Month: September 2010

Internal Investigations and the Use of Auditors and Accountants

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When whistleblowers report potential ethics violations within companies, the first step the company must take is an internal investigation. The best internal investigations are independent and led by outside counsel, for a variety of reasons.

But what about the part of the investigation that involves analyzing accounting records, financial statements, and SEC filings? Management often wants to use internal finance professionals or their outside auditors for this task. It seems to make sense to utilize the expertise of people who are already familiar with the company’s finances.

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The Fun Continues in the Medifast Litigation

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Lainie E. Cohen, Esq.
Lainie E. Cohen, Esq. arriving for my deposition (click to see full size)

UPDATE: On February 17, 2010, Medifast Inc. filed suit in US District Court, Southern District of California, alleging defamation, violation of California Corporations Code, and unfair business practices. On March 29, 2011, Judge Janis Sammartino dismissed all of Medifast’s claims against me in her ruling on my anti-SLAPP motion.

For nearly two years, Medifast (NYSE:MED) and its lawyers have known that I am not an appropriate target for a lawsuit. Nonetheless, they have pursued their malicious civil suit against me. Since the suit was filed, Medifast has been made aware of all the reasons why they shouldn’t be suing me:

  • I never said anything false about the company
  • I’m not aware of anything false that my co-defendants said, and which I later reprinted on this blog (and reprinting the writings of others does not make me responsible for those writings)
  • Every bit of evidence produced during discovery shows that I was not part of any conspiracy, and that I actually went out of my way to make sure that false statements or assumptions weren’t made or published about Medifast

But why let a little thing like the truth get in the way?

Read moreThe Fun Continues in the Medifast Litigation

Short On Ethics

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American Journalism Review

By Cary Spivak

Two Web sites that investigate business fraud are funded by short selling—placing market bets that the stock of companies they write about will go down. It’s an approach that makes journalism ethicists very uncomfortable.

At first the idea didn’t feel quite right to Christopher Carey.

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Whistleblower Provisions Under Dodd-Frank

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There has been lots of chatter about the whistleblower provisions under Dodd-Frank. A whistleblower  can earn 10% to 30% of any penalty the federal government imposes against a company. And companies have to be very careful, because there are anti-retaliation provisions in the legislation too.

One problem with this legislation that I hadn’t thought about is the impact it could have on employees using fraud hotlines. One of the most common ways that fraud is detected within companies is via tips from employees, vendors, or customers. An anonymous hotline helps encourage the reporting of these tips.

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Sentences Handed Down in International Multimillion-Dollar Fraud Scheme

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Thomas Huddleston Jr. – Corporate Counsel at Law.com

A lesson for would-be criminal masterminds: When looking for victims to scam, try someone other than the U.S. government.

A group of Kenyan nationals learned that the hard way Aug. 19 when U.S. District Judge John Copenhaver, Jr. doled out jail time ranging from 9-72 months for co-conspirators in a multimillion-dollar, international fraud and money-laundering scheme that targeted state governments.

Read moreSentences Handed Down in International Multimillion-Dollar Fraud Scheme

Who is Short Selling Medifast stock?

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UPDATE: On February 17, 2010, Medifast Inc. filed suit in US District Court, Southern District of California, alleging defamation, violation of California Corporations Code, and unfair business practices. On March 29, 2011, Judge Janis Sammartino dismissed all of Medifast’s claims against me in her ruling on my anti-SLAPP motion.

So who is short selling Medifast (NYSE:MED) stock? I’m not, but apparently plenty of other people are. (No, Medifast, I have no idea who it is, nor do I care who it is. That’s your problem. Not mine.)

As my readers already know, Medifast is on the hunt for anyone who would dare to say something less than flattering about the company. I’m being sued, along with others, for having a low opinion of Medifast’s Take Shape For Life (TSFL) division. Shame on me for voicing my negative opinion of a multi-level marketing scheme, and Medifast will MAKE ME PAY for daring to oppose them.

I am happy to report, however, that I’m not the only one who questions Medifast’s business model. Last week an article was posted at Fool.com about the amount of short selling activity around Medifast. Short selling is a bet that a company’s stock price will fall, and some like short selling overvalued companies.

Read moreWho is Short Selling Medifast stock?