Month: March 2007

Iraq Reconstruction Fraud: Where Are Your Tax Dollars Going?

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Whether you agree with the Iraq War or not, one thing is certain: There is fraud going on and your tax dollars are being spent. Of the approximately $350 billion (give or take) spent so far by the United States on the war and rebuilding effort, there have been plenty of cases of fraud, waste and abuse found.

Congress is currently investigating the work done by contractors in Iraq, and it looks like the project may widen in scope in the near future. As recently as last fall, the Government Accountability Office reported to Congress that Pentagon auditors had identified approximately $3.5 billion in contractor charges as questioned or unsupported costs.

However, Defense Contract Audit Agency chief William Reed recently stated that unsupported and questionable costs from Iraq reconstruction contractors exceed $10 billion. The payments were for things like delayed work, inflated expenses, substandard work, and work never done.

The $10 billion figure is the result of an audit of $57 billion in Iraq contracts, making almost one out of every six dollars questionable. This new figure is almost three times the previous estimate of contractor waste and abuse. Naturally, the Pentagon has been criticized for its lack of oversight in the process of awarding and overseeing contracts.

Read moreIraq Reconstruction Fraud: Where Are Your Tax Dollars Going?

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.

Read moreOn Making Money As a Fraud Investigator

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 … Read more Class action lawsuit against State Farm is blocked

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 … Read more Interesting Quote From One of Usana’s Lawyers

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.)

Read moreUsana Sues Barry Minkow

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 … Read more Insurance agent guilty of criminal counts related to identity theft

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 … Read more Milwaukee teens “on probation” running around unchecked

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:

Read morePlastic Surgery Patient Starts Website and Successfully Defends Defamation Claim

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.”

Read moreStock Option Backdating: What’s the Big Deal?