Tuesday, September 30, 2014

S.E.C. Makes Largest Ever Whistle-Blower Award

SECFrom the New York Times' Deal Book -

The identity is a mystery, but someone who provided important information to  regulators in a securities fraud enforcement action is suddenly $30 million richer thanks to a federal whistle-blower law. ...

The award is the largest ever given out by S.E.C. under the whistle-blower law, which was enacted as part of the financial regulatory overhaul known as Dodd-Frank.  The first such payout, in August 2012, was for nearly $50,000. ...

September 30, 2014 in Current Affairs | Permalink | Comments (0)

SEC Exam Chief Sends Warning on Wrap Accounts

Washington Bureau Chief Melanie Waddell ThinkAdvisor reports -

SECThe Securities and Exchange Commission’s exam chief recently warned sponsors of wrap fee programs to do a better job of monitoring and disclosing the number of “step-out” trades performed by the wrap account’s investment managers, as these types of trades require clients to pay a fee on top of the wrap fee.

Bowden said that the agency’s 30 exams of wrap accounts to date had found that sponsors were “unaware of how often this [step-out trading] activity is taking place.”

Step-out trading is the practice of one brokerage executing an order on behalf of a client but giving credit (and part of the commission) to another brokerage. ...

The SEC also recently won a court victory against an advisor who lied to his clients to get them to switch their accounts so that he could pocket a higher wrap fee.

September 30, 2014 in Current Affairs | Permalink | Comments (0)

Monday, September 29, 2014

FATCA Supplement For Reporting on Forms 1099

FATCA filing requirements of certain foreign financial institutions (FFIs). If you are required to report an account that is a U.S. account under chapter 4 of the Code (chapter 4), you may be eligible to elect to report the account on Form(s) 1099 instead of on Form 8966, “FATCA Report.”

Caution: If the account is either a U.S. account held by a passive NFFE that is a U.S. owned foreign entity or an account held by an owner-documented FFI, do not file a Form 1099 with respect to such an account. Instead, you must file a Form 8966, “FATCA Report,” in accordance with its requirements and its accompanying instructions to report the account for chapter 4 purposes.

Election described in Regulations section 1.1471-4(d)(5)(i)(A). You are eligible to make this election to report an account on Form(s) 1099 if--

  1. You are a participating FFI (including a Reporting Model 2 FFI) (PFFI) or are a registered deemed-compliant FFI (RDC FFI) (other than a Reporting Model 1 FFI) required to report a U.S. account as a condition of your applicable RDC FFI status (see Regulations section 1.1471-5(f)(1)(i));

  2. You are required to report the account as a U.S. account for chapter 4 purposes; and

  3. The account is a U.S. account held by a specified U.S. person that you elect to report under Regulations section 1.1471-4(d)(5)(i)(A).

Election described in Regulations section 1.1471-4(d)(5)(i)(B) . You are eligible to make this election to report an account on Form(s) 1099 if--

  1. You are a PFFI or are a RDC FFI (other than a Reporting Model 1 FFI) required to report a U.S. account as a condition of your applicable RDC FFI status (see Regulations section 1.1471-5(f)(1)(i));

  2. You are required to report the account as a U.S. account for chapter 4 purposes; and

  3. The account is a U.S. account held by a specified U.S. person that is a cash value insurance contract or annuity contract that you elect to report under Regulations section 1.1471-4(d)(5)(i)(B) in a manner similar to section 6047(d).

You may make an election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) either with respect to all such U.S. accounts or, separately, with respect to any clearly identified group of such accounts (for example, by line of business or by the location where the account is maintained).

Special reporting by U.S. payer described in Regulations section 1.1471-4(d)(2)(iii)(A). If you are a U.S. payer that is a PFFI other than a U.S. branch, you also may satisfy your requirement to report with respect to a U.S. account for chapter 4 purposes by reporting on each appropriate Form 1099 in the manner described in Regulations section 1.1471-4(d)(2)(iii)(A).

Reporting procedures. If you are an FFI that is eligible to make an election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) or are a U.S. payer reporting as described in Regulations section 1.1471-4(d)(2)(iii)(A), you must do so by filing each appropriate Form 1099 with the IRS and reporting the payments required to be reported by a U.S. payer (as defined in Regulations section 1.6049-5(c)(5)) with respect to the account.

Tip: All Form 1099 filers must have an EIN. If you have not previously filed a Form 1099 or other return, you must obtain an EIN and include it on each Form 1099 that you file. See part K for more information, including how to obtain an EIN.

In addition to the information otherwise required to be reported on the appropriate Form 1099, you also must include the following information for each account you are reporting as described in Regulations section 1.1471-4(d)(2)(iii)(A) or (d)(5)(i)(A) or (B):

  1. The name, address, and TIN of the account holder;

  2. The account number; and

  3. If applicable, the jurisdiction of the branch that maintains the account being reported by adding the branch’s jurisdiction after the payer’s name, that is, “Payer’s Name (Jurisdiction X branch)”.

Caution: If you are an FFI making an election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) or are a U.S. payer reporting as described in Regulations section 1.1471-4(d)(2)(iii)(A), you are required to report the payee’s account number on each Form 1099 you file (regardless of the fact that the account number otherwise may be optional for purposes of reporting on the applicable Form 1099).

Sponsored FFIs.  If you are a sponsoring entity that is reporting a U.S. account on behalf of a sponsored FFI, report on the appropriate Form(s) 1099 the following information in the payer boxes (if filing on paper) or in the appropriate fields of the payer record (if filing electronically):

  1. For the name, enter the sponsored FFI’s name on the first line and the sponsoring entity’s name on the second line.

  2. For the address, enter the sponsoring entity’s address.

  3. For the federal (or taxpayer) identification number, enter the sponsored FFI’s EIN.

In addition, if you are filing electronically, enter numeric code “1” in the “Transfer Agent Indicator” field. See Publication 1220 for electronic filing of forms. If you are filing on paper, enter your GIIN in the lower right hand portion of the title area on the top of Form 1096, Annual Summary and Transmittal of U.S. Information Returns.  For transmittal of paper forms, see Form 1096 and its accompanying instructions.

Transitional rule. Calendar year 2014 is a transitional year for FFIs to report their U.S. accounts. If you make the election for 2014, you are required to report the account, but you are not required to report any payments pursuant to the election. Even though reporting of payments to an account is not required for 2014, FFIs making the election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) for 2014 are required to report accounts to which no payments are made on Form 1099-MISC and enter “$1” in Box 3.  Remember to include the name (including the jurisdiction of the branch, if applicable), address, and TIN of the account holder, along with the account number on the Form 1099.

Caution: If you made payments to the account that you are otherwise required to report on Form(s) 1099 for purposes of chapter 61 (for example, because you are a U.S. payer), making an election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B) does not affect your obligation to report such payments on the applicable Form 1099 in accordance with the requirements under chapter 61. See the separate specific instructions for each Form 1099 to determine which Form(s) 1099 to file.

Irs_logoSee http://www.irs.gov/Businesses/Corporations/FATCA-Supplement-to-the-2014-General-Instructions-for-Certain-Information-Returns-Reporting-on-Forms-1099 

download for free –> LexisNexis® Guide to FATCA Compliance

September 29, 2014 in Current Affairs | Permalink | Comments (0)

UK Banks Fight Bank Against Cyber Crime

Unknown-2The Financial Crime Alerts Service allows banks and other financial groups to react faster to major incidents and keep abreast of techniques used by cyber criminals and terrorists.  "A recent paper from the Bank of International Settlements found that the UK financial sector was spending more than £700m annually on cyber security"

According to the Financial Times and the BBA, "[c]oncern about a possible state-sponsored attack on financial systems has been heightened after this summer’s infiltration and theft of data from computer systems at JPMorgan Chase, the biggest US bank by assets, which according to some reports had its origins in Russia."

"The new platform will build on the existing scheme between the banks and the National Fraud Intelligence Bureau, which has already prevented more than £100m of fraud losses through information-sharing, according to the BBA."

September 29, 2014 in Current Affairs | Permalink | Comments (0)

Inside the New York Fed: Secret Recordings and a Culture Clash

A confidential report and a fired examiner’s hidden recorder penetrate the cloistered world of Wall Street’s top regulator—and its history of deference to banks.

Federal_Reserve_Governors_sealSegarra had made a series of audio recordings while at the New York Fed. Worried about what she was witnessing, Segarra wanted a record in case events were disputed. So she had purchased a tiny recorder at the Spy Store and began capturing what took place at Goldman and with her bosses.

Segarra ultimately recorded about 46 hours of meetings and conversations with her colleagues. Many of these events document key moments leading to her firing. But against the backdrop of the Beim report, they also offer an intimate study of the New York Fed's culture at a pivotal moment in its effort to become a more forceful financial supervisor. Fed deliberations, confidential by regulation, rarely become public.

September 29, 2014 in Current Affairs | Permalink | Comments (0)

Should Life Insurers Be Regulated "Systemically Important Financial Institutions"?

ACLI_Logo_LGDesignating life insurers as SIFIs creates uneven playing field (The Hill reporting) -

... Critically, Dodd-Frank gave FSOC another tool as well: the ability to regulate activities. Rather than single out a few companies in an industry for SIFI designation, FSOC can "provide for more stringent regulation of a financial activity."

This came as a surprise to the life insurance industry. ... Life insurers also have been saying that their traditional activities — issuing life, long-term care and disability insurance and annuities, and using capital to make the long-term investments that support these products — pose no risk to the financial system. ...

Imposing new, unnecessary and unreasonable capital requirements on life insurers will directly affect the products that life insurers provide. To respond to the pressure on capital, consumer benefits may be reduced, prices may be increased, and some products may no longer be available. At a time when government social safety nets are under pressure and corporate pensions are disappearing, public policy should preserve — not undermine — competitively priced financial and retirement protection for consumers.

See American Council of Life Insurers for more information about this issue

September 29, 2014 in Current Affairs | Permalink | Comments (0)

email subscribe to the International Financial Law Professor

Please SUBSCRIBE to the headlines email of the "International Financial Law Professor" in the above menu "SUBSCRIBE"        

Thank you for being our reader! William Byrnes, David Herzig, and Gary Heald.

September 29, 2014 in Current Affairs | Permalink | Comments (0)

Sunday, September 28, 2014

Rethinking Virtual Currency Regulation in the Bitcoin Age

SSRNWashington Law Review, Forthcoming KEVIN V. TUUniversity of New Mexico School of Law MICHAEL W. MEREDITHUnited States District Court for the Western District of Texas

This Article investigates an increasingly important yet under-developed body of law: regulation of virtual currency. At its peak in March of 2014, the daily volume of Bitcoin transactions in U.S. Dollars exceeded $575,000,000. The growing mainstream acceptance of Bitcoin, however, is best illustrated by the number of leading merchants that have decided to accept Bitcoin payments. While Bitcoin’s rise as an alternative payment method is well-chronicled, Bitcoin’s impact extends further due to its use as an investment vehicle and its ability to spur the growth of an industry of Bitcoin-based businesses. Despite increasingly widespread use, Bitcoin (and other virtual currencies) have largely operated without the burden of regulation. Why? Like the potentially transformative innovations that preceded Bitcoin, virtual currency raises unique challenges for which existing legal models may be unprepared. As policymakers struggle to catch-up, the effort to develop an appropriate regulatory regime for virtual currency is at critical juncture. 

The response in the United States has thus far involved regulatory bodies acting independently to clarify the treatment of virtual currency under a variety of different laws designed to regulate traditional payment systems, financial services and investments. This Article argues, contrary to this approach, that a narrow focus on the technical application and extension of existing law creates a deficient regulatory regime. Instead, we suggest that policymakers should: (1) engage the various agency stakeholders to promote cross-communication; (2) think more globally about the wide spectrum of issues arising from virtual currency; and (3) embrace the unique and distinct characteristics of virtual currency. In support of this proposition, we show that refocusing on the collection of policy goals advanced by existing law offers policymakers an additional tool to aid in the development of a comprehensive, cohesive and appropriately-scaled virtual currency regulatory model.

Bitcoin_euroWhat is Bitcoin Mining ? (Federal Trade Commission)

September 28, 2014 in Current Affairs | Permalink | Comments (0)

Saturday, September 27, 2014

SEC enforces fraudulent accounting clawback of SABA former CEO Bobby Yazdani's incentive based pay and capital gains

SECSection 304 of the Sarbanes-Oxley Act of 2002 requires the chief executive officer of any issuer required to prepare an accounting restatement due to material noncompliance with the securities laws as a result of misconduct to reimburse the issuer for (i) any bonus or incentive based or equity-based compensation received by that person from the issuer during the 12-month periods following the false filings, and (ii) any profits realized from the sale of securities of the issuer during those 12-month periods.

Section 304 does not require that a chief executive officer engage in misconduct to trigger the reimbursement requirement. Yazdani received bonuses and incentive- and equity-based compensation from Saba, and also realized Saba stock-sale profits, during the 12-month periods following the filings containing financial results that Saba is required to restate. He has not, to date, reimbursed the Company for those amounts ($2,570,596).

1. This matter involves misstated revenues in the professional services organization at Saba Software, Inc. (“Saba” or “the Company”), a Silicon Valley-based enterprise software company. The misstatements were the result of the falsification of time records over a period of more than four years by professional services managers in multiple geographies directing consultants in Saba’s Indian subsidiary (the India Consulting Group or “ICG”) to falsify time records by either recording time in advance of performance of work or failing to record time for hours worked in order to achieve their quarterly revenue and margin targets.

2. As a result, Saba reported false financial results in its financial statements filed with the Commission over the period from October 4, 2007 through January 6, 2012. As Saba announced on August 6, 2012 and November 5, 2012, management has determined that the Company is required to restate its financial statements for fiscal years 2008 through 2011, as well as the first two quarters of fiscal 2012. The Company expects that the restatement will change the time period during which the affected revenues are recognized, generally shifting the timing of such revenues to later periods.

 

September 27, 2014 in Current Affairs | Permalink | Comments (0)

Friday, September 26, 2014

Treasury Department's Action to Rein in Tax Inversions

Unknown-1As we have reported often here, the topic of tax inversions is hot in the US.  The New York Times posted an editorial, Cracking Down on Corporate Tax Games, where they discuss the new rules from the Treasury Department.  According to the Times the Treasury rules, "would crack down on transactions that let inverted American companies access their tax-deferred overseas accounts without ever paying the taxes that would normally come due when foreign-held profits are repatriated. Those transactions, which could avoid tax on as much as $1 trillion in untaxed foreign-held profits, include complex loans from the inverted company’s American offshore subsidiaries to its new foreign parent — maneuvers that essentially turn untaxed profits into tax-free loan proceeds.

The rules do not stop all abuses, including, for instance, earnings stripping. That is the practice in which a foreign parent deducts the company’s interest payments against the income generated by a United States subsidiary, thus lowering the American tax bill. Buried deep in the new rules is an indication that the Treasury Department plans to devise additional rules to stop the practice. The sooner the better."

September 26, 2014 in Current Affairs | Permalink | Comments (0)

Study: Online classes really do work

Detailed quantitative study of learning online shows success, even among those with least preparation

Now, for the first time, researchers have carried out a detailed study that shows that these classes really can teach at least as effectively as traditional classroom courses — and they found that this is true regardless of how much preparation and knowledge students start out with.

The findings have just been published in the International Review of Research in Open and Distance Learning, in a paper by David Pritchard, MIT’s Cecil and Ida Green Professor of Physics, along with three other researchers at MIT and one each from Harvard University and China’s Tsinghua University. ...

 

September 26, 2014 in Current Affairs | Permalink | Comments (0)

Arboretum Sports $20 million Ponzi Scheme Suspect in Custody

220px-Serious_Fraud_Office (1)The SFO in conjunction with Hampshire Police's Serious and Organised Crime Group investigated the affairs of Arboretum Sports (UK) Limited, which went into liquidation in December 2007.  It is alleged that the company, under the guise of an Arbitrage gambling scheme, was in fact a Ponzi Fraud.   

David Gerald Dixon (D.O.B 17/09/65) had fled to Malaysia for which the Serious Fraud Office requested his extradition.  Yesterday he appeared before Westminster Magistrates' court on the thirteen multi-million pound (US$20 million) fraud-related charges.

 

September 26, 2014 in Current Affairs | Permalink | Comments (0)

SEC Charges Two Florida-Based Attorneys for Roles in Offering Fraud by Transfer Agent

SECThe Securities and Exchange Commission charged [on Tuesday] two Florida-based attorneys for their roles in an offering fraud conducted by a transfer agent that was the subject of an SEC enforcement action two months ago.

The SEC alleges that Jonathan P. Flom and James L. Schmidt II were designated to receive wire transfers of funds from investors who were solicited by cold callers using boiler room tactics to convince them their investments would yield high rates of return. 

Wiring the money to a licensed attorney bolstered the appearance of safety in the investment opportunity and concealed from investors how the money was really being spent after Flom or Schmidt received the funds.  Flom and Schmidt merely kept 2 percent of the funds they received from investors and transferred the remaining amounts to Cecil Franklin Speight, who promptly used it for personal expenses or to make Ponzi-like payments instead of investing in the high-yield investments or discounted stock promised to investors.  The SEC charged Speight and his firm International Stock Transfer Inc. (IST) with fraud in July.

Flom and Schmidt were arrested earlier today in parallel criminal actions brought by the U.S. DOJ-U-S-ATTORNEYS-OFFICEAttorney’s Office for the Eastern District of New York.

“Attorneys are critical gatekeepers in our securities markets, and Flom and Schmidt enabled a scheme to occur by using their legal credentials to add the appearance of legitimacy as they collected investor funds,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “We will continue to aggressively seek out and prosecute lawyers who abuse their positions of trust and serve as conduits to fraud in our markets.”

According to the SEC’s complaints filed in federal court in Brooklyn, Flom and Schmidt enabled Speight and IST to steal more than $3.3 million from at least 70 investors.  Approximately $2.7 million of scheme proceeds flowed through Schmidt’s account and more than $580,000 passed through an account controlled by Flom.  Cold callers told investors to wire their money to either Schmidt or Flom in order to purchase purported securities that included fake foreign bond certificates and stock certificates for a publicly-traded microcap company with no connection to IST. 

The SEC alleges that Schmidt and Flom knowingly participated with Speight in the sale of fraudulent securities.  Flom received e-mails from Speight that explicitly discussed the misappropriation of investor funds.  Schmidt collaborated with Speight to craft misleading responses to numerous investors who complained about the absence of promised coupon payments as well as the counterfeit appearance of the stock certificates they received and the inability to contact the cold callers who solicited them.

September 26, 2014 in Current Affairs | Permalink | Comments (0)

Thursday, September 25, 2014

FATCA Updates: Substitute W-8BEN-E, non-reporting FFI GIIN Registration, and new FATCA compliant 1099s

Treasury-Dept.-Seal-of-the-IRSFATCA Releases of September 25: 

- two new Q&As, one addressing whether a nonreporting FFI under the IGA should register for a GIIN, the other addressing whether a substitute W-8, allowed for IGA countries, is FATCA compliant.

- new FATCA compliant 1099s that have a check-box added to identify an FFI filing the 1099 to satisfy its chapter 4 reporting requirement. 

Q7.

Does an entity in a Model 1 jurisdiction that, relying on the definition of a nonreporting financial institution under the applicable IGA,  qualifies as a deemed-compliant FFI or an exempt beneficial owner under relevant U.S. Treasury Regulations, need to register on the FATCA registration website?

Added: September 25, 2014

A nonreporting financial institution in a Model 1 jurisdiction is treated as a certified deemed-compliant FFI and is not required to register unless it (1) is subject to a registration requirement under its QI Agreement (see Rev. Proc. 2014-39) or its WP or WT Agreement (see Rev. Proc. 2014-47), (2) will act as a sponsoring entity, (3) will act as a lead FI for one or more related entities, (4) is explicitly required to register under the applicable IGA, or (5) has a financial account on which to report to the Model 1 jurisdiction under the requirements of the applicable IGA.
Q8.

Annex I of the IGA provides that, for certain purposes, a self-certification may be made on an IRS Form W-8 or other “similar agreed form.”  What would be considered a similar agreed form?

Added:  September 25, 2014

Substitute Withholding Certificate: In General

A similar agreed form may include, for example, a substitute Form W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, or W-8IMY if its content is substantially similar to the IRS’s official Form W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, or W-8IMY (see the instructions to the requestor of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY), and the partner jurisdiction does not decline such treatment.  You may develop and use a substitute form that is in a foreign language, provided that you make an English translation of the form and its contents available to the IRS upon request.  You may combine Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY into a single substitute form.  

You may choose to provide a substitute form that does not include all of the chapter 4 statuses provided on the Form W-8, but the substitute form must include any chapter 4 status for which withholding may apply, such as the categories for a nonparticipating FFI or passive NFFE.  See Treas. Reg. § 1.1471-3(c)(6)(v)(A).  You may also provide with the form an alternative certification that reflects the requirements under an applicable IGA instead of the certification of chapter 4 status otherwise required by the form.  See the Instructions for the Requester of Forms W–8BEN, W–8BEN–E, W–8ECI, W–8EXP, and W–8IMY and the Instructions for Form W-8BEN-E for the requirements to use alternative certifications with respect to Form W-8BEN-E, which also apply to a substitute version of the form.

You are also required to furnish instructions for the substitute form to the extent and manner provided in the official instructions for the official form.

You may incorporate a substitute Form W-8 into other business forms you customarily use, such as account signature cards, provided the required certifications are clearly set forth.  However, you may not:

  1. Use a substitute form that requires the payee, by signing, to agree to provisions unrelated to the required certifications, or

  2. Imply that a person may be subject to 30% withholding or backup withholding unless that person agrees to provisions on the substitute form that are unrelated to the required certifications.

A substitute Form W-8 is generally valid only if it contains the same penalties of perjury statement and certifications as the official forms and the required signature.  However, if the substitute form is contained in some other business form, the words “information on this form” may be modified to refer to that portion of the business form containing the substitute form information, including any alternative certification under an applicable IGA provided with the substitute form.  The design of the substitute form must be such that the information and certifications that are being attested to by the penalties of perjury statement clearly stand out from any other information contained on the business form.

Substitute Withholding Certificate: Non-IRS Form for Individuals

A similar agreed form may also include a non-IRS form used in place of a Form W-8BEN (for individuals).  The substitute form must include the information required in Treas. Reg. § 1471-3(c)(6)(v), and the form must  be signed, dated, and also certified under penalties of perjury unless the form is accompanied by documentary evidence that supports the individual’s claim of foreign status.  For a case in which a withholding certificate is required to be associated with a payment subject to chapter 3 withholding or reportable amount under Treas. Reg. § 1.1441-1(e)(3)(vi), however, see the requirements for a beneficial owner withholding certificate under Treas. Reg. § 1.1441-1(e)(2).

Documenting an Entity’s Chapter 4 Status with a Written Statement

You may use a written statement described in Treas. Reg. § 1.1471-3(c)(4) to document an entity account holder or payee.  Such a written statement is valid only to the extent that it is permitted to be used based on the requirements of Treas. Reg. § 1.1471-3(d).  Also see Treas. Reg. § 1.1471-3(d) for when a written statement must be supported by documentary evidence of the payee’s foreign status.  The written statement may incorporate, rather than a chapter 4 status described in Treas. Reg. § 1.1471-3(d), a certification of status as determined under the requirements of an applicable IGA.

Inst 1099-MISC Instructions for Form 1099-MISC, Miscellaneous Income 2014 09/24/2014
Inst 1099-INT and 1099-OID Instructions for Forms 1099-INT and 1099-OID, Interest Income and Original Issue Discount 2014 09/24/2014
Inst 1099-DIV Instructions for Form 1099-DIV 2014 09/24/2014

FATCA filing requirements of certain foreign financial institutions (FFIs). Beginning in 2014, an FFI with a chapter 4 requirement to report a U.S. account maintained by the FFI that is held by a specified U.S. person may satisfy this requirement by reporting on Form(s)1099. Additionally, a U.S. payor may satisfy its chapter 4 requirement to report such a U.S. account by reporting on Form(s) 1099.  A new check box was added to Form 1099-DIV to identify an FFI filing this form to satisfy its chapter 4 reporting requirement.

 download for free –> LexisNexis® Guide to FATCA Compliance

September 25, 2014 in Current Affairs | Permalink | Comments (0)

TESCO's £250m Black Hole

Unknown-3In a recent Economist article, an old fashion cooking the books scheme has been in place for the retailer.  "It seems that Tesco's British arm had been booking discounts on goods it had not yet sold as income, while simultaneously understating the costs of the sales it had actually made."  This news certainly will shake up Warren Buffet's interest in the company.  As the third biggest shareholer with about 4% of the outstanding shares, "Berkshire is now nursing losses of about $750 million on the investment after the shares plunged by as much as 43% this year. It paid $1.7 billion for the stake" according to CNN.

But TESCO may have to answer to more than just Buffet.  The Guardian is reporting that "Tesco executives could face a parliamentary committee over its overstatement of profits, the select committee chairman told the BBC on Thursday.

Adrian Bailey told BBC Radio 5 Live that Tesco executives could be asked to explain its £250m misstatement of first-half profits which wiped £2bn off its stock market value. Bailey said Tesco’s overstatement was a “stratospheric error”, adding that any inquiry could be extended to the wider UK grocery industry.  “We may well as a committee want to look at this. Not just at Tesco but at what is going on in the retail industry and in the relationship with the suppliers to see if the issues we came across two years ago are still there,” he said."

September 25, 2014 | Permalink | Comments (0)

Is it Wal-Mart or Wal-Bank?

UnknownWal-Mart has now teamed up with GoBank a mobile banking platform to allow customers to sign-up and deposit cash into a GoBank account.  The Washington Post reports, "The partnership offers Wal-Mart yet another opportunity to become one of the largest financial services providers in the nation, without many of the regulatory headaches that plague traditional banks. Wal-Mart already offers a prepaid debit card, credit card, check cashing and money transfers. The retailer is even a part of a consortium that is building a mobile payment system that limits the role of banks."

"GoBank, unlike other mobile and traditional banks, will not use the Chex­Systems database to review would-be customers.

Thousands of banks and credit unions screen would-be customers through databases such as ChexSystems that document repeated overdrafts, bounced checks, unpaid balances and other behavior that could signal fraud."

According to the NY Times, "[i]n the past, Walmart has tried to secure a federal bank charter to become a deposit-taking bank, but abandoned that effort in 2007 in the face of opposition from the banking industry. Since then, the retailer has assembled an array of services that could be offered without a charter, as well as partnerships with financial service companies like Green Dot."

September 25, 2014 in Current Affairs | Permalink | Comments (0)

Trendon Shavers, "Pirateat40", Bitcoin Ponzi Schemer Ordered to Pay More Than $40 Million in Disgorgement and Penalties

SECTrendon T. Shavers and Bitcoin Savings and Trust ("BTCST"), the online entity Shavers created and used to operate his Ponzi scheme -  he defrauded investors out of more than 700,000 bitcoins.  The Court's judgment requires Shavers and BTCST to pay more than $40 million in disgorgement and prejudgment interest, and orders each Defendant to pay a civil penalty of $150,000.

The Commission established, and the Court found, that from February 2011 through August 2012, Shavers offered and sold investments in BTCST over the internet. Shavers solicited all investments, and paid all purported returns, in bitcoins.

Operating under the internet name, "pirateat40," Shavers solicited investors in online chat rooms and on the Bitcoin Forum, an online forum dedicated to Bitcoin, promising them up to 7% returns weekly based on his claimed trading of bitcoin against the U.S. dollar, including selling bitcoins to individuals who wanted to buy them "off the radar."

In reality, Shavers used new bitcoins received from BTCST investors to pay purported returns on outstanding BTCST investments, and diverted BTCST investors' bitcoins for his personal use.

The Court further found that, even as he publicly denied the Ponzi scheme on the Bitcoin Forum, Shavers knowingly and intentionally operated BTCST as a sham and a Ponzi scheme, and repeatedly made materially false and misleading representations to BTCST investors and potential investors concerning the use of their bitcoins, how he would generate the promised returns, and the safety of their investments.

Value of Bitcoin (July 2013)?

Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold.  Today the value of 700,000 Bitcoin exceeds $60 million.

September 25, 2014 in Current Affairs | Permalink | Comments (0)

25% student loan borrowers 90 days behind, 13.7% in default

Wall Street Journal article

About one in seven borrowers who left college or graduate school in the fiscal year ended September 2011 had defaulted on their student loans within three years, the department said Wednesday. The official figure—13.7%—was down from the 14.7% rate for those who left school in fiscal 2010.

Still, the government's default measure vastly underestimates the problem. The government considers people in default if they have made no payments in 360 days. A broader measure by Federal_Reserve_Governors_sealthe New York Federal Reserve—which accounts for all Americans with student loans—shows that roughly one in four borrowers are at least 90 days behind on a payment.

The government uses the measure to sanction schools with high default rates among former students, and the Education Department said it would strip federal funding for 21 such institutions. 

September 25, 2014 in Current Affairs | Permalink | Comments (0)

Online-Business Coaching Scam Netted $130 million

1024px-Federal_Trade_Commission_DC_2007The Federal Trade Commission is mailing more than $4.4 million in refund checks to 2,004 consumers harmed by the Ivy Capital business “coaching” scheme, which falsely claimed that it would help them develop their own Internet businesses.

Ivy Capital Inc. and 29 co-defendants allegedly took more than $130 million from people who paid thousands of dollars – some paid up to $20,000 – believing they would earn up to $10,000 per month. But the promised coaching program was worthless. Most of the defendants agreed to settle FTC charges that they misrepresented the program and its earning potential, and failed to fully disclose and honor their refund policy. A district court granted summary judgment against five defendants. Litigation continues against Benjamin Hoskins, Dream Financial, and three relief defendants, Leanne Hoskins, Oxford Financial LLC, and Mowab Inc., who filed an appeal. Five defendants defaulted.

Most of the defendants in a massive business “coaching” scheme that allegedly took more than $100 million from consumers have agreed to settle Federal Trade Commission charges that they misrepresented the earning potential of the coaching program they sold, misrepresented their goods and services, and failed to fully disclose and honor their refund policy, in violation of federal law.  The settlements, which ban the defendants from marketing and selling business coaching programs and require them to give up assets including two homes and eight cars, are part of the FTC’s continuing efforts to stop scams that target financially strapped consumers.

According to an FTC complaint filed in February 2011 against 40 defendants, including 22 interrelated companies, Ivy Capital Inc. and its co-defendants claimed their program would help consumers develop their own Internet businesses.  Most consumers paid between $2,000 and $20,000 for the program and related products and services but got very little in return and found it difficult to get their money back if they canceled.  The court halted the defendants’ businesses and froze their assets pending trial.

In addition to banning the defendants from selling business coaching programs, the settlement orders announced today permanently prohibit the defendants from misrepresenting material facts about products and services and misrepresenting or failing to fully disclose any refund policy.  The settlement orders also prohibit them from requiring consumers to keep refunds confidential and from requiring that consumers not publicly disparage the defendants in order to obtain refunds.  The defendants also are barred from violating the Telemarketing Sales Rule and from selling or otherwise benefitting from customers’ personal information.

The settlement orders impose a $130 million judgment against corporate defendants Ivy Capital, Inc., Ivy Capital LLC, Fortune Learning System LLC, Vianet Inc., 3 Day MBA LLC, Global Finance Group LLC, Virtual Profit LLC, ICI Development Inc., Logic Solutions LLC, Oxford Debt Holdings LLC, Revsynergy LLC,  Sell It Vizions LLC, Zyzac Commerce Solutions, Inc., Fortune Learning, LLC, and The Shipper, LLC, doing business as Wholesalematch.com.  The judgment will be suspended when these defendants have surrendered all of their assets.  The full judgment will become due immediately if they are found to have misrepresented their financial condition.

The settlement orders against individual defendants Kyle G. KirschbaumJohn H. HarrisonSteven E. Lyman,Christopher M. ZeligSteven J. Sonnenberg, and James G. Hanchett also impose a $130 million judgment.  The judgment will be suspended when these defendants surrender certain assets.  The full judgment will become due immediately if they are found to have misrepresented their financial condition.

The settlement order against Joshua F. Wickman and Enrich Wealth Group LLC (EWG) imposes a $46 million judgment that will be suspended when they have surrendered $68,884 from Wickman’s bank account and EWG’s assets.  The full judgments will become due immediately if they are found to have misrepresented their financial condition.

The settlement orders  also impose judgments against relief defendants who profited from the scheme but did not participate in it:  Cherrytree Holdings, LLC (more than $674,000), S&T Time, LLC (more than $801,000), Virtucon, LLC (more than $113,000), Curva, LLC (more than $679,000), Kierston Kirschbaum (more than $681,000), Melyna Harrison (more than $812,000), and Tracy Lyman (more than $572,000). The judgments will be suspended when they surrender certain assets.  The full judgments will become due immediately if the relief defendants are found to have misrepresented their financial condition.

Under the settlement orders, Kyle and Kierston Kirschbaum and their personal LLC, Cherrytree Holdings, will surrender to the FTC personal bank accounts with a total value of exceeding $213,000, a residential property with equity of approximately $100,000, a 2006 BMW 750Li sedan, and a 2007 Cadillac Escalade.  Steve and Tracy Lyman and their personal LLC, S&T Time, will surrender personal bank accounts with a total value of more than $143,000, a residential property with equity of about $174,000, a 2009 Mercedes CIS sedan, and a 2009 Cadillac Escalade.  John and Melyna Harrison and their personal LLC, Virtucon, will surrender personal bank accounts with a total value exceeding $24,000, a 2007 Infiniti G35, a 2007 Land Rover Range Rover Sport, and a 2008 Chevrolet van.  Hanchett will surrender a 2007 Cadillac Escalade.

Litigation continues against the two remaining defendants, Benjamin Hoskins and Dream Financial, and three relief defendants, Leanne Hoskins, Oxford Financial LLC, and Mowab, Inc. Five other defendants defaulted.

September 25, 2014 in Current Affairs | Permalink | Comments (0)

Wednesday, September 24, 2014

FATCA-Phishing To Steal Customer Account Data Has Begun

Irs_logoThe Internal Revenue Service today issued a fraud alert for international financial institutions complying with the Foreign Account Tax Compliance Act (FATCA).  Scam artists posing as the IRS have fraudulently solicited financial institutions seeking account holder identity and financial account information.

The IRS does not require financial institutions to provide specific account holder identity information or financial account information over the phone or by fax or email.  Further, the IRS does not solicit FATCA registration passwords or similar confidential account access information.

Financial institutions directly registered to comply with FATCA and those in jurisdictions that are treated as having in effect intergovernmental agreements (IGAs) to implement FATCA through intergovernmental cooperation have been approached by persons representing themselves as the IRS.  The IRS has reports of incidents from multiple countries and continents.

These fraudulent solicitations are known as “phishing” scams.  These types of scams are typically carried out through the use of unsolicited emails and/or websites that pose as legitimate contacts in order to deceptively obtain personal or financial information.

September 24, 2014 | Permalink | Comments (0)