Who would think that a talk radio host would lie let alone scam people? Well apparently they do. The following is a case brought by the SEC against a talk radio host and two of her accomplices:
“Washington, D.C., Oct. 7, 2010 — The Securities and Exchange Commission today charged a talk radio show host and two other executives at a Monterey, Calif.-based firm with misappropriating $2.5 million of approximately $7 million they raised through the fraudulent sale of interests in two real estate investment funds.
The SEC alleges that Barbra Alexander, the former president of APS Funding, used her status as host of an internationally-syndicated radio show for entrepreneurs called MoneyDots to lure investors who thought their money would be used to fund short-term loans secured by real estate. Alexander along with the firm's secretary/chief financial officer Beth Piña of Fairfield, Idaho, and vice president Michael E. Swanson of Seaside, Calif., instead stole investor money to pay themselves $1.2 million and finance MoneyDots and other unrelated businesses unbeknownst to investors. Alexander even used $200,000 of investor funds to remodel her kitchen.
"Alexander led investors to believe she would invest their money in secured real estate financing, but she and her cohorts merely used the money for their own benefit," said Marc J. Fagel, Director of the SEC's San Francisco Regional Office.
According to the SEC's complaint filed in federal district court in San Jose, Alexander, Piña and Swanson raised nearly $7 million from 50 investors for two investment funds managed by APS Funding. They claimed that the funds would make short-term secured loans to homeowners and yield 12 percent annual returns to investors. Contrary to what investors were told, $1.2 million of their money instead went directly to Alexander, Piña, and Swanson for personal use, and $1.3 million in investor funds was used to finance other businesses owned by Alexander and APS Funding, including MoneyDots.
The SEC further alleges that Alexander, Piña, and Swanson furthered the scheme by sending monthly account statements to investors reflecting fictitious profits and, in classic Ponzi scheme fashion, paying out purported returns that actually came from new investors.
The SEC's complaint charges Alexander, Piña, Swanson, and APS Funding with violating the antifraud provisions of the federal securities laws, and also charges Alexander, Swanson, and APS Funding with the unregistered sale of securities. The action seeks injunctive relief, disgorgement of ill-gotten gains, and monetary penalties.
In a related criminal proceeding announced today, the U.S. Attorney's Office for the Northern District of California filed criminal actions against Alexander, Piña, and Swanson based on the same alleged misconduct.
The SEC acknowledges the assistance of the U.S. Attorney's Office for the Northern District of California, the Federal Bureau of Investigation, and the Monterey County District Attorney's Office.”
What type of scheme will talk radio and TV hosts think of next? Maybe it will be investing in gold and silver. As an investor in gold and silver over the past 30 years I will tell you that most of the stuff sold on TV, Radio and through the want ads of publications is a scam. The best way to buy gold and silver is by buying proof coins directly from the government. That way you have some guarantee that the coins are not just gold or silver plated. I have purchased counterfeit coins from dealers and I was not very happy when I realized that they had stolen my money.
This is a photo of the National Register of Historic Places listing with reference number 7000063
Sunday, October 17, 2010
Sunday, October 10, 2010
SEC CHARGES ABB Ltd FOR BRIBERY
Bribery is a common business practice in many parts of the world. The United States has a law called the Foreign Corrupt Practices Act which prohibits U.S. businesses from paying bribes to foreign officials.
The following is an excerpt from the SEC web page. It describes in detail the transactions that got ABB Ltd. in trouble.
“Recently the SEC charged ABB Ltd. With giving bribes to Mexican officials and to officials in IRAQ during the Oil for Food program. ABB agreed to pay nearly $40 dollars to settle the SEC charges and another $19 million in penalties to settle charges brought by the Department of Justice Washington, D.C., Sept. 29, 2010 — The Securities and Exchange Commission today charged ABB Ltd with violations of the Foreign Corrupt Practices Act (FCPA) for using subsidiaries to pay bribes to Mexican officials to obtain business with government-owned power companies, and to pay kickbacks to Iraq to obtain contracts under the U.N. Oil for Food Program.
The SEC alleges that ABB's subsidiaries made at least $2.7 million in illicit payments in these schemes to obtain contracts that generated more than $100 million in revenues for ABB, a Swiss corporation that provides power and automation products and services worldwide.
ABB has agreed to pay more than $39.3 million to settle the SEC's charges.
"This investigation uncovered millions of dollars in bribes paid or promised to officials at Mexico's largest power company," said Scott W. Friestad, Associate Director of the SEC's Division of Enforcement. "As the sanctions in this case demonstrate, there are significant consequences for public companies that fail to implement strong compliance programs and prevent corrupt payments to government officials.
Cheryl J. Scarboro, Chief of the SEC's Foreign Corrupt Practices Act Unit, added, "ABB's violations involved conduct at a U.S. subsidiary and six foreign-based subsidiaries. Multi-national companies that make illicit payments through layers of subsidiaries will be held accountable."
The SEC's complaint filed in federal court in Washington, D.C., alleges that from 1999 to 2004, ABB Network Management (ABB NM) — a business unit within ABB's U.S. subsidiary — bribed officials in Mexico to obtain and retain business with two government owned electric utilities, Comision Federal de Electricidad (CFE) and Luz y Fuerza del Centro (LyFZ). The bribes were funneled through ABB NM's agent and two other companies in Mexico. The SEC alleges that ABB failed to conduct due diligence on these payments and entities and improperly recorded the bribes on its books as payments for commissions and services on projects in Mexico. Illicit payments included checks and wire transfers to relatives of CFE officials, cash bribes to CFE officials, and a Mediterranean cruise vacation for CFE officials and their wives. As a result of this bribery scheme, ABB NM was awarded contracts with CFE and LyFZ that generated more than $90 million in revenues and $13 million in profits for ABB.
The SEC alleges that from approximately 2000 to 2004, ABB participated in the U.N. Oil for Food Program through six subsidiaries that developed various schemes to pay secret kickbacks to the former regime in Iraq to obtain contracts under the program. ABB's Jordanian subsidiary acted as a conduit for other ABB subsidiaries by making the kickback payments on their behalf. Some of the kickbacks were made in the form of bank guarantees and cash payments. ABB improperly recorded these kickbacks on its books as legitimate payments for after sales services, consultation costs, and commissions. Oil for Food contracts obtained as a result of the kickback schemes generated $13.5 million in revenues and $3.8 million in profits for ABB.
Without admitting or denying the allegations in the SEC's complaint, ABB consented to the entry of a final judgment that permanently enjoins the company from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, orders the company to pay $17,141,474 in disgorgement, $5,662,788 in prejudgment interest, and a $16,510,000 penalty. The order also requires the company to comply with certain undertakings regarding its FCPA compliance program.
In related criminal proceedings, ABB has reached a settlement with the U.S. Department of Justice in which ABB has agreed to pay $19 million in criminal penalties.”
As with almost all major felony cases involving a U.S. corporation; no one will go to jail. It seems that having Ltd. or Inc. in the name of a business is the same as a “get out of jail free” card in the game of Monopoly.
Shakespeare said “What is in a name? A rose by any other name would smell as sweet.” Well, in terms of businesses with letters like Ltd. or Inc. in their names, they do smell but, not sweet like a rose.
The following is an excerpt from the SEC web page. It describes in detail the transactions that got ABB Ltd. in trouble.
“Recently the SEC charged ABB Ltd. With giving bribes to Mexican officials and to officials in IRAQ during the Oil for Food program. ABB agreed to pay nearly $40 dollars to settle the SEC charges and another $19 million in penalties to settle charges brought by the Department of Justice Washington, D.C., Sept. 29, 2010 — The Securities and Exchange Commission today charged ABB Ltd with violations of the Foreign Corrupt Practices Act (FCPA) for using subsidiaries to pay bribes to Mexican officials to obtain business with government-owned power companies, and to pay kickbacks to Iraq to obtain contracts under the U.N. Oil for Food Program.
The SEC alleges that ABB's subsidiaries made at least $2.7 million in illicit payments in these schemes to obtain contracts that generated more than $100 million in revenues for ABB, a Swiss corporation that provides power and automation products and services worldwide.
ABB has agreed to pay more than $39.3 million to settle the SEC's charges.
"This investigation uncovered millions of dollars in bribes paid or promised to officials at Mexico's largest power company," said Scott W. Friestad, Associate Director of the SEC's Division of Enforcement. "As the sanctions in this case demonstrate, there are significant consequences for public companies that fail to implement strong compliance programs and prevent corrupt payments to government officials.
Cheryl J. Scarboro, Chief of the SEC's Foreign Corrupt Practices Act Unit, added, "ABB's violations involved conduct at a U.S. subsidiary and six foreign-based subsidiaries. Multi-national companies that make illicit payments through layers of subsidiaries will be held accountable."
The SEC's complaint filed in federal court in Washington, D.C., alleges that from 1999 to 2004, ABB Network Management (ABB NM) — a business unit within ABB's U.S. subsidiary — bribed officials in Mexico to obtain and retain business with two government owned electric utilities, Comision Federal de Electricidad (CFE) and Luz y Fuerza del Centro (LyFZ). The bribes were funneled through ABB NM's agent and two other companies in Mexico. The SEC alleges that ABB failed to conduct due diligence on these payments and entities and improperly recorded the bribes on its books as payments for commissions and services on projects in Mexico. Illicit payments included checks and wire transfers to relatives of CFE officials, cash bribes to CFE officials, and a Mediterranean cruise vacation for CFE officials and their wives. As a result of this bribery scheme, ABB NM was awarded contracts with CFE and LyFZ that generated more than $90 million in revenues and $13 million in profits for ABB.
The SEC alleges that from approximately 2000 to 2004, ABB participated in the U.N. Oil for Food Program through six subsidiaries that developed various schemes to pay secret kickbacks to the former regime in Iraq to obtain contracts under the program. ABB's Jordanian subsidiary acted as a conduit for other ABB subsidiaries by making the kickback payments on their behalf. Some of the kickbacks were made in the form of bank guarantees and cash payments. ABB improperly recorded these kickbacks on its books as legitimate payments for after sales services, consultation costs, and commissions. Oil for Food contracts obtained as a result of the kickback schemes generated $13.5 million in revenues and $3.8 million in profits for ABB.
Without admitting or denying the allegations in the SEC's complaint, ABB consented to the entry of a final judgment that permanently enjoins the company from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, orders the company to pay $17,141,474 in disgorgement, $5,662,788 in prejudgment interest, and a $16,510,000 penalty. The order also requires the company to comply with certain undertakings regarding its FCPA compliance program.
In related criminal proceedings, ABB has reached a settlement with the U.S. Department of Justice in which ABB has agreed to pay $19 million in criminal penalties.”
As with almost all major felony cases involving a U.S. corporation; no one will go to jail. It seems that having Ltd. or Inc. in the name of a business is the same as a “get out of jail free” card in the game of Monopoly.
Shakespeare said “What is in a name? A rose by any other name would smell as sweet.” Well, in terms of businesses with letters like Ltd. or Inc. in their names, they do smell but, not sweet like a rose.
Sunday, October 3, 2010
HEDGE FUND ADVISOR PAYS TO SETTLE SEC CHARGES OF MARKET MANIPULATION
Making money can be very difficult if you work within our system of extremely volatile securities and commodities prices. One way to easily make money in such a system is to rig the system so that no matter what happens you will get someone else’s money out of their pocket and into yours.
It is common knowledge that many large investment firms will try to manipulate the prices of stocks sometimes on the upside but, usually it is toward the downside because when a stock price plunges small investors fear being wiped out and may also have margin calls to cover. (A margin call is when an investor is forced to sell stock because the value of his securities falls below the required total asset value to borrow money to buy on margin.) By instilling fear in the market for a stock the institutional short seller can get a stock price to tumble a lot without putting up a lot of money. It is legitimate to try to drive the price of a stock unless you have insider knowledge that diminishes or eliminates your own risk.
The following excerpt from the SEC web page is an illustration of a company that allegedly drove stock prices lower just prior to a public offering and then bought the stocks up very cheap:
“Washington, D.C., Sept. 23, 2010 — The Securities and Exchange Commission today charged Dallas-based hedge fund adviser Carlson Capital, L.P. with improperly participating in four public stock offerings after selling short those same stocks.
Carlson agreed to pay more than $2.6 million to settle the SEC's charges.
The SEC's Rule 105 of Regulation M helps prevent short selling that can reduce proceeds received by companies and shareholders by artificially depressing the market price shortly before the company prices its public offering. Rule 105 ensures that offering prices are set by natural forces of supply and demand rather than manipulative activity by prohibiting the short sale of an equity security during a restricted period — generally five business days before a public offering — and the purchase of that same security through the offering. The rule applies regardless of the trader's intent in selling short the stock.
According to the SEC's order, Carlson violated Rule 105 on four occasions and had policies and procedures that were insufficient to prevent the firm from participating in the relevant offerings. For one of those occasions, the SEC found a Rule 105 violation even though the portfolio manager who sold short the stock and the portfolio manager who bought the offering shares were different.
"Investment advisers must recognize that combined trading by different portfolio managers can still constitute a clear violation of Rule 105 when short selling takes place during a restricted period," said Antonia Chion, Associate Director of the SEC's Division of Enforcement. "This is true even when the portfolio managers have different investment approaches and generally make their own trading decisions."
In its order, the SEC found that the "separate accounts" exception to Rule 105 did not apply to Carlson's participation in that offering. If certain conditions are met, this exception allows the purchase of an offered security in an account that is "separate" from the account through which the same security was sold short. The Commission found that the combined activities of Carlson's portfolio managers violated Rule 105 and did not qualify for the separate accounts exception because the firm's portfolio managers:
Could access each others' trading positions and trade reports, and could consult with each other about companies of interest.
Reported to a single chief investment officer who supervised the firm's portfolios and had authority over the firm's positions.
Were not prohibited from coordinating with each other with respect to trading.
The SEC further found that the portfolio manager who sold short the particular stock during the restricted period received information — before the short sales were made — that indicated the other portfolio manager intended to buy offering shares.
Without admitting or denying the SEC's findings, Carlson agreed to pay a total of $2,653,234, which includes $2,256,386 in disgorgement of improper gains or avoided losses, a $260,000 penalty, and pre-judgment interest of $136,848. Carlson also consented to an order that imposes a censure and requires the firm to cease and desist from committing or causing any violations and any future violations of Rule 105. During the SEC's investigation, the adviser took remedial measures including implementation of an automated system that helps review the firm's prior short sales before it participates in offerings.”
In the above case there were two separate individuals involved that worked for the same firm. One sold the stock short while the other went long on the stock. The SEC suspected that there was collusion between the two individuals and the investment fund advisor agreed to pay back what it earned on the transaction and an additional penalty. The investment firm admitted to no wrongdoing.
It would be nice if the FBI would investigate the illegal acts of large corporations but,in truth FBI stands for For Big Institutions. In other words the FBI will investigate corparate fraud just like the SS would investigate the mental illness of Adolph Hitler.
It is common knowledge that many large investment firms will try to manipulate the prices of stocks sometimes on the upside but, usually it is toward the downside because when a stock price plunges small investors fear being wiped out and may also have margin calls to cover. (A margin call is when an investor is forced to sell stock because the value of his securities falls below the required total asset value to borrow money to buy on margin.) By instilling fear in the market for a stock the institutional short seller can get a stock price to tumble a lot without putting up a lot of money. It is legitimate to try to drive the price of a stock unless you have insider knowledge that diminishes or eliminates your own risk.
The following excerpt from the SEC web page is an illustration of a company that allegedly drove stock prices lower just prior to a public offering and then bought the stocks up very cheap:
“Washington, D.C., Sept. 23, 2010 — The Securities and Exchange Commission today charged Dallas-based hedge fund adviser Carlson Capital, L.P. with improperly participating in four public stock offerings after selling short those same stocks.
Carlson agreed to pay more than $2.6 million to settle the SEC's charges.
The SEC's Rule 105 of Regulation M helps prevent short selling that can reduce proceeds received by companies and shareholders by artificially depressing the market price shortly before the company prices its public offering. Rule 105 ensures that offering prices are set by natural forces of supply and demand rather than manipulative activity by prohibiting the short sale of an equity security during a restricted period — generally five business days before a public offering — and the purchase of that same security through the offering. The rule applies regardless of the trader's intent in selling short the stock.
According to the SEC's order, Carlson violated Rule 105 on four occasions and had policies and procedures that were insufficient to prevent the firm from participating in the relevant offerings. For one of those occasions, the SEC found a Rule 105 violation even though the portfolio manager who sold short the stock and the portfolio manager who bought the offering shares were different.
"Investment advisers must recognize that combined trading by different portfolio managers can still constitute a clear violation of Rule 105 when short selling takes place during a restricted period," said Antonia Chion, Associate Director of the SEC's Division of Enforcement. "This is true even when the portfolio managers have different investment approaches and generally make their own trading decisions."
In its order, the SEC found that the "separate accounts" exception to Rule 105 did not apply to Carlson's participation in that offering. If certain conditions are met, this exception allows the purchase of an offered security in an account that is "separate" from the account through which the same security was sold short. The Commission found that the combined activities of Carlson's portfolio managers violated Rule 105 and did not qualify for the separate accounts exception because the firm's portfolio managers:
Could access each others' trading positions and trade reports, and could consult with each other about companies of interest.
Reported to a single chief investment officer who supervised the firm's portfolios and had authority over the firm's positions.
Were not prohibited from coordinating with each other with respect to trading.
The SEC further found that the portfolio manager who sold short the particular stock during the restricted period received information — before the short sales were made — that indicated the other portfolio manager intended to buy offering shares.
Without admitting or denying the SEC's findings, Carlson agreed to pay a total of $2,653,234, which includes $2,256,386 in disgorgement of improper gains or avoided losses, a $260,000 penalty, and pre-judgment interest of $136,848. Carlson also consented to an order that imposes a censure and requires the firm to cease and desist from committing or causing any violations and any future violations of Rule 105. During the SEC's investigation, the adviser took remedial measures including implementation of an automated system that helps review the firm's prior short sales before it participates in offerings.”
In the above case there were two separate individuals involved that worked for the same firm. One sold the stock short while the other went long on the stock. The SEC suspected that there was collusion between the two individuals and the investment fund advisor agreed to pay back what it earned on the transaction and an additional penalty. The investment firm admitted to no wrongdoing.
It would be nice if the FBI would investigate the illegal acts of large corporations but,in truth FBI stands for For Big Institutions. In other words the FBI will investigate corparate fraud just like the SS would investigate the mental illness of Adolph Hitler.
Monday, September 27, 2010
THE PONZI REAL ESTATE FUND
Enron was never a rouge company that cheated their employees, investors and clients out of their money. Stealing money from employees, investors and clients is the way with many businesses today. For the most part government does nothing to improve this situation. The SEC is one of the few institutions that are currently investigating some of the fraudsters in America but, they have no power to prosecute the fraudsters and recommend anything except civil penalties. The power of the SEC is limited to fines and disgorgements. Even those committing Ponzi schemes, which are one of the most blatant forms of fraud, are often placed under no personal jeopardy of losing their freedom even if they admit to the crime.
Ponzi schemes are perpetrated in their most basic form by paying previous investors money using funds provided by new investors. As long as there is more money coming in from new investors than going out to old investors the Ponzi scheme can continue. The following is just another tale of a Ponzi scheme that was discovered. The next several paragraphs are taken from the SEC website:
“Washington, D.C., Sept. 21, 2010 — The Securities and Exchange Commission today charged a Minneapolis-based attorney and two San Francisco-area promoters with defrauding investors in a real estate lending fund by concealing the financial collapse of the fund's sole business partner.
The SEC alleges that Todd A. Ducksonn attorney who resides in Prior Lake, Minn., and Michael W. Bozora and Timothy R. Redpath, who reside in Marin County, Calif., raised more than $21 million from investors in the Capital Solutions Monthly Income Fund after the fund's sole business partner defaulted on its obligations to the fund. The SEC alleges that after this May 2008 default, the fund - whose sole business was to make real estate loans to a single borrower - had no meaningful income and was using new investor funds to pay existing investors.
"The fund's real estate lending strategy failed due to the collapse of the fund's sole borrower. Instead of disclosing this fact, Bozora, Redpath, and Duckson falsely claimed that the fund was positioned to profit from the U.S. real estate downturn," said Robert J. Burson, Senior Associate Regional Director of the SEC's Chicago Regional Office. "Investors were entitled to know true facts rather than the misleading positive spin that Bozora, Redpath, and Duckson provided."
The SEC alleges that after the default, Duckson, Bozora, and Redpath told investors that the fund was poised to take advantage of attractive lending opportunities provided by the collapse in the U.S. credit and real estate markets, when in fact the fund' s business strategy had failed.
According to the SEC's complaint filed in federal court in Minneapolis, Bozora and Redpath launched the fund in 2004 and, through August 2009, raised approximately $74 million from approximately 450 investors from across the U.S. After the May 2008 default by the fund's sole borrower, the fund foreclosed on the borrower's real estate projects. The SEC alleges that in late 2008, Bozora and Redpath asked Duckson, who was acting as the fund's outside counsel, to take over managing the fund. The SEC alleges that Duckson then began managing the fund while Bozora and Redpath continued to raise money from new investors. The SEC alleges that Bozora, Redpath, and Duckson failed to disclose the default and foreclosure to investors for several months.
The SEC alleges that Bozora, Redpath, and Duckson eventually made some disclosure of the default and foreclosure, but they minimized the impact of these events and continued to misleadingly promote the fund's ability to make new loans. In fact, the fund's ability to make new loans was limited. After the default and foreclosure, the fund was required to use most of its assets to maintain its existing real estate portfolio acquired through the foreclosure and to pay existing investors.
The SEC's complaint also charges True North Finance Corporation, a Minneapolis real estate lending company that merged with the fund in 2009, and True North's Chief Financial Officer Owen Mark Williams with accounting fraud. The SEC alleges that in 2008 and 2009, Williams caused True North to overstate its revenues by as much as 99 percent. The SEC alleges that True North improperly recognized revenue on interest from borrowers who were not paying True North and were in poor financial condition. The SEC further alleges that True North's recognition of revenue was contrary to its own revenue recognition policy, which stated that it would not recognize revenue where payment of interest was 90 days past due.
The SEC is seeking permanent injunctions, disgorgement, prejudgment interest and civil penalties against all of the defendants, and officer-director bars against Bozora, Redpath, Duckson, and Williams."
Perhaps these fraudsters might be bared from doing bad things in the future but, the future is a mysterious place. Today my own country is replete with criminals that make very large incomes based on bribery and fraudulant operations like Ponzi schemes.
Ponzi schemes are perpetrated in their most basic form by paying previous investors money using funds provided by new investors. As long as there is more money coming in from new investors than going out to old investors the Ponzi scheme can continue. The following is just another tale of a Ponzi scheme that was discovered. The next several paragraphs are taken from the SEC website:
“Washington, D.C., Sept. 21, 2010 — The Securities and Exchange Commission today charged a Minneapolis-based attorney and two San Francisco-area promoters with defrauding investors in a real estate lending fund by concealing the financial collapse of the fund's sole business partner.
The SEC alleges that Todd A. Ducksonn attorney who resides in Prior Lake, Minn., and Michael W. Bozora and Timothy R. Redpath, who reside in Marin County, Calif., raised more than $21 million from investors in the Capital Solutions Monthly Income Fund after the fund's sole business partner defaulted on its obligations to the fund. The SEC alleges that after this May 2008 default, the fund - whose sole business was to make real estate loans to a single borrower - had no meaningful income and was using new investor funds to pay existing investors.
"The fund's real estate lending strategy failed due to the collapse of the fund's sole borrower. Instead of disclosing this fact, Bozora, Redpath, and Duckson falsely claimed that the fund was positioned to profit from the U.S. real estate downturn," said Robert J. Burson, Senior Associate Regional Director of the SEC's Chicago Regional Office. "Investors were entitled to know true facts rather than the misleading positive spin that Bozora, Redpath, and Duckson provided."
The SEC alleges that after the default, Duckson, Bozora, and Redpath told investors that the fund was poised to take advantage of attractive lending opportunities provided by the collapse in the U.S. credit and real estate markets, when in fact the fund' s business strategy had failed.
According to the SEC's complaint filed in federal court in Minneapolis, Bozora and Redpath launched the fund in 2004 and, through August 2009, raised approximately $74 million from approximately 450 investors from across the U.S. After the May 2008 default by the fund's sole borrower, the fund foreclosed on the borrower's real estate projects. The SEC alleges that in late 2008, Bozora and Redpath asked Duckson, who was acting as the fund's outside counsel, to take over managing the fund. The SEC alleges that Duckson then began managing the fund while Bozora and Redpath continued to raise money from new investors. The SEC alleges that Bozora, Redpath, and Duckson failed to disclose the default and foreclosure to investors for several months.
The SEC alleges that Bozora, Redpath, and Duckson eventually made some disclosure of the default and foreclosure, but they minimized the impact of these events and continued to misleadingly promote the fund's ability to make new loans. In fact, the fund's ability to make new loans was limited. After the default and foreclosure, the fund was required to use most of its assets to maintain its existing real estate portfolio acquired through the foreclosure and to pay existing investors.
The SEC's complaint also charges True North Finance Corporation, a Minneapolis real estate lending company that merged with the fund in 2009, and True North's Chief Financial Officer Owen Mark Williams with accounting fraud. The SEC alleges that in 2008 and 2009, Williams caused True North to overstate its revenues by as much as 99 percent. The SEC alleges that True North improperly recognized revenue on interest from borrowers who were not paying True North and were in poor financial condition. The SEC further alleges that True North's recognition of revenue was contrary to its own revenue recognition policy, which stated that it would not recognize revenue where payment of interest was 90 days past due.
The SEC is seeking permanent injunctions, disgorgement, prejudgment interest and civil penalties against all of the defendants, and officer-director bars against Bozora, Redpath, Duckson, and Williams."
Perhaps these fraudsters might be bared from doing bad things in the future but, the future is a mysterious place. Today my own country is replete with criminals that make very large incomes based on bribery and fraudulant operations like Ponzi schemes.
Sunday, September 19, 2010
STEALING 3/5 OF SHAREHOLDER VALUE IS A BAD ACCOUNTING PRACTICE
It is wonderful when accountants go to jail for stealing. My father was an accountant for most of his life and was incredibly honest. It was a real stickler for making sure the numbers balanced and that no was stealing. The following is a tale from the SEC web site about accounts that made sure they got their share of corporate income from the Koss Corporation. Koss is a relatively small corporation that trades publicly at a current price of less than $6.00 per share. The alleged embezzlement is for $30,000,000 which is astounding in that the shareholder value in the company is less than $50,000,000. In addition, this company currently has a negative earnings per share.
Please read the following excerpt from the SEC web page to see the type of modern accounting practice that is used in some U.S. corporations:
“Washington, D.C., Aug. 31, 2010 — The Securities and Exchange Commission today charged two former senior accounting professionals at a Milwaukee-based headphone manufacturer with accounting fraud, books-and-records violations, and related misconduct arising from the embezzlement of more than $30 million from the company.
The SEC alleges that Sujata Sachdeva, who was the vice president of finance and principal accounting officer at Koss Corporation, stole money from company accounts to make millions of dollars in payments on her personal credit card and for other extravagant personal purchases from luxury retailers. With the assistance of Koss senior accountant Julie Mulvaney, Sachdeva concealed the theft on Koss’s balance sheet and income statement by overstating assets, expenses, and cost of sales, and by understating liabilities and sales. Based on the fraudulent records prepared by Sachdeva and Mulvaney, Koss prepared materially false financial statements and filed materially false current, quarterly, and annual reports with the SEC.
“Sachdeva brazenly stole millions from Koss Corporation with Mulvaney’s assistance and then used crooked accounting to cover up the theft,” said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office. “Sachdeva and Mulvaney abused their positions of trust and defrauded Koss shareholders who rely upon corporate filings for accurate information about the company’s financial condition.”
According to the SEC’s complaint, filed in U.S. District Court for the Eastern District of Wisconsin, the scheme began in 2004 and lasted through December 2009. After discovering the embezzlement, Koss amended and restated its financial statements for fiscal years 2008 and 2009 and the first three quarters of fiscal year 2010. Both Sachdeva and Mulvaney have been terminated by the company.
The SEC’s complaint alleges that Sachdeva, a resident of Mequon, Wisc., embezzled funds from company accounts through a variety of means, including cashier’s checks, unauthorized wire transfers, and unauthorized payments from petty cash. Sachdeva fraudulently authorized the issuance of more than 500 cashier’s checks totaling more than $15 million. She used them to make approximately $10 million in payments to American Express for her personal credit card, and also used them to make direct payments to luxury retailers. At times, Sachdeva used acronyms in an attempt to conceal the identities of the check recipients — such as “N.M. Inc.” for Neiman Marcus and “S.F.A. Inc.” for Saks Fifth Avenue.
According to the SEC’s complaint, Sachdeva used the embezzled funds to finance an extravagant lifestyle, including prolific purchases of designer clothes, furs, purses, shoes, and jewelry as well as china, statues, and household furnishings. She also used the stolen funds to buy automobiles, pay for airline tickets and hotels during personal travel, and finance home improvements and renovations. Meanwhile Mulvaney, who lives in Milwaukee, concealed and facilitated the theft by preparing false journal entries to disguise Sachdeva’s misappropriation of funds.
The SEC’s complaint charges Sachdeva with violations of the antifraud provisions of the federal securities laws and charges both Sachdeva and Mulvaney with violations of the reporting, books and records and internal control provisions of the federal securities laws. The SEC seeks a permanent injunction, disgorgement of ill-gotten gains and financial penalties against Sachdeva and Mulvaney, and an order barring Sachdeva from serving as an officer or director of a public company.
Sachdeva entered into a plea agreement with the U.S. Attorney’s Office for the Eastern District of Wisconsin on July 27, 2010, in a parallel criminal proceeding and pled guilty to six counts of wire fraud. Sachdeva admitted her multi-million-dollar theft from company and her scheme to falsify the company’s accounting records to hide her embezzlement. Sachdeva is scheduled to be sentenced on Nov. 18, 2010.”
It is good to see these crooks caught and prosecuted by the U.S. Attorney’s office and at least one of them will face some sort of personal jeopardy. But, perhaps these people should be Deans of some our businesses schools. It is not everyone who can steal thirty million dollars from a company which has a stock holder value (market cap) of about fifty million dollars. This tale is like the tale of Rumplestilskin turning straw into gold except, the first born of the investors may not have to be taken away to pay for the gold.
Please read the following excerpt from the SEC web page to see the type of modern accounting practice that is used in some U.S. corporations:
“Washington, D.C., Aug. 31, 2010 — The Securities and Exchange Commission today charged two former senior accounting professionals at a Milwaukee-based headphone manufacturer with accounting fraud, books-and-records violations, and related misconduct arising from the embezzlement of more than $30 million from the company.
The SEC alleges that Sujata Sachdeva, who was the vice president of finance and principal accounting officer at Koss Corporation, stole money from company accounts to make millions of dollars in payments on her personal credit card and for other extravagant personal purchases from luxury retailers. With the assistance of Koss senior accountant Julie Mulvaney, Sachdeva concealed the theft on Koss’s balance sheet and income statement by overstating assets, expenses, and cost of sales, and by understating liabilities and sales. Based on the fraudulent records prepared by Sachdeva and Mulvaney, Koss prepared materially false financial statements and filed materially false current, quarterly, and annual reports with the SEC.
“Sachdeva brazenly stole millions from Koss Corporation with Mulvaney’s assistance and then used crooked accounting to cover up the theft,” said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office. “Sachdeva and Mulvaney abused their positions of trust and defrauded Koss shareholders who rely upon corporate filings for accurate information about the company’s financial condition.”
According to the SEC’s complaint, filed in U.S. District Court for the Eastern District of Wisconsin, the scheme began in 2004 and lasted through December 2009. After discovering the embezzlement, Koss amended and restated its financial statements for fiscal years 2008 and 2009 and the first three quarters of fiscal year 2010. Both Sachdeva and Mulvaney have been terminated by the company.
The SEC’s complaint alleges that Sachdeva, a resident of Mequon, Wisc., embezzled funds from company accounts through a variety of means, including cashier’s checks, unauthorized wire transfers, and unauthorized payments from petty cash. Sachdeva fraudulently authorized the issuance of more than 500 cashier’s checks totaling more than $15 million. She used them to make approximately $10 million in payments to American Express for her personal credit card, and also used them to make direct payments to luxury retailers. At times, Sachdeva used acronyms in an attempt to conceal the identities of the check recipients — such as “N.M. Inc.” for Neiman Marcus and “S.F.A. Inc.” for Saks Fifth Avenue.
According to the SEC’s complaint, Sachdeva used the embezzled funds to finance an extravagant lifestyle, including prolific purchases of designer clothes, furs, purses, shoes, and jewelry as well as china, statues, and household furnishings. She also used the stolen funds to buy automobiles, pay for airline tickets and hotels during personal travel, and finance home improvements and renovations. Meanwhile Mulvaney, who lives in Milwaukee, concealed and facilitated the theft by preparing false journal entries to disguise Sachdeva’s misappropriation of funds.
The SEC’s complaint charges Sachdeva with violations of the antifraud provisions of the federal securities laws and charges both Sachdeva and Mulvaney with violations of the reporting, books and records and internal control provisions of the federal securities laws. The SEC seeks a permanent injunction, disgorgement of ill-gotten gains and financial penalties against Sachdeva and Mulvaney, and an order barring Sachdeva from serving as an officer or director of a public company.
Sachdeva entered into a plea agreement with the U.S. Attorney’s Office for the Eastern District of Wisconsin on July 27, 2010, in a parallel criminal proceeding and pled guilty to six counts of wire fraud. Sachdeva admitted her multi-million-dollar theft from company and her scheme to falsify the company’s accounting records to hide her embezzlement. Sachdeva is scheduled to be sentenced on Nov. 18, 2010.”
It is good to see these crooks caught and prosecuted by the U.S. Attorney’s office and at least one of them will face some sort of personal jeopardy. But, perhaps these people should be Deans of some our businesses schools. It is not everyone who can steal thirty million dollars from a company which has a stock holder value (market cap) of about fifty million dollars. This tale is like the tale of Rumplestilskin turning straw into gold except, the first born of the investors may not have to be taken away to pay for the gold.
Sunday, September 12, 2010
SEC CHARGES SKIN CARE COMPANY CFO WITH COOKING THE BOOKS
Fraud is so common in the American investment community that it is a wonder that the DJIA trades above 1,000 points. Financial statements are rendered worthless because so many accountants are willing to take bribes and falsely report income and losses (commonly known as cooking the books). So what is an investor to do? Well, based upon the performance of the stock market this year, most have choose to put their money under their mattress and wait and see if someone will ever get serious about stopping the rampant fraud throughout our economy. The following is an excerpt from the SEC blog which tells the tale of a company that allegedly defrauded investors with the help of an accounting firm:
“Washington, D.C., Aug. 9, 2010 — The Securities and Exchange Commission today charged the former chief financial officer of a Seattle-area skin care retailer with fraudulently boosting earnings by reporting sales of anti-aging products promoted through Home Shopping Network infomercials while the products still sat unsold in the company’s warehouse. The agency also separately settled charges against the company and began administrative proceedings against the company’s outside auditors for professional misconduct.
The SEC alleges that Karl Redekopp, the former CFO of International Commercial Television Inc. (ICTV), turned millions of dollars of quarterly losses into profits by falsely accounting for ICTV's sales of the Derma Wand, a skin care appliance that purports to reduce wrinkles and improve skin appearance. Redekopp fraudulently recognized revenue before the Home Shopping Network had actually sold or delivered the product to viewers. He also improperly recognized revenue before a free trial period offered by the company had expired, and failed to reverse revenue from products that had been returned. Redekopp's misconduct caused the company to falsely report millions of dollars in excess revenue in 2007 and 2008.
"Redekopp violated fundamental principles of accounting to fraudulently boost ICTV's bottom line and conceal its true financial health from investors," said Marc J. Fagel, Director of the SEC's San Francisco Regional Office. "Unfortunately, ICTV's auditors turned a blind eye to the company's financial irregularities and failed to fulfill their role in investor protection."
The SEC's complaint against Redekopp, filed in federal district court in Tacoma, Wash., alleges that Redekopp recorded "sales" of products that had not been shipped or that the customer was not obligated to pay for. Redekopp's fraudulent accounting resulted in ICTV adjusting net sales by more than $3.7 million over a five-quarter period in 2007 and 2008, negating all originally reported net income for those periods to restated net losses. For example, for year-end 2007 alone, ICTV restated its originally reported net income of $1.5 million to a net loss of $1.1 million after correcting the fraudulent reporting.
The SEC's complaint charges Redekopp, who lives in Vancouver, B.C., with violations of the antifraud, reporting, books and records and internal control provisions of the federal securities laws. The SEC seeks a permanent injunction, a financial penalty, and an order barring him from serving as an officer of a public company.
In a separate complaint, the SEC charged ICTV for its misleading financial statements. Without admitting or denying the allegations, ICTV agreed to settle the charges by consenting to a final judgment permanently enjoining the company from future violations of the reporting, books and records, and internal control provisions of the federal securities laws.
The SEC instituted administrative proceedings against ICTV's former outside auditors Steven H. Dohan, Nancy L. Brown and their Miami-area firm Dohan + Company CPAs as well as Erez Bahar, a Canadian Chartered Accountant who lives in Vancouver.
According to the SEC's order, Dohan, Brown, and Bahar were responsible for the issuance of an unqualified audit report stating that ICTV's financial statements were fairly reported in conformity with Generally Accepted Accounting Principles (GAAP) and that the audit had been conducted in accordance with Public Company Accounting Oversight Board (PCAOB) auditing standards. The SEC's Division of Enforcement alleges that the former auditors failed to identify the material accounting deficiencies and violations of GAAP that formed the basis of the SEC's enforcement action against Redekopp. The Division of Enforcement alleges that Dohan, Brown, Bahar, and Dohan + Company CPAs engaged in improper professional conduct under Rule 102(e) of the Commission's Rules of Practice. An administrative hearing will be scheduled to determine whether remedial sanctions are appropriate.”
This is another case where the SEC is taking action but, where is the Department of Justice? It seems that white collar crime is legal in the eyes of prosecutors. The theft of investment funds by fraudsters may well be recognized by historians as the reason for our current economic mess and also as the reason for our nation’s long term demise. Printing money to pour into the bottomless pit of Wall Street fraudster's pockets will cure nothing in the long run.
The government can only do so much to stimulate the economy. Before the economy can improve the general population must have a positive attitude toward business. For big business executives to simply blame the government for everything and then rail against any legislation that gets tough on fraudsters’ shows to the American public that business is not to be trusted any more than government. After all, if a business executive is not committing fraud then why is he against prosecuting those who are fraudsters? Perhaps “birds of a feather” do flock together.
For government and business to believe that doing nothing to clean up the horrific fraud in our economy caused by government and business, will somehow make things get better over time is ridiculous. Relying on luck or divine intervention to fix things will fix nothing because it was not a divinity or bad luck that caused this economic fiasco. To misquote Shakespeare, the economic problem that government and big business have isn’t in their stars, it’s in themselves.
“Washington, D.C., Aug. 9, 2010 — The Securities and Exchange Commission today charged the former chief financial officer of a Seattle-area skin care retailer with fraudulently boosting earnings by reporting sales of anti-aging products promoted through Home Shopping Network infomercials while the products still sat unsold in the company’s warehouse. The agency also separately settled charges against the company and began administrative proceedings against the company’s outside auditors for professional misconduct.
The SEC alleges that Karl Redekopp, the former CFO of International Commercial Television Inc. (ICTV), turned millions of dollars of quarterly losses into profits by falsely accounting for ICTV's sales of the Derma Wand, a skin care appliance that purports to reduce wrinkles and improve skin appearance. Redekopp fraudulently recognized revenue before the Home Shopping Network had actually sold or delivered the product to viewers. He also improperly recognized revenue before a free trial period offered by the company had expired, and failed to reverse revenue from products that had been returned. Redekopp's misconduct caused the company to falsely report millions of dollars in excess revenue in 2007 and 2008.
"Redekopp violated fundamental principles of accounting to fraudulently boost ICTV's bottom line and conceal its true financial health from investors," said Marc J. Fagel, Director of the SEC's San Francisco Regional Office. "Unfortunately, ICTV's auditors turned a blind eye to the company's financial irregularities and failed to fulfill their role in investor protection."
The SEC's complaint against Redekopp, filed in federal district court in Tacoma, Wash., alleges that Redekopp recorded "sales" of products that had not been shipped or that the customer was not obligated to pay for. Redekopp's fraudulent accounting resulted in ICTV adjusting net sales by more than $3.7 million over a five-quarter period in 2007 and 2008, negating all originally reported net income for those periods to restated net losses. For example, for year-end 2007 alone, ICTV restated its originally reported net income of $1.5 million to a net loss of $1.1 million after correcting the fraudulent reporting.
The SEC's complaint charges Redekopp, who lives in Vancouver, B.C., with violations of the antifraud, reporting, books and records and internal control provisions of the federal securities laws. The SEC seeks a permanent injunction, a financial penalty, and an order barring him from serving as an officer of a public company.
In a separate complaint, the SEC charged ICTV for its misleading financial statements. Without admitting or denying the allegations, ICTV agreed to settle the charges by consenting to a final judgment permanently enjoining the company from future violations of the reporting, books and records, and internal control provisions of the federal securities laws.
The SEC instituted administrative proceedings against ICTV's former outside auditors Steven H. Dohan, Nancy L. Brown and their Miami-area firm Dohan + Company CPAs as well as Erez Bahar, a Canadian Chartered Accountant who lives in Vancouver.
According to the SEC's order, Dohan, Brown, and Bahar were responsible for the issuance of an unqualified audit report stating that ICTV's financial statements were fairly reported in conformity with Generally Accepted Accounting Principles (GAAP) and that the audit had been conducted in accordance with Public Company Accounting Oversight Board (PCAOB) auditing standards. The SEC's Division of Enforcement alleges that the former auditors failed to identify the material accounting deficiencies and violations of GAAP that formed the basis of the SEC's enforcement action against Redekopp. The Division of Enforcement alleges that Dohan, Brown, Bahar, and Dohan + Company CPAs engaged in improper professional conduct under Rule 102(e) of the Commission's Rules of Practice. An administrative hearing will be scheduled to determine whether remedial sanctions are appropriate.”
This is another case where the SEC is taking action but, where is the Department of Justice? It seems that white collar crime is legal in the eyes of prosecutors. The theft of investment funds by fraudsters may well be recognized by historians as the reason for our current economic mess and also as the reason for our nation’s long term demise. Printing money to pour into the bottomless pit of Wall Street fraudster's pockets will cure nothing in the long run.
The government can only do so much to stimulate the economy. Before the economy can improve the general population must have a positive attitude toward business. For big business executives to simply blame the government for everything and then rail against any legislation that gets tough on fraudsters’ shows to the American public that business is not to be trusted any more than government. After all, if a business executive is not committing fraud then why is he against prosecuting those who are fraudsters? Perhaps “birds of a feather” do flock together.
For government and business to believe that doing nothing to clean up the horrific fraud in our economy caused by government and business, will somehow make things get better over time is ridiculous. Relying on luck or divine intervention to fix things will fix nothing because it was not a divinity or bad luck that caused this economic fiasco. To misquote Shakespeare, the economic problem that government and big business have isn’t in their stars, it’s in themselves.
Subscribe to:
Posts (Atom)
Subscribe To WALL STREET FRAUDSTERS
Posts
All Comments