fannie Mae formers
, ex-CEO, Franklin Raines
, ex-CFO, Timothy Howard and ex-controller, Leanne Spencer. OHEO would like to recover as much as $215 million from these folks for their part in Fannie Mae's recent financial shenanigans
(a $6 billion overstatement, for starters).
Labels: Fannie Mae, financial overstatement, Franklin Raines, Fraud, Leanne Spencer, Timothy Howard
Skilling Does Not Pass GO, Goes Directly To Jail
... here's a company that back in 2000 was booming, at least according to what folks on the outside thought. Unfortunately, on the inside, some people knew better. When faults - fraud, really - were discovered in the company's accounting CEO, William E. Morgenstern faced a tough decision - gloss it over or take it to the board. Did they start shredding? Not exactly:
Rent-Way’s board made a decision within days of detecting the fraud — Mr. Morgenstern called the Securities and Exchange Commission and revealed everything. The company would turn over documents typically protected by attorney-client privilege, he said. He then invited the S.E.C. to set up an office at Rent-Way’s headquarters to conduct an on-site investigation.
How did it all work out for Rentway?
, via an engrossing article at TheLedger.com
Labels: Enron, Fraud, pre-trial agreements, Rentway, SEC, Worldcom
Former Cendant Exec Gets House Arrest on Fraud Charges
Jeff Skilling, the former Enron chief exec, had been anticipating the possibility of a reprieve from jail time while he awaited the outcome of his appeal on fraud charges. It was not to be. The same court that signaled the possibility of bail
for Skilling has snatched it away. He may report as soon as today
to the Federal pen where, barring reversal on appeal, he'll be serving some or all of a 24 year sentence.
Labels: appeal, Conviction, Enron, Fraud, jail, Jeff Skilling
Would You Invest Your Money in Something Called the Viper Fund?
In addition to the ten year prison sentence and more than $3 billion in fines and restitution former Cendant vice Chair, E. Kirk Shelton has otherwise been facing, he has now been placed under house arrest
while he awaits the outcome of his appeals. Shelton was previously convicted on a variety of charges
relating to his role in artificially inflating Cendant's revenues by some $500 million. When the fraud was discovered back in 1998, Cendant's value dropped by $14 billion in a single day. Ouch.
Labels: Cendant, Conviction, E. Kirk Shelton, Fraud
How did The Daily Caveat
miss this one? In early November the SEC put the kibosh
on a group of California-based hedge funds run by a gentleman named Edward Ehee. Ehee was the proprietor of several funds, including, the Compass West Fund, the Viper Founders Fund, and the Viper Investments.
Shockingly, or perhaps not so, the SEC has seized the funds assets, alleging that Mr. Ehee diverted client funds to cover a variety of personal expenses, including car payments (any question about what he drives?). While Ehee's funds essentially ceased any kind of legitimate operation back in 2002, as recently as this year he was still peddling phony financials and convincing trusting souls to hand over their money for him to manage.
But no longer.
You can download the SEC's compliant here
and the link above leads to their press release.
And of course, being a few days late, but unable to pass on the story, will teach me not to read Dealbreaker
Labels: Dealbreaker, Edward Ehee, Fraud, hedge fund, SEC, Viper