Friday, April 14, 2006

Bonds Is the Target of a Grand Jury Investigation

It should not come as a great shock that a federal grand jury in San Francisco is investigating star slugger Barry Bonds for perjury related to his testimony in December 2003 in the Balco (Bay Area Laboratory Co-operative) steroid investigation.  CNN.com reports (here) that the grand jury began hearing testimony about one month ago, around the time reports emerged about the book "Game of Shadows" that asserts Bonds began using steroids in 1998, after Mark McGwire broke Babe Ruth's single-season home run record.  The San Francisco Chronicle reported in 2004 that Bonds told the grand jury that he used two items that he did not know contained steroids, but that he never knowingly used steroids. 

The grand jury has subpoenaed, among others, Bonds' personal physician, according to an AP story (here).  The doctor accompanied Bonds to Balco's offices and drew his blood there, according to "Game of Shadows."  In March 2005, a reputed former girlfriend of Bonds testified before the Balco grand jury that he took steroids (see earlier post here).  The testimony of the physician may corroborate assertions by others about Bonds' use of steroids at the time he testified before the grand jury, contradicting his testimony.  As an earlier post (here) noted, however, a perjury prosecution will depend on the specificity of the questions and answers from the 2003 testimony.

Mike Rains, Bonds' attorney, may already be setting up the defense to an indictment by arguing that the government set a "perjury trap."  According to the CNN.com story, Raines said, ""Look no further than Martha Stewart. The trap is perjury . . . You offer immunity and you get him in there and then you ask them questions and you get them on lying to federal officers.  That's the trap. That's exactly what they got Martha for."  I think the comparison to Martha Stewart is rather inapt.  Even if one accepts that it was unfair to prosecute Stewart for false statements but not the underlying subject of the investigation, she did not receive immunity and her statements were not under oath.  Bonds received immunity for the purpose of telling the truth, and the government had no desire to obtain false testimony from him.  Indeed, the reason why immunity is granted in most cases is because the person will provide evidence against others and avoids prosecution.  The immunity grant states explicitly that false testimony can be used against the person, and this appears to be the exact type of situation in which a perjury prosecution is most appropriate.  The witness agrees to tell the truth to assist an investigation, and then gives false testimony -- that strikes me as the paradigmatic scenario for a perjury prosecution.  Granting immunity is probably the least likely situation in which a so-called "perjury trap" would be set by prosecutors. (ph)

April 14, 2006 in Grand Jury, Investigations, Perjury | Permalink | Comments (0) | TrackBack (0)

Was Skilling On the Witness Stand Too Long?

The direct testimony of former Enron CEO Jeffrey Skilling ended after four days, with him bristling at the government's efforts to "rewrite history" and his attorney asking him if he needed a break to calm down.  Whether that outburst was spontaneous or pure theatrics, the testimony was the longest direct examination of a witness so far during the trial, approximately twice that of two of the government's key witnesses, Ben Glisan and Andy Fastow.   Judgments about the effectiveness of Skilling's testimony are premature at this point because he has not be subjected to cross-examination yet, and so the fact that his direct examination went as planned should not be a surprise given the time spent preparing for it.  While Skilling has to respond to the government's entire case when prosecution witnesses can testify about smaller parts of it, one question that keeps popping into my mind is whether Skilling spent too much time on the witness stand.  Long ago, when I underwent the Department of Justice's trial advocacy training, one adage that stuck with me was the refrain of an instructor: "Get 'em on and get 'em off -- don't dilly-dally!"  Have the witness testify to the key facts and don't spend too much time asking questions because the more the witness says the more material there is for cross-examination.  There's no way to know whether Skilling said "too much" when he testified, but I wonder how much the jury will retain from his direct testimony and whether he put himself in a position of being impeached based on his depth of knowledge about some topics and lack of knowledge about others.  Should counsel have gotten Skilling on-and-off more quickly?  The defense theory requires going against the grain of accepted wisdom about Enron's business and demise, so it may be that Skilling has to fill in a lot of detail, but he said an awful lot that likely will be fodder for cross-examination. Just a thought. (ph)

April 14, 2006 in Enron | Permalink | Comments (0) | TrackBack (0)

Thursday, April 13, 2006

Adnan Khashoggi Charged by SEC with Securities Fraud

Saudi financier Adnan Khashoggi and Ramy El-Batrawi, former CEO of telemarketing firm GenesisIntermedia, Inc. (GENI), were charged with securities fraud by the SEC in a civil complaint (here) filed in U.S. District Court in Los Angeles.  Khashoggi is best-known as the arms dealer in the Iran-Contra scandal in the 1980s, and he and El-Batrawi were controlling shareholders of GENI before its collapse in 2001.  They are accused of manipulating the stock price and misappropriating over $130 million in transactions that led to the collapse of several brokerage firms, resulting in the largest bailout in the history of SIPC.  According to the SEC's Litigation Release (here):

According to the complaint, Ramy El-Batrawi, GENI's Chief Executive Officer at the time, and Adnan Khashoggi, with the assistance of Richard J. Evangelista, Wayne Breedon, and Kenneth P. D'Angelo (a stock loan broker previously charged by the SEC and criminal authorities), developed a manipulation scheme by which they could profit from lending GENI shares (rather than selling them). The complaint alleges that El-Batrawi and Khashoggi, through an offshore entity called Ultimate Holdings, loaned approximately 15 million shares of GENI stock to Evangelista's employer at the time, Native Nations Securities, a New Jersey broker-dealer, and more than a dozen other broker-dealers in exchange for cash based upon the market value of the shares.

According to the complaint, Ultimate Holdings loaned stock through Native Nations (and other broker-dealers) to Breedon's employer at the time, Deutsche Bank Securities Limited in Canada, and received the current market value of the stock in cash. As GENI's stock price fluctuated, the loaned stock was marked-to-market by the broker-dealers. Ultimate Holdings received additional cash when GENI's price increased, and was obligated to return cash when the stock price dropped. By lending the shares in this manner, El-Batrawi and Khashoggi raised approximately $130 million without giving up control of the stock or depressing the market price for the stock.

The manipulation caused GENI's stock price to increase approximately 1,400%, from a low of $1.67 per share (split adjusted) on September 1, 1999 to a high of $25 per share on June 29, 2001. After the scheme collapsed in September 2001, GENI's stock price plunged to pennies per share. El-Batrawi and Ultimate Holdings then defaulted on their obligations to repay the approximately $130 million they had obtained from the stock loans, which caused several of the broker-dealers in the stock loan chain to go bankrupt.

(ph)

April 13, 2006 in Civil Enforcement, Fraud, Securities | Permalink | Comments (0) | TrackBack (0)

Latest Tax Avoidance Schemes

With April 15 -- well, the 17th actually, but who's counting -- almost upon us, the IRS faces an array of tax avoidance schemes that seek to cloak the failure to pay taxes on income in the guise of ostensibly legitimate legal argument.  The IRS identified its "Dirty Dozen" tax scams (press release here), and the top ones are variations on positions taken by the tax protester movement that assert no tax is owed. 

1. Zero Wages. In this scam, new to the Dirty Dozen, a taxpayer attaches to his or her return either a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 that shows zero or little wages or other income. The taxpayer may include a statement indicating the taxpayer is rebutting information submitted to the IRS by the payer.  An explanation on the Form 4852 may cite "statutory language behind IRC 3401 and 3121" or may include some reference to the paying company refusing to issue a corrected Form W-2 for fear of IRS retaliation. The Form 4852 or 1099 is usually attached to a “Zero Return.” (See number four below.)

2. Form 843 Tax Abatement. This scam, also new to the Dirty Dozen, rests on faulty interpretation of the Internal Revenue Code. It involves the filer requesting abatement of previously assessed tax using Form 843. Many using this scam have not previously filed tax returns and the tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses the Form 843 to list reasons for the request. Often, one of the reasons is: "Failed to properly compute and/or calculate IRC Sec 83––Property Transferred in Connection with Performance of Service."

* * * * *

4. Zero Return. Promoters instruct taxpayers to enter all zeros on their federal income tax filings. In a twist on this scheme, filers enter zero income, report their withholding and then write “nunc pro tunc”–– Latin for “now for then”––on the return. They often also do this with amended returns in the hope the IRS will disregard the original return in which they reported wages and other income.

One would think a claim based on a Latin term would have to work.  The Department of Justice filed suit against nine defendants in seven jurisdictions seeking to enjoin them from perpetrating this year's #1 scam, the "zero wages" traick, (press release here) that has resulted in almost $150,000 in improper tax refunds..  As one scam abates, a new one crops up, like dandelions on a lawn. (ph)

April 13, 2006 in Tax | Permalink | Comments (0) | TrackBack (2)

Former Head of FBI El Paso Field Office Indicted

Former FBI Agent Hardrick Crawford, Jr., was indicted in the Western District of Texas on five counts of violating Sec. 1001 (press release here).  Crawford was the Special-Agent-in-Charge (SAC) of the El Paso field office from July 2001 until November 2003, and is accused of making false statements and concealing information about his relationship with a Mexican citizen who owns a race track in Juárez, Mexico.   An El Paso Times article (here) notes that the race track owner is suspected of being involved in drug smuggling, and that Crawford first got to know him when he was an FBI informant.  The indictment alleges that Crawford made a false statement about his relationship with the race track owner, concealed gifts from him, and made false disclosures on his financial disclosure forms.  The gifts allegedly include trips, a country club membership, and a $5,000-per-month job for Crawford's wife at the race track.  Crawford resigned as SAC when an ethics inquiry began about his relationship with the race track owner.  The Times article quotes Crawford's attorney as stating that his client "looks forward to finally being able to defend himself against these allegations that have been hanging over his head for two and a half years." (ph)

April 13, 2006 in Obstruction | Permalink | Comments (0) | TrackBack (0)

Lawyer Sentenced to Two Years for Money Laundering of Client Funds

R. Scott Cunningham received a two-year prison term for his conviction on two counts of money laundering and one count of conspiracy arising from transactions he undertook on behalf of his client prior to filing for bankruptcy.  The jury acquitted Cunningham on 39 other money laundering counts.  The client, Abraham Kennard, was convicted in 2005 on 116 counts of fraud, money laundering, conspiracy, and tax evasion related to a scheme to defraud over 1,600 churches and non-profit organizations, most of which were poor; Kennard received over 17 years in prison.  A press release issued by the U.S. Attorney's Office for the Northern District of Georgia (here) describes Cunningham's role:

Cunningham represented Kennard in bankruptcy proceedings shortly before the criminal activity began. After Kennard began the church fund scheme, CUNNINGHAM agreed to deposit the proceeds of the fraud scheme into his attorney escrow account and disburse the proceeds when and as directed by Kennard.  From January 2002 through October 2002, CUNNINGHAM laundered more than $8.7 million in fraud proceeds through his attorney escrow account and assisted Kennard in concealing and disguising the source, location, ownership, nature, and control of the fraud proceeds. The evidence showed that Cunningham assisted Kennard in siphoning off approximately $3 million of the fraud proceeds for his own use. Kennard paid Cunningham more than $440,000 for his assistance in laundering the fraud proceeds.

The district court ordered Cunningham to forfeit assets acquired through the money laundering, including "his residence in Dalton,Georgia; approximately $422,000 in cash; a 2002 GMC pickup truck; a 2002 Cadillac Escalade; and a 1995 Harley Davidson motorcycle." (ph)

April 13, 2006 in Money Laundering, Sentencing | Permalink | Comments (0) | TrackBack (3)

Will President Bush Be a Witness at Libby's Trial?

Discovery fights are often interesting more for what they reveal about the theory of prosecution and possible defenses than the issues of what documents must be disclosed.  The prosecution of I. Lewis Libby has triggered a series of tit-for-tat responses between the two sides that seem to grow more interesting with each round.  The last filing by Special Counsel Patrick Fitzgerald discussed the President's authorization of Libby -- through the Vice President -- to disclose a previously classified report (a National Intelligence Estimate, or NIE) to New York Times reporter Judith Miller about WMD to rebut the claims advanced by Joseph Wilson (see earlier post here).  Fitzgerald's approach is that this authorization was "unique" and, therefore, Libby's alleged revelation of Valerie Plame's CIA role and connection to Wilson's Niger trip was an item of great importance.  Thus, it was unlikely to be forgotten by Libby, negating his faulty memory defense to the perjury and false statement charges.

Libby's response seeking documents from the White House, CIA, and State Department takes up that challenge by raising the specter that the President's involvement in responding to criticism will be an issue at trial, which means that he might be called as a witness.  Libby's response memorandum (available below) states:

The government’s brief suggests that only the OVP’s response to Mr. Wilson is relevant to the charges in the indictment. But efforts of Mr. Libby and other officials in the OVP to deflate criticism of the Administration cannot be neatly separated from the actions of officials from other agencies – particularly the CIA, the White House, and the State Department. For example, Mr. Libby worked with the CIA and the NSC to determine how to respond to the controversy over the sixteen words. The indictment itself refers to Mr. Libby’s alleged concerns about how the CIA was responding to the controversy. The indictment also describes actions by officials at the White House, including senior advisor Karl Rove and former press secretary Ari Fleischer, who both spoke to reporters about Mr. Wilson. Now, with the government’s injection of the NIE story into this case, the government has placed even more emphatically at issue the actions of the White House – including President Bush – in responding to media criticism about the 16 words.

I suspect it is a foregone conclusion that Vice President Cheney will be a witness for one side or the other, assuming the case gets that far.  The Vice President's interactions with Libby could be crucial to showing the state of Libby's knowledge of Plame's identity and the centrality of his role in responding to media criticism of the Iraq war.  Whether President Bush gets dragged into the trial now appears to be a real possibility.  Libby's memorandum makes it clear he was not authorized by the President to reveal Plame's identity, but the question whether rebutting Wilson's charges was a significant or minor issue could bring into play a number of issues regarding how the White House was responding in June and July 2003, a very messy topic. (ph)

Download libby_response_memo_april_12.pdf

April 13, 2006 in Plame Investigation | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 12, 2006

SEC Issues Policy Guidelines for Subpoenas to the Media

The SEC issued a policy statement (here) setting forth its procedures for issuing a subpoena to the media during a formal investigation.  The issue came to the forefront in February when the Commission issued subpoenas to three columnists who publish on-line for information about contacts with short sellers of Overstock.com shares.  An allegation commonly made against those who specialize in selling short a company's stock -- a bet that the stock will decline -- is that they spread false information through the media and internet to drive down the market price of the shares.  The Enforcement Division sought information from the journalists about columns they wrote that contained negative information about Overstock.com, but the subpoenas were withdrawn shortly thereafter due to the storm of criticism regarding interference with the media. 

SEC Chairman Christopher Cox issued the new policy, which imposes of number of intermediate steps before the Enforcement Division staff can issue a subpoena to members of the media.  First, the SEC must try to obtain the information informally, and contacts should be done through counsel for the journalist rather than by a direct contact.  The benefit of this approach is that issues of whether the journalist even has relevant information, and whether a claim of privilege might be raised, can be decided before any further steps are taken.  The policy also stresses that other avenues for obtaining the information should be exhausted, and any information sought should be important and not peripheral:

If negotiations are not successful in achieving a resolution that accommodates the Commission's interest in the information and the media's interests without issuing a subpoena, the staff investigating the matter should then consider whether to seek the issuance of a subpoena for the information. The following principles should guide the determination of whether a subpoena to a member of the news media should be issued:

(1) There should be reasonable grounds to believe that the information sought is essential to successful completion of the investigation. The subpoena should not be used to obtain peripheral or nonessential information.

(2) The staff should have exhausted all reasonable alternative means of obtaining the information from non-media sources. Whether all reasonable efforts have been made to obtain the information from alternative sources will depend on the particular circumstances of the investigation, including whether there is an immediate need to preserve assets or protect investors from an ongoing fraud.

Only after working through other possibilities can a request for a subpoena be made, and the decision whether to issue the subpoena will be made by the Director of Enforcement in consultation with the General Counsel.  If the decision is made to issue the subpoena, the Chairman must be notified, and the terms of the subpoena negotiated with counsel for the media outlet in advance so that it can be as narrow as possible.  Moreover, the policy states that "[i]n the absence of special circumstances, subpoenas to members of the news media should be limited to the verification of published information and to surrounding circumstances relating to the accuracy of published information."

All in all, the Commission's policy will make it very difficult for the Enforcement Division staff to issue subpoenas because of the many layers of review.  The policy stresses a cooperative process, in which counsel for the subpoena recipient will work with the staff to shape the information request, rather than an "issue first, ask questions later" approach to obtaining information through the SEC's compulsory powers.  (ph)

April 12, 2006 in Investigations, Media, Securities | Permalink | Comments (0) | TrackBack (0)

Round Two of the Scrushy Prosecution

The second criminal prosecution of former HealthSouth CEO Richard Scrushy is getting ready to launch, unless he can succeed in having the indictment thrown out because the pool of potential grand jurors did not include a sufficient number of African-Americans.  Scrushy was indicted in 2005 along with former Alabama Governor Don Siegelman and two former Siegelman aides on corruption charges.  The case is set to go to trial in Montgomery, the state capital which is in the Middle District of Alabama, at the end of April.  Scrushy and the other defendants have filed a motion to dismiss the indictment because the District has a 30% African-American population but the jury pool is less than that figure, although a government witness testified that African-Americans made up 21% of the pool, which meets the requirements of federal law.  Even if Scrushy does not win this motion -- and it is very difficult to establish such a violation for grand jury selection -- he can still challenge the pool of jurors available for selection to the petit jury, although a Sixth Amendment claim would also be very difficult to win because Supreme Court precedent does not require that the actual jury reflect the racial or ethnic composition of the District.  An AP story (here) discusses the hearing on Scrushy's challenge to the indictment.

On an related topic, Scrushy recently began running his television program Viewpoint in Montgomery.  The program features a number of local ministers, and began running in Birmingham in 2004 around the time he was indicted there on fraud charges related to HealthSouth.  Scrushy denies that there is any connection between the location of the next prosecution, assuming it survives the motion to dismiss, and the decision to run the show in  Montgomery.  Instead, it is part of a plan to roll out the program on a national basis, as noted in a Birmingham News story (here).  Surely it is just a coincidence, although I doubt American Idol is particularly worried about its ratings. (ph)

April 12, 2006 in Corruption, Grand Jury, Prosecutions | Permalink | Comments (2) | TrackBack (1)

A Very Strange Election

It is hard to imagine a successful electoral challenge to incumbents in a company town, particularly when the city owns the houses in which the voters live.  But that's what three candidates tried to do in Vernon, California, a small "city" southeast of downtown Los Angeles, and the election has had its share of bizarre turns.  Vernon is almost completely industrial, with a work force of over 40,000 within its five square miles, but a population of only 91 residents.  The city's website (here) notes that it has a police department of over sixty officers who provide "high level security and a quick response time."  The city owns all the housing within its borders, and subsidizes the rent for city employees who live there.  An AP story (here) discusses how three candidates set up residence in a warehouse to run for office, only to have the city condemn the property and evict them.  The city then called off the election, only to have it put back on again when a judge ordered voting.  After the election on March 11 for its 86 registered voters, the city clerk brought the locked ballot box to the city council chambers and refused to count the votes because of challenges to the election.  The challengers claim, not surprisingly, that the election is rigged because city workers are beholden to the Mayor and council for their jobs.  Vernon did not have an election since 1980.  This mess will have to be sorted out somehow, amidst accusations of corruption and intimidation.  (ph)

April 12, 2006 in Corruption | Permalink | Comments (0) | TrackBack (0)

Deferred Prosecution Agreements

Some of the deferred prosecution agreements of U.S. Attorney Christopher Christie are making the press (see here).  Specifically noted are his agreements with  Bristol-Myers Squibb and the University of Medicine and Dentistry of New Jersey.  In an article in the New Jersey Law Journal,  Lisa Brennan
writes about two provisions in these agreements that have caused concern: 1) the endowment of an ethics chair to Seton Hall Law School, the law school Christie attended; and 2) the selection of a monitor for reviewing company matters.

Clearly after Arthur Andersen, companies have a fear of being indicted, as the indictment alone can be a death sentence. The issue is whether prosecutors are placing inordinate pressure on companies to give into whatever a prosecutor desires. 

(esp)

April 12, 2006 in Settlement | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 11, 2006

Blame Fastow

Jeff Skilling in a second day of testimony denied wrongdoing and blamed Fastow, the individual who was testifying against him in return for a cooperation deal. (see Washington Post here)  Skilling and his attorney went through each charge denying that he committed illegal acts. (see Houston Chronicle here). 

In reading recent articles concerning the Lay/Skilling trial, it seems clear that the tables are turning.  Credibility will likely be a key issue - do you believe Skilling or do you believe Fastow. But cross-examination has not happened yet, and it will be interesting to see if the prosecution can present tangible evidence to impeach Skilling.

(esp)

April 11, 2006 in Enron | Permalink | Comments (1) | TrackBack (0)

Texas Lawyer Indicted

With all eyes focused on the Enron trial, it is easy to miss other cases being brought in Texas.  Fraud Update links to a press release here of the US Attorney's Office for the Eastern District of Texas telling of a "lawyer has been indicted for security and wire fraud violations."  The press release states that the attorney allegedly:

"lured potential investors by representing that their money would be used to purchase short-term securities from Fortune 500 companies. [He] specifically represented that he was an international mergers and acquisition lawyer who had been retained by a Fortune 500 company, that the company was in the final stages of closing a major merger or acquisition, and that the company needed short-term financing to complete the acquisition. [The lawyer] told investors that he could not identify the company because of various securities laws, and therefore the companies were identified by code names, . . .

The indictment alleges that [the attorney's] representations were false and misleading, that [he] did not represent these corporations in these transactions and that [he] spent the investors' monies on personal expenses and on payments to prior investors."

(esp)

April 11, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (1)

Insider Trading Ring Charged with Criminal and Civil Violations

Federal prosecutors and the SEC filed new criminal and civil insider trading charges in a case that grew out of suspicious trading in shares of Reebok in August 2005 right before the announcement of a friendly takeover by Adidas.  A short time later, charges were filed against David Pajcin, who worked at Goldman Sachs and is the nephew of a woman in Croatia who was the name on the account that traded Reebok stock and call options.  Pajcin was also charged with insider trading based on reviewing advance copies of Business Week, an old insider trading ploy that seems to crop up every few years.  Pajcin has cooperated with the authorities, and a wide-scale insider trading operation has come to light that generated profits of over $6 million.  The two lead players are Pajcin and Eugene Plotkin, who worked with Pajcin at Goldman and was most recently in the firm's Fixed Income Research division -- and I suspect he was terminated from that position as soon as the news hit the wire.  The scheme had two prongs, with information coming from a junior analyst at Merrill Lynch about deals in that firm's shotpand another pipeline into the printing plant for Business Week.  The SEC's litigation release (here) summarizes the two aspects of the insider trading operation:

The Merill Lynch Scheme:

The Complaint alleges that Plotkin and Pajcin infiltrated the investment banking unit of Merrill Lynch, repeatedly learning of mergers and acquisitions transactions before they became public. In exchange for a share of the illegal profits, Stanislav Shpigelman (“Shpigelman”), an analyst at Merrill Lynch, leaked confidential information to defendants Plotkin and Pajcin concerning at least six mergers or acquisitions that Merrill Lynch was working on, prior to the time the deals became public, including deals between (i) The Proctor & Gamble Company and The Gillette Company; (ii) Novartis AG and Eon Labs, Inc.; (iii) Duke Energy and Cinergy Corp.; (iv) Quest Diagnostics, Inc. and LabOne, Inc.; (v) Celgene Corp. and a company considering acquiring Celgene; and (vi) Reebok and Adidas. Plotkin and Pajcin traded on the insider information and passed the insider information on to individuals in the United States and Europe (“Traders”) who traded on it. Plotkin and Pajcin had an agreement with the Traders, pursuant to which they were to receive a percentage of the illicit profits made by the Traders. The Merrill Lynch Scheme yielded over $6.4 million in illicit trading profits.

The Business Week Scheme:

The Complaint further alleges that Plotkin and Pajcin also infiltrated one of the printing plants utilized by Business Week, repeatedly obtaining advance copies of the market-moving IWS [Inside Wall Street] column in Business Week. Plotkin and Pajcin recruited two individuals — first, Nickolaus Shuster (“Shuster”), and later Juan C. Renteria, Jr. (“Renteria”) — to obtain employment at Quad/Graphics, Inc., one of four printing plants that print Business Week magazine, for the sole purpose of stealing copies of upcoming editions of the magazine, and calling Plotkin or Pajcin to read them key portions of IWS — a widely-read column in the magazine that generally moves the price of the securities of companies mentioned in it – prior to the time the column became available to the public. The Complaint alleges that Shuster and Renteria provided Plotkin or Pajcin with insider information concerning at least twenty companies that were featured in the IWS column. Plotkin and Pajcin then either traded on the IWS insider information or passed the information to some or all of the Traders, who traded on the insider information. The Business Week Scheme yielded over $345,000 in illicit trading profits. here) discusses the charges. (ph)

All of the main players are in their 20s, with Pajcin the oldest at 29, although this is much more than a youthful indiscretion.  Plotkin and Shpigelman were arrested in New York on the criminal charges.  If the charges are proven, their  careers on Wall Street were over before lunch was served.  A Reuters story (here) discusses the charges, and the criminal complaint is available (here) on Findlaw. (ph)

April 11, 2006 in Civil Enforcement, Insider Trading, Prosecutions, Securities | Permalink | Comments (0) | TrackBack (1)

Monday, April 10, 2006

It is All Skilling

The white collar crime entries across blogsphere and the press have one thing in common - they are all about Skilling. (See Wall Street Journal here; Houston Chronicle here; New York Times here; Washington Post here; Atlanta Jrl Constitution here)  Everyone is describing the testimony, offering commentary and analyzing whether this learned and skillful description of the workings of the company will in the long-run backfire. Cases often turn on how well a person holds up on cross-examination, so much is yet to come.  A key factor may rest on whether Skilling will be able to explain why he sold stock when he did?

(esp) 

April 10, 2006 in Enron | Permalink | Comments (1) | TrackBack (1)

Are Ken Lay & Jeff Skilling Assisting the President?

The Lay/Skilling trial is clearly at a peak this coming week with many already in Texas and others heading there to watch the testimony of Jeff Skilling (see Wall Street Journal here). 

But as all eyes turn to Houston, one has to wonder if we are shifting focus from Washington, D.C. And there are certainly some questions that need answering from the White House.  For one, did Bush authorize the leaks?  If he did authorize the leaks, was it legal? And if he did authorize the leaks why didn't he just tell us this up front as opposed to having our tax dollars spent on this investigation? And if he did authorize the leaks then why did his aides state to the American public that he wanted to "'get to the bottom' of who leaked the name of Wilson's wife, covert CIA operative Valerie Plame." (see Washington Post here).  And if this was authorized, then is the white house saying that it is acceptable to leak information, information about a CIA operative, information that is being leaked to  "attempt to discredit a CIA adviser whose views undermined the rationale for the invasion of Iraq."(Id.)

(esp)

April 10, 2006 in Enron | Permalink | Comments (0) | TrackBack (0)

Sunday, April 9, 2006

Boeing Problems With Arms Export Control Act

According to the Washington Post (AP) here, Boeing will be paying $15 Million to settle an alleged violation of the Arms Control Export Act. It seems that 19 planes were sold to China with a chip that was prohibited to be sold by the US to China.  In addition to the monetary settlement, the company will also be appointing "an independent, external officer to oversee company wide export-control compliance for two years."  They will also be "retain[ing] an outside firm to audit its efforts." 

This is not the first fine Boeing is paying amounts for an alleged sale of items to China.  According to NewsMax here Boeing paid "a $2.12 million fine to settle criminal charges against its McDonnell Douglas subsidiary for the 1994 export of surplus machine tools and other equipment to China National Aero-Technology and Export Corp." There was no admitting of wrongdoing here. (See also NYTimes here for discussion of other amount paid by Boeing).

(esp)

April 9, 2006 in International, Settlement | Permalink | Comments (0) | TrackBack (0)