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.
The Medifast (NYSE:MED) lawsuit against Barry Minkow, Fraud Discovery Institute, me, Robert FitzPatrick, William Lobdell, and others marches on. Yesterday, the Medifast lawyers filed an amended complaint in the case. The passage of time has not made Medifast or its lawyers more honest, however, as the amended complaint repeats factual inaccuracies (those are called lies in my world) and even expands on them.
Grab a cup of coffee and kick up your feet while you read the amended complaint. The document now alleges a civil conspiracy related to Medifast’s Take Shape for Life (TSFL) division, and repeatedly refers to the defendants as co-conspirators. I can’t speak for the other defendants, but I certainly know that I conspired with no one. I simply performed services for a paying client, and I wrote about Medifast on this blog in a continuing effort to advance the discussion of the pitfalls of multi-level marketing. Continue reading
Francine McKenna over at re: The Auditors has a nice piece about Dan Stulac, a former Arthur Andersen partner who was in charge of the Peregrine Systems audit. Dan used the “I was duped” defense in his criminal case (charges of conspiracy, securities fraud, and wire fraud).
The charges against him were dismissed by a judge. Will someone like this ever get a job again? After all, his defense attorney apparently spent quite a bit of time proving that he doesn’t know much. Continue reading
Jeffrey Skilling, the former CEO of Enron is appealing his federal conviction and arguing that his 24 year sentence is unconstitutional. In May 2006, Skilling was convicted of 19 counts of fraud, conspiracy and insider trading in the Enron case. The former chairman of Enron, Kenneth Lay, was convicted of many counts in the same trial, but died several weeks afterward.
The appeal cites many arguments, including:
- Not moving the trial out of Houston was unfair to Skilling, as the community was outraged and “thirsting for vengeance”
- The jury selection process was flawed
- The 24 year prison sentence is not consistent with federal sentencing guidelines and statutes
- The an executive shouldn’t be held liable for defrauding an employer when his acts are intended to benefit the employer
In December, Skilling asked for bail while his appeal was pending. The Fifth Circuit, which will hear the appeal, denied bail but suggested that some of the conviction counts may be reversed.
David Bershad, former senior partner at Milberg Weiss & Bershad LLP, has pleaded guilty to conspiracy in federal court. He admitted to concealing secret payment agreements with plaintiffs in class action suits, and will forfeit $7.75 million and pay a $250,000 fine. Bershad could receive up to five years in prison, but if he cooperates in the prosecution of others, he will likely serve less than that. Continue reading
Last week, the U.S. Atorney’s office unsealed an indictment of Ernst & Young tax partners. The indictment alleges that Robert Coplan, Martin Nissenbaum, Richard Shapiro, and Brian Vaughn created and marketed tax shelters which were fraudulent, for use by individuals with taxable income in excess of $10 or $20 million. The tax shelters were created to improperly eliminate or reduce taxes due to the Internal Revenue Service.
The eight counts in the indictment include: conspiracy to defraud the IRS, tax evasion, making false statements to the IRS, and impeding and impairing the lawful functioning of the IRS.
The E&Y partners were part of a tax shelter development group first called VIPER (Value Ideas Produce Extraordinary Results) and then called SISG (Strategic Individual Solutions Group. It is alleged that the conspirators deceived the IRS about the true facts of the tax shelters, and that they knew discovery of the true facts by the IRS would result in the collection of unpaid taxes, interest, and penalties.
A deferred criminal charge against KPMG related to the sales of tax shelters has been dismissed by a federal judge. In August 2005, a deferred prosecution agreement was agreed to by the parties in the case against KPMG, which accused the audit firm of creating and selling the tax shelters to help people avoid paying U.S. income taxes.
Under the deferred prosecution agreement, KPMG paid a $456 million fine, submitted to outside monitoring, and gave up some of its tax businesses. The agreement called for the government to dismiss the deferred charges if KPMG was in compliance through December 31, 2006.
Had KPMG been indicted for those charges, it might have led to the firm’s demise. In the agreement, KPMG admitted being involved in a conspiracy to defraud the U.S. government and the Internal Revenue Service.
While the firm is off the hook, 17 former KPMG executives were criminally charged with fraud and tax evasion related to the tax shelters. One has pleaded guilty and the others are expected to be on trial in September. Jeffrey Stein, the former deputy chairman of KPMG, opposed the dismissal of the charges against KPMG.
Today a federal judge sentenced former Enron executive Jeffrey Skilling to 24 years and 4 months in prison for his conviction on federal charges of conspiracy, fraud and insider trading. Skilling, 52, was also fined over $18 million for his crimes. He was denied bond while waiting to report to prison, and instead is on home confinement.
The New York based law firm of Milberg Weiss Bershad & Schulman was indicted in Los Angeles yesterday for twenty years of activities, including a conspiracy to give kickbacks to lead plaintiffs in securities class-action cases. It is alleged that the fraud included payment of over $11 million in kicbacks, disguised as referral fees or other legitimate payments.
Included in the charges are conspiracy, racketeering, mail fraud, money laundering, and filing false tax returns. Melvyn Weiss, a co-founder of the firm, is not named as a defendant, but partners David Bershad and Steven Schulman are. Continue reading