Spanish Police Bust Bank-Card Fraud Ring

An international organization engaged in duplicating bank cards has been dismantled in an operation involving the arrest of 178 people in 14 countries, Spanish police said Tuesday. The ring, which made off with more than 20 million euros ($24.5 million), also committed other crimes including robbery, extortion, sexual trafficking and money laundering.

The investigation, directed by Spain’s National Court, was launched two years ago in the Mediterranean city of Valencia, where police detected several people forging bank cards to withdraw money from automatic teller machines or to make purchases.

Police discovered that the ring had subgroups based in 14 different countries, each led by an individual who alone had contact with the kingpins.

In Spain, 76 people have been arrested, 120,000 card numbers were made inoperative and 5,000 duplicated cards were seized, while police dismantled six workshops where cards were being copied.

In Romania, 23 searches resulted in 16 arrests, while in France the operation was carried out in three phases that led to 30 arrests and nine searches.

In Italy, two searches ended with seven people under arrest and 3,100 duplicated cards seized.

Another 16 people were taken into custody in Germany, including a man suspected of being one of the most important technicians for creating card-duplicating devices.

Three members of the gang were nabbed in a three-step operation in Ireland, while in the United States another eight people were arrested.

And thanks to information provided by the Spanish police, two suspects were arrested in Australia, another two in Sweden and Greece, three in Finland and four in Hungary.

Source: Latin American Herald Tribune

FBI investigates Florida political corruption in Capitol

Federal agents have begun investigating numerous Florida politicians at the State Capitol regarding improper campaign fundraising by now-indicted Hollywood ophthalmologist Alan Mendelsohn and former Ft. Lauderdale State Senator Mandy Dawson.

The charges against Dr. Mendelsohn include fraudulently using three Political Action Committees (PAC’s) to funnel $87,000 through an a former Dawson Aide, Venica Blakely, and ultimately to an unnamed public official from 2003 through 2006. Mendelsohn, well known as a high-rolling fundraiser, has reportedly raised over $2 million for Florida legislators, and apparently lied to investigators regarding his supposed connections and influence over Florida Governor Charlie Crist pertaining to an investigation against an insurance company.

Federal agents questioned a number of legislators regarding Mendelsohn and Dawson’s activities at the Capitol, including lobbying practices. Mendlesohn lobbied legislators on medical issues as well as on behalf of race tracks and casinos. Some allegations of fraud are also related to his representation of these types of entities as a lobbyist.

In a relatively unrelated matter, disgraced former Broward County Commissioner Josephus Eggeletion plead guilty in federal court on Thursday to charges of money laundering. He was accused of helping two other co-conspirators of laundering money provided by undercover federal agents, purportedly as proceeds of criminal acts, through banks in the Virgin Islands and Bahamas.

Later the same day, Eggeletion officially resigned as Broward County Commissioner, as he read his resignation letter sent to the Governor’s office.

Eggeletion will likely be sentenced by Judge Donald Middlebrooks in February, and will remain free on bond until then.

Source: Examiner

ACFE Estimates U.S. Organizations Lose 7 Percent of Revenues to Fraud

U.S. organizations lose an estimated seven percent of their annual revenues to fraud, according to a survey of Certified Fraud Examiners who investigated cases between January 2006 and February 2008. The Association of Certified Fraud Examiners (ACFE) published the results of the survey in its highly-anticipated 2008 Report to the Nation on Occupational Fraud & Abuse.


The Report also found that:

· Fraud schemes tend to be extremely costly. The median loss caused by the occupational frauds in this study was $175,000. More than one-quarter of frauds involved losses of at least $1 million.

· Schemes frequently continue for years before they are detected. The typical fraud in our study lasted two years from the time it began until the time it was caught by the victim organization.

· Frauds were most often committed by the accounting department or upper management, and most fraudsters were first-time offenders. Only seven percent of fraud perpetrators in the study had prior convictions and only 12 percent had been previously terminated by an employer for fraud-related conduct.

· Occupational frauds are much more likely to be detected by a tip than by audits, controls or other means.

· Small businesses are especially vulnerable to occupational fraud.

· Seventy-eight percent of victim organizations modified their anti-fraud controls after discovering that they had been defrauded.

The Report also details findings such as how organizations were impacted based upon industry, how the implementation of anti-fraud controls affected exposure to fraud, and the most common behavioral traits observed among fraud perpetrators.

Source: Elite Pro

Johnston Man Pleads Guilty in Money Laundering Case

Rocco DeSimone, 56, of Johnston, pleaded guilty today to federal mail fraud and money laundering charges, admitting that he conned an inventor and defrauded several investors with fraudulent claims about marketing inventions.


United States Attorney Peter F. Neronha, Warren T. Bamford, Special Agent in Charge of the Federal Bureau of Investigation, and Susan Dukes, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation, jointly announced the guilty plea, which DeSimone entered before U.S. District Court Judge William E. Smith in U.S. District Court, Providence. DeSimone pleaded guilty just as jury selection was scheduled to begin for his trial.

At the plea hearing, Assistant U.S. Attorney Lee H. Vilker said the government could prove that, in 2005, DeSimone convinced the inventor of a device called the Drink Stik to give him a one-third ownership interest in the product. The Drink Stik is designed to allow soldiers and first responders wearing protective gear to drink fluids without removing their gear. DeSimone falsely told the inventor that the CEO of Fidelity Investments had offered millions of dollars to purchase the Drink Stik. In fact, DeSimone had not discussed the Drink Stik with the CEO of Fidelity, nor had he ever even met him.

DeSimone then solicited investments from third parties, either to him personally or to a company he had established called Falcon, Ltd. In addition to misrepresenting that the CEO of Fidelity was interested in the Drink Stik, DeSimone also falsely represented that Raytheon Corporation and AlvaMed Corporation had offered to purchase the product. He told some investors that Raytheon was going to pay $268 million for the rights to the invention.

Through his misrepresentations, DeSimone was able to solicit approximately $1,221,250 in cash from investors. In exchange for shares in Falcon, Ltd, other investors sent him merchandise, including eight valuable antique Japanese swords.

Of more than $1.2 million that he raised for the Drink Stik, DeSimone spent about $28,000 on expenses related to the product. He spent the rest on personal expenses, including a $180,000 Ford GT automobile, art work, mortgage payments, and a large payment to the IRS for taxes owed from a previous federal prosecution involving the sale of artwork.

DeSimone also solicited investments in another invention, known as the DiscShield, which was a plastic coating designed to protect computer discs from scratches. DeSimone had spoken with an individual who had a half-ownership in the DiscShield but DeSimone did not own any interest in it or have any rights to market it. Nonetheless, he falsely represented that he was an owner and that he was negotiating with Nintendo to sell the DiscShield for between 11 and 14 million dollars.

DeSimone pleaded guilty to nine counts of mail fraud and one count of money laundering. The maximum penalty for each count of mail fraud is 20 years in prison and a fine of $250,000 or twice the amount of loss or gain. The maximum penalty for money laundering is ten years in prison and a $250,000 fine.

DeSimone is detained in federal custody pending sentencing, which is scheduled for May 21.

The Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation, conducted the investigation. Assistant U.S. Attorneys Vilker and John P. McAdams are prosecuting the case.

Source: ABC6

Jury finds Petters guilty in $3.5B fraud case

A jury that had deliberated for parts of five days delivered a sweeping verdict against Minnesota businessman Tom Petters on Wednesday, finding him guilty of all 20 counts in what prosecutors said was a $3.5 billion Ponzi scheme.

Petters, who had claimed that subordinates carried out the fraud without his knowledge, sat glumly as the verdicts were read in federal court. He was convicted of wire fraud, mail fraud, conspiracy and money laundering.

U.S. District Judge Richard Kyle did not immediately set a sentencing date.

The verdicts completed a stunning fall for Petters, who before his arrest a year ago was seen as one of the state's most successful businessmen. From early deals disposing of liquidated goods, Petters built a diversified company that held well-known names such as Polaroid, Sun Country Airlines and Fingerhut. He also was a philanthropist known for charitable work.

But prosecutors convinced jurors that Petters' empire was a sham, with evidence that included secret tape recordings and testimony from company officers who had earlier pleaded guilty.

Petters' attorney, Jon Hopeman, was ready for the verdict, handing reporters a printed statement.
"Though we disagree with today's outcome, we respect the jury and its decision," the statement said. "As much as anything, the trial showed how much good Mr. Petters has done in the world. This too is worthy of reflection."

Hopeman declined to comment further.

Prosecutors had alleged that the scheme worked by using fraudulent documents such as purchase orders and bank statements forged by Petters Co. Inc. vice presidents Deanna Coleman and Bob White to trick investors into thinking they were financing purchases of TVs and other electronic goods that would be resold to discount retailers such as Sam's Club, Costco and BJ's Wholesale Club.

The government said two other defendants — Larry Reynolds and Michael Catain — helped launder billions of dollars by allowing PCI to run it through their own businesses' accounts to make it look like their companies were the source of the nonexistent merchandise.

Defense attorney Paul Engh agreed there had been a large fraud at PCI. But he said Petters was an innocent victim of it, and that Coleman, White, Reynolds and Catain carried it out behind Petters' back. Engh said there was ample reason for jurors to distrust them: All four of them reached plea deals, then testified against Petters in hopes of getting lighter sentences.

Two other defendants also pleaded guilty. Sentencing hearings for the six have not been scheduled.
Assistant U.S. Attorney John Marti told jurors that evidence showed most of the investors' money went to pay off other investors, but that some $400 million went to PCI, where he said Petters used it to buy Fingerhut, Polaroid and Sun Country or subsidize money-losing companies in his Petters Group Worldwide empire. He said the $400 million total also included $82 million that flowed into Petters' personal accounts, and that Petters used it to "live the life of a corporate tycoon."

Source: AP

UK jury: Nigerian leader's sister laundered money

A U.K. jury has convicted the sister of a former Nigerian governor on charges of money laundering and mortgage fraud.

Christine Ibori-Ibie, sister of politician James Ibori, was found guilty Tuesday of 12 charges stemming from allegations she helped her brother embezzle an estimated $101.5 million from Nigeria's Delta state into U.K. bank accounts.

The jury acquitted one of Ibori's former assistants, while a third accused aide's trial continues Wednesday.

Nigeria's anti-graft agency says Ibori stole as much as $292 million while governor in the oil-rich state in the Niger Delta.

A Nigerian judge in December dismissed a 170-count fraud case against Ibori. Ibori was arrested May 12 in Dubai on a U.K. warrant and remains there, but is free on bail.

Source: The Associated Press

Money Laundering: When proceeds from fraud enter the financial system

“We have always tried to create better ways to curb crime, but criminals find alternative ways to beat the system: JAI BANDA of Dr Mtambo Law Firm investigated some of money laundering cases in 2007.

CONTRARY to the zero tolerance rhetoric by President Bingu wa Mutharika revelations from Transparency International indicated that the problem of corruption was getting worse in the country thereby increasing the possibility of laundering the proceeds of crime through the country’s financial systems.

There were many money laundering cases in Malawi from June to December last year that included fraud, drug trafficking, theft, robbery and tax evasion.


Fraud
Of significance during the period was insurance fraud. The Insurance Association on of Malawi warned the public to be on the look out as fraudulent acts were on the increase in the insurance industry. The Association went on to place flyers in the local dailies in which they stated that the fraud involved people of many disciplines which included lawyers, police officers and staff from insurance companies.

In the course of investigations one lawyer, who spoke on condition of anonymity, did reveal that it was true that there were indeed some lawyers who connived with hospital staff and police to issue false reports for processing by Insurance companies. The funds obtained from such kind of frauds are laundered as legitimate payments from insurers.

Chairman of the Insurance Association against fraud Eric Chapola further argued that the racket was manifested through fake documents issued by the professionals. Policemen would collude with fraudsters to issue fake police reports while medical officers would issue hospital reports and lawyers would push insurance companies to pay such fake claims.

The Medical Aid Society of Malawi (Masm) is another institution which during the period was hit by massive fraud. In the months of October and November the Society faced huge increases in dubious claims forcing the country’s health insurance provider to pay up to K80 million (US$ 571428.60). The Sales and Marketing Manager for MASM Andrew Ngomwa attributed the staggering figure to suspected high cases of fraud.

Health Insurance fraud ranges from doctors billing insurers service than the core performed (this is called “up coding”). The doctors provide services such as tests, surgeries and other procedures that are not necessary in order to get additional payment. Other fraudulent tactics include

Drug trafficking

An interview with the Officer In-Charge of the Police Station in the small town of Limbe revealed that Indian hemp in Malawi is mainly for export to the neighbouring countries. A 90 kilogramme bag is sold at K100, 000.00 (US$714.28) in Mozambique. Naturally the money realised from the sale of the indian hemp has to be injected into the formal system.

In July, police in Chileka impounded 80 bags of indian hemp weighing 90 kilogrammes and nine others weighing 50 kilogrammes each. The indian hemp was loaded in a three tonne lorry. The indian hemp was impounded in Lirangwe on its way to Blantyre from Nkhotakota .

In September, two men were arrested at Thabwa road block leading to the Southern Town of Nsanje which borders Mozambique with 16 cartons of indian hemp weighing a total of more than 100 kilogrammes and in November Blantyre police acting on a tip off impounded 23 bags of indian hemp weighing 90 kilogrammes each from a lodge situated on the outskirts of the City of Blantyre.

The above cases just show the magnitude of indian hemp being caught in transit in Malawi. The proceeds of the indian hemp are available to the drug trafficker for laundering. The police indicated that most of the indian hemp from Malawi is exported to the Republic of South Africa which gives rise to outgoing money laundering.

Theft and robbery

Money for laundering is at times derived from proceeds of robberies. In June armed men stole at gunpoint a Nissan Double Cabin vehicle. Mzuzu police confirmed that Mzuzu the capital city of the North had a spate of carjacking especially targeting twin cab vehicles. The vehicles are driven across the border using unchartered roots to Zambia and Tanzania and are sold. The monies realised are eventually laundered in these countries as proceeds of business.

In July in the central region of Malawi in Ntcheu two men were sentenced to fourteen years for motor vehicle theft. The two were arrested in Mozambique where they wanted to sell the car. It can be safely assumed the two in addition to bringing hard cash they could have brought goods from Mozambique. Favourite goods from Mozambique include liquor, macaroni and other food stuffs and a number of motor vehicles thieves are believed to indulge in cross border trade.

During the period it was not only motor vehicles which were robbed. In September armed robbers went away with K2,000,000.00 (US$14285.71) after raiding Metro Cash ‘n’ Carry depot in Blantyre. Similarly during the same month police arrested two security guards deployed at a construction company on allegations that they connived on the theft of K7,000,000.00 (US$50 000) meant for salaries. A visit was undertaken to the robbed premises in a town called Phalombe wherein the robbed company’s personnel indicated that they believed money realised from the robbery had been exported to Mozambique.

Tax evasion
On June 12, 2007 the Malawi Revenue Authority (MRA) held a press conference in Blantyre where it stated that they had uncovered three schemes some tax evaders used when importing cars and flat television screens. The tax authority revealed that they had seized three vehicles and 80 TFT LCT – TV Screens. MRA Deputy Director of Investigations and Audit Emmanuel Kaluluma said the evader marked the cartons “computer monitor” to evade tax. The scheme was exposed when MRA officials conducted a risk check. The tax evader took advantage of a policy government set that allows importation of computers duty free except for Value Added Tax. Had the scheme not been uncovered the evaders would have reaped off government K9 000 000.00 (US$ 64285.71) if they had been successful in the racket.

In another racket, a Malawian national only identified as Burton was on May 27 hired by a fellow Malawian based in South Africa, Deckerman Gumbi to drive a Toyota Fortunar into the country with fake a Malawian registration number CK 7618. What this tax evader did was to pretend as if the vehicle went out of Malawi and it was returning home through Mwanza border post. Investigations discovered that it was just a new vehicle being imported into the country. The tax collecting body was going to lose K3 400 000.00 (US$ 24285.71) in revenue in this racket which sum would have been laundered as legitimate funds.

Corruption
Corruption is another predicate offence which yields money for laundering. In the town of Mzuzu, the Mzuzu Chief Resident Magistrate convicted a policeman who sought money in order to release and drop criminal charges against three suspects. He solicited K6,000 (US$ 42.85) as an inducement to drop criminal charges.

In September President Bingu Wa Mutharika disclosed that government was investigating Minister of Information and Civic Education Patricia Kaliati on corruption allegations on the way she handled the Nyika-Vwaza conservation concession tender process when she was Minister of Tourism. The Member of Parliament for Mzimba West Loveness Gondwe had questioned the circumstances surrounding the Nyika-Vwaza Eco Tourism in Parliament accusing Kaliati of taking kickbacks from one of the bidders an investor from the United Arab Emirates.

The views expressed in this article are those of the author and not necessarily of Blantyre Newspapers Limited (BNL).

http://www.dailytimes.bppmw.com/article.asp?ArticleID=8146

Bank of China ex-managers, wives convicted in Las Vegas

Two former managers of the Bank of China and their wives were convicted this afternoon of racketeering, money laundering, international transportation of stolen property and passport fraud, according to a statement from the U.S. attorney's office in Las Vegas.

Xu Chaofan, Xu Guojun, Kuang Wan Fang and Yu Ying Yi were convicted by a federal jury in Las Vegas at the conclusion of a trial that began nearly three months ago. U.S. District judge Philip Pro is scheduled to sentence them Nov. 24.

The indictment also charged Kwong Wa Po, who remains a fugitive.

The charges stemmed from an elaborate scheme to defraud the Bank of China of at least $485 million. According to the U.S. attorney's office, the scheme was orchestrated by Xu Chaofan, Xu Guojun and a third former bank manager, Yu Zhendong, who pleaded guilty in connection with the investigation and cooperated with the United States.

Source: Review Journal

US: Man who filed fake IRS forms sentenced

By JOHN DIEDRICH
jdiedrich@journalsentinel.com
Posted: Oct. 28, 2007

Gary Pansier, a 70-year-old former airline pilot from Crivitz, hasn't paid taxes since the 1980s, and when the tax man came collecting, he had a way to retaliate.

Pansier filed a flurry of phony Internal Revenue Service forms against county, state and federal officials, according to federal court documents. He even filed forms against the IRS agent investigating him, a federal prosecutor and a federal judge.

On Friday, Pansier, who was convicted by a jury of filing fraudulent IRS forms in June after a nine-day trial, received 24 months in prison from U.S. District Judge Charles Clevert.

Pansier is the latest case of what the IRS says is a troubling pattern: people who lash out at government officials and others, with IRS forms, creating a difficult mess to clean up. He is the fourth person in the eastern district of Wisconsin to be convicted in the last few years of using IRS forms against government officials, said Assistant U.S. Attorney Gail Hoffman.

"He forced them to have private consequences for their public life," she said.

Pansier told Clevert he misunderstood what he was doing.

"These were mistakes, and I truly apologize," he said.

Pansier was charged with filing eight phony Form 8300s against people such as a state revenue agent, a Brown County judge, the Marinette County treasurer and others. In total, Hoffman said, he filed 41 of the 8300s, which are IRS forms required when someone receives a cash payment of $10,000 or more. The form is intended to catch suspicious transactions and often snares drug dealers. Hoffman, against whom Pansier filed a different IRS form after he was charged in November 2005, said they are a headache to clear up and can lead to audits. Pansier was not charged for filing the forms against Hoffman, the IRS agent and the federal judge, but he was locked up after filling out the forms on two separate occasions and has been behind bars for 11 months.

Pansier also sent other forms - called "sight drafts" - to government offices where he owed taxes. They looked like a money order but were bogus, Hoffman said.

Pansier's attorney, Nishay Sanan, said Pansier never benefited from the "sight drafts" because banks spotted them as bogus. Pansier viewed them like IOUs, Sanan said. Pansier was no mastermind committing an elaborate fraud, he said.

"This scheme was going nowhere," Sanan said.

Clevert, who noted Pansier hadn't acknowledged he had done anything wrong until sentencing Friday, said he would have given Pansier a tougher sentence if he were younger and didn't have health issues. Ordinarily, Clevert said, he doesn't think defendants 50 or older will commit more crimes, but he suspected Pansier might do it again.

"The court has to impose a sentence that gets the attention not only of the defendant but others who might follow a similar course of conduct," he said.

The 11 months Pansier has served will be subtracted from his sentence.

Pansier told Clevert he would appeal.

http://www.jsonline.com/story/index.aspx?id=679695&format=print

Swiss Bank Accounts: Separating Fact From Fiction

By Mark Koba Web Editor | 20 Aug 2008

Mention the words Swiss bank account and it can bring to mind corrupt politicians hiding vast sums of money, drug lords laundering ill gotten gains or filthy rich American citizens trying to avoid paying taxes. The reality, however, is quite different from the myths.

"Swiss banks must verify your identity and won’t accept your business if they think it is illegal, says Ken Wassell, CEO of Los Angeles, California-based Offshore Company, a firm that aids its customers in overseas financial services. "About five percent of applications a year are turned down because of possible fraud," says Wassell.

It doesn't stop there. James Nason, spokesman for the Swiss Bankers Association, adds that Swiss banks must not only verify your identity but also verify the source of the funds you are putting in the bank. "And besides that," says Nason, "the beneficiary of the funds must also be positively identified."

That’s not to say there isn’t secrecy in having a Swiss bank account. Any Swiss banker today who reveals your information without your consent risks prison time by law. And there is secrecy when it comes to issues like inheritance or divorce. It’s up to plaintiffs to prove someone has a bank account in Switzerland, if they want access to it through a lawsuit.

There are, of course, exceptions to the secrecy rule, especially concerning crimes such as gun running and drug trafficking. Swiss banks are forbidden by law to accept money which they know might be as a result of a crime.

And when it comes to names, the so-called secret numbered accounts in Swiss banks are not completely secret.

"Yes, banks can set up an account by number only," says Nason," but you will have to go through the same process to open the account as a named account" at greater expense. Your name will be known to several upper management types in the bank and there are records of ownership."

Origins Of Secrecy

The concept got its start in the 18th century, when a group called The Great Council of Geneva passed a law in 1713, preventing banks from sharing information about their clients.

The modern Swiss banking system started in 1934 during the global depression era when France and Germany pressured Switzerland to divulge depositor information as part of an effort to prevent capital flight. Switzerland, in trying to maintain sovereignty, passed a law making the disclosure of such information a crime. And in 1984, some 73-percent of all Swiss citizens voted to keep bank secrecy.

Taxes

Any American Swiss bank account holder does not pay taxes to Switzerland. But if an American is looking to hide money from the IRS, a Swiss bank account won’t do much good. As of January 1, 2001, unless a foreign bank obtained a status of QI or "qualified intermediary," the bank must report to the IRS all earnings received from the U.S. and the names of the beneficial owners. If the bank does have a QI, which keeps a bank’s secrecy if it follows strict regulations, U.S. citizens can only have money in the bank if they are willing to disclose their identity to the IRS.

Opening An Account

If you still want to open an account, it's not complicated but it does take some time, effort and of course, money. A search on the Internet for Swiss bank accounts suggests that you don’t need much money to open an account, but that is one of the myths about how the system works.

Nason says that while the deposit amount varies for each of the more than 400 banks in Switzerland, most of them are looking to invest the money for a depositor, and not just hold it to generate a minimal amount of interest.

"I get letters nearly once a month from Americans asking about Swiss banks," says Nason. "I recently got one from a man in Virginia, asking for help in finding a bank to hold his retirement savings account for him and his wife. But that’s not what Swiss banks really do. They are into professional asset management. A six-figure sum is usually the starting point for opening an account."

Wassel says it’s more like $250,000. "Most people opening a Swiss bank account or doing so for privacy and from potential litigation," says Wassel, "and to protect their assets."

Besides the right amount of money, there is also the vast amount paper work to consider. Here’s what you more than likely need to have to set up an account:

• Valid Passport
• Verification of Address
• Documents to prove economic background
• Documents to prove economic origin of money being deposited
• Identification of any beneficiaries of the account
• You must be 18 years oldYou must go in person or have a financial service company open it for you

"Americans account for a very small percentage of our business currently," says Francois Xavier of Micheloud & Co., an immigration and financial consultancy based in Switzerland, which helps people set up accounts in Swiss banks.

"The QI regulations are definitely slowing banks down when it comes to Americans opening Swiss accounts," says Nason." It's a lot of regulation for these banks to conform with."

"There are less Americans now then during the Reagan administration because inflation was so high then," explains Xavier. "People tried to escape the erosion of the American dollar. Maybe if things [economically] get worse in the U.S., that will change and more of them will open accounts."

Source: CNBC

Staffing Shortages at FBI Hamper Financial Crime Investigations

By Matthew Harwood

The Federal Bureau of Investigation does not have enough manpower to investigate financial crimes related to the current financial collapse, reports The New York Times.

The bureau slashed its criminal investigative work force to expand its national security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties. Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes.

The FBI has been under pressure to do more financial crime investigations since criminal investigations have been opened against Fannie Mae and Freddie Mac, American International Group (AIG), Lehman Brothers, as well as 1,500 other mortgage-related investigations. In response, the agency will reassign hundreds of agents to work financial crimes, but the Justice Department wonders where the agents will come from and whether there will be enough.

From 2000 to 2007, prosecutions for various forms of fraud fell sharply as the FBI was transformed into a domestic counterterrorism and intelligence organization. Fraud prosecutions against financial institutions fell 48 percent, insurance fraud prosecutions tumbled 75 percent, and security fraud cases dipped 17 percent.

According to the Times, the FBI has repeatedly requested additional funding from President Bush to hire more agents to do criminal investigations. The requests were denied.

Currently the FBI has 177 agents working 1,552 cases of mortgage fraud, hundreds of agents short of the staffing levels seen during the savings and loan scandals of the 1980s.

Assistant Director John Miller of the FBI told the Times that the agency only concentrates on multimillion-dollar corporate fraud cases where it can do the most good and retrieve victims' money due to the resource shift from criminal investigations to counterterrorism and intelligence.

Source: Security Management

FBI smashes online credit card ring

Written by Iain Thomson in San Francisco

The FBI has concluded a two-year investigation into an online market for stolen credit card data behind millions of dollars worth of fraud.

The Dark Market forum was buying and selling stolen financial information, including credit card data, log-in credentials (user names and passwords), as well as equipment used in carrying out certain financial crimes.

The FBI operation, carried out in conjunction with the UK's Serious Organised Crime Agency and other law enforcement agencies around the globe, has resulted in 56 arrests.

However, the FBI believes that there may have been as many as 2,500 regular forum members.

"In today's world of rapidly expanding technology where cyber-crimes are perpetrated instantly from anywhere in the world, law enforcement needs to be flexible and creative in its efforts to target these criminals," said FBI cyber division assistant director Shawn Henry.

"By joining forces with our international law enforcement counterparts we have been, and will continue to be, successful in arresting those individuals and dismantling these forums."

The FBI estimates that it has protected bank accounts and credit lines worth $70m by shutting down the forum, and said that the investigation has spawned new leads and investigations that will also be followed up.

Source: vnunet.com

Sacramentan guilty of bank fraud, money laundering

A 25-year-old Sacramento man pleaded guilty Tuesday to bank fraud and money laundering in federal court in Sacramento.

Sennett H. Swift defrauded two homeowners and their lenders by offering refinance loans with interest rate caps and promises of refunds for early payment penalties when he knew those terms were not real. Swift wanted to get the substantial broker commissions, said Matthew Stegman, the assistant U.S. Attorney prosecuting Swift.

It turns out at least one of the homeowners wasn't eligible for the loan program. Swift also submitted a forged loan application.

Sentencing is scheduled before Judge Lawrence Karlton on March 25.

The case was investigated by the Federal Bureau of Investigations and the Internal Revenue Service.

http://www.bizjournals.com/sacramento/stories/2008/01/14/daily26.html

ACFE Report to the Nation 2008

According to research conducted by the Association of Certified Fraud Examiners (ACFE), U.S. organizations lose an estimated 7 percent of annual revenues to fraud. Based on the projected U.S. Gross Domestic Product for 2008, this percentage indicates a staggering estimate of losses around $994 billion among organizations, despite increased emphasis on anti-fraud controls and recent legislation to combat fraud.

The ACFE's Report to the Nation on Occupational Fraud & Abuse details the survey results of 959 Certified Fraud Examiners (CFEs) throughout the US who were asked to provide specific information on one fraud case he or she had personally investigated that met the following criteria:

• The case involved occupational fraud;
• The fraud occurred within the last two years;
• The investigation of the fraud was complete; and
• The CFE was reasonably sure that the perpetrator had been identified.

The end result is a comprehensive report that sheds light on occupational fraud and abuse while offering stark lessons and valuable insights about its prevention and detection.

• Download the 2008 Report to the Nation* (PDF 5 MB)
  
  
• Download the 2008 Report to the Nation (PPT 10.1 MB)

Source: ACFE

HSBC calls in police in €90m fraud probe

Accountancyage- HSBC has called in police to investigate an alleged €90m fraud attempt in its securities division.

Police are investigating an alleged €90m (₤70m) fraud attempt at the securities services division of UK’s biggest bank HSBC, understood to involve the operations staff at the bank, after being called in to its Canary Wharf headquarters in London on 25 April.

The balance of HSBC’s main euro account, which is normally between €30m and €1bn, reportedly was at zero before the bank traced a single transaction moving €90m from the account, the Financial News reports.

HSBC said no customer funds were involved and no money had been lost. The investigation is understood to have been triggered by unusual activity in its third-party securities settlement uncovered by the HSBC systems.

City of London police said Jagmeet Channa, 25, was on April 25 charged with conspiracy to defraud, money laundering and abusing a position of trust and has been remanded in custody until June 25, when he will appear at Southwark Crown Court. Three other men linked to the investigation have been released on police bail.

http://www.amlosphere.com/europe/aml/hsbc-calls-in-police-in-90m-fraud-probe.html

Have the Mafia moved to SA?

By Lavern de Vries

Organised crime syndicates, including Mafia organisations, are believed to have moved their financial operations to South Africa, says award-winning journalist John Grobler.

Grobler, who was speaking at a briefing on organised crime and money laundering at the Institute for Security Studies in the Cape Town on Monday, said it was because money laundering was easy here because of an unsophisticated anti-crime corruption unit and the ability to exploit officials.

Grobler won the 2007 CNN African Freelance Journalist of the Year Award for a story on how Mafia bosses were buying unused diamond cutting and polishing licences, allegedly with the help of Zackey Nujoma, son of former Namibian president Sam Nujoma.

The article detailed confusion over whether Pietro Palazzolo or his alleged crime boss brother, Vito Palazzolo, had been appointed a director of one of the companies that bought the licences.

Originally from Sicily, Vito Palazzolo was granted South African citizenship 13 years ago and has lived in Cape Town since.

Nearly two decades ago he served a sentence in Switzerland for laundering drug money.

He has appeared in local courts on a number of charges including fraud and forgery related to his South African citizenship.

Palazzolo was convicted, in absentia, two years ago by a tribunal in Palermo, Sicily, of associating with the Mafia and sentenced to nine years.

Last year Italy asked for him to be extradited and the justice department said earlier this year it would only begin processing the extradition request once his appeal against that conviction was finalised.

Grobler said the authorities should not think of organised crime in the conventional way of Italian bosses involved in drug smuggling and prostitution.

"It is far more sophisticated and they are moving from that image into one with more respectability where they appear to be involved in turning around diamonds."

Grobler, who spent 18 months investigating his award-winning story, said research had led him to believe that Mafia families from different nationalities used their political connections in Namibia to obtain diamond cutting licences.

Namibia was targeted because of its lucrative mining industry and easy access to influential people, while South Africa's lack of border control and its stable economy was ideal for money laundering operations, he said.

Although drugs, racketeering and prostitution was still the core part of organised crime, it was also currently being seen as the bottom rung of the business.

"I think they still set up deals but they don't get their hands dirty anymore."

Grobler said specialised units such as the Scorpions, whose future hangs in the balance, were ideal to deal with the now mature forms of organised crime.

This article was originally published on page 7 of Cape Argus on September 30, 2008

Brooklyn Rabbi pleads not guilty in tax fraud, money laundering scheme

The grand rabbi of a Brooklyn-based Orthodox Jewish group and five other men accused in a tax fraud and money laundering scheme pleaded not guilty to federal charges on Monday.

Naftali Tzi Weisz, 59, the Grand Rabbi of Spinka, and the others were arrested after an indictment was returned Dec. 18 accusing the group of 37 counts including conspiracy, mail fraud and money laundering.

Authorities allege Weisz helped solicit millions of dollars in contributions to five Spinka charitable groups by promising to secretly refund up to 95 percent of the donations. That way, the contributors could falsely claim higher tax deductions, authorities said.

Prosecutors say that in some cases, donors received cash payments through an underground money transfer network involving business owners in Los Angeles' jewelry district.

Prosecutors allege the scheme cheated the Internal Revenue Service out of at least $33 million (€22.42 million).

The other defendants named in the indictment are Gabbai Moshe Zigelman, 60, of Brooklyn, New York; Joseph Roth, 66, of Tel Aviv, Israel; Yaacov Zeivald, 43, of Valley Village, New York; and Alan Jay Friedman, 43, and Yosef Nachum Naiman, 55, of Los Angeles, as well as five Spinka charities.

It was not immediately known if the men had retained as attorneys.

http://www.iht.com/articles/ap/2008/01/01/america/NA-GEN-US-Rabbi-Plea.php

Feds Charge Five in $70 Million "Dream Home" Scam

By Lisa Wade McCormick

Federal authorities on Monday charged five people in connection with a "Dream Home" mortgage scheme that cost investors nearly $70 million.

The defendants allegedly promised to pay off the mortgages on the "dream homes" of the more than 1,000 consumers taken in this scheme, but left them with nothing but shattered dreams and drained bank accounts, said Assistant Attorney General of the Criminal Division Lanny A. Breuer and U.S. Attorney for the District of Maryland Rod J. Rosenstein.

According to the grand jury indictments unsealed on Monday, the defendants allegedly ran their deceptive mortgage payment program from 2005-2007 under various corporate names, including Metropolitan Grapevine LLC, Metro Dream Homes, POS Dream Homes, and POS DH LLC (collectively, MDH).

The defendants named in the federal indictments Andrew Hamilton Williams, Jr., 58, of Hollywood, Florida, the founder and owner of MDH; Michael Anthony Hickson, 46, of Commack, New York, the chief financial officer; Isaac Jerome Smith, 46, of Spotsylvania, Virginia, the president; and Alvita Karen Gunn, 31, of Hanover, Maryland, the vice president of operations.

Authorities also filed information against a fifth defendant, Carole Nelson, 50, of Washington, D.C., the chief financial officer of POS Dream Homes.

The indictments allege the defendants used deceptive marketing tactics to convince consumers to participate in their "Dream Homes Program."

Here's how the scheme worked:

• The defendants convinced consumers to pay a minimum of $50,000 for each home enrolled in the program. Investors also had to pay an "administrative fee" of up to $5,000;

• The defendants told investors not to worry about high mortgages because Metro Dream Homes would pay their future monthly payments and pay off their mortgages within five to seven years — using returns on the homeowner's original investment. At that time, the homeowner and Metro Dream Homes would then own an equal interest in the home;

• The defendants told consumers their $50,000 would be used to fund investments in automated teller machines, flat-screen TV displays that carried commercial advertisements, and Touch-N-Buy electronic kiosks that sold telephone calling cards and other items;

To make their scheme appear more legitimate, the defendants marketed the program through live presentations at posh hotels in Washington, D.C.; Baltimore, and Beverly Hills, California.

But authorities allege the defendants didn't use investors' money as promised.

"The indictment alleges that there was no revenue to pay the mortgage payments," Rosenstein said. "Instead, the conspirators used some of the investors' money to repay earlier investors in the Ponzi scheme and spent the remainder on themselves."

Authorities learned the defendants used investors' money to pay for 10 chauffeurs and a fleet of luxury cars, travel and tickets to the 2007 National Basketball Association All-Star game, the 2007 National Football League Super Bowl, and luxury accommodations on both trips.

The defendants also used consumers' money to pay themselves salaries of up to $200,000 a year — and their mortgages; pay off investors in a prior failed ATM investment venture founded by Williams; make multiple donations of up to $50,000 each to charitable organizations to allegedly give MDH the appearance of being financially successful; and fund investments in third-party businesses that had not been disclosed to investors.

Federal prosecutors also allege the ATM machines, flat-screen TVs, and electronic kiosks never generated any meaningful revenue.

"The effects of this wide-ranging mortgage fraud scheme are particularly disturbing against the backdrop of today's economic environment," said Thomas J. Harrington, Executive Assistant Director of our Criminal, Cyber, Response, and Services Branch.

The Maryland Securities Commissioner on August 15, 2007, issued a cease-and-desist order against Williams, MDH, and other related companies. That order directed them to immediately stop offering and selling unregistered securities in connection with the Dream Homes Program.

The defendants, however, allegedly ignored that order and held additional meetings in which they made further misrepresentations about the financial success of MDH's operations.

On September 4, 2007, the defendants filed a legal challenge to the cease-and-desist order in federal court.

The federal indictment alleges during a September, 12, 2007, hearing, Hickson testified that the financial success of the Dream Homes Program did not rely on new investor funds. Hickson, however, knew the sole source of meaningful revenue for MDH was new investor funds, the indictment alleges.

Federal authorities said more than 1,000 consumers invested approximately $70 million in the Dream Homes Program.

When the defendants stopped making the mortgage payments, authorities said, the homeowners had to try and make the payments MDH promised to pay in full.

"These types of crimes drive homeowners into foreclosure, erode the integrity of our tax system, and threaten the financial health of our communities," said Eileen Mayer, Chief, IRS Criminal Investigation.

The four indicted defendants face a maximum sentence of 20 years in prison for the fraud conspiracy; 20 years in prison on each of the 15 counts of wire fraud; and 20 years in prison for conspiracy to commit money laundering.

Hickson also faces a maximum sentence of five years in prison for making false statements. And Smith faces a maximum sentence of 30 years in prison for bank fraud in connection with his alleged misrepresentation of his income to obtain a bank loan for a new Bentley automobile. Nelson was charged by information with money laundering, which carries a maximum penalty of ten years in prison.

The indictments also seek forfeiture of the fraud proceeds, including the $70 million investors lost in the scheme. An indictment is not a finding of guilt, federal authorities said. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceeding.

Source: ConsumerAffairs.com

U.S. Attorney General cites asset forfeiture as weapon against drug cartels

by Mary Spicuzza

Attorney General Eric H. Holder Jr. on Thursday spoke about using asset seizure and forfeiture to go after Mexican drug cartels during an appearance before the U.S. House of Representatives Committee on the Judiciary. Holder spoke of the goals, work and priorities of the U.S. Department of Justice, addressing topics ranging from counter-terrorism efforts and closing detention facilities at Guantanamo to investigating mortgage fraud and violent cartels.

He specifically cited the Justice Department's strategy for confronting violence, corruption and other threats posed by cartels. "This strategy uses federal prosecutor-led task forces that bring together federal, state and local law enforcement agencies to identify, disrupt and dismantle the Mexican drug cartels through investigation, prosecution, and extradition of their key leaders and facilitators, and seizure and forfeiture of their assets," Holder said in his statement. "The Department is increasing its focus on investigations and prosecutions of the southbound smuggling of guns and cash that fuel the violence and corruption, as well as attacking the cartels in Mexico itself, in partnership with the Mexican Attorney General's Office and the Secretariat of Public Security."

Holder's statements about seizure and forfeiture of cartels' assets come a month after President Barack Obama imposed financial sanctions on three of Mexico's most violent cartels — Sinaloa, Los Zetas and La Familia Michoacana — by adding them to the list of foreign "drug kingpins." The move to designate the trio under the Foreign Narcotics Kingpin Designation Act allows the U.S. government to seize or block the cartels' assets, accounts or securities subject to U.S. jurisdiction and prosecute U.S. citizens or companies who work with them.

Recently, the U.S. Department of State also released its Country Reports on Terrorism 2008, which criticized Mexico's recent terrorist financing law for its lack of asset forfeiture provisions, but offered praise for the country's efforts to combat violent cartels.

Source: Asset Forfeiture Watch

Madoff faces 150 years in alleged Ponzi scheme

by ANTHONY M. DESTEFANO

Bernard Madoff, after being charged with 11 counts for allegedly running Wall Street's biggest Ponzi scheme, now faces up to 150 years in prison when he pleads guilty tomorrow, officials said yesterday.

Manhattan federal prosecutors unveiled the charges, as well as the 70-year-old's prospect of dying behind bars, during a court appearance in which the disgraced investment adviser told a judge that he wanted to keep his lawyer despite potential legal conflicts.

The attorney, Ira Sorkin, said Madoff intends to plead guilty to the charges tomorrow.

In disclosing the charges, prosecutors revealed that Madoff is accused of mail fraud, wire fraud, securities fraud and money laundering in connection with a $50-billion Ponzi scheme that allegedly ran for more than 25 years. He is also charged with perjury, giving false statements to the Securities and Exchange Commission and stealing from an employee benefit program.

"From at least as early as the 1980s through on or about December 11, 2008, Bernard L. Madoff, the defendant, perpetrated a scheme to defraud the clients of Bernard L. Madoff Investment Services by soliciting billions of dollars of funds under false pretenses," federal prosecutors said in charging documents.

"I think 150 years is in the right direction," said investor Burt Ross of Englewood, N.J. "When will he go to jail?"

The documents didn't spell out a specific amount of investor losses. But the charges noted that as of November, Madoff's clients received statements showing total balances in their accounts of $64.8 billion, when the amount was just a fraction of that. When he was arrested, Madoff allegedly told investigators his scheme totaled $50 billion.

The charges also indicate other unnamed Madoff employees took part in the alleged scheme by generating false account statements and trading tickets to show investment activity that didn't exist.

There wasn't information on Madoff's wife, Ruth, who is on the verge of being counseled by the law firm of former federal prosecutor Peter Chavkin, in court as a special counsel to advise Madoff on the conflict-of-interest issues involving Sorkin. Chavkin has cited that possibility in court.

Madoff, under house arrest after posting a $10-million bond, also diverted $250 million in client funds over a six-year period to fund the operation of his legitimate market-making activities, according to the documents.

Disclosure of the charges overshadowed the ostensible reason for the court hearing, which was the legal conflict of interest issue. On that point, Madoff, who had come to court wearing a protective vest, spoke publicly for the first time. Leaning against a table, Madoff for 12 minutes answered repeatedly with "Yes," and "Yes, I am," when asked by U.S. District Court Judge Denny Chin if he understood or was aware of the nature of Sorkin's potential conflicts.

Sorkin had represented two men who were potential witnesses against Madoff, and his family members had prior investments with Madoff's company. Sorkin himself also at one point had about $60,000 in retirement money invested with Madoff, but took it out around 1993, court papers disclosed.

Prosecutor Marc Litt revealed Madoff hasn't signed an agreement with the government, indicating he would have to plead guilty to all charges and could face up to 150 years. "He is throwing himself at the mercy of the court," said a defense attorney not involved in the case who didn't want to be named.

Chin said sentencing would take place "several months" after any guilty plea.

THE CHARGES (With maximum prison sentences)

SECURITIES FRAUD (1 COUNT) Alleges Madoff ran a Ponzi scheme out of his investment firm for more than 25 years. Penalty: 20 years

INVESTMENT ADVISER FRAUD

(1 COUNT) Alleges that as investment adviser, Madoff defrauded his clients for more than 25 years. Penalty: 5 years

MAIL FRAUD (1 COUNT) Alleges that Madoff used the mail to perpetrate his fraud. Penalty: 20 years

WIRE FRAUD (1 COUNT) Alleges that Madoff used wire communication such as the telephone, faxes and computers to carry out his fraud. Penalty: 20 years.

INTERNATIONAL MONEY LAUNDERING (1 COUNT) Alleges that Madoff transferred funds from his business in New York to his offices in London and back again to carry out a fraud. Penalty: 20 years

INTERNATIONAL MONEY LAUNDERING (1 COUNT) Alleges Madoff transferred funds back and forth to Europe to disguise their nature as proceeds of a crime. Penalty: 20 years

MONEY LAUNDERING (1 COUNT) Alleges that Madoff diverted more than $54 million from an employee benefit fund. Penalty: 10 years.

FALSE STATEMENTS (1 COUNT) Alleges that Madoff gave false statements to the Securities and Exchange Commission. Penalty: 5 years

PERJURY (1 COUNT) Alleges that Madoff gave false testimony to the SEC under oath in 2006. Penalty: 5 years.

FALSE FILING (1 COUNT) Alleges that Madoff filed false documents with the SEC in 2007. Penalty: 20 years

THEFT FROM AN EMPLOYEE BENEFIT PLAN (1 COUNT) Alleges that Madoff stole $10 million in funds from pension plans of 35 labor unions. Penalty: 5 years.

Sources: Federal court records, U.S. attorney's office

Source: NewsDay