Note to readers, I moved this post to the forefront for the benefit of the Fall 2015 Accounting Students. We study fraud in several classes. Amazing how much of it there is new and fresh every fall! I also have links to the posts from previous years.
This thread begun Thursday August 13, 2015
Yep it's that time again. I teach the Accounting Ethics 5308 class in the spring. So the last few fall terms I have started a post titled Who's the Worst!
Every time I spot a story about a fraudster or other ethical failure, I post it. And it is amazing how many stories can accumulate in just one semester!
Previous Installments Include
August 4, 2013
October 30, 2012
December 9, 2011
Politics
8/8/15 Our first fraudster was connected to yes the Clintons. Norman Hsu crewated a Ponzi Scheme ala Bernie Madoff. He promised big returns to investors. Then claiming they were making money he asked for political donations raising some $850,000. The Clintons say they gave the money to the Treasury, gee why not to the people that got defrauded?
8/21/15 Former Virginia Governor Bob McDonnell lost his appeal to stay out of jail while appealing his two year sentence to the US Supreme Court. He got two years and his wife one year. The crime was accepting gifts in apparent exchange for political favors. the previous link shows a graphic time line of everything the family accepted. Ethical teaching moment-did he really think no one would notice?
10/13/15 Outraged citizens protest $216K City Manager Salary James Jonas earns $216K as city manager of tine Crystal City, Texas population 7,100. Citizens are outraged.
10/14/15 Former chief Executive of the Chicago School District pleaded guilty to fraud. She attempted to steer some $23 million in contract to two consulting firms where she formerly worked. The firms were going to kick back money, sports tickets, meals, and such to her and her relatives for years in the future. Prosecutors dropped 19 of the 20 charges, the 66 year old will probably be sentenced to 7.5 years in prison. I mean really she thought she could get away with this? Chicago mayor Rahm
emanuel appointed her in the Fall of 2012.
10/18/15 The State of Illinois has stopped paying lottery winners. But the ads for the lottery continue? If Illinois is not paying out but spending the money elsewhere, how will they ever get the money pay the previous winners to date? I guess the voters get what they deserve in Illinois, see previous post on Chicago Schools.
10/24/15 Dianna Duran, New Mexico Secy of State, resigned pleading guilty to personal use of campaign funds. She agreed to a suspended sentence and five years of probation. To pay gambling debts she withdrew $282,806.96 at eight casinos in 2014 and $147,641. in 2013. Her resignation and plea came two months after the State Atty General had brought criminal charges against her.
11/30/15 MY State House Speaker Sheldon Silver is convicted in Manhattan. He arranged for money to go to a doctor who then referred mesothelioma patients to a law firm. The law firm shared its fees with Silver. Silver had been a long time political boss in NY State.
1/11/16 Spain's Princess Cristina on trial for tax fraud She is the sister of the King of Spain (what you did not know Spain had a King?) Allegations are that she and her husband diverted funds for a stadium for their own use. Expect lots of headlines on this one.
10/24/16
Former PA Atty General Kathleen Kane was sentenced to 10-23 months on nine couints.
Perjury, obstruction of justice, leaking grand jury document5s all to embarrass a political foe and for lying about it under oath.
Note it is the lying about it under oath that so often brings people down.
Business
8/15/15 Edward Jones Fined $20 M by the SEC Years ago I was working through First Affiliated Securities as a broker. I met some ex Edward Jones employees who had moved to First Affilliated. When I asked why they switched, laughter erupted. The called Jones the 'six point bond boys' meaning that firm would add $60 ( a point in bond talk is $10) to the commission. Apparently Ed Jones is still doing some of that. Note in this article that the head trader was only fined $15,000 and barred from the business for two years. Do you think she will repent her wicked ways in two years or just become more clever?
8/15/15 A German prosecutor will charge eight Deutsch Bank employees with a $149 M euro tax fraud. Recall that Deutsch Bank was also involved in the KPMG tax shelter fraud case. Hmm, sounds like that ethical tone at the top is just not happening for D Bank.
8/20/15 Convicted Embezzler promises not to practice accounting but changes name and does so anyway. Stephen P. Corso became Steven John Corso and simply started practicing as a CPA, Attorney and Consultant with Ivy League Degrees, none of which he actually possessed. He helped convict some mobsters and in return had his sentence reduced from 7.5 years to less than one year. But he became a CFO for a company earning $70,500 a year. One of the things you learn in Auditing is Professional Skepticism. This is another example of how easily firms are duped by con men.
8/27/15 Armando Jesus Hernandez Leall a former Mexican banker, plead guilty to a charge of laundering millions of dollar he was supposed to have invested. He was living here in Shavano Park.
8/27/15 Fernando Jose De Leon, former Asst Development Services Director of the land development division for the City of San Antonio was sentenced to 14 months in federal prison. He was involved a bribery scheme regarding city contracts. He also has to pay back $284,949.21 in restitution.
9/21/15 VW admits to rigging emissions tests. The Stock dropped 18% on the day of admission to a three year low. A device in their diesel cars detected when the car would be checked. When it was not being checked, the device turned off the emissions system. This is classic bad corporate behavior like the GM ignition with designed too cheaply or the Ford Pinto gas tank behind the frame which would catch fire.
GM agrees to pay $900 M fine over ignition switch disaster. the GM culture of never too cheap has gotten really expensive.
Blue Bell recalls products over listeria outbreak.
9/23 VW CEO Winterkorn resigns. Now read his comments
In a statement issued by the company Winterkorn said he was "shocked by the events of the past few days."
"Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group."
So he has chosen to go with the tory that he did not know. As I said in a previous post this really does not look any better than knowing and denying, in this instance he is saying he is either not close enough to know what is going on day to day or he failed to establish a culture of ethics that would prevent such behavior, either way he is out.
But is that justice? Now someone else has to clean up his mess. What do you think.
9/15/2015
The CEO and several execs with UAL resigned in a corruption scandal. Remember Bridgegate when some of Chris Christie's guys closed a bridge as political pay back? That stunt was engineered by a guy named Samson who apparently was still running a New Jersey airport. Seems UAL arranged a money losing flight from Newark to where Samson lived. And apparently there was some dealing on the prices of fees at the airport. What, scandal in New Jersey, we're shocked. …
10/8/15 2015 Biggest Sore Loser Award Goes to Bill Gross for Suing PIMCO for hundreds of millions.
Gross is to worth $2 billion and says he would give th money to charity if he won. Bill you are a big boy and left of your own will, get back to work, this sort of thing is to the way to end your career, or perhaps it is a career ending move now that I think about it.
11/6/15 Anthony Allen and Anthony Conti were found guilty of scheming to rig the LIBOR rate. Three Rabobank traders who had already plead guilty testified adjacent them.
11/6/15 The FED barred former Goldman employee from the banking industry. Bonita Bansal plead guilty to obtaining FED secrets. He may face a year in jail. But at least it is encouraging to know someone can actually get kicked out of the industry for such stuff.
12/2 Laura Mayfield sentencing postponed Laura Mayfield, 54, pleaded guilty to a single felony count of wire fraud after overstating D'Harris State Bank's equity in financial statements used by SA Vantage Bancorp in their decision to purchase the bank in 20147. Vantage says it overpaid by $817,892 ( gee what precision, not a round number?). Prosecutors want Mayfield to re pay $700,000. Mayfield's lawyer says no deal as her client did not take the money. Sentencing resumes Jan 26 as our ethics class gets underway.
12/17 Turing CEO Martin Shkreli arrested for securities fraud. Shkreli is CEO of Turing Pharma, KaloBios Pharma and manages a hedge fund MSMB Capital Management and Retrophin. Brooklyn US Atty Robert Capers said Shkreli essentially ran his companies like agonize scheme were he used each subsequent company to pay off defrauded investors in the prior company. No doubt Martin deserves his day in court, did we mention he is only 32? shkreli had previous raised th price of a prescription drug by more than 5,000 percent.
1/18 Goldman Sachs is fined $5 billion to settle claims for losses in mortgage backed securities.
Typical in such cases, no blame was admitted and on one lost a job. Now as Bernie Sanders pointed out in the debate last night, how can it be that one gets jail time for smoking marijuana but no one goes to jail for such crimes against investors. He also noted that Hillary had taken $600,000 in speaking fees from Goldman. Would that influence her decision making as President?
International
8/16/15 An enterprising Chinese man set up a ghost bank. Yes the name said China Construction Bank but it had no charter. He simply installed his daughter and a couple of friends as tellers. Things went awry when new depositors tried to withdraw their finds via legitimate China Construction Bank locations. He had been denied a charter and so decided to take action of his own.
8/17/15 Brazil’s embattled President Dilma Rousseff was the target of demonstrators in cities across the country demanding her ouster amid scandals involving bid-rigging and briberyat state-run oil giant Petroleo Brasileiro SA, Reed Johnson and Luciana Magalhaes report. Ms. Rousseff has seen her approval rating drop to 8% about seven months into her second term, as she struggles with the scandal. Many protesters carried placards demanding that the president be impeached and others called for the military to overthrow the government and set up new elections. Protests apparently were staged in all of Brazil’s 26 states and the capital district of Brasilia. In Sao Paulo, the protest was the second-largest since March, with estimates ranging from 135,000 to 350,000 protesters.
8/18/15 the explosion in Tianjin, China was a result of too much sodium cyanide being in storage. the amount stored was excessive and it violated rules about how close it should or could be to a neighborhood. The results was the loss of life and property. Chinese officials have ignored safety and environmental rules while working to expand GDP. Perhaps human safety will begin to take more importance. Interestingly the facts on this are in the open, something different for China.
10/14/15 Not only is Dina Rousseff, the Brazilian President facing potential impeachment, now the House wants Speaker Eduardo Cunha out as well. The complaints are tied to the Petrobras scandal.
11/10/15 Toshiba reports first loss in six years. An accounting scandal has it suing former execs
Sports & Education
Online classes Give Rise to Organized On Line Cheating Entire companies now exist to allow one to 'outsource' the education requirement. Most schools are not doing anything to monitor who actually takes the test on line. How will this affect the value of a degree?
SMU's basketball coach Larry Brown has been sanctioned by the NCAA. This is the third time the previous being Kansas and UCLA.
The NCAA has banned Southern Methodist University's men's basketball team from 2016 postseason play, and it has also suspended Hall of Fame coach Larry Brown for 30% of the team's game this season due to multiple rules violations, the NCAA announced Tuesday morning. Brown was hit with a "lack of coach control" charge, and other NCAA charges against the program include academic fraud and unethical conduct.
In addition, Brown "failed to promote an atmosphere of compliance when he did not report violations and was not initially truthful during an interview with NCAA enforcement staff," the NCAA found. Brown was also hit with a two-year show-cause order, and he will be required to attend an NCAA Regional Rules seminar during each year of the show-cause period.
Accounting Teaching Moment – Since SMU knew that Brown had a poor track record of compliance, why didn't they assign someone from the internal audit office to monitor what was going on?
Spurs Coach Popovic orders Duncan and Parker to foul DeAndre Jordan the Spurs maintained their perfect home record of 15-0 beating the LA Clippers 115-107. A letter writer to the Express News notes ' I will never forget the disgusted look on Duncan's face when he wrapped his arms mourned Jordan in an intentional foul at Popovich's instruction. I won't be watching any more Spurs games.'
Professor Elam 