The Most Corrupt and the least Corrupt Nations of the World ---
http://www.businessinsider.com/most-corrupt-countries-in-the-world-2014-12

Question
What is probably the main reason the USA is not among the Top 35 nations in terms of low corruption?

Answer
The interaction of the public and private sectors in fraudulent procurements of goods and services and financing. For example, there are millions of examples of kickbacks and bribery from the upper reaches of the Pentagon procurement down procurements in small counties and towns and school districts throughout the USA where hundreds and hundreds of millions of dollars change hands under the table. Among the classic piñatas for municipality frauds are bond sales.

Exhibit A
"SEC Tightens Policing of Municipal Debt Market: Agency Seeks to Ban Some Local Officials for Their Involvement in Alleged Fraud," by Andrew Ackerman, The Wall Street Journal, December 19, 2014 ---
http://www.wsj.com/articles/sec-tightens-policing-of-municipal-debt-market-1419019536?mod=WSJ_LifeStyle_LatestHeadlines 

WASHINGTON—U.S. securities regulators, ratcheting up their policing of the $3.7 trillion market for state and local debt, are seeking to ban local officials from the market for their involvement in alleged fraud.

The Securities and Exchange Commission this year has sought to bar three officials in suburban Chicago and Detroit from future municipal-bond transactions, citing their roles in misleading investors in prior bond sales. A federal judge has issued a preliminary agreement to one of the requests.

Attempts to bar individual municipal officials are the latest sign of the SEC’s efforts to crack down on what it views as stale or misleading investor disclosures for municipal-bond investors. The move is significant, securities attorneys said, in part because the SEC hasn’t previously sought such prohibitions.

Unlike brokers and advisers whom regulators routinely bar from their respective industries for wrongdoing, the agency doesn’t have authority to directly regulate municipal officials and instead polices much of the market using broad antifraud authority.

“It’s an indication of how zealous they are in their enforcement actions in the state and local government market,” said Paul Maco, a partner at Bracewell & Giuliani LLP, who previously served as the SEC’s municipal-bond chief.

In seeking to bar individual municipal officials, the SEC has relied on a catchall provision of the securities laws that allows them to seek “any equitable relief that may be appropriate or necessary for the benefit of investors.” SEC officials say censuring individual municipal officials is a better alternative than imposing fines on local governments, because any fines would be borne broadly by taxpayers.

“In the municipal securities area, where the SEC has very limited enforcement authority, it is critically important to pursue cases that will deter future violations without harming innocent taxpayers,” said Daniel Gallagher, a Republican SEC commissioner. “In this context, actions against culpable individuals provide maximum deterrence.”

Last month, the SEC sought to bar the former mayor and former city administrator of Allen Park, Mich., as part of a suit against the city, for failing to inform investors of the city’s deteriorating financial condition. The city had sold $31 million of bonds to finance a now-failed movie studio.

Gary Burtka, the former mayor, and Eric Waidelich, the former city administrator, agreed to settle the SEC charges and consented to being barred from future municipal-bond transactions. A federal judge has yet to sign off on the settlements. Attorneys for Mr. Burtka didn’t respond to requests for comment. An attorney for Mr. Waidelich declined to comment.

Separately, the SEC earlier this year sued Harvey, Ill., and its former comptroller, Joseph Letke, having found the city diverted about $1.7 million of bond proceeds originally to be used for the construction of a Holiday Inn hotel—for “improper, undisclosed uses.” The city agreed to settle the charges but Mr. Letke, whom the SEC alleged received about $269,000 in undisclosed payments from the bond proceeds, has refused to settle.

Continued in article

Exhibit B
"Jury Convicts Former Detroit City Treasurer, Pension Officials of Conspiring to Defraud Pensioners Through Bribery"
U.S. Attorney's Office
December 8, 2014
http://www.fbi.gov/detroit/press-releases/2014/jury-convicts-former-detroit-city-treasurer-pension-officials-of-conspiring-to-defraud-pensioners-through-bribery

Jensen Note
Schertz is a suburb of San Antonio in Bexar County. Professor Dennis Elam is an accounting professor and blogger from Texas A&M University at San Antonio ---
http://professorelam.typepad.com/my_weblog/

"Where Were the Auditors?" by Dennis Elam, December 18, 2014 ---
http://professorelam.typepad.com/my_weblog/2014/12/where-were-the-auditors.html

Michael Dennehy embezzled $1.7 million form Bexar Waste from 2008 to 2014. As an accounts payable clerk he wrote himnself checks and deposited them to personal accounts.  A stamp forged the proper signature and names were changed for payeesin Quick Books. 

Bexar Waste is garbage collection service based in Schertz.  In my opinon the firm is in need of improved internal controls a serious outside auditor who would at least perform a review of the books

What other simple methods could have prevented an ongoing fraud like this?

After posting this news item early this morning I received, no surprise, this via my Internal Audit Membership.

PCAOB to detail internal control audit checklist.

The PCAOB is still dissatisfied with the quality of many audits it inspects. While Bexar Waste is a small privately held company, that story highlights the importance of internal controls. 

As I have thought the Bexar Waste case over, it occurs to me that whoever was in charge must not have  known the company very well. If your accounts went missing $1.7 Million over five years, would you notice, that is 340K a year!  I would think that is a significant number in a firm that size. 

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

Jensen Comment
After correcting for some arithmetic this might make a fun module for an ethics course or a movie script.

"An Ethical Story" by Dennis Elam, December 22, 2014 ---
http://professorelam.typepad.com/my_weblog/2014/12/an-ethical-story.html

A few years ago robbers entered a bank in a small town. One of them shouted: "Don't move! The money belongs to the bank. Your lives belong to you.” Immediately all the people in the bank laid on the floor quietly and without panic.

This is an example of how the correct wording of a sentence can make everyone change their view of the world.

. While running from the bank the youngest robber (who had a college degree) said to the oldest robber (who had barely finished elementary school): "Hey, maybe we should count how much we stole." The older man replied: "Don’t be stupid. It's a lot of money so let's wait for the news on TV to find out how much money was taken from the bank"

This is an example of how life experience is more important than a degree..

After the robbery, the manager of the bank said to his accountant: "Let's call the cops and tell them how much has been stolen." "Wait”, said the Accountant, "before we do that, let's add the $800,000 we took for ourselves a few months ago and just say that it was stolen as part of today’s robbery."

This is an example of taking advantage of an opportunity.

The following day it was reported in the news that the bank was robbed of $ 3 million. The robbers counted the money, but they found only $1 million so they started to grumble. "We risked our lives for $1 million, while the bank's management robbed two million dollars without blinking? Maybe it’s better to learn how to work the system, instead of being a simple robber." ​​

This is an example of how knowledge can be more useful than power !!!

Moral of the Story : Give a person a gun, and he can rob a bank. Give him a bank, and he can rob everyone.

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

"The Double-Dipping Legal Scam Bogus asbestos claims break into the open in federal court," The Wall Street Journal, December 25, 2014 ---
http://www.wsj.com/articles/the-double-dipping-legal-scam-1419535915?tesla=y&mod=djemMER_h&mg=reno64-wsj

House Speaker John Boehner says asbestos legal reform is a priority in the New Year, and it can’t come soon enough. Based on the details emerging from federal bankruptcy court, asbestos litigation fraud has reached new heights.

Garlock Sealing Technologies is a maker of gaskets that since its bankruptcy in 2010 has become a symbol of the corrupt practices of the plaintiffs bar. Lawyers demanded $1.3 billion in payouts from Garlock for mesothelioma patients until federal Judge George Hodges reviewed evidence showing that many of the claims were a sham. The judge in January slashed the company’s liability to $125 million and slammed the trial bar for “misrepresenting” the facts.

Then in October he moved to unseal that evidence, and now we’re getting a glimpse of what has become a widespread tort-bar con. Court documents show the ugly specifics of “double-dipping”—in which lawyers sue a company and claim its products caused their clients’ disease, even as they file claims with asbestos trusts blaming other products for the harm. This lets them get double or multiple payouts for a single illness, with a huge cut for the lawyers each time.

Garlock unveiled how this worked in at least 15 different cases that it had previously settled or lost after Judge Hodges allowed for belated discovery. In a case called Torres, the plaintiff claimed the only asbestos he handled was in Garlock gaskets, even as he told multiple trusts that he regularly handled raw asbestos.

In a case called White, the plaintiff told Garlock he’d never worked at the Norfolk naval shipyard, that he never went aboard naval ships, and that he’d never had exposure to insulation in the Coast Guard. The plaintiff meanwhile told various asbestos trusts that he had worked at the Norfolk shipyard, that he’d been exposed to asbestos aboard naval ships, and that he’d been exposed to insulation while in the Coast Guard. Each of the 15 cases shows similar contradictions.

The extent of the deception won’t surprise anyone who’s done business with plaintiffs firms. In the White case, the plaintiff told Garlock that he’d been exposed to only two asbestos products. He told others (including trusts or courts) he’d been exposed to 22 additional products.

Of the 15 cases in question, the plaintiffs disclosed to Garlock a cumulative total of 32 asbestos products to which they’d had exposure. In other forums, those same 15 plaintiffs claimed to have been exposed to 284 different products—many containing the most dangerous forms of asbestos.

Often these trust claims were filed with sworn statements in which plaintiffs attested to having “breathed” specific products—though they hid this from Garlock. The company paid nearly $18 million to these 15 plaintiffs based on the misrepresentations.

Garlock noted in court that these 15 cases were handled by the same five national firms: Shein Law Center; Waters, Kraus & Paul; Belluck & Fox; Williams Kherkher; and Simon Greenstone Panatier Bartlett. The gasket maker also pointed out that four of the firms (all but Shein Law Center) employ lawyers who’d once worked for Baron & Budd, a firm famous for a 1997 memo that instructed clients in the art of withholding pertinent information from defense attorneys and courts.

The law firms have been able to get away with this because they’ve pressured dozens of outside asbestos trusts not to share claims data with each other or with courts. Most judges deny requests for discovery, and Garlock was able to uncover the double-dipping because Judge Hodges was a rare exception. No doubt more extensive discovery would turn up more double-dipping, and Garlock has filed federal racketeering suits against four of the firms toward that end.

Another response is moving through Congress: The Furthering Asbestos Claim Transparency Act would require asbestos trusts to disclose basic details about the claims they receive. This would allow companies and the courts to produce more honest assessments of asbestos liabilities. It would also allow the trusts to exercise some due diligence, preserving more assets to compensate asbestos victims who have legitimate claims.

The FACT Act had no chance in Harry Reid ’s Senate, but a Republican Congress might be different. Asbestos fraud is a blight on the courts and basic legal fairness, and Congress ought to put a bill to stop it on President Obama ’s desk.

 

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

"Congressman Plans To Plead Guilty In Tax Fraud Case," by Hunter Walker, Reuters, December 22, 2014 ---
http://www.businessinsider.com/r-us-rep-grimm-to-plead-guilty-in-tax-fraud-case-source-2014-12

Rep. Michael Grimm (R-New York) is expected to plead guilty on Tuesday to resolve federal tax fraud and other charges, a source familiar with the case told Reuters. 

An indictment filed against Grimm in April included 20 different charges relating to Healthalicious, a Manhattan restaurant he was a part owner of from 2007 until 2010, the year before he was elected to Congress. The indictment detailed what was described as Grimm's "schemes" including hiding over $1 million in earnings to pay lower taxes and knowingly hiring undocumented immigrants. Grimm initially denied any wrongdoing. 

Despite his legal woes, Grimm, a former FBI agent whose New York City district includes Staten Island and parts of Brooklyn, was easily re-elected to a second term in November. 

The New York Daily News first reported on Grimm's guilty plea and said he "is expected to argue that he can continue to hold his House seat despite his guilty plea" if he is able to avoid jail time.

If Grimm does fight to keep his seat, House Republican leaders will need to decide whether to try to force him out. Grimm's re-election campaign was one of the most hotly-contested in the country as he is the only Republican House member within the confines of New York City.  

Court records show a plea hearing has been scheduled for Tuesday afternoon in Brooklyn federal court.

Grimm has also been under investigation by federal authorities since at least 2012 for various allegations involving his campaign fundraising. In January, a woman was charged with funnelling $10,000 into Grimm's war chest illegally through straw donors. Last August, an aide to a high profile Israeli rabbi who raised six figure sums for Grimm from the rabbi's followers pleaded guilty to visa fraud.
 

In addition to his legal problems, Grimm made headlines in January when he was videotaped threatening to throw a reporter off a balcony. The reporter, NY1's Michael Scotto, had asked Grimm about the probe into his fundraising. 

Continued in article

Bob Jensen's Fraud Updates are at http://www.trinity.edu/rjensen/FraudUpdates.htm

"Former IRS employee gets prison for tax fraud," by Brianne Pfannenstiel, Kansas City Business Journal, October 27, 2014 ---
http://www.bizjournals.com/kansascity/news/2014/10/27/former-irs-employee-gets-prison-for-tax-fraud.html

Taylor Knight, a former employee of the Internal Revenue Service in Kansas City, will spend two years in prison after stealing taxpayer identity information.

Knight pleaded guilty in July and was sentenced Monday. Knight admitted to inappropriately accessing information for three taxpayers and using the stolen identities to receive fraudulent tax refunds.

Knight submitted a false 2010 tax return and obtained a $46,572 refund check. Knight deposited $5,000 onto a debit card, but the receiving banks rejected other deposits.

Knight's boyfriend, Michael Moore, then called the IRS and asked to have the remaining money mailed to a former residence in Independence.

Later, the victims filed legitimate amended 2010 tax returns. A $46,734 check was mailed to the address Moore had submitted. Knight and Moore intercepted the check.

Continued in article

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

FCC plans $105 million fine for Sprint Corp..
The Federal Communications Commission is preparing to fine Sprint Corp. $105 million over allegations the company charged consumers for unwanted text message alerts and other services ---
http://www.wsj.com/articles/corporate-watch-news-digest-1418777105

Bob Jensen's Fraud Updates are at http://www.trinity.edu/rjensen/FraudUpdates.htm

Question
On occasion does a new book publisher rip off Amazon customers with enormous differential pricing?

One Illustration
Yesterday I found a short paperback book on Amazon with used copy prices starting at $130. Amazon reported that it also had four new copies in stock at a price of $64 each. When I went to the Website of the publisher in Canada no mention was made about limited supplies of new copies of this book. The price was $10 USD plus $3 for shipping and handling. I immediately cancelled my $64 Amazon order and purchased the $10 version from the publisher.

My Assumptions

• Amazon does not usually carry inventories of used books but will sell used copies that are shipped directly from vendors (like you or me) who have one or more used copies on hand. The used-book vendor sets the price and ships the book directly to the Amazon customer. Amazon does the billing and sends the vendor the net price for the book plus shipping costs. Amazon customers thereby do not have to take the risk of giving credit numbers out to strangers. Amazon also guarantees satisfaction with the advertised quality of the used book. Used books can be returned to Amazon for full refunds. I assume that Amazon waits a reasonable length of time before sending money to the used-book vendor.
   
• Infrequently the lowest used book price substantially exceeds the new book price. Used-book sellers are anticipating that the limited supply of new books will soon be exhausted and that the used copies will be in greater demand. Sometimes the differential premium for a used book copy seems absurd, but this is capitalism at its best. Buyer beware!
   
• Amazon does carry many new books in its own warehouses. I assume that it buys the copies on hand but negotiates the new book price with the publisher, because publishers in this instance like to retain control over prices of their new books. Amazon also sells eBook versions of many books. However, publishers negotiate prices of electronic digital versions as well. Amazon may also carry consignment books that are still owned by the publisher.
   

My True Story

Although I sometimes buy eBooks from Amazon for my Kindle, I prefer hard copy books. When possible I almost always purchase used copies through Amazon.  I'm almost never suspicious about new book or used book prices on Amazon.

This week Erika returned home with a paperback book loaned to her by one of her doctors. Yesterday I found this book on Amazon with used copy prices starting at $130. Amazon reported that it also had four new copies in stock at a price of $64 each. Barnes & Noble did not have any available copies of this specialty book published in 2008.

When I went to the site of the publisher in Canada no mention was made about limited supplies of new copies of this book. The price was $10 USD plus $3 for shipping and handling. I immediately cancelled my $64 Amazon order and purchased the $10 version from the publisher.

My Question
On occasion do publishers rip-off Amazon customers with negotiated prices for new copies of their books that are substantially higher from Amazon than from their own Websites?

Answer
That would seem to be the case in this one anecdotal instance.

It would seem that whenever you're suspicious about the pricing of a new book copy from Amazon you should check around for prices from vendors other than Amazon, including the Website of the publisher. I do not believe that in this instance Amazon is intentionally ripping off customers at an inflated price of $64 for a book that sells for $10 from the publisher. I'm more inclined to blame the publisher that negotiated the Amazon price.

Amazon should install some internal controls that prevent rip-offs such as the one described above at new book prices of $64 each.

One such internal control would be a contractual clause that requires publishers to notify Amazon of all current prices of new books at its own Website.

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

"For-Profit Educator Will Pay $3.75-Million Over Deceptive Marketing," by Andy Thomason, Chronicle of Higher Education, December 12. 2014 ---
http://chronicle.com/blogs/ticker/jp/for-profit-educator-will-pay-3-75-million-over-deceptive-marketing?cid=at&utm_source=at&utm_medium=en

A for-profit education company has agreed to pay Massachusetts $3.75-million to settle claims it engaged in deceptive marketing practices, The Boston Globe reports. The office of the state’s attorney general, Martha Coakley, announced on Friday that the Salter chain, which is owned by Premier Education Group LP, had claimed its admissions process was selective when it wasn’t and had misrepresented job-placement rates. The company’s chief executive, Gary Camp, disputed the allegations but said the company had agreed to change some of its practices and begin offering career counseling for current and former students in 2015.

Continued in article

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

"Pittsburgh police payroll accountant waives preliminary hearing," by Liz Navratil, Pittsburgh Post-Gazette, December 17, 2014 ---
http://www.post-gazette.com/local/city/2014/12/17/Pittsburgh-police-payroll-accountant-waives-preliminary-hearing/stories/201412170258

A Pittsburgh police payroll accountant charged with stealing from the city waived her right to a preliminary hearing today, according to court records.

Tamara L. Davis, a civilian, was scheduled to appear in court Thursday morning for a hearing on charges of theft, forgery and misapplication of entrusted property. Her next court appearance will be formal arraignment, scheduled for Feb. 9.

The waiver by Ms. Davis, 48, of the Hill District, comes 11 months after the city's former police chief, Nate Harper, pleaded guilty to federal charges of failing to file income tax returns and conspiring with others to steal from the bureau. The charges filed against Ms. Davis appeared to have brought to a close a long and sprawling probe of the Pittsburgh police bureau and former mayor's office.

Investigators accused Ms. Davis, second-in-command in the police bureau's personnel and finance office, of stealing various amounts totaling $9,165 from the city on five instances between 2009 and 2012. In some cases, Ms. Davis withdrew money from an off-the-books account named "I.P.F" -- the same one Harper tapped -- while depositing checks made out to the bureau, according to an affidavit supporting the criminal charges. In another, a detective wrote, she forged invoices to obtain a $3,000 check made out to the police bureau, depositing some of the money into I.P.F. and keeping the rest.

The affidavit accuses Ms. Davis of withdrawing $4,000 from I.P.F. under the guise of buying riot shields for the 2009 G-20 summit. But instead of using the money on bureau expenses, Ms. Davis kept it for herself, the affidavit said.

She has also been charged in connection with a 2012 instance in which investigators said they suspect she kept part of $3,000 check cut by the city under the guise it would be used for a D.A.R.E. program.

In another instance, investigators wrote that Ms. Davis told an officer a check given to the officer for providing children's backpacks to the bureau had been cut from the wrong account and the officer should submit a new invoice and reimburse the money. A detective wrote that he suspects Ms. Davis kept the money submitted by the officer.

City officials announced after the charges were filed against Ms. Davis that they were placing her on unpaid leave.

Bob Jensen's Fraud Updates are at http://www.trinity.edu/rjensen/FraudUpdates.htm

From the CFO Journal's Morning Ledger on December 15, 2014

Meet the SEC’s brainy new crime fighters ---
http://www.wsj.com/articles/meet-the-secs-brainy-new-crime-fighters-1418601581
Long outgunned by Wall Street’s legions of Ph.D.’s, the Securities and Exchange Commission is arming itself with mathematicians and computer programmers of its own to catch bad market actors. While the SEC has used computer models to detect fraud for years, the approach has gained added steam under Mary Jo White.

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

What is the incentive to manage pensions responsibly in Illinois or California?

"Illinois’s Pension Absurdity:  A judge rules that all benefits are forever, no matter the public cost," The Wall Street Journal, November 28, 2014 ---
http://online.wsj.com/articles/illinoiss-pension-absurdity-1417219755?tesla=y&mod=djemMER_h&mg=reno64-wsj

Republican Bruce Rauner has his work cut out rehabilitating Illinois from years of liberal-public union misrule, but now he may also have to cope with a willful state judiciary. Consider a lower court judge’s slipshod ruling last week striking down de minimis pension reforms.

The fiscally delinquent state has accrued a $111 billion unfunded pension liability—a 75% increase from five years ago—in addition to $56 billion in debt for retiree health benefits. Incredibly, the state is spending more of its general fund on pensions than on K-12 education. One in four tax dollars pays for retirement benefits. Last year the state had to defer $7 billion in bills to contractors. This is after Democrats in 2011 raised income and corporate taxes by 67% and 30%, respectively. Little wonder that Illinois has the nation’s worst credit rating.

Democrats last year passed modest pension fixes conceived with the fainthearted judiciary in mind. The retirement age for younger workers increased on a graduated scale. Workers now in their 20s could still retire with pensions approximating 75% of their salaries at age 60.

Salaries used for pension calculations were also capped at an inflation-adjusted $110,600 with a gaping carve-out for workers who collectively-bargained higher pay. Cost-of-living adjustments were tied to years of service and inflation instead of annually compounding at 3%. As a political salve, the state even cut worker pension contributions by 1%.

Yet Sangamon County Circuit Court Judge John Belz last week rejected all pension trims as a violation of the state Constitution, which holds that “[m]embership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” According to Judge Belz, there is “no legally cognizable affirmative defense” for impairing pensions benefit.

Except, well, 80 years of U.S. Supreme Court precedent. Federal courts have established that states may invoke their police powers to impair contracts. In the 1934 case Home Building & Loan Association v. Blaisdell, the U.S. Supreme Court ruled that emergencies “may justify the exercise of [the State’s] continuing and dominant protective power notwithstanding interference with contracts,” which the U.S. Constitution otherwise prohibits.

The Supreme Court has since developed a balancing test that allows states to impair contracts when it is reasonable and necessary to serve an important public purpose. The level of legal scrutiny increases with the severity of the impairment.

Yet Judge Belz refused even to consider the state’s argument that it must tweak pensions to maintain vital public services (e.g., police, schools). The court “need not and does not reach the issue of whether the facts would justify the exercise of such a power if it existed,” the judge asserted. If the police power existed?

Perhaps the judge assumes that the Illinois Supreme Court, based on its 6-1 decision this summer that extended constitutional protections to retiree health benefits, will strike down the pension reforms. Judge Belz teed up the high court by quoting copiously from that opinion.

Even if they lose at the Illinois Supreme Court, Mr. Rauner and the legislature will still have options for fixing their pension mess including moving new workers to defined-contribution plans and putting a constitutional amendment before voters that affirms the ability to prospectively modify retirement benefits. Option C would be to petition Illinois’s more prudent neighbors for annexation.

Pension Benefit Guaranty Corporation (PBGC) --- http://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation

The Pension Benefit Guaranty Corporation (PBGC) is an independent agency of the United States government that was created by the Employee Retirement Income Security Act of 1974 (ERISA) to encourage the continuation and maintenance of voluntary private defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at the lowest level necessary to carry out its operations. Subject to other statutory limitations, the PBGC insurance program pays pension benefits up to the maximum guaranteed benefit set by law to participants who retire at age 65 ($54,000 a year as of 2011).[2] The benefits payable to insured retirees who start their benefits at ages other than 65, or who elect survivor coverage, are adjusted to be equivalent in value.

During fiscal year 2010, the PBGC paid $5.6 billion in benefits to participants of failed pension plans. That year, 147 pension plans failed, and the PBGC's deficit increased 4.5 percent to $23 billion. The PBGC has a total of $102.5 billion in obligations and $79.5 billion in assets.

Jensen Comment
Private sector companies can pay premiums to insure employee pension benefits will carry on when companies carrying this insurance go bankrupt. But at least those benefits are capped. For example, here on Sunset Hill Road I have a friend who is a retired United Airlines Captain. When United Airlines went bankrupt his pension benefits were cut in half because the insured benefits are capped for high-salaried employees. In terms of the public sector such caps are no longer allowed unless this court ruling is overturned by a higher court.

Because of their skills, airline Captains are understandably paid very well with large pension benefits tied to their high salaries before retirement, pensions that they themselves contributed to out of their salaries over the years. In the public sector, salaries are generally not so high, and sometimes the high pension benefits are outright frauds such as the $500,000 annual pension of the former City Manager of tiny Bell, California. Illinois public pension plans were similarly wracked with frauds promising enormous pensions and early retirements.

One can argue that pension contracts should not be broken, but pension contracts are commonly broken in the private sector. Employees of companies that did not pay for PGBC insurance may lose all their pensions depending upon the outcomes of the bankruptcy courts. Employees of companies that are insured by PGBC may still lose part of their pensions like my friend nearby lost half of his United Airlines pension. Then why is it that public sector pension contracts cannot be broken somewhat similar to private sector pensions?

The main problem with this ruling is that there is moral hazard. It encourages fraud and mismanagement of pensions in the public sector. The main problem with public sector pensions in Illinois that they were enormously mismanaged and underfunded. What is the incentive to manage pensions responsibly in Illinois?

Vernon's former city manager, for example, was receiving more than $500,000 in annual pension payments. Most public safety workers can retire as early as 50. And some public employees had cashed out unused vacation and other perks to unjustly spike their retirement pay.
"California pension funds are running dry," by Marc Lifsher, Los Angeles Times, November 13, 2014 ---
http://www.latimes.com/business/la-fi-controller-pension-website-20141114-story.html

A decade ago, many of California's public pension plans had plenty of money to pay for workers' retirements.

All that has changed, according to a far-reaching package of data from the state controller. Taxpayers are now on the hook for billions of dollars more to cover the future retirements of public workers, with the bill widely varying depending on where they live.

The City of Los Angeles Fire and Police Pension System, for instance, had more than enough funds in 2003 to cover its estimated future bill for workers' retirement checks. A decade later, it is short $3 billion.

The state's pension goliath, the California Public Employees' Retirement System, had $281 billion to cover the benefits promised to 1.3 million workers and retirees in 2013. Yet it needed an additional $57 billion to meet future obligations.

The bill at the state teachers' pension fund is even higher: It has an estimated shortfall of $70 billion.

The new data from a website created by state Controller John Chiang come at a time of growing anger from taxpayers over the skyrocketing cost of public workers' retirements.

Until now, the bill for those government pensions was buried deep in the funds' financial reports. By making this data available, Chiang is bound to stir debate about how taxpayers can afford to make retirement more comfortable for public workers when private-sector employees' own financial futures have become less secure. For most non-government workers, fixed monthly pensions are increasingly rare. lRelated Stockton bankruptcy ruling preserves city pensions

Business Stockton bankruptcy ruling preserves city pensions

"Somebody, who is knowledgeable and interested, is several clicks away from the ugly mess that will define California's financial future," said Dan Pellissier, president of California Pension Reform, a Sacramento-area group seeking to stem rising statewide retirement costs.

Chiang has assembled reams of data from 130 public pension plans run by the state, cities and other government agencies. It's now accessible at his website, ByTheNumbers.sco.ca.gov.

In nearly eight years as controller, essentially the state's paymaster, Chiang has made good on a commitment to make government financial records more transparent and accessible.

. . .

The pension debate in recent years has been fueled by controversy.

Vernon's former city manager, for example, was receiving more than $500,000 in annual pension payments. Most public safety workers can retire as early as 50. And some public employees had cashed out unused vacation and other perks to unjustly spike their retirement pay.

Meanwhile, cash-strapped cities are facing escalating bills. Rising pension costs contributed to bankruptcies in Stockton, San Bernardino and Vallejo.

Why should private-sector taxpayers give California's public workers more money to retire than most of them will ever make? jumped2 at 11:33 AM November 14, 2014

Critics contend that governments can no longer afford to pay generous pensions to retirees that aren't available to most private-sector workers. Unions, meanwhile, have vehemently defended the status quo, saying these benefits were promised to workers for years of serving the public.

"In the months ahead, California and its local communities will continue to wrestle with how to responsibly manage the unfunded liabilities associated with providing retirement security to police, firefighters, teachers and other providers of public services," Chiang said.

"Those debates and the actions that flow from them ought to be informed by reliable data that is free of political spin or ideological bias," said Chiang.

Continued in article

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

"Accountant accused of stealing millions from N.J. megachurch," by Katie Lannin, NJ.com, December 4, 2014 ---
http://www.nj.com/union/index.ssf/2014/12/accountant_stole_millions_from_rahway_church_over_7_years_funneled_some_to_golf_association_attorney.html

The former accountant for the Agape Family Worship Center has been indicted for embezzling more than $4 million from the church over a period of seven years, church officials said today.

Donald Gridiron, Jr., a certified public accountant licensed in California, was arrested in Los Angeles Tuesday, according to a statement from the church.

The thefts were hidden in 900 separate transactions in which Gridiron would write checks to himself or arrange wire transfers, said Matthew Davis, a Texas-based attorney representing the church.

"Professionally, our former CPA violated the trust of the ministry," said Lawrence Powell, Agape's senior pastor. "And personally, I feel betrayed because this man used to be my friend. It hurts, but we serve a God who will get us through this."

The church began in Powell's parents' garage 14 years ago and has since grown to a 6.5-acre campus that serves a congregation of nearly 5,000.

Gridiron had sole control over the church's finances, Powell said.

The accountant, a California resident selected for the job in part because of his "connections with individuals in the religious community as well as his standing within that community," earned a monthly salary of $5,500, according to a criminal complaint filed Monday in federal court.

On top of his salary, he took more than $4.25 million in unauthorized payments, sending more than $2.75 million to his personal accounts in California, FBI Special Agent Abigail Weidner wrote in the complaint.

Gridiron, 50, spent those funds at casinos and a luxury car dealership and on mortgage payments, the complaint reads.

Continued in article

From the CFO Journal's Morning Ledger on December 9, 2014

Inside trading convictions reversed
http://www.wsj.com/articles/appeals-court-overturns-two-insider-trading-convictions-1418224146
In a blow to the Justice Department’s Wall Street crackdown, a federal appeals court overturned two insider-trading convictions and ruled it isn’t always illegal to buy or sell stocks using inside information. The ruling raised the bar for prosecutors on a crime that is already hard to prove.

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

New Inefficiencies in the Capital Markets:  Unwanted (and possibly unreachable) Insiders Now Conducting Insider Trades
"Security Firm Says It Uncovered A Cyber Espionage Ring Focused On Gaming The Stock Market," by Jim Finkle, Reuters via Business Insider, December 1, 2014 ---
http://www.businessinsider.com/r-cyber-ring-stole-secrets-for-gaming-us-stock-market-fireeye-2014-12

BOSTON (Reuters) - Security researchers say they have uncovered a cyber espionage ring focused on stealing corporate secrets for the purpose of gaming the stock market, in an operation that has compromised sensitive data about dozens of publicly held companies.

Cybersecurity firm FireEye Inc, which disclosed the operation on Monday, said that since the middle of last year, the group has attacked email accounts at more than 100 firms, most of them pharmaceutical and healthcare companies.

Victims also include firms in other sectors, as well as corporate advisors including investment bankers, attorneys and investor relations firms, according to FireEye.

The cybersecurity firm declined to identify the victims. It said it did not know whether any trades were actually made based on the stolen data.

Still, FireEye Threat Intelligence Manager Jen Weedon said the hackers only targeted people with access to highly insider data that could be used to profit on trades before that data was made public.

They sought data that included drafts of U.S. Securities and Exchange Commission filings, documents on merger activity, discussions of legal cases, board planning documents and medical research results, she said.

"They are pursuing sensitive information that would give them privileged insight into stock market dynamics," Weedon said.

The victims ranged from small to large cap corporations. Most are in the United States and trade on the New York Stock Exchange or Nasdaq, she said.

An FBI spokesman declined comment on the group, which FireEye said it reported to the bureau.

The security firm designated it as FIN4 because it is number 4 among the large, advanced financially motivated groups tracked by FireEye.

The hackers don't infect the PCs of their victims. Instead they steal passwords to email accounts, then use them to access those accounts via the Internet, according to FireEye.

They expand their networks by posing as users of compromised accounts, sending phishing emails to associates, Weedon said.

FireEye has not identified the hackers or located them because they hide their tracks using Tor, a service for making the location of Internet users anonymous.

FireEye said it believes they are most likely based in the United States, or maybe Western Europe, based on the language they use in their phishing emails, Weedon said.

She said the firm is confident that FIN4 is not from China, based on the content of their phishing emails and their other techniques.

Researchers often look to China when assessing blame for economically motivated cyber espionage. The United States has accused the Chinese government of encouraging hackers to steal corporate secrets, allegations that Beijing has denied, causing tension between the two countries.

Weedon suspects the hackers were trained at Western investment banks, giving them the know-how to identify their targets and draft convincing phishing emails.

"They are applying their knowledge of how the investment banking community works," Weedon said.

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

Bob Jensen's threads on the Efficient Market Hypothesis (EMH) ---
http://www.trinity.edu/rjensen/theory01.htm#EMH

Jensen Comment
I think Harvard's Ben Edelman overreacted in a fit of temper at being overcharged one time at a Chinese restaurant. I also do not fully support Peter Jacob's defense of Professor Edelman
"Stop Hating On The Harvard Professor Who Complained About Overpaying For Chinese Food — He Had A Good Point," by Peter Jacobs, Business Insider, December 10, 2014 ---
http://www.businessinsider.com/in-defense-of-harvard-professor-ben-edelman-2014-12

Jensen Comment
The academic approach to this situation, and the possible police undercover investigation approach, should have been to say nothing and not even reveal that the overcharge was detected. Then investigators (or Edelman's friends) should have dined out in the future to investigate whether there was a systematic pattern to such overcharges.

This is what happened in an incident at the golf course that I live beside up here in Sugar Hill, New Hampshire.
The golf course is owned by the Sunset Hill House Hotel (SSH) subject to deed restrictions that the mountain golf course can only be a golf course or a forest. The owners of the SSH at the time contacted me and other nearby friends to pay green fees so that the SSH owners could investigate account bookings of the fees.

They suspected pilfering of green fees by the golf course manager and pro who also gave golfing lessons. Let's call him Pro X.

Even though I don't play golf, I was one of the local residents who the SSH owners asked to pay green fees to play a round of golf. Subsequent inspections of the accounting records uncovered a pattern of unbooked green fees. Eventually the police conducted their own undercover investigation. When confronted under oath in court, Pro X eventually plea bargained to stay out of prison by confessing to stealing over $100,000 from the golf course over the years. He was unable to pay back most of the stolen funds, although the SSH eventually got the deeds to a home and car owned by Pro X. His wife also bid him farewell.

The point is that if the Chinese restaurant overcharged Professor Edelman also systematically overcharged a relatively large number of customers it becomes a matter for undercover investigation. Sadly, law enforcement often does nothing in such instances. For example, studies have shown that some hospitals systematically overcharge patients, especially billings when third parties (e.g., Medicaid, Medicare, and medical insurance companies) pay the billings such that patients are not directly harmed by the billing errors. Studies show that in over 90% of the time in some hospitals the billing errors are in favor of the hospitals. Patients seldom scrutinize bills that they do not have to pay themselves.

Back to the Chinese restaurant
Peter Jacobs does provide us with some background information on Peter Edelman that perhaps explains Edelman's overreaction. It does not explain his stupidity of making a big issue out of this one instance. Instead he should have quietly had his friends examine future billings by this restaurant in an effort to detect a systematic pattern of fraud.

Then it becomes a matter for law enforcement just like the suspected fraud by Pro X eventually became a matter for law enforcement.

Here are some pictures of the mountain golf course in question ---
Set 1 --- www.trinity.edu/rjensen/tidbits/GolfCourse/GolfCourseSet01.htm

Question
Since the PwC auditors gave a warning, was Tesco’s Audit Committee asleep at the wheel?

Answer
Snore

"The unanswered questions in Tesco’s accounting scandal:  Tesco wants to draw a line under accounting scandal, but questions remain about size of the blackhole and what was behind it," Graham Ruddick, The Telegraph, November 6, 2014 ---
http://www.telegraph.co.uk/finance/comment/11214948/Unanswered-questions-in-Tescos-accounting-scandal.html

Despite the best efforts of Dave Lewis, the accounting scandal facing Tesco will not go away. Two weeks ago Lewis, the chief executive, pledged to draw a line under the crisis when the retailer published interim results. Since then the scandal has gone nowhere, a bit like Tesco’s share price.

The Serious Fraud Office announced days after Lewis’s first presentation to the City that it would launch a criminal investigation into events at Tesco.

This inquiry could drag on for up to seven years, according to City lawyers, so the roots of the inflated profit shortfall and the perpetrators, if it was created deliberately, will not be confirmed for some time.

But, aside from the matter of who and how, there are a collection of key questions about the scandal at Britain’s biggest retailer that remain unanswered.

How big is the black hole?

When Tesco originally alerted the City to the potential shortfall in its profits, the company estimated that profits for the past six months had been overstated by £250m. It said this was primarily a “timing issue” – meaning that profits could eventually be booked in a later period – and related to the recognition of revenue and costs on deals with suppliers.

However, when the company published its half-year results last month, Tesco completely wrote off £263m of profits. Not only that, but only £118m actually related to the previous six months, with the rest from previous financial years. Tesco’s new finance director, Alan Stewart, also said the majority of this related to the recognition of revenues, not costs.

The plot thickens with the £382m collection of impairment charges that Tesco booked in the results. This includes £27m for the mis-selling of payment protection insurance by Tesco Bank, but also a £41m retrospective charge relating to a Valuation Office ruling on the payment of business rates on cash machines, £63m in stock write-downs, and £136m of impairment charges on assets in the UK and Europe.

The timing of the charge for cash machines is slightly odd because Sainsbury’s booked its £13m hit last year. Meanwhile, industry sources say the stock write-down stands out for its size – Tesco did not book any stock write-downs in the previous financial year and it takes a lot of products to add up to £63m.

Finally, it is unusual for a retailer to book impairment charges at a half-year. Usually these charges – some of which are on the value of supermarkets – are taken in the annual results when the financial performance of the company is fully audited. Did life change so dramatically for Tesco in the six months that it was forced to book an extra £136m of write-downs? Perhaps. But in the three years that Philip Clarke was chief executive, no impairment charges were ever booked at the half-year on the value of the company’s assets.

These charges highlight that the health of Tesco was even worse than feared, and worse than just £263m of missing profits. Why did Tesco and PwC sign off last year’s accounts when they included a warning about a “risk of manipulation” in commercial revenues?

Much has been made of the fact that Tesco’s auditors, PwC, warned in last year’s annual report that the company’s commercial revenues was at “risk of manipulation”, which effectively flagged up that this could be a problem for Tesco.

Sources in the audit world with a knowledge of how the British boardroom works claim that most audit committees would have refused to sign off a report that included that wording. They claim that it is likely the committee would have ordered PwC to go back and ensure that there had been no manipulation.

This, therefore, raises a few questions – was Tesco’s audit committee asleep at the wheel? Or was PwC concerned that there had been manipulation and that was the only wording the auditors were prepared to use in their report?

A public company cannot risk its auditors refusing to sign off accounts – it would set off serious alarm bells – so some sort of agreement between both parties must always be reached.

What prompted the SFO to launch its investigation?

The Financial Conduct Authority, the City regulator, was already investigating Tesco when the SFO announced it would launch a probe into the accounting regularities. Also, the SFO is already stretched to breaking point with investigations into the banking industry, Rolls-Royce and GlaxoSmithKline. It has been regularly forced to go cap in hand to the Government in search of fresh cash and Theresa May, the Home Secretary, appears to want to close it down.

Put simply, the SFO had little reason to want to get involved with Tesco. Sceptics will say that Britain’s biggest retailer could be a trophy victory for SFO, but equally it is a political hot potato given that the company employs more than 320,000 people.

Continued in article

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

"Dissenting From an SEC Windfall For Lawyers:  A $600 million ‘fair fund’ is likely to benefit only class-action attorneys and the fund’s administrators," by SEC Commissioners Daniel M. Gallagher And Michael S. Piwowar, The Wall Street Journal, November 10, 2014 ---
http://online.wsj.com/articles/daniel-m-gallagher-and-michael-s-piwowar-dissenting-from-an-sec-windfall-for-lawyers-1415665948?tesla=y&mod=djemMER_h&mg=reno64-wsj

Earlier this month reports circulated that the Securities and Exchange Commission may set up a $600 million “fair fund” to distribute money collected from defendants to purportedly harmed investors in the insider-trading case SEC v. CR Intrinsic Investors.

In 2012 the SEC charged the Connecticut-based hedge-fund advisory firm CR Intrinsic Investors and former portfolio manager Matthew Martoma in connection with a $276 million insider-trading scheme involving the development of an Alzheimer’s drug by two pharmaceutical companies. The SEC’s complaint alleged that Martoma illegally obtained confidential details about negative results of a clinical trial and that, based on this information, several hedge funds sold more than $960 million in securities, avoiding hundreds of millions of dollars in losses.

In June the federal district court in the Southern District of New York approved a settlement between the SEC and CR Intrinsic. The court then ordered interested parties—including allegedly harmed investors—to make submissions to the SEC as to whether a fair fund should be established to distribute the money collected in the settlement. The court also directed the SEC to make a recommendation on setting up a fair fund.

We strongly object to the SEC’s reported recommendation to set up a fair fund, for a number of reasons. Fair funds can play an important role in returning money to defrauded investors, but in this case it will be incredibly difficult and expensive to identify and compensate the victims. In fact, it may not be possible to know who was harmed.

The only guaranteed winners will be administrators who distribute the fair fund and class-action lawyers who will take a significant cut of any funds paid to their clients. Indeed, plaintiffs lawyers mounted an unprecedented lobbying campaign after the court directed the SEC to make a recommendation about whether to establish a fair fund. Before the vote, our offices received dozens of letters from purported victims urging the commission to petition for a fair fund.

The strikingly similar tone and content of the letters that came cascading into our offices made it clear that they had been sent at the behest of class-action lawyers in a parallel civil action. It was all part of a coordinated campaign by the plaintiffs bar to gain access to the pot of gold at the end of the government investigations rainbow. These lawyers played no part in the commission’s successful enforcement action, yet they may now receive tens of millions of dollars as a result of the majority’s vote.

We refuse to be a part of any commission decision that will create a cottage industry for class-action lawyers, piggybacking on government investigations and targeting the disgorgement—and, even worse, government-ordered penalties—collected from defendants in SEC enforcement actions.

This decision sets a dangerous precedent. Class-action lawyers now have an incentive to round up potential victims in SEC insider trading cases and arrange a substantial contingency fee, then lead a fair-fund campaign under the guise of a grass-roots movement by harmed investors. Class-action lawyers could reap a third of the fair fund payouts thanks to the efforts of hard-working SEC staffers and the taxpayers who pay them.

The most galling aspect of the majority’s decision to seek a fair fund is that it will, in the long run, harm the investors the SEC is supposed to protect. Rather than receiving the maximum possible compensation for their losses under a fair fund, harmed investors are now at greater risk of suffering the additional loss of a significant amount of their potential recovery at the hands of opportunistic trial attorneys. The creation of a fair fund in this case is simply a misguided, massive wealth transfer to plaintiffs lawyers.

Beyond the corrupting influence this fair fund will have on internal SEC processes and the risk of further harm to victims, the majority’s action ignores questions of whether identifying harmed investors and calculating the amount of damages is practical, or even possible. The minuscule chance that some harmed investors might be identified cannot justify the resources that would be expended on a fruitless search.

The majority’s decision is all the more worrisome because it signals that the SEC may seek a fair fund in every insider trading case hereafter. Such a road would lead to pure folly—or in the case of class-action plaintiffs lawyers, to the bank.

Messrs. Gallagher and Piwowar are commissioners at the Securities and Exchange Commission.

Bob Jensen's Fraud Updates are at http://www.trinity.edu/rjensen/FraudUpdates.htm

When it's easier to steal a house and car than a candy bar:  At least someone stealing a candy bar might be caught on video
At least 100 deed frauds suspected in Queens

"Woman fights to take back house stolen in deed-fraud scam," by Amber Jamiesonn, NY Post, October 12, 2014 ---
http://nypost.com/2014/10/12/woman-fights-to-take-back-house-stolen-in-deed-fraud-scam/

It’s a case of grand theft house.

A Manhattan woman claims an ex-con stole her family home in Queens by filing a phony deed with the city and moving in.

Now Jennifer Merin is battling in court to remove the convicted armed robber, Darrell Beatty, 49, and his sons, Darrell Kash Beatty, 25, and DeShaun Beatty, 22, from the three-bedroom Tudor she says they snatched in February.

“It just devastates me,” Merin, an online film critic, said as she looked at cherished family heirlooms — photos, a circa-1920 bed frame, vintage suitcases, classic television sets, a smashed 6-foot vase — piled like trash in the garage of the Laurelton home.

Merin said her Russian and Ukrainian grandparents moved into the new row house on 141st Avenue in 1931 and raised her mother and her mother’s two siblings there.

The family filled the home with treasures from around the world. She inherited it several decades ago after her mother died.

“The house was maintained basically as a sanctuary to my family,” said Merin, who paid insurance, taxes and utility bills on the property and would visit every few months.

She never rented it, and kept her 1992 Subaru Outback parked there, she said.

A spike in her February water bill, which she got on May 27, first alerted her to illegal occupants. She called 911, but when cops went to the house, Beatty told them he was the legal resident.

She went to investigate herself and was “horrified” to find the locks changed and her car missing. Peering through the windows, she saw most of her possessions were also gone.

“Everything from Chinese palace vases to my underwear,” she recalled.

She called cops again. But with no one answering the door, they advised Merin to take the matter to court.

Neighbors said they saw trucks arrive at the house around February and furniture being carried out. Around the same time, they said, the Beattys and their pit bull became fixtures on the quiet block.

“I see them coming and going. I don’t think they talk to nobody in the neighborhood,” a neighbor said.

Merin and her lawyer soon unearthed a deed transfer filed by Darrell Beatty, claiming he obtained the house in March 2013 from an “Edith Moore.” But the address given for Moore does not exist.

The phone number for Beatty listed on the deed was answered by the voice mail of a “Tony,” and messages were not returned.

There was no mention of Merin or her grandparents, the original owners, on the transfer form.

Merin contacted the Finance Department, which oversees the city register. Officials confirmed the 2013 deed transfer was fraudulent and updated the deed with Merin’s name on June 4.

A Finance source said that the case is being jointly investigated by the Queens District Attorney’s Office and the city sheriff and that it “could be part of a larger ring” of deed scammers.

Beatty has not been charged.

The extraordinary theft has jolted city bureaucrats.

“That case is what changed the dynamic in the Department of Finance of how we process deed transfers,” city Sheriff Joseph Fucito, whose office executes evictions and probes deed fraud, told The Post.

For years, filing a fake deed transfer was easy. The legal documents can be found online, filled out with only basic details, then stamped by a notary public.

“The old policy was designed to be customer friendly. It’s very hard to be customer friendly and super vigilant at the same time,” Fucito said.

Since the Merin case, staffers have been retrained to flag discrepancies, such as unusually low sale prices or suspect businesses, and personal information is checked against previously filed city records.

City property owners can also sign up for a new Finance Department service that alerts them if a change is made to their deed.

Since June, the new policies have red-flagged more than 500 deed transfers. While many were found to contain legitimate filing errors, at least 100 deeds impacting 300 properties are now being investigated as possible frauds, Fucito said.

Continued in article

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

"Accounting firm paying Cherryville $75K for not finding embezzlement," WSOCtv, October 21, 2014 ---
http://www.wsoctv.com/news/news/local/accountant-paying-cherryville-75k-not-finding-embe/nhnz3/
Thank you Going Concern for the heads up.

CHERRYVILLE, N.C. —

An accounting firm in Kings Mountain will pay the town of Cherryville $75,000 for failing to find embezzlement.

Channel 9's partners at The Gaston Gazette reported that Darrell L. Keller CPA is paying the city after an agreement reached through mediation.

Cherryville had accused Keller's firm of failing to discover the embezzlement of more than $500,000 by two city employees. Both former employers were later convicted.

Keller said the payment is not an admission of wrongdoing. The firm says the settlement was cheaper than taking a case to trial.

Former city finance director Bonny Alexander was convicted of taking more than $435,000 over six years. Former utility director Jennifer Hoyle was accused of taking more than $92,000 over a four-year period.

Cherryville Mayor H.L. Beam says he's pleased with the settlement.

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

"Accountant accused of part in misappropriation of up to €7.9m:  Businessman claims he was victim of ‘devastating fraud’ perpetrated by accountancy firm and related parties," Irish Times, October 21, 2014 ---
http://www.irishtimes.com/business/sectors/financial-services/accountant-accused-of-part-in-misappropriation-of-up-to-7-9m-1.1970589
Thank you Going Concern for the heads up.

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

Cramming --- http://en.wikipedia.org/wiki/Cramming_%28fraud%29

"AT&T to Pay $105 Million to Settle Accusations It Billed for Bogus Fees:  FTC ‘Cramming’ Complaint Says Carrier Added Hundreds of Millions in Third-Party Charges to Subscribers’ Bills," by Gautham Nagesh, The Wall Street Journal, October 8, 2014 ---
http://online.wsj.com/articles/at-t-to-pay-105-million-to-settle-accusations-it-billed-for-bogus-fees-1412784337?mod=djemCFO_h 

WASHINGTON— AT&T Inc. T +0.80% has agreed to pay $105 million to settle accusations that it added hundreds of millions of dollars in bogus third-party charges to subscribers’ wireless bills.

The settlement is the latest in a string of enforcement actions from regulators aimed at stopping mobile “cramming,” the practice of charging subscribers fees for third-party services they didn’t order. Earlier this year the Federal Trade Commissionsued T-Mobile US Inc. TMUS +0.38% over similar conduct; that case is still pending in court.

The FTC, Federal Communications Commission and all 51 state attorneys general collaborated on the investigation and joint settlement. The regulators pledged to continue cooperating on future cramming investigations at a news conference on Wednesday.

“For too long, consumers have been charged on their phone bills for things they did not buy,” FCC Chairman Tom Wheeler said. “It’s estimated that 20 million people a year are caught in this kind of trap…costing hundreds of millions of dollars. It stops today for AT&T.”

The settlement stemmed from a complaint in which regulators accused AT&T of billing customers for horoscopes, ringtones, love tips and other third-party premium short message services, or PSMS, that they didn’t sign up for. The charges, typically $9.99 a month, were listed as “AT&T Monthly Subscriptions” on consumer phone bills, leaving customers to believe they were paying for services from AT&T. Regulators said AT&T kept at least 35% of the charges.

“This case underscores the important fact that basic consumer protections, including that consumers should not be billed for charges they did not authorize, are fully applicable in the mobile environment,” FTC Chairwoman Edith Ramirez said in a statement.

The settlement is the largest against a specific carrier for cramming and the largest amount of redress to consumers victimized by the practice. It is also the largest enforcement action in FCC history.

An AT&T spokesman, in an email, said: “While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services.”

The spokesman added that the “settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund.”.

Vermont Attorney General William Sorrell said he was a victim of cramming himself in early 2011, when a member of his staff noticed a $9.99 charge on his office cellphone bill for two months. Mr. Sorrell said the charges were for services he hadn’t authorized and didn’t know were there.

The FTC complaint states that AT&T received numerous complaints from consumers regarding the practice, including more than 1.3 million calls to its customers service department about the charges in 2011. According to the complaint, AT&T in October 2011 altered its refund policy, reducing the amount customer service representatives could offer in refunds from three months’ worth of charges to two months’ worth.

As part of the settlement, AT&T will pay $80 million to the FTC to provide refunds to customers who were billed for unauthorized charges, along with $20 million to the states and $5 million to the FCC in penalties. The company must notify all current customers who were billed for unauthorized charges; customers who believe they are eligible for a refund can contact the FTC to submit a claim.

AT&T must also obtain customers’ consent before placing any further third-party charges on their wireless bills, must clearly indicate the charges on monthly bills, and give customers the option to block third-party charges altogether.

The wireless carriers have argued in the past that most third-party charges are authorized.

In some cases, customers can sign up by downloading a ringtone or responding to a text, without realizing it comes with a subscription fee. In other instances, customers are billed without any action on their part.

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

"SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone," Myles Udland, Business Insider, September 16, 2014 ---
http://www.businessinsider.com/shoe-company-ceo-coo-go-missing-2014-9

Jensen Comment
We might say the shoe company's cash just walked away.

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

Payment fraud on the rise in India with E-commerce growth ---
http://articles.economictimes.indiatimes.com/2014-10-02/news/54560301_1_payu-india-credit-card-mobile-wallets

"Yet More IRS Employees Busted for Stealing Taxpayers' Identities," by J.D. Tuccille, Reason Magazine, September 29, 2014 ---
http://reason.com/blog/2014/09/29/yet-more-irs-employees-busted-for-steali

Jensen Comment
It seems stupid for an IRS employee to directly file false tax returns. A much harder crime to detect is the black market sale of the ID theft data to others who may have lower probability of being caught, especially if the buyers of the data are unaware who purloined the data they are buying. Of course adding middlemen might reduce the profits from the illicit refunds.

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

"For-Profit College Is Accused of $6.5-Million Fraud Against U.S," by Andy Thomason, Chronicle of Higher Education, October 2, 2014 ---
http://chronicle.com/blogs/ticker/for-profit-college-is-accused-of-6-5-million-fraud-against-u-s/87317?cid=at&utm_source=at&utm_medium=en .

 http://www.trinity.edu/rjensen/FraudUpdates.htm