Lance Armstrong Investigation: Lance and Landis Competing Again

The competition between Lance Armstrong and Floyd Landis isn't in the French Alps but, instead, may be in a U.S. federal court room. The Wall Street Journal reported today that Lance's troubles with Landis and the Department of Justice are still ongoing. Floyd was astute enough to file a whistleblower lawsuit against Lance under the Federal False Claims Act which allows whistleblowers to collect up to 30% of any recovery by the Federal Government if the government sues an individual for defrauding them. When Lance was sponsored by the U.S. Postal Service he was prohibited from doping by his contract with the USPS. Unfortunately for him, just when Lance probably would like to pay his last legal bill, it sounds like he may be supporting his all-star legal team for some years to come. Here's what the Wall Street Journal has to say about it...

More to the Goldman Sachs VP's Story

Earlier this year, a VP at Goldman Sachs, Greg Smith, resigned and published his resignation letter in the New York Times. In his letter he laid out claims that Goldman's business model is to consciously rip off their clients. 60 Minutes recently did a story on Smith and interviews him along with numerous other individuals. Smith has recently published a book titled "Why I left Goldman Sachs." Goldman officials claim that Smith has a personal vendetta against his employer. On the other hand, Smith is not the first person to criticize Goldman or the investment banking industry for unethical business practices. Many trace some of the major economic downturns of our times back to this industry including major frauds like Enron and Worldcom as well as the mortgage meltdown. Check out the 60 Minutes story if you're interested in hearing more from Smith and his allegations against Goldman.

Lance Armstrong Investigation: Anti-Sportsman of the Year

Today, Sports Illustrated published something that makes me conclude that the world has clearly come to grips with the corruption and cheating in pro cycling that existed for the past several decades. If you haven't seen it yet, you should check out this Sports Illustrated link where they awarded Lance as the "Anti-Sportsman of the Year." To my knowledge, this award has been created just for Lance. Well, I guess Lance can add that to his list of accomplishments. (If I'm wrong about this, please let me know but I don't think SI has ever given such an award before.)

Livestrong, Lance Armstrong and the IRS

Forbes published an article yesterday that discusses the distinct possibility that LiveStrong may be in trouble with the IRS. As it turns out, non-profit organizations are prohibited by law from exerting political influence. In addition, if reports are true that Lance has often taken a cut of the funds that donors thought they were giving to Livestrong, the IRS certainly will want to know more about that behavior too. Here are some excerpts from the Forbes article:

HP Writes Off Nearly $9 Billion Related to Accounting Fraud

Reports are coming out today that Hewlett Packard will take an $8.8 billion writeoff of an acquisition of a software company they purchased for $10 billion. The reason for the writeoff is because the company they acquired, Autonomy, deceived them by using a massive revenue recognition fraud. HP stated that they have turned over the case to the SEC and regulators in the UK. You can read a few more details on Forbes, MSNBC and elsewhere. It seems the reports are still a bit vague though...

According to this article in the WSJ, two of the Big Four, Deloitte and KPMG, were involved in the audit and purchase of Autonomy. Unfortunately, they will undoubtedly be dealing with this mess too.

JOBS Act Leads to First Fraud Case

In March of this year we blogged about the, then proposed, JOBS Act and how this act would eliminate important disclosures meant to protect investors from fraud. The Act lowers the regulatory hurdles for companies who are defined as emerging growth companies. The NY Times reported this week that a company named Caribbean Pacific Marketing is the first company that got its start under the JOBS Act and is being prosecuted for fraud. Here are a few bytes from the NY Times:

Lance, Livestrong and the UCI

Numerous reports are flooding the internet that the UCI has sustained USADA's decision to strip Lance Armstrong of his seven Tour de France titles making Greg LeMond the only American to ever win the Tour de France. Of course, this comes as no surprise to those who were aware of the plethora of evidence showing Lance to be the biggest sporting fraud in history; the Bernie Madoff of sport.

Last week we read of Livestrong donors asking for their money back. My wife says that given today's news we should be reading soon about Lance wanting his donations to the UCI back too...

Lance Armstrong Investigation: Was LiveStrong Built on the Back of a Fraud?

As I mentioned in the last post, I've been contacted by some LiveStrong donors who want their money back because they believe they donated under false pretenses. You can read about two of these donors on CNN. Here are a few bytes:

Lance Armstrong's Kingdom is Crumbling

 Update: since publishing this post this morning, several other sponsors have dropped Lance Armstrong. This article in The Wall Street Journal lists a bunch...

A few days ago, I received an email from a person who explained that, in 2000, she and her husband had donated $50,000 to the Lance Armstrong Foundation, now LiveStrong. A few years later she initiated a fundraiser that hosted Lance and collected $155,000. She explained that "With the news of Lance's deception, we feel cheated and also resentful that we were used to unknowingly continue the fraud." She said they believe there may be grounds for a class action lawsuit and wondered if there are any attorneys working on LiveStrong litigation due to Lance's fraud. (I'm still trying to find out so please email me if you have information on this.) Today's news reports indicate that this sad story is not an isolated case and that Lance's kingdom is quickly crumbling...

Lance Armstrong Investigation: Signs of Corporate Corruption

Lance Armstrong has now officially earned the title as the Bernie Madoff of sporting fraud. To fraudulently orchestrate an operation that led to winning the Tour de France seven times in a row all the while running a sophisticated doping operation for himself and his teammates is no small feat. Just as Bernie Madoff could never run a $50 billion Ponzi scheme on his own, Lance needed a lot of players to go along with it. Recent news reports are now suggesting that Lance had help from corporate sponsors to pull off this tragic deception...

Lance Armstrong Investigation: A Documentary

Australian television has a very well done documentary on the Lance Armstrong investigation at this link. Some highlights include videos of Lance and many others testifying in the SCA Promotions lawsuit from a few years ago. Also, Phil Liggett finally admits in an interview that Lance must have doped. There is a lot more testimony and details in the documentary that you might enjoy if you've been following this fraud. I agree with Betsy Andreu's assessment in the documentary that Lance is the Bernie Madoff of sport.

Heroes in the Lance Armstrong Investigation

Emma O'Reilly

There are a few heroes that paid a substantial price in the fight for truth in the Lance Armstrong investigation. For example, Emma O'Reilly, Lance's former soigneur, was one of the first to tell others that she knew Lance was doping. Emma spoke up nearly a decade ago and told her story. She paid a price for her honesty as Lance sued her for libel and persecuted her ruthlessly. In her words:  Lance tried to make her life hell. Emma paid a big price for telling her story. Yes, she was paid by a book author to tell it but without her story, it's possible many other stories would not have come out.

The Complexity of Bernie Madoff's Ponzi Operation is Coming to Light

The Wall Street Journal published an article this week with more information about how Bernie Madoff's Ponzi scheme could operate with so few people. I've always been skeptical that anyone could pull off such a massive fraud without a team of people involved. It looks like the government is now putting together a case showing that a team was behind the fraud and it ran for a much longer time than previously estimated: nearly four decades.

USADA Evidence Against Lance Armstrong

The WSJ and other news outlets are reporting that later today USADA will release more than 1,000 pages of documents supporting their accusations that Lance Armstrong doped.  Some noteworthy highlights:

Lance Armstrong Investigation: Death Threats for Tygart?!

The French newspaper, L'Equipe, published an interview with USADA CEO, Travis Tygart. I just read an english translation of the interview that describes Tygart's challenges in the investigation including several death threats that are now being investigated by the FBI. The translator says that neither French or English are his native language so there may be mistakes but he also says that he had others check his translation. With that caveat, here are a few of the more interesting tidbits:

Whistleblowing Pays

Today's news challenges the notion that whistleblowers always suffer. The IRS awarded $104 million to former UBS banker, Bradley Birkenfeld, for providing information about a tax evasion scheme. Here are a few quotes from Bloomberg:

Lance Armstrong Investigation: More on the Conspiracy

You may be feeling a bit worn down on all the Lance Armstrong stuff in the news. I know I have been. However, today, I read a few things that I found pretty fascinating. One was an article about Jörg Jaksche. The other was an article about Lance's efforts to help both Landis and Hamilton in their efforts to lie about their doping. Here are some excerpts:

Lance Armstrong Investigation: A confession and more

Here's the latest press worth reading on the Lance Armstrong investigation. First, Lance finally came as clean as he's going to come in this editorial published by the ONN. Additionally, the LA Times tells it like it is in this editorial titled "Lance Armstrong Can't Get Cheating Out of His System." This isn't too surprising though given that it's been in his system for a long, long time...

This is almost as good as the Lance Armstrong press gets this week. These two publications get special kudos for not buying into the shoot the messenger mantra of criticizing and demonizing USADA. Also, they earned my praise for not going along with the weak-minded babble that people like Rick Reilly and Phil Liggett have been spewing this past week. Here's why I say this.

The guy cheated. He broke the rules and is being disciplined by the organization that he contracted with when he purchased his license to be a bike racer. He signed his license and in doing so, he agreed to follow the rules and be subject to the processes of WADA and, by delegation, USADA. Sure, he has done some good things in his life but that doesn't change the fact that he is the biggest sports fraud in history. 

In addition, to glorify him while ignoring his mistakes is to condone the cruel things he did to the people who tried to stop him from committing his fraud including Greg LeMond, Frankie and Betsy Andreu, Emma O'Reilly and Mike Andersen, among others...

Let's not forget them and the injustices they have experienced because Lance was, and still is, too weak to admit that he cheated...

Lance Armstrong Investigation: Another Victim

I had no idea about this latest victim, Gary Osgood, who suffered from the Lance Armstrong saga.. Read about him on ONN.

Lance Armstrong Investigation: Is USADA the Bad Guy?

Lance and his PR machine are doing a remarkable job of spreading the message that he is the victim of a wild, power hungry, anti-American, unconstitutional agency that is out to hurt him for some unknown reason or motive. Here are my thoughts on this...

Lance Armstrong Investigation: Favorite Quotes from the Press

There is a ton being written about Lance's decision to not fight the allegations that he was a fraudster during his cycling career. I've decided to collect my favorite quotes here with links to the articles...

Lance Armstrong Investigation: More Misleading Information

Photo taken from the internet

All the news outlets are saying that Lance Armstrong has decided to quit fighting USADA but I don't believe it. Here's why...

Lance Armstrong Investigation: Words of Wisdom from Betsy Andreu

Photo from Bicycling.com

If you have any interest in fraud, truth and ethics, you have to read this short interview of Betsy Andreu in Bicycling Magazine. If you are a cyclist and have interest in fraud, truth and ethics, this interview is a gem!
Betsy and Frankie Andreu have paid a huge personal price, in terms of the economics of this world, for fearlessly telling the truth. Here are a few of the more profound quotes...

Lance Armstrong Investigation: Judge Sparks' Ruled for USADA

Photo from CyclingNews

It was announced today that Judge Sparks has ruled that USADA has the authority to bring its case against Lance. In cycling lingo, this is one more attack that Lance needs to cover in this last stage of his race to hold on to his yellow jerseys. The stage isn't over yet but Lance needs to respond by Thursday. Here are a few more details from the news outlets...

It’s Only Lying About Drugs (A Guest Post)

Lance Armstrong (from the internet)

Note: The following is a guest post by R. Duke Dougherty, Jr. Fraudbytes publishes high quality guest posts on fraud-related topics.

If I doze off while reading a cycling article, I run the risk of dreaming about Lance Armstrong. The dream goes like this: I’m watching TV while Armstrong addresses a press conference. Armstrong gives his questioner “the look” and angrily wags a finger as he says, “I did not admit to drug abuse around that woman...Ms. Andreu.” Then my head bobs up a little, but I don’t wake up. Instead, I see Armstrong angrily wagging his finger again as he says, “I did not give used syringes to that masseuse...Ms. O’Reilly.”

Olympic Cheaters Should Lose Their Medals

Photo of Cameron van der Burgh from Supersport.com

I mean, it seems only logical to me to take away someone's gold medal if they have been caught cheating and even admit to it. Cameron van der Burgh intentionally broke the rules of his swimming competition. He admits to breaking them. Case closed!

However, it looks like Mr. van der Burgh may keep his gold even though it's being reported that he admits that he cheated to get it. Here's what NBC.com has to say:

Lance Armstong Investigation: Have I Heard From Him?

I get this question on a regular basis. People have heard that he tries to intimidate and bully anyone who says anything negative about him. Well, the short answer is that I haven't heard from him. If I do, you will be the first to know as I'll blog about it here.

Interestingly, another blogger about Lance's woes, Anna Zimmerman, did hear from him recently. Check it out here. It's complete with screenshots from Anna's twitter account. He started following her one day and contacted her. When she didn't respond right away he contacted her again.

She basically called his bluff as he asked to meet with her so he could share some thoughts and she said no thanks, you can just tell me what you want to tell me using the internet. Not surprisingly, Lance didn't respond...I think he's smarter than that.

Here is one of the screenshots from her blog:

My guess is that she will be recording any phone calls he makes to her too. I know I would...

By the way, Anna's blog is full of some well thought out analysis of Lance's situation. I recommend reading her recent posts about Lance and LiveStrong. She lays it out pretty clearly why, in her opinion, Lance's lawsuit against USADA is baseless and that LiveStrong could lose its tax-exempt status for lobbying on Lance's behalf.

She appears to have a legal background and lives in Austin, Texas. Pretty gutsy woman if you ask me. I tip my hat to her.

Lance Armstrong Investigation: USADA Strikes Back in Court

Photo from FoxSports.com AU

Late Thursday night, news outlets are reporting that USADA has filed a 19-page motion asking U.S. District Judge Sam Sparks to dismiss the lawsuit filed by Lance Armstrong about ten days ago.

Here are some details of the news reports as taken from Thursday's Wall Street Journal:

Lance Armstrong Investigation: LiveStrong Gets Involved

Photo from Wall Street Journal

News reports suggest that LiveStrong donors should rest well knowing that their funds given to help fight cancer are being used to lobby Congress to pressure USADA in its investigation of Lance Armstrong.

Today's Wall Street Journal reported that a Congressional staff member has confirmed that "The...Texas-based charity known as Livestrong, sent a lobbyist to Capitol Hill last week to discuss the funding for the agency that has accused the retired cycling champion of cheating to win the Tour de France." Here are more details from the Journal:

Iraqi Relief Funds and Fraud [Guest Post]

Through the end of Fiscal Year 2011, the United States Congress appropriated $51.4 billion for the relief and reconstruction of Iraq. Congress also commissioned the Special Inspector General for Iraq Reconstruction (SIGIR) to perform an audit of the expenditures.

SIGIR released a final forensic audit report last Friday. The extent and nature of some of the frauds and waste encountered make it appropriate that the report was released on Friday the 13th. You can access the full report here. My reading of the report suggests a mixed signal. On the one hand, SIGIR finds relatively effective controls over the payment process. On the other hand, SIGIR found several prevalent and serious control weaknesses in the procurement process.

To quote the report:

Lance Armstrong Investigation: John McCain Supports USADA

Senator John McCain

This news is about a day old now but I just got time to put it up for those of you following the Lance Armstrong investigation.

After Rep. Sensenbrenner (Rep. Wisconsin--Trek Bicycles district) put pressure on USADA on Thursday (see this link), I was pleasantly surprised to see John McCain come out in support of USADA. Here are a few more details from an article on VeloNation along with my usual commentary.



McCain issued the following statement that you can find online on McCain's website and in various news articles:

Peregrine Financial Group: 20 Years of Forged Documents by CEO

Photo of Wasendorf from CBS News

Earlier this week it was reported that Peregrine Financial Group was short about $220 million of the reported $225 million of customer funds. Today the text of a suicide note written by the CEO, Russell Wasendorf Sr., shows that Wasendorf forged documents for twenty years to conceal his fraud.

Below is the text of the note as reported on various news sources. In the note, Wasendorf lays out, in detail, how he committed the fraud.

Lance Armstrong Investigation: USADA Under Political Pressure

Congressman Sensenbrenner

Well, you have to hand it to Lance. Just when it looks like he will receive some consequences for the massive doping that his teammates have allegedly accused him of, cases are closed and politicians come to his rescue. First the DOJ drops his case earlier this year with virtually no explanation and now a Congressman from Wisconsin is putting pressure on USADA to back off. Amazing!

Here is some more information from an article on VeloNews: 

The congressman, James Sensenbrenner, wrote a letter to the Office of National Drug Control Policy (ONDCP) which oversees USADA and stated: 

“The U.S. Congress has no role in determining whether an individual athlete doped, but we do have a great interest in how taxpayer money is spent,” Sensenbrenner wrote in his letter to Kerlikowske.

He continued:

Revisiting Allen Stanford's Ponzi Scheme

While Bernie Madoff has claimed the bulk of the spotlight in fraud related news over the past few years, Allan Stanford's fraud isn't just another Ponzi scheme, as highlighted in this interesting article by DailyFinance.  Here are some of the highlights:

Lance Armstrong Investigation: Has He Been Tested Over 500 Times?

Photo taken from NY Times

I tip my hat to a group of skeptics who have put together an analysis of Lance's claim that he has been "tested over 500 times and not once tested positive." Before we get to the analysis, here are a few of the actual quotes (in addition to the one above) that are attributed to Lance or his legal team in this regard. You can find similar quotes by a simple Google search.

"Lance is the most tested athlete, amateur or professional in the history of sport. We don’t know exactly the number but we think it’s around 300 separate tests that he’s undergone and he has never had a positive test." (Tim Herman, Lawyer to Lance Armstrong, July 2010)

"Throughout his twenty-plus year professional career, Mr. Armstrong has been subjected to 500 to 600 drug tests without a single positive test." (Civ. Action No. 1:12–cv–00606–SS July 2012)

As it turns out, the number of tests he has had over the period from 1990 - 2010 appears much closer to Tim Herman's quote in 2010: 300. Here are some key points from the analysis documented at Cyclismas.com...

Lance Armstrong Investigation: Lifetime Bans and Real Heroes

While Lance Armstrong is fighting USADA to try to stop them from taking away his seven Tour de France titles, three of those who have been accused with Lance as being part of a doping conspiracy have, apparently, quietly conceded to receive lifetime bans from any involvement in cycling. According to VeloNation, the three include two doctors: Michele Ferrari and Luis Garcia del Moral and the team trainer, Pepe Marti. The article continued by saying:

Lance Armstrong Investigation: Lawsuit Dismissed Already!

Photo from CyclingNews

Wow, this has to be some sort of record. Within seven hours of Lance Armstrong's team filing a lawsuit against USADA, a federal judge has dismissed the claim! I mean, I don't know how the judge could read the 80 pages in much less than seven hours! Here is a great quote from the judge (courtesy CyclingNews):

"This Court is not inclined to indulge Armstrong's desire for publicity, self-aggrandizement or vilification of Defendants, by sifting through eighty mostly unnecessary pages in search of the few kernels of factual material relevant to his claims."

The Court claimed that the lawsuit filed earlier in the day contained "allegations" which were separate to the case and therefore "the Court must presume, were included solely to increase media coverage of this case, and to incite public opinion against Defendants."

A footnote on the documents states the following:

"Contrary to Armstrong's apparent belief, pleadings filed in the United States District Courts are not press releases, internet blogs, or pieces of investigative journalism. All parties, and their lawyers, are expected to comply with the rules of this Court, and face potential sanctions if they do not."

I guess this judge wants to be on recored that he isn't going to be intimidated or allow Lance's high-priced legal team use his court to bully USADA via public opinion...I don't know about you but I'd like to meet this guy!

Lance Armstrong Investigation: Lance sues USADA

In a move that should surprise no one, Lance Armstrong has filed suit against USADA in an attempt to halt the doping charges he is facing. USADA's CEO responded with the following statement:

In an emailed statement, Mr. Tygart implied that Mr. Armstrong's legal action Monday was nothing new. "Like previous lawsuits aimed at concealing the truth, this lawsuit is without merit and we are confident the courts will continue to uphold the established rules which provide full constitutional due process and are designed to protect the rights of clean athletes and the integrity of sport," said Mr. Tygart.

My main question is whether this response is something you would expect from an innocent person or someone who is backed into a corner and sees his kingdom crumbling before him?

Lance Armstrong Investigation: What Do His Reactions Suggest?

Today, numerous news organizations from VeloNation to NY Times have reported that an anonymous source has said that four of Lance's closest associates and former teammates have agreed to testify against him; each of the four are still racing. The reports also said that those who have agreed to testify will receive reduced sentences for their doping. The sentences will last six months and start after the season is over. This is essentially a slap on the hand since the riders have about six months before most of the big races start up again. Here is the list of those reported to be testifying:

Lance Armstrong Investigation: USADA's Case to Move to Arbitration

Various news outlets from the Wall Street Journal to VeloNation are stating that a three-person independent review board has ruled unanimously to move forward with USADA's doping case against Lance Armstrong. In essence, the review board served as a quasi Grand Jury that determines if USADA has enough evidence to pursue sanctions against Lance and the others.

Previously, USADA stated that the arbitration hearing (assuming those involved don't accept the sanctions -- wink, wink) will take place before November of this year. Presumably, now that the case is moving forward, Lance and the others (including Johan Bruyneel and Michele Ferrari, Pedro Celaya, Luis Garcia del Moral and Jose Pepe Marti) will learn more about the evidence USADA has and maybe we will also learn more as well. So far we know that at least ten former team members will testify that they have firsthand knowledge that Lance doped or tried to get others to dope. They have also stated that they have blood results from 2009 and 2010 that show evidence of doping.

As might be expected, Lance and his attorneys are attacking USADA and the review board. Lance has discovered embarrassing personal information about one member of the review board as this quote from VeloNation suggests:

Going After the Deep Pockets in the Madoff Case

If you are looking for a break from today's coverage of the Supreme Court's ruling on ObamaCare, the NYTimes has an interesting article on the legal doctrine that is making it hard for Irving Picard to recover money from the banks that helped enable Madoff's historic Ponzi scheme.

Madoff and Merkin: A $410,000,000 Resolution

Photo from NY Times

We've written before about Ezra Merkin's hedge funds that fed Madoff billions of investor dollars. Merkin collected his fee and then apparently went to the beach to rest from his hard work. Occasionally he took a break from the beach and the golf course to write to his investors and tell them how he actively managed the funds.

Merkin has now settled part of the lawsuits against him for claiming to actively manage his funds and then giving Madoff the money. Here are some details from the NY Times...

Lance Armstrong Investigation: Are Pro Athletes Being Harassed?

I read on a regular basis, sometimes from comments left on this blog, that the government shouldn't be harassing Lance Armstrong, Roger Clemens, Barry Bonds or other pro athletes for using performance enhancing drugs or for lying to Congress. Others have said that the investigations are modern-day witch hunts. This editorial from the Rockland County Times expresses a well-reasoned response to that opinion.

Lance Armstrong Investigation: Is it Affecting the Olympic Team?

The rumor mill is speculating that four US cyclists who would normally be considered for the US Olympic cycling team this summer are not going to race because of some involvement in the Lance Armstrong investigation. This rumor comes from the following statement published by USA Cycling:

Sir Allen Stanford gets life sentence

Well, the US Justice Department comes through on Ponzi schemer, Allen Stanford and sentenced him to 110 years for running his $7 billion Ponzi scheme. 

Unless you follow fraud like I do, you probably have never heard of Stanford. That is one bizarre effect of the Bernie Madoff fraud. If Madoff hadn't come to light about two months before the Stanford fraud came to light, everyone would know Sir Allen since his Ponzi scheme would have been known as the largest in history, by far. If you want to learn more about Sir Allen, including why I refer to him as "Sir" you can read the posts linked here.

Now, I just hope the Justice Department decides to prosecute some of the fraudsters who caused the mortgage meltdown and put the world economy in a the great recession...

Lance Armstrong Investigation: USADA's Charges and Evidence

Photo from cbsnews.com

I found a copy of USADA's letter to Lance and friends online. From what I've read, some of USADA's evidence came to light from their participation in the grand jury investigation of fraud charges as the Grand Jury heard from the likes of Lance's closest associates including George Hincapie and others. The full letter is included below, along with some key points that I got from it:

Lance Armstrong Investigation: It's Not Over Yet...

Photo taken from WSJ.com (Gettty Images)

Just when you thought maybe the Lance Armstrong doping investigation was going to be over, USADA charged him yesterday with being involved in a massive doping conspiracy for over a decade. Now, I have to ask myself, if USADA doesn't have much of a case would they dare dig this up again and take on the amazing Mr. Armstrong again? I mean, doping charges against Lance have been about as effective as efforts to balance the US budget have been! Of course, no criminal charges in serious cases in the US have gone anywhere lately so Lance is joined by all sorts of high profile fraudsters in dodging criminal bullets. As to these charges, they aren't criminal but they could mean he loses his seven yellow jersey titles if they do stick. Here is a summary of the news, hot off the press:

What happens when you mix Pharma with Politics?

Apparently, the result is shady dealing and crony capitalism at its finest. When favors are made to a vendor or customer in business we call it corruption. In this case, internal emails from sources outside of Washington are providing evidence that deals were cut behind closed doors that will cost taxpayers as companies like Pfizer and Merck get profit protection in return for campaigning for Obamacare. This is according to several sources that are covering the findings of an investigation by the House Energy and Commerce committee of negotiations between the drug companies and the White House.

Here are some links to news sources if you want more details:

More on Fraud and the US Department of Justice

In several recent posts, I've been critical of the US Department of Justice's extremely poor record of prosecuting Wall Street executives who were a big cause of our current economic crisis. The executives of numerous large financial institutions took home hundreds of millions in compensation while pushing their firms to commit illegal business practices. It's obvious that basic mortgage fraud was rampant in many organizations and yet virtually no one has gone to jail yet.

Surprisingly, the lack of vigilance by the current administration is so blatant that even the NY Times has published an editorial by one of its columnists that says the current Democratic administration panders to business more than past GOP administrations did! I'd like to see a study of how often the NY Times has compared a Democratic administration to a Republican one and found the scale tipped to the GOP side of things. It has to be rare.

I recommend reading the analysis that this editorial gives and see if you agree with the bottom line that this editorial makes:

Amazing, isn’t it? George W. Bush has turned out to be tougher on corporate crooks than Barack Obama.

Wow--from the NY Times no less! Can Eric Holder and President Obama fall any further than that?!

Fraud and the Mortgage Meltdown

Charles Ferguson, the person who created the documentary on the mortgage meltdown "Inside Job," has written a book on the topic titled "Inside Job: The Financiers Who Pulled Off the Heist of the Century." I can only seem to find it on Amazon's UK website so I don't know if it will be available in the US. In any case, this article in the Guardian, written by Ferguson, has some interesting comments about the fact that the Obama administration and the US Justice Department is not prosecuting anyone. Ferguson also names several banks that he claims were complicit in the meltdown and committed various forms of fraud. He says that It's pretty disheartening to think this much corruption exists in the financial industry and the government isn't doing much to hold anyone accountable for it. Here are a few excerpts:

CFOs and Fraud

EY just released the latest version of its annual Global Fraud Survey and some of the findings are striking.    15% of surveyed CFOs expressed a willingness to pay bribes and 4% would be willing to misstate financial performance to help their business to survive an economic downturn (versus 9% and 3% last year, respectively).  While the survey was conducted globally, according to the report, "No strong patterns were identified in relation to the jurisdictions, industries or types of companies where these issues were more acute."  That is, these results aren't primarily driven by a few extreme locations or types of companies but appear to apply fairly generally everywhere, to all companies.

Causes and Effects of Cheating in America

Here is an article that describes how the family's failure to instill a strong moral compass (and even corrupting the moral compass of some children) is leading to costly short- and long-term economic consequences. It reports a case where several students were found to buy "ringers" to take entrance exams for them so as to get into colleges where they would otherwise be unable to gain entrance. A troubling statement in the article is: "Parents – who presumably foot the bill for hiring these ringers – feel tremendous pressure to give their children the best odds they can for gaining admission to Ivy League schools, where success would mean better prospects for future careers." Assuming parents are supporting or at least not preventing this sort of behavior, the family is truly failing in this case. The least of the consequences from such a situation are described in the article as follows:

Imagine John Edwards on the US Supreme Court

Check out this article about former Senator John Edwards watching a video of himself lying about his affair. The article states that he was holding out hope to be a US Supreme Court Justice. Wow, that is scary...

Lehman Brothers and the U.S. Department of InJustice

60 Minutes aired what is likely to be the last segment on the global mortgage meltdown and how the U.S. Department of Justice has essentially given the key players a "Get out of Jail Free" card. The latest segment focuses on the Lehman bankruptcy and the fraud involved in that case. Steve Kroft of 60 Minutes says that he has given up hope that the Department of Justice or the SEC will bring any charges against the key players. He says that he is "astounded" that the government has failed to bring cases against the key individuals. In the main video...

U.S. States with Highest Consumer Fraud

24/7 Wall Street published an analysis of consumer fraud that ranked the top ten states in terms of complaints to the Federal Trade Commission per 100,000 people. FTC complaints are put in two categories: identity theft complaints and other fraud complaints. Identity theft was the top category with debt collection fraud coming in second. Here are the top ten states as published by 24/7 Wall Street:

Wealth is a Jealous Master

I was reminded today of a classic quote by a former BYU Professor, Hugh Nibley. Here is the quote:

Wealth is a jealous master who will not be served halfheartedly and will suffer no rival—not even God: “Ye cannot serve God and Mammon.” (Matthew 6:24) In return for unquestioning obedience, wealth promises security, power, position, and honors, in fact anything in this world. … The more important wealth is, the less important it is how one gets it.

My reminder came when reading a story in Bloomberg Businessweek about a fraud in France involving breast implants. Here is the rest of the story from Bloomberg Businessweek...

Wall Street Justice III: Fraud Pays in Healthcare Industries

One of my students forwarded me a link to an article describing numerous pharmaceuticals that have committed fraud only to have the CEO receive a hand slapping and a multi-million dollar bonus on the way out the door. Here are a few of the cases mentioned in the Forbes article:

Mets Owners Settle Willful Blindness Case

Just as jury selection was about to begin, the New York Mets owners have opted to settle the $303 million lawsuit against them.  While the article is a bit unclear, I believe the settlement amount of $162 million is in addition to the $83 million in fictitious profits that the Mets owners already had to return per a ruling by Judge Rakoff.  

Wall Street Justice II: More Insanity on the Way

As if the government's hands-off approach to prosecuting Wall Street firms wasn't enough, Congress is in process of passing laws to lessen regulation for firms trying to go public so they can raise money without the usual disclosures. Guess what industry is licking their lips right now hoping this bill passes--the investment banking industry. The following is from yesterday's Washington Post:

Wall Street Justice: An Oxymoron?

It looks like the U.S. Department of Justice has decided to give Wall Street firms and their top executives a "get out of jail free" card over the last several years. The latest example of this is the MF Global scandal with the former governor of New Jersey, Jon Corzine, and company appearing to get away with $1.6 billion of customer assets that are "missing." An Op-Ed in the NY Times explains Corzine's crimes this way:

Stanford Convicted on 13 of 14 Counts

Allen Stanford has been been convicted of fraud.

Insider Trading: Massive Investigation in the Works

Various news outlets are reporting that federal authorities are working on what sounds like a massive case to prosecute about 120 individuals in an insider trading crackdown on Wall Street. 

The FBI has also released a video with Michael Douglas commenting on the problems of insider trading. It appears this is a focus of prosecution for federal authorities for the time being....

Olympus Fraud: More to the Story

Bloomberg-Business Week had a great story about Michael Woodford, former President and CEO of Olympus, and how he came to be the person to blow the whistle on the corrupt leadership of Olympus. The story includes everything from the Japanese Mafia (aka Yakuza) to the missing money that is in the billions and may never be found. Here is one paragraph to wet your appetite:

Woodford, 51, recounted how he had just returned from Hong Kong, having fled Tokyo after a board meeting in which Olympus Chairman Tsuyoshi Kikukawa had fired him. The cause for dismissal, according to Woodford: his insistence that Olympus officials come clean about a series of questionable purchases dating to 2006, totaling $1.6 billion, none of which had been adequately reported in the company’s consolidated financial statements. The deals had been approved by Kikukawa and the Olympus board, yet in several cases the parties receiving the sums were not even clearly identified in Olympus’s books.

This is a crazy story that I'm guessing will be made into a movie some day. In any case, the article says Woodford is working on a book. I may have to read that one... 

Affinity Fraud--A Radio Interview

Check out this radio segment (Segment 2) where Mark talks about affinity fraud.

Catching up on fraud in the news

Olympus Scandal Leads to Arrests: Seven employees have been arrested in conjunction with the alleged financial statement fraud at Olympus.  Whether those arrests will lead to criminal punishment remains to be seen:

Under Japanese securities laws, the men arrested Thursday could each serve up to 10 years if found guilty. But convictions for white collar-crime have been rare in Japan, and courts have been known to hand down suspended sentences even in egregious cases.

Alan Stanford's Ties to Soc Gen Probed: Stanford is alleged to have used a Swiss bank account with Societe Generale as a slush fund through which he bribed regulators and auditors.  Soc Gen is also being accused of having had knowledge of Stanford's dealings and to have profited thereby.  From the article:

“SG Suisse had a special, extensive, symbiotic and nefarious relationship with Stanford from which it greatly benefited,” the lawsuit says, alleging that by December 2008, bank officials “realized the Stanford Entities were insolvent,” and the bank wanted its money bank. 

What Do I Have Against Lance?

I was told by a friend that someone asked him what I have against Lance. Maybe others have also wondered that. Before I get to that, let me comment on some other news in pro cycling.

Lance Armstrong Investigation: Skeptics at ESPN

I just read a thought piece at ESPN about the Lance Armstrong investigation being suddenly dropped this past week. The author offers several thoughts on how this may have happened and is generally pretty skeptical that it wasn't--at least--a political move in the Obama administration. If so, we definitely have some corrupt politicians IMO...Check out the article, it's short but worth the time.

Lance Armstrong Investigation: Petition Opened

I received an email today that informed me about a petition on the White House website asking for President Obama's administration to look into and comment on the reason that the Justice Department dropped the Lance Armstrong investigation. The petition (click here to go to the petition) requires 25,000 signatures. Last I checked it only had about 100 signatures so it has a way to go. If you're interested in finding out more about why this investigation was closed, you might want to take a minute to sign the petition and pass this link on to friends who also might be interested.

Lance Armstrong Investigation: More to the Story

Several news outlets (including NPR, VeloNation and CyclingNews) are reporting that the decision to drop the criminal charges against Lance Armstrong came as a big surprise to several federal agencies that were working on the case. The word is that the other agencies believed they had a solid case against Lance. You have to wonder what motivated the individual at the US Attorney's Office who allegedly made this decision on his own, Andre Birotte, to take this action. Was Birotte given a donation like the UCI received a donation?! Here are some quotes to consider:

Contador Ruling: Stripped of Tour de France Title

VeloNation is reporting that the Court of Arbitration in Sport (CAS) has ruled on Alberto Contador and, to my surprise, they found that his doping violation will hold. What this means is that he is stripped of one of his Tour de France titles, a Giro d' Italia title and several wins in other races. Contador was given the full two-year ban. It appears that justice is sometimes served in pro-cycling!

The SEC's Record with Large Ponzi Schemes: Not So Hot

I've been listening to Harry Markopolos's book, "No One Would Listen: A True Financial Thriller" (I recommend it by the way) and have been surprised at how much of the book is devoted to criticizing the SEC. From Harry's account, the SEC totally dropped the ball and was incompetent, corrupt or both in how it handled the Madoff case. I personally think he has a pretty good argument and that the SEC has managed to avoid serious consequences even though the Madoff case was a tragedy that they could have prevented.

Well, now that the Stanford Ponzi scheme is being tried, we are learning that the SEC also dropped the ball with Sir Charles. It may be that the SEC really doesn't understand Ponzi schemes or that they are underfunded, undereducated, understaffed and under-incentivized. All we know for sure is that they appear to be underperforming. Reuters has an article that talks about how Sir Charles was able to keep the SEC at bay for so many years while he built his Ponzi empire, complete with retail offices in the U.S. I recommend it for further insight.

One claim by Markopolos is that the SEC staff are all basically looking for a job in industry to make more money. As such, when they go to investigate a firm, they also ask for a job application. The Reuters article seems to add a second witness to this claim as it describes a former SEC investigator by the name of Barasch and his role in helping Stanford stay out of the SEC's crosshairs:

Barasch was told at the time by an SEC ethics officer that he was legally precluded from representing Stanford. Barasch went to work for Stanford anyway. In a later investigation of the failure to catch Stanford earlier, the SEC Inspector General asked Barasch why he did so. His reply, according to the Inspector General's report: "Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines." 

FBI agents and prosecutors also uncovered evidence that on at least two occasions Barasch sought confidential information regarding the SEC's probe of Stanford during his brief representation of the banker, Justice Department officials said in court records and a press release. 

In agreeing to pay the fine, Barasch denied any misconduct, settling the matter "to avoid the expense and uncertainty of protracted litigation," his attorney, Paul Coggins said.

Another claim by Markopolos is that the SEC seemed to avoid taking on the Madoff case because it was too large and complex. Instead, they went after cases that Harry describes as fleas while the elephant (Madoff) was running free. This Reuters article also seems to bear this out in the following quote:

In 1997, 1998, 2002, 2004, and 2005, according to internal agency records seen by Reuters, examiners for the SEC recommended that the agency investigate Stanford. In three of those instances, Barasch, at the time an SEC official in Ft. Worth, personally overruled the examiners' recommendations, according to those records. Those decisions helped the Ponzi scheme to continue unabated for several additional years, costing investors additional billions of dollars, according to a report by the SEC's Inspector General. 

Barasch told the SEC Inspector General that he made those decisions because he was not sure the SEC had the statutory authority or jurisdiction to investigate. He blamed his superiors and a broader culture within the SEC for pressuring the staff not to pursue complex and difficult cases, according to the Inspector General report. 

Apparently, Barasch was able to help Stanford both while he worked for the SEC and after he went to work for Sir Allen (i.e. Stanford) himself. Sounds like a bad case of a corrupted fraud investigator. I have a feeling I will be reading another book in the future about how the SEC dropped the ball in the Stanford Ponzi scheme too, costing thousands of people billions of dollars.

Lance Armstrong Investigation: What Did We Learn?

As you've probably heard, it was announced yesterday that the Grand Jury investigation that involved Lance Armstrong's alleged criminal activity on the U.S. Postal Service cycling team has been closed without any charges. When this investigation first opened, I remember talking with a friend about what would come of it. I thought at the time that the most likely scenario was that we would learn a lot more about Lance and that his reputation would be seriously damaged but that it was unlikely that he would find himself in jail. I never totally thought it was impossible that Lance would end up in jail but I thought it was a very long shot (like half court at the buzzer). After all, if they couldn't find his blood or urine with drugs in it then it would probably be hard to make the charges stick.

In my view, Lance's record has become extremely tainted from the news of the past two years. If you believe the saying that where there is smoke there is fire, then you have to observe all the smoke that came from this investigation and conclude there must be something causing it. The following points are what I think are some of the biggest stains on his record that came from this investigation. As I look at the list, I have to believe that those who followed the investigation will likely have lost most, if not all, respect for Lance (unless they are in complete denial and hero worship). Here is my summary (with links to the top posts on the topic) of the most interesting, and in many cases the most damaging, tidbits to come out from this investigation:

Stanford Trial: Two Friends Become Enemies

The NY Times discusses how the trial regarding the alleged Ponzi scheme run by R. Allen Stanford will pit Stanford against his long-time friend and CFO of Stanford Financial Group before it collapsed, James M. Davis. It's a classic example of the Prisoner's Dilemma. Here are some excerpts:

Doping in Cycling: Some News that Caught My Eye

Today has two strange stories about cyclists who have been linked to doping that I just couldn't resist commenting on...

Another Link Dump

Here are a few more links to keep you up to date on the latest fraud-related news:

Contador Investigation: Expect Alberto to be found Innocent

VeloNews is reporting that WADA lawyers have threatened to walk out of the Alberto Contador hearing which is supposed to rule this week whether the Spaniard will be found to have violated doping rules. Contador has a lot riding on this ruling (no pun intended) since the rule states that any clenbuterol found in his system is a violation that will cause him to lose his Tour de France title and ban him for up to two years. As we've covered on Fraudbytes previously, Contador claims he got the steroid from eating tainted beef during the tour.

The VeloNews article is short and highlights several claims by an anonymous source that Contador has biased the arbitration process in his favor. If you're interested in why WADA is so frustrated by this hearing, I'd recommend reading the article.

Lance Armstrong Investigation: LiveStrong Brought to Light

Outdoor Magazine published an extensive article on Lance Armstrong's LiveStrong Foundation today. I know they have been working on this for a while since the author, Bill Gifford, first contacted me in May 2011. Interestingly, I received several phone calls from investigative reporters around the same time--undoubtedly because they found these posts of interest.

As far as I can tell, Gifford's article is the first one to hit the press. His article notes why this may be the case by saying:

At least two other major publications have done serious reporting on Livestrong—that is, they started to. In both cases, Livestrong lawyers succeeded in shutting down the stories before they were published. They applied the same pressures to Outside, blitzing my editors with pissed-off e-mails, phone calls, and, eventually, a five-page letter from general counsel Mona Patel complaining about “Mr. Gifford’s conduct, professionalism, and method of reporting.” One of my crimes was a failed attempt to get a source to talk off the record, an ordinary journalistic practice. All of which now makes me wonder if I missed something. 

I recommend reading the article if you're interested in LiveStrong and Lance. For those who want to get a flavor of the article, here are a few highlights that summarize the main conclusions:

Happy New Year and A Few Links

Happy New Year! While I've never really been one for New Year's resolutions, I do intend to post more often over the next year. In the meantime, I've been collecting links to write about on FraudBytes and I've fallen a bit behind. In an effort to purge my queue, here are a few articles worth reading: