Another Twist to the Bielinski Brothers Story

Last week’s scheduled sentencing of former Bielinski Brothers CEO Robert Brownell was postponed after he was allegedly mugged outside his home a few days prior. Federal prosecutors now say that the mugging was staged by Brownell, who had his 14 year-old son hit him with a board.

Brownell pleaded guilty to one count of conspiracy to commit mail fraud, and could be sentenced to as much as 20 years in prison and $250,000 in fines. The fraud scheme allegedly masterminded by Brownell caused losses to Bielinski Brothers estimated at $10 million.

Enron’s ex-CEO will testify this week

Andrew Fastow, the former CEO of Enron will testify this week in the trial of Kenneth Lay and Jeffrey Skilling. Fastow created partnerships to do financial “deals” with Enron, but the partnerships did not meet accounting requirements to make them independent of Enron

The defense is expected to say that Lay and Skilling were really victims of Fastow’s fraud. This falls in line with a defense claim that many Enron executives pleaded guilty to crimes they never committed.

Fastow has already pleaded guilty to two counts of conspiracy related to Enron’s collapse, and has agreed to 10 years in prison.

9/11 insurance claim by U.S. Airways is denied

U.S. Airways filed an insurance claim with its carrier, PMA Capital Insurance, following September 11, 2001. The claim was for a loss of business related to the terrorist attacks, because Reagan National Airport was closed from September 11 to October 4.

The Supreme Court of Virginia, however, has ruled that U.S. Airways cannot collect on the insurance claim because the company already received $310 million in federal aid following the attacks. The court said this money should be deducted from any insurance claim. Since the maximum liability under the insurance policy was $2.5 million and the policy provided that losses would be reduced by all recoveries, PMA Capital owes no money.

U.S. Airways has since merged with America West Group Holdings, Inc.

Adelphia’s Former Executive VP to Serve 10 Months of Home Confinement

Michael J. Rigas, the former executive vice president of cable company Adelphia Communications Corp. will serve 10 months of home confinement and two years of probation. He will also pay a $2,000 fine. This is his punishment for helping to conceal fraud at the company.

Rigas faced up to three years in prison for filing a false statement with the SEC in connection with a 1999 purchase of Adelphia stock for $1.7 million. He reported that source of the money he used to purchase the shares was personal funds. He later admitted that the money actually came from Adelphia.

I’m presenting at the NACVA 2006 National Conference

The National Association of Certified Valuation Analysts is having its 2006 conference in San Francisco. I have been invited to present my paper on financial statement fraud related to Hurricane Katrina.

The NACVA awards the Certified Valuation Analyst (CVA) credential, as well as the Certified Forensic Financial Analyst (CFFA) and the Certified Fraud Deterrance Analyst (CFD).

My presentation will be part of the Fraud Deterrance track.

Read my paper on Hurricane Katrina, entitled Financial Statement Fraud in the Katrina Aftermath: A Whirlwind of Opportunities.

Wal-Mart is looking for an ethics chief

Wal-Mart Stores Inc. is seeking a director of global ethics to help monitor compliance with its worldwide code of conduct. Wal-Mart currently has 1.6 million employees in 15 countries, and over 6,200 stores. The new director would oversee the Global Ethics Office, which was opened in 2004 to offer employees guidance on ethics compliance.

Read about Sequence Inc.’s employee education services.

U.S. auto makers pay employees to NOT work

A longstanding deal with the United Auto Workers means that U.S. auto makers pays billions for employees who don’t work. The “Jobs Bank” program sees to it that over 15,000 unneeded workers continue to earn wages and benefits that often exceed $100,000 annually per employee. The total cost of this program will be $1.4 billion to $2.0 billion this year.

This was such an interesting story in the Wall Street Journal that I’m posting the entire article here.

Detroit’s Symbol of Dysfunction: Paying Employees Not to Work
By Jeffrey McCracken
WSJ, March 1, 2006

FLINT, Mich. – In his 34 years working for General Motors Corp., one of Jerry Mellon’s toughest assignments came this January. He spent a week in what workers call the “rubber room.”

The room is a windowless old storage shed for engine parts. It is filled with long tables, Mr. Mellon says, and has space for about 400 employees. They must arrive at 6 a.m. each day and stay until 2:30 p.m., with 45 minutes off for lunch. A supervisor roams the aisles, signing people out when they want to use the bathroom.

Their job: to do nothing.

This is the “Jobs Bank,” a two-decade-old program under which nearly 15,000 auto workers continue to get paid after their companies stop needing them. To earn wages and benefits that often top $100,000 a year, the workers must perform some company-approved activity. Many do volunteer jobs or go back to school. The rest must clock time in the rubber room or something like it.

12 year-old sticks a wad of gum to a $1.5 million painting

Huh??? It’s true. A 12 year-old on a field trip to the Detroit Institute of Arts took a wad of gum out of his mouth and stuck it on a painting worth $1.5 million, leaving a spot of residue the size of a quarter.

The abstract painting was done in 1963 by Helen Frankenthaler, and is entitled “The Bay.” The museum got the piece in 1965, and says that today it is worth approximately $1.5 million.

Museum officials are researching the chemical properties of the gum to determine the correct solvent to use on the painting.

Felons Employed by the University of Wisconsin System

A Legislative Audit Bureau report on the UW System’s employment practices shows that the system employed 40 felons currently under supervision this past fall. (An Associated Press report states 40 felons work for the UW System, but the truth is that the 40 are only the ones currently under supervision. There could be other felons working for the system, but not under supervision.)

Enron Raided Reserves to Boost Earnings

Wesley Colwell, the former head of accounting of Enron’s wholesale energy unit testified that in July 2000, he shifted $14 million from reserve accounts to pump up earnings. He also testified that neither Kenneth Lay nor Jeffrey Skilling directly told him to manipulate earnings.

Colwell testified that Enron’s wholesale unit delayed financial reports for the fourth quarter of 2000 until they were instructed on how much profit the company wanted to report.

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