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3/17/2008
Nacchio Gets a New Trial
This is a reprieve from a potential six years behind bars for former Quest CEO, Joe Nacchio. Whether his luck will hold is an open question. Details on the new trial here.

-- MDT

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Blogger Jay Draimansaid...
NACHSHON DRAIMAN 09-17582 and Multiut 09-17575 file for bankruptcy
ilnbke
09-17582

ilnbke
09-17575


On May 14, 2009, NACHSHON DRAIMAN filed for Chapter 11 bankruptcy. The filer is being represented by Michael L Ralph, Sr of the firm Ralph, Schwab & Schiever, Chtd.
A bankruptcy petition preparer’s failure to comply with the provisions of
title 11 and the Federal Rules of Bankruptcy Procedure may result in
fines or imprisonment or both 11 U.S.C. §110; 18 U.S.C. §156.
Multiut Corporation
/s/ SCOTT R. CLAR
SCOTT R. CLAR 06183741
Crane, Heyman, Simon, Welch & Clar
Suite 3705
135 South LaSalle Street
Chicago, IL 60603-4297
312-641-6777 Fax: 312-641-7114
May 14, 2009
Nachshon Draiman
/s/ Nachshon Draiman
President
May 14, 2009

I certify under penalty of perjury that the information provided above is true and correct.
Signature of Debtor: /s/ Nachshon Draiman
Nachshon Draiman
Date: May 14, 2009
Software

B4 (Official Form 4) (12/07)
United States Bankruptcy Court
Northern District of Illinois
In re Nachshon Draiman Case No.
Debtor(s) Chapter 11
LIST OF CREDITORS HOLDING 20 LARGEST UNSECURED CLAIMS
Following is the list of the debtor's creditors holding the 20 largest unsecured claims. The list is prepared in
accordance with Fed. R. Bankr. P. 1007(d) for filing in this chapter 11 [or chapter 9] case. The list does not include (1)
persons who come within the definition of "insider" set forth in 11 U.S.C. § 101, or (2) secured creditors unless the value of
the collateral is such that the unsecured deficiency places the creditor among the holders of the 20 largest unsecured claims.
If a minor child is one of the creditors holding the 20 largest unsecured claims, state the child's initials and the name and
address of the child's parent or guardian, such as "A.B., a minor child, by John Doe, guardian." Do not disclose the child's
name. See 11 U.S.C. § 112; Fed. R. Bankr. P. 1007(m).
(1)
Name of creditor and complete
mailing address including zip
code
(2)
Name, telephone number and complete
mailing address, including zip code, of
employee, agent, or department of creditor
familiar with claim who may be contacted
(3)
Nature of claim (trade
debt, bank loan,
government contract,
etc.)
(4)
Indicate if claim is
contingent,
unliquidated,
disputed, or subject
to setoff
(5)
Amount of claim [if
secured, also state
value of security]
Alan Mandel
7520 N. Skokie Blvd.
Skokie, IL 60077
Alan Mandel
7520 N. Skokie Blvd.
Skokie, IL 60077
Attorney's Fees and
Costs
Disputed
Subject to Setoff
193,963.62
BankFinancial, F.S.B.
3443 W. Touhy Avenue
Lincolnwood, IL 60712
Bank Financial
3443 W. Touhy Avenue
Lincolnwood, IL 60712
Personal Line of
Credit
120,000.00
BankFinancial, F.S.B.
3443 W. Touhy Avenue
Lincolnwood, IL 60712
Bank Financial
3443 W. Touhy Avenue
Lincolnwood, IL 60712
Guaranty on Bank
Loan, Lifescan
Laboratiries, Inc.
Contingent
Unliquidated
259,748.58
BankFinancial, F.S.B.
3443 W. Touhy Avenue
Lincolnwood, IL 60712
Bank Financial
3443 W. Touhy Avenue
Lincolnwood, IL 60712
Guaranty on Bank
Loan, Peterson Park
Health Care Center
Contingent
Unliquidated
1,048,361.25
BankFinancial, F.S.B.
3443 W. Touhy Avenue
Lincolnwood, IL 60712
Bank Financial
3443 W. Touhy Avenue
Lincolnwood, IL 60712
Guaranty of Real
Estate Mortgage
Loan, Lifescan
Laboratiries, Inc.
Contingent
Unliquidated
859,670.31
Brickyard Bank
6676 N. Lincoln Avenue
Lincolnwood, IL 60712-3631
Brickyard Bank
6676 N. Lincoln Avenue
Lincolnwood, IL 60712-3631
Guaranty on Bank
Loan, Embassy
Holdings, LLC
Contingent
Unliquidated
2,200,000.00
Brickyard Bank
6676 N. Lincoln Avenue
Lincolnwood, IL 60712-3631
Regina Hirn
Brickyard Bank
6676 N. Lincoln Avenue
Lincolnwood, IL 60712-3631
847-979-2265
Personal line of
credit
677,251.85
Cole Taylor Bank
225 W. Washington St.
8th Floor
Chicago, IL 60606
Jonathon Rothstein
Cole Taylor Bank
225 W. Washington St., 8th Floor
Chicago, IL 60606
312-442-5000
Guaranty of Bank
Loan LOC, LCF
Associates
Contingent
Unliquidated
400,000.00
Cole Taylor Bank
225 W. Washington St.
8th Floor
Chicago, IL 60606
Cole Taylor Bank
225 W. Washington St., 8th Floor
Chicago, IL 60606
Guaranty of Real
Estate Mortgage
Loan, LCF
Associates
Contingent
Unliquidated
1,000,000.00
Danny Shabat
3531 W. Howard
Skokie, IL 60076
Danny Shabat
3531 W. Howard
Skokie, IL 60076
200,000.00
Software Copyright (c) 1996-2007 Best Case Solutions - Evanston, IL - (800) 492-8037 Best

B4 (Official Form 4) (12/07) - Cont.
In re Nachshon Draiman Case No.
Debtor(s)
LIST OF CREDITORS HOLDING 20 LARGEST UNSECURED CLAIMS
(Continuation Sheet)
(1)
Name of creditor and complete
mailing address including zip
code
(2)
Name, telephone number and complete
mailing address, including zip code, of
employee, agent, or department of creditor
familiar with claim who may be contacted
(3)
Nature of claim (trade
debt, bank loan,
government contract,
etc.)
(4)
Indicate if claim is
contingent,
unliquidated,
disputed, or subject
to setoff
(5)
Amount of claim [if
secured, also state
value of security]
Dynegy Marketing and Trade
1000 Louisiana
Suite 5800
Houston, TX 77002
Dynegy Marketing and Trade
1000 Louisiana, Suite 5800
Houston, TX 77002
Judgment Creditor -
Appeal Pending
Disputed 15,348,244.72
First Bank
900 East Higgins Road
Elk Grove Village, IL 60007
First Bank
900 East Higgins Road
Elk Grove Village, IL 60007
Guaranty of Bank
Loan for now
inactive business,
Embassy Day Care
Center, Inc.
Contingent
Unliquidated
Disputed
800,000.00
Great-West Life & Annuity et al.
c/o Chittenden Murday Novotny
303 W. Madison #1400
Chicago, IL 60606
Great-West Life & Annuity et al.
c/o Chittenden Murday Novotny
303 W. Madison #1400
Chicago, IL 60606
Pending litigation -
health insurance
claims
Contingent
Unliquidated
Disputed
142,360.00
Greenberg Traurig
77 West Wacker Drive
Suite 2500
Chicago, IL 60601
Greenberg Traurig
77 West Wacker Drive, Suite 2500
Chicago, IL 60601
Attorneys' Fees and
Costs
Disputed
Subject to Setoff
827,310.10
Israel Discount Bank
Yehuda Halevy 27-31
POB 456
Tel Aviv , Israel, 65136
Israel Discount Bank
Yehuda Halevy 27-31, P.O. Box 456
Tel Aviv, Israel 65136
Pending Litigation Contingent
Unliquidated
Disputed
Subject to Setoff
25,000,000.00
Peterson Park
7520 Skokie Blvd.
Skokie, IL 60077
Peterson Park
7520 Skokie Blvd.
Skokie, IL 60077
Contingent
Unliquidated
Disputed
3,000,000.00
Premier Bank
1210 Central Avenue
Wilmette, IL 60091
Ginett Ramos
Premier Bank
1210 Central Avenue
Wilmette, IL 60091
847-920-1400
Guaranty on Bank
Loan, Embassy
Holdings, LLC
Contingent
Unliquidated
749,316.68
Robert Hartman
6633 N. Lincoln Avenue
Lincolnwood, IL 60712
Robert Hartman
6633 N. Lincoln Avenue
Lincolnwood, IL 60712
Loan - Business 200,000.00
Ron Shabat
5936 N. Bernard
Chicago, IL 60659
Ron Shabat
5936 N. Bernard
Chicago, IL 60659
750,000.00
Virginia Feddeler et al.
c/o Paul R. Shuldiner
20 S. Clark #500
Chicago, IL 60603
Virginia Feddeler et al.
c/o Paul R. Shuldiner
20 S Clark #500
Chicago, IL 60603
Pending litigation -
personal injury torte
claim
Contingent
Unliquidated
Disputed
3,000,100.00
Software Copyright (c) 1996-2007 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy

B4 (Official Form 4) (12/07) - Cont.
In re Nachshon Draiman Case No.
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7/30/2007
Quest's Nacchio Faces Fine, Jail Time
Quest's former CEO, Joe Nacchio, was sentenced on Friday in connection with his sell-off of $52 million in Quest stock while not disclosing to his companies investors that rough times were ahead. For what the judge in the case called "crimes of overarching greed" Nacchio was sentenced to six years in prison. He was also ordered to forfeit the $52 million within 15 days along with a $19 million fine. Still ahead for Nacchio is a civil suit against Quest executives that is scheduled to get going in 2009.

-- MDT

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4/20/2007
Nacchio Guilty on 19 Counts
19 of 42 would be a pretty darn good batting average in the MLB. Less so in a guilty verdict. Former Quest CEO Joe Nacchio has been found guilty on 19 counts of insider trading after six days of jury deliberations in his criminal trial. In 2001, over five months Nacchio more than 100 million dollars worth of Quest stock, before disclosing the financial troubles the company was facing. A civil trial relating to the same issues is still pending.

There's more on the Nacchio Guilty verdict at TheOlympian.com.

-- MDT

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3/16/2007
Coverage of the Joe Nacchio trial at The Race to the Bottom
The Daily Caveat mentioned this blog last week as one to watch...well start watching, because starting Monday they'll be providing daily coverage of the Joe Nacchio trial. Nacchio, the former quest head honcho, was indicted back in December 2005 on 42 counts of insider trading, having sloughed off more than $100 million in Quest stock when he knew the company was about to tank. Nice. Real nice.

Take a swing over the TheRacetoTheBottom.org on Monday and see what its all about.

-- MDT

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1/08/2007
Former Quest Finance Exec Reaches Settlement
Robin Szeliga has reached a settlement with the SEC regarding her role in the multi-billion dollar Quest Communications financial fraud. Szeliga is expected to accept a $250,00 fine ans two years probation based on a guilty plea on one count of insider trading. She is also expected to be a key witness against her former boss and fellow defendant, former Quest CEO, Joe Nacchio.

Now won't that trial be interesting.

-- MDT

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11/26/2006
Quest CFO Resigns Amid Stock Option Questions
By now you know the familiar story. Quest CFO Brinkley Morse has succumbed to the current black plague of the business community, stock option backdating. While Quest's review is continuing and has already claimed a few heads at the telecom firm, the big question hanging in the air is whether chairman and CEO Vincent Smith will end upon the chopping block.

-- MDT

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10/03/2006
Quest Faces $400 Million Class Action Settlement
The settlement was approved on Friday in a Denver court. Quest executives Joe Nacchio and Robert Blackburn were not included in the settlement and will likely pursued separately by investors.

More here.

-- MDT

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7/12/2006
Springloading, Backdating? Pick Your Poison, Options Chicanery Remains a rRd Hot Topic
Apple Computer, Mercury Interactive, McAfee, CA, Affiliated Computer Services, Quest Software, and Comverse Technology, Take Two Interactive...just a few of the recent names added to the list of companies facing scrutiny over their handling of executive stock options. What's notable about this list (and also of the 50 some odd companies under investigation) is the number of technolgy companies, as discussed in the L.A. Times:
"...The technology industry is at the center of this, of course, because stock options long have been the preferred type of compensation for tech executives. In the 1990s shareholders were told, over and over, that even though their stakes in tech companies faced continual dilution because of the huge volume of options granted to executives, the awards were necessary to keep the industry's entrepreneurial spirit alive.

What's more, Silicon Valley leaders fought like mad for a decade to prevent accounting regulators from forcing companies to formally record options granted as a business expense. They finally lost in 2004."
Shades of the early mid-1990s securities class action boom, don't you think? More on the still-growing options story, from InformationWeek.

And credit where credit is due to one Professor Erik Lie of the Henry B. Tippie college of business in Iowa City, Iowa, who as been called the whistleblower (a term he rejects) of the option scandal. Lie published a paper last year examining the manner in which option transactions were handled in the 1990s. Lie sent his research to the SEC, who has proved to be very interested indeed. Lie's website can eb found here.

-- MDT

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1/20/2006
Quest Settlement Dunzo...Executives Fate Uncertain
Via BusinessWeek.com:
Ex-Qwest exec settlement said collapsed

THE ASSOCIATED PRESS/DENVER
By SANDY SHORE
AP Business Writer
January 19, 2006

A tentative settlement has collapsed for a former Qwest chief financial officer in a civil case arising from the telecommunications company's multibillion dollar accounting scandal, her attorney said Thursday.

Robin Szeliga's attorney provided no details during a court hearing about the Securities and Exchange Commission's case against Szeliga and other former Qwest executives. Szeliga announced in June she had agreed to settle the civil case.

"That settlement ultimately did not occur," attorney Mark Drooks told Magistrate Judge Craig B. Shaffer. SEC attorney Robert Fusfeld declined comment outside the courtroom...
Check out the full article for more on the probably fate of Nacchio and the five other Quest execs fingered in the fraud.

-- MDT

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12/29/2005
Form Quest Exec Pleads Guilty to Wire Fraud
Only days after ex-Quest CEO Joe Nacchio was indicted on insider trading charges another former exec from the telecom company has been forced to pay the piper...

Via BusinessWeek:
Ex-Qwest exec pleads guilty to wire fraud

By JON SARCHE
Associated Press Writer
December 28 2005

Former Qwest Communications executive Marc Weisberg pleaded guilty Wednesday to wire fraud and agreed to cooperate with federal prosecutors trying to convict other company officials of wrongdoing, including former Chief Executive Joseph Nacchio.

Weisberg, a former senior vice president who oversaw investments, mergers and acquisitions for Denver-based Qwest Communications International Inc., pleaded guilty to a single count of fraud. He had faced eight counts of wire fraud and three counts of money laundering.

Prosecutors declined comment through U.S. Attorney's spokesman Jeff Dorschner. Weisberg's attorneys did not immediately return calls. He faces a March 3 sentencing hearing.
More here.

-- MDT

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12/21/2005
Nacchio Indicted on 42 Counts of Insider Trading
A little Happy Holidays! from Federal Prosecutors for the former Quest CEO...

Via ABCNews.com:
Former Qwest CEO Joe Nacchio Is Indicted

By Don Mitchell
The Associated Press

DENVER Dec 20, 2005 — Joseph Nacchio, the former chief executive of Qwest Communications during its multibillion-dollar accounting scandal, was indicted Tuesday on 42 counts of insider trading accusing him of illegally selling off more than $100 million in stock.

The indictment includes the first criminal charges against Nacchio in the government's nearly four-year-old investigation into accounting practices at Qwest Communications International Inc., the Denver-based primary telephone service provider in 14 mostly Western states.

Nacchio, 56, was in custody and his initial court appearance was expected later Tuesday, said Jeff Dorschner, a prosecution spokesman. Nacchio's attorneys said he would plead not guilty "with perfect confidence in his exoneration"...
More here.

-- MDT

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11/28/2005
Quest CEO Claims CIA Deals Prompted Suspect Stock Trades
Via Motleyfool.com:
Joe Nacchio: CEO or Secret Agent?

By Tim Beyers
November 22, 2005
Motley Fool

...Authorities have made [ Quest CEO, Joe] Nacchio the centerpiece of a federal investigation into an accounting scandal that forced the telco to restate its 2000 and 2001 earnings, which were found to be inflated by an aggregate of $2.2 billion.

Nacchio has long denied any wrongdoing in the case, but some might argue he was somewhat more fortuitous in his timing of sales of Qwest stock than your average Joe or Jane Oddlot. Nacchio's defense has been that he established a regular program of pruning to diversify his portfolio and that his hyperbolic public statements that touted the company were nothing more than optimistic puffery grounded in a naive belief that the business was just humming along. Call it the "I didn't know someone else was cooking the books" defense, if you like.

It now appears the story has changed. According to yesterday's edition of The Wall Street Journal, Nacchio's so-called pumping was motivated by the knowledge that the firm had landed secret national security contracts and was expecting to receive more. In other words: By day, he was a mild-mannered spreadsheet-touting CEO. By night, he was a back alley negotiator brokering secret deals with government spooks promising to increase sales and earnings for years. Call it the "I could tell you but I'd have to kill you" defense...
More here.

-- MDT

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9/22/2005
Lord Black Confidant Pleads Guilty on Hollinger Fraud Charge
Via The GuardianUK:
Conrad Black's right-hand man pleads guilty to $32m fraud

David Teather in New York
September 21, 2005
The Guardian

David Radler, the former right hand man of disgraced media tycoon Conrad Black, pleaded guilty to fraud charges yesterday in a Chicago courtroom. The plea could prove a pivotal moment in the long-running investigation into the alleged looting of Hollinger International, the newspaper group that until last year owned the Daily Telegraph. "This is the first step in making amends for what has taken place," Mr Radler's lawyer, Anton Valukas, said after the hearing.

Mr Radler had been a business partner of Lord Black for 35 years and was the financier behind the flamboyant former press baron. But there were clear signs of a crack in the relationship last month when Mr Radler was indicted on seven fraud charges, each carrying up to five years in prison. The US attorney general, Patrick Fitzgerald, said at the time that Mr Radler would plead guilty and had agreed to cooperate with further investigations. Federal investigators disclosed in March that they were conducting a fraud inquiry into Hollinger, Mr Radler and Lord Black.

There were reports in the US media at the weekend that Lord Black could in turn be planning to point the finger of blame firmly at Mr Radler. According to the Wall Street Journal, Lord Black has been building a defence strategy arguing that he had not been a hands-on manager and that any alleged misdeeds were down to Mr Radler. The indictment alleges that Mr Radler and his "co-schemers" diverted more than $32m (£18m) of Hollinger funds to themselves and companies controlled by him, Lord Black and others. The funds were largely in the form of "non-competition" payments - money that is usually paid to the seller of a business to guarantee that it doesn't immediately re-enter the market it has just exited. In this case, the money was allegedly paid to individuals, instead of to Hollinger.

Lord Black was ousted as Hollinger chief executive in November 2003 after an internal inquiry sparked by a disgruntled shareholder. The investigation eventually uncovered hundreds of millions of dollars that had allegedly been taken by Lord Black, Mr Radler and others in unapproved bonuses and non-competition fees and excessive pay. The company has since sued for the return of $425m.

A 500-page internal report accused Lord Black of running a "corporate kleptocracy" and of pursuing an "endless quest" for cash. Lord Black denies all wrongdoing and has launched countersuits against Hollinger. Lord Black craved a British title so much he gave up his Canadian citizenship. But his reputation has been left in tatters by the financial scandal. He has been forced to sell his lavish London townhouse as well as a mansion in Palm Beach, Florida.

Lord Black and Mr Radler began their business relationship by acquiring a small newspaper in Quebec in 1969. They built an empire of more than 340 titles, including the Chicago Sun-Times, the Daily Telegraph and the Jerusalem Post. While Lord Black hobnobbed in London, Mr Radler worked behind the scenes in the company's offices in Vancouver and Chicago.

The new management at Hollinger has since broken the company up. The Telegraph was sold to the billionaire Barclay brothers in June last year for £665m. According to the indictment, in one instance Hollinger sold newspapers to a company controlled by Mr Radler and Lord Black. It then paid Mr Radler and Lord Black's holding company Ravelston $1.2m "not to compete with themselves".

In March 2003 a Hollinger annual report disclosed details of "non-competition" payments - in one case of $53m paid into a Black-controlled firm. The auditors had insisted on the disclosures. Eight months later, Radler resigned with an agreement to pay back unauthorised fees of $7.2m. On the same day, Conrad Black quit as chief executive.
The original article appears here.

-- MDT

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8/26/2005
Corporate Crime Reporter Lists Top Ten Prosecutors
Russell Mokhiber has been reporting on white collar crime for many years via his weekly Corporate Crime Reporter. Recently, the CCR rated America's top prosecutors, based on "a survey of major corporate crime prosecutions over the last year." The list and associated comments are quite interesting:

“The vast majority of state and federal prosecutors don’t have the resources, staff, energy, perspective, know-how, legal authority, and – perhaps most importantly – political drive needed to bring major corporate crime prosecutions,” said Russell Mokhiber, editor of the Corporate Crime Reporter. “The overwhelming number of prosecutors in the country look at the obstacles and say – I’ll pass. But these ten prosecutors have what it takes to tackle the problem.”


“The prosecutors who enter this field need an added element – a finely tuned sense of political and prosecutorial discretion – knowing when to go and when to stop, so as not to offend the powers that be,” Mokhiber said. “If things go right, prosecutors use the publicity they gain from these prosecutions to fuel their ongoing quest for higher office. If things go wrong, as they can easily and often do, these prosecutors will be publically humiliated in the courtroom by high-priced white collar crime defense attorneys and in the court of public opinion by the business press and political rivals.”


The top prosecutors (in alphabetical order) are:


Christopher Christie, U.S. Attorney, New Jersey
James Comey, Deputy Attorney General, Justice Department, Washington, D.C.
Patrick Fitzgerald, U.S. Attorney, Chicago
David Kelley, U.S. Attorney, Manhattan
Alice Martin, U.S. Attorney, Birmingham, Alabama

Patrick Meehan, U.S. Attorney, Philadelphia, Pennsylvania
Robert Morgenthau, District Attorney, Manhattan
Eliot Spitzer, Attorney General, New York
Michael Sullivan, U.S. Attorney, Boston, Massachusetts
Debra Yang, U.S. Attorney, Los Angeles, California.

The prosecutors were chosen for their consistent emphasis on high profile corporate and white collar crime cases.


Check out the full article at CCR for the line by line profile on each candidate. Tip of the hat to a Daily Caveat favorite, the excellent White Collar Crime Prof Blog (Read Ellen Pogdor's comments on the CCR list here).

-- MDT

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8/19/2005
Same Story, Different Country - Corporate Fraud Trial Gets Underway in Iceland
This is as interesting a corporate crime matter as any currently being pursued in the U.S. today. Note the prominent mention of a UK corporate investigator assisting with the case. Oh yea, and it's pronounced Ray-Kee-Ah-Vick...
Iceland's corporate world on trial as Baugur case begins

By Susie Mesure in Reykjavik
August 18, 2005
The Independant

Jon Asgeir Johannesson, the chief executive of Baugur and one of the UK's most prolific retail investors, launched his quest to clear his name yesterday after he was formally charged with committing fraud, embezzlement and breach of trust against the Icelandic company he co-founded with his father 13 years ago.

Pleading not guilty to 40 charges ranging from embezzling company funds for buying a yacht to swindling fellow investors, Mr Johannesson struggled to maintain his trademark aloof veneer during yesterday's 25-minute hearing in Reykjavik's main court.

His five co-defendants, who include his father and sister, all also protested their innocence. Their lawyers have a reprieve before the court sits again on 20 October to hear whether the defence team has managed to bolster its case before the hearings proper, which could last for years, kick off.

Spectators including Mr Johannesson's arch-foe and former business partner, Jon Gerald Sullenberger, jostled for the chance to see how one of Iceland's most eminent businessmen would cope with being formally charged. For Icelanders, it is as if their entire country is on trial, given that the unfolding legal drama pits its corporate against its political elite. Johannes Jonsson, Jon Asgeir's father, speaking afterwards, repeated his belief that the case was a political "conspiracy" drummed up on behalf of the country's former prime minister, David Oddson.

Wheeling out the first of its trump cards, Baugur's board yesterday said a favourable independent report by a UK corporate investigator gave it no qualms about reiterating its "unreserved support" for Jon Asgeir and the others charged. Deidre Lo, a director of Capcorn Argen, a law firm, claimed she had picked apart the 40 charges against the six defendants. Where the police investigators, who have spent the past three years investigating Jon Asgeir's corporate dealings, uncovered fraud, she maintained that in every instance Baugur had been victor not victim.

The crux of the case will hinge on the relationship between Gaumur, Jon Asgeir's private investment company, and Baugur, which is at the centre of almost half the charges. These so-called "related party transactions", which are rare in UK plcs, include one charge that Baugur lent 35m Icelandic kronur (£303,000) to Gaumur to buy shares in a Debenhams franchisee in 1999. Others concern the initial purchase of shares in Icelandair, part of the FL Group that has easyJet in its sights, in 1997 and the acquisition of various chunks of real estate in Reykjavik.

By and large, Icelandic law allows for such transactions between closely linked public and private companies, although there are limits on the loans that can be made in some cases. Whether Jon Asgeir clears his name will largely depend on the interpretation of this law.

Two of the most serious fraud charges relate to the acquisition of Thee Viking, a yacht in Florida, and tax avoidance of about ISK1m. One charge relates to payments to Nordica, Mr Sullenberger's US-based firm that used to source goods for Baugur to sell in its Icelandic retail outlets. There is confusion over whether any of the payments are related to the boat, which Jon Asgeir used when in the US. In his defence, the Baugur chief executive will argue that Gaumur paid $450,000 (£250,000) towards the boat.

Other charges assert that Mr Johannesson embezzled company funds by using a corporate credit card to pay for nearly 200 items. Although the indictment acknowledges that Mr Johannesson did repay the sums, he still stands accused of a crime that violates the country's Companies Act. Ms Lo said: "Here is a CEO of a very fast-growing company who travelled a great deal. He was in London four out of five working days. It's not unusual to use a company credit card but at all times Baugur owed him more money than he owed Baugur."

The fate of the Baugur boss will lie in the hands of three judges, described by one well-connected observer as "heavy hitters", rather than a jury.

In the meantime, Baugur's appetite for deals is undiminished. It recently bought a second Danish department store chain, adding to the £442m it has invested across the UK, Iceland and Denmark since the Icelandic police launched their investigation in August 2002. That same inquiry has scuppered two deals: the possible acquisitions of Arcadia and Somerfield to add to a UK portfolio that includes Hamleys, Iceland, Karen Millen and Oasis. But as Sege Jonsson, a taxi driver, said yesterday: "There is a saying in Iceland that still stands true. If today Jon Asgeir buys one share in a company, tomorrow you should buy two."

Jon Asgeir Johannesson, the chief executive of Baugur and one of the UK's most prolific retail investors, launched his quest to clear his name yesterday after he was formally charged with committing fraud, embezzlement and breach of trust against the Icelandic company he co-founded with his father 13 years ago.

Pleading not guilty to 40 charges ranging from embezzling company funds for buying a yacht to swindling fellow investors, Mr Johannesson struggled to maintain his trademark aloof veneer during yesterday's 25-minute hearing in Reykjavik's main court.

His five co-defendants, who include his father and sister, all also protested their innocence. Their lawyers have a reprieve before the court sits again on 20 October to hear whether the defence team has managed to bolster its case before the hearings proper, which could last for years, kick off.

Spectators including Mr Johannesson's arch-foe and former business partner, Jon Gerald Sullenberger, jostled for the chance to see how one of Iceland's most eminent businessmen would cope with being formally charged. For Icelanders, it is as if their entire country is on trial, given that the unfolding legal drama pits its corporate against its political elite. Johannes Jonsson, Jon Asgeir's father, speaking afterwards, repeated his belief that the case was a political "conspiracy" drummed up on behalf of the country's former prime minister, David Oddson.

Wheeling out the first of its trump cards, Baugur's board yesterday said a favourable independent report by a UK corporate investigator gave it no qualms about reiterating its "unreserved support" for Jon Asgeir and the others charged. Deidre Lo, a director of Capcorn Argen, a law firm, claimed she had picked apart the 40 charges against the six defendants. Where the police investigators, who have spent the past three years investigating Jon Asgeir's corporate dealings, uncovered fraud, she maintained that in every instance Baugur had been victor not victim.

The crux of the case will hinge on the relationship between Gaumur, Jon Asgeir's private investment company, and Baugur, which is at the centre of almost half the charges. These so-called "related party transactions", which are rare in UK plcs, include one charge that Baugur lent 35m Icelandic kronur (£303,000) to Gaumur to buy shares in a Debenhams franchisee in 1999. Others concern the initial purchase of shares in Icelandair, part of the FL Group that has easyJet in its sights, in 1997 and the acquisition of various chunks of real estate in Reykjavik.

By and large, Icelandic law allows for such transactions between closely linked public and private companies, although there are limits on the loans that can be made in some cases. Whether Jon Asgeir clears his name will largely depend on the interpretation of this law.

Two of the most serious fraud charges relate to the acquisition of Thee Viking, a yacht in Florida, and tax avoidance of about ISK1m. One charge relates to payments to Nordica, Mr Sullenberger's US-based firm that used to source goods for Baugur to sell in its Icelandic retail outlets. There is confusion over whether any of the payments are related to the boat, which Jon Asgeir used when in the US. In his defence, the Baugur chief executive will argue that Gaumur paid $450,000 (£250,000) towards the boat.

Other charges assert that Mr Johannesson embezzled company funds by using a corporate credit card to pay for nearly 200 items. Although the indictment acknowledges that Mr Johannesson did repay the sums, he still stands accused of a crime that violates the country's Companies Act. Ms Lo said: "Here is a CEO of a very fast-growing company who travelled a great deal. He was in London four out of five working days. It's not unusual to use a company credit card but at all times Baugur owed him more money than he owed Baugur."

The fate of the Baugur boss will lie in the hands of three judges, described by one well-connected observer as "heavy hitters", rather than a jury.

In the meantime, Baugur's appetite for deals is undiminished. It recently bought a second Danish department store chain, adding to the £442m it has invested across the UK, Iceland and Denmark since the Icelandic police launched their investigation in August 2002. That same inquiry has scuppered two deals: the possible acquisitions of Arcadia and Somerfield to add to a UK portfolio that includes Hamleys, Iceland, Karen Millen and Oasis. But as Sege Jonsson, a taxi driver, said yesterday: "There is a saying in Iceland that still stands true. If today Jon Asgeir buys one share in a company, tomorrow you should buy two."
The original article appears here.

-- MDT

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Blogger Jay Draimansaid...
INCREASING COST OF ENERGY and INFLATED FRAUDULENT BILLING

It is not enough that consumers are paying higher cost for energy – Gas, Electric, Tel., Etc.
Due to the market volatility and the increase demand for energy worldwide and the manipulation of market conditions by various corporation.
Deregulation, which was designed to save the consumer on the cost of energy. Many new companies have started selling gas and electric in the past 20 years, as a result of this deregulation. We now have numerous deregulated third party suppliers of Gas and Electric that are gouging the consumers – billing prices higher than the regulated utility companies, inflating the bill, billing for product never delivered, billing phantom tax on the product, reneging on fixed price contract – when market prices go beyond the fixed contract. In short any way they can cheat, deceive and defraud the consumer is fair game.
Among the companies that practice such tactics is MULTIUT CORP or Multiut LLC of Skokie, Illinois the owner of the company Nachshon Draiman is well connected, one of the previous owners of Multiut was a federal judge and therefore has gotten away with numerous over billing and deceptive practices, there are numerous lawsuits for fraud pending against Multiut Corp and its owner Nachshon Draiman among them a Class Action Suit and Dynegy Mkg & Trade v. Multiut Corp, Nachshon Draiman et al 1:02-cv-07446 The Federal Court has imposed numerous contempt orders against Multiut and its owner and its owner Nachshon Draiman is involved in numerous other fraud in the Nursing Home business (defrauding the state Nursing License with false documents to obtain a Nursing Home License) and a hotel project where he committed a fraud of $45 million dollars and numerous other fraud and deception too numerous to mention. (Especially since Multiut and its owner Nachshon Draiman is represented by Jack Abramoff Law Firm – which has clout).
Energy Billing Fraud Charges vs Multiut owned by Nachshon Draiman!
Multiut Admitted to holding money belonging to customers.

In a Class Action proceeding initiated in November 2001 - The case after numerous delays by Multiut, is now proceeding.
Gore vs Multiut - IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS Case No. 01 CH 19688 (See: www.antidefamationusa.com)

Another Company is Santana Energy out of Texas. Some utility companies were forced to refund the consumers hundreds of million of dollars due to manipulation of pricing and billing – many of those shenanigans stem from the Enron debacle some precede it and continue on to date.
Many of these suppliers of Gas and Electric who are promoting saving are actually charging higher prices than the local utility company which defeats the intent of deregulation – Multiut’s billing shows 20% to 30% higher cost and billing for gas that was never delivered. Not to mention Multiut’s billing for non existent City of Chicago Tax on Natural gas and inflated billing for lighting retrofit to various Nursing Homes which inflates the Medicaid billing to the government.
Corporate CEO and other higher ups in the corporate world have been convicted of fraud and sentenced/fined (WorldCom, Enron, Adelphia, Etc.). But it seems that some companies can continue to defraud the public without being hindered by the authorities.
Other frauds by Gas Electric suppliers are: Centerpoint Energy Inc.,
Pending lawsuits are: AG files fraud suit against Sempra affiliate alleging Enron-like games.
JD
This article is presented by Citizen for Honest and Fair Billing

PS
THREE FORMER NICOR ENERGY EXECUTIVES AND OUTSIDE
LAWYER INDICTED IN ALLEGED CORPORATE FRAUD SCHEME

CHICAGO -- Three former executives of Nicor Energy L.L.C. and an outside lawyer for the Lisle, Ill.-based company were indicted today for allegedly engaging in a corporate fraud scheme to obtain $400,000 in bonuses and other benefits for themselves by inflating revenues - at times by as much as $6 million - and understating expenses to make the company appear more profitable than it actually was in 2001. The defendants allegedly fraudulently deprived Nicor Energy - a retail energy marketing company established in 1997 as a 50/50 joint venture by Nicor Inc. and Dynegy Inc. - of their honest services and caused a loss to investors in publicly-traded Nicor, Inc. and Dynegy. On July 18, 2002, Nicor Inc. issued a press release announcing that its financial results for the second quarter and first half of 2002 were negatively affected by several factors, including irregularities in accounting at Nicor Energy, and the following day, the stock price of Nicor Inc. fell approximately 40 percent. Nicor Energy is currently in the process of final liquidation.

The five-count indictment returned by a federal grand jury charges Kevin Stoffer, formerly Nicor Energy's President and Chief Executive Officer; Andrew Johnson, former Director of Financial Services; John Fringer, former Vice President of Major Markets and Power Services; and outside counsel Michael Munson, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois
Judge Concludes Energy Company Drove Up Prices
by Richard A. Oppel Jr. and Lowell Bergman, September 24, 2002 (New York Times)
QUOTE: In the ruling, Curtis L. Wagner Jr., the chief administrative law judge at the Federal Energy Regulatory Commission, essentially validates the suspicions of California officials that El Paso, the nation's largest natural gas company, withheld natural gas from the state, thus driving up the cost of electricity...
ABSTRACT: In a judge’s ruling, a company who provides gas and energy supplies was found to have aided in raising the price of gas and electricity in California during previous energy crisis’s. The El Paso Corporation allegedly withheld natural gas, and in doing so, raised both gas and electricity prices. The ruling is still up for further review and many lawsuits are pending, but the El Paso Corporation contends that operations were normal and that an appeal will follow if the current decision is upheld.
--- C. Heimbuch-Skaley

MADIGAN, DALEY ANNOUNCE $196 MILLION SETTLEMENT WITH PEOPLES ENERGY; CUSTOMERS OF PEOPLES GAS AND NORTH SHORE GAS TO RECEIVE $100 MILLION IN CREDITS
Chicago – Attorney General Lisa Madigan and Mayor Richard M. Daley today announced that Peoples Energy has agreed to more than $196 million in consumer credits and benefits as part of a settlement that will provide much-needed relief to current Peoples Gas and North Shore Gas customers, establish a more than $25 million program of conservation and weatherization assistance for low- and moderate-income households and reconnect customers who have been disconnected from their heating services due to an inability to pay the high gas prices.
MADIGAN, DALEY, CUB ANNOUNCE REFUND CREDITS TO APPEAR ON NEXT GAS BILL FOR CUSTOMERS OF PEOPLES GAS AND NORTH SHORE GAS
Chicago — Attorney General Lisa Madigan, City of Chicago Mayor Richard M. Daley and Citizens Utility Board (CUB) Executive Director David Kolata today announced that as a result of their settlement agreement with Peoples Energy more than one million current customers of Peoples Gas and North Shore Gas will see refund credits on their next gas bills.
To compensate for over billing consumers between 2000 and 2004, Peoples Energy has agreed to provide a refund credit to each of the 1,014,071 current customers of Peoples Gas and North Shore Gas. The credits – totaling $100 million – will be included on the first bill received by customers after April 24.
“These refund credits cannot change the conduct of Peoples Energy, but they will help consumers who suffered as a result,” Madigan said. “This is an appropriate response to Peoples' conduct.”
“We are pleased that consumers are finally receiving the refunds that they deserve,” said City of Chicago Corporation Counsel Mara Georges. “Consumers should not have to pay for bad planning and business decisions by Peoples Gas.”
WEDNESDAY, JUNE 13, 2007
Justice Department Investigating NY Energy Markets
New York's wholesale energy market is being investigated for possible antitrust violations, according to a recent news report. A Newsday story indicates that a subject of the investigation may be possible withholding of capacity from the market, to drive prices up. This revelation has raised further questions regarding the proposed merger of National Grid and Keyspan, which controls significant amounts of generation capacity in the New York City markets.
Reliance Energy fraud on consumers

REL power bills have shocked Mumbai citizens, who will now have to pay double the amount they had been paying. A citizen pins down — point-by-point — the discrepancies in this billing and warns of the "REL fraud" perpetrated on the consumer.
2007.09.17
Oilman on trial in New York was involved in Austin's 1970s energy crisis
Monday, September 10, 2007
Former president of Coastal States Gas charged with wire fraud and conspiracy
Lawyers for Austin and San Antonio also learned that Lo-Vaca was selling gas to utilities serving the Dallas-Fort Worth area at the same time it was curtailing in Austin and San Antonio. In 1974 and 1975, Austin and other customers sued Lo-Vaca for $1.6 billion in rate overcharges.
EnCana Corp. et al.
A class action lawsuit has been filed against EnCana Corp., its marketing company, and sixteen other companies and corporations on behalf of Fairhaven Power Co. and all other business entities in the state of California that purchased natural gas between Jan. 1, 2000, and Dec. 31, 2001. The suit alleges a massive scheme to control the flow and prices of natural gas that was sold within California, which is a violation of U.S. antitrust laws. The suit further charges the companies with false reporting of natural gas prices, of conducting "wash trades" designed to boost trading volumes and conspiring to avoid competing with each other in the pricing and sale of natural gas in California.
Centerpoint Energy Inc. et. al.
A class action lawsuit has been filed against Centerpoint Energy Inc. and other natural gas suppliers on behalf of millions of residential customers in Arkansas, Texas, Louisiana, Oklahoma, Mississippi and Minnesota. The suit alleges fraud, unjust enrichment and claims that a conspiracy between the companies has led to the artificially inflated natural gas prices.

If you feel you qualify for damages or remedies that might be awarded in this class action please click the link below to submit your complaint.

BP & Reliant - Guilty of Price Fixing

In yet another settlement over the California Energy Crisis, BP & Reliant admit guilt and settle with the State of California.

Source: TheTip, 2003-07-21

Candidate: Enron

Naturally, the settlement does nothing to compensate the hundreds of thousands of people whose jobs and lives were ruined by the FERC-Caused California Recession.

BP Energy agreed to contribute $3 million to fund low-income home energy assistance programs in California and Arizona to settle a case in which federal energy regulators said that they found apparent evidence of power price manipulation.

In March, staff members of the Federal Energy Regulatory Commission issued a report on the 2000-01 energy crisis in the West. It said it found evidence indicating Reliant Resources and BP Energy, both based in Houston, appeared to have engaged in coordinated efforts to manipulate power prices at a trading hub in Arizona.

Both companies were ordered to demonstrate why their authority to sell power on unregulated wholesale markets shouldn't be revoked.

BP Energy doesn't lose that ability under the settlement. But for six months, BP Energy's electricity sales in the West will be subject to review by the FERC with the possibility of refunds.
Mid America Energy Inc.,
The Securities and Exchange Commission said today that it had filed a civil complaint against Gary M. Milby and his company, Mid-America Energy Inc., asserting that they bilked several hundred investors of more than $19 million in what the commission described as "a fraudulent oil-and-gas investment scheme."
SEC charges four more former Nortel execs
Allegations the men manipulated reserves to change Nortel earnings
The Associated Press
Updated: 6:36 a.m. PT Sept 13, 2007
TORONTO - The U.S. Securities and Exchange Commission has charged four more former Nortel Networks Corp. executives with accounting fraud, alleging they manipulated reserves to change Nortel’s earnings statements on the orders of more senior officers of the Canadian networking equipment maker.
Sept. 21, 2007
ENERGY Edison Is Hit Hard For Fraud On Survey
Category: Lexis Nexis - AC, CG News & Updates, Acc News & Updates, A/F News & Updates, ET News & Updates, PG News & Updates, Main AC RSS Feed, AC - Whats New
BY: LOS ANGELES TIMES – Oct. 2, 2007
ELIZABETH DOUGLASS, TIMES STAFF WRITER
There is "overwhelming" evidence that senior managers at Southern California Edison knew about a seven-year fraud at the Rosemead utility to collect millions of dollars in customer-funded incentives, according to a judge's decision released Monday by the California Public Utilities Commission.
The opinion, written by Administrative Law Judge Robert Barnett, makes official the $200-million cost to Edison that he outlined Thursday in an unusual oral preview of his conclusions. The decision required Edison to lose $160 million in performance bonuses and to pay a $40-million fine -- among the largest ever assessed by the commission.
Waste Management Pays For Executives' Fraud
Washington (Aug. 30, 2005) - Looking to avoid the publicity of a trial, the country's largest trash hauler will pay $26.8 million to cover most of the costs of a settlement between former executives and the Securities and Exchange Commission.
The settlement by Waste Management Inc. was approved in U.S. District Court in Chicago. Originally filed in 2002, the SEC suit had accused Waste Management's founder and former chair, Dean Buntrock, and three other former executives of failing to report expenses, postponing costs and filing false financial statements, in order to meet earnings targets between 1992 and 1997.
A new chief executive of the company ordered a review of the company's accounting practices in late 1997, eventually uncovering the problems and leading to a restatement of $1.7 billion in earnings. At the time, the restatement was the largest in the country's history.
In 2001, Waste Management agreed to pay $457 million to settle a class-action lawsuit alleging securities-law violations, and received about $20 million in a related settlement with now-defunct auditor Arthur Andersen LLP. At the time of that settlement, Buntrock reportedly agreed to pay a $2.3 million fine, and Andersen later paid another $7 million to settle with the SEC.
Conviction upheld in Cendant case
A federal appeals court upheld the conviction of former Cendant Corp. Chairman Walter Forbes on Monday for leading an accounting fraud.
The 2nd U.S. Circuit Court of Appeals in New York upheld Forbes' conviction on conspiracy to commit securities fraud and two counts of making false statements. Forbes was sentenced to 12 years and seven months in prison and ordered to pay more than $3 billion in restitution. Forbes, 64, reported to prison Aug. 7. 2007.
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8/12/2005
Worldcom CFO, Sullivan, Sentenced to Five Years
Details about Sullivan's sentencing and a handy-dandy Worldcom timeline, via Bloomberg:
From WorldCom's Origin to Sullivan Fraud Sentence: Timeline

August 11, 2005
By Carrie O'Reilly
Bloomberg

The following timeline lists events leading to and in the investigation of WorldCom Inc. and former finance chief Scott Sullivan, who was sentenced to five years in jail today for helping lead an $11 billion fraud that ended in bankruptcy.

The Timeline

September 1983: Businessmen Murray Waldron and William Rector meet in a Hattiesburg, Mississippi, coffee shop to discuss plans for a new reseller of long-distance service. A waitress scribbles the letters ``LDDC'' on a napkin and gives the company its first name, Long Distance Discount Co. The University of Southern Mississippi is the first customer.

April 1985: Early LDDC investor Bernard Ebbers, a former bar bouncer, basketball coach and hotel owner, is named chief executive officer.

August 1989: LDDC goes public by acquiring Advantage Cos.

May 1995: LDDC changes its name to WorldCom.

April 1998: Clinton, Mississippi-based WorldCom buys MCI Communications Corp. for $47 billion to challenge global telecommunications companies such as British Telecommunications Plc, France Telecom SA and Deutsche Telekom AG in selling businesses one-stop long-distance and data services.

June 21, 1999: WorldCom shares reach an all-time high of $61.99.

Sprint Merger Abandoned

July 2000: Ebbers abandons a planned $152 billion merger with the No. 3 U.S. long-distance carrier Sprint Corp. in the face of opposition by U.S. and European antitrust regulators.

June 8, 2001: Trading starts in tracking stock of WorldCom's consumer long-distance unit, MCI Group.

March 11, 2002: WorldCom says U.S. securities regulators are investigating loans to top executives and accounting practices.

April 3, 2002: WorldCom says it will fire 3,700 workers, or 4.4 percent of its workforce, in the face of declining demand and the accounting investigation.

April 25, 2002: The company says first-quarter 2002 profit fell 78 percent as long-distance sales slid.

Ebbers Quits

April 30, 2002: Ebbers, found later to have borrowed $408 million from the company in April, quits after 17 years as chief executive. Vice President John Sidgmore replaces him.

May 10, 2002: The three biggest credit-rating companies drop their ratings of WorldCom debt to below investment grade.

May 14, 2002: WorldCom shares fall in the most active day for a U.S. stock, with 413 million shares trading after Standard & Poor's says it will remove the company from its main index.

May 22, 2002: WorldCom says it will buy MCI Group stock to save $284 million in annual dividend costs.

June 5, 2002: WorldCom, weighed down by $30 billion in debt, says it will exit the wireless business immediately and cut jobs that some analysts estimate may total as many as 16,000.

WorldCom Admits Fabrications

June 25, 2002: WorldCom says it fabricated profit by misreporting $3.85 billion in expenses and fires Chief Financial Officer Scott Sullivan. The Securities and Exchange Commission says the earnings restatement for the first quarter and 2001 shows ``improprieties of unprecedented magnitude.'' WorldCom says it notified the SEC after auditors found expenses booked as capital expenditures. The company says it will cut 28 percent of its workforce, or 17,000 jobs.

June 27, 2002: The SEC says it will review $31.6 million in stock sales by WorldCom officers and directors during the 15 months that the company concealed losses.

July 12, 2002: Twenty-five banks sue WorldCom, claiming the company committed fraud in borrowing $2.5 billion six weeks before announcing that the expenses were misreported.

July 15, 2002: WorldCom is sued by the California Public Employees Retirement System, the largest U.S. pension fund, and other pension funds over $433 million in bond losses.

Debt Ratings Cut

July 17, 2002: WorldCom credit ratings on some debt are cut to D, indicating default, by Standard & Poor's after the long-distance carrier fails to make $74 million in interest payments.

July 21, 2002: WorldCom files for bankruptcy, reporting more than $35 billion in debts and $103.9 billion in assets, the largest U.S. bankruptcy ever measured by assets.

Aug. 1, 2002: Sullivan and David Myers, WorldCom's former controller, are arrested.

Aug. 28, 2002: Sullivan is indicted on charges of making false SEC filings to deceive investors and inflate WorldCom earnings.

Sept. 4, 2002: Sullivan pleads not guilty in federal court in New York.

Following Orders

Sept. 26, 2002: Myers pleads guilty to conspiracy and securities fraud and says he was following senior managers' instructions.

Oct. 2, 2002: Buford Yates Jr., WorldCom's former accounting director, pleads guilty to participating in fraud.

Oct. 10, 2002: Betty Vinson and Troy Normand, former WorldCom accounting officials, plead guilty to fraud and conspiracy.

Oct. 11, 2002: Myers pleads guilty in Mississippi to a state charge of conspiring to commit securities fraud.

Nov. 5, 2002: The SEC says WorldCom misstated $9 billion in income, almost $2 billion more than previously disclosed, and adds two charges to its civil suit against the company.

Nov. 15, 2002: Yates and Myers settle civil fraud charges with the SEC.

SEC Settlement

Nov. 26, 2002: WorldCom settles SEC fraud case, agreeing to hire an independent consultant to review its accounting and allow a court-appointed monitor to review its governance.

December 2002: Michael Capellas replaces Sidgmore as WorldCom chief executive officer. His $50 million pay package is approved on condition that court-appointed monitor Richard Breeden gets more say on the CEO's bonuses.

March 31, 2003: An internal investigation uncovers $11 billion in overstated profit, $2 billion more than previously disclosed.

June 9, 2003: Bankruptcy examiner Richard Thornburgh, a former U.S. attorney general, reports a ``board breakdown'' at WorldCom allowed fraud to flourish. Former SEC lawyer William McLucas, hired by WorldCom to examine company accounting, reports the fraud was a ``consequence'' of the way Ebbers ran the company.

Oklahoma Charges

Aug. 27, 2003: Oklahoma Attorney General Drew Edmondson charges WorldCom, Ebbers, Sullivan, Yates, Normand, Vinson and Myers with 15 felony counts of violating the Oklahoma Securities Act.

September 2003: Ebbers, Sullivan and WorldCom plead not guilty to the Oklahoma charges.

Oct. 17, 2003: Oklahoma agrees to delay its cases against Yates, Vinson, Normand and Myers until after Sullivan's federal trial.

Oct. 24, 2003: A federal judge allows investors and bondholders to pursue claims as a group against former WorldCom officers, directors and underwriters, including Ebbers, Citigroup Inc. and its former telecommunications analyst Jack Grubman.

Oct. 31, 2003: WorldCom, now based in Ashburn, Virginia, wins court permission to exit bankruptcy and rename itself MCI Inc.

Nov. 20, 2003: Oklahoma's Edmondson drops charges against Ebbers to avoid interfering with Sullivan's federal trial.

Sullivan Pleads Guilty

March 2, 2004: U.S. prosecutors charge Ebbers with directing the biggest accounting frauds in U.S. history. Sullivan pleads guilty to fraud, conspiracy and making false statements and agrees to assist prosecutors.

April 20, 2004: MCI, formerly WorldCom, exits bankruptcy after shedding $35 billion in debt.

July 6, 2004: MCI, Ebbers and 18 former WorldCom officials agree to pay about $51 million to settle a suit by employees who lost hundreds of millions of dollars when the company collapsed.

July 20, 2004: Judge approves Citigroup Inc.'s $2.65 billion settlement of a suit by WorldCom Inc. investors over the underwriting of the company's securities.

Jan. 25: Ebbers's fraud trial begins.

Feb. 17: Sullivan says he decided which one-time revenue items to use in financial reports to meet analyst expectations, ending a 6 1/2-day stint as the star witness in Ebbers's trial.

Feb. 22: At the trial, Ebbers criticizes Sullivan for having been ``too conservative'' with Wall Street analysts.

Ebbers Convicted

March 15: Ebbers is convicted of directing an $11 billion fraud that triggered WorldCom bankruptcy, the largest in U.S. history.

March 16: JPMorgan Chase & Co., the second-largest U.S. bank, agrees to pay $2 billion to settle claims by investors that the lender should have known WorldCom Inc.'s books were fraudulent when it helped sell $5 billion in company bonds.

March 18: WorldCom investors settle securities-fraud claims against 11 former company directors for $55.25 million.

March 21: Ex-WorldCom Chairman Bert Roberts agrees to pay $5.5 million to settle fraud claims by investors.

Settlements

April 25: Arthur Andersen LLP, WorldCom's auditor, agrees to pay $65 million to settle lawsuit over its liability in collapse, ending the largest securities-fraud class action in U.S. history.

May 2: MCI agrees to $8.44 billion takeover offer from Verizon Communications Inc., after spurning higher bid from Quest Communications International Inc.

June 30: Ebbers agrees to pay as much as $45 million to settle claims by the government, ex-employees and defrauded investors, leaving him with $50,000 and a ``modest'' home in Mississippi.

July 13: Ebbers sentenced to 25 years in prison for orchestrating the largest accounting fraud in U.S. history. He is ordered to report to federal prison to start serving his term on Oct. 12.

July 26: Sullivan, Myers and Yates settle a civil suit over the accounting fraud. The settlement forces Sullivan to turn over the 30,000-square-foot home he was building in Boca Raton, Florida, and hundreds of thousands of dollars in his 401(k) retirement plan. More than $6.1 billion has been recovered by investors from defendants including underwriters, accountants and directors.

Sentences

Aug. 5: Vinson sentenced to five months and in jail and five months home detention. Normand sentenced to probation.

Aug. 9: Yates sentenced to one year and one day in prison.

Aug. 10: Myers sentenced to one year and one day in prison.

Aug. 11: Sullivan sentenced to five years in prison and three years' probation.
The original article appears here.

-- MDT

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8/09/2005
Investigating Hedge Funds
An interesting article from the Wall Street Journal follows, describing the growing role of the corporate investigative sector in assessing and evaluating Hedge Funds individual-investor clients as well as larger institutions. Based on their capacity for rapid returns, hedge funds have become a tempting investment choice for many, but their sparsely regulated nature and the infrequent horror story in the financial press leaves potential investors sometimes feeling unsure of how to separate the reputable from the reprobates. That's where we come in:

Digging for hedge-fund dirt

August 08, 2005
By Jane J. Kim
The Wall Street Journal

The exploding popularity of hedge funds is creating a boom for modern-day corporate sleuths, who are doing big business digging into these secretive investment vehicles and their managers. The investigative firms range from large, multinational companies such as Kroll Inc., a unit of Marsh & McLennan Cos., to smaller shops with just a handful of private investigators. Though their biggest clients are institutional, a growing number of wealthy investors and their family offices also are looking for information.

The costs of these reports can range from roughly $1,000 to check out a one-manager hedge fund to tens of thousands of dollars for an in-depth, detailed report on a fund with multiple managers and world-wide operations. The investigators typically are former law-enforcement agents, licensed private investigators, forensic accountants and investigative journalists.

Because hedge funds -- lightly regulated investment pools that employ a wide range of strategies and are geared to institutions and the wealthy -- aren't subject to many of the reporting requirements that apply to mutual funds, it can be difficult to get details about their assets, returns and the people who run them. Assets in hedge funds are estimated to have more than doubled to about $1 trillion during the past five years, while the number of hedge funds has swelled to more than 8,000.

There have been some high-profile blowups recently, such as KL Financial Group, a Palm Beach, Fla., hedge fund that shut down amid an investigation by regulators of allegations that it reported outsize returns while actually losing money. In the five years through 2004, the Securities and Exchange Commission brought 51 cases against hedge-fund advisers who, it asserted, defrauded investors of more than $1.1 billion.

For many investors, checking out a hedge-fund manager used to be as simple as making a few discreet calls to well-placed friends at Wall Street firms. But as more money and new players flood the industry, returns -- in the 20 percent-plus range a decade ago -- have moved closer to those of stocks and bonds. In their quest for higher returns and innovative strategies, investors increasingly are seeking out international hedge funds or managers with nontraditional backgrounds, making the usual means of gathering information more difficult, experts say.

Investigative firms verify the manager's credentials and scour public records, such as news sources, company documents, regulatory filings and court documents, including criminal filings, bankruptcy records and civil lawsuits. Though some searches have turned up outright crooks, most discoveries are more mundane: managers who padded their resumes or failed to disclose jobs that went bad. (One investigative firm found that a fund manager was banned from the national parks for indecent exposure.)

But sometimes managers have had run-ins with securities laws. Tax liens, prior bankruptcies or other signs of financial difficulties are often deal breakers for potential investors. Even evidence of an active social life can deter potential investors who worry that the person may not be singularly focused on managing the fund.

"Unlike your friends, who you want to be Renaissance men, in a hedge-fund manager you're looking for the guy that doesn't have a personality," says Randy Shain, executive vice president at First Advantage Corp.'s First Advantage CoreFacts LLC investigative unit, which produces BackTrack Reports."People who have spent a lot of time doing a lot of other things, like auto racing, means that they're away from a computer screen."

Investigative firms estimate that between 10 percent and 20 percent of their searches will turn up suspicious information. But many say that percentage has been increasing as investors flock to more exotic funds and nontraditional managers.

Whether the information that a search turns up is enough to quash a potential investor's interest in the fund depends on the investor. Some will balk if a "white lie" pops up on the manager's resume, whereas others may be reluctant to walk away after spending a significant amount of time and money looking into the fund, even if faced with evidence of criminal activity. That is especially true if the criminal conviction was long ago or if the type of activity, such as drunken driving, isn't considered "material" by the investor, says Jeff Brenner, principal at Intelysis Corp., a corporate-fraud investigation firm. "It's a character flaw, I suppose, but not one (of) business acumen."

To be sure, institutional investors such as pension funds, endowments and so-called funds of hedge funds -- which bundle stakes in different hedge funds into one investment -- conduct a fair amount of due diligence on their own, analyzing investment strategies and delving into performance. But they are increasingly relying on outside investigators to look further into a manager's background.

Some consultants and investigators, such as London-based Control Risks Group and Capco, a unit of Capital Markets NV of Belgium, also look at whether assets reported to investors, as well as the methods used to value those assets, are accurate. That is a growing concern as hedge funds have become more complicated, with multiple managers investing in increasingly hard-to-value securities, such as credit derivatives. And as more hedge funds seek control of companies through private-equity deals, they themselves are hiring investigative firms to vet the directors or management.

The Financial Investigation Services division of NCO Financial Systems Inc., a unit of NCO Group Inc., says hedge funds now make up about 30 percent of the division's revenue, up from about 8 percent three years ago. The division's private investigators are spending more time delving into the backgrounds of hedge-fund managers in Asia, Europe and the Middle East as U.S. investors look overseas for higher returns, and hedge funds set up shop in countries with less regulation. About 12 percent to 15 percent of the division's revenue now comes from overseas projects, up from less than 5 percent five years ago.

The original article apears here. For more on all things hedge fund, check out our friends at FundStreet.org.

-- MDT

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7/18/2005
Former Quest CFO Cops to Insider Trading
Via Wyoming's Casper Star Tribune:
Ex-Qwest CFO pleads guilty to insider trading

By SANDY SHORE
AP Business Writer

DENVER (AP) -- A former Qwest Communications finance chief pleaded guilty to a single count of insider trading Thursday, the highest-ranking one-time executive to admit wrongdoing in the telephone company's multibillion-dollar accounting scandal...

...The SEC has said the fraud at Qwest Communications International Inc., the dominant local phone provider for 14 mostly Western states, occurred between April 1999 and March 2002, allowing it to improperly report approximately $3 billion in revenue that helped its 2000 merger with U S West. Qwest later restated earnings from 2000 and 2001 to erase about $2.2 billion in revenue and then agreed last year to pay $250 million to settle SEC fraud charges in a deal that excluded individual officers. The company did not admit wrongdoing...
Szeliga is the first of the Quest executives under investigation to reach a plea agreement with prosecutors:
Flanked by two attorneys, Robin Szeliga spoke in a soft monotone, her voice breaking just once as she answered the judge's questions about netting $125,000 on a stock sale by using financial information intentionally withheld from the public....Szeliga, 44, faces up to 10 years in prison and a $1 million fine, though the plea agreement recommends a term of 15 to 21 months. She agreed to pay $125,000 in restitution and to cooperate with prosecutors, which could prove valuable in their three-year investigation into accounting irregularities that forced Qwest to restate billions in revenue.

Acting U.S. Attorney William Leone said he was pleased with Szeliga's plea but declined to discuss specifics of her case or the ongoing investigation. "I do feel like the charge we brought today or that she pleaded guilty to today, reflects a fair view of the evidence," he said. Securities attorney Andrew Stoltmann of Chicago said Szeliga's agreement was a significant victory for prosecutors. "Once the CFO flips, that is huge in any case that the Department of Justice is going after," Stoltmann said. "From the prosecutor's standpoint, they kind of use that CFO's knowledge to go after the CEO or anyone higher up than the CFO"...
To that end, in her plea agreement Szeliga admitted that:
...she and other senior executives knew in late April 2001 that some business units would fail to meet revenue targets for the first six months of that year. She said she and other executives also knew that Qwest improperly booked revenue from one-time sales of equipment and fiber-optic swaps as recurring to meet those targets. Szeliga sold 10,000 shares of stock at $41 per share on April 30, 2001, earning a net profit of $125,000...
An investigation into the activities of other Quest execs are still pending.

Full article appears here.

-- MDT

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3/30/2005
SEC Suspends Quest Auditor, Former Arthur Andersen Partner
Via BusinessWeek Online:
SEC suspends Qwest's former auditor

MAR. 29 4:49 P.M. ET The Securities and Exchange Commission on Tuesday suspended the former Arthur Andersen LLP partner in charge of auditing the books of Qwest Communications International Inc.

Mark Iwan, the former partner at the now-defunct firm, is banned from handling audits of publicly traded companies for five years. He was accused of failing in his professional duties during audits from 1999 through 2001 by overlooking signs of what regulators have called a massive financial fraud at the company.

Qwest, based in Denver, was a once high-flying telecommunications company whose fortunes changed in the late 1990s amid excess capacity in the industry. Last year, the company agreed to pay $250 million to settle charges that it used accounting tricks to boost revenue in order to meet overly optimistic revenue projections.

Iwan's license expired in May 2004. As part of the settlement, the former partner agreed to cooperate with the SEC staff. The SEC two weeks ago filed civil charges against former Qwest executives, including Joseph Nacchio, the former chief executive.

Scott Schreiber, an attorney for Iwan, didn't immediately return a phone call.
The original article can be found here.

-- MDT

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3/15/2005
Former Quest Execs Face SEC Suit
Hot off Reuters:
SEC Sues Ex-Qwest CEO Nacchio, Six Others

Tuesday March 15, 2:03 PM EST

DENVER, Colo, (Reuters) - The U.S. Securities and Exchange Commission on Tuesday sued former Qwest Communications International Inc. (Q) Chief Executive Joseph Nacchio and six other former executives, accusing them of perpetrating a massive financial fraud on investors.

The lawsuit, filed in Denver federal court, alleged that the Qwest management team filed false financial statements that hid the true source of the company's revenues between April 1999 and March 2002.

The scheme caused the Denver-based phone company to fraudulently report about $3 billion of revenue and also facilitated the company's June 2000 merger with US West Inc., the lawsuit said.
Read the rest at MYWAY News.

-- MDT

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