Saturday, February 27, 2010
Another possible life sentence in the Madoff case
In other news, the WSJ reported that "one of Bernard Madoff's daughters-in-law says she and her children shouldn't have to bear the burden of his name. Stephanie Madoff filed court papers in Manhattan on Wednesday asking to change her last name to Morgan. She made the same request for her two children. She is married to the jailed financier's son, Mark. She says her family has gotten threats, and she wants to drop the Madoff name to avoid "additional humiliation" and harassment."
Ever wonder what's in your tomato paste?
The article also talks about how tone at the top appears to have affected some major companies in the food industry and perhaps the entire industry. The article reads: “If you have a couple of people who are willing to bend the rules and they set that tone from the top, that can spread very quickly in that company and in that niche of the industry, and that’s what happened here,”
The scheme, as laid out by federal prosecutors, has two parts. Officials say that (officials) at SK Foods greased the palms of a handful of corporate buyers in exchange for lucrative contracts and confidential information on bids submitted by competitors. This most likely drove up ingredient prices for the big food companies.
In addition ... SK Foods shipped its customers millions of pounds of bulk tomato paste and puree that fell short of basic quality standards... Often that meant mold counts so high the sale should have been prohibited under federal law...
The scope of the tainted shipments was much broader than the bribery scheme, touching more than 55 companies. In some cases...the tainted ingredients wound up in food sold to consumers.
This shows how corruption in business can even taint your spaghetti sauce!
Monday, February 15, 2010
Who Blows the Whistle on Corporate Fraud?
The main result emerging from our analysis is that in the United States fraud detection relies on a wide range of, often improbable, actors. No single one of them accounts for more than 20 percent of the cases detected. These findings suggest that to improve corporate governance abroad one needs to adopt a broader view than implied by the legal or private litigation approaches to corporate governance.
The second main result is that the incentives for the existing network of whistleblowers are weak. Auditors, analysts, and employees do not seem to gain much and, in the cases of employees, seem to lose outright from whistleblowing. The two notable exceptions regarding who benefits from whistleblowing are journalists involved in large cases and employees who have access to a qui tam suit.
A natural implication of our findings is that the role of monetary incentives should be expanded. We find that the use of monetary rewards provides positive incentives for whistleblowing. As the evidence in the healthcare industry shows, such a system appears to be able to be fashioned in a way that does not lead to an excessive amount of frivolous suits.
Saturday, February 13, 2010
Former Healthsouth CFO to participate in FASRI roundtable
Surprise: people are finding more ways to steal from the U.S. government
Wednesday, February 10, 2010
Anyone want to buy some snake oil?
Tuesday, February 9, 2010
Goldman helps Greece lube their balance sheet
Sunday, February 7, 2010
Modern Snake Oil?
The full history of war profiteering in Iraq may never be known, but it will be hard to top the magic wand known as ADE 651 as a symbol of corruption. The hand-held wand, wielded by Iraq’s security teams at hundreds of checkpoints, is supposed to detect car bombs and weapons. But the battery-free device — supposedly powered by the static electricity of a soldier’s body — turns out to be a very expensive hoax, no more reliable than a coin flip or a Ouija board.Perhaps the most surprising thing about this scam is the fact that it ensnared a military organization. I would have thought that if a military force wanted to rely on such a product that they would have done some independent testing (or some form of reliable assurance) before choosing to rely on this device as a security measure.
After widespread doubts, including warnings by American military officials who never used ADE 651s, Britain finally banned the devices’ export and arrested the manufacturer for fraud. But not before Iraq bought more than 800 wands, which cost $250 each to make but drew up to $60,000 each from the Baghdad government.
As an aside, this story got me thinking about some of my favorite Dilbert comics:
Thursday, February 4, 2010
Bank of America charged with fraud in Merrill deal
Today's WSJ says that Cuomo is claiming that BofA also defrauded the U.S. Government (i.e., you and me) by exploiting "the economic fear that existed in late 2008" so that it could get $20 billion in aid from the U.S. Government by saying the losses at Merrill were worse than anticipated.
This quote from today's WSJ summarizes Cuomo's claims:
"We believe bank management understated the Merrill Lynch losses to shareholders to get shareholders to approve the deal then overstated their ability to terminate the agreement to get $20 billion from federal government," Mr. Cuomo said on a conference call.Sounds like those BofA executives deserve a hefty bonus don't you think?!
Monday, February 1, 2010
TARP and fraud
In his quarterly report to Congress, Neil Barofsky, the special inspector general for the trouble asset relief program (TARP) says: "The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse."
According to an article published yesterday by National Public Radio (NPR), Barofsky's report said:
"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," Barofsky wrote.
Here are a few more quotes from NPR:
The (financial) institutions that were deemed "too big to fail" have grown larger and failed to restrain the lavish pay for their executives...the banks still have an incentive to take on risk because they know the government will save them rather than bring down the financial system.
This sounds like a serious conflict of interest. As such, whenever there is a lot of money floating around, stretched resources to oversee the funds and conflicts of interest, you can bet fraud is around the corner. In this regard, here's more from NPR's article:
Barofsky also said his office is investigating 77 cases of possible criminal and civil fraud, including crimes of tax evasion, insider trading, mortgage lending and payment collection, false statements and public corruption.
One case concerns apparent self-dealing by one of the private fund managers Treasury picked to buy bad assets from banks at discounted prices. A portfolio manager at the firm apparently sold a bond out of a private fund, then repurchased it at a higher price for a government-backed fund. A rating agency had just downgraded the bond, so it likely was worth less, not more, when the government fund bought it. The company is not being named pending the outcome of Barofsky's investigation.