This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

Mishcon Fraud Watch - July 2014
28 July 2014

Mishcon Fraud Watch - July 2014

Welcome to the July edition of Mishcon Fraud Watch. 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.


Tax fraud

UK Businessman Michael Voudouri, one of Britain's most wanted tax fugitives, has been jailed for more than 11 years and had a Financial Reporting Order imposed against him for a 15-year period for a multi-million-pound tax fraud. Having pleaded guilty in October 2012 to laundering £11.6 million through foreign and domestic banks, company accounts and individuals, between 2001 and 2004, as part of a VAT scam, Voudouri fled to northern Cyprus, where he was tracked down and extradited last month.
Telegraph, 28 June 2014

Insider trading

Damian Clarke, a former Schroders trader, has been charged by the Financial Conduct Authority with nine counts of insider trading between October 2003 and November 2012. The allegations relate to trading in both equities and spread bets. Schroders is not subject to any investigation.
Caroline Binham
FT, 26 June 2014



Spain's Princess Christina is facing trial, having been ruled a suspect in connection with the case against her husband, Inaki Urdangarin, for fraud, falsifying documents and embezzlement. Urdangarin's charitable foundation, Noos, for which Princess Christina was a board member, is accused of siphoning off €5.8 million in public funds. Together with his former business partner Diego Torres, they are accused of using connections to win public contracts, overcharging for services and stashing money in privately owned companies and offshore tax havens.
Ashifa Kassam
Guardian, 26 June 2014

Tax fraud

Marcel Bruehwiler, the head of UBS's business in Belgium has been charged for alleged involvement in a multibillion-euro tax fraud, as the Belgian authorities step up their investigation into the Swiss bank. Bruehweiler faces charges of organised crime, money laundering, illegal practice as a financial intermediary and serious organised fiscal fraud, based on data gleaned from a UBS compliance officer turned whistleblower. Bruehweiler denies the charges.
Alex Barker
FT, 21 June 2014


Securities and Exchange Committee (SEC)

The SEC has filed an emergency enforcement action to halt an ongoing fraud by Scott Valente, an investment adviser based in Albany, N.Y., and his firm The ELIV Group LLC. Valente is charged with lying to clients about the success of their investments while stealing their money for his personal use, fraudulently raising more than $8.8 million from approximately 80 clients.
SEC Press release 2014-112, 3 June 2014

The SEC has charged Saleem Khan and Roshanlal Chaganlal, a director in the finance department at California-based Ross Stores headquarters, with insider trading in Ross Stores stock options. Khan traded based on non-public information about monthly sales results on more than 40 occasions, then tipped Chaganlal and another colleague Ammar Akbari so they too could trade on the stock options, resulting in collective profits of more than $12 million. 
SEC Press release 2014-117, 13 June 2014

The SEC has charged Florida-based hedge fund advisory firm, Weston Capital Asset Management LLC, and founder Albert Hallac, with fraudulently shifting money from one investment to another without informing investors. Hallac illegally drained more than $17 million from a hedge fund they managed and transferred the money to a consulting and investment firm known as Swartz IP Services Group Inc.
SEC Press release 2014-121, 23 June 2014

The SEC announced charges against Thomas A. Neely Jr., Jeffrey C. Kuehr, and Michael J. Willoughby, three former senior managers at Regions Bank, for intentionally misclassifying $168 million in loans that should have been recorded as impaired for accounting purposes.  Messrs. Kuehr and Willoughby agreed to settle the SEC’s charges by paying $70,000 each.  The SEC also announced that it entered into a deferred prosecution agreement with Regions Bank, which will pay $51 million to resolve parallel actions brought by the SEC, Federal Reserve Board, and Alabama Department of Banking.
SEC Press Release 2014-125, 25 June 2014

The SEC instituted settled administrative proceedings against Derek W. Bakarich, Carmela Brocco, Tina Lizzio, Steven J. Niemis, and William W. Vowell, for committing short-selling violations while trading for themselves and Worldwide Capital Inc., a Long Island, New York-based proprietary firm.  According to the SEC, the traders violated Rule 105 by short-selling shares during the restricted period and purchasing offering shares of the same securities they had shorted.  The traders agreed to settle the SEC’s charges and pay a collective total of approximately $750,000.
SEC Press Release 2014-131, 2 July 2014

The SEC announced charges against seven men with trading on non-public information.  According to the SEC, Eric McPhail, Douglas A. Parigian, John J. Gilmartin, Douglas Clapp, James A. Drohen, John C. Drohen, and Jamie A. Meadows relied on insider information to trade on the shares of American Superconductor Corporation, reaping more than $554,000 in illegal profits.  Mr. McPhail purportedly received the non-public information from a company executive, and then shared it with the others, most of whom were his golfing buddies.  Messrs. Gilmartin, Clapp, and Drohens agreed to settle the SEC’s charges, agreeing to collectively pay approximately $145,000 in fines.
SEC Press Release 2014-134, 11 July 2014

The Department of Justice

The Department of Justice announced a historic settlement with Citigroup Inc. to resolve federal and state civil claims related to residential mortgage-backed securities.  The settlement includes a $4 billion civil penalty, an acknowledgement by the company that it made serious misrepresentations to the public, and a requirement that Citigroup provide relief to affected homeowners, borrowers, and communities.  The settlement does not eliminate the possibility of future criminal charges.
Department of Justice Press Release, 14 July 2014

LIBOR manipulation

Takayuki Yagami, a former Rabobank trader, has pleaded guilty before US District Judge Jed Rakoff in Manhattan to his role in manipulating the Yen Libor benchmark interest rate on one count of conspiring to commit wire fraud and bank fraud. Yagami admitted to conspiring with three other previously charged Rabobank traders to submit false, fraudulent Yen Libor submissions to benefit their own trading positions.
Telegraph, 10 June 2014