More Details on the Felony Charges Against Terry Gaouette, Former CFO of the Milwaukee Public Museum

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As reported yesterdaygaouette.jpg, the former CFO of the Milwaukee Public Museum has been charged with four criminal counts against him for his part in the raiding of the organization’s endowment fund.

Here is a summary of the criminal complaint against Terry Gaouette:

Count 1 – Theft By Officer – From March 1, 2004 and February 28, 2005, transferred money out of the endowment fund without the owner’s consent. Continue reading

The Milwaukee District Attorney’s Office Has Actually Charged Someone in the Milwaukee Public Museum Scandal!

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The Milwaukee county district attorney’s office has brought criminal [tag]misconduct[/tag] charges against Terry Gaouette, the former CFO of the Milwaukee Public Museum. He is charged with four felonies related to illegally transferring endowment funds and falsifying records. He could receive up to 28 years in prison if found guilty on all counts. Continue reading

John Grisham’s new book comes out today

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John Grisham’s most recent book is not a fictional crime thriller. Rather, it is the true story of a former minor league baseball player who spent eleven years in prison for a crime he did not commit. Although the story is non-fiction, Grisham says he found it as compelling as any legal thriller he has written.

The Innocent Man: Murder and Injustice in a Small Town details the case of Roy Williamson. He was once a promising baseball player who was drafted 41st out of 800 players chosen in the 1971 major league baseball draft. He played in the minor leagues until 1976, when arm injuries and alcoholism brought his career to an end.

Williamson went home to a life of drinking, womanizing, and signs of bipolar disorder. He couldn’t hold down a job, and had several arrests. He was charged with rape twice, but was found innocent in both jury trials.

In 1982, a cocktail waitress in his hometown was raped and murdered. Williamson and his friend Dennis Fritz were accused of the murder and put on trial. The authorities had no proof that the men committed the crime. There were no fingerprints at the scene and no eyewitnesses. The best piece of “evidence” presented by the prosecutor was a vague identification of them as the killers.

Both men were convicted of the murders, with Williamson receiving the death sentence and Fritz receiving a life sentence in prison. Eleven years later, they were both cleared of any involvement in the crime when DNA tests exonerated them. Those same DNA tests proved that the killer was actually the man who provided the identification of Williamson and Fritz at their trial.

Grisham’s book explores how the system denied these men their rights throughout their trial, and eventually robbed them of more than eleven years of their lives. They were released from prison in 1999, a mere five days before Williamson was scheduled to be put to death. He died of cirrhosis of the liver five years later.

Another former Enron executive is sentenced

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On Friday, Enron’s former executive in charge of investor relations, Paula Rieker, was sentenced to two years of probation. She could have received up to ten years in prison, but was given a lighter sentence because she has cooperated with the investigation of other Enron executives.

Specifically, Reiker was instrumental in the trails of Kenneth Lay and Jeffrey Skilling. She testified that Lay hid bad news from Wall Street, and that board members were upset at his personal financial gains from Enron. Reiker also testified that on two occasions, Skilling ordered that Enron inflate its earnings-per-share figures to meet or beat stock market expectations.

Reiker was one of 16 ex-executives from Enron who pleaded guilty to charges related to the company’s collapse.

Guilty Pleas in Frank Jude Beating Case

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U.S. Attorney Steven M. Biskupic has filed federal charges against two Milwaukee police officers who have agreed to plead guilty and testify against others in the Frank Jude Jr. beating case. Joseph Schabel was the first on-duty officer to respond to the 911 which reported the beating in Bayview, outside the home of an off-duty officer.

Schabel admits to kicking Jude in the head but lying about it. He is pleading guilty to depriving Jude of his civil rights by assaulting him and obstructing justice by lying to investigators. He has been suspended from the police department (and will be fired soon) and faces up to 20 years in prison. Continue reading

IRS Commissioner says CFO’s shouldn’t receive options

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Mark Everson, commissioner of the [tag]Internal Revenue Service[/tag], is proposing that corporations stop offering [tag]stock options[/tag] to Chief Financial Officers. The recent [tag]option backdating[/tag] problems are fueling his comments, and he says that CFOs are already rich and shouldn’t have to cheat companies out of more money by manipulating stock options.

Everson suggests that CFOs, general counsel, and non-executive board chairs should receive only fixed compensation. He says that the opportunity for huge gains from stock options makes it tempting for executives to manipulate them. The [tag]IRS[/tag] is considering changes to the tax code for executive compensation packages.

New SEC Guidance Regarding Errors To Be Reported on 10-Ks

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The Securities and Exchange Commission has issued guidance for companies that need to correct errors for prior period financial statements. At issue is materiality. While an error in one year may not be material, a build-up of similar errors over time may create a total error that would distort results materially if the error was corrected on current year financial statements.

A $10 million dollar error in each of 4 years may have been immaterial in each of those years, but the resulting $40 million total error could be material to this year’s financial statements. Two approaches have been used to deal with this situation:

  • Rollover approach (also called current period approach or income statement approach) – The error is quantified in terms of its effect on the current year income statement.
  • Iron curtain approach (also called the cumulative approach or balance sheet approach) – The error is quantified in terms of the cumulative amount by which the current year’s balance sheet is misstated.

Both approaches have drawbacks, so the SEC instructs accountants to determine whether or not an error is material based upon the larger result from these two approaches. In the first 10-K filed after this bulletin, companies must correct balance sheet errors by recording the culuative effect on the financial statements. (Instead of just restating prior year financial statements.)

Scam Busting: Why pick on MLMs?

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In researching multi-level marketing (MLM) opportunities, I found some common threads that bothered me. MLMs are generally legal, while pyramid schemes are generally illegal. Yet if the MLM business opportunities are legal, why would I be interested in researching them and calling them scams?

Even though these “businesses” may not directly violate any laws, they have common elements which disturb me. The first is their focus on recruiting new distributors. The MLMs achieve their legitimacy by having a bona fide product, but once someone becomes an independent sales representative, the focus moves to recruiting other distributors.

While reps may generally agree that a profit can be made simply by selling the products of the MLM, the real money is made in recruiting and encouraging those recruits to purchase packages of products. What started off as a low cost investment (most companies have minimal sign-up fees) can easily become a costly venture.

The second big reason I have focused on the MLM businesses is because of the deception that I perceive in the companies. It is a common practice to parade around a copy of a very large commission check earned by someone in the upper echelons of the selling ranks. No mention is made of how long it took the person to get to that commission level, what type of recruiting had to be done, what a normal commission check is like, or what expenses the salesperson inccurred in connection with that commission check.

Participants are encouraged to not think critically about the information presented to them. Quick decisions without full information are encouraged. Without the full picture, a potential recruit can’t fully evaluate the MLM opportunity.

Bank of America sends Matthew Shinnick to jail

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Is this a fraud committed against an innocent citizen, or what?

Clark Howard highlighted this story on his website. Matthew Shinnick went to Bank of America to verify the validity of a check he received for someone who bought two bikes from him through CraigsList. The bank said that the account the check was drawn upon was valid, so Matthew cashed the check.

BoA employees then called the police to arrest Shinnick, because the check was actually a fraudulent check drawn on a legitimate account number. Matthew had no idea that his buyer presented him with a bad check, which is why he went into the bank to inquire about the check in the first place. He ended up spending the night in jail, and had to spend $14,000 in legal fees to clear his name.

Matthew asked BoA to cover his legal fees because this situation occured due to their error. The bank refused to pay the legal fees, and now Clark Howard is urging customers to close their BoA accounts, since the bank clearly does not care about its customers.

Clark Howard talked to bank officials, and they still refused to pay the legal bill. Clark even offered to pay $7,000 of the fees if the bank would also pay $7,000. They refused the offer.

Clark’s listeners have reported withdrawing $20 million from their Bank of America accounts so far.

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Cingular Wireless files suit against a company involved in the H-P pretexting case

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On Friday, Cingular Wireless filed a lawsuit against CAS Agency Inc. in U.S.District Court in Atlanta. Cingular claims that the company fraudulently accessed the records of one of its cutomers during the [tag]investigation [/tag]of the Hewlitt-Packard board of directors information leak.

Specifically, Cingular says CAS Agency illegally accessed the records of CNET reporter Dawn Kawamoto, one of the reporters who wrote about discussions among members of H-P’s board.

Also included in the lawsuit are 100 unidentified companies and 100 “John Does” who have attempted to obtain and sell customer records. This lawsuit follows the Verizon Wireless lawsuit filed on Thursday against 20 unidentified people who fraudulently obtained their records in cnnection with the H-P [tag]pretexting[/tag] scandal.