Mishcon Fraud Watch - August 2009
Welcome to the August 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 Law Lords have dismissed claims of negligence against Moore Stephens, the accountancy firm, for allegedly failing to detect a fraud at Stone & Rolls, a trading company.
Megan Murphy
Financial Times, 31 July 2009
City of London Police
The City of London Police has seized almost £1m worth of luxury cars as part of an ongoing investigation into an alleged £80m ponzi scheme. The investigation centres on Business Consultancy International, a London based consultancy firm.
City of London Police press release, 22 July 2009
Government
The Cabinet Office has published an updated strategy for tackling serious organised crime. The strategy has four principles: to take action against all known organised criminals; to use whichever tools will have the maximum impact; to work with government and the public sector; and to work better with partners at home and abroad.
Cabinet Office report entitled Extending our Reach: A Comprehensive Approach to Tackling Serious Organised Crime, 21 July 2009
Sport
Sport England has commissioned an investigation into a bank account controlled by World Class Payment Bureau, a division of Sport England, which acts on behalf of smaller sports to distribute Lottery and government funds. The investigation was set up to establish whether public funds have been misused or misappropriated.
Paul Kelso
The Daily Telegraph, 1 July 2009
NORTH AMERICA
Banking and Finance
James Davis, the former Chief Financial Officer of Stanford Financial Group, has pleaded not guilty to criminal charges which are related to an alleged $7bn fraud. His lawyer has confirmed that Mr Davis plans to enter a formal guilty plea within two weeks, as part of a deal with the authorities.
Sheila McNulty
Financial Times, 14 July 2009
Securities and Exchange Commission (SEC)
The SEC has charged four promoters and a Phoenix-based company with securities fraud. The four are accused of misleading investors over how their money could be used. The promoters made loans to Mortgages Ltd, a lending company specialising in high-interest short-term loans, through their company, Radical Bunny LLC.
SEC press release 2009-174, 28 July 2009
The SEC has asked a court to order Maynard L. Jenkins, the former CEO of CSK Auto Corporation, to reimburse the company and its shareholders with more than $4m, which he received in bonuses and stock sale profits while CSK committed accounting fraud. This is the first action seeking reimbursement under the SOX "clawback" provision from an individual who is not alleged to have otherwise violated the securities laws.
SEC press release 2009-167, 22 July 2009
The SEC has charged New York based broker-dealer Sky Capital LLC and six individuals in connection with alleged involvement in a fraudulent boiler room scheme that raised millions of dollars from US and UK investors.
SEC press release 2009-152, 7 July 2009
The SEC has charged Michael Rand, the former chief accounting officer of Beazer Homes USA, in connection with an alleged accounting fraud. The SEC claims that Mr Rand, amongst other things, fraudulently recorded improper accounting reserves and misled Beazer's outside auditors and internal accountants in order to conceal his wrongdoing.
SEC press release 2009-146, 1 July 2009
MIDDLE EAST
At least four banks have filed claims at the High Court in London against the Saad Group and entities owned by the Algosaibi family. The claims relate to debts owed by the two Saudi conglomerates, which are facing financial difficulties. The Ahmad Hamad Algosaibi & Brothers Company (AHBC) recently filed a lawsuit in the US against Maan Al Sanea, Saad's owner and former managing director of AHBC, in connection with an alleged $10bn fraud.
Michael Peel and Andrew England
Financial Times, 18 July 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.