Mishcon Fraud Watch - September 2009
Welcome to the September 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
Eric Butler, a former Credit Suisse broker, has been found guilty of fraudulently selling auction-rate securities. Mr Butler was accused, alongside another colleague, of scheming to generate higher commission by lying to clients about the type of securities they were being sold. Mr Butler plans to appeal the decision.
Joanna Chung
Financial Times, 19 August 2009
Energy
Seven people have been arrested in connection with an alleged £38m VAT fraud involving the trade of carbon credits bought from overseas. The British government has temporarily suspended VAT on carbon credits to allow the EU time to decide on a common policy for tackling this type of 'missing trader' fraud.
Rowena Mason
The Daily Telegraph, 20 August 2009
Serious Fraud Office (SFO)
Aftab Al Hassan and Riad el Tahir, sole traders in the oil market, have been charged with offences in connection with breaching United Nations sanctions in the Iraqi oil-for-food programme. The move is part of an ongoing investigation by the SFO.
Christopher Hope
The Daily Telegraph, 27 August 2009
The SFO has announced that it does not intend to instigate a criminal investigation into the sale of car manufacturer, MG Rover Group. The SFO's decision follows a review of documents from the Department of Business, Innovation and Skills.
SFO press release, 11 August 2009
UNITED STATES
Banking and Finance
James Davie, the former Chief Financial Officer at the Stanford Financial Group, has pleaded guilty to charges connected to an alleged $7bn ponzi scheme run by Sir Allen Stanford.
Sheila McNulty and Stacy-Marie Ishmael
Financial Times, 28 August 2009
Clients of Standard Chartered Bank in the US have launched a class action lawsuit to recoup up to $7.5m of fees the bank charged them to invest with Bernard Madoff.
James Doran
The Observer, 23 August 2009
PWC Canada has been named in several lawsuits brought by victims of Bernard Madoff’s ponzi scheme. PWC Canada acted as auditor to Fairfield Sentry, a feeder fund that became the biggest single casualty of the fraudulent scheme.
Philip Aldrick
The Sunday Telegraph, 23 August 2009
Securities and Exchange Commission (SEC)
The SEC has charged Frank DiPascali, Bernard Madoff's chief financial officer, with securities fraud. The SEC claims that Mr DiPascali faked millions of documents and trading records to conceal the fraud from regulators and investors.
SEC press release 2009-182, 11 August 2009
The SEC has charged former American International Group (AIG) Chairman and CEO, Maurice Greenberg, and former Vice Chairman and CFO, Howard Smith, for their alleged involvement in improper accounting transactions. The SEC claims that the men inflated AIG's reported financial results between 2000 and 2005.
SEC press release 2009-180, 6 August 2009
The SEC has filed civil fraud charges against General Electric Company alleging that the company misled investors by reporting materially false and misleading results in its financial statements.
SEC press release 2009-178, 4 August 2009
The SEC has charged Bank of America Corporation for misleading investors about billions of dollars in bonuses that were paid to Merrill Lynch executives at the time of its acquisition of the firm. Bank of America has agreed to settle the SEC's charges and pay a penalty of $33m.
SEC press release 2009-177, 3 August 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.