Securities: May 2007 Archives

Ex-Coke Secretary Gets 8 Years

Joya Williams, a former secretary for Coca-Cola, was convicted of conspiracy to steal trade secrets from Coca-Cola and has been sentenced to eight years in federal prison. Williams and Ibrahim Dimson plotted to sell Coca-Cola's recipe secrets to Pepsi for at least $1.5 million. U.S. District Judge J. Own Forrester said that "this is the kind of offense that cannot be tolerated in out society."

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Seven Years for Ex-US Foodservice Exec

Mark Kaiser, the former chief marketing officer of one of the largest food products distributors in the country, was sentenced to seven years in prison for his role in a widespread securities fraud. He also was fined $50,000. Kaiser said that he was "never fueled or driven by greed in anything he has ever done."

Seven Years for Former US Foodservice Exec in Securities Fraud

U.S. District Judge Thomas P. Griesa, however, disagreed, saying that Kaiser's criminal conduct was obvious. "It was deliberate. He had a leadership role and he got other people into trouble," said Griesa. Kaiser will remain free while his sentence is appealed.

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Securities Fraud Class Action Meets Legal Test

Nature's Sunshine Products' motion to dismiss a class action lawsuit has been denied. U.S. District Judge Ted Stewart decided on Monday that there was adequate evidence that the company might be guilty of allegations of securities fraud, cover-up, and insider trading. Stewart ruled against Nature's Sunshine on all counts, except he did decide to limit the scope of claims to those occurring on or after March 15, 2005.

Securities Fraud Class-Action Suit Meets Legal Test

Steven Anreder, a spokesman for Nature's Sunshine, said that the ruling was routine and that the company was not concerned. "We disagree with the allegations in the complaint and we expect to successfully defend them on the merits," Anderer said. Investors who bought Nature's Sunshine stock based on impressive financial reports say they were misled by company officials who sold off $2.9 million of their own stock before the share price dropped.

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Investors Need to Be Aware of Scams

The North American Securities Administrators Association, NASAA, has compiled a list of the top ten way that investors get involved in investment scams. It is important for all investors to be aware of the variety of scams that are out there. Bob Webster, a spokesman for NASAA, says "no one is immune to these schemes. We put out this list every year to try to keep one step ahead of the con artists. We want people to remain vigilant."

Before Choosing an Investment, Check Securities Fraud Watch List

The scams can take a variety of forms. While many plots use fake investment opportunities, investors also often are persuaded to put their money into real invests that are not suitable for them. Brokers are supposed to consider a client's age, financial situation, and investment objectives prior to recommending financial projects. The list of investment scams can be found at NASAA's website.

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Former Wall Street Banker Admits Fraud

Bert Fingerhut, a former Wall Street investment banker and part-time resident of Aspen, Colorado, has pleaded guilty to conspiracy. Fingerhut and several acquaintances improperly bought stock when mutual banks went public. Federal authorities say that the men cheated investors of 65 mutual banks more than $12 million over the last ten years.

Former Wall Street banker admits role in $12 million fraud

Fingerhut pleaded guilty to conspiracy and will lose about $11 million in illegal proceeds. Robert Danetz pleaded guilty with Fingerhut. Fingerhut's nephew Bruce Fingerhut and Danetz's brother settled with the SEC. U.S. Attorney Christopher Christie said of the case: "Fingerhut used his Wall Street acumen to concoct a cunning scheme. He made millions by robbing everyday depositors of an opportunity to which they were entitled and deserved."

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SEC Will Work to Return Funds to Victims of Stock Fraud

Christopher Cox, the chairman of the Securities and Exchange Commission, said that he has ordered the creation of a new office that will return money lost by investors affected by stock fraud. Congress decided to allow the SEC in 2002 to distribute the fines ordered of those who defraud investors to victims. Cox says that the SEC will "very soon" distribute about $3.4 billion owed to investors.

SEC to Focus on Returning Funds to Victims of Stock Fraud

Cox told lawmakers that the SEC office will work to return money to investors as quickly as possible. The SEC is working with the U.S. Treasury Department's Bureau of Public Debt to assure that the money it collects is invested in interest-bearing accounts while waiting for distribution.

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Ex-US Foodservice Executive Jailed for Securities Fraud

Mark Kaiser, the former chief marketing officer of U.S. Foodservice, was sentenced to ten years in jail for securities fraud. U.S. Food overstated its earnings by more than $1 billion because of the fraud that was going on. U.S. Foodservice is one of the largest distributors of food products in the United States.

One federal prosecutor said that Kaiser's actions demonstrated "an astonishing degree of corruption at the highest levels of corporate America." The judge who presided over the case said that Kaiser "had a leadership role and he got other people into trouble." U.S. Foodservice is a subsidiary of Royal Ahold.

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Doctors Charged in $30.5 M Surgery Scam

Three doctors were charged on Wednesday because they allegedly participated in a "rent-a-patient" scam that cost investors millions of dollars. Prosecutors say that Unity Outpatient Surgery Center found patients from across the country. These patients then underwent unnecessary surgery for money or low-cost cosmetic procedures. Dr. Michael Chan, an obstetrician from Cerritos, Dr. William Hampton, a surgeon from Seal Beach, and Dr. Mario Z. Rosenberg, a gastroenterologist, were arrested on Wednesday. Bail for the men ranged from $1 million to $2.3 million.

SoCal Doctors Charged in $30.5 Million Surgery Scam

Each of the doctors was charged with 47 felony counts, including conspiracy for billing 19 insurance companies $30.5 million after performing unnecessary colonoscopies and surgeries on 940 patients. The doctors could face up to 50 years in jail. Orange County District Attorney Tony Rackauckas said of the hefty charges: "Doctors have a respected position in our community and are entrusted with our health and well-being. Doctors need to know if they commit insurance fraud, they may be trading in their scrubs for prison jumpsuits."

Posted by Patricia Bowling at 07:25 PM | Permalink | Comments (0) | TrackBacks (0)

Tyco Pays to Settle Fraud Suits

The industrial company Tyco International Ltd. has agreed to pay three billion dollars in order to settle shareholder lawsuits alleging securities and accounting fraud by its former management. The agreement has been reached after a five year legal battle and is related to Dennis Kozlowski's actions. Kozlowski currently is serving a 25-year jail term for having stolen hundreds of millions of dollars from the company. Tyco says that it is setting up a $2.975 billion cash fund to compensate investors. Lawyers for the plaintiffs say that by the time the accord is approved in court, the fund could increase to over three billion dollars.

Tyco to pay 3 billion dollars to settle fraud suits

Lawyers who represented the shareholders say that the deal is "the single largest payout from any corporate defendant in the history of securities class-action litigation." Jay Eisenhofer, a managing partner at one of the law firms representing the shareholders, says that "this is a fantastic resolution and closes a chapter on one of the largest and most appalling examples of corporate fraud in US history."

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Former Oracle VP Will Settle

A former vice president of Oracle Corp. will pay $198,000 to settle charges of insider trading. Christopher Balkenhol, 40, is believed to have used information targets that he learned from his wife. Balkenhol's wife served as a lead executive assistant to Oracle's chief executive and two co-presidents. Balkenhol decided to settle the Security and Exchange Commission's civil complaint without denying or admitting any wrongdoing.

Ex-Oracle VP to pay SEC in settlement

Balkenhol's wife was not charged or identified. Helane Morrison, the head of the SEC's San Francisco Regional Office, said of the case: "In these situations, the family members have a duty to refrain from using the information for personal gain in the stock market." The SEC says that Balkenhol made trades in 2004 and 2005 with knowledge of Oracle's bids for Retek Inc.

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Former McAfee CFO Convicted for Fraud

The former chief financial officer for software manufacturer McAfee Inc., Prabhat Goyal, was convicted of 15 counts of securities fraud last week. Goyal acted as the vice president and CFO of McAfee, which formerly was known as Network Associates, until an accounting scandal forced his resignation. McAfee agreed to pay $50 million in January 2006 to settle the accounting fraud charges.

Former McAfee CFO Convicted on Fraud Charges

Goyal is believed to have caused Network Associates to make payments to its distributors disguised as discounts, rebates, and marketing fees. These payments caused the distributors to engage in channel stuffing, which meant they held excess inventory, not returning unsold products and purchasing more products than they actually could sell.

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Ex-Morgan Stanley Analyst Arrested

US prosecutors arrested Jennifer Wang and her husband Ruben Chen for misusing non-public information about pending merger deals. Wang worked as a Morgan Stanley analyst. The arrests of Wang and Chen occurred the same day as a former Morgan Stanley compliance lawyer and her husband pleaded guilty to having leaked confidential merger information.

Ex-Morgan Stanley Analyst Arrested

Wang and Chen, a former ING hedge fund analyst, made more than $600,000 by illegally trading the securities of three companies. Prosecutors say that Wang and Chen conducted their trading in an account that was hidden from their employers. David Spears, Wang and Chen's attorney, said that the couple would plead not guilty. Morgan Stanley said of the case: "The alleged wrongdoing by a former employee of our firm is an egregious violation of Morgan Stanley’s values and policies. We fully support and will provide every assistant to the government’s prosecution of insider trading by those who take personal advantage of the trust of our clients and the firm.”

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Execs Plead Guilty to Bribing Lawmakers

The two top officers of an oil services company have pleaded guilty to having bribed Alaskan lawmakers with money and the promise of jobs, contracts, and favors for their backing on bills supported by the firm. Bill J. Allen and Rick Smith have pleaded guilty in U.S. District Court to charges of extortion, bribery, and conspiracy. Allen is the founder and chief executive of Anchorage-based VECO Corp., and Smith was the vice president of the company.

Execs Plead Guilty to Bribing Lawmakers

Federal prosecutors say that Smith and Allen bought the support of the five state lawmakers. The lawmakers are not named in the court documents. Allen also pleaded guilty to giving company bonuses to VECO executives in order to pay them back for campaign contributions they made and then claiming the bonuses were legitimate company expenses. Amy Menard, an attorney for VECO, says that the situation is unfortunate: "No company wants to find itself where VECO is at. It's a difficult set of circumstances for any company to contend with." Sentencing has not yet been determined.

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Banker Charged For Securities Fraud

The United States Federal Bureau of Investigation has arrested a Credit Suisse investment banker on charges of securities fraud. Hafiz Nazeem, 37, was picked up after telling an accomplice in Pakistan about nine transactions that the bank was working on. The Financial Times says that these transactions include Babson & Brown's acquisition of Northwestern Energy and a buy-out of TXU.

Banker Arrested in Securities Fraud Case

Nazeem worked as a junior banker on Credit Suisse's global energy team in March 2006. He is believed to have begun phoning tips to a banker in Pakistan soon after he began work. Nazeem's accomplice was able to make dozens of trades ahead of merger announcements and made more than $7 million as a result of these trades. The U.S. Securities and Exchange Commission has filed concurrent civil charges against Nazeem.

Posted by Patricia Bowling at 08:10 PM | Permalink | Comments (0) | TrackBacks (0)

Wave of Lawsuits Hits YouTube

YouTube's legal troubles have begun: last week, the Football Association Premier League, England's most prestigious soccer organization, filed a lawsuit against the company, as did NBC Universal and Viacom. Thailand's government reportedly is considering a lawsuit against YouTube for displaying a video that is dangerous to the country's monarch. Analysts, however, say that the biggest threat against YouTube is that the website facilitates theft of intellectual property.

Legal Troubles Mount For YouTube

Prior to the lawsuits filed last week, only Tur and Viacom had filed patent lawsuit infringement claims against YouTube. While the lawsuits against YouTube are mounting, it still hasn't been decided if the video-sharing site should be held accountable for post-pirated videos. YouTube says that it's protected from culpability by the Safe Harbor provision of the Digital Millennium Copyright Act (DMCA). Kent Walker, Google's general counsel, said in an email, "These suits simply misunderstand the (DMCA), which balances the rights of copyright holders against the need to protect Internet communications. As a result, they threaten the way people legitimately exchange information."

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Ethics Chief Says Wolfowitz Broke Rules

The head of a World Bank ethics panel says that World Bank President Paul Wolfowitz broke staff rules when he intervened in his girlfriend's personnel matters even though he said he wanted no role in transferring her outside the bank. In a statement that looked at Wolfowitz's role in arranging a large promotion for his girlfriend, the former official, Ad Melkert, said that it would have been in Wolfowitz's best interest to transfer Shaha Riza to avoid conflict of interest issues.

Ethics Chief: Wolfowitz Broke Rules

Melkert added that "contrary to what the staff rules allowed for, Mr. Wolfowitz's proposal explicitly insisted on the possibility of maintaining professional contacts with Ms. Riza. He kept that opinion even after grudgingly following the advice by the ethics committee. Thus, Mr. Wolfowitz denied that the general staff rules should be applicable to his particular situation." The World Bank's overseeing board of directors says that they have finished interviewing people about the matter and now will create a report.

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Browne Could Face Perjury Charges

John Browne, the former chief executive of British Petroleum, could face perjury charges for having given false testimony in court. Browne, 59, resigned this week after a court ruled that newspapers had the right to publish details about his four-year relationship with Jeff Chevalier. Browne admits to have given "an untruthful account" about his first meeting with Chevalier. Although the judge in that case decided that Browne was guilty of criminal contempt, he said that Browne's disclosure of his actions was "sufficient penalty."

Browne Could Face Perjury Charges

The newspaper that published Chevalier's story said that it wants for perjury charges to be brought against Browne. Browne has been fighting to keep stories of his love life private since January. Browne also is facing allegations that he used BP's computers and staff to help Chevalier. Allegedly, Brown used support staff to set up and then end a company created for Chevalier to run and sent a senior BP staff member on a personal errand for Chevalier.

Posted by Patricia Bowling at 08:24 PM | Permalink | Comments (0) | TrackBacks (0)

Fraud Scam Affects Online Stock Trading

The U.S. Justice Department plans to step up enforcement of online brokerage account fraud that targets those accessing their accounts at public places such as hotels and internet cafes. The first criminal case based on such charges was released in March. Since December, five civil complaints have been brought by the U.S. Securities and Exchange Commission.

Fraud Scam Targets Online Stock Trading

Scams of this nature cost E*Trade Financial $18 million last year. Ameritrade says that they lost $4 million. Shawn Henry, the deputy assistant director of the Federal Bureau of Investigation's Cyber Division, says that "I don't want it to be this panic, but the fact of the matter is that everyone's vulnerable. We are very focused on it." The fraud utilizes the old pump-and-dump scheme in which a stock is hyped to artificially increase its price. When investors access a public computer to check stock holdings or to make a trade, his or her user names and password can be stolen. Another member of the crime ring then opens an online trading account and buys shares of a low-price, not very traded stock. They then use the investor's account, liquidate it, and use the money to purchase securities that they already own.

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SEC Charges Wireless Facilities' Former Options-Plan Administrator With Fraud

The U.S. Securities and Exchange Commission has charged the former administrator of Wireless Facilities Inc.'s stock-options plan with fraud. Vencent Donlan, 44, transferred shares and options worth $7.7 million to himself and to his wife between November 2002 and November 2003.

SEC charges Wireless Facilities' former options-plan administrator with fraud

Donlan abused his position by issuing and transferring more than 728,000 company shares and options to a brokerage account that he held with his wife. The SEC says that Donlan faked entries into the company's stock options software to create and hide the grant. Donlan's attorneys could not be reached for comment.

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Lawyer Convicted of Securities Fraud

Ulysses Thomas Ware, 46, an Atlanta lawyer who represented himself in trial was convicted of securities fraud. A New York jury decided that Ware misled investors with faked press releases in order to sell stock to his own companies at a profit. Ware was convicted of conspiracy to commit securities fraud and wire fraud.

Atlanta lawyer convicted of securities fraud by NYC jury

Ware likely will be sentenced to between eight and ten years in jail. Prosecutors ask that Ware be held without bail because Ware did not reliably show up to cases in the last decade. The government says that Ware offered to help companies through consultant work and financial advice he offered through his law firm. As payment, the companies would give Ware stock. In closing arguments, Assistant U.S. Attorney Steven Feldman said that Ware caused investors to lose money by sending faked press releases over the internet, leading to the stock price to increase as interest grew. Feldman says that Ware's goal was to "create false hype about stocks and get unsuspecting people.. to buy the company's stocks so Ware could dump his own shares and make a lot of money for himself."

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Former Econ Prof Got Coin Buyer to Give Investment Money

Al Parish, a Charleston Southern University Economics professor, bought a rare coin for $70,000 days before the Securities and Exchange Commission charged him with investment fraud. Court documents show that Parish persuaded one of his coin agents to give him $75,000 of his own money to invest.

Former economics professor got his coin buyer to hand over investment money

Parish has been charged by the SEC for five counts of fraud. He says that he suffers from amnesia and should not be held accountable for his actions.

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Spouse of Amgen Exec Charged With Fraud

The Securities and Exchange Commission says that it has filed securities fraud charges against the husband of a top executive at the biotechnology company Amgen Inc. Gary K. Melton is said to have misused confidential information from his wife, Amgen's vice president of strategic sourcing and procurement. The SEC does not mention Melton's wife, Farryn Melton, in the case.

Spouse of Amgen Exec Charged With Fraud

The complaint says that Gary Melton told his wife in November 2005 that he might buy some Abgenix stock after seeing positive results from the study of an antibody that was designed by researchers from both Amgen and Abgenix. Gary Melton reaped $15,252 from his trades, says the SEC. Melton has agreed to pay $31,000 in order to settle the fraud charges without denying or admitting any wrongdoing. Melton's attorney, Andrew Holmes, said that Melton was happy that the case was over and reiterated that Melton's wife never gave him any information. "This was him doing something he shouldn't have done, actually directly against her instructions," Holmes said.

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Businessman Sentenced to 10 Years for Investment Fraud

Michael P. Schaefer, a northeast Kansas businessman who admitted to defrauding investors in an Arizona housing project, has been sentenced to 10 years in jail. Schaefer will pay $1.1 million in restitution after he is released from jail. Prosecutors said that Schaefer took $10 million from 150 investors nationwide beginning in 2001 by promising to double or triple the money that they put in.

Businessman Sentenced to 10 Years for Investment Fraud

Schaefer pleaded guilty under an agreement with prosecutors in April 2006 to 19 counts of securities fraud and selling unregistered securities and 12 counts of selling securities when not registered as a securities broker. Schaefer also pleaded no contest to 10 counts of felony theft.

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Cyberonics Insiders Made Nearly $50 Million Trading Stocks

Cyberonics' chief executive and financial officer resigned after an internal investigation showed that unnamed insiders had falsely reported the dates of company stock options for several years. David Wise, the general counsel of Cyberonics, said that the company had under-reported its executive compensation expense by about $10 million over the past 8 years. This information comes at a time when federal authorities already are investigating at least 130 companies to decide whether insiders backdated options-award dates in order to profit from market gains.

Special Report: Insiders Made Nearly $50M Trading a Money-Losing Company's Stock

Cyberonics told the public that it was being investigated by the Securities and Exchange Commission in June. The company also faces several lawsuits brought about by shareholders and it involved in a proxy fight with an investor who is demanding that changes be made to the board. Former Cyberonics CEO Robert "Skip" Cummins maintains that no illegal activities occurred. "We have nothing to hide," Cummins said. Cummins had been working to gain Medicare reimbursement for its medical devices that treat severe depression; this could open a $1 billion sales market for the company.

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May 31, 2007

Ex-Coke Secretary Gets 8 Years

May 30, 2007

Seven Years for Ex-US Foodservice Exec

May 29, 2007

Securities Fraud Class Action Meets Legal Test

May 28, 2007

Investors Need to Be Aware of Scams

Former Wall Street Banker Admits Fraud

May 25, 2007

SEC Will Work to Return Funds to Victims of Stock Fraud

May 24, 2007

Ex-US Foodservice Executive Jailed for Securities Fraud

May 23, 2007

Doctors Charged in $30.5 M Surgery Scam

May 22, 2007

Tyco Pays to Settle Fraud Suits

May 21, 2007

Former Oracle VP Will Settle

May 18, 2007

Former McAfee CFO Convicted for Fraud

May 17, 2007

Ex-Morgan Stanley Analyst Arrested

May 16, 2007

Execs Plead Guilty to Bribing Lawmakers

May 15, 2007

Banker Charged For Securities Fraud

May 14, 2007

Wave of Lawsuits Hits YouTube

May 11, 2007

Ethics Chief Says Wolfowitz Broke Rules

May 10, 2007

Browne Could Face Perjury Charges

May 09, 2007

Fraud Scam Affects Online Stock Trading

May 08, 2007

SEC Charges Wireless Facilities' Former Options-Plan Administrator With Fraud

May 07, 2007

Lawyer Convicted of Securities Fraud

May 04, 2007

Former Econ Prof Got Coin Buyer to Give Investment Money

May 03, 2007

Spouse of Amgen Exec Charged With Fraud

May 02, 2007

Businessman Sentenced to 10 Years for Investment Fraud

May 01, 2007

Cyberonics Insiders Made Nearly $50 Million Trading Stocks