the the chances of organizational misconduccted 79. Visit the FBI's web site and review a posting entitled 2009 financial Crime report. Read the General Overview, Initiatives, and significant cases sections. Using the information in these sections prepare a memo to your instructor setting forth the key aspects of the material you reviewed. Corporate Fraud 1. General Overview As the lead agency investigating corporate fraud, the FBI has focused its efforts on cases which involve accounting schemes, self-dealing by corporate executives, and obstruction of justice. The majority of corporate fraud cases pursued by the FBI involve accounting schemes designed to deceive investors, auditors, and analysts about the true financial condition of a corporation. Through the manipulation of financial data, the share price of a corporation remains artificially inflated based on fictitious performance Indicators provided to the investing public. In addition to significant financial losses to investors, corporate fraud has the potential to cause immeasurable damage to the U.S. economy and investor confidence. While the number of cases involving the falsification of financial information remains relatively stable, the FBI has observed a spike in the number of corporate fraud cases involving subprime lending institutions, brokerage houses, home-building firms, hedge funds and financial Institutions, as a result of the financial crisis partly caused by the collapse of the subprime mortgage market in the fall of 2007. As a result of the current financial crisis, trillions of dollars in shareholder value have been lost, several prominent companies, i.e., Lehman Brothers, have gone out of business, several prominent banks, L.o., IndyMac Bank and Washington Mutuel, have failed, and the Federal Government has provided over a trillion dollars in relief to keep other companies from falling, Le.. American Insurance Group, General Motors, and CitiGroup A subprime mortgage lender is a business that tends to borrowers who do not quality for loans from mainstream lenders. Once the subprime loans have been Issund, they are bundled and sold as securities process known as securitization. Fraud has been identified throughout the loan process, which commences with the borrower providing false information to the mortgage broker and/or lender. The next layer of potential fraud, the corporate fraud, occurs with the banks, brokerage houses, and other financial institutions that package loans through the securitization process. As the housing market declined, subprime lenders have been forced to buy back a number of nonperforming loans. Many of these subprime lenders have relied on a continuous increase in real estate values to allow the borrowers to refinance or sell their properties before going into default. However, based on the sales slowdown in the housing market, loan defaults increased, the secondary market for subprime securities dwindled, and the securities lost value. As a result, publicly traded stocks dramatically decreased in value as financial institutions realized large losses due to the sub prime securities they hold or insured, resulting in financial difficulties and bankruptcies As publicly traded companies suffered financial difficulties due to subprime market, analyses of company financials have identified instances of false accounting entries and fraudulently inflated assets and revenues. Investigations have determined that several of these companies manipulated their reported loan portfolio risks and used various accounting schemes to inflate their financial reports. In addition, before these companies stocks rapidly declined in value, executives with insider information sold their equity positions and profited illegally. The FBI is working with the U.S. Department of Justice (DOJ), the U.S. Securities and Exchange Commission (SEC), and other US regulatory agencies to identify possible corporate fraud centered on violations of insider trading securities fraud, and accounting fraud. In addition to the subprime market issue, corporate fraud matters involving seal-dealing by corporate executives, particularly utilizing companies to perpetrato large- scale Ponzi fraud schemes, continue to be an issue of concern. Traditionally, Ponzi schemes were perpetrated by individuals, or small groups, within a community environment. However, the current financial crisis resulted in the exposure of several large Porai schemes perpetrated not on an individual community level, but on a corporate national level by executives of what were once considered legitimate companies, Le Petters Company, Inc. (see page 8). Corporate fraud remains one of the highest priorities for the FBI. At the end of 2009, 592 corporate fraud cases were being pursued by FBI field offices throughout the United States, several of which involved losses to public investors that individually exceed $1 billion. Corporate fraud investigations involve the following activities: (1) Falsification of financial information, including: {a) False accounting entries: (b) Bogus trades designed to inflate profit or hide losses; and, (c) False transactions designed to evade regulatory oversight (2) Self-dealing by corporate insiders, including: (a) Insider trading: (b) Kickbacks: (c) Backdating of executive stock options (d) Misuse of corporate property for personal gain and (6) Individual tax violations related to self-dealing (3) Obstruction of justice designed to conceal any of the above-noted types of criminal conduct, particularly when tho obstruction impedes the Inquiries of the SEC, other regulatory agencies, and/or law enforcement agencies. The FBI has formed partnerships with numerous agencies to capitalize on their expertise in specific areas such as securities, tax, pensions, energy, and commodities. The FBI has placed greater emphasis on investigating allegations of these frauds by working closely with the SEC, Financial Industry Regulation Authority (FINRA), Internal Revenue Service (IRS), Department of Labor Federal Energy Regulatory Commission Commodity Futures Trading Commission (CFTC) U.S. Postal Inspection Service (USPIS), and Special Inspector General for the Troubled Asset Relief Program (SIGTARP) In addition, the FBI is an active member of the Financial Fraud Enforcement Task Force (FFETF) created by Presidential Executive Order in November 2009. As reflected in the statistical accomplishments of the FBI, the cooperative and multiagency investigative approach has resulted in highly successful prosecutions The FBI has also worked with numerous organizations in the private industry to increase public awareness about combating corporate fraud, to include: Public Company Accounting oversat Band American Contour Account Association of Candid Examinem. Na Amica . bigov Pamiz Google Ocge og 2016 11 HOMO Deals AM background information on subject individuals andior subject companies to further investigative corts 2 H. Overall Accomplishments Through FY 2009, cases pursued by the FBI resulted in 153 indictments Informations and 156 convictions of corporate criminals. Numerous caesar pending plea agreements and trials. During FY 2009, the Fal secured $6.1 billion in restitution orders and 55.4 million in fines from corporate criminals. The chart below rates corporate fraud pending cases from FY 2005 through FY 2009 as follows: FY 2005423 cases: FY 2008486 cases, FY 2007-28 case FY 2008-S45 CM and FY 2009592 cases. CORPORATE FRAUD PENDING CASES Corporate Fraud Pending Cases 2006-2009 IL Significant Cases Petters Company, Inc. (Minneapolis): Thomas J. Petters, through his company, Petters Group Worldwide LLC (POW). obtained loans from hedge funds and Investment groups for the stated purpose of financing sales to well-known big box retailers, such as Costco and Sam's Club. The investigation revealed that the purchase and subsequent sale of merchandise to the retailers were actually fabricated transactions supported by fictional documentation Thomas Powers was indicted for mail and wire fraud, conspiracy, and money laundering in December 2008 for his role in a $3.4 billion corporate fraud scheme. Sex Individuals have been Indicted during the course of the investigation for various roles in the scheme, including the production of false banking transaction documentation Puters that begon on October 28, 2009, and Petters was convicted on December 2, 2009. following an 18-day trial on all counts of the indictment. It is anticipated that Peters will be sentenced sometime in 2010. Credit Suisse (New York): Credit Suisse is a global financial services company, advising clients across the globe in all aspects of finance, ST Microelectronics (STM) is a Switzerland-based semiconductor company with annual net revenue of US $9.85 bilion in 2006. In 2006, STM invested 5400 milion with Credit Suisse in what were purportedly securities backed by student loans to include Investment statements); however, the funds were backed with subprime loans Credit Suisse tried unsuccessfully to settle the matter for 5280 million. The two managers, Eric Butler and Julian Tzolov, were indicted on Securities fraud charges and arrested in June 2008. Tzolov pled guilty and testified as a key witness for the government in the trial against Butter After several weeks of trai, Butler was convided in August 2009 by the jury and later sentenced to five years in prison. It is anticipated that Tzolov will be sentenced in 2010, 1031 Tax Group (Richmond): From August 2005 through April 2007. Edward Okun, former owner of 1031 Tax Group LLP (1031 Tax Group) and Investment Properties of America (IPA), and Lara Coleman, former Chief Financial Officer (CFO) of IPot, and two other consistors used 1031 Tex Group and its subsidiaries in a scheme to defraud clients through false pretenses. Section 1031 of the Internal Revenue Code allows Investment property owners to delet the capital gains tax that would otherwise be due on properties sold, dependent on the use of the proceeds to purchase new property in a specified time frame. Okun and Coleman obtained funds by promising clients their money would be used solely to effect 1031 exchanges as outined in the exchange agreements. After making such promises, Okun and Coleman minappropriated approximately 5132 million in client funds to support Okun's lavish ifestyle, pay operating expenses for his various m.candinuddin intermedi.com.bd Jordan 11 HD Movie Zone Watch romance ACETA 10-11 indicted during the course of the investigation for various roles in the scheme, including the production of false banking transaction documentation, Petterstrial began on October 28, 2009, and Petters was convicted on December 2, 2009, following an 18-day trial, on all counts of the Indictment. It is anticipated that Petters will be sentenced sometime in 2010. Credit Suisse (New York): Credit Suisse is a global financial services company, advising clients across the globe in all aspects of finance ST Microelectronics (STM) is a Switzerland-based semiconductor company with annual net revenue of US $9.85 billion in 2006. In 2006, STM invested $400 million with Credit Suisse in what were purportedly securities backed by student loans (to include investment statements)however, the funds were backed with subprime loans. Credit Suisse tried unsuccessfully to settle the matter for $280 million. The two managers, Eric Butler and Julian Tzolov, were indicted on securities fraud charges and arrested in June 2008. Tzolov pled guilty and testified as a key witness for the government in the trial against Butler. After several weeks of trial, Butler was convicted in August 2009 by the jury and later sentenced to five years in prison. It is anticipated that Tzolov will be sentenced in 2010. 1031 Tax Group (Richmond): From August 2005 through Apr 2007. Edward Okun, former owner of 1031 Tax Group LLP (1031 Tax Group) and Investment Properties of America (IPofA), and Lara Coleman, former Chief Financial Officer (CFO) of PotA and two other conspirators used 1031 Tix Group and its subsidiaries in a scheme to defraud clients through false pretenses. Section 1031 of the Internal Revenue Code allows investment property owners to defor the capital gains tax that would otherwise be due on properties sold, dependent on the use of the proceeds to purchase new property in a specified time frame. Okun and Coleman obtained funds by promising clients their money would be used solely to offect 1031 exchanges as outlined in the exchange agreements. After making such promises, Okun and Coleman misappropriated approximately $132 million in client funds to support Okun's lavish #festyle, pay operating expenses for his various companies, invest in commercial real estate, and purchase additional qualified intermediary companies to obtain access to additional client funds. Okun and Coleman also instructed employees to withdraw cash from a company bank account and smuggle the cash to Okun's personal yacht on Paradise Island in the Bahamas to avoid federal currency reporting requirements. The two additional conspirators, Robert D. Field II and Richard E Siming, were the CFO and Chief Legal Officer, respectively, of a holding company set up to oversee both PotA and the 1031 Tax Group. Both pled guilty and were sentenced to five years and three years respectively. After pleading guilty, Coleman was sentenced to 10 years in prison Okun received a prison sentence of 100 years after he was found guilty at trial the the chances of organizational misconduccted 79. Visit the FBI's web site and review a posting entitled 2009 financial Crime report. Read the General Overview, Initiatives, and significant cases sections. Using the information in these sections prepare a memo to your instructor setting forth the key aspects of the material you reviewed. Corporate Fraud 1. General Overview As the lead agency investigating corporate fraud, the FBI has focused its efforts on cases which involve accounting schemes, self-dealing by corporate executives, and obstruction of justice. The majority of corporate fraud cases pursued by the FBI involve accounting schemes designed to deceive investors, auditors, and analysts about the true financial condition of a corporation. Through the manipulation of financial data, the share price of a corporation remains artificially inflated based on fictitious performance Indicators provided to the investing public. In addition to significant financial losses to investors, corporate fraud has the potential to cause immeasurable damage to the U.S. economy and investor confidence. While the number of cases involving the falsification of financial information remains relatively stable, the FBI has observed a spike in the number of corporate fraud cases involving subprime lending institutions, brokerage houses, home-building firms, hedge funds and financial Institutions, as a result of the financial crisis partly caused by the collapse of the subprime mortgage market in the fall of 2007. As a result of the current financial crisis, trillions of dollars in shareholder value have been lost, several prominent companies, i.e., Lehman Brothers, have gone out of business, several prominent banks, L.o., IndyMac Bank and Washington Mutuel, have failed, and the Federal Government has provided over a trillion dollars in relief to keep other companies from falling, Le.. American Insurance Group, General Motors, and CitiGroup A subprime mortgage lender is a business that tends to borrowers who do not quality for loans from mainstream lenders. Once the subprime loans have been Issund, they are bundled and sold as securities process known as securitization. Fraud has been identified throughout the loan process, which commences with the borrower providing false information to the mortgage broker and/or lender. The next layer of potential fraud, the corporate fraud, occurs with the banks, brokerage houses, and other financial institutions that package loans through the securitization process. As the housing market declined, subprime lenders have been forced to buy back a number of nonperforming loans. Many of these subprime lenders have relied on a continuous increase in real estate values to allow the borrowers to refinance or sell their properties before going into default. However, based on the sales slowdown in the housing market, loan defaults increased, the secondary market for subprime securities dwindled, and the securities lost value. As a result, publicly traded stocks dramatically decreased in value as financial institutions realized large losses due to the sub prime securities they hold or insured, resulting in financial difficulties and bankruptcies As publicly traded companies suffered financial difficulties due to subprime market, analyses of company financials have identified instances of false accounting entries and fraudulently inflated assets and revenues. Investigations have determined that several of these companies manipulated their reported loan portfolio risks and used various accounting schemes to inflate their financial reports. In addition, before these companies stocks rapidly declined in value, executives with insider information sold their equity positions and profited illegally. The FBI is working with the U.S. Department of Justice (DOJ), the U.S. Securities and Exchange Commission (SEC), and other US regulatory agencies to identify possible corporate fraud centered on violations of insider trading securities fraud, and accounting fraud. In addition to the subprime market issue, corporate fraud matters involving seal-dealing by corporate executives, particularly utilizing companies to perpetrato large- scale Ponzi fraud schemes, continue to be an issue of concern. Traditionally, Ponzi schemes were perpetrated by individuals, or small groups, within a community environment. However, the current financial crisis resulted in the exposure of several large Porai schemes perpetrated not on an individual community level, but on a corporate national level by executives of what were once considered legitimate companies, Le Petters Company, Inc. (see page 8). Corporate fraud remains one of the highest priorities for the FBI. At the end of 2009, 592 corporate fraud cases were being pursued by FBI field offices throughout the United States, several of which involved losses to public investors that individually exceed $1 billion. Corporate fraud investigations involve the following activities: (1) Falsification of financial information, including: {a) False accounting entries: (b) Bogus trades designed to inflate profit or hide losses; and, (c) False transactions designed to evade regulatory oversight (2) Self-dealing by corporate insiders, including: (a) Insider trading: (b) Kickbacks: (c) Backdating of executive stock options (d) Misuse of corporate property for personal gain and (6) Individual tax violations related to self-dealing (3) Obstruction of justice designed to conceal any of the above-noted types of criminal conduct, particularly when tho obstruction impedes the Inquiries of the SEC, other regulatory agencies, and/or law enforcement agencies. The FBI has formed partnerships with numerous agencies to capitalize on their expertise in specific areas such as securities, tax, pensions, energy, and commodities. The FBI has placed greater emphasis on investigating allegations of these frauds by working closely with the SEC, Financial Industry Regulation Authority (FINRA), Internal Revenue Service (IRS), Department of Labor Federal Energy Regulatory Commission Commodity Futures Trading Commission (CFTC) U.S. Postal Inspection Service (USPIS), and Special Inspector General for the Troubled Asset Relief Program (SIGTARP) In addition, the FBI is an active member of the Financial Fraud Enforcement Task Force (FFETF) created by Presidential Executive Order in November 2009. As reflected in the statistical accomplishments of the FBI, the cooperative and multiagency investigative approach has resulted in highly successful prosecutions The FBI has also worked with numerous organizations in the private industry to increase public awareness about combating corporate fraud, to include: Public Company Accounting oversat Band American Contour Account Association of Candid Examinem. Na Amica . bigov Pamiz Google Ocge og 2016 11 HOMO Deals AM background information on subject individuals andior subject companies to further investigative corts 2 H. Overall Accomplishments Through FY 2009, cases pursued by the FBI resulted in 153 indictments Informations and 156 convictions of corporate criminals. Numerous caesar pending plea agreements and trials. During FY 2009, the Fal secured $6.1 billion in restitution orders and 55.4 million in fines from corporate criminals. The chart below rates corporate fraud pending cases from FY 2005 through FY 2009 as follows: FY 2005423 cases: FY 2008486 cases, FY 2007-28 case FY 2008-S45 CM and FY 2009592 cases. CORPORATE FRAUD PENDING CASES Corporate Fraud Pending Cases 2006-2009 IL Significant Cases Petters Company, Inc. (Minneapolis): Thomas J. Petters, through his company, Petters Group Worldwide LLC (POW). obtained loans from hedge funds and Investment groups for the stated purpose of financing sales to well-known big box retailers, such as Costco and Sam's Club. The investigation revealed that the purchase and subsequent sale of merchandise to the retailers were actually fabricated transactions supported by fictional documentation Thomas Powers was indicted for mail and wire fraud, conspiracy, and money laundering in December 2008 for his role in a $3.4 billion corporate fraud scheme. Sex Individuals have been Indicted during the course of the investigation for various roles in the scheme, including the production of false banking transaction documentation Puters that begon on October 28, 2009, and Petters was convicted on December 2, 2009. following an 18-day trial on all counts of the indictment. It is anticipated that Peters will be sentenced sometime in 2010. Credit Suisse (New York): Credit Suisse is a global financial services company, advising clients across the globe in all aspects of finance, ST Microelectronics (STM) is a Switzerland-based semiconductor company with annual net revenue of US $9.85 bilion in 2006. In 2006, STM invested 5400 milion with Credit Suisse in what were purportedly securities backed by student loans to include Investment statements); however, the funds were backed with subprime loans Credit Suisse tried unsuccessfully to settle the matter for 5280 million. The two managers, Eric Butler and Julian Tzolov, were indicted on Securities fraud charges and arrested in June 2008. Tzolov pled guilty and testified as a key witness for the government in the trial against Butter After several weeks of trai, Butler was convided in August 2009 by the jury and later sentenced to five years in prison. It is anticipated that Tzolov will be sentenced in 2010, 1031 Tax Group (Richmond): From August 2005 through April 2007. Edward Okun, former owner of 1031 Tax Group LLP (1031 Tax Group) and Investment Properties of America (IPA), and Lara Coleman, former Chief Financial Officer (CFO) of IPot, and two other consistors used 1031 Tex Group and its subsidiaries in a scheme to defraud clients through false pretenses. Section 1031 of the Internal Revenue Code allows Investment property owners to delet the capital gains tax that would otherwise be due on properties sold, dependent on the use of the proceeds to purchase new property in a specified time frame. Okun and Coleman obtained funds by promising clients their money would be used solely to effect 1031 exchanges as outined in the exchange agreements. After making such promises, Okun and Coleman minappropriated approximately 5132 million in client funds to support Okun's lavish ifestyle, pay operating expenses for his various m.candinuddin intermedi.com.bd Jordan 11 HD Movie Zone Watch romance ACETA 10-11 indicted during the course of the investigation for various roles in the scheme, including the production of false banking transaction documentation, Petterstrial began on October 28, 2009, and Petters was convicted on December 2, 2009, following an 18-day trial, on all counts of the Indictment. It is anticipated that Petters will be sentenced sometime in 2010. Credit Suisse (New York): Credit Suisse is a global financial services company, advising clients across the globe in all aspects of finance ST Microelectronics (STM) is a Switzerland-based semiconductor company with annual net revenue of US $9.85 billion in 2006. In 2006, STM invested $400 million with Credit Suisse in what were purportedly securities backed by student loans (to include investment statements)however, the funds were backed with subprime loans. Credit Suisse tried unsuccessfully to settle the matter for $280 million. The two managers, Eric Butler and Julian Tzolov, were indicted on securities fraud charges and arrested in June 2008. Tzolov pled guilty and testified as a key witness for the government in the trial against Butler. After several weeks of trial, Butler was convicted in August 2009 by the jury and later sentenced to five years in prison. It is anticipated that Tzolov will be sentenced in 2010. 1031 Tax Group (Richmond): From August 2005 through Apr 2007. Edward Okun, former owner of 1031 Tax Group LLP (1031 Tax Group) and Investment Properties of America (IPofA), and Lara Coleman, former Chief Financial Officer (CFO) of PotA and two other conspirators used 1031 Tix Group and its subsidiaries in a scheme to defraud clients through false pretenses. Section 1031 of the Internal Revenue Code allows investment property owners to defor the capital gains tax that would otherwise be due on properties sold, dependent on the use of the proceeds to purchase new property in a specified time frame. Okun and Coleman obtained funds by promising clients their money would be used solely to offect 1031 exchanges as outlined in the exchange agreements. After making such promises, Okun and Coleman misappropriated approximately $132 million in client funds to support Okun's lavish #festyle, pay operating expenses for his various companies, invest in commercial real estate, and purchase additional qualified intermediary companies to obtain access to additional client funds. Okun and Coleman also instructed employees to withdraw cash from a company bank account and smuggle the cash to Okun's personal yacht on Paradise Island in the Bahamas to avoid federal currency reporting requirements. The two additional conspirators, Robert D. Field II and Richard E Siming, were the CFO and Chief Legal Officer, respectively, of a holding company set up to oversee both PotA and the 1031 Tax Group. Both pled guilty and were sentenced to five years and three years respectively. After pleading guilty, Coleman was sentenced to 10 years in prison Okun received a prison sentence of 100 years after he was found guilty at trial