On Making Money As a Fraud Investigator

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The recent publication of a report detailing the results of an investigation of Usana Health Sciences done by Barry Minkow, Fraud Discovery Institue, and other professionals has prompted some criticism.

One criticism I’ve seen is the fact that *gasp* the Fraud Discovery Institute is a for-profit corporation and there was a paying client in the Usana matter.

When did it become wrong to get paid for investigating fraud? You see, I investigate fraud. That’s my job. It’s how I make a living. I’m good at it. Because I’m good at it, people are willing to pay me money to do it. It is up to me to maintain objectivity in my investigations and reporting. Even when I have paying clients. Continue reading

Class action lawsuit against State Farm is blocked

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Today a judge did not allow a Hurricane Katrina class action lawsuit against State Farm Insurance to proceed. The judge said that even though the lawsuits appear to have similar facts (i.e. all properties were destroyed during Hurricane Katrina) they cannot be declared a class because there are many factual differences between each case.

The “class” status was sought by policyholders who wanted to speed up the process of resolving hundreds of individual lawsuits against State Farm.  The company has denied the claims, generally because its policies cover damage from wind but not rising water (which includes storm surge).

Interesting Quote From One of Usana’s Lawyers

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In response to the investigative report about Usana Health Sciences issued by Barry Minkow and Fraud Discovery Institute, Dave Andereton of the Deseret Morning News reports the following:

“Minkow is simply looking to line his pockets based upon a hodgepodge of misinformation, half-truths and outright lies,” said D.J. Poyfair, an attorney for Usana. “Usana is regularly identified as the gold standard in network marketing by state and federal regulators.” (emphasis mine)

Dare I ask D.J. Poyfair to back that statement up with proof? Exactly which state and federal regulators have said such things, and exactly when were they said, and to whom were they said?

Usana Sues Barry Minkow

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UPDATE: The judge in this case quickly threw out all of Usana’s claims against Barry Minkow, except one. That final cause of action was settled with Usana paying Barry Minkow $200,000. In exchange, Minkow agreed to remove from the internet all materials about Usana under his control.

Usana Health Science, the multi-level marketing company investigated by Barry Minkow and team (that includes me!) has filed a defamation lawsuit against Barry in federal court. Naturally, the company is quick to point out that Minkow was a convicted felon who served time in prison for securities fraud. Barry has turned his life around, becoming a Christian pastor and assisting law enforcement in investigating and shutting down multiple investment scams. The FBI even has Barry train its employees on identifying and investigating white collar crime.

Usana is claiming that Barry misrepresented details in his report in order to make a profit off a drop in stock prcie, since he holds put options for Usana stock. (Incidentally, the stock did fall 15% yesterday to $49.85.) Continue reading

Insurance agent guilty of criminal counts related to identity theft

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Former American Family Insurance agent Nancy Paquette was found guilty of 104 criminal counts – 52 counts of forgert and 52 counts of identity theft. Paquette established dozens of fraudulent insurance policies in order to receive commissions and bonuses, as well as to remain one of the company’s top agents.

Paquette’s defense was that organized crime was behind the insurance policies, but those “people” could not be located by law enforcement. She claimed that they scammed her into taking out these policies. Her lawyer says there was no way she would risk a successful 17-year career on these policies, which only amounted to about 5% of her business.

She used $200,000 of her own money to create these insurance policies, some for actual customers and others for people she had never even met. For these policies, Paquette received $265,000 in commissions.

She faces 200 years in prison at her sentencing on April 30.

Milwaukee teens “on probation” running around unchecked

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This news really hits home with me. I was a probation officer a long time ago. I supervised adult offenders, most of whom were on probation for domestic violence, other physical assaults, or drug dealing. I had a few on parole for more serious offenses. (We were required to call them “clients” back then. Referring to them as criminals might hurt their feelings.)

I’ve always believed that probation is only a bandaid on a larger problem. In theory it’s great: You get a second chance to live right while under the supervision of law enforcement. In reality, it’s quite often a joke: Offenders know the probation officer has little power to enforce the law with jail overcrowding and certain violent offenses as priorities.

Even though the system is far from perfect, it is sad to see what little it does offer being squandered. Children in Milwaukee are waiting months to receive supervision, and in the meantime are running the streets. Recently a 16-year-old boy was convicted of homicide by negligent operation of a vehicle. He received probation in the Serious Chronic Offenders Program (which should tell you something about his record), but waited over two months to start the program.

There are two big problems with this:

  1. The children are not receiving the guidance and supervision they often desperately need.
  2. Some are committing new crimes while unsupervised.

The chief probation officer at the Children’s Court Center say there are too many cases for her probation staff. She says that they each supervise 40 to 44 children. (That’s actually not much, if you’ve ever worked in the field.)

Here’s a big problem: The judges didn’t know there was a “waiting list” for these probation programs. They were sentencing the kids to probation, thinking their supervision would kick in right away. Had they known it would not, they likely would have put some of the more violent kids in secure detention to protect society.

Plastic Surgery Patient Starts Website and Successfully Defends Defamation Claim

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Plastic surgery patient Georgette Gilbert was unhappy with her results, and started a website called My Surgery Nightmare. On the site, she detailed her experience with Dr. Jonathan Sykes, including before and after photos. She had an endoscopic browlift, lower blepharoplasty, cheeklift and fat injections…and I must say that the “after” pictures are scary.

Here is a snippet of what Georgette wrote on her site: Continue reading

Stock Option Backdating: What’s the Big Deal?

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The list of companies involved in stock option backdating and related investigations continues to grow. The Wall Street Journal currently lists more than 120 companies under scrutiny, including the likes of UnitedHealth, Broadcom, Apple, and Home Depot. These companies are either under investigation by the Securities and Exchange Commission (SEC) or the Justice Department, or they have issued restated financial statements.

Is anyone surprised anymore when a company ends up on this list? This seems to be the scandal that never goes away, and people aren’t too shocked when a new company is added to the list. The crux of the scandal is the timing of stock options. But calling it “backdating” makes the problem sound far more innocuous than it really is.

As we know, stock options are a popular corporate incentive, generally meant to give executives a vested interest in the company’s stock performance. Options are issued, giving the employee the “option” to purchase shares of the company’s stock at a specified price. This exercise price is usually equal to the market price of the stock on the date the options are granted, meaning that the options are “at the money.” Continue reading

Wisconsin Governor Jim Doyle Wants to Raise Taxes By $1.74 BILLION

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Remind me again…. didn’t he say in his re-election campaign that he wasn’t going to raise taxes? Sounds like another lie from the Doyle administration…

Here’s what’s in store for us:

  • An additional $630 per each of the 2.76 million income tax filers (but gosh, how beter could this money be spent anyway)
  • $506 million from the $2.02 per pack tax on cigarettes
  • $417 million from the new tax on hospitals
  • $272 million from the tax on oil company profits (not that this will ever happen, but still, he wants it)
  • $142 million from doubling the real estate transfer fee paid
  • Increased “fees” of $376.2 million (but that’s not really a tax, is it?)

And if you’re not tired of bending over yet, property tax bills are probably going to go up by about $350 million at the end of this year… Please sir, may I have another?

Oh wait… they already gave it to us again, by having Doyle’s spokesman Matt Canter say that “… this budget provides targeted tax relief for the middle class…” Yeah, this is what tax relief really looks like.