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.