Welcome to the October edition of Mishcon Fraud Watch. Its aim is to provide businesses and their advisors with a snapshot of what has been happening in the world of fraud in the last month.
Alan Knight of Swansea pretended to be a paraplegic who regularly suffered serious seizures in order to cover up a long-term fraud he had committed on his elderly neighbour, who was suffering from dementia, during which he stole over £40,000. Mr Knight was caught when CCTV showed him to be fit and active. He has been charged with 19 counts of forgery, fraud and theft.
The Independent, 22 October 2014
A former senior banker at a British bank became the first person to plead guilty to the Serious Fraud Office's charges of rigging the Libor rates. The first jury trial into the offences is scheduled for May 2015.
Financial Times, 11 October 2014
The FCA has charged Paul Coyle, the former treasurer and head of tax for Morrisons, with two offences of insider dealing relating to trading in Ocada shares during the supermarket's tie-up with Ocado in spring 2013.
Andea Felstead and Caroline Binham
Financial Times, 30 September 2014
Chris Ronnie, the then manager of JJB Sports, has been charged with failing to declare three secret deals organised between 2007-2009 which netted him £1m during a time he was £11m in debt to Kaupthing.
The Independent, 24 September 2014.
Facebook is suing US law firms DLA Piper, Milberg LLP, Paul Argentieri & Associates, and Lippes Mathisa Wexler Friedman LLP for fees and punitive damages. They claim that the firms knowingly represented a fraudster, Paul D Ceglia, who had forged document which claimed he was owed Facebook shares.
Hannah Kuchler, Financial Times, 21 October 2014
The Securities and Exchange Commission has announced enforcement action against former Wells Fargo compliance officer Judy K Wolf, who allegedly altered a document before it was produced to the SEC during an investigation. The document and investigation related to a broker charged with insider trading, and Wolf is accused of altering a 2010 review of said broker two years later, to make it seem that she performed a more thorough review than she in fact had.
SEC press release, 15 October 2014
The Securities and Exchange Commission has announced charges against two individuals for insider trading on a prominent hedge fund manager’s announcement that his hedge fund had formed a negative view of Herbalife Ltd. and taken a $1 billion short position in its securities. The SEC’s orders find that Filip Szymik of New York City and Jordan Peixoto of Toronto engaged in insider trading in Herbalife securities in advance of hedge fund manager William Ackman’s December 20, 2012 announcement of the views of his hedge fund, Pershing Square Management, L.P
SEC press release, 30 September 2014
The Securities and Exchange Commission charged Zachary Zwerko with insider trading for allegedly providing nonpublic information regarding potential acquisition targets of his employer to a friend. According to the SEC, Mr. Zwerko’s friend allegedly made $683,000 in illicit profits from the insider information. The U.S. Attorney’s Office for the Southern District of New York also commenced a parallel criminal action against Mr. Zwerko.
SEC Press Release, 14 October 2014
On September 29, the Securities and Exchange Commission charged Erick Laszlo Mathe, former CEO of Vision Broadcast Network, and Ashif Jiwa with engaging in a scheme to defraud investors. According to the SEC, the men were able to raise $5.7 million by claiming to be raising money for a start-up television network that purportedly had a low-power television station, 70 broadcast licenses, and U.S. basketball star Michael Jordan as an investor. Hundreds of thousands of dollars were funneled to Mathe and Jiwa, purportedly for services that were never provided, and to pay for personal and travel expenses. The U.S. Attorney’s Office for the Eastern District of Pennsylvania also announced parallel criminal proceedings against the men.
SEC Press Release, 29 September 2014
The Securities and Exchange Commission announced charges against Jonathan P. Flom and James L. Schmidt II, both Florida-based attorneys, for their roles in an offering fraud. According to the SEC, Flom and Schmidt received wired funds from investors who were pressured through boiler room tactics; the designation of attorneys as the recipient of the money allegedly was designed to provide the appearance of security. In reality, the men only kept two percent of the money, sending the rest to Cecil Franklin Speight, who used the money for personal expenses and Ponzi-like payments. Flom and Schmidt were also arrested on parallel criminal charges in New York.
SEC Press Release, 23 September 2014
The Securities and Exchange Commission announced that it had obtained an emergency asset freeze against Abatement Corp. Holding Company Limited, a Turks and Caicos company, in connection with the operation of an alleged Ponzi scheme perpetrated in Florida. According to the SEC, Abatement’s former principal, Joseph Laurer a/k/a Dr. Josef V. Laurer, promised guaranteed returns for investment in a Ponzi scheme he operated from November 2004 through May 2014. The SEC also named Laurer’s widow, Brenda Davis, and International Balanced Fund as relief defendants.
SEC Press Release, 16 September. 2014
Kumho Asiana chairman Park Sam-koo is under investigation by South Korean authorities for suspected embezzlement. He is accused of forcing other related companies to buy commercial paper from Kumho Petrochemical shortly before it filed for debt restructuring.
Financial Times, 25 September 2014
Barcelona striker Lionel Messi is potentially facing trial over an alleged tax fraud. The Spanish authorities have rejected his appeal against accusations of not paying £3.6m in tax on earnings from his image rights in 2007-2009
Daily Telegraph, 4 October 2014