US attorneys’ offices had a record-setting year collecting money for damages from civil and criminal cases in 2012,
taking in a total $13.1 billion in criminal and civil actions, according to a recently released report.
Last year the offices confiscated $6.5 billion, not even half as much.
US Attorney’s Office for the Southern District of New York, which covers Manhattan, alone reported a haul of $2.98 billion in forfeitures, the largest amount since the Department of Justice Assets Forfeiture Fund launched in 1984. Plus, the office acquired $526.7 million from civil actions and $76.8 million in restitution, fines, and special assessments. (A large portion of this massive amount came from the settlements related to the Bernie Madoff Ponzi scheme.)
[Also see: Inside Five of the Most Pervasive Investment Scams.
It should come as no surprise that the district containing Wall Street saw the largest catch. Since the financial crash in 2007, US attorneys from southern New York have handled some of the largest asset forfeitures ever, and have prosecuted a high volume of white-collar crimes in the world’s financial capital. (View the Department of Justice’s statistics here
Below are a list of other high-profile pathological liars, kleptomaniacs, narcissists, bad businessmen and women, and swindlers from the financial industry and other sectors who made headlines in 2012.
(NASDAQ:YHOO) CEO Steve Thompson wanted his position at the Internet company a little too badly.
Thompson resigned in May of 2012 when a major institutional shareholder of Yahoo called attention to his misrepresentation of his
college record. Thompson claimed he had a degree in accounting and computer science from Stonehill College in Massachusetts, but activist shareholder Daniel Loeb
of the hedge fund Third Point brought to the attention of the Yahoo board that Stonehill College did not offer a degree in computer science until four years after Thompson graduated in 1983. Oops.
Yahoo first responded to the claim, calling it an “inadvertent error” and later released a statement saying it regarded
Thompson as a “highly qualified executive with a successful track record leading large consumer technology companies."
During the following week, though, Thompson’s facade crumbled.
Thompson initially attempted to blame the “error” on an alleged mistake printed on his resume by the headhunting firm Heidrick & Struggles when eBay
(NYSE:EBAY) hired him for a job. Heidrick caught Thompson lying again, though, and promptly released an internal memo stating that Thompson’s claim was “verifiably not true
” within a week of the accusation. Heidrick also notified the Yahoo board that it still had the resume in question in its possession.
In addition to this damning piece of evidence, the struggling Internet company also faced calls for Thompson's removal among executives and engineers in the company.
Amid the pressure, Thompson officially resigned and ended his brief five-month tenure at the company after revealing he had been diagnosed with thyroid cancer. He never admitted to lying, though.
You know you’re important in the financial community when the prosecution calls Goldman Sachs
(NYSE:GS) CEO Lloyd Blankfein and former Procter & Gamble
(NYSE:PG) CEO A.G. Lafley to testify in your case.
In 2008, Raj Gupta, a former Goldman Sachs director, helped some be greedy when others were fearful (to borrow Warren Buffett's famous adage), and the federal government caught him during its crackdown on insider trading following the financial crisis. Amid a collapsing financial system, Warren Buffett had ploughed $5 billion into Goldman Sachs stock. Gupta slipped knowledge
of the deal
to Raj Rajaratnam, the hedge fund manager and founder of the former Galleon Group, whom law authorities also caught using the tips for insider trading. (See also The 10 Corporate Criminals With the Longest Prison Sentences
The federal grand jury originally accused
Gupta of one count of conspiracy to commit securities fraud and five counts of securities fraud in October of 2011.
Gupta liked playing the role of an information broker, building "friendships and elite business relationships
." Prosecutors had a tape
of Rajaratnam bragging to associates that he had received insider information, though Rajaratnam did not officially reveal his source of information. The wiretaps helped bolster the circumstantial evidence of phone records,
showing that Gupta frequently called Rajaratnam after receiving confidential information.
Federal officials have been using wiretaps since 2009 to help acquire more substantial evidence rather than basing insider-trading cases on purely circumstantial evidence. According to the Wall Street Journal
, prosecutors dealing with insider trading saw this win as a big victory because it showed they could successfully prosecute insider-trading cases without the use of wiretaps.
Last June, a federal jury found
Gupta guilty of three counts of securities fraud and one count of conspiracy tied to the information shared with Rajaratnam. In the fall, a Manhattan federal judge sentenced
Gupta to two years in jail. The prosecutors had called for 10 years.
The lighter sentence may have something to do with a couple of letters
the judge received on Gupta's behalf: one from Microsoft
(NASDAQ:MSFT) co-founder Bill Gates and another from former UN Secretary General Kofi Annan.
Gupta also had to pay a $5 million fine.
John McAfee’s story has captured so much attention that Warner Bros. has plans to make a movie
Guatemalan officials detained the eccentric founder
and former owner of McAfee software for illegally entering the country in December of last year. Up until that point, McAfee’s bigger concern had been evading an investigation into the death of 52-year-old Greg Faull.
Faull and McAfee lived next to each other on the remote northern part of the beautiful island of Ambergris Caye, 36 miles off the coast of Belize mainland. (CNN wrote a good piece describing the McAfee’s millionaire residential compound
.) The two had irreconcilable differences, though.
McAfee owned many dogs, which Faull disliked because of their aggressive behavior and loud barking. On November 9, McAfee reported to police that Faull had poisoned his dogs. McAfee then shot his pets in the back of the head to end their misery, according to one his seven girlfriends. Two days later, police found Faull dead in his second floor living room. A gunshot wound to the head had ended his life.
The police understandably wanted to question McAfee about the Faull's death; however, he refused to comply and went into hiding.
From that point, his story grows increasingly bizarre.
McAfee has provided a look into his escapades by regularly writing convoluted posts to his John McAfee blog, which he launched after going on the run. (View it here
.) He has also taken his case to the media, appearing on CNBC
and Alex Jones’ show InfoWars
According to his side of the story, the Belizean government has harassed him for not supporting the major political parties and resisting shakedowns. In April of this year, 42 soldiers raided his house for allegedly running a meth lab and owning illegal guns but found nothing illegal. McAfee demanded the prime minister of Belize make an official apology, and this demand apparently insulted the political figure. The government then framed McAfee through Faull's death, according to McAfee.
He has offered $25,000 to anyone who finds the real killer of Faull.
Doubts have been raised, though, because of his odd behavior and unbelievable stories.
His most recent post
from January 2 details how he “trained” 29 men and women to become friendly with important government officials, usually by sleeping with them. During his James Bond training work, he says of his spies, “Eight of the women were so accomplished that they ended up living with me.” McAfee had given his targets in the government laptops with invisible keystroke logging software, and the spies supposedly installed software on the computers that gave McAfee access to their documents.
What alleged discovery did this clandestine operation turn up?
In McAfee’s own words, “Belize is clearly the central player in a larger network whose goal is to infiltrate the US with individuals having links to terrorist organizations.”
After another series of plot twists, he has settled in Portland, Oregon, where he hopes to write a graphic novel about his life. You can read the rest of his story here
Ira Rubin dropped his poker face for US District Judge Lewis Kaplan in January of this year when he pleaded guilty to conspiracy charges related to illegal gambling, bank fraud, wire fraud, and money laundering on behalf of three online gaming sites.
Rubin will face three years
for helping PokerStars, Full Tilt Poker, and Absolute Poker hide the true nature of their transactions with US poker players from US legal authorities and banks.
What’s wrong with a little Internet poker, you ask?
The Federal government banned banks from processing payments to offshore gaming sites with the Unlawful Internet Gambling Act of 2006
. Ireland-based Full Tilt Poker, Isle of Man-based PokerStars, and Costa Rica-based Absolute Poker decided to circumvent the law and concealed billions of dollars in payments from US gamblers with the help of Rubin in addition to the 10 others tied to the scandal.
The Department of Justice also filed a civil suit, and PokerStars agreed to pay $731 million to settle the case.
Rubin helped list the payments as money wired to nonexistent merchants for items such as golf balls, flowers, and jewelry
. He also aided in the fabrication of credit card payments.
This con artist has a long history of theft and swindling people out of money, going back to his teenage years when he engaged in petty theft. By the time he began working for the three companies, he had assembled a good resume for wire fraud and working in the black market.
No stranger to prison, he saw jail time on multiple occasions for passing bad checks while running a T-shirt business, for wire fraud for selling collectible cars that he did not possess, and for running a telemarketing scheme.
Judge Kaplan called Rubin an “unreformed con man and fraudster” and said he would likely leave prison “trying to cook up some new scheme that in all likelihood will be illegal.” As a result, Kaplan handed Rubin three years, longer than the 18 to 24 months established in the sentencing guidelines .
Former National Lampoon CEO Timothy Shawn "Tim" Durham made a mockery of the individuals who invested in his commercial financing firm Fair Finance.
Over 5,000 clients of the firm lost
most of the $208 million collectively investing in Durham's poorly named Ponzi scheme between 2005
and 2009. Durham and his two associates James Cochran and Rick Snow spent the money collected from investors and loaned it to their other businesses.
Durham served as CEO of several companies acquired by the Indianapolis-based buyout firm Obsidian Enterprises, of which he also served as the CEO. Obsidian bought Fair Finance in 2002.
The trio used their clients' money to buy mansions, classic cars, and other luxury items. Durham became known for throwing
lavish parties at his 30,000-square-foot mansion in Fortville, Indiana. One of his most noted bashes -- a Playboy Manison-themed birthday gala -- included 30 glamour models and several Indianapolis Colts players among 1,000 invitees. Customer funds also financed grand parties in Los Angeles, Miami, and on Durham's yacht in the Caribbean.
The depraved fun ended in 2009 when FBI agents raided the offices of Obsidian and Fair Finance, and the US Attorney's Office indicted the three partners with one count of conspiracy to commit wire and securities fraud, 10 counts of wire fraud, and one count of securities fraud. US District Judge Jane Magnus-Stinson sentenced
Durham to 50 years in prison after a jury convicted him of all charges in November of last year. For his crimes, Durham will serve
the longest white-collar fraud sentence in Indiana history.
Among their clients, Fair Finance counted many elderly individuals planning on using the stolen money they had invested for retirement. Barbara Lukacik, a 74-year-old nun from Ohio, lost
$125,000 in the collapse of the firm.
Durham's attorney tried convincing the jury that Fair Finance struggled through the 2008 financial crisis, and that investors had run with their money when regulators placed the firm under scrutiny.
Judge Magnus-Stinson wasn't convinced, however, saying about Durham, “He has earned a place among the greediest, most selfish and remorseless of criminals.” Although he apologized, Durham did not appear truly remorseful. Now a broken man, Judge Magnus-Stinson will allow Durham to file an appeal as an indigent
Mike Lynch and HP Executives
(NYSE:HPQ) executives and employees embody incompetence, or former Autonomy
(PINK:AUTNF) CEO Michael Lynch is a pathological liar.
investors when it announced in November of last year $8.8 billion in charges related to its $11.1 billion acquisition of
Autonomy in August of 2011. Investors promptly sent the stock to 10-year lows on the news.
HP took a $5 billion write-down on the value of the company and alleged that Autonomy engaged in serious "accounting improprieties, disclosure failures, and outright misrepresentations.” How did HP executives miss this amount of financial fraud, though?
HP claims it could not have had knowledge of Autonomy’s hijinks.
No one has officially been found guilty of any crimes yet, but HP points fingers at Lynch. HP stated it began its own investigation “after a senior member of Autonomy’s leadership team came forward, following the departure of Autonomy founder Mike Lynch, alleging that there had been a series of questionable accounting and business practices at Autonomy prior to the acquisition by HP.” According to Forbes
, a source from within HP said, "There was really sketchy accounting going on," speaking of Autonomy's books.
Lynch vociferously denies HP’s accusations and recently stated
, “HP has again failed [to] publish any explanation of the serious allegations. It is now less clear how much of the $5 billion write-down is in fact being attributed to the alleged accounting issues, and how much to other changes in business performance and earnings projections.”
The Department of Justice has opened
a probe into the scandal, and investors have filed a class-action lawsuit against HP. Lynch says he will comply with the investigation.
In one way, Paul Burks has earned the ignominious title of operating a bigger Ponzi scheme than Bernie Madoff.
While the website ZeekRewards.com lost $600 million, which pales in comparison to the $64.8 billion stolen by Madoff, its closure in August of this year by the Securities and Exchange Commission has impacted more than 1 million of its investors. Madoff worked for 4,800
Burks' company Rex Venture Group ran ZeekRewards.com, and the ZeeksRewards scam began in early 2011. The website had 2.2 million members, and it offered several ways to earn money through the ZeekRewards program. Two involved
purchasing contracts that were not registered with the SEC. Allegedly, the website promised investors 50% of the company’s daily net profits through a profit-sharing system in which they accumulated reward points that could be received as a cash payout or rolled over to compound for better returns.
The scam required investors to roll over their points to keep it functional.
Federal investigators said ZeekRewards made false claims of profitability and that the company owed investors much more than the company’s cash position. Stephen Cohen, an associate director of the SEC’s enforcement division stated
, “ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investors.”
The SEC said 98% of the money invested in ZeekRewards ended up
covering the payouts for the higher-up affiliates, making the company a pyramid scheme. In July of this year, ZeekRewards brought in $162 million and paid out $160 million, but an increase in requests for cash payouts would have pushed the company into insolvency.
Burks personally cashed in on this intricate scheme by siphoning several million dollars of investors' funds. He also distributed $1 million to family members.
Although he has avoided any jail time, Burks has agreed to settle charges with the SEC and pay a penalty of $4 million. As for his involvement in the mess, he did not admit or deny any of the allegations
Sung Kook “Bill” Hwang
Tiger Asia Management under the leadership of Bill Hwang performed well in 2011, securing a 8.6% return when the average hedge fund lost
5%. Last year was rough for the fund, and Tiger Asia Partners (the other hedge fund founded by Hwang), though. Rather than seeing returns of any sort, both funds settled a costly insider trading case.
In 2001, Hwang founded both “Tiger Cubs,” an appellation given by Wall Street to funds started by protégés of Julian Robertson. Robertson himself had managed
the former Tiger Management, and Hwang was Robertson’s top Asia manager.
Facing federal charges, Hwang admitted in December that the firm illegally traded using insider information and pleaded guilty to wire fraud. The fund used nonpublic information received through private placement offerings to sell short shares of the Bank of China
(HKG:3988), China Construction Bank (SHA:601939)
, and one other stock. Then the funds covered the short positions with private placement shares purchased at a significant discount to the stocks' market price. (View the SEC press release here
Under the control of head trader Raymond Y. H. Park, Tiger Asia Management used the information provided by the three investment banks to time the trades when Tiger Asia had made legal agreements that it would not utilize the non-public information to execute the trades.
In a separate act, Hwang and Park established a manipulative trading scheme that produced $496,000 in fake management fees.
To settle the case, Tiger Asia forfeited
$16.3 million, the amount gained from illegal trades executed from December of 2008 to January of 2009. Hwang will not do any jail time and remained silent on his civil allegations, but he and Park will have to pay $8.3 million in penalties each, separate from the penalty placed on Tiger Asia. The total settlement reached $44 million.
Regulators in Japan and Hong Kong have also begun
pursuing legal action against Tiger Asia for manipulating the market.
Suspicions of Libor rate rigging had existed for years, and the scandal finally made headlines last June when Barclays reached a $450 million settlement with regulators in Washington and London. After months of investigations, prosecutors have begun making their first charges against individuals.
Officials from the US Department of Justice have focused on Tom Hayes (photo unavailable) in their investigation. In the UK, the Serious Fraud Office and City of London Police
arrested Hayes last month along with two others in the first arrests tied to the rate-rigging scandal.
Former British UBS AG
(NYSE:UBS) trader Tom Hayes faces charges
of wire fraud and price-fixing for manipulating the yen Libor rate while working at the firm from 2006 to 2009. Hayes also must answer to charges of conspiracy to manipulate the interbank lending rate with his former peer Roger Darin, who was a onetime short-term interest-rates trader at UBS.
Other individuals from UBS have been charged
, too. However, the Commodity Futures Trading Commission (CFTC) said
, “The volume of unlawful requests submitted by one particular senior yen derivative trader dwarfed them all.” The one trader made at least 800 requests to UBS’s yen Libor rate-setters, about 100 requests to traders at other banks, and 1,200 requests to interdealer brokers to alter the rates.
The CFTC has not officially specified who requested these manipulations, but the Department of Justice has pretty damning evidence against Hayes.
Electronic chat messages
between Hayes and Darin obtained by investigators have Hayes asking Darin:
“Hi roger i have a 500k usd fix in 6m today, can we try to keep it on the low side pls?”
In another example, he had switched to Citigroup
(NYSE:C) and asked an interdealer broker on March 3, 2010:
“Any favours you can get with [Bank C Submitter] would be much appreciated ... even if [the Bank C Submitter] only move 3m down 1bp.”
The broker replied, “Libor lower ;)”
Rebekah Brooks has made the list as the one women who belongs in the company of these bad boys of business.
Brooks ran News International, News Corp.’s
(NASDAQ:NWS) UK news unit, as its CEO until July of 2011 when she found herself at the
center of the defunct News of the World phone-hacking scandal
. Brooks resigned in that month as the chief executive of News International when it became known that News of the World
hacked the voicemail messages of kidnapped and murdered 13-year-old Milly Dowler.
Brooks has been brought to court for other charges in addition to the phone hacking.
At a preliminary hearing in London last month, Brooks faced accusations of conspiracy to intercept communications, conspiracy to pervert the course of justice, and conspiracy to commit misconduct in public office.
Prime Minister David Cameron's former communications director Andy Coulson and veteran Sun
journalist John Kay along with Brooks stand accused
of conspiracy to pay approximately 100,000 British pounds for information from a Defense Ministry Official. The information formed the basis of several news stories between 2004 and 2011.
Bribing a public official carries a potentially hefty jail sentence
of 10 years in prison.
News Corp. does take care of its own, though. News International paid Brooks 10.9 million British pounds. It officially stated that it made the payment to “one director as compensation for loss of office