Gordon Grigg…scheduled for release 9/29/2014.
KPMG India Fraud Survey – Patterns of Crime – Comments by Business Ethics and Fraud Prevention Expert Chuck GallagherDecember 9, 2012
White Collar Crime up? Is that any surprise considering the vast changes in the world economy over the past four years? With high profile cases like Bernie Madoff and a host of others, I have been asked multiple times if we reached a point where “White Collar Crime” may be on the decline. My response is “heaven’s no!” In fact, there are three components of an ethical lapse and the proliferation of “White Collar Crime” and NEED is at the top of the list!
When the Economy stinks NEED IS HIGH…
To my left is a graph from a KPMG India Fraud Survey – the entire report is found HERE. In their report KPMG states that “White-collar crime in corporate India has witnessed a ‘substantial increase’ over the last two years.”
The graph shows the areas where respondents indicated that fraud had taken place. Interestingly enough, according to the report the incidents of fraud had increased by 10% from 2010 to the same survey in 2012.
According to the KPMG Survey:
Cracking down on fraud is critical for a country that needs investment.
“India is a fast-growing economy. The problem is a level of low confidence in international investors, which stems from corruption,” Rohit Mahajan, partner and co-head, forensic services, KPMG India, said at a press briefing in New Delhi. “Besides international investors, this has also impacted entrepreneurial spirit in India.”
The infringements are of various kinds, with bribery and corruption making up 83% of cases. A large part of the frauds also relate to cyber crime (71%) and diversion of assets (65%). The sectors most affected are financial services (33%) and information and entertainment (17%), according to the survey.
Most frauds (85%) are investigated internally and very little of the money is actually recovered, the survey said. The most effective methods for detecting frauds are whistleblowers, internal audits and data analytics.
The challenge represented by this report is not limited to India. Other data suggests that similar patterns of fraud and white collar crime exist in all developed economies especially those whose development has been spurned by rapid economic growth. India and China for example. The challenge becomes how to stop the proliferation of white collar crime? Policies alone will not be the most significant deterrent. We must stem the gap between ethical policies and practical behavior.
Often misconduct either never gets reported or when reported is somehow never escalated beyond direct managers. This silo of data prohibits effective solutions when combating white collar crime. For purposes of this post however the primary value is to observe the patterns of white collar crime so organizations will have an intelligent methodology to target abuse and curb unethical and potentially illegal practices.
YOUR COMMENTS ARE WELCOME!
As the founder of the Ethics Resource Group, I work with Companies, Associations and Universities bring awareness of Ethical Choices and how to help Employee and Members stay within the ethical boundaries. For more information contact me at firstname.lastname@example.org or visit chuckgallagher.com
Christopher Olivera, former GameStop VP of corporate communications and public affairs plead guilty to embezzlementNovember 5, 2012
Why do good people, well educated people, make unethical choices – in many cases choices that are illegal – knowing that “Every Choice has a Consequence” and the consequences that follow unethical illegal choices are never pleasant?
Frank Christopher Olivera, former GameStop VP of corporate communications and public affairs plead guilty Thursday to one count of mail fraud for embezzling $1,965,900 from the company.
More information is provide on my White Collar Crime Speaker blog. You can read the full post here.
YOUR COMMENTS ARE WELCOME
Whatever Happened to the Criminal Justice System in the USA? Dan Frishberg’s Biz Radio Folly goes Unpunished and Dan’s still on the Radio… Go Figure!July 20, 2012
It’s been a while…a long while since I turned my attention to Daniel ( Dan ) Frishberg – the radio personality who, with his partner Al Kaleta, caused many an investor to lose substantial funds in the failed Biz Radio debacle. I received an email today from a defrocked investor in Dan Frishberg’s failed scheme asking “Whatever happened to the criminal justice system in the USA? Dandy question, cause it seems that Dan Frishberg has effectively walked away with no criminal consequence to his very public investor fraud. If you want to see background go to these wordpress posts on “The Money Man“.
The key is to hold the right assets for enough time so that the investment can reap its full reward. It takes a lot confidence for an investor to believe that the company will not only be in business years from now but will continue to create an increasing amount of value several business cycles into the future. Successful investors are only able to hold on to stocks for the long term if they are able to create conviction with the proper due diligence, generate income, and protect their capital during uncertain times.
Hum…I read the words written and wonder! You state, “It takes a lot confidence for an investor to believe that the company will not only be in business years from now but will continue to create an increasing amount of value several business cycles into the future.” Yet, I wonder how the folks feel that listened to your advice on Biz Radio and your podcasts and YouTube and believed that you had a sustainable business model that would create an increasing amount of value to sustain them into the future. Seems from all accounts that you and your cronies led folks into investing into nothing more than a Ponzi scheme and today they have lost. But have you?
“Successful investors are only able to hold on to stocks for the long term if they are able to create conviction with the proper due diligence, generate income, and protect their capital during uncertain times.” Dan those are your words. Yet, you solicited investments that did not protect capital, generate income and were void of due diligence. Shame on you…! You survived, but what about those who trusted you?
I believe in Second Chances – in fact I wrote a book about it! I know with every fiber of my being how you operate as (sadly) I was you at one time. But there is one BIG DIFFERENCE. I acknowledged my unethical actions, made restitution and changed my choices. Seems accepting responsibility – which is the first step to recovery – is something that continues to allude you. Isn’t it time – Dan Frishberg – to face the truth of your lies and deceptions – take responsibility – make restitution and then move forward with your life in an honest and ethical way.
You – Dan Frishberg – could be a leader in ethical business practice, sharing the truth of your folly and how unethical practice can be turned into societal good. Sadly, Dan, it seems that you only know one thing – how to be a talking head on the radio. Every choice has a consequence and the consequences of your choices are not over…cause karma’s a bitch.
If you have been defrauded by Dan Frishberg and Al Kaleta – feel free to share your experience so others can at least be warned!
ALEXANDRIA, Va. – Javier Siveroni, 48, of Springfield, Va., pleaded guilty today to using his position as a loan officer to help carry out a multi-million dollar mortgage fraud scheme involving more than 15 homes in Northern Virginia.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement after the plea was accepted by United States District Judge Liam O’Grady.
Siveroni pleaded guilty to one count of an indictment charging him with conspiracy to commit wire fraud. Siveroni faces a maximum penalty of 20 years in prison when he is sentenced on Nov. 4, 2011.
According to court documents, Siveroni, a former loan officer at the Falls Church branch of SunTrust Mortgage, prepared and submitted false, fraudulent, and misleading mortgage loan applications for unqualified buyers – individuals who lacked the finances, credit rating, or legal status to obtain a certain loan amount. The fraudulent mortgage loan applications contained false information regarding applicants’ employment, income, assets, immigration status, and intent to live in the property as a primary residence. As part of the fraud scheme, Siveroni created, and taught his co-conspirators how to create, fake documents in order to corroborate false information contained in the loan applications. The total amount of mortgage loans approved through the conspiracy exceeded $6.5 million. The total loss attributable directly to Siveroni is over $2.5 million.
In related matters, three loan officers have pled guilty for their roles in the alleged conspiracy: Preston Cherouny, 45, of Washington, D.C.; John Leone, 44, of Vienna, Va.; Alejandro Alquinta, 35, of Springfield, Va. Maria Teresa Sanchez, 44, of Burke, Va., and Yolanda Salazar Camacho, 35, of Alexandria, Va., also pled guilty for their roles as loan officer assistants in the conspiracy.
This ongoing investigation was conducted by the FBI’s Washington Field Office. Assistant United States Attorney Uzo Asonye prosecuted the case on behalf of the United States.
Birdie Leroy Revis pleads Guilty to Multi-Million Dollar Health Care Fraud Scheme… Choices and Consequences…August 9, 2011
HOUSTON – An accused recruiter in a multi-million dollar health care fraud scheme scheduled for trial on Monday, has instead pleaded guilty to conspiracy to violate the Anti-Kickback Statute, United States Attorney José Angel Moreno announced today. Birdie Leroy Revis, 60, of Houston, pleaded guilty before United States District Judge David Hittner this morning to conspiracy to violate the Anti-Kickback Statute. Trial had been scheduled to begin with jury selection on Monday, Aug. 8, 2011.
Revis was a recruiter for Sefan Medical Supply (Sefan), a durable medical equipment provider, located in Houston. Based upon the joint investigative efforts of the agencies comprising the Medicare Fraud Strike Force into a $2.8 million scheme to defraud Medicare by Sefan, evidence was obtained proving that Revis’ role in the scheme was to provide Medicare beneficiary information to Sefan. Sefan, in turn, then billed Medicare for medically unnecessary durable medical equipment and supplies which were either not provided to Medicare beneficiaries or a lesser product from what was billed to Medicare was provided. The information was provided on a prescription form for arthritis kits. All the kits included a knee adjustment with air chamber, rigid frame back brace, elbow with joint, ankle gauntlet, flex glove with elastic finger, heat lamp with stand and a wrist brace. Sefan would order these items for both the left and right side. If the beneficiaries received any items, they did not receive the rigid brace items billed to Medicare, instead they would receive neoprene sleeves, which was not covered by Medicare.
Revis provided to Sefan information for more than 686 beneficiaries for which Sefan paid Revis approximately $400 per beneficiary for a total of more than $353,000. With the information provided by Revis, Sefan billed Medicare for more than $2.8 million worth of claims for arthritis kits and was paid more than $1.7 million for those fraudulent claims.
Revis remains on bond pending sentencing, which is set on Nov. 2, 2011. Revis faces a maximum of up to five years in prison to be followed by up to a three-year-term of supervised release and a fine of up to $250,000 for the kickback conspiracy conviction.
The owner of Sefan and the physician whose signature was on the prescriptions have also been convicted following their respective pleas of guilty to conspiracy to commit health care fraud. Kate Ose Olear, the owner of Sefan, was sentenced to 57 months in prison on Feb. 10, 2011, by United States District Judge David Hittner. John Edward Perry III, the physician, pleaded guilty in June 2010. He remains on bond pending his sentencing on Oct. 21, 2011, before United States District Judge Gray H. Miller.
The investigation leading to the charges in this case was conducted by the Medicare Fraud Strike Force comprised of agents with the Department of Health and Human Services, Drug Enforcement Administration Diversion Division, Texas Attorney General Medicaid Fraud Control Unit, United States Railroad Retirement Board and the FBI. Assistant United States Jennifer Lowery and Special Assistant United States Attorney Justin Blan are prosecuting the case.
From time to time I wonder what motivates someone to perpetrate such a significant fraud? Having been there, I understand that once the illusion is created it’s difficult to escape from the lack of reality that sets in, but still – what motivated it to start with?
David R. Lewalski, formerly of Gainesville, Fla., pleaded guilty today to mail fraud in connection with his operation of a $30 million investment fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Robert E. O’Neill of the Middle District of Florida.
Lewalski, 47, pleaded guilty before U.S. Magistrate Judge Mark A. Pizzo in the Middle District of Florida and faces a maximum penalty of 20 years in prison.
According to court documents, the defendant, who operated a company called Botfly LLC, willfully engineered and executed a scheme to defraud by promising victim investors that he could generate returns of up to 10 percent per month, compounded monthly, through his trading in the foreign currency (forex) market. In fact, the defendant operated an investment fraud scheme. The defendant and others working at his direction raised approximately $29,851,598 from victim investors, but the defendant used only a small percentage of those funds for forex trading (approximately $2.6 million), the vast majority of which he lost.
Lewalski admitted that instead of trading in the foreign currency market as he promised, he used the bulk of victim investor funds to make payments to other investors in order to perpetuate the scheme and make it appear as if he was generating the promised returns. Lewalski paid investors $14,339,887 in “returns” that he led them to believe were generated by his forex trading when, in reality, he was merely paying them with other victim investors’ funds. Lewalski also spent millions of dollars of victim investor funds on personal expenses, including high end real estate, private jet travel, luxury automobiles, computer equipment and jewelry.
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ETHICS AND WHITE COLLAR CRIME NEWS RELEASE:
Edward Louis Molz, III, aka “Frank Sullivan,” 29, of Plano, Texas, was sentenced by U.S. District Judge Sam A. Lindsay to 96 months in federal prison and ordered to pay $1,074,725 in restitution following his guilty plea in January to one count of wire fraud in connection with a fraudulent advance fee scheme he ran.
In addition, according to the plea agreement, Molz will be ordered to forfeit property that was derived from proceeds traceable to his offense, including funds seized on September 7, 2010, from the 3rd Street Financial LLC account at JPMorgan Chase, as well as a 2007 BMW 650, a 2005 Maserati and real estate located on Cartwright Street in Irving, Texas.
Molz was arrested in September 2010 at his home by FBI agents on wire fraud and mail fraud charges outlined in a federal criminal complaint, and was released on a personal recognizance bond. A federal grand jury returned a six-count indictment the following month charging Molz with four counts of wire fraud and two counts of mail fraud. In March 2011, Molz’s bond was revoked.
According to the factual resume filed in the case, from November 2009 through May 2010, Molz ran a scheme in which he induced small business owners, who were seeking alternative means of financing, to pay a fee to purchase an “aged” corporations. These “aged” corporations purportedly had access to lines of credit that were available to the purchaser.
To carry out his scheme, Molz established 3rd Street Financial, LLC, and, using the assumed name of “Frank Sullivan,” held himself out as its chief financial officer. He marketed 3rd Street Financial through a website and a loose association of financial brokers. He represented to potential purchasers that he had established and maintained a number of “aged” corporations which had been in existence for four to five years and had access to lines of credit between $250,000 and $400,000. For a $3250 acquisition fee, a purchaser could acquire a “Tier 1″ corporation with a minimum line of credit of $150,000. However, for a $6500 acquisition fee, a purchaser could acquire a “Tier 2″ corporation with a $250,000 minimum line of credit.
Molz represented that upon payment of the fees, he could deliver the aged corporation to a purchaser within nine to 12 weeks. He also represented that each “aged” corporation had additional benefits, including established “business trade lines,” a complete financial and business plan, a Dun & Bradstreet listing and three years of valid tax returns. He furnished potential purchasers with false and fictitious documents, including service agreements, testimonials from satisfied purchasers and letters from financial institutions confirming the issuance of lines of credit.
During the time frame mentioned above, approximately 247 individuals mailed or wired money to Molz and he deposited those funds into JPMorgan Chase and Compass Bank accounts. Molz did not deliver any “aged” corporations as promised. Instead, he used the money almost exclusively for his personal benefit, including the acquisition of personal assets and real estate.
YOUR COMMENTS ARE WELCOME
Harvard H. Hill, of Houston, has been charged with three counts of wire fraud in connection with an investment in the general partnership of a Houston-based venture capital fund he promoted.
Hill, 74, surrendered to FBI agents as a result of the return of the three-count indictment on July 21, 2011.
The indictment alleges that Hill defrauded an investor in the general partnership that managed the James Sunbelt Investment LP Fund that Hill promoted. Hill, who has operated venture capital funds in Houston under the name Houston Partners, solicited an investor to become a special limited partner in the general partnership. Under the supposed structure of the fund, the general partnership would receive 20% of the fund’s profit distributions and a 2% annual management fee. The special limited partner would receive a percentage of the general partnership’s stake, so the ability to repay the special limited partner depended in significant part on the amount invested in the fund given the annual 2% management fee.
The indictment alleges that Hill misrepresented that millions of dollars were already in the fund under the management of the general partnership, provided false information listing the names of companies in which the fund was supposedly invested and falsely claimed that professors at Rice and MD Anderson Cancer Center had agreed to serve on the fund’s Scientific Advisory Board. The indictment further alleges that within a week of the investor wiring $500,000 to Hill in July 2006, Hill had transferred over half the funds to a personal account in his name, a bank account controlled by a member of Hill’s family and an account in the name of another fund in which Hill had past due expenses. According to the indictment, within two months of receipt of the investment, more than 80% of the money had been spent and was not used for promoting and managing the fund.
Each wire fraud count carries a potential punishment of up to 20 years in prison and a $250,000 fine.
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Indicted infomercial pitchman Donald Lapre, of Phoenix, who previously failed to appear at his arraignment on 41 counts for Conspiracy, Mail Fraud, Wire Fraud, Promotional Money Laundering and Transactional Money Laundering, will remain in custody pending trial. At a hearing in Phoenix today, U.S. Magistrate Judge Lawrence O. Anderson ordered that Lapre be detained as a flight risk.
In the course of the hearing, the prosecution noted that Lapre had received notice of his scheduled arraignment and failed to appear, and that while he had recently been residing in Maricopa County, the investigating agencies were unable to locate any record of his current address through checks related to a residence, motor vehicle, driver’s license, telephone, or private post office box. The indictment alleges that the 47-year-old Lapre oversaw and promoted a nationwide scheme to sell essentially worthless Internet-based businesses to over 220,000 victims through his company “The Greatest Vitamin in the World.”
According to the indictment, from April 2003 through October 2007, Lapre allegedly conspired with others to defraud thousands of victims all across the country by encouraging them to invest in an Internet-based business. The “business” primarily consisted of selling the Greatest Vitamin in the World (GVW) over the Internet and the opportunity to sell the opportunity to do the same thing to others. At the height of the scheme, Lapre had enlisted approximately 226,794 people to sell a limited number of products via individual websites. Along with selling tens of thousands of Internet-based businesses which were essentially worthless, Lapre fraudulently provided his investor/victims, known as “Independent Advertisers” (IAs), with false vitamin sales records. These records encouraged IAs to purchase additional advertising and services in the hope of obtaining commissions including $1,000 checks. Lapre also fraudulently sold bulk Internet traffic to IAs while claiming that it was targeted to individuals who were seeking to either buy vitamins or invest in similar businesses. GVW sales representatives regularly signed up victims as IAs even if they did not own a computer. During the course of the scheme, at least 220,000 victim/IAs were defrauded of approximately $51.8 million. During this same period, approximately $6.3 million in commissions were paid to approximately 5,000 victim/IAs.
Trial is currently set for October 4, 2011, before U.S. District Court Judge Susan R. Bolton in Phoenix. Convictions in this case for Conspiracy carry a maximum penalty of five years, a $250,000 fine or both; Mail Fraud and Wire Fraud carry a maximum penalty of 25 years, a $250,000 fine or both; Promotional Money Laundering carry a maximum penalty of 20 years, a $500,000 fine or both; and Transactional Money Laundering carry a maximum penalty of 10 years, a $250,000 fine or both. In determining an actual sentence, Judge Bolton will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. The judge, however, is not bound by those guidelines in determining a sentence.
An indictment is simply the method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.
Potential victims of this scheme may submit a victim statement via the following website operated by the Postal Inspection Service: www.postalinspectorsurvey.com/vitamins. Potential victims of this scheme may also keep track the progress of the case by visiting the following link located on the U.S. Attorney for the District of Arizona’s website: http://www.justice.gov/usao/az/us_v_donald_lapre_gvw.html
HERE’S a cool article related to Donald Lapre: http://www.quackwatch.org/11Ind/lapre.html
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