Mishcon Fraud Watch - February 2010
Welcome to the February edition of Mishcon Fraud Watch, prepared by the Fraud & Insolvency Group at Mishcon de Reya. Its aim is to provide businesses and their advisors with a snapshot of what has been happening in the world of fraud in the last month.
We make no judgement whatsoever as to the morality, legality or appropriateness of the conduct which forms the subject matter of this bulletin. We simply aim to bring these matters to the attention of those involved in the prevention, detection and investigation of fraud.
UNITED KINGDOM
Banking and Finance
The Supreme Court has ruled against the extradition of Ian Norris to the United States to face fraud charges relating to an alleged price-fixing cartel.
Michael Peel
Financial Times, 1 December 2009
Serious Fraud Office (SFO)
Five men have been jailed for conspiracy to defraud investors in Prudential Commercial Investments, a fraudulent property loans business. The fraud involved using unsuspecting Independent Financial Advisers to attract ex-pat investors to the scheme.
SFO press release, 22 December 2009
The SFO has announced that it will investigate Kaupthing hf, the Icelandic bank, to establish whether misrepresentations or false representations were used to attract UK investors.
SFO press release, 16 December 2009
Edward Davenport, Martin Riley and David Horsfall have been charged with conspiracy to defraud, deception and money laundering. The charges relate to alleged international commercial loans and rents fraud.
SFO press release, 4 December 2009
NORTH AMERICA
Banking and Finance
Lord Black of Crossharbour has launched a challenge to his conviction for fraud. Lord Black has asked the US Supreme Court to examine the statute, under which he was convicted, that makes it a crime to deprive another of the right to "honest services".
James Bone
The Times, 10 December 2009
Brien Santarlas, a former attorney with law firm Ropes & Gray, has pleaded guilty to charges of fraud and conspiracy. The charges related to an alleged insider trading scheme involving the Galleon hedge fund and the acquisitions of 3Com and Axcan.
Joanna Chung and Stacy-Marie Ishmael
Financial Times, 11 December 2009
Terra Firma, the private equity group, has filed a lawsuit against Citigroup in the US. Terra Firma alleges that Citigroup held a fraudulent auction for EMI in 2007 and misrepresented 'fundamental facts'. Citigroup denies any wrongdoing.
Henny Sender and Andrew Edgecliffe-Johnson
Financial Times, 12 December 2009
Manufacturing
A court in the US has ruled that Nacco, a kitchen appliance manufacturer, is entitled to pursue claims of fraud and civil conspiracy against Harbinger Capital, a hedge fund. Nacco alleges that Harbinger misused confidential information related to the takeover of Applica, a rival kitchen manufacturer.
Louise Armitstead
The Daily Telegraph, 31 December 2009
Securities and Exchange Commission (SEC)
The SEC has charged a US subsidiary of ICAP PLC with fraud. The charges relate to allegations that the company engaged in deceptive broking activity and made material misrepresentations to customers concerning its trading activities.
SEC press release 2009-272, 18 December 2009
Ernst & Young LLP (‘E&Y') has agreed to pay US$8.5m to settle charges brought by the SEC relating to an accounting fraud at Bally Total Fitness Holding Corporation. The SEC found that E&Y knew or should have known about Bally's fraudulent financial accounting and disclosures.
SEC press release 2009-271, 17 December 2009
The SEC has charged Brookstreet Securities Corporation and its President and CEO, Stanley Brooks, with fraud. The charges relate to alleged systematic selling of risky mortgage-backed securities to customers with conservative investment goals.
SEC press release 2009-260, 8 December 2009
The SEC has charged Patti Dodge, David Kenneally and Brad Morrice, former executives of New Century Financial Corporation, with securities fraud in connection with allegations that they misled investors in the company’s subprime mortgage business.
SEC press release 2009-258, 7 December 2009
EUROPEAN UNION
The European Union has lost €5bn from VAT fraud connected to carbon trading, according to Europol.
Ashley Searger
The Guardian, 15 December 2009
Mishcon de Reya
Mishcon's Fraud Watch is published by the Fraud & Insolvency Group of Mishcon de Reya Solicitors. Widely recognised as the leader in the field of fraud investigations, the Group has pioneered the use of financial fraud techniques in numerous fields, including the rapidly growing areas of theft of confidential information and counterfeiting. The Group founded and run both the Fraud Network, made up of international legal fraud specialists and the Financial Risk Group, for risk and compliance officers.