Medicare Fraud is Rampant ---
 http://townhall.com/columnists/stevesherman/2016/02/05/medicare-fraud-is-rampant-n2115375?utm_source=thdaily&utm_medium=email&utm_campaign=nl&newsletterad=

From the CFO Journal's Morning Ledger on March 22, 2016

Former Lehman CFO tells her side of the firm’s collapse
Erin Montella’s new memoir offers a unique perspective on the events that led to the financial crisis. “Full Circle,” which was released Sunday on Amazon.com, tells the story of how Ms. Montella rose to become the highest-ranking woman on Wall Street in 2008, only to resign from the firm six months after being named CFO. She accepted the position only after becoming convinced she could make the role more important, “something close to the CEO heir apparent.”

Bob Jensen's threads on the 2008 bailouts and non-bailouts (as in the case of Lehman) in the Greatest Swindle in the History of the World ---
http://faculty.trinity.edu/rjensen/2008Bailout.htm 

"Washington State Prof Charged With $8M Research Fraud," Inside Higher Ed, February 26, 2016 ---
https://www.insidehighered.com/quicktakes/2016/02/26/washington-state-prof-charged-8m-research-fraud?utm_source=Inside+Higher+Ed&utm_campaign=8ef91c166e-DNU20160226&utm_medium=email&utm_term=0_1fcbc04421-8ef91c166e-197565045

The U.S. Justice Department on Wednesday charged a professor at Washington State University and two family members with defrauding federal agencies of $8 million in research funds for their personal use.

Haifang Wen, the Colf Distinguished Professor in Civil Engineering at Washington State, was arrested Wednesday on charges that he and his brother and sister-in-law had set up false businesses and conspired to defraud the government of grants designed to help small firms develop asphalt composition technologies. Wen and the others face up to 30 years in prison and a $1 million fine

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm

Accountant Who Cooked Wholesaler's Books Gets 27 Months ---
http://www.law360.com/articles/775230/accountant-who-cooked-wholesaler-s-books-gets-27-months

Law360, New York (March 23, 2016, 7:09 PM ET) -- A Manhattan federal judge on Wednesday hit a Long Island accountant who helped a Florida-based beauty products wholesaler overstate its financial position with a 27-month prison sentence after the fraud cost a bank lender $4.9 million.

U.S. District Judge Lewis A. Kaplan also hit Marc Wieselthier, 57, with $161,000 in forfeiture and $4.9 million in restitution for the fraud, which was revealed when the company, DIT Inc., fell into bankruptcy.

The judge said prison was the only way to send the message to CPAs and lawyers...

"IRS Employee Pleads Guilty to $1 Million ID Theft Tax Fraud Scheme
United States Department of Justice, February 9, 2016
http://www.justice.gov/usao-ndal/pr/irs-employee-pleads-guilty-1-million-id-theft-tax-fraud-scheme

"Gordon and Bud Did It. Did You? Insider Trading Gets a Rethink," by Neil Weinberg and Patricia Hurtado, Bloomberg, February 16, 2016 ---
http://www.bloomberg.com/news/articles/2016-02-16/gordon-and-bud-did-it-did-you-insider-trading-gets-a-rethink?cmpid=BBD021616_BIZ 

Insider trading used to seem so simple.

Pass a tip: “Blue Horseshoe loves Anacott Steel.”

Make a killing: “It’s all about the bucks, kid.”

And, just maybe, get busted: “At that moment, man finds his character.”

That, anyway, is the Hollywood version, circa 1987, in “Wall Street.”

On the real Wall Street, insider trading has rarely been that clear. And now, the prickly legal questions around it -- questions that have been around since the days of Gordon and Bud -- could get even thornier.

Almost three decades after the film, and seven years after the start of another dragnet that ensnared dozens, the U.S. Supreme Court is poised to take up the issue in a case involving brothers-in-law.

But before that happens, Judge Jed S. Rakoff -- who wrote the opinion headed to the Supreme Court -- is getting another chance to weigh in.

Simple Answer?

This week, Rakoff, a Manhattan federal court judge, is set to preside over a case that highlights a question that has many traders on edge: Just what is insider trading anyway? The answer might seem simple, but it’s not and never has been.

Part of insider trading requires that tippers, or people who pass inside information, get a “benefit.” After a pair of appeals court rulings since December 2014, it’s now unclear what counts as a benefit. Cash? Yes. Career advice. No. But say the tipper and the trader are just brothers-in-law and no money is exchanged. Or roommates who occasionally share secrets. Is that insider trading?

That’s what this trial is about.

Tuesday’s case was brought by the U.S. Securities and Exchange Commission against two brokers, and it centers on a merger tip passed from one roommate to another. The tip was about a billion dollar deal that made its way to the two brokers now on trial.

Lawyer’s Tip

According to the SEC, a lawyer who worked at Cravath, Swaine & Moore LLP told his friend, a stock trader, about International Business Machine’s acquisition of SPSS Inc. in 2009. The friend in turn bought shares in SPSS and told his roommate, who then tipped broker Daryl Payton and two colleagues. One of those brokers told another colleague, Benjamin Durant.

Rakoff said in rulings last year that the SEC may have a case against Payton and Durant, who are on trial. The evidence may well show that the tips were swapped in exchange for “past and prospective services rendered” by one roommate to the other. If the jury agrees, that would be enough to establish the benefit required under insider-trading law, he said.

“They together ate dinner, drank beers, played video games, watched TV, used drugs and discussed their respective days, current events and personal details of their lives,” Rakoff said, summarizing the SEC’s claims. One roommate “took the lead in organizing and paying shared expenses, and resolving problems at the apartment.”

Nine Months

Lawyers for Payton and Durant are expected to argue that the tip to the roommate didn’t include a benefit -- so neither that, nor anything that followed, was insider trading. The lawyers say the roommates didn’t have a close relationship; they lived together for only nine months, didn’t share details about one another’s work, and hadn’t met one another’s families or friends. Payton and Durant knew even less about the roommates’ relationship, their lawyers say.

Hoary legal definitions -- in fact, no single U.S. statute covers insider trading -- have complicated the issue for years, as have different views from different global jurisdictions. Pretty much everyone is confused, from traders, to prosecutors to corporate executives.

“It’s a scary world when nobody knows how to conduct themselves,” said Jeffrey Robertson, a Washington-based lawyer who represents clients in securities litigation. “Obviously, it’s a state of flux.”

It’s so confusing, in fact, that Payton and Durant were criminally charged with insider trading, only to see those cases dismissed after a federal appeals court changed the law in December 2014.

California Case

The Supreme Court may at last provide guidance. Last month, it agreed to review a case from California in which Rakoff -- who was sitting on the appeals court there as a visiting jurist -- wrote an opinion on benefit that was favorable to prosecutors.

Continued in article

Jensen Comment
In my opinion, the more insider traders get away with exploiting private information the more investors will abandon the market. It's as simple as that. To protect the market you have to both discourage and punish insider trading even if its an accidental mistake.

Bob Jensen's Fraud Updates --- http://faculty.trinity.edu/rjensen/TidbitsDirectory.htm

Monsanto to Pay $80 Million to Settle Charge of Improper Accounting (for deferred deductions of rebates exposed by whistleblower) ---
https://www.sec.gov/news/pressrelease/2016-25.html

According to the SEC’s order instituting a settled administrative proceeding against Monsanto, accounting executives Sara M. Brunnquell and Anthony P. Hartke, and then-sales executive Jonathan W. Nienas:

·         Monsanto’s sales force began telling U.S. retailers in 2009 that if they “maximized” their Roundup purchases in the fourth quarter they could participate in a new rebate program in 2010.

·         Hartke developed and Brunnquell approved talking points for Monsanto’s sales force to use when encouraging retailers to take advantage of the new rebate program and purchase significant amounts of Roundup in the fourth quarter of the company’s 2009 fiscal year.  Approximately one-third of its U.S. sales of Roundup for the year occurred during that quarter.

·         Brunnquell and Hartke, both certified public accountants, knew or should have known that the sales force used this new rebate program to incentivize sales in 2009 and Generally Accepted Accounting Principles (GAAP) required the company to record in 2009 a portion of Monsanto’s costs related to the rebate program.  But Monsanto improperly delayed recording these costs until 2010.

·         Monsanto also offered rebates to distributors who met agreed-upon volume targets.  However, late in the fiscal year, Monsanto reversed approximately $57.3 million of rebate costs that had been accrued under these agreements because certain distributors did not achieve their volume targets (at the urging of Monsanto).

·         Monsanto then created a new rebate program to allow distributors to “earn back” the rebates they failed to attain in 2009 by meeting new targets in 2010.  

·         Under this new program, Monsanto paid $44.5 million in rebates to its two largest distributors as part of side agreements arranged by Nienas, in which they were promised late in fiscal year 2009 that they would be paid the maximum rebate amounts regardless of target performance.

·         Because the side agreements were reached in 2009, Monsanto was required under GAAP to record these rebates in 2009.  But the company improperly deferred recording the rebate costs until 2010. 

·         Monsanto repeated the program the following year and improperly accounted for $48 million in rebate costs in 2011 that should have been recorded in 2010.

·         Monsanto also improperly accounted for more than $56 million in rebates in 2010 and 2011 in Canada, France, and Germany.  They were booked as selling, general, and administrative (SG&A) expenses rather than rebates, which boosted gross profits from Roundup in those countries.  

Scott W. Friestad, Associate Director in the SEC’s Division of Enforcement, said, “Monsanto devised rebate programs that elevated form over substance, which led to the booking of substantial amounts of revenue without the recognition of associated costs.  Public companies need to have robust systems in place to ensure that all of their transactions are recognized in the correct reporting period.”

Monsanto consented to the SEC’s order without admitting or denying the findings that it violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, the reporting provisions of Section 13(a) of the Securities Exchange Act of 1934 and underlying rules 12b-20, 13a-1, 13a-11, and 13a-13; the books-and-records provisions of Exchange Act Section 13(b)(2)(A); and the internal accounting control provisions of Exchange Act Section 13(b)(2)(B). 

Continued in article

Bob Jensen's threads on creative accounting ---
http://faculty.trinity.edu/rjensen/theory02.htm#Manipulation

"Boeing to Face SEC Probe of Dreamliner and 747 Accounting," by Robert Schmidt, Julie Johnsson, and Matt Robinson, Bloomberg, February 11, 2016 ---
http://www.bloomberg.com/news/articles/2016-02-11/boeing-said-to-face-sec-probe-into-dreamliner-and-747-accounting?cmpid=BBD021116_BIZ 

Bob Jensen's threads on creative accounting ---
http://faculty.trinity.edu/rjensen/theory02.htm#Manipulation

"Valeant uses rare accounting maneuver for acquisitions that cushions income," by Francine McKenna, Market Watch, February 7, 2016 ---
 http://www.marketwatch.com/story/valeant-uses-rare-accounting-maneuver-for-acquisitions-that-cushions-income-2016-02-11

Valeant Pharmaceuticals International Inc. is constantly defending its business strategy—spending more to acquire companies with valuable drugs it can market than on research and development of new drugs.

New, original research by MarketWatch, supported by data gathered by financial research firm Calcbench, shows how Valeant VRX, -3.66% uses a rare accounting maneuver to obscure the true details of its many complex deals. In particular, it shows how much it pays for companies over book value and how it adjusts that amount over time without hitting prior income statements.

Last Thursday Valeant’s interim CEO Howard Schiller was subjected to a bipartisan grilling from members of the House Committee on Oversight, who questioned him about the company’s drug pricing tactics. Valeant’s business strategy has been to buy companies with drugs that have little or no generic competition and then raise the prices substantially to capitalize on desperate demand for these drugs. The company has been under scrutiny for its aggressive accounting activities ever since a short seller, Citron, accused it last fall of fraud related to its previously undisclosed specialty pharmacy Philidor. The company has since terminated its relationship with Philidor.

Continued in article

CDO --- https://en.wikipedia.org/wiki/Collateralized_debt_obligation

"Goldman Reaches $5 Billion Settlement Over Mortgage-Backed Securities:  Pact marks largest settlement in history of Wall Street firm," by Justin Baer and Chelsey Dulaney, The Wall Street Journal, January 14, 2016 ---
http://www.wsj.com/articles/goldman-reaches-5-billion-settlement-over-mortgage-backed-securities-1452808185?mod=djemCFO_h

Goldman Sachs Group Inc. agreed to the largest regulatory penalty in its history, resolving U.S. and state claims stemming from the Wall Street firm’s sale of mortgage bonds heading into the financial crisis.

In settling with the Justice Department and a collection of other state and federal entities for more than $5 billion, Goldman will join a list of other big banks in moving past one of the biggest, and most costly, legal headaches of the crisis era.

Goldman said litigation legal expenses stemming from the accord would trim its fourth-quarter earnings by about $1.5 billion, after taxes. The firm is scheduled to report results Wednesday.

“We are pleased to have reached an agreement in principle to resolve these matters,” Lloyd Blankfein, Goldman’s chief executive, said in a statement.

Government officials previously won multibillion-dollar settlements from J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc. The probes examined how Wall Street sold bonds tied to residential mortgages, and whether banks deceived investors by misrepresenting the quality of underlying loans.

The government’s inquiry into Goldman related to mortgage-backed securities the firm packaged and sold between 2005 and 2007, the years when the housing market was soaring and investor demand for related bonds was still strong.

Continued in article

Bob Jensen's threads on CDO accounting scandals and new rules ---
http://faculty.trinity.edu/rjensen/theory02.htm#CDO

Nikki Nguyen left a $50,000-a-year job at Boeing Co. in 2006 to pursue a law degree at Thomas Jefferson School of Law in San Diego, her sister's successful career as a corporate attorney providing a glimpse of the possibilities she imagined ahead of her.

Instead, she struggled for more than a year to find a job after she graduated and watched her student loan debt of over $180,000 balloon.

Nguyen, 34, is among 12 former Thomas Jefferson students who are suing the university in a California court, accusing it of inflating its graduates' employment figures and salaries to attract students. "They weren't transparent," said Nguyen, whose case is scheduled to go to trial in March. "People who have a dream of law school should go into it with their eyes wide open." ...

Nguyen's lawsuit is among more than a dozen similar ones filed in recent years against law schools, including Golden Gate University School of Law in San Francisco and the University of San Francisco School of Law. Though most of the suits have been dismissed, critics say they point to a need for greater regulation and transparency for law schools, so prospective students know their employment prospects, the debt they will incur and even their chances of successfully passing the bar.

"Schools are setting up a lot of people to fail," said Kyle McEntee, executive director of Law School Transparency, a nonprofit legal education policy group that had no involvement with the lawsuits.

Thomas Jefferson reported post-graduation employment figures that exceeded 70 percent and topped 90 percent in 2010, but did not disclose that those figures included part-time and non-legal work such as a pool cleaner and a sales clerk at Victoria's Secret and were based on a small sample of graduates, according to Nguyen's lawsuit and her attorney, Brian Procel. The lawsuit further alleges that the school routinely reported unemployed students as employed and shredded surveys and other documents that reflected a more accurate employment picture. ...

The lawsuits against Golden Gate University and the University of San Francisco also alleged the schools were misrepresenting their post-graduate employment figures. The Golden Gate lawsuit was settled, with each of the five plaintiffs receiving $8,000, according to a May 2015 court filing. The case against the University of San Francisco was dismissed in May. ...

Nguyen said she now owes more than $200,000. Though she works in a paralegal-type position and lives with her sister, she said she has not been able to touch the principal on her loan

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm