Dunn resigned after the company's board of directors began investigating his personal conduct. According to some reports, the investigation focuses on allegations of misuse of resources and an inappropriate relationship with a 29-year-old female employee. Dunn's severance package could be as high as $3.35 million, depending on whether his departure is deemed "voluntary" or "involuntary." Further details are expected to emerge upon public release of his severance agreement.
]]> In another recent case of misconduct, former Hewlett-Packard CEO Mark Hurd received a severance package of $30 million in August 2010 following an internal probe of expense-account irregularities. The allegations involved a female employee who claimed Hurd harassed her. The investigation found that Hurd falsified some reports to hide expenses involving meals and travel with the employee. Hurd departed a few weeks later, maintaining his innocence.CEO cases that involve criminal charges can lead to steep sanctions, including fines and jail time. Many will remember Martha Stewart's brush with infamy a few years ago. She was forced to resign from her namesake company and served five months in jail for lying to federal prosecutors about insider trading of another company's shares. She also settled a civil case with the SEC for nearly $200,000. She has since rejoined the company's board of directors.
Some question whether CEOs are punished more severely than other criminals to make an example of them, due to their public stature. Dunn's case will bear watching, especially if it is determined that illegal activity was involved.
Source: Yahoo! Finance.com, "Best Buy's Dunn departure sparks speculation," 4/13/12.
]]>Prosecutors alleged that the attorney organized a scheme to improperly secure legal immigration status for thousands of illegal aliens. His firm applied for legal status by filing fictitious letters claiming that the illegal aliens had been sponsored by U.S. employers. The employers were often shell companies created for the scheme. Shell company "employees" signed off on fictitious filings, and accountants created fake returns for shell companies.
The firm accepted millions of dollars in compensation from immigration clients over more than a decade. Prosecutors said that the applications, nearly all of which contained false or fictitious information, were handled by several firm offices operating under different names.
]]> The New York bar suspended the attorney from practicing in 2004, but he continued to practice by removing his name from filings. He also continued to operate the firm from Canada, hiding income from the scheme in a separate bank account tagged for other purposes. The firm finally closed shop after law enforcement obtained warrants to search multiple premises in 2009.As many as 27 people have been charged for involvement in the scheme. The attorney admitted the allegations were true in pleading guilty to conspiracy to commit mail fraud, wire fraud, and make materially false statements in immigration applications. He agreed to forfeit $2.5 million and faces up to eight years and three months in prison.
Source: Wall Street Journal, "Suspended NY Lawyer Pleads Guilty In Immigration Fraud," 4/2/12.
]]>Prosecutors accused the 92-year-old woman of several crimes, including helping people commit suicide. She admitted to selling so-called "suicide kits," which contained supplies that would help terminally ill people end their lives. Her attorney characterized her action as one of compassion.
]]> Last year, federal investigators raided her home in order to gather evidence. Allegedly she was involved in six assisted suicides.Currently, there is no federal law regarding assisted suicides. In an effort to stop the woman from assisting in further suicides, prosecutors agreed not to charge her in state court for her involvement in the six deaths in exchange for her guilty plea to charges of tax evasion.
The tax charges date back to 2007. As part of the plea deal, she admitted to failing to file taxes on more than $150,000 in income, including from the sale of the suicide kits.
According to the terms of her sentence, she is on supervised probation for five years. She is also to refrain from any participation in suicides, including the manufacture of the kits, or as a consultant to anyone seeking to commit suicide. She also must work with the Internal Revenue Service to determine the amount she owes in back taxes and a plan to pay it back.
Source: CBS News, "Woman, 92, sold 'suicide kits,' gets sentenced for tax evasion," Barry Leibowitz, May 9, 2012.
]]>An investigation by the Medicare Fraud Strike Force led to defendants in seven cities throughout the United States being indicted on charges of committing fraud against the Medicare system, which could have resulted in as much as $450 million in fraudulent claims.
]]> Many of the 107 people charged were doctors, nurses and other licensed medical professionals. Ambulance owners, office managers, patient recruiters and patients themselves were also accused of submitting fraudulent Medicare claims.In some cases, it is alleged that the elderly, mentally ill and drug-addicted were recruited from homeless shelters and nursing homes so that the accused could submit fraudulent claims on their behalf.
The fraudulent behavior alleged in some of the cases includes:
These are all serious charges that could carry jail time. However, it is very important to remember that merely being charged with a crime does not always lead to a conviction. With an aggressive criminal defense attorney on your side, it is possible to fight charges of healthcare fraud and avoid jail time.
Source: Bloomberg Businessweek, "107 Charged With $452M in Medicare Fraud," Seth Stem, Laurel Brubaker Calkins and Margaret Cronin Fisk, May 2, 2012
]]>The charges against him were brought in federal court, which generally carries greater consequences than criminal charges brought in state court. Both the FBI and the IRS were involved in the investigation of the alleged fraud scheme.
]]> The charges stem from a purported real estate development plan in China. Walker apparently enticed approximately 30 investors from four different states to contribute money to his companies in order to develop land in China for residential uses, including estate properties, townhomes and patio homes. In fact, Walker collected more than $2 million from these investors.Walker established two companies which were intended to actually develop the land. Whether any progress was made in the development of the real estate was not reported, but the prosecution was able to prove to the U.S. district judge that Walker used investors' money for personal items, including a luxury vehicle and a boat.
Walker was convicted of wire fraud and tax evasion and was sentenced to 45 months and 36 months respectively. These sentences will run concurrently. He must also make restitution to the investors who were defrauded.
Source: Miami Herald, "Jeffrey Walker sentenced for fraud scheme," May 2, 2012
]]>He then set up a legal defense fund called the Floyd Fairness Fund. This fund was set up as a trust for his benefit, as opposed to a non-profit corporation. The fund raised more than $1 million in order to disprove the scientific process used to test him. Federal authorities are now investigating the possibility of alleged fraud committed by Landis with respect to his legal defense fund.
]]> In addition to Landis' own funds, many individuals donated to the fund. Though the fund closed its books five years ago, witnesses have been subpoenaed to testify before a grand jury during the last year concerning the fund.In 2010, the fund's administrator stated that all of the money went towards legal expenses, and that Landis did not have check-writing authority.
Even with this large criminal defense fund, Landis was eventually stripped of his Tour de France title. Since then, Landis has tried to sign on with a team, but no one would hire him.
Whether this criminal investigation into Landis' financial history will come up with evidence pointing to fraud is something that Landis himself must be concerned with. If it does, he may need another criminal defense plan to prove his innocence from inappropriately tampering with the funds. If criminal fraud charges are not brought, even simply the accusations of fraud may continue to haunt this famous athlete for years to come.
Source: ESPN, "Feds investigate Floyd Landis' fund," Bonnie D. Ford, April 26, 2012
]]>According to experts this is the largest construction fraud settlement in New York's history. The company will not be charged criminally after an agreement was made with federal prosecutors in Brooklyn. The man who led the company plead guilty to fraud charges on Tuesday in United States District Court in Brooklyn. The former executive plead guilty to conspiracy to commit mail fraud and wire fraud and faces up to 20 years in prison.
]]> Investigators and construction executives agree that that the overbilling fraud scheme is widespread and commonly goes by the name "eight plus two." The practice involves paying labor foremen for two hours of overtime that they do not work as an incentive to stay on a construction project.The settlement agreement between the construction company and the U.S. attorney in Brooklyn is known as a "deferred prosecution agreement." The investigation, conducted by the F.B.I., the inspector general of the Port Authority, and the inspector general of the United Stated Department of Labor began in 2009.
The district attorney can reopen the case if the company violates the agreement or commits additional crimes. Ironically, the construction company also renovated the United States attorney's office in Brooklyn, which oversaw the investigation, negotiated the deal, and now houses the court papers outlining the charges.
Source: New York Times, "Construction Company Admits Fraud Scheme," William K. Rashbaum, April 24, 2012.
]]>The agent had been charged with fraud last year for supposedly stealing millions of dollars from his tax clients. The pretrial hearing for the fraud charges was supposed to begin on March 19.
After working for the IRS, the former agent established a tax preparation business for wealthy clients. According to the fraud complaint, he purportedly filed returns stating substantially lower levels of income than what was accurate and directed his clients to deposit their tax money into his accounts with the promise that he would forward it to the state and federal tax authorities. Between the embezzlement and tax fraud, authorities believe former IRS received over $11 million.
]]> When two former clients came forward to testify against the former agent for fraud charges, he allegedly arranged for a former employee to kill the witnesses. According to the affidavit of an FBI agent, the former IRS agent offered to pay his former employee $100,000 for the killings and would arrange for his limo driver to coordinate the payment. The limo driver has been charged with conspiracy to tamper with witnesses.This story provides a cautionary tale of how tangled things can get when someone is involved in white collar crimes like fraud. No matter the original intentions, things often easily spiral out of control and people find themselves in way over their heads.
Source: Fox News, "Calif. tax preparer accused of ordering hit on 2," 3/5/12.
]]>It should come as no surprise, then, that identity theft has been the top consumer complaint for 12 straight years.
According the FTC, the most common complaint related to identity theft - 27 percent of identity theft complaints - involves personal information being stolen and used on government documents in order to fraudulently obtain government benefits, such as filing for Social Security using someone else's SSN.
]]> The second most common type of identity theft reported by consumers to the federal agency is credit card fraud. Credit card fraud is followed by the third most common type of identity theft, which involves bank, phone or utility fraud.As technology continues to grow, the FTC expects that instances of identity theft will continue to increase, as will a number of other common Internet crimes.
The second consumer complaint to the FTC this year involved bad debt collection, followed by scams involving prizes, sweepstakes and lotteries.
Source: CNN Money, "Identity thefts tops list of consumer complaints," 3/4/12.
]]>Identity theft is typically divided into the following categories:
For example, in a recent case, a man inadvertently became his own identity thief when he made a number of large, routine purchases online, and in a couple of different states. This action appeared suspect to his bank, caused the financial institution to overreact and close his account. The end result was a significant drop in his credit rating - all because his bank thought he was an identity thief.
Related resource: The United States Department of Justice, "What Are Identity Theft and Identity Fraud?"
]]>The study also uncovered a number of other interesting tidbits about patterns seen in securities fraud cases in 2011:
Accounting Violations. Fewer cases involved violations of accounting principles- decreasing to 45 percent compared to almost 70 percent the six years prior.
Securities Class Actions. Fewer class actions were settled, falling to only 10 percent, compared to nearly 30 percent the year before.
]]> Institutional Plaintiffs. Fewer cases had institutions as the lead plaintiffs, which means that more individuals were suing than companies.Case Length. Cases are being resolved more quickly, lasting on average only 1.3 years. That is 32 percent shorter than the average length for the five prior years.
Underwriters & Section 11. More cases involved underwriters, in fact matching the all-time high of 26 percent of cases. The fact that a quarter of the cases settled in 2011 dealt with underwriters, can be traced back to the fact that most were filed in 2007 or 2008, which were higher years involving Section 11 claims. Most likely this number will be high for another year as the rest of these Section 11 and underwriter cases are settled.
Credit Crisis Cases. Fewer cases related to the credit crisis were filed in 2011, but an increasing number were settled. They account for 10 of the 65 settled this last year. But on a whole, the credit crisis securities cases settle a slower rate than other securities fraud cases.
Source: Insurance Journal, "Securities Fraud Settlements in 2011 Were Lowest in Decade," 3/14/12.
]]>A study conducted by Stanford Law School and Cornerstone Research discovered that only 65 security fraud settlements were approved by the courts in 2011. Those settlements totaled $1.36 billion. While that number still seems large, compare it to 2010, which saw approval of 86 settlements totaling $3.21 billion.
The largest single settlement in 2011 came from banking giant Washington Mutual's agreement to pay $208.5 million.
]]> But the question remains, what do 2011's record-low numbers means for security fraud prosecutions in 2012?One business professor noted that recent increases in enforcement activity by the Securities and Exchange Commission (SEC), coupled with whistleblower lawsuits and large settlements in the works with companies like AIG, could result in a larger number of private settlements.
AIG has agreed to settle claims of accounting fraud and manipulating stock prices for a whopping $725 million. It is also believed that a number of other settlements will top $100 million each, including those involving Lehman Brothers, Motorola, and bank National City Corporation.
Despite the lower number of settlements seen in 2011, more enforcement cases (735) were filed by the SEC last year than in any previous years, which, of course, suggests that a number of these white-collar criminal cases may settle in 2012.
Source: Insurance Journal, "Securities Fraud Settlements in 2011 Were Lowest in Decade," 3/14/12.
]]>The Department of Financial Services (DFS) has issued a regulation that allows regulators to "search for and ban doctors who engage in dishonest practices" with the state's no-fault insurance payment system. Authorities are concerned that dishonest doctors and "medical mills" submit bills for reimbursement for treatments that never occurred or that were unnecessary in the first place.
]]> According to the DFS, 135 medical providers have already been flagged as possibly committing health care fraud, due to suspicious billing behaviors. Letters are being sent to all of these medical providers asking for more information. Medical providers that do not respond to the inquiries could be banned from the no-fault system altogether.Governor Cuomo noted that "The state has no tolerance for medical providers or doctors ripping off the system. This affects all New Yorkers because we all pay the consequences with higher insurance premiums."
Source: Insurance Journal.com, "N.Y. Unveils Plan to Shut Down Fraud Docs, Medical Mills."
]]>Because of the increasing spotlight placed on the health care debate, it is no surprise that state and federal agencies are quick to allege and prosecute for health care fraud.
And given that we recently blogged about how government authorities reported recovering over $4.1 billion in fraudulent Medicaid and Medicare claims, it looks as if the prosecutions are succeeding - overzealous or not.
But at what price to those accused of health care fraud?
]]> For one woman, it could mean 303 years in prison. The 49-year-old owner of a neurological services company was accused of billing insurance companies and Medicare for services that were not actually administered. A jury convicted her of 26 counts of health fraud and on eight counts of falsifying patient health care records. Given that she was convicted on so many counts after a three-day jury trial, this is probably not the case of an overzealous prosecution. But it still comes with very strict consequences.Prosecutors of white-collar crimes have been pushing longer prison sentences and increased fines for those convicted of health care fraud in hopes that it will continue to deter future fraud from occurring, but the question remains whether innocent people are being deemed as criminals simply because they were caught up by the complicated billing systems created by insurance companies and federal agencies.
Source: Insurance Journal.com, "Va. Woman Faces Maximum of 303 Years in Prison for Healthcare Fraud," 3/19/12.
]]>The New York legislature has decided to put the brakes on these fraud schemes. Last week, the state Senate passed three bills that aim at cracking down on auto insurance fraud.
]]> Under the current law in New York, auto insurance companies cannot cancel auto insurance policies even if fraud occurs. Under one of the proposed bills, this would change. Insurance companies would be able to retroactively cancel an auto policy within 60 days if the initial premium payment was rejected (because it was a bad check, unauthorized account or stolen credit card). The majority of other no-fault states already allow for retroactive cancellation.The second bill would make staging a motor vehicle accident a felony. Conviction under this law could result in up to seven years in prison.
The third and final bill would make "runners" illegal in New York. Runners are commonly used in New York to find "clients" or "patients" to receive unnecessary medical care. Under the bill, hiring a runner would be a felony that could result in up to four years in prison.
The bills are currently sitting with the New York State Assembly.
Source: The Insurance Journal, "N.Y. State Senate Passes Auto Insurance Fraud Measures," 3/23/12.
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