White Collar Crime

The Corruption of Global Football

Dylan Curry

2 December 2015

The Fédération Internationale de Football Association (FIFA) acts at the international governing body of association football, futsal, and beach football. From a once humble start in 1904, the organization now governs the sport between 208 member countries (BBC, 2015). This includes the countries under the continental football bodies of CONMEBOL (South America) and CONCACAF (Caribbean, Central, and North America), who oversee major tournaments such as the Gold Cup and Copa America. Please click here to read the full article.

The Fall of Barings Bank

Nick Wilson

26 November 2015

In late February of 1995 the world was blindsided by the news that a single man had defrauded Great Britain’s oldest acting merchant bank to the tune of £827 million in losses. This man was Nick Leeson, a young trader in his mid-twenties from Watford that had been sent to Singapore to run Barings Bank’s derivatives trading desk. Starting in 1992, Leeson gambled on future market fluctuations, and eventually started losing more than he was winning. Hiding these losses in a secret trading account, Leeson’s debts began to quickly snowball. When the Kobe Earthquake hit Japan on 17 January, 1995 the Asian stock market plummeted, taking Leeson’s remaining investments with it. Twenty years later, the tale of this worldwide financial superpower being reduced to nothing as a result of one man’s faults acts as a benchmark for all other large-scale financial scandals. Please click here to read the full article.

Trial of Dewey & LeBouef Executives Continues

C. L.

25 November 2015

Top executives at law firm await the decision of the jury. Currently, Dewey & LeBouef LLP executives are undergoing trial, all faced with numerous charges. The trial has been ongoing since May of 2015, and now, former top executives Steven Davis, Stephen DiCarmine, and Joel Sanders await the jury’s decision to conclude the trial. This article discusses the trial, the charges, and details of evidence carelessly left behind by the three individuals. Please click here to read the full article.

Decade Long Ponzi Scheme Comes to an End

Rebecca Kovac

5 October 2015

In February of 2014, Deepal Wannakuwatte was arrested by the FBI for committing one of the longest running ponzi schemes in Sacramento history. Wannakuwatte’s white-collar crime came to an end and he was charged with three cases of fraud and incurred $3 million in fines. For more than ten years he convinced over 150 investors to trust in his Sacramento based companies, International Manufacturing Group (IMG) and Relyaid Global Heath Care. Wannakuwatte fraudulently earned over $230 million from these investors, which included individuals, businesses, government agencies, and financial institutions. In November he was sentenced to 20 years in prison and to pay restitution to his victims. Since his sentencing, both of his businesses have filed for bankruptcy and Wannakuwatte has also personally filed for bankruptcy. Please click here to read the full article.

Medical Fraud Brought to Light

Destiny Medina

23 September 2015

Owner of Prairie View Hospice is sentenced to three years in prison for medical fraud. Prairie View Hospice, Inc. is located in Oklahoma, United States. Prairie View Hospice was supposed to provide different services to Medicare companies. These services include, “providing healthcare, medication, medical equipment, and other goods and services to terminally ill patients.” (United States Department of Justice, 2015). In 2014, the owner of Prairie View, Paula Kluding, was found guilty on “39 separate counts relating to Medicare fraud, conspiracy, obstruction of a federal audit, and making false statements in health care matter.” (United States Department of Justice, 2014) Please click here to read the full article.

An insight into insider dealing

25 February 2015

“If you can’t beat them, join them. Or better yet, try to have them join you”. That could be a good summary for what seems to be the official strategy of SAC Capital Advisors, a hedge fund that pleaded guilty to securities fraud in November 2013 and agreed to pay a fine of $1.8 billion. The judge is yet to decide whether to approve or reject the guilty plea. In the meantime, the company owner Steven Cohen has announced that, far from shutting down the firm, he is planning its resurrection under a new name and style.

As part of his commitment to reform the way the firm operates, he is looking to hire a former prosecutor or securities regulator to monitor the firm’s trading activities. Please click here for more information. Incidentally, it was Mr Preet Bharara, the so-called “sheriff of Wall Street”, who took down eight of the firm’s employees, and who takes the credit for the company’s guilty plea itself.

The question on everyone’s mind now is – will he go after Steven Cohen himself? If you’re interested in finding out who is catching or joining whom, watch this space. For details of Preet Bharara’s track record in putting way insider traders since his appointment as the US attorney for the Southern District of New York, please click here. For details of his success against SAC employees, please click here.

Insider Dealing in Italy and the UK

Domenico Galimi

23 February 2015

This paper firstly analyses the 2003 Directive of the European Community, detailing what all member states have to integrate. Afterwards, both the national legislation of Italy and the United Kingdom are examined, detailing the essential requirements of inside information, the insider and the criminal behaviour. Finally, an Italian insider dealing case is analysed, including its most recent development involving the European Court of Justice. Please click here to download the full report.

Insider trading conviction in Galleon case stands

19 November 2013

In 2009, the Galleon Group, one of the largest hedge fund companies in the world, was at the centre of the biggest insider trading scandal in US history. The firm closed in October 2009, when its founder Raj Rajaratnam and five others were charged with multiple counts of fraud and insider dealing. In 2011, Rajaratnam was convicted and sentenced to 11 years in prison. A federal court in New York has now upheld the decision. According to government, Rajaratnam made nearly $64 million in illicit profit from insider trading over the six years prior to his arrest. A former director of Goldman Sachs, Rajat Gupta, was ordered to pay a penalty of £9 million and banned from serving in any public company for having passed corporate secrets to Rajaratnam. For details of the 2011 conviction please click here.

Olympus executives sentenced

4 July 2013

Tsuyoshi Kikukawa, former chairman of Olympus, and executives Hisashi Mori and Hideo Yamada, received suspended jail sentences for falsifying accounts to cover up losses of £1 billion on the company’s speculative investments. Last year, they admitted lying to regulators and shareholders for over a decade, trying to hide the loss. Mr Kikukawa and Mr Yamada were given three-year sentences and Mr Mori a two-and-a-half-year sentence. Suspended sentences are the norm in cases of false accounting in Japan, especially when the perpetrators have not profited personally from their crime. Please click here for the full article.

Jail term cut for Enron chief executive

22 June 2013

Jeffrey Skilling, the former chief executive of Enron, has his jail term cut to 14 years. He was originally sentenced to over 24 years in 2006 over the collapse of Enron in 2001, which was one of the biggest corporate scandals in the world over the last decade. The resentencing comes after an agreement was reached between Skilling and federal prosecutors, under which the former Enron boss would drop his appeal and forfeit $40m in assets seized by the government. Please click here for the full article.

Trader charged with fixing rates

18 June 2013

Tom Hayes, a former trader at investment banks Citigroup and UBS, was charged with conspiring to fix key interest rates with employees at eight other financial firms. He is the first person so far charged by the Serious Fraud Office with Libor-rigging offences. He was one of three individuals arrested in December, as part of the SFO investigation. The other two were released on bail. The Serious Fraud Office has been pursuing criminal investigations since July last year. Hayes’ first hearing will take place at Southwark crown court on 4 July. Please click here for the full article.

Thyssen CEO homicide sentence reduced

Turin – 28 February 2013

Two years ago, Harald Espenhahn, the former CEO of the Italian division of Germany’s ThyssenKrupp steelmaker, was convicted of homicide for the deaths of seven workers, and sentenced to sixteen and a half years in prison. On February 28 this year, his sentence was reduced to ten years because appeal court judges ruled that Harald Espenhahn had not been deliberately negligent in cutting back on emergency services at the plant. Please click here for the full article.

Rogue trader Kerviel sentenced to jail and £4bn fine

24 October 2012

Former Société Générale employee Jerome Kerviel lost his appeal in Paris, and was sentenced to three years in prison and ordered to pay back £4 billion in losses. He was convicted in 2010 for one of the worst frauds in history, involving forgery, breach of trust, and unauthorised deals that caused the bank’s share price to fall. Kerviel is yet to be jailed, pending another appeal. Please click here for the full article.

In UBS Convictions, Parallels to the Libor Investigation

4 September 2012

Three former UBS executives were convicted on Friday in the US, for conspiracy and fraud charges for rigging bids in the municipal bond market. This may serve as a template for how prosecutors can pursue cases in the manipulation of the LIBOR in the UK. Please click here for the full article.

Jail for the fugitive tycoon Asil Nadir

23 August 2012

Two decades after he committed he stole nearly £29m from his Polly Peck International company, Asil Nadir has finally been brought to justice. The judge gave him 10 years in jail and said “You were a wealthy man who stole out of pure greed”. The empire collapsed in 1990 following a Serious Fraud Office investigation, and Nadir fled the UK in 1993 while awaiting trial. Please click here for the full article.

The Winning Record of Prosecutors on Insider Trading

21 August 2012

The record of the United States attorney’s office for the Southern District of New York is 8-0 in insider trading cases that have gone to trial since the wide-ranging investigation came to light in October 2009. Cases include the recent conviction of the hedge fund manager Douglas F. Whitman four counts of securities fraud and conspiracy, based on receiving confidential information about Marvell Technology, Google and Polycom. Under federal sentencing guidelines, the recommended sentence for Mr. Whitman is about 4 to 5 years, based on the trading profits and other factors. Please click here for the full article.

Chief of Lloyds online security admits fraud

7 August 2012

Jessica Harper, a former Lloyds bank boss, has admitted having taken £2.4m from her em-ployer through false invoices over a four-year period while working as head of fraud and se-curity for digital banking at Lloyds Banking Group. She was charged with one count of fraud by abuse of position and money laundering between September 2008 and December 2011. She also pleaded guilty to one charge of transferring criminal property. She will be sentenced at a later date. Please click here for the full article.

News of the World Executives to face charges

25 July 2012

Seven executives at the News of the World and the paper’s private investigator, Glenn Mulcaire, will face a total of 19 charges of conspiracy to hack mobile-phone voicemails. The prime minister’s former director of communications Andy Coulson and chief executive of News International Rebekah Brooks have been charged with conspiring to hack the phones of more than 600 people. The maximum penalty for each charge is two years imprisonment, or a fine, or both – and it is at the judge’s discretion whether any sentences would be served concurrently. CPS thinks there is a realistic prospect of securing convictions. Please click here for the full article.

Libor scandal arrests imminent

23 July 2012

U.S. prosecutors and European regulators are close to arresting individual traders and charging them with colluding to manipulate global benchmark interest rates. Please click here for the full article.

Jail sentence for son and nephew of Irish billionaire

21 July 2012

Peter Darragh Quinn failed to turn up at the high court in Dublin, and was sentenced to three months in jail for contempt. His cousin, Sean Quinn junior, is already in prison. The pair were sentenced to three months in prison at the Dublin high court for moving hundreds of millions of euros out of the reach of the now stated-owned Anglo Irish Bank. Sean Quinn senior was found guilty of the same offence but avoided jail. Instead he was ordered to co-operate with the state-owned Irish Bank Resolution Corporation (IBRC), which is attempting to find the estimated €500m (£390m) the Quinns are accused of hiding. Please click here for the full article.

Bankers to face criminal charges

15 July 2012

The Treasury is proposing to change the law to be able to bring criminal charges against bank chiefs who behave ‘recklessly’. The proposal, in a consultation document, cites the 2007 acquisition of ABN Amro by the Royal Bank of Scotland by then CEO Fred Goodwin as an example of ‘extreme risk and poor decision-making’. Please click here for the full article. (Please note that you will have to pay to download the full article)

‘Fred Goodwin Law’ to ban reckless bank directors

4 July 2012

The Treasury yesterday published a consultation document proposing rules that could prevent directors of failed banks from ever holding senior positions in finance again. Please click here for the full article.

FSA calls for tighter laws against failing bankers

1 July 2012

FSA Chairmain Adair Turner says that the law should be tightened to tackle misbehaviour in banking. The FSA had already already indicated to the Government that it felt the current available legislation did not do enough to hold directors responsible for their roles in banking scandals such as the financial crisis of 2007/8 and the current Libor crisis. Please click here for the full article.

Commentary: Richard Tudway – Corporate Governance Reform

4 July 2012

The press is again full of handwringing over the latest management failures in the British Banking System in general, and Barclays Bank Plc in particular. What is extraordinary, however, is that there is not a mention of corporate governance. Everything appears to turn on personalities like Premier League football. This is an unhelpful distraction. We need to understand the source of this pervasive failure in the stewardship of bank and non bank public corporations alike. The failure arises from our reliance on unitary boards where there is no proper or effective independent ex ante monitoring of what those who run these mega businesses are up to. Please click here for the full article.

Business as usual for Barclays boss Bob Diamond

10 November 2011

In a recent Letter to The Guardian, economist Richard Tudway denounces Bob Diamond’s lecture (Banks can be good citizens, 4 November) as an example of sophistry and deception. He suggests that what we really need is proper, thorough-going supervision with independent supervisory boards made up of representatives of the shareholders and stakeholders about which Diamond speaks so fondly. Please click here to read an extract from Bob Diamond’s lecture.

Bob Diamond’s lecture (Banks can be good citizens, 4 November) is an example of the sort of sophistry and deception we are all subjected to. Corporations are inanimate fictional entities in law. Corporations are not citizens, and it’s absurd, but intentional, that they are portrayed as if they were. Directors like Diamond and his other managers are effectively the corporation we all know as Barclays plc. It is to them we should be asking the question about their own actions as citizens. Putting this irrelevant corporate entity in between is intended to suggest there is another entity which the directors and managers are there, in some sense, to tame. This is a smoke screen: a grand deception.

What we need is proper, thorough-going supervision with independent supervisory boards made up of representatives of the shareholders and stakeholders about which Diamond speaks so fondly. These supervisory boards would make their voice clear on what the corporation should or should not be doing to make money. They would also settle the vexed issue of executive pay. But Diamond wants none of that sort of democratic control and accountability. He wants to continue to control the business, at the same time daring to suggest they are all working to make Barclays Bank plc a better citizen. Pull the other leg, Mr Diamond. You just want the clamour to go away and to get back to making money at everyone else’s expense. (Richard Tudway, Centre for International Economics). Please click here to read the letter to the Guardian.

11 October 2010: Chief Executive of Hungarian company that caused the toxic sludge spill arrested

Mr Zoltan Bakonyi, the chief executive of the industrial plant at the centre of the toxic sludge spill in Hungary has been taken in for questioning by the police. So far, eight people have lost their lives due to the toxic spill. The Hungarian PM Viktor Orban said the company would be temporarily nationalised and that those responsible for the disaster should bear the financial consequences. Click here to read the full article.

French rogue trader Jerome Kerviel sentenced to 3 years in prison

5 October 2010

The former Société Générale trader has been found guilty of forgery, unauthorised computer use and breach of trust. He will spend 3 years in prison and repay the damages of 4.9bn euros ($7bn; £4bn) which the bank said it lost through his risky trades. Please click here for the full article.

Commentary – Insuring against corporate crimes, by Neil Foster, University of Newcastle, Australia

October 2010

Can and should corporate directors and officers obtain insurance for, or indemnify themselves against, the possibility of a criminal fine following a conviction? Or should this be deemed to be against public policy? The general rule is that one should not be able to insure against one’s own wrongdoing. Criminal laws would lose much of their deterrent effect if the rule were otherwise in respect of fines-only offences. Please click here for the full article.

Former South African top policeman convicted for bribery

2 July 2010

Jackie Selebi, South Africa’s former police chief, has been found guilty of corruption in a landmark case. He was accused of links to organised crime and taking 1.2m rand (£103,000) in bribes to turn a blind eye to drug trafficking. Selebi faces at least 15 years in prison, but will remain free on bail until sentencing on 14 July. Please click here for the full article.

Kerviel trial draws to a close

25 June 2010

Jerome Kerviel will have to wait until the autumn to find out if he will be sent to prison for four years or ordered to pay back the £4bn that Société Générale claims to have lost through his unauthorised trades. Please click here for the full article.

Supreme Court limits the use of a federal fraud law

24 June 2010

The US Supreme Court significantly narrowed the scope of a law often used by federal prosecutors in corruption cases and called into question the fraud convictions of Jeffrey K. Skilling, a former chief executive of Enron, and Conrad M. Black, a newspaper executive convicted of defrauding his media company. Please click here for the full article.

Trial against Jerome Kerviel starts at the Palais de Justice, in Paris

9 June 2010

The 33-year old former trader faces charges of breach of trust, computer hacking, and falsification of records leading to Société Générale losing £4 billion. Kerviel admits he took excessive risks, but insists his bosses knew what he was doing and encouraged him while he was winning. The trial is expected to last three weeks. Please click here for the full article.

Kerviel has just published his own account of what happened, in a book called The Spiral: Memoirs of a Trader. This, as well as his experience, bears an eerie resemblance to that of Nick Leeson, who was also engaged in high-risk arbitrage before causing the collapse of Barings Bank in 1995. La plus ca change, la plus ca reste le meme chose…please click here for more details about Kerviel’s Memoirs.

New Bill on Safety Duties for Company Directors shelved

18 May 2010

The Bill, which was introduced in Parliament on the 19 January by Labour MP Frank Doran, never made it through to its second reading scheduled to take place on 23 April 2010. Please click here for the full article. Please note that in order to read the article, you have to subscribe to the Business Database.

Bank staff charged for alleged insider-dealing

1 April 2010

Seven men were charged by the Financial Services Authority in its first prosecution of an alleged insider dealing ring. The FSA named them as Pardip Saini, Paresh Shah, Neten Shah, Bijal Shah, Truptesh Patel, Mitesh Shah and Ali Mustafa. The 13 charges brought against the men relate to illegal trading in shares of 12 companies between 2006 and 2008. One of the seven, Mitesh Shah, was also charged with money laundering. Please click here for the full article.

Rio Tinto employees sentenced in bribery case in China

29 March 2010

Four employees of the British-Australian mining giant Rio Tinto, including an Australian citizen, were convicted by a Chinese court on Monday and sentenced to seven to 14 years in prison for accepting millions of dollars in bribes and stealing commercial secrets.

SFO investigates Alstom directors

24 March 2010

Three company directors are being investigated by the Serious Fraud Office for bribes-for-contracts. Please click here for the full article.

New arrest in connection with the FSA’s operation against insider dealing

24 March 2010

A seventh man has been arrested under suspicion of insider dealing, in an operation involving three financial institutions: hedge fund Moore Capital, leading German bank Deutsche Bank and Exane BNP, partly owned by French bank BNP Paribas. Those arrested have yet to be named. Please click here for the full article.

Three MPs and one peer charged with false accounting for their expenses claims

5 February 2010

The Director of Public Prosecutions has decided to prosecute three MPs and one peer for false accounting. Elliot Morley, Jim Devine, David Chaytor and Lord Hanningfield will face charges under the Theft Act 1968 section 17, over allegedly improper expense claims. Please click here for the full article.

New Bill on Safety Duties for Directors

19 January 2010

A Labour MP is pressing for a new law to place legally binding, explicit safety duties on company directors. Aberdeen North MP Frank Doran presented his Health and Safety (Company Director Liability) Bill in a House of Commons debate on 19 January. The Bill is scheduled to receive a second reading on Friday 23 April. The TUC, trade unions, personal injury lawyers, health and safety campaigners and victims’ advocates have all called for explicit legal safety duties on company directors. Please click here for a summary of the Bill.

11 January 2010: Claims of prosecutorial misconduct in two cases of white-collar crime

A federal judge dismissed charges against three Broadcom executives accused of options backdating, because of changes in witness testimony. Another similar claim was raised in the prosecution of a KB Homes executive. Click here to read the full article.

International comparison of health & safety duties imposed on company directors

November 2007

A 2007 Centre for Corporate Accountability report shows that seven out of the nine countries studied contain safety legislation that imposes positive safety obligations upon either directors or senior managers of companies. These are: Germany, France, Italy, Sweden, Japan, Canada (four out of fourteen jurisdictions) and Australia (two out of nine jurisdictions). There is, in addition, another category of jurisdictions which, whilst not imposing explicit positive duties upon directors, do impose significant responsibilities through the creation of offences that are targeted at directors. This category includes four Australian states. There are also, however, jurisdictions which either impose minimal or no duties upon directors. Two countries – USA and Holland – do not impose any obligations. Please click here to download the full report.

Health & Safety responsibilities of company directors in the UK

October 2007

Whilst there are clear, positive duties imposed on company directors and senior managers concerning the financial management of their organisation, the same is not true insofar as health & safety responsibilities are concerned. Directors have no individual legal duties in relation to the safety of their company operations. It is only the company as a separate legal entity and the employees of the company, which have duties under the Health & Safety at Work Act 1974. This means that company directors have no positive obligations in relation to the health and safety of their organisation, and therefore cannot be held individually accountable for safety failures which cause great harm and even death at the workplace. The only exception, Section 37 of the 1974 Act, mentions those cases where a director can be prosecuted – namely, where the offence was caused by “consent, connivance, or neglect” on the part of the director. This however only imposes a duty upon directors to take action if they are already aware that their company is committing an offence; it does not impose a positive obligation on directors to inform themselves of offences being committed, or indeed to prevent offences from being committed.

History of lobbying for directors’ duties reform in the UK

Please click here for the history of lobbying for directors’ duties reform in the UK.