INVESTIGATIVE INTELLIGENCE

U.S. Revises Guidelines on White Collar Crime

“NEW YORK (Reuters) - The U.S. Justice Department announced new guidelines on Thursday for investigating corporate crime cases, following criticism that prosecutors have gone too far in pressing companies to cooperate with criminal probes and restricted individual defendants’ rights.”

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Bank of China Denies Supporting Terrorists 

“Bank of China (BOC), China’s third-largest commercial lender by assets, has denied accusations that it transferred money to terrorist groups, and has said it will defend itself against a lawsuit filed in Los Angeles.”    

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The World’s Most Wanted White-Collar Fugitives

“These individuals show high intelligence and tend to put together very complex schemes,” says Sharon Ormsby, the Federal Bureau of Investigations’ financial crimes section chief. “They understand international markets–some have multiple passports–and are familiar with the laws.”

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Ex-MJIB Chief Indicted

“TAIPEI, Taiwan — Prosecutors indicted Yeh Sheng-mao, the former chief of the Ministry of Justice’s Investigation Bureau (MJIB) for withholding information about former President Chen Shui-bian’s possible involvement in money laundering, and sought a jail term of two years and six months.”

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“Prosecutors on Monday listed Taiwan’s former President Chen Shui-bian, his wife, son and daughter-in-law as suspects in a widening money laundering probe that has dealt a major blow to the island’s main opposition party.”

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“Online brokerage E*Trade has agreed to pay $1 million to settle claims that two of its units failed to comply with US anti-money laundering (AML) regulations.”

According to the SEC, E*Trade failed to establish adequate CIP (Customer Identification Program) requirements, thus violating the rules of the Patriot Act.

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“Federal prosecutors charged 11 people yesterday with the theft and sale of more than 40 million credit and debit card numbers from at least nine U.S. retailers in what they said was one of the largest and most complex hacking and identity theft cases ever brought.” 

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“The attorney general of New York, Andrew M. Cuomo, said on Friday that he would take legal action against Citigroup, which he said misled investors about the dangers of auction-rate securities and destroyed evidence that his office had requested as part of its investigation into the company’s sales practices.”

This comes a week after Cuomo brought a multi-billion dollar civil lawsuit against the Swiss bank UBS for its role in selling auction-rate securities to investors during and inopportune time in the market.

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“Massachusetts regulators yesterday charged Merrill Lynch & Co. with fraud and unethical conduct in the sales of auction-rate securities, alleging that the Wall Street firm pressured research analysts to publish misleading reports on the investments and failed to warn customers about the risks in the market.”

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A 2007 Internet Crime study by the FBI’s Internet Crime Complaint Center shows that reported losses from Internet fraud is $40 million higher than it was in 2006.

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The full  2007 report can be found here

“U.S. securities regulators plan to issue an emergency rule later on Tuesday to limit certain types of short selling in major financial firms.”

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Short selling is the selling of a security that the seller doesn’t own, with the expectation that the value of the security will decrease. When the price goes down, the seller then buys back the stock at a lower price, making a profit. Essentially, the worse a stock does the more money the investor makes. 

See these websites for more information on short selling:

Investopedia.com - Introduction to Short Selling

Wikipedia.org - Short Selling

InvestorGuide.com - Guide to Short Selling

Former HSBC clerk, Jagmeet Channa, was sentenced to nine years for attempting to steal £72 million. He used colleagues’ passwords to steal money from a trading account, which he then wired to associates in Manchester and Morocco.

This goes to show that due diligence is a two way street. It is not only important to know your customer, but also to know your employees.

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“Phillip Bennett, the former chief executive of Refco, was sentenced to 16 years in prison on Thursday for fleecing investors of more than $2.4 billion in a fraud that destroyed the world’s largest independent commodities broker.” I hope he doesn’t pull a Samuel Israel.

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If I was on the run for stealing millions of dollars, I would be on some tropical beach drinking something with a tiny umbrella in it. I guess Samuel Israel had a different idea. This morning, Israel rode his motor scooter to the Southwick, Massachusetts, Police Department and turned himself in.

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I guess being a millionaire and dating a movie star wasn’t enough for him. Raffaello Follieri was charged with conspiracy, wire fraud, and money laundering.

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When are people going to learn that if you plan on doing something illegal, don’t talk about it through e-mail.

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You’re never too young to start stealing credit card information.

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The newest update in the Samuel Israel story is that Debra Ryan, Israel’s girlfriend, has been arrested for aiding in the escape of the hedge fund manager. I hope he was worth it.

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More cases of ”hedge fund managers gone wild!”  This is, once again, why conducting due diligence is such an important facet of the hedge fund game.

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The U.S. Marshall Service confirms Israel did not commit suicide. It is now a fugitive investigation.

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The possible fake suicide of Samuel Israel III is currently the biggest story in the due diligence industry. Because of him, many financial institutions bumped up their existing due diligence programs and others added new programs that were non-existent before the Israel fiasco.

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