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Corruption
related News Items of Interest for the entire
Ex-Morgan exec pleads in corruption case. A
former J.P. Morgan vice president pleaded guilty to arranging a $50,000 payment
to a close friend and adviser of
air force official
imprisoned. It was reported that the former number two buyer for the
Lawmakers Allege
Oil-For-Food Corruption. It was
reported that a congressional delegation said it found anecdotal evidence of
high-level corruption in the U.N. oil for food program in
Ex-manager convicted in
pension fraud. It was reported that a former money fund manager was
convicted of defrauding the state pension system by using its funds to revive
the stock price of his own company. Nathan Chapman Jr. was found guilty of 23
fraud counts, including ripping off his own companies, partly to pay for
extramarital affairs. Prosecutors have accused Chapman of looting more than
$500,000 from the businesses, but jurors did not agree on the amount. Chapman
was acquitted on seven counts and the jury could not reach a decision on two
counts. (Associated
Press,
Ex-Riggs manager
won't testify about accounts. A
former Riggs Bank manager have invoked the Fifth Amendment and refused to
answer questions from a Senate panel investigating his handling of hundreds of
millions of dollars in suspicious transactions for a West African dictator,
including why he lugged a 60-pound suitcase stuffed with $3 million in
plastic-wrapped cash to Riggs's Dupont Circle branch. The Senate probe is the
latest in a series of investigations into Riggs's once-prestigious embassy
banking division, now tarnished by reports that it helped former Chilean
dictator Augusto Pinochet hide millions. (Washington Post, 16 July 2004, summary by Sherldine Tomlinson).
Stewart gets 5 months
in jail. It was reported that Homemaking
entrepreneur Martha Stewart has been sentence for months in prison for
lying about a stock sale. According to
the report, Stewart said that “she could do it” I'm a really good camper. "I'll be back, I will be back," she said,
surrounded by her lawyers and her daughter, Alexis. "I'll do whatever has
to be done. I'm not afraid. Not afraid whatsoever. I'm just very, very sorry it
had to come to this." (Chicago
Tribune July 18, 2004, summary by Sherldine Tomlinson).
Grand Jury says officials
steered funds. Six officials accepted NASCAR tickets, clothes, a
hunting dog and other bribes totaling $545,000 to steer disaster relief money
to contractors. The accused in a 43-count federal indictment include former
Buchanan County Board of Supervisors chairman Stuart Ray Blankenship, who faces
up to 60 years in prison and a $1 million fine. (Associated Press, 25 June 2004
summary by Sherldine Tomlinson).
Pressure Mounting to Ensure Ethical Behavior in the House. According to reports, the ability of the House of Representatives to police itself is coming under increasing scrutiny, with critics saying the in-house ethics system is failing even as accusations of misconduct mount. Eight Washington watchdog groups have banded together to urge House leaders to change the ethics rules to allow outsiders again to file complaints. The groups say the House is suffering from an ethics crisis due to unwillingness by lawmakers to bring their own formal accusations against their colleagues. (The New York Times, March 22, 2004, summary by Sherldine Tomlinson).
Grand Jury Is Investigating KPMG´s Sale of Tax Shelters. According to reports, federal grand jury in Manhattan is investigating the sale of tax shelters by KPMG, the big accounting firm, to corporations and wealthy individuals who used them to escape at least $1.4 billion in federal taxes. The disclosure of the inquiry, made yesterday in a statement by KPMG, comes one month after KPMG shook up its tax practice and removed three senior executives in the wake of widening scrutiny by Congress, the Internal Revenue Service and lawsuits by clients whose shelters failed. (New York Times, February 20, 2004, summary by Sherldine Tomlinson).
USA: Tyco Defendant Testifies on His Taxes. The former chief
financial officer of Tyco International said that he never filed New York State
income tax returns even though his wife and children lived in the state and he
worked in New York at least part time. The executive, Mark H. Swartz, testified
in his corruption and larceny trial that he did not file New York returns from
1995 to 1997 because he considered himself a resident of New Hampshire, where
Tyco was based and where there is no state income tax. He said he spent less
than 30 percent of his time in Tyco’s office in New York. (New York Times, February 26, 2004, summary
by Sherldine Tomlinson).
Halliburton Execs
Said to Take Kickbacks. According
to reports, two Halliburton Co. officials accepted up to $6 million in
kickbacks from a Kuwaiti company that was awarded
contracts to supply U.S. troops in Iraq. Halliburton disclosed the alleged
impropriety to the Pentagon inspector general’s office. The two employees, who
have been fired, worked for Halliburton subsidiary Kellogg Brown & Root in
Kuwait, the same division of the company involved in a highly scrutinized
gasoline contract. (New York Times, January 23, 2004 summary by Sherldine Tomlinson).
US attorney general urges global fight against corruption. US Attorney General John Ashcroft urged stepped-up international cooperation to combat official corruption he branded a major threat to democracy and development around the world. Ashcroft stated that “Corruption is a contagion that cannot be contained by borders... so much of corruption is trans-national”. Ashcroft also called for moral leadership to break past habits of indulging public corruption as a tolerated business evil and even a tax write-off, an allusion to practices once common in countries like France. (Yahoo News (AFP), January 22, 2004, summary by Sherldine Tomlinson).
USA: Ex-Accounting Chief at Enron Is Indicted on 6 Felony Charges. The former chief accounting officer of Enron was indicted on six felony charges that accuse him of participating in a multiyear effort to disguise the company’s collapsing financial performance. Criminal charges against the executive, Richard Causey, had been expected after a guilty plea last week by Andrew Fastow, the former chief financial officer. As part of his deal, people involved in the case said, Fastow has provided information against Causey that was used in support of some of the charges filed. (New York Times, January 23, 2004, summary by Sherldine Tomlinson).
EX-C.F.O.
of Enron and Wife Plead Guilty. Andrew S. Fastow, the former
chief financial officer of Enron, pleaded guilty to two felonies. In his plea,
Fastow admitted to working with other senior officers to disguise Enron’s
deteriorating financial health, as well as engaging in a scheme to defraud
Enron of millions of dollars for his own benefit. In another courtroom, Lea
Fastow, Fastow’s wife who was a former assistant treasurer at Enron, entered a
separate guilty plea to a single tax felony stemming from efforts she made to hide
income that came from one of her husband’s secret dealings with an Enron
colleague. The two pleas were negotiated as a joint resolution of the separate
criminal cases facing the Fastows. (New
York Times, January 15, 2004, summary by Sherldine Tomlinson).
S.E.C.
Is Investigating Coca-Cola. It was reported that the Coca-Cola
Company was being formally investigated by the Securities and Exchange
Commission for accusations levied against the company last year in a wrongful
termination lawsuit. The investigation
stems from a $44.4 million lawsuit filed in May by Matthew Whitley, a former
finance director in Coke’s fountain unit who accused Coke of committing $2
billion in accounting fraud, discriminating against minorities and women and
manipulating inventories. (New
York Times, January 15, 2004 summary by Sherldine Tomlinson).
TRUSTED TRUCKERS TO SPEED THROUGH MEXICAN BORDER. Dept of Homeland Security Secretary Tom Ridge will unveil a new system to clear trusted commercial truck lines at customs checkpoints in seconds at the Mexican border by swiping pre-registered ID cards. The idea is to have already received driver identification and content information in advance through electronic transmission to be verified as the driver shows a “proximity” card. A similar system at the Canadian border is already in place and has reduced costs and time. Critics say that trade crossing the Mexican border is more corrupt and such a trust based system would be vulnerable to various kinds of smuggling and bribery. Delays at some border crossings are currently upwards of 24 hours. (UPI report cited in The Washington Times, 03 Dec 03, summary by Stefanie Weiland)
S.E.C. Bars Questioning of Lawyers for Martha Stewart. At a hearing in Manhattan federal court, Ms. Stewart’s lawyer, Robert Morvillo, said that he planned to ask Judge John E. Sprizzo to force the S.E.C. to allow pretrial questioning of two of its lawyers. Ms. Stewart, the former chief executive of Martha Stewart Living Omnimedia Inc., is accused of conspiring with a broker for Merrill Lynch & Company, Peter Bacanovic, to obstruct an investigation into her sale of stock in ImClone Systems. She has pleaded not guilty. (New York Times, November 13, 2003, summary by Sherldine Tomlinson).
Ex-Goldman Economist Pleads Guilty. It was reported that a former Goldman Sachs economist pleaded guilty to receiving an illegal tip in 200. John Youngdahl of Summit pleaded guilty to four counts in Manhattan federal court, forgoing a trial. Youngdahl pleaded guilty to securities fraud, conspiracy, wire fraud and conversion of property. The government has said that Goldman made nearly $4 million on the tip. Goldman has agreed to pay $9.3 million to settle related charges from the Securities and Exchange Commission. (New York Times, November 12, 2003, summary by Sherldine Tomlinson).
Investigators Request Information from Bank of New York on Funds. It was reported that the Bank of New York Co. Inc., received information requests from regulators in connection with probes into the $7 trillion mutual fund industry. The New York-based bank said that it is broadly involved with the mutual fund industry, and that various governmental and self-regulatory agencies have sought information from it in connection with investigations relating to that industry. Bank of New York made the disclosure in its quarterly report filed with the U.S. Securities and Exchange Commission. (New York Times, November 12, 2003, summary by Sherldine Tomlinson).Ex-Enron treasurer pleads guilty. A fired Enron Corp. Treasurer has become the first Enron executive sentenced to prison after pleading guilty to criminal conspiracy. Ben Glisan’s pleaded guilty to a single count of criminal conspiracy and was immediately sentenced to five years in federal prison. He also forfeited $938,000 in profits from an illegal transaction involving one of Enron’s off-balance-sheet partnerships. Glisan had been previously charged with two dozen counts of money laundering, fraud and conspiracy. (CNN News, September 10, 2003, summary by Sherldine Tomlinson).
EarthLink Founder Sentenced in Fraud. It was reported that a founder of the Internet service provider EarthLink Inc., was sentenced to 14 years in prison after pleading guilty to cheating investors out of hundreds of millions of dollars. Reed Slatkin pleaded guilty in 2002 to 15 counts, including mail fraud, wire fraud, money laundering and conspiracy to obstruct justice. (New York Times, September 3, 2003 summary by Sherldine Tomlinson).
Ex-Enron treasurer pleads guilty. Fired Enron Corp. Treasurer Ben Glisan became the first Enron executive sentenced to prison after pleading guilty to criminal conspiracy. The court heard that Glisan forfeited $938,000 in profits from an illegal transaction involving one of Enron’s off-balance-sheet partnerships. Glisan had previously been charged with two dozen counts of money laundering, fraud and conspiracy for taking part in one of the secret partnerships Fastow is alleged to have set up to inflate Enron’s earnings and put millions of dollars in his own pocket. (CNN News, September 10, 2003 summary by Sherldine Tomlinson).
Former economist at Goldman is indicted. A former senior economist at Goldman Sachs has been indicted for insider trading, fraud, perjury and other charges in connection with the purchase of about $318 million of 30-year bonds and bond futures minutes ahead of the Treasury’s announcement in 2001 that it was ending the sale of 30-year bonds. The report said that a Washington consultant, Peter Davis, who passed on the information to the Goldman economist, John M. Youngdahl, and to the MFS portfolio manager, Steven Nothern, pleaded guilty to felony charges involving insider trading, conspiracy and theft of government property. (The New York Times Sep 05 2003 summary by Sherldine Tomlinson).
Ex - Guam Senator
Sentenced for Corruption. A former Guam legislator was sentenced to
nearly six years in prison for accepting kickbacks from developers in exchange
for approvals and funding. A jury in March convicted Manibusan of conspiracy to
commit wire fraud, misapplication of government funds, money laundering,
conspiracy to commit extortion, making false statements to a bank and
bankruptcy fraud. James Sablan, the former president of the Guam Housing Corp.,
pleaded guilty in the case and was sentenced to three years probation. (New York Times, August 18, 2003, summary by
Sherldine Tomlinson).
Sweeney will reportedly plead guilty in corruption case. Carson Mayor Daryl Sweeney has agreed to plead guilty to federal corruption charges in connection with an alleged scheme to exchange his votes on a city waste contract for cash. Prosecutors alleged that Sweeney recruited former council members for the scheme. The contract was later voided. One of the former council members approached investigators and told of corruption in the city. The first-term councilman agreed to wear a wire during meetings with Sweeney when bribes were discussed. Sweeney is also charged with trying to extort money from Waste Management Inc. officials in exchange for extending the company’s contract with the city. (Daily Breeze, July 29, 2003, summary by Sherldine Tomlinson).
Accused
Mob Son Sentenced for Gambling. The son of a reputed
Gambino crime family captain was sentenced to prison after pleading guilty to
taking part in a gambling operation that took in $30 million worth of wagers a
year. Alphonse Trucchio was sentenced. In April, the younger Trucchio pleaded
guilty to enterprise corruption for serving as bookmaker for an operation that
took bets as high as $15,000 on professional and college sports. Anthony
Moscatiello his associate was also sentenced to a prison term. Ronald Trucchio
also pleaded guilty to attempted enterprise corruption in connection with the
gambling ring. Others accused in the gambling operation have received jail or
prison terms. (New York Times, July 22, 2003, summary by Sherldine Tomlinson).
In Settlement With S.E.C., WorldCom Is to Give Investors Stock. According to a sweetened settlement the company and the Securities and Exchange Commission filed, shareholders and bondholders who lost money in WorldCom will receive $250 million in common stock of the reorganized company. WorldCom, the telecommunications company, which entered bankruptcy protection last summer after being enveloped in an $11 billion fraud scandal, will provide the stock in addition to the record $500 million fine it has agreed to pay to settle S.E.C. fraud charges. Both the bankruptcy court overseeing WorldCom’s reorganisation and the federal court handling the civil fraud charges against the company would have to approve the sweetened settlement. (New York Times, July 3, 2003 summary by Sherldine Tomlinson).
ECONOMIC CRIMES STRIKE A THIRD OF US FIRMS, SURVEY FINDS More than a third of the US companies have been struck by fraud and other kinds of economic crime, surveyed by PricewaterhouseCoopers, and Wilmer Cutler Pickering, a law firm. Of the 91 companies whose executives completed the survey, about 35% responded that they had been victims of asset misappropriation - usually theft or embezzlement or some other kind of economic crime in the last two years. The study of regions outside the US, which the accounting firm has conducted for three years, also found that the overall incidence of economic crime has increased, rising to 34% of respondents in Western Europe in 2003 from 29% in 2001 and to 37% from 26% in Central and Eastern Europe with the average amount lost, according to the most recent survey results, was $2.2m. And the highest levels of economic crime were reported in Africa and North America. (International Herald Tribune 09 Jul 2003, summary by Hanh Vu).
ACCOUNTING AT MORTGAGE CONCERN IS UNDER INVESTIGATION. Freddie Mac, the second-largest holder of home mortgages is being investigated by federal prosecutors. Once the Federal Home Loan Mortgage Corporation, Freddie Mac holds $600 billion in mortgages so the investigation could reverberate throughout the economy. Questions were raised in January by the corporation¹s auditor, PricewaterhouseCoopers which took over from Arthur Andersen last year, about whether the company had properly reported its portfolio of derivatives. The accounting firm claimed that had it used the correct accounting procedures, Freddie Mac would have reported higher earnings for 2001-2. President, David W. Glenn, was fired for refusing to cooperate with an internal investigation and chairman and chief executive, Leland C. Brendsel, stepped down taking with him stock options worth $21.1 million and severance of $3.2 million. Freddie Mac¹s new chairman, Shaun F. O¹Malley, said, "We will continue to cooperate in all respects as the investigation continues." (New York Times, June 12, 2003, Summary by Janet Hudgins).
Kazakhstan, USA: Former executive of Mobil pleads guilty to tax evasion. A retired senior Mobil Oil Corp. executive pleaded guilty to dodging taxes on more than 7 million in payments he received while doing business on behalf of the U.S. oil company. But the executive disputed federal prosecutors’ allegations that the payments were kickbacks for securing deals for oil fields. Federal prosecutors opened the investigation three years ago surrounding a number of complex banking deals Mobil made in connection with Kazakhstan oil fields between 1995 and 1999. Swiss authorities subsequently launched a probe. (The Wall Street Journal 13 Jun 2003 summary by Sherldine Tomlinson).
2 Accused of Falsifying Records. Two former officers of an Internet company that is now defunct were indicted on charges of fraud and falsifying records in a suspected scheme to inflate revenues. Arthur Goodwin was the senior vice president for worldwide sales at the company, Interspeed Inc. He was indicted on eight counts of securities and wire fraud. William Burke, the former chief financial officer, agreed to plead guilty to one count of falsification of records. Burke and another former Interspeed executive were already facing a Securities and Exchange Commission civil suit contending that Goodwin planned the actions to increase his bonus. The indictment contends that Goodwin overstated sales and revenue by about $9 million, or 60 percent, of what the company reported. Burke was accused of knowingly withholding information from an auditor. (New York Times, June 6, 2003, summary by Sherldine Tomlinson).
Martha Stewart Is Subject of Criminal Probe. It was reported that Martha Stewart,
the domestic taste-maker who is the target of a lengthy probe into
insider-trading allegations, could soon be indicted on criminal charges by a
federal grand jury. Stewart, the founder and chief executive of Martha Stewart
Living Omnimedia Inc., is under investigation for her December 2001 sale of
ImClone Systems Inc. shares just before the biotechnology firm said federal
regulators had turned down a review of an experimental cancer drug. The U.S.
Attorney’s Office for the Southern District of New York intends to seek a grand
jury indictment against Stewart, the company said in a release. It was also
informed that a civil complaint by the Securities and Exchange Commission is
expected. (New York Times, June 3, 2003 summary by
Sherldine Tomlinson).
Corruption Probe Launched in CALIFORNIA and Neveda. According to authorities, FBI agents searched six undisclosed locations as part of a corruption probe involving public officials in Las Vegas and San Diego and their ties to two strip club owners. A FBI spokesman said that search warrants were served as part of an ongoing investigation that included raids earlier this month on striptease clubs in Las Vegas and San Diego, and the offices of three San Diego City councilmen. A warrant served raid at Jaguars Gentlemen’s Club in Las Vegas said authorities were looking for records about “payments or gifts” to several area officials. The San Diego councilmen whose officers were searched also have denied any wrongdoing. (The New York Times, May 30, 2003, summary by Sherldine Tomlinson).
Ex-Chief of ImClone Systems to Be Sentenced on June 10. According to a federal judge Samuel Waksal, the former chief executive of ImClone Systems who pleaded guilty to securities fraud, perjury and other charges last year, will be sentenced at a hearing June 10. Waksal pleaded guilty in October to six crimes involving the sales of ImClone shares. The partial plea is part of an arrangement in which Waksal is thought to be seeking leniency by cooperating with the investigation of trading in ImClone stock. He has also admitted evading sales tax on $15 million worth of art bought from a Manhattan gallery owner. (New York Times, May 29, 2003, summary by Sherldine Tomlinson).
SEC FINES PRICEWATERHOUSECOOPERS $1MILLION Under a settlement with Big Four firm PricewaterhouseCoopers regarding the firm's 1997 audit of SmarTalk Teleservice Inc by Securities and Exchange Commission, PwC has to pay a fine of $1m. for a charge of engaging in improper professional conduct in its audit of the now bankrupt SmarTalk. The firm also agreed to have its computer software system reviewed by an independent consultant. Philip Hirsch, former PwC audit partner who was in charge of the SmarTalk audit was also accused of engaging in improper professional conduct and has been barred from auditing publicly traded companies for a year, after which time he may apply for reinstatement. (AccountingWEB, 23 May 2003, summary by Hanh Vu).
Ex-Chief Sues HealthSouth for Legal Costs. The Former chief
executive of The HealthSouth Corportation Richard Scrushy is begin sued. The
Securities and Exchange Commission has accused HealthSouth and Scrushy of
inflating earnings by $1.4 billion since 1999. Prosecutors say the fraud will
exceed $2.5 billion and have secured guilty pleas from 11 former executives.
Prosecutors are examining Scrushy’s role in the fraud; he has not been charged
with a crime. Earlier this month, a federal judge in Alabama refused to extend
a freeze on Scrushy’s assets imposed after the S.E.C. sued him. (The New York Times, May 20, 2003, summary by
Sherldine Tomlinson).
HALLIBURTON
CORPORATION INVOLMENT IN IRAQ RECONSTRUCTION. Last week the extent of
Halliburton Corp's involvement in the reconstruction of Iraq has been
exposed. Halliburton (the oil and defense services conglomerate once
headed by US Vice President Dick Cheney) is in fact, as reported in Washington
Post is now engaged in pumping and distributing Iraq's oil reserves, which
would probably benefit the corporation billions of dollars. This has not
been publicly disclosed at first as part of Halliburton's no-bid, open ended
contract all along. Vice President Dick Cheney, purportedly still
receives from the company approximately $1,000,000 in deferred compensation
annually. (The Moscow Times 16 May 2003, summary by Editha Ampil).
USA: OVERSIGHT BOARD SAYS IRS LAGGING IN REFORM EFFORT. A board created to oversee the agency’s management has said that the Internal Revenue Service still provides poor customer service and fails to enforce tax laws. “The IRS must work harder and smarter,” the IRS Oversight Board said. The report also said the IRS is not reforming itself as quickly as expected or desired, despite making significant progress in some areas. Mark Everson, the new IRS commissioner, testified that the agency cannot track down every tax dodger and backed a program to use private debt collectors to go after some unpaid taxes. Everson said he wants to closely monitor a program under development in the Treasury to reduce erroneous payments to the working poor. (Nando Times, May 8, 2003, summary by Sherldine Tomlinson).
USA: KAZAKH OIL BRIBERY PROBE INVOLVES EXXON-MOBIL AND FRENCH BANK EXECUTIVE. The Wall Street Journal has reported that Swiss authorities have opened a new front in an investigation of alleged bribery of senior Kazakhstan officials by U.S. and European oil companies. The newspaper said that Swiss investigators are looking into possible money laundering and are probing the role of a former executive of French bank Credit Agricole SA. In April, a U.S. prosecutor said that Exxon Mobil Corp. was a subject of a U.S. government probe into an alleged bribery scheme involving oil deals in Kazakhstan. A former senior Mobil executive, pleaded not guilty to tax evasion charges growing out of the investigation. The indictment of a New York banker who is accused of designing the alleged bribery identifies a Credit Agricole employee who, it is alleged, opened a bank account and set up shell companies. (Forbes News, May 6 2003, summary by Sherldine Tomlinson).
SPIEGEL TO LAY OFF MORE THAN 600 IN BANKRUPTCY RESTRUCTURING. According to reports, Spiegel Inc. is eliminating 635 jobs, while working through its Chapter 11 bankruptcy reorganization. As part of a restructuring of its Eddie Bauer division, the company also is laying off 180 employees from its Eddie Bauer headquarters. The company said the job cuts resulted from its redefined systems strategy, which includes a significant reduction in systems development initiatives. The company also said that it has received final court approval for the full amount of its $400 million in debtor-in-possession bankruptcy financing, which is being provided by a consortium of banks. (Nando Times, May 6, 2003, summary by Sherldine Tomlinson).
FORMER HEALTHSOUTH CFO PLEADS GUILTY TO BANK FRAUD. Former HealthSouth Corp. chief financial officer Aaron Beam has pleaded guilty in federal court to bank fraud charges in a huge accounting fraud scandal at the rehabilitation services company. He was accused of using bogus financial information to obtain loans from 32 lenders totalling $1.25 billion in 1996 and 1997. Beam is one of 11 former HealthSouth executives, including all five of its former CFOs, to enter into plea agreements with federal prosecutors in a criminal investigation. (New York (Times, May 5, 2003, summary by Sherldine Tomlinson).
Tyco faces $1.2 billion more in accounting woes, newspaper reports. The Wall Street Journal has reported that Tyco International Ltd., has found $1.2 billion in accounting problems. In December of last year, the company assured investors that a months-long internal probe had failed to find any significant fraud at Tyco. Tyco has been rocked in the past year by criminal charges against its two former top executives, who have been accused of looting millions from the company in unauthorized compensation and illicit stock sales. Tyco operates in electronics, fire and security services, medical supplies and numerous other businesses. (Nando Times, April 30,2003 summary by Sherldine Tomlinson).
Enron whistleblower
speaks at conference.
According to Enron whistleblower Sherron Watkind, the corporate world needs, a
few good women. “Women can ask questions and not feel it’s an insult, challenge
or sign of distrust of the CEO. They’re just asking because they want to know”.
Watkins, a former Enron accountant who warned then-company CEO Kenneth Lay of
impending disaster before the company collapsed, said in an interview that
women have qualities that the corporate world lacks. (Nando Times, April 28,
2003 summary by Sherldine Tomlinson).
CLEARONE REMOVES EXECS LINKED TO SEC PROBE. ClearOne Communications Inc. has removed two executives connected to allegations by the Securities and Exchange Commission that the company overstated revenue to boost its stock price. The two were named as defendants in the SEC’s complaint. The SEC claimed that ClearOne had stuffed the company’s distribution pipelines with unwanted audio and videoconference products at the end of each quarter so it could record those transactions as sales. Judge Dale Kimball denied a preliminary injunction in March filed by the SEC because he said management changes at the company most likely would prevent repeat offences. ClearOne is waiting for a decision from the Nasdaq Stock Market, which suspended trading in the company’s shares in January. (Nando Times, April 11, 2003 summary by Sherldine Tomlinson).
TRIAL DELAYED FOR EX-EXECUTIVE OF TYCO. A district judge in New Hampshire has ruled that the federal tax-evasion trial of the former chief financial officer of Tyco International should be postponed until July. Lawyers for the former executive, Mark Swartz, had wanted to delay the trial until 60 days after his trial on more serious criminal charges in New York, which is planned for Sept, but Judge Joseph DiClerico of United States District Court in Concord, N.H., denied their motion. Prosecutors have accused Swartz of helping loot Tyco of $600 million while he was chief financial officer. In the New Hampshire case, Swartz is accused of evading nearly $5 million in federal income tax. (New York Times, April 15, 2003 summary by Sherldine Tomlinson)
EX-CREDIT SUISSE BANKER ARRESTED, ACCUSED OF HINDERING PROBE. A former star investment banker with Credit Suisse First Boston was arrested on charges of obstructing investigations by a federal grand jury and the Securities and Exchange Commission and witness tampering. The complaint said Frank Quattrone "unlawfully, wilfully, and knowingly, corruptly influenced, obstructed and impeded ... the due administration of justice." Authorities said Quattrone was in custody and was expected to appear later in the day in court. U.S. Attorney James B. Comey planned an afternoon news conference to discuss the charges. (Nando Times, April 23, 2003 summary by Sherldine Tomlinson).
BUSINESSMAN GOES ON TRIAL IN TRAFICANT CORRUPTION CASE. Testimony has began in the trial of a contractor accused of bribing former Rep. James A. Traficant Jr. to help him collect money from business ventures in the Middle East. Bernard Bucheit is charged with conspiracy and giving an unlawful gratuity. He also is charged with committing perjury during the grand jury investigation of Traficant, a nine-term congressman who was convicted of racketeering and bribery last April and expelled from the House. Bucheit is accused of paying contractors $27,000 to build an addition and deck at Traficant’s farmhouse in 1993. In exchange, Traficant allegedly helped Bucheit collect $11.6 million for construction of a shopping mall in Saudi Arabia and later helped Bucheit recoup money from a manufacturing company in the Gaza Strip. (Nando Times, April 23, 2003, summary by Sherldine Tomlinson).
WORLDCOM Sullivan Pleads Not GUILTY. The former chief financial officer of WorldCom pleaded not guilty to new charges that he lied on financial statements to secure $4.25 billion in credit for the company. At a hearing in federal court, the executive, Scott Sullivan, entered the plea through his lawyer. The new charges of bank fraud and making false statements were added by the government to original charges of conspiracy, securities fraud and false Securities and Exchange Commission filings. Mr. Sullivan also pleaded not guilty to those charges. (New York Times, April 23, 2003, summary by Sherldine Tomlinson).
HOUSE PANEL OPENS HEALTHSOUTH INQUIRY. The House Energy and Commerce Committee opened an investigation into accounting and other practices at the HealthSouth Corporation and the role of its auditor, Ernst & Young. The panel demanded HealthSouth records and communications about its finances; the business relationships of its former chief executive, Richard M. Scrushy; and Medicare billing and reimbursement practices. The government has accused a group of HealthSouth officers of overstating earnings by $2.5 billion since 1994 in a scandal that has left the company fighting to avoid bankruptcy. The House committee also sent a similar request to Ernst & Young, which served as the auditor for HealthSouth during the period in question. (New York Times, April 23, 2003, summary by Sherldine Tomlinson).
Gemstar’s Former Chief Is Dismissed. According to Gemstar, Henry Yuen who was a former chief executive has been fired by the company. The company said that Yuen is also stepping down from Gemstar’s board. The Securities and Exchange Commission has asked a federal court to find Yuen in contempt for his failure to testify in an investigation of Gamester’s accounting practices. The Securities and Exchange Commission has also asked the federal court in Los Angeles to order Yuen jailed and to impose a fine until he appears and testifies. Yuen agreed last month to a court order compelling him to testify in the investigation. (New York Times, April 21, 2003, summary by Sherldine Tomlinson).
American Airlines drops controversial executive bonuses. According to reports, American Airlines has dropped a plan to award bonuses to top executives if they stay at the embattled airline until 2005. The bonuses had caused an uproar among American employees, who earlier approved wage cuts and other concessions that the company said it needed to avoid bankruptcy. The bonuses, equal to twice their salary, were offered to Chairman and chief executive and five other senior executives. Employees complained about the bonuses, which were approved last year but only disclosed after union workers voted to cut their own pay 15.6 percent to 23 percent to avoid even deeper cuts and layoffs if American filed for bankruptcy. (Nando Times, April 21, 2003 summary by Sherldine Tomlinson).
FORMER WORLDCOM OFFICIAL HIT WITH FRAUD CHARGES. Former WorldCom executive Scott Sullivan, 40, was charged with lying on financial statements to secure $4.25 billion in credit for the company. He has also been charged with making false financial filings, making WorldCom appear profitable when it was losing money. Sullivan was Chief Financial Officer when WorldCom was charged with $9 billion in accounting fraud. He faces 185 years in potential prison time. His trial begins on September 8, 2003. The government is also considering prosecuting Bernard Ebbers, former WorldCom CEO. (The New York Times, April 16, 2003, Summary by Laurie Morra).
GLAXO AND BAYER SETTLE U.S. MEDICAID FRAUD CHARGES.On Wednesday, April 16, 2003, Glaxo and Bayer reached a settlement with US prosecutors representing Medicaid, a health plan for the US poor. The drug makers were charged with fraud for inflating the prices of prescription drugs. Bayer agreed to pay $257 million, and Glaxo agreed to pay $87.6 million. US attorneys and states are cracking down on abusers of Medicaid. The US has a price law and for drug makers to take part in Medicaid, they must offer the 'best price' on its pharmaceuticals. In the cases of Glaxo and Bayer, they did not offer the 'best price', but charged Medicaid too much. California, New York, Florida, Illinois, Texas and Pennsylvania are among states that will recover damages as part of the settlement. (New York Times, April 16, 2003, summary by Laurie Morra).
NEW GUILTY PLEAS AT HEALTHSOUTH. According to Alice Martin, a United States attorney, several employees of the HealthSouth Corporation will plead guilty in an accounting fraud investigation. The Securities and Exchange Commission has sued HealthSouth and its former chief executive, Richard M. Scrushy, contending they misstated company finances and inflated revenue by $1.4 billion and assets by $800 million. (The New York Times, April 3, 2003, summary by Pavlidis George).
NINE
MEMBERS OF THE DEFENSE POLICY BOARD TIED TO DEFENSE CONTRACTORS Richard Perle,
who recently resigned as chairman of Defense Policy Board due to his work for
defense contractors and eight others have potential conflicts of interest.Nine
have ties to companies that won some $72 billion in 2001 and 2002. Four members
are registered lobbyists.Visit http://www.public-i.org (summary by H. Vinod, March 28, 2003).
Enron Shareholders’ Move Against Banks Is Rebuffed by Judge. A federal bankruptcy judge in New York rejected an attempt by shareholders of Enron to increase the possible liability of various companies. Shareholders had asked Judge, Arthur J. Gonzalez of United States Bankruptcy Court in Manhattan, to let them proceed with a lawsuit against Enron, which had been shielded from litigation after it filed for bankruptcy protection. Shareholders are also seeking to recover $25 billion in losses. (New York Times, February 28, 2003 summary by Sherldine Tomlinson).
Secretary angers labor leaders by citing cases of corruption. In a speech, Labour Secretary Elaine Chao cited cases of corruption in unions. Chao stunned more than 100 labour leaders when, in response to a question about greater government scrutiny of union finances, she read aloud about seven criminal cases involving officials from the machinists’ union. She brought to the meeting a dossier detailing union-related crimes. The meeting was closed to the news media, and Teamster officials. (The News Tribune, February 27, 2003 summary by Sherldine Tomlinson).
DRUGS GROUPS ACCUSED OF BRIBERY AND FRAUD A cluster of drugmakers including Aventis, GlaxoSmithKine and Pharmacia was accuses of fraud and bribery schemes to inflate prices for consumers and government health plans. According to the lawsuit, the companies reported higher drug prices to government health plans and consumers, meanwhile charging doctors and pharmacies lower prices, allowing them to pocket the difference but all three companies deny any wrongdoing and point to the odd complexities of the government pricing system. Other states and regional units of the US Justice Department as well have taken similar action against global drug groups. (Financial Times 14 Feb 2003, summary by Hanh Vu).
GIMME TAX SHELTER. By
Arianna Huffington. IRS ALLOWS Corporate
accountants TO pocket share of taxes they shELTER from gov’t. Hundreds of corporate executives have been
exempted from paying billions of dollars in taxes sheltered through
questionable corporate accounting practices. Executives that have profited
include Tyco’s Dennis Kozlowski, Global Crossing’s Gary Winnick, and Sprint CEO
William Esrey and associate Ron LeMay.
Esrey paid no taxes on $288 million in stock option profits. Accounting firms such as Ernst & Young
benefit from an IRS rule that enables accountants to take a percentage of the
taxes they save a corporate client from paying,
creating a corrupt tax shelter industry. (Salon
Magazine, Feb. 12, 2003, http://archive.salon.com/opinion/huffington/2003/02/12/tax_shelters/index_np.html,
summarized by Kelly Kristen).
NEW YORK WILL SUE 2 BIG DRUG MAKERS ON DOCTOR DISCOUNT New York is joining six other states in suing two major pharmaceutical companies, GlaxoSmithKline and Pharmacia, for paying doctors and pharmacists to choose the companies´ drugs over competing medicines, a practice that costs state and federal governments and consumers hundreds of millions of dollars. The drug companies establish prices for drugs that the government and insurance companies use to determine how much to reimburse the doctors and pharmacies for the drugs they buy. The companies then allow the doctors and pharmacies to buy their drugs at much lower prices than the ones reported to the government, with the doctors and pharmacies pocketing the difference. The drug companies, doctors and pharmacists profit from this arrangement, while taxpayers and patients pay for it in the form of higher co-payments. Doctors have come under fire for participating in this practice, but regulators have decided it is easier to go after the big companies than the individual doctors. Prosecutors say they are not interested in monetary settlements in the suits, but are more focused on seeing that structured pricing practices are put into place. (New York Times, February 13, 2003, www.nytimes.com, summary by Kyle Looby).
SENATE PROBE TO REPORT 'EYE-POPPING' ENRON DEALS. The Senate Finance Committee Chairman announced Wednesday that a congressional panel has uncovered pay deals for Enron executives and an elaborate scheme to manipulate the company's taxes and accounting. Details will be released on Thursday and will include the full story on Enron executives' alleged wrong doings. The company's top executives received millions of dollars worth of company stock, which they sold in 2000 and 2001, inflating company profits by hundreds of millions of dollars and boosting share prices. These executives were then paid bonuses in excess of $320 million as rewards for hitting target stock prices. Enron's former top tax executive, Robert Hermann, has said that the company boosted its reported profits by another $1 billion by using tax schemes, a practice he defends as perfectly legal. Experts say that even if this practice is legal, it did help Enron paint a false picture of its financial situation. If such practices are determined to have been illegal, creditors will be able to go after assets resulting from those deals and to sue the banks, accounting firms, and law firms that were involved in the deals. (Nando Times, February 13, 2003, www.nandotimes.com , summary by Kyle Looby).
Former Enron Executive’s Trial Delayed. A federal judge granted a 90-day delay in the case of the former chief financial officer for the Enron Corporation, Andrew S. Fastow, because of the huge amount of paperwork that has been generated. The additional time was granted to permit lawyers to better manage the documentation. Fastow was indicted on Oct. 31 on 78 counts of fraud, money laundering, conspiracy, obstruction of justice and other charges related to Enron’s fall in 2001. He pleaded not guilty and is free on $5 million bond. (New York Times, February 11, 2003 summary by Sherldine Tomlinson).
Plea Talks in Fraud CASE . Files have shown that Gregory Earls, the top executive of U.S. Technologies Inc., a company whose financial troubles led William H. Webster to resign from a new accounting oversight board, is in talks to settle charges he bilked investors of $13.8 million, court papers. Earls, the chief executive and chairman of the company, was charged in a criminal complaint unsealed last month in Manhattan federal court accusing him of one count of securities fraud, one count of mail fraud and eight wire fraud counts. The criminal complaint contends that Mr. Earls diverted investors’ money to a trust for his children, to investors from other failed ventures and to his former wife. (New York Times, January 22, 2003, summary by Sherldine Tomlinson).
Harder time for
white-collar crime: The US
Sentencing Commission has approved the increase in penalties for corporate
criminals by 25% or more due to the amount of frauds and corporate scandals in
2002. Under the new guidelines the corporate offender of securities fraud can
now be sentenced to up to 8 years in prison (increase from 6.5 years) or even
up to 10 years if he/she has been the officer the publicly traded company. The
plan goes into effect in January and is thought to last at least till November.
Its main message is “If you do the crime, you’ll do the time – the crimes in
suites will be treated as seriously as the crimes in the streets”. The
amendment of sentencing guidelines has been controversially assessed. Defense
lawyers see it being too cruel. The European Union welcomes the exemptions for
non-US companies in the amendment in order to prevent business scandals. All in
all, the amendment will require the corporate audit committees to be more alert
about their reviews of the companies’ financial books. On the other hand, the
federal prosecutors think the amendment is too flexible and largely ignores
corporate offenders in smaller-scale offences which cause devastating harm across
the US. (International Herald Tribune, January 10, 2003, www.iht.com,
summary by Egle Ciuzaite).
PHONE FUND FOR SCHOOLS, LIBRARIES RIDDLED WITH FRAUD The Center for Public Integrity has recently launched an investigation into the Universal Service Fund, a $2.25 billion federal program originally created in 1983 to provide phone service to rural areas at affordable prices. The fund’s mission was expanded in 1996 to help the nation’s poorest schools and libraries connect to the Internet. The program is now honeycombed with fraud and financial shenanigans from virtually all stakeholders. The program is funded from a service fee by every American who pays a phone bill, is controlled by a telecom-industry-dominated, non-profit corporation sanctioned by the FCC, and government officials in charge claim they don’t have enough resources to fix the wrongdoing. Only two FCC auditors are presently assigned to oversee the program, which subsidizes an average of 30,000 Internet connection projects each year. Telecom giants IBM, SBC, Verizon, Bellsouth, and Quest have all received well over $100 million from the fund, with IBM receiving $352 million in 2001 alone. Some of the officials in the nation’s poorest schools have been asked to lie to cover up fraudulent schemes by internet providers in return for receiving new equipment and services with little or no price controls imposed, at a cost entirely borne by the U.S. government. (The Center for Public Integrity, Jan. 10, 2003, summary by Marg Reynolds).
New accounting oversight board set to meet The first formal meeting
of the newly formed Public Company Accounting Oversight Board is scheduled at
the Securities and Exchange Commission’s headquarters in Washington. William Webster
stepped down as chairman, after it was revealed that he served on the audit
committee of an Internet company that fired its accountant because of
disagreements over accounting controls. Moreover, the oversight board will
discuss its proposed bylaws and funding, the appointment of an interim chief
administrative officer, and a mechanism for accounting firms and their
associates to register with the new oversight board. Nando Times, January 7, 2003, summary by Sherldine Tomlinson).
DRUG-MAKERS BATTLE PLAN TO CURB REWARDS FOR DOCTORS. Doctors and drug-makers are protesting a new Bush initiative that will restrict pharmaceutical manufacturers from giving gifts and other rewards to doctors. Manufacturers have given gifts and rewards in the past to ensure the prescribing of particular drugs. However, in October, the Department of Health and Human Services said many of the gifts could possibly be illegal kickbacks. Since then, some consumer groups – such as the AARP – have come to support the restricting of gifts. Doctors and drug-makers who have criticized the proposal, though, outnumber their support. The gifts, they say, are a necessary form of financial support. The Bush administration has stated that it was considering the comments and would issue final guidelines within a few months. (Source: New York Times, December 31, 2002, summary by Mahvish Shaukat).
Former federal agent
sentenced in Cicero corruption case . A judge sentenced a former federal
agent to a year and a day in prison for advising a reputed mob boss and two
police officers on how to hide money stolen from suburban Cicero’s town
treasury. Gregory Ross, 55, had pleaded guilty. He was sentenced on a single
tax charge. Ross also has confessed to his role in two other scams, including
the mob-related looting of Cicero’s insurance fund, which is expected to send
former town President Betty Loren-Maltese to federal prison. (Nando Times,
December 11, 2002, summary by Sherldine
Tomlinson).
WHITE HOUSE AID PLAN EYES POOR NATIONS. In his 2004 budget request to Congress, US President George Bush will be asking lawmakers to approve a new independent government organization, which will be responsible for supplying an additional $5 billion a year towards the country’s international aid program. The president will expect a change from current methodologies in dispensing international aid. For countries to be given this aid, certain criteria will be in affect. Although criteria, such as government efficiency, health and education, and trade policies are important, corruption is the main criteria that will need to be addressed. No matter what the country’s performance may be in addressing other criteria, if the country does not perform well under the corruption category, they will not receive funding. However, some feel that, through this method of aid distribution, the US is dictating the economic policies of other countries. [North Light (AP), November 26, 2002, summary by Vincent Fung]
Former Adelphia VP reportedly will plead guilty to fraud charges . Former Adelphia Communications executive James Brown was scheduled to plead guilty in connection with alleged corporate looting at the troubled cable television company. Brown, the former vice president of finance at Adelphia Communications Corp., was indicted in September on charges of securities fraud, wire fraud and bank fraud and pleaded innocent. Executives allegedly looted corporate accounts, built a golf course with company money and used corporate jets for personal business. Their spending and heavy borrowing led the nation’s sixth-largest cable company into bankruptcy, prosecutors say. (Nando Times, November 14, 2002 summary by Sherldine Tomlinson).
Government sues Ernst & Young over bank collapse
. The US government filed a $548 million fraud and negligence lawsuit
against accounting giant Ernst & Young in connection with the failure of a
Chicago bank in 2001. The lawsuit, brought by the Federal Deposit Insurance
Corp., accused Ernst & Young of misstating Superior Bank’s assets and
deliberately delaying reporting of the error for fear it would hurt an $11
billion sale of the accounting firm’s consulting arm. The lawsuit said Ernst
& Young admitted in January 2001 after lengthy denials that $270 million
overvalued Superior’s assets. Further investigation showed that the value of
the assets had to be reduced by an additional $150 million. (Nando Times, November 4, 2002, summary
Sherldine Tomlinson).
Former Enron CFO indicted on 78 federal
counts Former Enron Corp. chief financial officer Andrew Fastow was indicted on
78 federal counts alleging he masterminded a scheme to
artificially inflate the energy company’s profits. Fastow allegedly received
kickbacks from payments Enron made to Chewco through transfers to his wife and
other family members. Enron’s collapse last year was the first in a series of
corporate scandals that have rocked the business world and roiled the stock
market. (Nando Times, November 1
2002, summary by Sherldine Tomlinson).
Guilty plea to be made in SEC investigation of EarthLink co-founder . A business associate of EarthLink Inc. co-founder Reed Slatkin has agreed to plead guilty to an elaborate scheme to obstruct the Securities and Exchange Commission’s investigation of Slatkin. Daniel Jacobs will plead guilty to conspiracy to obstruct justice when he is arraigned next month. Slatkin, who also served as a financial adviser to celebrities, business executives and socialites, pleaded guilty in April to five counts of mail fraud, three counts of wire fraud, six counts of money laundering and one count of conspiracy to obstruct justice. Slatkin left the board of the Atlanta-based Internet service provider last year. His sentencing is pending. In his plea agreement, Jacobs, 60, acknowledged that when the SEC began its investigation of Slatkin in 1999, he and others provided the agency with false documents concerning NAA Financial, a bogus Swiss brokerage firm in which Slatkin claimed he was holding investors´ funds.(Nando Times, October 23, 2002 summary by Sherldine Tomlinson)
Arthur Andersen LLP fined, given probation . Arthur Andersen was sentenced to five years’ probation and
fined $500,000 for obstruction of justice for its handling of Enron-related
documents. According to jurors, the knockout blow came in May, when David
Duncan, the former auditor in charge of the Enron account, testified that
in-house attorney Nancy Temple told him to remove a sentence and her name from
a memo regarding Andersen’s take on Enron’s earnings release, which was rife
with bad news. Duncan pleaded guilty to obstruction of justice in April and
agreed to cooperate with the government in exchange for immunity for other
possible crimes and the recommendation of a light sentence. . (Nando Times, October 17, 2002 summary by Sherldine Tomlinson).
US Treasury Secretary blasts corporate crooks. U.S. Treasury
Secretary Paul O’Neil hit out at fallen business leaders, calling them
"frogs in boiling water" lacking in any moral direction. Speaking to
a group of Harvard business students, the outspoken Treasury chief said the
U.S. economy would shake off the shock caused by shamed chief executives and
move on to new heights. U.S. financial markets have been shaken in recent
months by tales of corporate corruption. O’Neil said the key to good leadership
is honesty and accountability and urged the students to achieve their ambitions
without bending their values to give into the demands.(Forbes News, October 18, 2002 summary by Sherldine Tomlinson).
Tyco auditor says it won´t be indicted Pricewaterhouse has assigned more
auditors to look at the books of Tyco International Ltd. as it conducts its
annual audit of the troubled conglomerate. The inquiry is looking at individual
auditors, not the accounting firm itself, according to the source, who added
that criminal charges are not imminent. The firm said it was cooperating with
the investigation. Kozlowski, Tyco’s former chief executive, and Mark Swartz,
its former chief financial officer, have been charged with enterprise
corruption and grand larceny for allegedly stealing $600 million from the
company. They face up to 25 years in prison on each charge if convicted. (The Boston Globe, October 16, 2002, summary by Sherldine Tomlinson).
Chicago trade board contests soy bean corruption allegations The Chicago Board of Trade is being sued in the US District Court in Chicago for a 1989 decision that forced the owners of large amounts of soybean futures contracts to sell their positions. Farmer Harvey Joe Sanner is alleging that the Board knew its order would cause prices to drop, thereby benefiting the trading firm of one of its directors. At the time, the Board had claimed that its order was aimed at preventing an Italian firm, Ferruzzi Finanziaria SpA, from cornering the market; it said that it had been aggressively buying futures. Sanner, whom is a former president of the now defunct American Agriculture Movement, also alleges that the Board caved into pressure from food processor Cargill Inc, a large soybean customer which needed a lower price to buy back contracts (Just - Food News, October 9, 2002, summary by Sherldine Tomlinson).
Tyco Wants Swartz´s Severance Package Back Facing criticism from prosecutors,
Tyco International has reversed course and filed for arbitration to recover a
$44.8 million severance package the company awarded to indicted former chief
financial officer Mark Swartz. Swartz "breached his fiduciary duties"
and "misappropriated company funds and other assets," Tyco alleged in
a filing with the Securities and Exchange Commission. The company said it has
sought an American Arbitration Association action to recover "all damages
suffered by the company as the result of such breach." The allegations
stem from a September corruption and grand larceny indictment that accused former
Tyco CEO Dennis Kozlowski and Swartz of illegally reaping more than $600
million from Tyco. (The Salt Lake Tribune,
October 10, 2002, summary by Sherldine Tomlinson).
MERRILL Lynch aide in plea deal; will testify against
Martha Stewart An
assistant to Martha Stewart’s stockbroker has decided to plead guilty and
testify against the home decorating maven and others in the ImClone Systems
scandal, The Associated Press learned. Investigators are looking into Stewart’s
sales of nearly 4,000 ImClone shares last December, just before the stock price
plunged on news the Food and Drug Administration would not review its highly
touted cancer drug, Erbitux. Merrill Lynch handled Stewart’s ImClone sale.
Prosecutors are trying to determine if Stewart was tipped off by her close
friend Sam Waksal, ImClone´s founder and ex-CEO. A spokesman for the U.S.
Attorney’s office also declined to comment. Waksal was indicted in August on
charges that he tipped off family members so they could dump millions of
dollars worth of ImClone stock before the bad news about Erbitux became public.
He has pleaded innocent to the charges. Stewart has said she had a standing
order with her Merrill Lynch broker, Peter Bacanovic, for whom Faneuil worked,
to sell the ImClone shares if they fell below $60. Faneuil initially gave
investigators the same account but later changed his story and said there had
been no such order. (The Nando Times,
October 2, 2002, summary by Sherldine Tomlinson).
U.S. official tells
Romania to eradicate corruption U.S. official urged Romania to work to
eradicate corruption and continue to implement economic and judicial reforms
even after it joins NATO. Speaking at the end of a two-day visit to Romania,
Bruce Jackson, president of the U.S. Committee on NATO, told reporters that
battling endemic corruption was the area where least progress had been made.
Jackson also said that Romania should begin to reform its justice system, and
said that privatization of state industry was going too slowly in the former
communist nation, private news agency Mediafax reported. Moreover, Jackson visited Romania to discuss
needed reforms with Romanian officials ahead of the summit. Jackson also denied
rumors that the Washington had demanded that Romania’s government sign a treaty
agreeing not to turn over U.S. citizens to a new international court of justice
in exchange for support of NATO membership.(Yahoo News, September 9, 2002, summary by Sherldine Tomlinson).
ENRON’S DEMOCRAT PALS. According to reports, documents obtained by Time
has that show the energy giant enjoyed much closer ties with Clinton
Administration regulators than was generally known. Long before Cheney’s task
force met with Enron officials and included their ideas in Bush’s energy plan,
Clinton’s energy team was doing much the same thing. (CNN,
August 19, 2002, summary by Sherldine Tomlinson).
BUSH ACTS ON US SCANDALS. President George Bush will attempt to shore up confidence in corporate
America with the promise of a crackdown on those responsible for a damaging series
of accounting scandals. The attempt to exert some control over the escalating
crisis in the US comes as fresh accusations have been leveled at the president
over his own business dealings. What started with the collapse of the
Houston-based energy firm Enron has since spread to big name companies
including WorldCom, owner of one of the world’s biggest internet networks, and
copying firm Xerox. In addition, the campaign for business and accounting
reform, which was sparked by the collapse of Enron, has found new momentum with
the $3.8bn fraud uncovered at WorldCom. Investors have reacted furiously to the
huge amounts earned by executives even as their companies were careering toward
collapse. (The Guardian, July 9, 2002, summary by
Sherldine Tomlinson).
FORMER DIPLOMAT GETS 21-YEAR SENTENCE. According to reports a former American diplomat was sentenced to 21 years in federal prison for selling visas at the U.S. Embassy in Guyana. Thomas Carroll, sold up to 800 visas allowing buyers to sneak into the United States, charging between $10,000 and $15,000 apiece, prosecutors said. They prosecutors also that said Carroll shared some of the bribe money with others but could have pocketed up to $4 million himself. Co-defendant Halim Khan, a Guyanese national, also pleaded guilty and awaits sentencing. Carroll previously had been posted by the State Department to Taiwan and mainland China and was on his way to a new assignment in South Africa when he was caught. A third man, Hargobin Mortley, pleaded guilty in January 2001 and was sentenced to time served, nine months and 22 days. In addition, at least 26 people who got into the country on visas sold by Carroll ended up committing crimes which ranges from disorderly conduct to gang rape in the United States.(The Guardian, June 14, 2002, summary by Sherldine Tomlinson).
FBI AGENTS INDICTED IN STOCK FRAUD According to reports two FBI agents helped an Internet stock analyst shake down publicly traded companies by sneaking him confidential information on investigations of the companies. Lynn Wingate, an FBI agent assigned to the bureau's Albuquerque, N.M, office, Jeffrey Royer, a former Oklahoma City agent, and analyst Amr Elgindy were among five defendants charged in a securities fraud indictment in a federal court. In exchange for money, the agents used FBI databases to provide their co-conspirators inside FBI information on publicly traded companies. In 2000 and 2001, an associate of Elgindy, Derrick Cleveland, wired Royer $30,000 while he was still a FBI agent. Elgindy spread negative information on the companies on his Web site and to Brooklyn subscribers of his e-mail newsletter, InsideTruth.com, while betting that that the companies' stock would go down. If convicted of racketeering conspiracy and other charges, each defendant could receive 20 years in prison. (The New York Times (Associated Press), May 22, 2002 summary by Sherldine Tomlinson).
Bush to be tough on US aid during Latin America trip The United State president will be going to the United Nations development conference in Mexico. During his meeting with world leaders at the conference, President George Bush Jr., will promote his initiative to help poor nations that respect human rights, root out corruption, open their markets, and have education and health care systems. He also will meet Andean leaders in Peru and Central American leaders in El Salvador before returning to Washington. Bush also spoke separately with Venezuela’s President Hugo Chavez about the political corruption’s in his country. “We respect democracy in our country, and we hope he respects the democratic institutions within his country,” the president said. Moreover, also Bush announced an aid initiative for developing nations. “Countries that practice good habits will get money,” said the president. (Yahoo News (Reuters), March 20, 2002, summary by Sherldine Tomlinson).
BROADCAST INDUSTRY DEFEATS SHAYS-MEEHAN PROVISION of Campaign Reform Act (Web posted Mar. 7, 2002) Of the 14 amendments proposed to Shays-Meehan Bill three passed. One eliminated a reform to reduce cost of political advertising. In year 2000 broadcast outlets earned $600 million. Full report at: http://www.public-i.org
Major Auditing
Reforms Needed: accountants suffer in public perceptions of honesty and ethics.
A new CNN/USA Today/Gallup poll showed that while there is still general
confidence in accounting firms, nevertheless on decrease since November when the
question was last asked, major reforms are perceived as necessary, especially
following the Enron case. (Gallup News
Service, February 26, 2002, summary by Monica Voitovici).
U.S. OPPOSES CALL FOR MORE FOREIGN AID A major United Nation’s conference will be held during March in Monterrey, Mexico during which negotiators from over 150 countries will develop a blueprint to reduce worldwide poverty. The U.S. believes good governance, transparency, accountability, and government implementation would enable developing countries to better spend their current aid budgets. Kofi Annan, U.N. Secretary-General, has called for doubling foreign aid spending within three years. The ‘Monterey Consensus’ must be adopted by world leaders and other delegates. Upon the conviction that dire poverty can be reduced for half the three billion people currently living on less than $2 per day, the countries can surely build. (NYT (AP, Jan. 29, 2002, summary by Marg Reynolds).
Professor Vinod’s Essay of Jan. 27, 2002 on Enron entitled
WINNERS AND LOSERS IN MULTIPLE FAILURES AT ENRON:
Many of us in the anticorruption community have been calling
for better enforcement of “Conflict of Interest” provisions of existing laws,
ban on shell corporations, especially those in money laundering havens. It is clear that if these had been followed,
Enron fraud might have been detected and thousands of investors may have saved
billions of dollars in losses due to Enron bankruptcy of December 2001. Enron
paid no taxes in four out of the last five years, had 882 partnerships for
shifting losses and debt off-balance sheet. It used fancy mark-to-market
accounting devices to hide and defraud.
Why various checks and balances failed in this case? Besides listing the various failures we
indicate eleven groups of winners and six groups of losers. While it is
fashionable to count Enron employees among losers due to their 401(k) losses,
we argue that employees were also among bulk recipients in the mass transfer of
wealth from investors. We include many specific policy proposals to promote
transparency, curb corruption, and prevent various abuses. Since the so-called “Chinese Wall”
regulations separating investment banking and other business of brokerages have
failed, we call for a break-up of such brokerages. An Appendix includes the two
cows joke updated for Enron.
ACCOUNTING FIRMS’ PEER REVIEW PROBLEMS EXPOSED BY ENRON CASE. While conducting a peer review of troubled accounting firm Arthur Andersen's records, fellow 'Big Five' accountant Deloitte & Touche ignored Enron from its analysis. According to Deloitte & Touche's spokeswoman, that's normal procedure when firms check up on each other's work. The full report can be accessed at: http://www.public-i.org
THE UNITED STATES OF ENRON The arrogant high-flyers in Enron’s executive, having made campaign donations to both political parties in return for seeking favors, are only a part of the political and financial scandal. Not only did Enron approach Penthouse and Playboy in an attempt to enter to porn business, it also donated $600,000 to M.D. Anderson Cancer Center in a backdoor role to the life and death matter of stem cell policy. Enron, together with its former audit firm, Arthur Anderson, liberally donated to no fewer than 71 senators and 188 congressmen. Also, the Bush administration’s chief at the Securities and Exchange Commission (SEC), Harvey Pitt, is a former lawyer with Arthur Anderson, and may well have been in the loop of Enron’s business, but neither the SEC or Arthur Anderson has been forthcoming in releasing the dates of his employment. The perfect storm of the Enron scandal will muddy both Democrats and Republicans, and the greed of the perpetrators of the scandal, who took their cut early, looks even uglier against the backdrop of the average American fighting the war against terrorism. (NYT, Jan. 19, 2002, summary by Marg Reynolds).
ENRON PAPERS DESTROYED AFTER SEC
PROBE BEGAN. Andersen admitted that it could not determine if Enron documents
had been destroyed after the SEC served its subpoena. David Duncan, the lead
partner on the Enron audits in Houston (the person that allegedly had ordered
the disposal of the documents) was fired. A lawyer for Mr Duncan claimed that
his client had been properly following instructions from head office in
Chicago. Enron filed for the largest corporate bankruptcy in the US in
December. The Justice Department, the SEC and the Congress have launched a
criminal investigation. ( Financial Times, January 16, 2002, summary by
Pavlidis George).
Enron’s Chairman Received Warning About Accounting. A senior Enron employee explicitly warned the company’s chairman in August that several years of improper accounting practices threatened to bring down the company, Congressional investigators said today. "I am incredibly nervous that we will implode in a wave of accounting scandals," the employee, Sherron S. Watkins, wrote in an unsigned seven- page letter to Kenneth L. Lay, Enron´s chairman and chief executive. Excerpts from the letter were released today by the House Energy and Commerce Committee, one of five Congressional committees investigating Enron´s collapse. The company, which once had a market value of $70 billion, filed for bankruptcy protection on Dec. 2 after acknowledging that it had overstated its profits by nearly $600 million. The seven-page letter suggests that Mr. Lay had been warned about the company´s accounting problems at a time when he was assuring employees and investors that Enron´s stock would rebound. Disclosure of the letter came as a lawyer for Mr. Lay said that he had used company stock to repay a loan, raising questions about whether Mr. Lay shed some holdings as the stock declined. The letter could also bring significant new problems for Enron; its accounting firm, Arthur Andersen; and Vinson & Elkins, the company´s law firm, at a time when the Justice Department has dispatched dozens of prosecutors and federal investigators to Houston, where a federal task force´s wide-ranging criminal inquiry will be based. The letter from Ms. Watkins, a vice president of corporate development, was sent to Mr. Lay between Aug. 14, when the company´s chief executive, Jeffrey K. Skilling, suddenly resigned, and Aug. 31. In an Aug. 21 letter, Mr. Lay sought to reassure Enron employees that the company was on solid footing, writing, "One of my highest priorities is to restore investor confidence in Enron. This should result in a significantly higher stock price." At the time, Enron shares were trading at almost $37. By late November, it was trading as low as 30 cents a share. After receiving the letter, Mr. Lay asked Vinson & Elkins to investigate the issues raised in it. But the company insisted that the law firm limit its investigation to a review of whether the letter contained new factual information, not a wider inquiry into whether Enron was properly accounting for its profits and losses. On Oct. 15, Vinson & Elkins found that Enron had committed no wrongdoing, lawyers involved in the matter said.Ms. Watkins could not be reached for comment today. Her husband, Richard Watkins, referred phone calls to a lawyer. In the letter, Ms. Watkins raised concerns about Enron´s accounting practices and asked whether company partnerships were being used to hide losses and inflate the company´s stock price. These are among the issues now being investigated by the Justice Department, the Securities and Exchange Commission, the Department of Labor and members of Congress. Federal investigators are trying to determine whether Enron executives, armed with inside information about Enron´s financial condition, sold their own stock before the improper accounting methods were publicly disclosed in October. Thousands of Enron employees, who were barred from selling the stock for six weeks in the fall, lost vast amounts of their retirement savings. In her letter, Ms. Watkins expressed anguish about the accounting practices of four Enron partnerships and the involvement in one deal of the company´s former chief financial officer, Andrew S. Fastow. She also complained to Mr. Lay that several senior Enron employees had repeatedly raised questions and concerns about Enron´s accounting methods to senior Enron officials, including Mr. Skilling.Philip H. Hilder, Ms. Watkins´s lawyer, said in an interview tonight that Ms. Watkins worked for Mr. Fastow, who ran two of the partnerships that Enron allegedly used to inflate its profits, between July and September. After September, Ms. Watkins "asked to be reassigned," Mr. Hilder said. He said he did not believe the company retaliated against her for writing the letter. He would not comment on whether investigators had contacted her.Excerpts of the letter were released today by Representative Billy Tauzin, the Louisiana Republican who is chairman of the House Energy and Commerce Committee, and Representative James C. Greenwood the Pennsylvania Republican who is the head of the investigations subcommittee. People who have reviewed the full text of her letter said Ms. Watkins wrote Mr. Lay: "I have heard one manager-level from the Principal Investments Group say, `I know it would be devastating to all of us, but I wish we would get caught. We’re such a crooked company. " Ken Johnson, a committee spokesman, said today, "Obviously this is an explosive new development in our investigation that clearly shows that top Enron executives were warned of serious financial problems months before the company reduced shareholder equity. "Robert S. Bennett, Enron’s Washington lawyer, protested the committee’s release of excerpts from the letter. "I think it’s very unfair for committees of Congress who profess to be conducting fair and objective investigations to be selectively releasing documents with their spokespeople putting spins on them," he said. He said Mr. Lay acted "very, very responsibly" and was concerned about the issues raised by Ms. Watkins and referred them to Enron’s outside law firm for investigation. Congressional investigators who have reviewed the full text of her letter said Ms. Watkins began it with two prescient questions: "Has Enron become a risky place to work? For those of us who didn’t get rich over the last few years, can we afford to stay?" She then went on to express deep concerns about the accounting practices used by Arthur Andersen involving three partnerships by the names of Condor, Raptor and Whitewing. Ms. Watkins complained about the opaque structure of the Enron partnerships that were used to conceal losses. "Is there a way our accounting gurus can unwind these deals now?" she asked. "I have thought about how to do this, but I keep bumping into one big problem — we booked the Condor deals in 1999 and 2000, we enjoyed a wonderfully high stock price, many executives sold stock, we then try to reverse or fix the deals in 2001 and it’s a bit like robbing the bank in one year and trying to pay back two years later. Nice try, but investors were hurt." She continued, "They bought at $70 and $80 dollars looking for $210/ share and now they’re at $38 or worse. We are under too much scrutiny and there are probably one or two disgruntled redeployed employees who know enough about the funny accounting to get us in trouble." She also includes a page of suggestions on how to untangle the accounting irregularities. Vinson & Elkins concluded its inquiry on Oct. 15, just one day before Enron announced its third quarter earnings and a $1.2 billion reduction in shareholder equity due to losses later associated with partnerships involving Enron officials. Ms. Watkins also told Mr. Lay that "several senior Enron employees `consistently and constantly´ questioned the corporation’s accounting methods to senior Enron officials, and directly" to Mr. Skilling, about transactions involving L.J.M., an Enron partnership. The House Energy Committee sent letters of inquiry today to Mr. Lay; Arthur Andersen’s managing director, Joseph F. Berardino; and Joseph C. Dilg, the managing partner of Vinson & Elkins. The committee letters demanded more information about the way they addressed the concerns raised by Ms. Watkins. Joe Householder, a spokesman for Vinson & Elkins, which has 860 lawyers in nine offices worldwide, said lawyers were reviewing the committee’s letter. "On this issue," he said, "we just aren´t prepared to comment because we want to review the letter first. "Today, several Enron officials questioned whether it was proper for Vinson & Elkins to conduct a supposedly independent inquiry of Enron’s accounting practices. "There are so many Vinson & Elkins lawyers working for Enron that they have office space in the company’s headquarters in Houston for extended periods of time," said one Enron official, who spoke on condition of anonymity. A Vinson & Elkins lawyer said the firm was owed more than $5 million when Enron petitioned for protection last month under Federal bankruptcy law. The lawyer added that Enron was among the law firm’s most lucrative clients. At some point after the Vinson & Elkins inquiry began, Ms. Watkins met with Mr. Lay for an hour to express her concerns in person, Congressional investigators said. They said they did not know exactly when the meeting took place. Enron admitted in November that it used partnerships like those mentioned in the letter to overstate its profits by $586 million since 1997. To raise money, the partnerships, which included both Enron and outside investors, took out loans that were indirectly guaranteed by Enron.The partnerships would then buy investments that Enron had made at prices that enabled Enron to claim the investments had been profitable. But because Enron had guaranteed most of the money the partnerships had used to buy assets from it, the company was essentially selling assets to itself. The L.J.M. partnerships are even more questionable, because they were controlled by Mr. Fastow, who earned more than $30 million running them. Mr. Fastow should not have been allowed to work for both Enron and the partnerships, critics say. (The New York Times, January 15, 2002. summary by Sherldine Tomlinson).
NEW YORK: ‘CLEAN MONEY’ CURB FOR ‘BIG MONEY’ INDEBTEDNESS Acceptance of campaign funding by political candidates from wealthy individuals and interests who have been calling the shots in state government far too long has caused the public to become disenchanted with elected government officials. Large contributors often stand in the way of women’s, civil rights, consumers’, workers’, environmental, and senior issues. The current system reeks of corruption in many states. However, the ‘Clean Money, Clean Elections’ reform of Massachusetts, Maine, Arizona, and Vermont gives candidates access to a fixed and equal amount of public campaign funds. All candidates seeking election are urged to support the Clean Money, Clean Elections reform. (The Times Union, Jan. 1, 2002, summary by Marg Reynolds).
WHO FIDDLED WHAT? Anderson’s pure auditing of Enron for sixteen years was dull, but became dangerous and expensive when mixed with selling internal audit and consulting services. A restatement of financial statements from 1997 to 2000 resulted in a $591 million profit reduction and a $628 million debt increase due to three off-balance-sheet special purposes vehicles. Although Anderson claims it was not given this information and warned Enron’s audit committee about illegal acts, Enron claims Anderson was involved in the real time audit procedures. The Securities and Exchange Commission (SEC) may bar Anderson from taking new clients for a time as the company recently paid a $7 million fine for misleading investors of Waste management and $110 million for accounting fraud at Sunbeam. The Public Oversight Board and the Financial Accounting Standards Board must revisit audit rules of self regulation and peer reviews to provide better audits or risk regulators’ ban on selling consulting services to those they audit. (The Economist, Dec. 20, 2001, summary by Marg Reynolds).
AFTER ENRON, NEW DOUBTS ABOUT AUDITORS The global energy-trading powerhouse, Enron, became the biggest bankruptcy in U.S. history when investors and customers could not trust the numbers vouched for by blue-chip accounting firm, Arthur Anderson. Over $100 billion has been lost to investors in the last six years due to financial fraud and the accompanying restatement of financial statements. The auditors’ public watchdog mission is clouded by: making more money by selling advice, profit margins diminishing as efforts at thoroughness increase, lack of total independence from the client, and finding inventive ways to help the client grow by developing full-service relationships. However, an industry panel found both professional audit effectiveness and quality to be fundamentally sound in the majority of cases. The application of old standards to the new economy and the SEC’s new interpretations of complex standards gives rise to the question, ‘How is it that auditors are able to do so well in today’s environment?’ (WP, Dec. 5, 2001, summary by Marg Reynolds).
COURT PATRONAGE RAPPED. A number of judges and lawyers are facing charges of misconduct. An investigator, appointed by state Chief Judge Judith Kaye, had previously issued an interesting report. This report detailed widespread corruption in the handling of lucrative cases. Allegedly, attorneys plundered the assets of the elderly by charging them thousands of dollars for routine tasks. Unethical judges face penalties ranging from censure to removal from the bench. Unethical lawyers could be disbarred. "It [the report] shows that the rules were not being followed, that the best interests of incapacitated persons [and] children were not always being met," said Jonathan Lippman, the state's chief administrative judge. (Source: Yahoo Daily News, December 4, 2001, summary by Pavlidis George).
TWO RABBIS SENTENCED
IN EMBEZZLEMENT SCHEME. Two
rabbis, Efroim Stein and Jaocb Bronner were sentenced to nearly three
years in prison for embezzling federal money meant for training counselors for
elderly Holocaust survivors. As a part of plea deal, they have paid
$162,000 in restitution. In 1995, the federal government awarded them a
$2.5 million grant to provide the training. (The Charleston Gazette, August 11,
2001, summary by Barbara Gray).
US TO STRENGTHEN LAWS ON
LAUNDERING. US Attorney General John Ashcroft said he would ask Congress to
toughen US regulations intending to combat money laundering. "Money
laundering constitutes a serious threat to our communities, to the integrity of
our financial institutions, and to our national security," he said.
"Behind every dollar of dirty money in need of laundering is a trail of
victims." The current legislation, which was passed in the 1970s, only
requires shipments greater than $10,000 to be reported to the US Customs
Service. Nevertheless, the government cannot seize the currency that was not
reported. According to Mr. Ashcroft, the Justice Department may recommend new
legislation to allow customs agents to seize the cash, as well as laws against
transporting large sums of illegal currency over the nation's highways and
through airports. (Source: Financial Times, August 8, 2001, summary by Pavlidis
George).
MADISON COUNTY CLERK
RESIGNS AMID FEDERAL PROBE. Steve Duncan, a key figure in an ongoing probe of
alleged corruption in Madison County, has resigned as chancery clerk. The
FBI in June seized computers belonging to Duncan and his deputy clerk, Kathy
Gregory. In 1999, Duncan reported earnings of $307,794 of which $300,000 came
from four $75.000 per-year positions. (AP State & local Wire, August
7, 2001, summary by Barbara Gray).
MONEY LAUNDERING
BATTLE INTENSIFIES. Sen Carl Levin, D-Mich., chairman of the U.S. Senate
Permanent Subcommittee on Investigation, along with Chuck Grassley, R-Iowa,
co-chairman of the U.S. Senate Drug Caucus introduced a bill designed to combat
money laundering and to deter money launderers from infiltration the U.S.
banking system. An estimated $1 trillion in criminal proceeds is
laundered each year, and about half of that $500 billion—is believed to be
laundered through U.S. banks. The bill, the Money Laundering Abatement Act,
targets the key tools used by money launderers: bank secrecy; offshore shell
banks that often are mere nameplate institutions with no employees in foreign
financial centers. (The Miami Herald, August 4, 2001, summary by Barbara
Gray).SAYBOLT PLEADS GUITY; FINED $4.9M. Saybolt Inc, a petroleum testing
company has agreed to plead guilty to defrauding its clients and the
Environmental Protection Agency. The company will pay a fine of
$4.9 million. The company was also found in violation of the Foreign Corrupt
Practices Act. (The Boston Globe, July 31, 2001, summary by Barbara Gray).
GAO ASSAILS PENTAGON ACCOUNTING PRACTICES A report commissioned by Reps. Stephen Horn (R-Calif) and Jim Nussle (R-Iowa) revealed the Pentagon made $615 million in illegal and improper accounting entries last year. Analysts believe the financial mismanagement was ‘sleight-of-hand’ in adjusting old and canceled accounts to pay the Pentagon’s contractor bills. David M. Walker, Comptroller General, also noted that over $5.3 billion was returned to Pentagon contract administrators by defense contractors due to payment errors. The violations of legal and accounting requirements and illegal manipulation of appropriated funds means billions of dollars are siphoned from real needs. (WP, July 26, 2001, summary by Marg Reynolds).
EX-PRESECUTOR DETAINED FOR CORRUPTION. Peruvian police arrested the country's ex-prosecutor Blanca Nelia Colon, who is accused of corruption and covering up the wrongdoing by a corrupt official. The authorities detected Colon's irregular income, which allowed her to buy a house worth about 800,000 U. S. dollars. She also faces charges including having destroyed the files of Vladimiro Montesinos, the former presidential assessor and ex-spy chief, who has been accused of crimes ranging from corruption to human rights violations. (XINHUA, July 26, 2001, summary by Barbara Gray).
AGENTS ALLEGE CORRUPTION AMONG SENIOR FBI OFFICIALS John Ashcroft, Attorney General, has ordered a Justice Department investigation into recent disclosures that the FBI could not account for 449 guns and 184 computers. He will attempt to rein in the ‘tradition of independence’ and the ‘culture of arrogance’ within the FBI. Senators Patrick Leahy (D-Vt.) and Orrin Hatch (R-Utah) believe the very, very serious management problems within the FBI to be simply inexcusable. Present and former agents testified before a Senate panel that promotion and internal disciplinary systems were corrupt and unfair as misconduct by members of the Senior Executive Service receives little or no punishment, whereas junior agents would have been suspended or fired. (The Miami Herald, July 19, 2001, summary by Marg Reynolds).
U.S. COMMITTED TO MONEY LAUNDERING FIGHT Paul O’Neill, Treasury Secretary, announced the Bush administration will pursue aggressive enforcement of money laundering and asset forfeiture laws. He further stated that a recent internal review was an effort to ensure tax-payers money was well-spent and was not a signal that this administration was backing away from previous efforts. The National Money Laundering Strategy will be published soon with input from U.S. bank regulators, and will include investigation and prosecution of high impact major cases, protection of U.S. financial system integrity, and improvement of result measurements. (Reuters, July 18, 2001, summary Marg Reynolds).
TWO CHARGED IN
CHICAGO-TO-FLORIDA BRIBES FOR LICENSES STING. Lech Rzendzian of Wheeling and
Felix O. Mamedov of Palm Coast Fla. were charged with interstate travel in aid
of racketeering. The two men brought to 43 the number of people charged
in the federal government's three-year investigation of drivers licenses issued
in exchange for bribes. (AP State & Local Wire, July 12, 2001, summary by
Barbara Gray).
‘FAILING TO DO ENOUGH’ ON FINANCIAL CRIME In a survey of twenty-nine industrialized nations, the Financial Action Task Force, a group formed to battle money laundering, marked the United States third from the bottom, ahead of Canada and Mexico. This embarrassment for the United States, long an advocate of efforts to combat international financial crime, was explained as a low mark because there are no laws to report suspicious transactions, whereas countries with extensive rules mainly reported only from the banks. The U.S. is committed to this work, despite concerns over a similar global task force to combat tax evasion in offshore financial centers. Liechtenstein, the Cayman Islands, the Bahamas and Panama have been removed from the blacklist and Egypt, Guatemala, Hungary, Indonesia, Burma, and Nigeria have been added. Jose Mara Roldan, task force President, stated FATF has prepared conditional sanctions against Nauru, the Philippines, and Russia. (FT, June 22, 2001, summary by Marg Reynolds).
INTIFADA GIVES COVER TO ARAFAT’S GRAFT AND FRAUD Opinion by Rachel Ehrenfeld, Director of the New York-based Center for the Study of Corruption and the Rule of Law. The Bush administration, when faced with the appalling corruption of Yasser Arafat and the Palestinian Authority (PA), must consider that Arafat and his cadre are incapable of transforming from professional terrorists to a law-abiding government. More than $75 million annually is skimmed from American tax dollar aid to Arafat’s private coffers and ostentatious villas and Benz vehicles are situated beside the dismal conditions of refugee camps. The CIA estimated in 1990 that between $8 billion and $14 billion has been generated from a 5 percent tax on expatriate Palestinians in Arab countries. Other origins of assets include donations, extortion, payoffs, illegal arms dealing, drug trafficking, money laundering, fraud, and stock market manipulation. Richard Newcombe, U.S. Treasury official, stated on May 10 that the Office of Foreign Assets Control can prohibit or regulate commercial or financial transactions involving specific foreign countries, entities, or individuals engaged in terrorism, drug trafficking, and money laundering and believes there is little doubt that Arafat’s corruption represents punishable crimes. (Insightmag.com, June 24, 2001, summary by Marg Reynolds).
WHISTLEBLOWER SCORES AS ARMY PROBES RIVER CONSTRUCTION PROJECT
Don Sweeney, Army Corp of Engineers economist and former leader of the Mississippi River study, alleged top corps officials engaged in misconduct by manufacturing a case for expansion to locks on the Mississippi and Illinois rivers, in part to please powerful agribusiness interests. The Army inspector general’s report confirmed Sweeney’s allegations and the officials accused of giving false testimony to inspector general personnel and congressional investigators are: Maj. Gen. Russell Fuhrman, retired as second-in-charge at the corps; Maj. Gen. Phillip Anderson, former Mississippi Valley division commander and presently South Atlantic Division head; and Col. James Mudd, retired as Rock Island District, Illinois Commander. The Corps. Has a $4 billion flood control and river navigation budget and the inspector general’s report noted a corps-wide culture in favor of large construction projects. Lt. Gen. Robert Flowers, new corps. Commander, told Congress that the officials were trying to fix a flawed economic model and were not altering the eight-year, $56 million cost-benefit analysis to make the locks project appear justified. (DJ Newsires (AP), June 6, 2001, summary by Marg Reynolds).
USA: HELSINKI COMMISSION CHAIRMAN INTRODUCES INTERNATIONAL ANTI-CORRUPTION ACT Senator Ben Nighthorse Campbell (R-Colo), Chairman of the Helsinki Commission, has introduced the International Anti-Corruption Act of 2001. Which ties U.S. financial assistance to corruption fighting efforts. Corruption will undermine fledgling democracies and impede a free market economy and chill foreign investment. The legislation would require a Presidential certification that the countries receiving aid are not hostile to U.S. businesses and investors, and provides an exception for continued support where discontinued assistance jeopardizes either humanitarian aid or national interests of the U.S. Senator Campbell has urged Colin Powell, Secretary of State, to build upon the anti-corruption efforts and raise visibility of the Helsinki Commission in the region covered by the 55-nation Organization for Security and Cooperation in Europe. (US Newswire, June 5, 2001, summary by Marg Reynolds).
NEW YORK: DOCTOR BILLED FOR HUNDREDS OF THOUSANDS IN PHONY TESTS
Dr. Aubrey Ku pleaded guilty in a Manhattan Court to submitting the same electrodiagnostic tests for multiple patients and defrauding at least seven insurance companies of at least $838,000 over the past three years. Ku practiced at clinics in Manhattan, Queens, and Brooklyn, and charged up to $3,000 for each fraudulent report. He may be the first physician in the city to go to prison for no-fault insurance fraud, as he did his own billing, had the checks sent to his home, and even called to see what happened to his payments. He agreed to pay $424,000 in restitution as part of his plea deal. (NYP, June 1, 2001, summary by Marg Reynolds).
GAO AUDITORS REVIEW FED’S CYBERCRIME UNIT InfraGard, an FBI-consortium to gather information from corporations, government agencies, and academic institutions, plans to share information between its 500 members and report computer-based invasions. The consortium’s parent, the National Infrastructure Protection Center, has been accused of hoarding information and lording power by keeping non-FBI personnel out of key databases, and by failure to issue timely electronic attack warnings. The NIPC cost taxpayers $27 million per year, and it remains unclear as to where the authority for the Center originates and whether integration of the Center’s national security warning process is planned. (Darwin, May 29, 2001, summary by Marg Reynolds)
STAFFING SHORTAGES HAMPER GOVERNMENT ANTI-CYBERTERRORISM UNIT The General Accounting Office stated the National Infrastructure Protection Center was unable to alert the public to dangerous computer viruses due to delays caused by staffing shortages and lack of a system to share information government wide. The Center, in operation for three years, has committed, heroic staff, but their efforts cannot reach full capacity to assess, warn, and protect Americans without increased staff. (DJ Newswires, May 22, 2001, summary by Marg Reynolds).
FBI TAKES ON GLOBAL CORRUPTION The FBI, the German Federal Criminal Police, and the George C. Marshall European Center for Security Studies co-sponsored a conference titled: ‘Corruption within Security Forces: A Threat to National Security’. The FBI organized crime section experts shared methods and techniques with participants of the conference, which was attended by high level officials, many from former Soviet Bloc countries. Topics included: black markets, organized crime, porous borders, trafficking of all kinds, bribery, legal wiretaps and other tools, and international mutual assistance agreements. The objectives of the conference included threats, impacts, identification and containment, combat measure effectiveness, and domestic and transnational processes. (Virtual New York (UPI), May 17, 2001, summary by Marg Reynolds).
REPUBLICAN LEADER CONVICTED OF BRIBERY Peter Murphy, Republican Chairman of Passaic County, has been convicted of three bribery and three mail fraud charges for steering county contracts in exchange for $70,000 in kickbacks to his cronies. He faces 33 to 41 months in prison and his attorney, John Arseneault of Chatham, stated an appeal would be lodged. Carlton Wessel, Assistant U.S. Attorney, believes Murphy’s actions cross the line from giving patronage jobs to party loyalists into criminal behavior. Also investigated were: Curt Masklee, Undersherriff John Bonazzi, Joseph DiDonna, and Joseph DiPasquale, a Totowa bankruptcy trustee. Murphy may cooperate with the corruption probe to avoid a lengthy prison term. (The Record, May 15, 2001, summary by Marg Reynolds).
$4 MILLION PAID FOR FUTURE MEDICAL COSTS OF ALREADY DEAD PATIENT The Health Care Financing Administration, a Medicare agency, has paid premiums for about two hundred people who died between 1991 and 1999. Payments have been due to database discrepancies between the Medicare master and the smaller, Health and Human Services records. A total of $4 million of the misdirected funds have been recovered, however, $3.2 million is still outstanding. An estimated 43 percent of seniors receiving these benefits live in Arizona, California, Colorado, and Florida and discrepancies were noticed in routine regional checks. It was discovered last month during investigations by HHS and Congress that millions of dollars in Medicare benefits were received by felons and fugitives, in spite of federal laws prohibiting most from receiving these health benefits. (Dow Jones Newswires (AP), May 12, 2001, summary by Marg Reynolds).
POOR ACCOUNTING MAY BE PENALIZED BY BUDGET CUTS Mitchell Daniels Jr., Director of the Office of Management and Budget, stated goals for financial management improvements should be tied to yearly budget requests in order to redistribute funding from weak to strong performers. Federal agencies failing to receive ‘clean opinions’, due to the need for upgraded computer systems for instance, presently do not face penalties. However, Congress needs to be careful about cutting funding for certain vital programs on the basis of ‘clean opinions’, as the programs could be turned over to a third party or private sector financial management company. (Federal Times, May 7, 2001, summary by Marg Reynolds).
GOVERNMENT MAY WAIVER IN WAR ON TAX HAVENS (Extracts from an article by Andres Oppenheimer) Paul O’Neill, Secretary of the Treasury, recently stated that certain aspects of the OECD campaign against tax havens are under review by the Bush administration, causing concern among Latin American emerging economies and their efforts to combat the corruption epidemic. Reforms within several countries, such as the Cayman Islands and Bermuda, in the past year have caused the countries to be removed from a blacklist of 35 harmful tax havens that carry out unfair tax practices. Elisa Carrio, Argentine congresswoman, stated a U.S. retreat on this issue would allow illegal business to continue and even increase their criminal activities. Countries that encourage tax evasion and money laundering erode emerging democracies, enable crooks to deposit funds in offshore banks, negate efforts to promote good governance, and cause the whole hemisphere to be worse off. (Miami Herald, May 6, 2001, summary by Marg Reynolds).
COMPTROLLER GENERAL DISCUSSES 21ST CENTURY CHALLENGES TO GOVERNMENT (The following is extracted from a speech titled ‘Government Challenges in the 21st Century’ given at the National Press Club on April 23, 2001 by David M. Walker, Comptroller General of the United States). The mission of the General Accounting Office (GAO) is to maximize the performance and accountability of the federal departments and agencies, each of which reports separately, and to focus on longer-range, cross-governmental issues. The GAO performs audits, investigations, evaluations, and policy analyses; approximately 90 percent of the work is at the request or direction of Congress; and the GAO generated $23 billion in financial benefits to the taxpayer for a $375 million investment – an ROI of about $61 for every $1. Other achievements by the GAO include strengthening weapons systems acquisition practices, improving care in nursing homes, modernizing federal human capital practices, and enhancing governmental computer security. The GAO also addresses issues such as the globalization of markets, information and enterprises; changing security threats; rapidly evolving technologies; quality of life considerations; devolving more activities to the people and from the government; and long-range budget challenges. The GAO will aggressively pursue analyses and information to provide policymakers with options when making timely and informed judgments. ‘Clean Opinions’ were received by 18 of 24 major federal departments and agencies; however, only 6 of 24 really had clean opinions, no material weaknesses, and no major compliance problems. This is not the way to run any enterprise, it must change as both government leaders, and taxpayers need assurances of accountability and safeguarding of taxpayer dollars. (USGAO Website, Apr. 23, 2001, summary by Marg Reynolds).
CYBER RISK HANDBOOK OFFERED The Chubb Group of Insurance Companies has announced publication of a free, 102-page guide, which summarizes risk assessment and loss control techniques for electronic commerce. The Chubb CyberRisk Handbook provides a comprehensive overview of electronic security breaches, online liabilities, and privacy violations. A copy of the Handbook may be obtained at: http://www.chubb.com/businesses/dfi/cyber/handbook.html (CFE News (Bus. Wire), May 2, 2001, summary by Marg Reynolds).
LICENSE PLATES TRADED FOR CAMPAIGN FUNDS Larry Hall, former facilities manager, pleased guilty in a probe in which supposedly prestigious automobile license plates were issued in return for campaign funds and other favors for George Ryan, Secretary of State. Hall faces 12 to 18 months in prison and 37 of 40 other individuals that were charged have pleaded guilty. Portions of the illegal campaign contributions went directly into Ryan’s pocket and Hall also admitted five drunken drivers paid him between $1,000 and $1,500 to obtain new licenses under different names. (Chicago Sun-Times, May 1, 2001, summary by Marg Reynolds).
LOCAL GOVERNMENT FINANCIAL PLANNING SYSTEM ANNOUNCED Adaytum, in separate alliances with Accenture and the Government Finance Officers Association, has created a separate, web-based, high participation, integrated financial planning solution for the public sector that responds to the unique requirements of the state and local sectors. Integration of complex public sector processes, rules, regulations, and statutory requirements have been combined to determine how the funds can best be spent on people, programs, and projects. A major improvement in budgeting and financial planning will aid finance officers of government organizations in serving the citizens. (Accenture Release, Apr. 30, 2001, summary by Marg Reynolds).
ACCENTURE TO DEVELOP AIR FORCE REAL-TIME INTEGRATED FINANCIAL MANAGEMENT SYSTEM The U.S. Air Force will implement the use of a fully integrated system called the Financial Information Resources System (FIRST) over the next six-year period at a cost of $33 million. The Air Force will realize improved productivity, increased financial analysis and decision support capabilities, a shared data environment, full budget visibility, audit trails on all financial processes, better estimates of manpower and flying hours, budget formulation and execution, funds management, and processing of transactions on a near real-time basis. A single, flexible, standardized system used by Air Force budgeters all over the world will manage tens of thousands of daily financial transactions. (Accenture Release, Apr 30, 2001, summary by Marg Reynolds).
MONEY-LAUNDERING OVERSIGHT WEAKENED BY 1999 LAW A reform known as the Gramm-Leach-Bliley Act, legislation enacted two years ago on the issue of financial services amongst banks, securities firms, and insurance companies, has weakened anti-money-laundering oversight. Sen. Carl Levin, D-Mich., stated the Act reduced the Federal Reserve’s banking regulators’ oversight of compliance to a key anti-money-laundering measure for bank-owned broker-dealers. The Securities and Exchange Commission does not have authority to examine for compliance because it can not enforce bank regulators’ suspicious-activity rules. Treasury Department officials have not yet set a date to issue a proposal for the adoption of a suspicious-activity reporting rule for broker-dealers. (WSJ, Apr 20, 2001, summary by Marg Reynolds).
AUDITORS SAY FEDERAL ACCOUNTING STILL FAULTY David Walker, Comptroller General, stated many federal departments still fail to present consistent, auditable financial statements. The Department of Defense grades an ‘A’ on effectiveness, but could not accurately justify $378 billion of costs in 1999. The General Accounting Office recorded a total of twenty-two entries on the high-risk list, which included Medicare, IRS Financial Management, and the Federal Aviation Administration’s traffic control modernization. (AOL News (Reuters), Apr 23, 2001, summary by Marg Reynolds).
HIGH TECH EXECUTIVE ACCUSED OF EMBEZZLING OVER $10 MILLION Robert S. Gordon, Vice President of Business Development at Cisco Systems Inc., has been arrested and accused of fraudulently obtaining 30,000 shares in Internet Security Services Group Inc. He transferred the shares to a company he started in the Bahamas, sold the shares for $5 million, reinvested in Spanlink Communications Inc., who was partnered with Cisco, and doubled his investment to $10 million. Cisco informed law enforcement authorities and is assisting in the investigation. Gordon faces a fine of $250,000 and five years in prison. (AOL News (AP), Apr 24, 2001, summary by Marg Reynolds).
WORLD BANK NAMES LAW ENFORCEMENT EXPERT TO FIGHT FRAUD AND CORRUPTION Maarten de Jong, formerly Managing Director of the European Institute for Law Enforcement Cooperation (EULEC), has been appointed Director of the newly created Department of Institutional Integrity of the World Bank. The department will investigate fraud, corruption or misconduct allegations by bank staff or in bank-financed projects. Over six hundred anti-corruption initiatives in ninety-five countries have been undertaken by the bank since 1997, and names of firms and individuals who have committed a form of fraud or corruption are published on its web page. (All Africa.com, Apr 18, 2001, summary by Marg Reynolds).
FRAUD IN TENDERS FOR USAID FUNDS BY EUROPEAN CONTRACTORS MAY REACH $1 BILLION Construction companies who contracted to undertake work laid out in the Camp David Peace Accord of 1977 have been accused of rigging bids and defrauding the U.S. government of up to $1 billion. Cartels were formed by the companies, which agreed to submit tenders above the real value of the contract. Courts have not yet released the names of all the firms involved, however, Phillip Holzmann, German construction giant, has been fined $30 million and an ABB subsidiary division has been fined $53 million. (The Scotsman, Apr 14, 2001, summary by Marg Reynolds).
Washington
DC, WATCHDOG TARGETS REPUBLICAN FUND RAISING. Judicial Watch is a legal-watchdog
group that frequently pursued accusations of corruption against the
Clinton administration. Now the group is leveling similar charges against
top Republicans. Larry Klayman, chairman and general counsel of the Judicial
Watch, announced the filing by the group of a criminal complaint with
the Justice Department against the National Republican Congressional
Committee (NRCC) and House Republican Whip Tom DeLay of Texas for
"illegal activities in selling meetings with Bush administration
officials
for political campaign contributions." The NRCC, Mr. DeLay, and
House
Speaker J. Dennis Hastert are accused of participating in a Republican
fund-raising
scheme that violated several federal statutes. They allegedly invited
potential contributors to give money for face-to-face meetings with
Republican
legislators and White House officials. (Source: The Washington Times, April
11, 2001, summary by Pavlidis George).
HACKERS ACCESSED FEDERAL GOVERNMENT COMPUTERS Thirty-two federal agencies reported 155 computers has been attacked by hackers last yeart and a computer security study completed in February cited 124 weaknesses on government and contractor computers. Three-quarters of the attempts involved foreign attackers. James Greenwood, R.-Pa, stated very few of the fifteen federal agencies he demanded updates from regarding their compliance with security regulations had done even cursory checks on their defenses. A total of 102 investigations are underway and only 5 to 10 percent of federal agencies use automatic security detection programs. (AOL News (AP), Apr 5, 2001, summary by Marg Reynolds).
INSPECTOR GENERAL SAYS EDUCATION DEPARTMENT WASTED $450 MILLION. The Inspector General stated the U.S. Education Department lost $450 million to fraud and mismanagement over the past three years. Some grants were issued twice and a total of $23 million in checks were allowed by 21 employees without additional approval. Congressional auditors stated the purchase card and check-writing systems were to blame. Lawmakers are preparing to debate the educational reform plan of President George Bush, who has promised to increase his education budget by $4.6 billion to $44.5 billion, or 11.5 percent, the largest percentage increase in any department. (AOL News (Reuters), Apr 3, 2001, summary by Marg Reynolds).
GAO REPORTS PRESIDENTIAL INVESTIGATIONS COST $60 MILLION SO FAR. Independent counsel investigations of Bill Clinton, former President, have totaled almost $60 million, with months of wrap-up work ahead. The probes include the Whitewater dispute, the White House travel office firings, the FBI files controversy, and the Monica Lewinsky scandal. Five independent counsels have spent over $110.4 million investigating Clinton administration officials, and hours before he left office, Clinton reached a deal with Robert W. Ray, Independent Counsel, that he would avoid indictment for his misleading statements about Lewinsky. Clinton admitted giving false testimony. Ray’s office will submit records to the National Archives at a later date. (WP, Mar 31, 2001, summary by Marg Reynolds).
USA/MEXICO: INVESTIGATORS REVEAL SCAM FOR LICENCES Arturo Camara, Secretariat of Social Development administrator, has stated his office has received complaints that the Federal Transportation office is issuing commercial licenses to tractor-trailer rig drivers which allows them to drive on U.S. highways without having to submit to a required medical examination. A Transport Office clerk stated to a federal anti-corruption agent that the agent would not have to take a medical exam if he paid $205 to expedite authorization of the license, the federal license actually costs $102.50. The investigator called the difference a bribe and an investigation of nearby agents began. (Amarillo News (AP), Mar 30, 2001, summary by Marg Reynolds).
BUSBOY ACCUSED OF MASSIVE INTERNET FRAUD SCHEME Abraham Abdallah has been accused of wire and mail fraud for breaking into accounts of 217 people listed last year as the wealthiest people in America by Forbes Magazine. The scheme was an effort to cheat these people out of $22 million and if convicted, he will face 30 years in prison and a fine of $1 million on each of the two counts. (AOL News (Reuters), Mar. 26, 2001, summary by Marg Reynolds).
WASHINGTON: NEW GUIDELINES ISSUED FOR DEALING WITH INFORMANTS Agents of law enforcement agencies will be required to periodically justify their reliance on informants associated with criminal groups to ensure the government does not become a partner in crime. John Ashcroft, Attorney General, Michael Chertoff, New Jersey organized crime prosecutor, together with Louis Freeh, FBI Director, will work to ensure the new guidelines which were designed to break down traditional barriers between the departments are scrupulously honored. (NYT, Mar. 24, 2001, summary by Marg Reynolds).
GAO TO LOOK INTO WHY SEC IS COLLECTING LESS FROM FAUDSTERS
John Dingell, D-Mich., and Kanjorski, D-Pa., have written a letter to GAO’s Comptroller General, David Walker, to request an explanation for the decline in collections by the Securities and Exchange Commission. The ‘totally unacceptable’ recovery of illegal gains from stock swindlers and scam artists by the General Accounting Office to reimburse victims is thwarted by scammers who have gone broke or have hidden or transferred assets. The SEC has recovered $1.7 billion total, which is $1.69 for every $10 owed by financial violators. (USA Today, Mar. 23, 2001, summary by Marg Reynolds).
WITNESSES
REFUSE TO TESTIFY, FEAR BEING CHARGED
Beth Dozoretz, contributor of $1 million to the Clinton Library and
Denise Rich, contributor of $1 million to the Democratic Party and $450,000 to
the Clinton Library and also ex-wife of billionaire Marc Rich, have both
refused to testify at the House Government Reform Committee hearing conducted
by Dan Burton. In return for the
controversial presidential pardon granted to Marc Rich, the list of potential
crimes include bribery, racketeering and conspiracy to contribute foreign
illegal campaign funds. A total of 79
witnesses pleaded the Fifth Amendment in an illegal campaign contribution
investigation four years ago and does suggest to a legal expert that something
there should be pursued. (Atlanta
Journal-Constitution, Mar. 1, 2001,
summary by Marg Reynolds).
BANKS
ADMIT LAXNESS IN MONITORING OFFSHORE ACCOUNTS
Officials from Bank of America and J.P. Morgan Chase admitted they
failed to adequately monitor the Swiss American Bank and the American
International Bank in Antigua and are said to have laundered millions of
dollars from fraud, drugs and internet gambling through correspondent
accounts. Senator Levin states criminals
and money launderers use correspondent banking as a gateway to the U.S.
financial system. Structures have been put
in place for the U.S. banks to more quickly identify money-laundering threats. (FT,
Mar. 1, 2001, summary by Marg Reynolds).
DID
PARDON BY THE PRESIDENT CONSTITUTE A CRIME? – DEBATE RAGES. Both Congress and
the U.S. Attorney in New York regarding his last-minute official pardons have
accused Former President, Bill Clinton, of political misjudgement and
investigators are searching for evidence of a crime. Potential crimes have been located in a list
of major donors to the Clinton Library and could include bribery or corruption
of a public official. Denise Rich,
ex-wife of Marc Rich, who is wanted for racketeering, wire fraud, income tax
evasion, and illegal oil trading, donated $1 million to the Democratic Party
and $450,000 to the Clinton Library.
Four Hasidic Jews convicted of swindling tens of millions of dollars
from the federal government also were pardoned after the Jewish community where
the four men lived voted overwhelmingly for Hillary Rodham Clinton. However, proving bribery against the Clintons
is a tall order no prosecutor would want to go after. (Christian Science Monitor, Mar. 2, 2001, summary by Marg Reynolds).
FUNDRAISER
REFUSES TO TESTIFY IN CLINTON PARDON PROBE
The House Government Reform Committee is one of two panels examining
allegations of influence peddling and possible illegal payments linked to
former President Bill Clinton’s controversial pardons. Committee Chairman, Dan Burton, has
subpoenaed donor lists of more than $5,000 to the Clinton Library; is
investigating a $400,000 fee received by lawyer Hugh Rodham, brother of Hillary
Rodham Clinton, from families of men he represented that did receive clemency;
and has also subpoenaed three top former Clinton aids to testify at the
hearing. (iWon News, Reuters, Feb. 26, 2001, summary by Marg Reynolds).
PARDONED
FUGITUVE WAS OFFERED TRIAL DEAL CONTRARY TO LAWYER’S ASSERTIONS Dan Burton, House Investigation Chair, has
disclosed at the second public hearing of his Government Reform Committee, that
the U.S. Attorney in New York offered to drop accusations that Marc Rich,
indicted fugitive commodities dealer, violated the Racketeer-Influenced Corrupt
Organizations (Rico) Act, if Rich returned to face trial. During the second hearing, it was also
disclosed that Carlos Vignali, convicted cocaine trafficker, lied on his pardon
application but was still pardoned at the urging of Hugh Rodham, Clinton’s
brother-in-law. Beth Dozoretz,
Democratic fundraiser and friend to both Denise Rich and Bill Clinton, was to
be a star witness but invoked her constitutional rights against
self-incrimination. The hearing came as
authorities announced Marc Rich owed $137 million in back taxes, penalties and
interest. (FT, Mar. 1, 2001, summary by Marg Reynolds).
THIRD
RELATIVE OF EX-PRESIDENT INVOLVED IN OBTAINING PARDONS AGAINST JUSTICE
DEPARTMENT OBJECTIONS Tony Rodham,
Bill Clinton’s brother-in-law, assisted in obtaining a presidential pardon for
Edgar Allen Gregory Jr. and wife, Vonna Jo, who were convicted of bank fraud in
1982. The couple made major
contributions to both the Democratic and Republican campaigns and also to
Hillary Rodham Clinton’s Senate campaign.
Lawyers at the Justice Department strongly opposed this pardon. Hugh Rodham received $400,000 for his work on
two clemency applications and Mr. Clinton’s half-brother, Roger, urged clemency
for six people. Former Clinton aids
stated the six applications were rejected.
(NYT, Mar. 1, 2001, summary by
Marg Reynolds).
BANKERS
OPPOSE LIMITING OFFSHORE BANK ACTIVITY
Major U.S. bank executives have advised Congress against enacting legislation
to strictly regulate dealings between U.S. financial institutions and offshore
banks. Huge amounts of money are
laundered through correspondent accounts at offshore banks, allowing access to
the U.S. financial system. However,
executives from the bank of America and J.P. Chase Morgan & Co. warned
lawmakers against a flat prohibition, as some U.S. dealings are critical to
international capital flows. Senator
Carl Levin has stated legitimate offshore banks are in the minority and that
consideration should be given to U.S. banks who obtain better information about
new correspondent clients. Mr. Christie,
Vice President of Bank of America, stated legislation should be confined to
high-risk banks and countries.
(WSJ, Mar. 2, 2001, summary by
Marg Reynolds).
USA/COLOMBIA: CLINTON’S COMMUTATION OF DRUG FIGURE OUTRAGES
COLOMBIA. Complaints of a double standard in the drug war were registered this
week at former President, Bill Clinton, as he commuted the eleven-year sentence
for Harvey Weinig, for failure to report a kidnapping and laundering tens of
millions of dollars from drug proceeds.
Alfonso Valdivieso, Colombia’s United Nations ambassador and Rorigo
Pardo, former Foreign Minister, have stated Mr. Clinton’s commutation of the
sentence was sordid and that the United States demands more from Colombia than
itself. Mr. Pastrana’s administration
called for tougher money laundering legislation at U.S. banks. (Nando Times, AP, Feb. 26, 2001, summary by Marg Reynolds).
THIRD RELATIVE OF EX-PRESIDENT INVOLVED IN PARDONS. Former President Bill Clinton's brother-in-law Tony Rodham helped obtain a presidential pardon for a Tennessee couple. Mr. Clinton pardoned Edgar Allen Gregory Jr. and his wife, Vonna Jo. The Gregorys were convicted of bank fraud in 1982, accused of using the assets of a bank they owned to give loans to friends. They were placed on probation. The pardons free them of the consequences of felony convictions. In an interview, Mr. Rodham acknowledged that he had asked the president to pardon Mr. and Mrs. Gregory, but he said he received no payment for his efforts. But Mr. Rodham does have a financial tie to the Gregorys and has worked as a consultant for Mr. Gregory. Tony Rodham is the third Clinton relative to be involved in pardon decisions. Besides Hugh Rodham, Mr. Clinton's half broth, Roger, urged the president to pardon six people. Their applications were rejected.(New York Times, March 1, 2001,summary by B. Gray).
Washington, CITIBANK ADMITS TO LAPSES IN DEALINGS WITH TWO CARIBBEAN SHELL BANKS.during a Congressional hearing. Banks were used to launder millions of dollars from drug trafficking and bribery. After federal officials seized nearly $2 million from the M.A. Bank, 1.5 years lapsed and Citibank still continued to take deposits from M.A. Bank licensed in Cayman Islands. Michigan Senator Carl Levin said “This is one failure after another.” Citibank officials also failed to provide Argentine authorities with information about Federal Bank licensed in the Bahamas, in fact owned by wealthy Argentines often used for hiding bribes. Argentina's central bank had written to Citibank Argentina for “all information” it had about Federal Bank. Citibank replied, “Our records contain no information.” Mr. Levin said this letter was “clearly false.” (NY Times, March 3, 2001)
New York: CLINTON PARDONS AND BRIBERY. Bob Herbert, a columnist for the NY Times says that Bill Clinton is “so thoroughly corrupt that it is frightening”. He described Bill and Hillary as a “terminally unethical and vulgar couple.” He defined bribe as the promise of money or gifts (something of value) to influence the action or behavior of an official. By this definition Clinton’s pardons are bribes, but so are several large campaign contributions.to all political parties. (NYT, Feb. 26, 2001)
Boston: COURT PAPERS DEPICT SCHEME IN UROLOGICAL DRUG BILLING. United States attorney's office here has charged a urologist Dr. Joseph Spinella, of Bristol, Conn with conspiring with a drug maker, identified in court filings as Company X, to receive excessive payments from Medicare. It is a federal crime to bill the government, patients or others for free drug samples or to pay kickbacks, bribes or rebates to doctors. Lupron, a prostate cancer drug is sold by TAP Pharmaceutical Products, a joint venture of Abbott Laboratories of Abbott Park, Ill., and Takeda Chemical Industries of Japan. Prosecutors said that Dr. Spinella received 30 free doses in late November and early December 1995, and also $15,000 for same samples. In early 2000, Dr. Rodney Mannion of Michigan City, Ind., pleaded guilty of conspiring to bill insurance companies for free samples of Lupron received from TAP. TAP is battling AstraZeneca Pharmaceuticals, which makes Zoladex a cheaper drug than Lupron. American Urological Association, said investigators asked to see the financial records over the last two years of at least 100 urologists.(NYT February 20, 2001) .
LAB TEST
PROVIDER SETTLES FEDERAL FRAUD CASE FOR $13 MILLION. Nichols Institute, a division
of Quest Diagnostics Inc., has been charged with fraud by the U.S. Justice
Department in its over billing of government insurance programs such as
Medicaid, Medicare and Tricare. Surya
Mohapatra, President and COO of Quest, has denied the charges and maintains the
company provided medical lab testing similar to common industry practices. Corning Inc., Quest’s former parent firm, has
agreed to cover the $13.1 million settlement cost and David Ogden, Assistant Attorney
General in the Civil Division of the Justice Dept., feels that the recovery of
$850 million to date demonstrates the commitment to protect federal funds from
fraud and abuse. (Fraud News, Jan. 4,
2001, summary by Marg Reynolds).
NATIONAL
SECURITY COORDINATOR CITES RELEASE OF INTERNATIONAL CRIME ASSESSMENT Richard Clarke, coordinator of security
infrastructure protection and counterterrorism for the National Security
Council released a first ever unclassified threat assessment of international
crime and also announced a center was being established to combat forms of
these international criminal cartels.
The aspects that have caused sophisticated criminal networks access to
technology together with open borders and opportunities are the same as with
globalization. The criminal networks
cost Americans their lives and also billions of dollars and crimes range from
counterfeiting of money and software; smuggling of people, armaments, and
precious gems; copying of materials protected by copyright; auto theft;
prostitution; kidnapping and illegal narcotics.
The U.S. government plans to work closely with those governments that
are cooperating significantly in the training of law enforcement officers, prosecutors
and judges and also in harmonizing criminal legislation among countries around
the world. Special attention will be
paid to the money laundering havens of these cartels, primarily from Colombia,
Nigeria, Russia and China. The threat
assessment will be on the White House website at: http://usinfo.state.gov/cgi-bin/washfile/display.pl?p=/products/washfile/topic/global¾ (White House Press Briefing on Washington
File, Dec. 15, 2000, summary by Marg Reynolds).
PENTAGON
BOOKS IN “UTTER DISARRAY” – AN OPINION
Ret. Navy Vice Admiral Jack Shanahan, Head of the Military Advisory
Panel of Business Leaders for Sensible Priorities, together with Franklin C.
Spinney, of the Office of the Secretary of Defense, have expressed the view
that defense spending in the Pentagon has flouted both constitutional
requirements and a 1990 act of Congress requiring an annual financial
audit. The Defense Department has been
unable to pass an audit for four years, although it accounts for half the
nation’s discretionary spending. Of $6.9
trillion of entries, $2.3 trillion did not have sufficient audit trails, $2
trillion of entries were not audited due to time constraints, therefore the
Inspector General audited only $2.6 trillion of accounting entries. Up to $180 billion increase in spending has
been proposed by the Congressional Budget Office, presidential candidates and
the Joint Chiefs of Staff whereas critics advocate trimming the budget by the
same amount. The future level of
allocated public funding cannot be predicted accurately due to the Pentagon’s
bookkeeping shambles. (LA Times, Dec.
29, 2000, summary by Marg Reynolds).
STATEMENT
BY PRESIDENT CLINTON ON INTERNATIONAL CRIME THREAT
President
Clinton announced the release of a comprehensive assessment as part of the
International Crime Control Strategy of May, 1998. Illegal activity threatens the safety and
prosperity of the citizens of the United States and undercuts confidence in
democracy and global free markets. The
United States, together with many other countries, signed the United Nations
Convention on Transnational Organized Crime with the aim of harmonizing
international laws and of promoting increased governmental cooperation. Subsequent to the signing of two supplemental
protocols attached to the Convention, the Departments of State and Justice will
establish a Migrant Smuggling and Trafficking in Persons Coordination
Center. The Center will integrate,
improve, assist and promote efforts by foreign governments and international
organizations. (Washington File, Dec.
15, 2000, summary by Marg Reynolds).
CONGRESSIONAL
TESTIMONY BY INTERPOL ON ORGANIZED CRIME THREAT. Ralf Mutschke, Assistant
Director of the Criminal Intelligence Directorate of Interpol, testified at a
congressional panel that increasing mergers and consolidation of hybrid
terrorist groups together with existant transnational criminal organizations in
unstable, war-torn countries will threaten certain nations and entire
regions. Emphasizing Albania, he cited
profits from drug and human trafficking, forced prostitution, car theft and
corruption to fund the Kosovo Liberation Army.
The full Mutschke text is available at . (Washington File, Dec. 22,
2000, summary by Marg Reynolds).
FACT
SHEET ON EFFORTS TO FIGHT INTERNATIONAL CRIME. The Presidential Decision
Directive on International Organized Crime (PDD-42) has resulted in leading
agencies identify, target, investigate, prosecute and disrupt transnational
crime groups including drug and arms trafficking, money laundering, migrant
smuggling, trafficking in persons, intellectual property theft and foreign
official corruption. The dramatic growth
of international crime, as with globalization, may be attributed to more open
borders, increased volume of international trade, and advances in technology
and communications. (Washington File,
Dec. 15, 2000, summary by Marg Reynolds).
Conflict of Interest at FCC? New
Federal Communications Commission Chairman Michael K. Powell used to represent
GTE Corp., a major telecommunications player. GTE merged last year with Bell
Atlantic to form Verizon Communications. Powell needs to recuse himself from
matters relating to GTE or Verizon.
http://www.public-i.org/story_01_021301.htm
Former Teamsters president Ron Carey was indicted on federal
charges that he lied repeatedly in an investigation into fund-raising in his
1996 campaign. (Jan. 26, 2001, NY Times, National Section).
The World Bank plans to use its instruments and mechanisms to remedy corruption in commercial transactions of various countries. The Bank will provide an annual blacklist with the aim of boycotting the firms and cause them to abandon their corrupt practices. (WBD News, Nov. 13, 2000, summary by Marg Reynolds).
Miguel Briceno’s family of five people and three other co-conspirators will be prosecuted for selling thousands of illegal immigrant documents. The family members will be deported to Peru after serving their prison terms for their roles in trading I-94 immigration forms, which netted them $4 million. Prosecutor, Richard Hong, will seek 5-year sentence for Miguel Briceno. In another case, Ricardo Martin Antipas was deported to Argentina for selling passports, I-94 documents and Social Security cards.(Sun-Sentinel, Nov. 21, 2000, summary by Marg Reynolds).
The Internal Revenue Service may soon adopt monitoring strategies and restrictive employee use of the Internet as employees are violating present policies. Present employee usage practices could result in a hostile work environment and communications capacity problems. The Inspector General may enable log audits to prosecute inappropriate use.(DJ Newswires, Nov. 20, 2000, summary by Marg Reynolds)
‘Transnational Crime, Corruption and Information Technology’ was the theme for American University’s Center for the study of Transnational Crime and Corruption 2000 Annual Conference held November 30-December 1. The conference served as the basis for future training and research in the emerging fields of transnational crime and corruption. The Center’s website is:
HTTP://www.american.edu/transcrime. (TraCCC Circular, Nov. 22, 2000, summary by Marg Reynolds).
AUDIT FINDS HIGH PERSONAL USE OF INTERNET AT INTERNAL REVENUE SERVICE. An audit by the Treasury Inspector General for Tax Administration (TIGTA) has found Internal Revenue Service employees of using the Internet more for personal reasons than for legitimate business purposes. According to the report, IRS personnel accessed sexually explicit material, on-line gambling, sports Web sites and streaming audio and video services, among other things because IRS management exerted only minimal efforts to restrict and monitor Internet activity. In response, the Service has deployed updated software to block inappropriate Web sites, is studying "other monitoring strategies" and educating workers on what is expected of them. TIGTA sampled IRS employee use of the Internet during January and February of this year. It found that 51% of the activity under study was personal in nature, resulting in loss of productivity, unnecessary demand on its telecommunications capacity, and possible fostering of a hostile work environment by allowing sexually explicit material into the workplace. At the time of the audit, the IRS already had some Internet blocking software installed, but TIGTA found it was ineffective. The IRS also had the capability to maintain logs of all incoming and outgoing Internet traffic, which can be used as audit trail to prosecute inappropriate use, but the agency was not doing so. (Dow Jones Newswires, 20 Nov 2000, summary by Debbie Uy).
WASHINGTON- The World Bank has fired three unnamed employees over allegations they accepted kickbacks from Swedish firms estimated to be about $900,000, and referred the case to authorities for possible prosecution. The bank was alerted by a call placed to a corruption hotline established in 1998. (Canadian Broadcasting Corporation, December 6,2000. Summary by Fabian Camacho).
Washington– Congressional
investigators have said in a report that financial giant Citibank and
Commercial Bank of San Francisco violated control rules and allowed about 1$
billion of possibly illegal Eastern European money to pass through their
accounts. The report is the latest in allegations involving large scale money
laundering by the U.S. banking system, which include the revelation last year
that the Bank of New Year processed 7$ billion of Russian money, much of it
probably related to criminal activities. (Reuters, Summary by Fabian Camacho,
Nov 30, 2000).
WASHINGTON - A Congressional study has concluded that Western aid to Russia failed to provide the desired economic transition there partly because there has been no comprehensive strategy. The study cites examples such as Western support for a major privatization plan in the mid - 1990's which according to analysts enabled state assets to be effectively stolen in the process. (Summary by Fabian Camacho, Nov 1. 2000).
Washington (WORLD BANK), PANEL DISCUSSION ON CORRUPTION EFFORTS. Transparency International has fiercely criticized the World Bank for its lending policy to corrupt states in the past; However, Bank's representatives try to deflect criticism by presenting Bank's current initiatives. According to Sanjay Predhan, of the Europe and Central Asia division, the Bank is currently involved in almost 600 anti-corruption programs. It has withdrawn its loans where corruption was endemic, such as Kenya. The World Bank is currently working on incorporating the level of corruption (dubbed "state capture") in its making lending decisions. (Source: Emerging Markets, September 27, 2000, summary by Pavlidis George).
USA, USAID OFFICIAL REVIEWS ANTI-CORRUPTION EFFORTS. Vivian Lowery Derryck, assistant administrator for Africa of the U.S. Agency for International Development (USAID), told the Senate Subcommittee on Africa that Nigeria’s President Obasanjo "has taken some bold moves, including introducing an anti-corruption bill, which signals a strong commitment to deal with one of Nigeria’s most difficult development problems." He added that the Nigeria program of USAID remains a priority on the anti-corruption efforts of the Agency. (Source: The Washington File, September 25, 2000, summary by Pavlidis George).
Arlington, ANTI-CORRUPTION SUMMIT 2000: USAID ADMINISTRATOR ANDERSON CALLS CORRUPTION ``A DEVELOPMENT CHALLENGE``. Corruption is "one of the foremost development challenges of the 21st century" according to J. Brady Anderson, Administrator of the U.S. Agency for International Development (USAID). In his speech to the Anti-Corruption Summit 2000 (Arlington, Va.), Mr. Anderson explained that corruption is not limited to developing countries. The problem is that in these countries, where resources are already so scarce, "corruption has the power to rob people of the essential elements of their lives-economic opportunity and political rights." In this context, USAID´s greatest contribution to the fight against corruption would be, according to Mr. Anderson, the ability of USAID to "engage, promote, and foster individuals and organizations taking up the fight against corruption in their communities" (Source: USAID Press Release, Sept. 21, 2000, summary by Pavlidis George).
Washington
(WORLD BANK), FIGHTING CORRUPTION COULD DOUBLE INCOMES. According to World Bank's report on "Quality of
Growth", some countries could
actually double their incomes in the mid-term by improving the rule of law and by controlling the incomes of
government officials and politicians.
Bad governance, argues the report, allows the economic oligarchy to buy
policy and laws to their advantage and
it severely undermines economic growth
(Source: World Bank Development News, Sept. 27, 2000, summary by Pavlidis George).
TAPED
CONVERSATIONS DISCLOSED IN EX-GOVERNOR´S FRAUD TRIAL. More than three-dozen
secretly recorded conversations were presented Monday by the prosecutors in
Edwin Edwards´ insurance fraud trial. The tapes, according to the prosecutors,
show the former governor, the Insurance Commissioner Jim Brown and others
committing "a fraud in progress" in the settlement of a failed
insurer, Cascade Insurance Co. The
tape-recorded conversations were made from secret wiretaps the FBI had
installed on Edwards´ office and home phones, as well as from a "bug"
in his office. (Source: Fraud News,
Sept. 26, 2000, summary by Pavlidis
George).
EMPLOYEES
FEEL THEIR COMPANIES HAVE WEAK ANTI FRAUD ABILITIES. According to Preventing
Business Fraud´s 2000 Fraud Risk Assessment survey, most organizations´
abilities to prevent, detect, and investigate fraud are not adequate. The
respondents were asked to rate their organizations on a series of factors. The
ratings show that respondents are ambivalent about the ´´work ethic´´ of their
organization and their colleagues. Furthermore, the respondents, in their
majority, feel that employee fraud constitutes a greater risk for their
organization than management fraud or external fraud. (Source: Preventing
Business Fraud, October 2000, Summary by Pavlidis George).
SENIOR AUDITORS AT HOUSING DEPARTMENT
INSPECTOR GENERALS´OFFICE SUSPENDED FOR COMPUTER MISUSE IN DOWNLOADING
PORNOGRAPHY Several employees at the agency that checks for fraud and abuse in
federal housing programs have been suspended in an investigation into the use
of government computers to obtain sexually explicit materials, officials said.
The investigation into the Department of
Housing and Urban Development inspector general´s office caught Secretary
Andrew Cuomo off guard because the watchdog agency didn´t inform the
department. ``We heard about the allegation. We had not been previously
informed,´´ HUD Deputy Secretary Saul Ramirez said Friday. ``We´re obviously
very concerned because such use of government computers is clearly a violation
of the department´s policy.´´ ``We have asked for a response from the IG and
she has repeatedly failed to provide that response,´´ Ramirez said in a
statement. In a letter to Ramirez on Friday, Inspector General Susan Gaffney
blamed a canceled meeting for the delay and said, ``I now look forward to
discussing the issue at our rescheduled meeting´´ next week. A HUD official
familiar with the investigation, speaking only on condition of anonymity, said
senior auditing employees at the inspector general offices in Washington, Fort
Worth, Texas, and Boston have been suspended in connection with the probe.
The official did not know exactly how many
employees have been suspended.
``The investigation involves the improper
use of government computers to download sexually explicit materials and, in
some cases, the distribution of the materials via HUD e-mail,´´ the official
said. A spokesman for Gaffney declined comment. All Cabinet departments and
other major federal agencies have an independent watchdog office of inspector
general, responsible for guarding against waste, fraud and abuse. The official
said the allegations of the misuse of computers by HUD inspector general
employees was overseen by the President´s Council on Integrity and Efficiency,
which monitors the conduct of the inspector generals. The council used FBI
agents and investigators from the Labor Department´s IG office to conduct the
investigation, according to officials and documents.
Documents obtained by The Associated Press
show investigators requested computer usage logs for 10 HUD inspector generals´
employees showing which Web sites they visited during 1999. The request was
made last December. The senior HUD official told the AP the suspensions were
handed out within the last few weeks. Calls to the offices of three employees
on the list this week confirmed they have been placed on leave. Rep. Tom
Lantos, D-Calif., wrote Gaffney on Friday expressing concerns that workers
within an agency charged with guarding against abuse were involved in misusing
computers. He also chided Gaffney for not telling HUD officials earlier. ``I
have received reports that senior members of your office have been subjected to
disciplinary actions, including suspensions, for accessing and downloading
pornographic material from the Internet during the workday using their HUD
computers and transmitting such materials using HUD´s e-mail system,´´ Lantos
wrote. ``In my view, it is clear that you are required to advise both Congress
and HUD senior management about these matters,´´ he added. The HUD matter comes
just a few weeks after the White House acknowledged that a handful of its
employees were reprimanded and one was suspended without pay a year ago for
downloading pornographic material from the Internet. AOL News (AP), Sept. 2,
2000 http://www.aol.com
USA: ``MODERN DAY SLAVERY``
MULTIBILLION-DOLLAR BUSINESS OF ORGANIZED CRIME MAY INVOLVE UP TO 50,000 LATINS
PER YEAR BROUGHT TO USA When an acquaintance offered Maria a way to land a
good-paying restaurant job in the United States, the young woman from Veracruz,
Mexico, had no way of knowing the magnitude of the lie she was being told. She
also had no way of anticipating the physical, moral and spiritual degradation
she would endure. The phony offer lured her at age 18 into becoming an
unwilling part of what some are calling modern-day slavery. Maria was smuggled
across the border into Texas, then transported to Florida and forced to work as
a prostitute, having sex with 35 migrant workers a day in rundown trailers. Her
horror did not end until months later when law enforcement officials raided the
brothels and brought criminal charges against members of Mexico´s Cadena
family. ``I was enslaved for several months, other women were enslaved for up
to a year,´´ Maria, using an alias to protect her identity, said through a
translator. ``We were constantly guarded and abused. If anyone refused to be
with a customer, we were beaten. If we adamantly refused, the bosses would show
us a lesson by raping us brutally. They told us if we refused again it would be
even worse the next time,´´ she said. ``I was too afraid to try to escape.´´
Maria´s story is tragic but not unusual. U.S. officials estimate that 50,000
people from Latin America, Eastern Europe and Asia are trafficked into the
United States annually by organised crime gangs. Officials say half of them are
women and girls -- some barely into their teens -- who are forced into
prostitution, while the rest are people forced into involuntary servitude in
homes, sweatshop factories and fields. And the U.S. situation represents just a
fraction of a massive worldwide problem. The U.S. State Department says 1
million people annually are ensnared in trafficking. Local, state and federal
officials are just beginning to recognise the scope of the problem and the
inadequacy of existing U.S. laws to combat it. The Senate and House of
Representatives both have passed legislation to increase penalties against the
perpetrators, provide services and a new type of immigrant status for victims,
and launch a global campaign to get the word out about human trafficking.
``There´s been no real concerted effort to end this morally reprehensible,
deplorable practice,´´ Sen. Paul Wellstone, a Democrat from Minnesota, said in
an interview. He and Sen. Sam Brownback, a Kansas Republican, are the chief
sponsors of the Senate bill. Trafficking in human beings, particularly women
for prostitution, has become a $9-billion-a-year global business, the United
Nations says. A key factor behind the recent surge in trafficking was the
entrance of crime syndicates from Russia and other former Soviet republics that
kidnap and exploit women from the old Soviet bloc seeking opportunities in the
West. ``I think much of the world isn´t aware that this is going on,´´
Brownback said in an interview. Most people brought to America come from former
Soviet bloc nations (Russia, Ukraine, Latvia, the Czech Republic, Hungary,
Poland), Latin American countries such as Mexico, Honduras and Brazil, and Asia
countries such as Thailand, the Philippines, Malaysia, South Korea, China and
Vietnam, U.S. officials said. A CIA report, ``International Trafficking in
Women to the United States: A Contemporary Manifestation of Slavery,´´ found
that weak laws on trafficking people and the complicated nature of building
cases against those responsible have dissuaded many U.S prosecutors from taking
trafficking cases. The report pointed out that after raiding brothels,
authorities generally jail and quickly deport the women because they are
illegally in the United States, depriving prosecutors of potentially vital
witnesses against the perpetrators. Bills now in Congress are intended to
change all that. They would criminalize all forms of trafficking in people and
double the maximum penalties for enticement into slavery or peonage and sale
into involuntary servitude to 20 years. They provide for life terms for cases
that result in death or involve kidnapping or aggravated sexual abuse or for
sex trafficking by force, fraud or coercion or trafficking of children under
age 14. They would expand services for victims and would let them sue perpetrators
for monetary damages. The measures would also bar victims from being jailed,
instead requiring authorities to give them shelter, medical care, food and
other services, as well as access to legal help. And they would create a new
immigration status for trafficking victims, letting them stay in the United
States and seek permanent resident status after three years. U.S. assistance
also would go to nations aiming to stop the trafficking of their citizens, and
America would mount campaigns to promote awareness overseas about trafficking
schemes. The House unanimously passed its version on May 9 and the Senate
followed on July 27, also with no dissent. Representative Chris Smith, a New
Jersey Republican, and Represntative Sam Gejdenson, a Connecticut Democrat, are
the lead sponsors of the House bill. House and Senate negotiators are working
to iron out the differences, chiefly over whether to require U.S. sanctions on
countries deemed to be doing too little to stop human trafficking. Final
congressional approval is expected in September and Wellstone said he has a
firm commitment that President Bill Clinton will sign the legislation into law.
Brownback said a trip he took in January convinced him that something had to be
done. ``I personally went into Nepal, to Katmandu, earlier this year and met
with young girls -- they were probably around 16, 17, 18 -- who had returned
from being trafficked from Nepal into India,´´ he said in an interview.
``Two-thirds of them were coming back with AIDS and/or tuberculosis. These are
girls who were being trafficked at 11, 12, 13 years of age, deceived, tricked,
promised a job and forced into prostitution. And then they come home to die. It
is the most horrifying thing that I´ve seen,´´ he said. ``We like to stress that
there´s trafficking going on in just about every country: Either they´re a
sender country, a transit country or a receiver country,´´ said Laura Lederer,
director of the Washington-based Protection Project at Johns Hopkins University
and an expert in human trafficking. Maria told her story to a Senate
subcommittee in April, pleading for lawmakers to ``not let this happen to
anyone else.´´ She wore a disguise during her appearance alongside a handful of
other survivors, saying she feared her captors would recognise her and threaten
her life and her relatives in Veracruz. Her ordeal began in May 1997. Maria
said she had been working as a domestic helper and jumped at the chance of
making better pay working in a U.S. restaurant or bar. She described her disbelief
when, after being smuggled into Florida, a member of the Cadena family told her
that she would be working instead as a prostitute to pay off a ``smuggling
debt´´ of $2,200. ``We worked six days a week and 12-hour days,´´ she said.
``We mostly had to serve 32-35 clients a day. Our bodies were utterly sore and
swollen.´´ She also described being jailed after the brothels were raided. She
won her release only after the Miami-based Florida Immigrant Advocacy Centre
convinced authorities that the Cadena family´s many victims needed help, not
punishment. Rogerio Cadena, a ringleader, pleaded guilty in federal court last
year to civil rights violations and other charges and was sentenced to 15 years
in prison and ordered to pay $1 million in restitution to the victims. Seven
others also were convicted, but another seven indicted members of the Cadena
family remain in Mexico. AOL News (Reuters), Sept. 1, 2000 http://www.aol.com
TEACHERS IN 5 STATES PAID BRIBES TO CHEAT ON TESTS
http://support.casals.com/aaaflash1/busca.asp?ID_AAAControl=2956
CNN News (AP), August 17, 2000
http://wwwcnn.com/2000/US/08/17/testing.scandal.ap/
WEB SITE TAKES A LOOK AT MILITARY CORRUPTION
http://support.casals.com/aaaflash1/busca.asp?ID_AAAControl=2967
The Tampa Tribune, August 20, 2000
http://www.tampatrib.com
GAO SAYS WHITE HOUSE TRAVEL HAS COST $292
MILLION According to a Washington Post article, "A General Accounting
Office report puts administration airlift costs for foreign travel at $292
million since 1997. The Post says that the review by the U.S. General
Accounting Office of administration air transport expenses was requested by six
Republican senators. It reports the White House as saying that the type of
travel expenses incurred for trips taken by Clinton--the most widely traveled
of all presidents--were similar to the expenditures of former administrations.
The article goes on to itemize the costs
as follows: "Clinton´s 27 trips in the last three years account for 85
percent, or $247 million, of the total aircraft cost, according to the report,
which is scheduled for release in September. Hillary Rodham Clinton´s 20 trips
make up 4 percent, or $12 million, of the cost. And Vice President Gore´s eight
trips total 4 percent, or $12.5 million, of the total." It says that no
similar accounting exists for any previous administration according to GAO
officials. (Washington Post, August 18, 2000
http://washingtonpost.com/wp-dyn/articles/A46730-2000Aug17html)
ETHICS PANEL URGES TRAVEL DISCLOSURES FOR
CITY OFFICIALS IN HOUSTON City officials would have to document who is paying
for their travel and accompanying them on trips related to city business under
an ordinance approved by City Council´s Ethics Committee. The committee voted
to recommend the proposed ordinance, aimed at improving what committee Chairman
Chris Bell refers to as "transparency of government," to the full
council. The proposed ordinance is a result of fallout over Mayor Lee Brown´s
trade mission to Africa last November. The trip prompted numerous questions
about expenses and who was paying for the mayor´s travel and for his wife´s,
questions that were not answered until after the 11-day mission. Questions
lingered for months after the city refused to reimburse $1,100 in expenses for
two Houston police officers who accompanied the mayor as his bodyguards on the
trip. The proposal also comes as the mayor and three council members are out of
town for most of this week, attending the Democratic National Convention in Los
Angeles. It is unknown when the mayor´s office will place the proposal on the
council agenda. There could be a wait while the city legal department adds
language to the proposed ordinance to specify when and to whom the information
is to be reported -- most likely to the city secretary´s office. If approved,
the ordinance would require elected officials and city employees to disclose
the source and amount of any city business travel paid for by anyone other than
themselves or a relative. The disclosure also would have to include the same
information for any immediate family member whose travel on the same trip is
paid for by a third party. The proposed ordinance also would require disclosure
of the names of any travelers who accompany city officials or employees on
trade or economic missions. There may be some privacy concerns about requiring
disclosure of the identities of accompanying travelers. Houston Chronicle,
August 16, 2000. http://www.chron.com
ACCOUNTANCY PROFESSION TO OVERHAUL AUDIT TECHNOLOGY
WITH XML COMPUTER LANGUAGE. A new computer language may unleash a wave of new,
more profitable attest services. By the end of the month, a coalition led by
national CPA firms and software developers plans to release a new computer
language known as eXtensible Markup Language, or XML. While the group´s members
right now are donating time and resources to develop XML, behind the scenes
they are all planning commercial applications, which are generating a lot of
hype if not publicly available market projections. One of the most profitable
potential uses of XML will be in helping auditors more efficiently compile and
analyze a company´s financial records. Envisioned as the successor to the HTML
language for financial documents, XML would assign codes to all types of
financial data, thereby allowing a computer to extract comparable data points
either online or offline and dump them into an auditor´s spreadsheets without
garbling numbers in the process. Minimally, software written in XML will
automate the labor-intensive steps of keying all data into the auditor´s
spreadsheets and reprinting work papers for members of the audit team after
every update. Copies alone cost DÞtens of thousands of dollars a year,
confirmed Bradley Murlick, the firm´s national director of business and
insurance consulting. Public Accounting Report, August, 2000 http://www.straffordpub.com/headlines/accounting.html
NEW FRAUD BUSTING SOFTWARE HELPS IDENTIFY
FRAUDULENT INSURANCE CLAIMS Watch out, bad guys - thanks to the cutting-edge
technology of NetMap for Claims(TM) from Alta Analytics, SAFECO (Nasdaq: SAFC)
has a great new tool for identifying fraudulent claims. "Reducing payment
on fraudulent claims has a direct impact on our ability to keep premium prices
low for our policyholders. Industry statistics suggest last year SAFECO spent
millions on fraudulent claims, and that fraud costs the average U.S. household
$300 per year in the form of increased premiums," noted Rick Worthington,
director of SAFECO´s Special Investigations Unit (SIU). "Currently, our
claims representatives and investigators review claims on an individual basis,
without seeing the bigger picture," said Worthington. "NetMap gives
us the ability to simultaneously review all of SAFECO´s PÇclaims, looking for
common elements such as names and addresses. We´re looking for commonalties,
unusual relationships and trends that often indicate something illegal may be
going on. "Most claims are legitimate and don´t require any additional
investigating," noted Worthington. "However, NetMap will help us find
patterns in the details of claims that are suspicious." How powerful is
this new tool? When SAFECO´s SIU tested the software earlier this year, it examined
a group of associated medical clinics suspected of foul play. "SAFECO had
already paid a significant amount in medical claims through these clinics, and
each of the claims looked legitimate on its own," noted Worthington.
"However, NetMap discovered the clinics were run by two doctors, neither
of whom were practicing medicine anymore. Together, these doctors were involved
in hundreds of claims paid by SAFECO in the past." Federal authorities are
investigating the clinics, and SAFECO is poised to recover payments pending the
investigation´s outcome. "This new technology will allow us to detect
fraudulent claims, including those that are more complicated and may involve
fraud rings, attorney schemes and medical provider fraud that we might not have
caught before," said Worthington. SAFECO will begin using NetMap for
Claims to examine existing cases in October, and will begin using the software
more extensively next year as the company becomes familiar with the software´s
capabilities. In addition to PÇclaims, NetMap also will be used throughout the
corporation, including life and financial operations, to identify fraud. Alta
Analytics is a privately held software company headquartered in Columbus, Ohio.
Alta´s NetSuccess(TM), a rapid-ready deployment option, includes NetMap for
Claims for fraud detection and NetDetect(TM), an automated claims scoring
application. Alta Analytics can be reached at www.altaanlytics.com or by
calling 1.800.NETMAPS. SAFECO, in business since 1923, is a Fortune 500
diversified financial services company based in Seattle. SAFECO and its more
than 17,000 independent agents and financial advisors provide premier insurance
and financial services to individual and business customers. SAFECO´s website
address is www.safeco.com . Public Accounting Report, August, 2000
HEALTH
RELATED CORRUPTION.
--In the mid-1990s, the WHO was investigated for poor accounting practices by the U.S. and several European governments.-- The prestigious British Medical Journal wondered if the agency was doomed to "flounder in a morass of petty corruption and ineffective bureaucracy." At about the same time, Mr. Dietrich in these pages pointed out that the WHO was increasing the budget for conferences by 73% while slashing funds for some vaccinations in poor countries. The agency's own reports admitted that infectious diseases were rising because "vigilance had been relaxed." Millions die every year from infectious diseases -- most of those lives could be saved by a vaccine that costs less than $1 per dose. The WHO did clean up its bookkeeping in response to the 1990s complaints. And it also has stepped up spending for vaccinations, we're told. So maybe the critics did some good. Instead of excoriating them, the WHO should consider them free consultants. (W S Journal Europe, August 3, 2000, summary by Rujuta Vinod).
JUDICIAL
BRIBERY? FEDERAL JUDGES TRIPS COINCIDED WITH ENVIRONMENTAL RULINGS FAVORING
SPONSORS. Federal judges who attended
expenses paid seminars underwritten by conservative foundations who get their
money from corporations coincided with environmental rulings favoring sponsors
of these seminars. (Washington Post, July 25, 2000, summary by Rosado Maritza).
SENATE RATIFIES OAS INTER-AMERICAN
CONVENTION AGAINST CORRUPTION Following is the officialtext of a State
Department press release issued on August 1, announcing the July 27
ratification by the United States Senate of the Organization of American States
(OAS) Inter-American Convention on Corruption (see AAA Flash #192 of July 27
for more detailed information): ***** Statement by Philip T. Reeker, Deputy
Spokesman - "On July 27 the U.S. Senate approved the OAS Inter-American
Convention on Corruption, opening the door for the United States to join 19
other countries in the hemisphere that have ratified the agreement. The
Convention is designed to fight corruption in the government arena by
strengthening cooperation on extradition, mutual legal assistance, and asset
forfeiture for corruption-related crimes. The Convention, which was the first
anti-corruption treaty instrument in the world, commits the United States and
other OAS countries to criminalize a wide range of corrupt acts and strengthen
preventive measures. We look forward to working with other OAS countries on the
full implementation of the Convention and on the development of an evaluation
mechanism for the Convention." (Distributed by the Office of International
Information Programs, US.Department of State. http://usinfo.state.gov
Money Laundering: Morty's Legacy, Are Indictments On The Way At D.H. Blair? Over the course of more than three decades, D.H. Blair & Co. foisted hundreds of initial public offerings of small companies on the investing public, marking up stock prices sharply and often leaving public investors high and dry when the stocks subsequently collapsed. Two years ago, the firm shut itself down, not long after paying a $2 million fine to the National Association of Securities Dealers and agreeing to pay $2.3 million in restitution to bilked investors. The 20-count indictment includes charges of stock fraud, money laundering and racketeering. (DJ News, July 15th, 2000 Summary by L. Mcpherson).
WASHINGTON --House Bill Seeks Tougher Penalties For Identity Fraud- The dramatic increase in cases of identity theft from stolen Social Security Numbers has led to other things including raiding of bank accounts, and credit cards. The United States prompted legislation in the House on Thursday to restrict the use of Social Security numbers in the public and private sectors. (Cox Washington Bureau, July14th, Summary by L. Mcpherson). Washington: Robert Parker, chief statistician in The Bureau of Economics Affairs is departing from this agency to assume a newly created chief statisticians spot at the General Accounting Office. In an interview he was asked if anyone had leaked advance information to traders or cooked the books in return for a bribe. Mr. Parker said that on the day before a new quarterly GDP number is to be issued, a lockdown is declared and no one is allowed to leave before the meeting concludes. Even Parker’s phone is monitored for several days prior to the lockup to discourage him from leaking information. If there are any leaks after the lockup ends, there would be a short list of suspects and this tends to discourage violations. In reference for bribing to make the numbers look better or worse than they actually are the payoffs would have to go to everyone in the room and someone will tell.(DJ News, July 8, 2000, summary by Rosado Maritza).
US Supreme Court protects online free speech in unanimous ruling that the Communications Decency Amendment (CDA) censorship provisions of the Telecommunications Reform Act of 1996 is unconstitutional. (June 26, 1997).
WASHINGTON, Top Court Won't Revive La.Campaign Contribution Ban - The Supreme Court in 1976 said limiting the amount of money people can give to candidates can be justified as away to curb corruption. The justices affirmed that concept in January when it upheld a Missouri law that caps contribution in many state races at $1,075. But critics said Louisiana's law went further by banning -rather than just limiting - political contributions.( DJN, May 15, 2000).
Investigating Clinton cabinet by independent counsels update summary: (i) Labor Secretary Alexis M. Herman no charges (Apr. 5, 2K) by the end of investigation. (ii) Bruce Babbitt, Secry. of Interior, also no charges (Oct, 13, 1999). (iii) Henry Cisneros, Housing Secry., pleaded guilty of lying about payments to former mistress and fined $10,000 (Sept. 7, 1999).
(iv) Ron H. Brown, Commerce Secry., corruption charges ended with his death in plane crash (Apr. 4, 1996). (NYT, Apr 6, 2K, p. A25).
How politics supercedes ethics. Renegade Ohio democrat, James A. Traficant Jr., admits that he is about to be indicted as a part of grand jury investigation in corruption in Youngstown. Federal agents had videotaped his taking money from mob, but his defense was that he was doing a sting operation. His proposal for a $35 million (pork money) grant to Youngstown, Ohio, won. The problem is the thin Republican majority in Congress and Mr. Traficant’s threat to quit the Democratic party. (NYT Apr. 6, 2K, p. A1 and A25).
Supreme court has made it harder for whistleblowers to sue under RICO (WSJ Interactive Apr. 26, 2000)
Nineteen people including some senior members of the Mafia are charged in a stock scheme to cheat investors out of $40 million. It is a classic pump and dump ploy. Loretta Lynch, US attorney in Brooklyn is a prosecutor. (NYT, March 3, 2K, p. B3).
Clinton-Gore 1996 campaign, Maria Hsia allegedly raised $55,000 says Eric Yaffe, the prosecutor, including some in the Buddhist temple. Maria was convicted (NYT, Mar. 3, 2K, pA1 and A16). Justice Dept. is weighing new charges of money laundering (WSJ, Mar 16, 2K, p. A28).
Bill Bradley endorsed a special prosecutor for checking fund-raising irregularities in Clinton-Gore 1996 campaign. (NYTimes, Feb 21, 2000, p. A14).
Lucy
Edwards and Peter Berlin are expected to plead guilty and an officer senior to
Lucy Edwards is alleged to have taken a bribe (NYT, Feb 16, 2k, p.A8). Crimes
Enforcement network. Stiffer guidelines against travelers checks and casinos
are expected. (NYT, Feb 9, 2000, p. C2). Alleged
Money Laundering, Bank of New York, (WSJ, Dec. 1, 1999, p. A4.) Fired bank
employee arrested. Bank of New York money laundering probe may lead to
stiff fines by using Financial Institutions.
Tough new laws to fight money laundering are proposed. (NYT, Mar 3, 2K,
p. A1 and A8). Svetlana Kudryavtsev of Brooklyn who accepted $500 a month to
monitor money laundering accounts at the Bank of NY entered guilty plea before
Judge Jed S. Rakoff. She was allegedly a part of a scheme by Lucy Edward, former
VP in the Eastern European division of the bank and her husband Peter Berlin.
Svetlana sent Mr. Berlin the account statements. (NYT, Mar. 29, 2K, p. A8)
Washington D.C. -- US bullies nations into awarding contracts--India was among 14 emerging market economies subjected to diplomatic pressure by the United States to grant lucrative business contracts to American corporations, according to a Gallup poll (the poll, commissioned by Transparency International (TI), a global coalition seeking to root out corruption) released here. Frank Vogl, vice chairman of TI, said at a news conference that the US is seen as "exerting its superpower status to bully" other countries. "Many European countries argue that's why bribery is the only way to get the deals," he said. The findings suggested that executives in the 14 emerging market economies justified bribery as a counterweight to US diplomatic pressure. The poll found infrastructure projects, particularly public works and construction, weapons and energy industries, including petroleum, to be the most susceptible to bribery. Bribery and corruption was increasing in their countries, the respondents said, chiefly because of low salaries for government workers and officials, government secrecy and bureaucratic procedures for selling state-owned assets. Peter Eigen, chairman of TI, warned "bribery by international companies is weakening national economies". He said the scope of "bribe-paying by international corporations in the developing countries of the world is massive." An awareness of the new convention or corporate plans to comply with the new international anticorruption rules." The antibribery treaty was enacted last year by OECD, a Paris-based group. (IANS, Hindustan Times, January 24, 2000, summary by Rujuta Vinod). Last Updated: January 16, 2005.
IN HONOR OF AN EARLY FIGHTER AGAINST CRIME, Robert F. Kennedy. A short paragraph by Mike Clavet. “ The sharpest criticism often goes hand in hand with the deepest idealism and love of country.” - Robert Kennedy, 1967 (RFK). One of the greatest democracies in the world continues for its rightful purpose of freedom to promote wealth and justice for all. We are grateful for all those who struggled and fought so we may have freedoms of walking, breathing the air and witness to one of the greatest loves of mankind, nature and its core necessity to sustain life. While war is both questionable and confrontational, aggression is the worst of those evils and should be meet with a stronger force and prevent injustice to women and children. Tyranny has no place in a democracy and to all soldiers around the world who have fought for this cause are to be commended. It is imperative that we maintain the principles for all and not just the wealthy and in Government, we stop soft money from making sound principals. In America, the late struggle of RFK has again brought us full circle in the largest democracy of the free world. Since the early 1970, America has more poverty, crime, drugs and a healthcare system that has become a dysfunctional family, 45 Million American without healthcare because of Corporate Soft and Corporate welfare. The questionable tactics of a media to create division amongst races and yet thru the face of color we all need the same to promote happiness, a fair and equitable justice systems and at times that must question its own purpose to promote justice. We cannot sustain equal democracy under the present manifestations of corruption and a disdain for the American people and its families, as in growth of any issue it starts from the center and concentrates its growth thru believe and purpose, not ignorance and power!
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