Watchdog

Tax

Lesser-Known Enron Executives Face First Criminal Trial

The first Enron case to go before a jury does not involve famous names or deals that led to the company’s spectacular demise."It’s not about Andy Fastow, it’s not about Jeff Skilling, it’s not about Ken Lay. But I think the public thinks that it is," defense attorney Dan Cogdell told Reuters.
Technology

Treasury Releases Report On "Phishing" Identity Theft Prevention

Assistant Secretary of the Treasury, Wayne A. Abernathy, announced this week the release of a new report on the rapidly growing cyber-crime known as “phishing”. “When President Bush signed legislation giving consumers and law enforcement important new tools to fight the spread of identity theft, he sent a message to identity thieves that their schemes would not be tolerated.
Tax

Rite Aid Former Chief Executive Sentenced to Eight Years in Jail

The son of the man who founded the Rite Aid drugstore chain will spend eight years in prison for his role in one of the biggest fraud cases to hit corporate America, Reuters reported.Glass, 50, the company’s former chief executive, was also sentenced yesterday to three years of supervised release after he completes his prison term, according to Thomas Marino, U.S. attorney for the Middle District of Pennsylvania. As part of his plea deal, Grass, the fourth of six former Rite Aid executives to be sentenced, will pay $500,000 in fines and will forfeit $3 million to the government.
Tax

New SEC Rule Establishes Ethics Standards for Mutual Funds

The Securities and Exchange Commission voted this week to adopt a new Rule 204A-1 under the Investment Advisers Act and related amendments to Advisers Act Rule 204-2, Advisers Act Form ADV, and Rule 17j-1 under the Investment Company Act. New Rule 204A-1 would require registered investment advisers to adopt and enforce codes of ethics applicable to their supervised persons. The new rule is designed to prevent fraud by reinforcing the fiduciary principles that must govern the conduct of advisory firms and their personnel.
Tax

Case Against WorldCom's Ebbers Expands With New Indictment

The government’s case against former WorldCom Inc. chief executive Bernard J. Ebbers grew on Monday when a new 31-page indictment was handed up by a Manhattan grand jury with seven new changes of false Securities and Exchange Commission filings, the Washington Post reported. The seven new changes are added to the charges Ebbers, 62, already faces, including one count each of conspiracy, securities fraud and false filing in the role he allegedly played in the nation’s largest accounting scandal.
Tax

First Rite Aid Executive Sentenced in Accounting Scandal

Former Rite Aid Corp. executive Eric Sorkin became the first of six former top company officials to be sentenced in an accounting scandal at the drug store chain.Sorkin, 55, was sentenced yesterday to spend five months in jail and five months house arrest, to be followed by two years of probation. He was also ordered to pay a $5,000 fine.
Tax

Somali Tax Preparers Accused of Seeking Unwarranted Refunds

The Internal Revenue Service and Minnesota tax officials are looking into 3,500 questionable tax returns filed on behalf of Somali immigrants.Eleven tax preparers, themselves Somalis, are suspected of taking advantage of the recent immigrants’ confusion about the U.S. tax code, language difficulties and blind trust, community leaders told the Associated Press. The state stopped payment on about $3 million in unearned refunds, claimed by tax preparers who inflated their clients’ income, created fictional dependents or made improper business deductions."I'm shocked.
Community News

BDO Seidman Sued by Banco Espirito Santo over $170 Million Fraud

Chicago-based BDO Seidman is being sued by Banco Espirito Santo International Ltd. over an alleged $170 million fraud that the accounting firm allegedly failed to uncover. Banco Espirito claims that BDO signed off on "obviously false financial statements," the Associated Press reported.BDO Seidman, the auditor for E.S.
Technology

New Scam Uses Email to Target Taxpayers

The California Society of Enrolled Agents is joining the U.S. Department of the Treasury and the Internal Revenue Service in warning the public of a new scam that attempts to trick taxpayers into revealing personal information such as Social Security numbers, bank and credit card numbers and passwords, and driver license information. Typically, the scheme advises potential victims that they are under investigation for tax fraud and liable for prosecution.
Community News

Former Enron Executive Pleads Guilty, More to Come

Paula Rieker, the former second in command of Enron Corp.’s investor relations division pleaded guilty yesterday to insider trading charges for cashing out stock options after hearing that Enron’s broadband unit would post big losses, the Washington Post reported.Rieker, 49, agreed to enter a guilty plea and to cooperate with the government’s ongoing investigation, the Securities and Exchange Commission stated and the Post reported. She was arraigned yesterday morning and was due to plead guilty before U.S.
Tax

E-mail Scammer Gets Stiffest-Ever Penalty for Online Fraud

A Houston man who fooled e-mail recipients into turning over 473 credit card numbers was sentenced Tuesday to almost four years in jail, one of the toughest penalties ever handed down for online fraud.U.S. District Court Judge Vanessa Gilmore in Houston gave Zachary Hill, 20, "one of, if not the longest-ever" sentences against an e-mail scammer, Justice Department spokesman Michael Kulstad told the Washington Post. Hill used a so-called "phishing" scheme to make his e-mail look like it came from Internet service provider America Online or PayPal, which eBay uses for online payments.
Tax

Lucent Agrees to a $25M Settlement; Ten Individuals Charged With Securities Fraud

The Securities and Exchange Commission today charged Lucent Technologies Inc. with securities fraud, and violations of the reporting, books and records and internal control provisions of the federal securities laws. The SEC also charged nine current and former Lucent officers, executives and employees, and one former Winstar Communications Inc. officer with securities fraud and aiding and abetting Lucent's violations of the federal securities laws.
A&A

USPS Offers Solution to Validate Mutual Fund Trades

Cleaning up the mutual fund industry is going to take more than good intentions on the part of traders. The U.S. Postal Service is suggesting the $7 trillion mutual fund industry make use of technology that would stamp the date and time on electronic transactions, making it impossible to sneak in a late trade.The mutual fund sector has been beset by scandal as it came to light that fund mangers were allowing some preferred trades to go through after the 4 p.m. close of trading for the day.
Tax

20 Ways You Can Detect Fraud

Here is a list of items to help you detect fraud in your company or a client's company. 1. Unusual BehaviorThe perpetrator will often display unusual behavior, that when taken as a whole is a strong indicator of fraud. The fraudster may not ever take a vacation or call in sick in fear of being caught. He or she may not assign out work even when overloaded. Other symptoms may be changes in behavior such as increased drinking, smoking, defensiveness, and unusual irritability and suspiciousness.2.
Tax

Stock Options Accounting Legislation Clears House Subcommittee

On Wednesday, the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, chaired by Rep. Richard H. Baker (LA), approved legislation that would preserve broad-based employee stock option plans and improve American competitiveness.H.R. 3574, the Stock Option Accounting Reform Act, introduced by Rep. Baker on Nov. 21, was agreed to by a voice vote with two amendments.
Community News

WorldCom Investors, Enron Employees Win Settlements

Two of the most stunning business collapses of the last few years produced hefty settlements for some of the victims this week.Citigroup, Inc. on Monday agreed to pay $2.65 billion to investors who claim the firm’s brokerage unit pumped up WorldCom despite their knowledge of massive losses at the company. The suit, which sought $54 billion, also alleged that Citigroup's brokerage arm, Salomon Smith Barney, offered big loans to WorldCom’s then-chief executive Bernard Ebbers in a swap for investment banking business.Citigroup, the world's largest bank, denies wrongdoing.
Tax

PWC Settles Warnaco Case for $2.4 Million

On Tuesday, The Securities and Exchange Commission instituted settled enforcement proceedings against The Warnaco Group, Inc., its former CEO, Linda Wachner, its former CFO, William Finkelstein, former general counsel Stanley Silverstein, and the company's former audit firm, PricewaterhouseCoopers LLP ("PwC"). Warnaco was charged with securities fraud for issuing a false and misleading press release about its financial results on March 2, 1999, and Finkelstein with aiding and abetting the company's fraud.
Tax

Skilling Ordered to Avoid Alcohol, Given Curfew

Facing more than three dozen counts of fraud and other crimes related to Enron’s 2001 collapse, Jeffrey Skilling has now been ordered to quit drinking, told to enter a rehab program and given a curfew by a federal judge.Skilling, 50, and his wife were involved in an April 9 melee in New York City, during which he accused other bar patrons of being FBI agents, attempted to pull the license plate off a car and lifted the shirt of a woman to see if she was wearing a wire.
Tax

IRS Offers Settlement for ‘Son of Boss’ Tax Shelter

The Internal Revenue Service announced today that taxpayers who invested in an abusive tax shelter commonly known as “Son of Boss” will have until June 21 to accept an IRS settlement offer to resolve their tax issues.“These transactions were developed and marketed by an interlocking network of commercial interests, including leading law firms, accounting firms and investment banks,” said IRS Commissioner Mark W. Everson. “Son of Boss deals had only one purpose – the elimination of tax.
Tax

Lesson from Quattrone Retrial: Don’t Cover Up Your Crimes

The retrial of Frank P. Quattrone suggests that prosecutors are focusing on the cover-up of the crime rather than the crime itself.Rather than mire a jury in the complexity of financial transactions and other details, prosecutors are filing charges connected with the straightforward question of whether the defendant lied to the government or hindered its investigation, the New York Times reported.

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