19 Feb

Whistleblower website forced off the internet

Wikileaks.org, a site that allowed people to anonymously leak incriminating documents, has been shut down by its web host, Dynadot. Dynadot, shut it down and locked the domain name so it can’t be transferred to another host, pursuant to an agreement settling a lawsuit against it.

Someone posted documents on the site claimed to show that a bank in the Cayman Islands was engaged in money laundering and tax evasion. Julius Baer, the parent company of the accused bank brought a lawsuit against Dynadot after unsuccessfully trying to get the site to remove the documents.

Instead of defending itself in the lawsuit, Dynadot decided it was easier to shut down the site. But this I think is even more interesting: Dynadot is turning over information about Wikileaks, including IP addresses and information associated with the site. Read More

18 Feb

Congratulations Greg Farrell!!!

Greg Farrell, investigative reporter for USA Today was selected as one of the 100 Most Influential People in Business Ethics. Here’s what they said about him:

Greg Farrell (Journalist, USA Today, and respected business author)
greg-farrell.JPG

As Lynn Brewer, the self-proclaimed “Enron Whistleblower” traveled the world, charging upwards of $13,000 per speech and being feted by the Nobel Foundation, Farrell (author of the book, Corporate Crooks: How Rogue Executives Ripped Off Americans… and Congress Helped Them Do It!) took it upon himself to gumshoe her experience. Farrell’s research, including interviews with two dozen former Enron executives resulted in a USA Today piece that exposed Brewer herself as a fraud, which served as a powerful reminder that even the “business ethicists” may not always be what they seem.

I had the pleasure of hearing Greg speak at the 2007 Fraud Conference put on by the Association of Certified Fraud Examiners. He was fantastic and I’m happy to see him on this list.

18 Feb

Lawsuit Against Bank Raises Third-Party Issues

A lawsuit against Wachovia Bank by a group of defrauded consumers raises some interesting issues related to third-party fraud liability. The question for consumers, investors, and executives is: What is the threshold for liability in fraud cases? What knowledge or actions had to be present in order for a person or company to be held liable for fraud?

In the old days, I think the answer to these questions was a bit clearer for the lay person. The person or entity committing the fraud was the one responsible and the one liable to repay victims. But as time goes on, victims have a tendency to look further and further for a party who can repay them.

Victims are looking for deep pockets. And the fact remains that those who steal from others almost always spend it all, so there is nothing to recover. The victims then turn to those with peripheral knowledge or participation and those with liability insurance or other deep pockets that may cover their losses. Read More

17 Feb

Buying Your Way to Director at Usana Health Sciences

Is it possible to buy your way to the top of the pyramid at Usana (NASDAQ:USNA)? Who would even want to? Well the answer is simple… those who are at the top of the pyramid have a much easier time recruiting new marks into the scheme. So buy your way to the top, and you’ll likely get more publicity and more opportunities to recruit new victims. More victims equals more commissions.

Here’s how it would work, and this is compliments of an anonymous writer who wanted to share the methodology with my readers: Read More

15 Feb

Former CEO of Refco Cries His Way to a Guilty Plea

Phillip Bennett, the former CEO of Refco Inc. pleaded guilty today while crying… Refco was one of the world’s largest commodities brokerages, but it went down in flames a few weeks after going public in August 2005.

The reason? Management concealed the fact that a company controlled by Bennett owed Refco $430 million. The SEC says that Refco hid losses in the financial markets and made false filings from the late 1990s onward.

Bennett pleaded guilty to 20 charges of conspiracy to commit securities fraud, wire fraud, bank fraud, money laundering, and false SEC filings. He could get sentenced to 315 years in prison. Since he’s now 59 years old, analysts suspect he’ll spend the rest of his life in prison. And the government is taking $2.4 billion from him.

I’d cry too if I had to give up that much money and spend the rest of my life in prison. But if you do the crime, you do the time. And this seems to be a fraud scheme that went on for a long time and cost a lot of people a lot of money.

15 Feb

Self-Promotion: If you don’t ask for it, you won’t get it

You’re trying to develop your business and increase your name recognition and your professional profile. Do you even know where to begin? One of the most basic steps is asking for the opportunity… asking to be able to promote your company, asking others to promote you, asking to be paid more, asking do to something that gets you exposure…

Locally, I have been referred to as the queen of shameless self-promotion, and I can’t argue with that too much. I started my business from scratch, with literally no money, no clients, and no spouse to float me financially. Ever hear someone say “you eat what you kill”? Well that was definitely true for me.

Early on, I had the chance to meet E. Kelly Hansen (now E. Kelly Fitzsimmons) and she was a local media darling. She ran her own computer security firm and you couldn’t open the Business Journal without seeing a picture of her or a quote from her. I decided that I wanted to be “the Kelly Hansen of fraud.” I wanted my mug in the newspapers and in the magazines. Read More

13 Feb

From White Collar Crime Fighter: Why would the founder of a successful financial institution steal from it – risking all?

The former CEO of the First National Bank of Northern Kentucky was indicted in connection with a $4.5 million fraudulent loan scheme that he allegedly facilitated. Richard Thomas, who founded the bank in 1992, was charged with conspiracy to commit bank fraud and aiding and abetting the submission of false loan applications.

Details: According to court documents, one of Thomas’s longtime bank customers introduced him to John and Linda Van Winkle and Thomas subsequently began acting as their personal banker and the banker for their two businesses. Those “businesses,” Design Services and Koolsuit Inc., held patents for air-cooled bullet-proof vests and race-car driver suits. The patents, the value of which was undetermined, were nonetheless used to secure several of the 19 fraudulent loans made to the Van Winkles as well as to Ms. Van Winkle’s two daughters, one of whom was a fulltime law school student at the time. Read More

13 Feb

Overstock.com: Pretend Accounting Measures Muddy the Waters

Patrick Byrne Overstock Conspiracy TheoryI present for you today one (just one) example of the accounting shenanigans at Overstock.com Inc. (NASDAQ:OSTK) to demonstrate the deception of management. This accounting concept is quite elementary, and it is called EBITDA.

EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization

Accountants and investors generally agree on what all of those items (earnings, interest, taxes, depreciation, amortization) are. So the computation of EBITDA is quite simple, if presented with accurate and complete financial statements. Read More

12 Feb

Overstock.com: Year-End Revenues Fall Far Short of Byrne’s Hype

If Patrick Byrne is good at anything, it’s hyping Overstock.com (NASDAQ:OSTK) when the company is not deserving of the hype. To hear him tell it in real time, everything is rosy and the company is doing stellar and investors will surely be impressed. (It’s only a couple of years later that he admits to “screwing up” the company.)

The fourth quarter earnings release showed quarterly revenue up 2% to $300 million, and annual revenue down 2% to $768.8 million. Neither of these are particularly impressive.

And they are even less impressive when you look at them in conjunction with an interview Patrick Bryne gave CNBC on December 7, 2007. According to the company’s press release about the interview: Read More