Case Study of the ConvergEx Group 2013 Deferred Prosecution Agreement (DPA)
In December 2011, ConvergEx Group publicly disclosed parallel investigations by the United States Securities and Exchange Commission and the United States Department of Justice. Between 2006 and 2011, two former employees of ConvergEx Group had concealed the “routing of certain global trading and transition management customer orders to the former Bermuda trading desk of ConvergEx Global Markets (“GCM”) where they were net traded” (“ConvergEx Resolves,” 2013). According to the court documents, Acting Assistant Attorney General Mythili Raman stated “…ConvergEx…along with several of its employees, engaged in a concerted and coordinated effort to fleece its clients by charging them millions of dollars in unwarranted fees…and then concealing those charges from its clients through a pattern of deception” (“Convergex Group,” 2013). In layman’s terms, ConvergEx employees were moving funds through ConvergEx Global Markets in Bermuda, while marking up or down the investments in order to keep a sum of the money for themselves from the clients. The employees also falsified the documents that were sent to the clients regarding these transactions. The subsidiaries and the individuals involved with this scheme were charged with wire fraud and conspiracy to commit securities fraud and wire fraud.
On December 12, 2013 ConvergEx Group LLC signed a deferred prosecution agreement or DPA, which included fines totaling
In this case, there are several conspirators who is involved in the fraud receiving punishment from either SEC or federal government. Robert Levin, the AMRE executive and major stockholder, and Dennie D.Brown, the company’s chief accounting officer, were subject to the punishment in the form of a huge amount of fine by the SEC and the federal government. This punishment came from reasons. After AMRE going public, the company have the obligation to publish its financial reports but its performance did not meet expectation. The investigation by SEC shows that Robert took the first step of this scam, fearing the sharp drop of AMRE’s stock price because of the poor performance of company. He abetted Brown, to practice three main schemes to present a false appearance of profitable and pleasant financial reports. Firstly, they instructed Walter W.Richardson, the company’s vice president of data processing, to enter fictitious unset leads in the lead bank and they originally deferred the advertising cost mutiplying “cost per lead” and “unset leads” amount, so that they deferred a portion of its advertising costs in an asset account. The capitalizing of advertising expenses allowed them to inflate the net income for the first quarter of fiscal 1988. Secondly, at the end of the third and fourth quarters of fiscal 1988, they added fictitious inventory to AMRE’s ending inventory records, and prepared bogus inventory count sheets for the auditors. Thirdly, they overstated the percentage
The fact that the insider trading charges were thrown out, but the conspiracy charges stuck is curious. It appears, yet again, the judicial process and mainstream social construct of acceptable behavior collided with what Martha, her broker, and fellow investor touted as ‘nothing wrong’. Knowing more of John Savarrese’s role as Martha’s pretrial counsel, gives two more important points about Martha’s case of white collar crime. The first is questionable ethics and the other is arrogance. Mr. Savarrese has been criticized by legal analysts for not providing ethical legal advice to Martha or making the right professional choices himself. The belief is that Savarrese knew or at least suspected, Martha and Bacanovic planned to perjure themselves. As Martha’s legal counselor it was ethically negligent of Savarrese not to advise Martha of the legal repercussions of lying to the SEC. If Martha insisted on presenting her fraudulent story, Savarrese should have immediately withdrawn as her counsel (Hoffman, 2007). More importantly than if Savarrese knew or not, in her arrogance, Martha never thought this issue of a mere $45, 637 would develop into charges nor a prison sentence! She was simply above the laws and saw no reason to tell the
This $490 million came from the netting manipulation when they offset their expenses with unrelated gains on the sale of assets. The geography manipulation allowed them to move millions of dollars to different sections of the income statement to “make the financials look the way we want to show them” said James Koenig, one of the primary forces behind the scandal. However, none of the fraudulent activities would have gone unknown for so long without the aid of the auditors, Arthur Anderson LLP, involved with Waste Management.
Overview of the Case: The Securities and Exchange Commission claims Mark D. Begelman misused proprietary information regarding the merger of Bluegreen Corporation with BFC Financial Corporation. Mr. Begelman allegedly learned of the acquisition through a network of professional connections known as the World Presidents’ Organization (Maglich). Members of this organization freely share non-public business information with other members in confidence; however, Mr. Begelman allegedly did not abide by the organization’s mandate of secrecy and leveraged private information into a lucrative security transaction. As stated in the summary of the case by the SEC, “Mark D. Begelman, a member of the World Presidents’ Organization (“WPO”), abused
Judges are a lot like police officers in that they hold a great amount of discretionary power in their courtrooms and their judgments. Judges are required to ensure that the accused is given a fair trial, while also ensuring that the best interest of the public is maintained. There is a great amount of pressure placed on judges today with excessive case loads and pressures from the media and other outside sources.
The criminal complaint, filed in federal court in New York, offers the clearest view yet of one of the biggest cases of alleged insider dealing ever. In its lawsuit, filed in federal court in Manhattan, the Commission alleges that the defendants violated the antifraud, periodic reporting, record keeping, and internal controls
Plea-bargaining is one of the most controversial aspects of the American legal process. While some individuals regard plea-bargaining as an effective tool used to ensure justice, others consider it fundamentally unconstitutional. Plea-bargaining is a process in which a defendant agrees to plead guilty to a charge in exchange for either a reduced sentence or a lesser charge. The process is extremely private and judges typically have very little influence over the negotiation. Most frequently, the prosecutor negotiates the plea with the defendant who maintains the right to effective legal counsel. Once an agreement is reached, the prosecutor presents the decision to a judge who has the final say on all sentencing matters. To date, the Department of Justice estimates that approximately 97% of all criminal cases are resolved by plea-bargaining as opposed to trial by jury. While plea-bargaining offers multiple benefits to the legal process and the general public, it is a system that is in need of critical reform. Plea bargains frequently result in court decisions that are both unjust and unconstitutional. However, implementing federal requirements that limit prosecutorial power and protect the defendant’s Sixth Amendment rights can significantly reduce these issues.
BMIS engaged in three different operations, namely investment advisor services, market making services and proprietary trading. Bernard Madoff conducts certain investment advisory business for clients that are separate from the BMIS proprietary trading and market making activities. Bernard Madoff has been conducting a Ponzi-scheme through the investment advisor services of BMIS, and through their scheme have defrauded investors out of monies estimated to exceed $50 billion. When a senior employee was told by Madoff that there had been a request from clients for approximately $7 billion in redemption and he was struggling to obtain the liquidity necessary to meet those obligations. Madoff also told another employee on December 9, 2008 that he wanted to pay bonuses to employees of the firm. This was earlier than bonuses were paid, and also with another employee admitting that his investment advisory business was a fraud that it’s all just one big lie and that it was basically giant Ponzi scheme. Bernard Madoff also informed employees that he planned to surrender to the authorities but before he does that he had approximately $200-300 million left and planned to use that money to make payments to certain selected family and friends. Madoff would make people believe that BMIS was a legitimate enterprise engaged in the lawful brokerage and sale of investment securities, when BMI
With the case finally behind me I could finally focus on what really mattered, laundering money through Caribbean bank accounts for The Columbians. The Columbians were what you might call commodity traders. I simply deposited large amounts of greenbacks in the account for a company named Enterprise International, but before that I would send the money through a trail of different other accounts. What can I say, my clients value their privacy above all else.
The Securities and Exchange Commission can also impose financial penalties on institutions and individuals for violations outside of insider trading for the breach of any Federal Securities Law following a report issued by the National Commission on Fraudulent Financial Reporting, also known as the Treadway Commission. The Treadway Commission’s objective was to detect fraud and identifying acts that contribute to fraudulent financial reporting. As a result, Congress took the Treadway Commission’s recommendations and passed the Securities Enforcement Remedies and Penny Stock Reform Act of 1990 known as the Remedies Act. This gave the Securities and Exchange Commission the authority to seek financial penalties against individuals or institutions
The Securities and Exchange Commission investigated Global Crossing for more than two years before finding the fraud. The company allegedly used 'capacity swaps' between itself and other entities, which it "booked as revenue and used to pump up its financial position in 2001" (Global Crossing settles with regulators, 2005, AP Wire). "Capacity swaps" are used to "fill gaps in its network and provide bandwidth to competitors" and are technically legal but critics alleged they were conducted to inflate revenue and did not serve a legitimate purpose (Global Crossing executives defend capacity swaps, 2002, Accounting SmartPros).
According to Daniel F. Dooley (2008), a member of the Commercial Fraud Taskforce, financial fraud with private middle-market companies is on the rise. In fact, Mr. Dooley believes that he has seen more instances of fraud in the past two years than in the previous ten. He notes seven areas in which financial fraud has increased over the past few years:
In today’s society crime occurs everyday across all aspects of life. One particular crime is that of white collar and corporate level crime. It is important that we as a society study this type of crime in depth because many individuals believe that white collar and corporate level crimes are victimless crimes when in reality they have the potential to destroy major corporations and economies all with one single case. The news or media rarely talk about this type of crime because it is often difficult to understand and individuals typically lack interest in these types of cases. One particular case is that of Jordan Belfort. Dubbed the infamous “Wolf of Wall Street” Jordan Belfort is a former stockbroker who robbed investors of over $200 million dollars to create his wealth through “pump and dump” schemes, insider trading, money laundering securities fraud, and stock-market manipulation. As an attempt to further understand these complex cases I will break down Belfort’s case as far as the methods and means as to how he got started, his use of “pump and dump” schemes and other means as to how he acquired his wealth. In addition to this I will discuss the sanctions and disciplinary action that Jordan Belfort was given, how the case affected society and what new regulations were
The illegal construction of the Bernie Madoff securities pyramid scheme grew to preposterous proportions from legal, auditing, and regulatory weaknesses of the Securities Exchange Commission, the designated regulatory body of the U.S. financial markets. The required expertise, authority, and relevant penalties needed to deter management from committing ethical breaches lacked substance in the case study of BMIS (Crews 11). Even after the wake of the Enron and WorldCom scandals that occurred in the early 2000s, the SEC unexplainably revoked provisions created to help avoid fraud. The provision the SEC revoked specifically mandated firms structured like Madoff’s to be audited by accounting firms registered and audited by the Board. By revoking the provision, BMIS was allowed to continue its Ponzi scheme for another half a decade with the aid of utilizing an unregistered, small accounting firm called Freihling & Horowitz (“Madoff’s Jenga”
This paper will discuss the corporation WorldCom, a telecommunications company that was based in Mississippi. In 2002 WorldCom was involved in one of the largest accounting scandals in the United States. WorldCom inflated its assets by nearly $11 billion dollars, which eventually lead to about 30,000 employees losing their jobs, as well as, 180-billion dollars in losses for its investors. The CEO at the time of this accounting fraud was Bernard Ebbers and led to him receiving a 25-year prison sentence. This paper will go into the details of how WorldCom was able to manipulate its accounting records to deceive its internal auditors, as well as, investors.