Enron trial: Lay and Skilling to take the stand

The trial of former Enron executives Jeffrey Skilling and Kenneth Lay will continue this week, with the prosecution expected to wrap up its case. However, according to the Wall Street Journal:

…there has been no smoking gun — no emails or incriminating papers — conclusively tying the defendants to illegal acts.

The prosecution’s case has been laid out by former executives who have testified about illegal deals to hide Enron’s ailing finances. The witnesses say that Skilling and Lay either directed or knew about the various schemes.

Ben Glisan Jr., the former treasurer of Enron testified about some of the schemes. According to the Wall Street Journal, he testified that:

…he spoke with Mr. Skilling in 2000 of a plan to use Enron stock to absorb losses on company investments through off-balance-sheet entities known as the Raptors. An outside partnership, run and partly owned by Enron’s then-chief financial officer, Andrew Fastow, also took part in the Raptor deals.

Glisan also testified that he told Skilling about a feature of the partnership that helped Enron hide millions of dollars of losses, and that Lay “giggled” about the plan.

The defense case will likely rely heavily on testimony from Skilling (former president) and Lay (former chairman).

More on the Red Cross and Hurricane Katrina

Accusations of corruption are still lingering for Red Cross volunteers. They are being accused of diverting relief supplies, failure to follow Red Cross procedures for supply tracking and distributions, and use of felons as volunteers (which is against Red Cross policy).

Specific problems include the disappearance of:

  • rented vehicles
  • generators
  • 3,000 air mattresses
  • computer equipment that could be used to add funds to debit cards

Estimates of the dollar value of misappropriation are not available, but it is known that the Red Cross received about 60% of the $3.6 billion donated by Americans. The investigation is being done by the Red Cross ethics and compliance department.

Read my article about the potential for financial statement fraud related to Hurricane Katrina.

Former Milwaukee Police Sergeant appeals his demotion

Corstan Court was the first supervisor on the scene of the October 2004 Frank Jude Jr. beating by off-duty police officers. Chief Nannette Hegarty demoted Court to officer because he failed to perform the duties of a supervisor. Namely, he left the scene without telling anyone, did not separate witnesses and suspects, did not request additional officers to the scene, and did not make any arrests. Hegarty said:

He is not being punished because he didn’t do everything perfect. He is being demoted because he didn’t do anything right at the scene that night.

Edited to add: The demotion was upheld this afternoon by the police and fire commission.

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Internet phishing at tax time

Identity theft by people posing as the Internal Revenue Service is on the rise. Hundreds of thousands of emails purporting to be from the IRS have been sent to targets, asking readers to go to a site that mimics the look of the IRS site. They are then asked to give sensitive personal financial information.

The IRS says that the phishers are generally people outside the U.S., and that they have confirmed 12 websites in 18 different countries using a scam like this.

The IRS is directing taxpayers to a page on the REAL IRS website, which gives information on the scams.

IRS audit of Greenpeace confirms non-profit status

In 2003, Public Interest Watch (a group that calls itself a watchdog of non-profit groups) wrote a letter to the Internal Revenue Service accusing Greenpeace of money laundering and other crimes. The letter accused Greenpeace of laundering $24 million in tax-deductible contributions by diverting them to a related entity that held protests against the Iraq war, an oil tanker and a nuclear-power station.

In September 2005, the IRS finally began an audit of the U.S. division of Greenpeace. Greenpeace has just received a notice from the IRS, indicating that they still qualify for exemption from federal income taxes as a non-profit.

PIW has received funding from Exxon Mobil Corp, among others. Greenpeace is known for blocking the path of oil tankers, and now the speculation about the ties between the audit and the oil giant begins.

Exxon Mobil denies any involvement in the report to the IRS.

Accounting Problems at GM; Last Year’s Losses Increase

The board of directors of General Motors Corp is asking for an investigation into newly revealed accounting errors which have delayed the filing of its annual report. The SEC filing of its 10-K will be delayed because of accounting errors found in the residential mortgage business of GM’s finance arm, General Motors Acceptance Corp. In addition, other accounting mistakes have been found, and these will cause the company to restate earnings from 2000 to 2005.

Texas and Oklahoma wildfires and financial statement fraud

The Oklahoma CPA Society recently asked me to pen a piece about the potential for financial statement fraud related to the recent wildfires. They printed it in their newsletter, OSCPA Wire.

Any natural disaster creates opportunities for fraud and that’s exactly what recent wildfires have done. Dishonest executives have a chance to manipulate their financial statements following fire losses and no one may detect it.

You can read the full article here.

Parents and Son Indicted on Federal Money Laundering Charges

Christopher Vnuk and his parents, Stephen Vnuk and Sharon Vnuk have been indicted by a federal grand jury on money laundering charges. Money from trafficking high-grade marijuana was allegedly laundered through purchases of vehicles. The parents are also alleged to have purchased items on credit cards, and used drug money to pay the credit card bills and home equity loans.

One particular incident allegedly includes a home equity loan to purchase a $66,685 Mercedes Benz for the son’s use. The bulk of that loan was paid off with drug money.

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