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Showing posts with label charges. Show all posts
Showing posts with label charges. Show all posts

Wednesday, March 2, 2011

Copy that: Plagiarism charges unseat Germany's 'superstar' Defense minister (The Christian Science Monitor)

Frankfurt, Germany – He was Germany’s favorite politician, a conservative star boosting his party’s standing in the polls, a doer who pushed through a historic reform of the German armed forces.

But in a development that's rare for a country that never seemed to care much about politicians' private lives or personal indiscretions, Baron Theodor zu Guttenberg resigned this week amid Internet-fueled charges that he plagiarized his PhD dissertation. It was an embarrassment to Chancellor Angela Merkel's battered center-right Christian Democratic Union and the downfall of a politician whose career marked a departure from traditionally bland German politics.

"We’re seeing the failure of a concept where a person presents himself as superstar, where a politician tries to rise so high with so much glamour that he thinks he is an icon," says Gero Neugebauer of the Free University in Berlin.

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Mr. Guttenberg, whose wife is the great-great granddaughter of former chancellor Otto von Bismarck, seemed to flaunt his family name the way no German politician had done before. He was seen as a man of action, responsible for pushing through a plan to end the draft in the boldest reform of the armed forces since World War II.

Like many politicians here who see getting a doctorate as a way to increase their political fortunes, Guttenberg wrote his PhD dissertation in 2006 on the development of the US and European constitutions. But trouble started only two weeks ago when a law professor doing a review of the unpublished thesis uncovered incidents of plagiarism.

On Feb. 16, a German newspaper reported that parts of the thesis appeared to draw on articles in other newspapers, a US State Department website, and other essays without attribution. That news led to the development of a website, GuttenPlag Wiki, that made it possible for others to read the dissertation and discuss it.

Saying that Guttenberg, who became known as "baron cut and paste," had violated basic academic standards of honesty and integrity, 51,000 scholars signed a letter asking Chancellor Merkel for Guttenberg's dismissal.

Guttenberg initially dismissed the charges as "absurd." Merkel, too, treated it as a side issue, saying she’d hired a minister, not a research assistant. But when the University of Bayreuth, which had awarded his doctorate, withdrew Guttenberg’s degree, he resigned. "I’ve always been prepared to fight but I have reached the limits of my strength," he said Monday.

"The academic community acted collectively and said, ‘We’re not going to let that happen,' " says Mr. Neugebauer. "It was a milestone that scholars, and not politicians, were the ones that drove a politician to step down."

The scandal "is a reassertion of academic sovereignty vis-à-vis the political sphere," says Paul Nolte, a German historian who is currently a visiting professor of history at the University of North Carolina (UNC) at Chapel Hill. "But perhaps the lesson is that German politicians should think of themselves as doing politics, not at the same time pursuing some kind of academic career."

On Wednesday, Chancellor Merkel replaced Guttenberg, a potential chancellor candidate, with one of her most trusted aides, and seemingly increased her political chances for the future at the same time.

"Angela Merkel has lost a formidable competitor for chancellor," says Professor Nolte. "If there was anybody having the stature of a chancellor, it was Guttenberg and nobody else."

De Maiziere, the new Defense minister, is the best choice to continue Guttenberg’s milestone reform of the Army, says Nolte. "It’s striking a good deal for Merkel."

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SEC charges defense contractor, 3 ex-directors (AP)

WASHINGTON – Federal regulators on Monday charged a U.S. defense contractor and three of its former board members with accounting fraud, saying the company overstated earnings to investors.

The Securities and Exchange Commission said DHB Industries Inc. settled the civil charges without receiving any penalty. The company, which makes bullet-proof vests for the U.S. military and law enforcement agencies, agreed not to repeat the alleged violations.

The SEC said the settlement terms took into account corrective measures taken by DHB Industries.

The Pompano Beach, Fla., company changed its name to Point Blank Solutions Inc. in 2007 and is operating while in bankruptcy proceedings. Its main plants are in Florida and Tennessee.

Charges against former directors Jerome Krantz, Cary Chasin and Gary Nadelman are pending. The SEC said the directors from outside the company, who made up the board's audit and compensation committees, allowed senior managers to overstate income and other data in financial reports from 2003 to 2005.

Attorneys for Chasin and Nadelman disputed the SEC's charges. A lawyer representing Krantz didn't immediately return a telephone call seeking comment.

Former DHB Industries CEO David Brooks and former Chief Operating Officer Sandra Hatfield were convicted of criminal charges including securities fraud and conspiracy in September. The company's former chief financial officer, Dawn Schegel, pleaded guilty to conspiracy to commit fraud and testified against Brooks and Hatfield.

The SEC also accused Krantz, Chasin and Nadelman of "willful blindness" that allowed Brooks to siphon $10 million from DHB Industries to another company he controlled, and take another $4.7 million or so to pay for luxury cars, jewelry, art, real estate and prostitutes.

The SEC is seeking unspecified restitution and civil fines from the three former board members and wants them barred from serving as officers or directors of any public company.

Chasin's attorney, Amy Millard, said her client "faithfully carried out his role as an outside director of DHB (and) he looks forward to a resolution of this matter."

Nadelman lawyer Robert Gottlieb said "Mr. Nadelman is a good and decent man who did not willfully or knowingly do anything to justify today's SEC's action."


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Tuesday, March 1, 2011

SEC charges ex-Goldman director in insider case (Reuters)

NEW YORK (Reuters) – A former Goldman Sachs Group Inc director leaked secret details to Galleon Group hedge fund manager Raj Rajaratnam about Warren Buffett's plan to invest $5 billion in the Wall Street bank at the height of the financial crisis, a U.S. securities regulator charged.

The U.S. Securities and Exchange Commission said the director, Rajat Gupta, tipped Rajaratnam by phone just minutes before the public learned of the investment by Buffett's Berkshire Hathaway Inc, which helped ensure Goldman's stability.

Gupta, a former worldwide managing director at consulting firm McKinsey & Co, was also accused of tipping Rajaratnam about quarterly earnings at Goldman and Procter & Gamble Co, where he was a director before resigning on Tuesday.

The 62-year-old Gupta is one of the highest-ranking corporate executives implicated in the government's wide-ranging insider trading probe, which has resulted in criminal or civil charges against dozens of individuals.

Tuesday's charges mark the first time that activity said to have occurred at Goldman was directly implicated in the probe.

The SEC said Rajaratnam, who faces a March 8 criminal insider trading trial, used the tips to trade at his firm, Galleon Group, reaping more than $18 million of illegal gains. It said Gupta invested in at least some Galleon hedge funds.

"Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets," SEC enforcement chief Robert Khuzami said in a statement. "Directors who violate the sanctity of board room confidences for private gain will be held to account for their illegal actions."

The SEC began administrative and cease-and-desist proceedings against Gupta. It described Gupta as a "friend and business associate" of Rajaratnam.

"Based on the allegations in the order instituting the administrative proceedings, it appears the SEC has a powerful, circumstantial case against Gupta," said Kathleen Hamm, managing director at Promontory Financial Group in Washington and a former SEC enforcement official.

"TOTALLY BASELESS" CHARGES, LAWYER SAYS

Gary Naftalis, a lawyer for Gupta, called the SEC allegations "totally baseless," and said his client had lost his entire $10 million investment in a Galleon fund that Rajaratnam managed, known as GB Voyager.

"Mr. Gupta has done nothing wrong," Naftalis said in a statement. "There is no allegation that Mr. Gupta traded in any of these securities or shared in any profits as part of any quid pro quo."

Gupta sat on Goldman's board from November 2006 until last May and served on its corporate governance committee.

The Westport, Connecticut, resident had served on Procter & Gamble's board since 2007 before resigning on Tuesday.

"He's stepping down in the interest of the company, to prevent any distraction to the P&G board or our business," company spokesman Paul Fox said.

Rajaratnam also faces SEC civil charges. He has denied wrongdoing.

"This is simply an effort to destroy a favorable witness," John Dowd, a lawyer for Rajaratnam, said in a statement about the Gupta charges. "There is no case, absolutely none. No conversations, no benefit, no nothing. These are old friends and Mr. Gupta is a distinguished human being."

Goldman spokesman Ed Canaday declined to comment. Berkshire did not return a request for comment.

"It is striking the SEC refers to phone calls immediately before the trades," said Kip Weissman, a partner at Luse Gorman Pomerenk & Schick PC in Washington and a former SEC enforcement lawyer. "This suggests there was a witness, or that the SEC has more circumstantial evidence."

Gupta is one of a web of associates in Corporate America that investigators have said Rajaratnam used to learn advance tips about potentially market-moving news.

A Harvard Business School graduate, Gupta was previously worldwide managing director at McKinsey, where he worked for more than three decades.

The Gupta case "does not help in instilling confidence in Main Street investors that they're getting a fair shake at these multinational companies," said Michael Nix, co-chief investment officer at Greenwood Capital Associates LLC.

In trading on the New York Stock Exchange on Tuesday, Goldman fell $2.47, or 1.5 percent, to close at $161.31, while Procter & Gamble fell 31 cents, or 0.5 percent, to $62.74.

MULTIPLE TIPS ALLEGED

Prosecutors have said a Morgan Stanley banker also leaked inside information that found its way to Rajaratnam.

Former McKinsey consultant Anil Kumar pleaded guilty in January 2010 to leaking inside information about a possible merger to Rajaratnam, in return for $1.75 million.

White-collar defense lawyers said civil administrative proceedings may afford the SEC a more friendly forum in which to pursue its case. They also allow the regulator to avoid having to amend its own lawsuit against Rajaratnam.

"It's faster, the evidence rules are more liberal, and the SEC can wield a bigger hammer in penalties, which can include barring someone from the securities industry." Weissman said.

The SEC alleged Gupta tipped Rajaratnam about Goldman's results for the second and fourth quarters of 2008, resulting in more than $16.6 million of illicit gains.

It said he also tipped Rajaratnam about Procter & Gamble's results for the final quarter of 2008, resulting in more than $570,000 of profit.

The SEC said Gupta had at least two phone calls with Rajaratnam shortly before Goldman announced Berkshire's investment on September 23, 2008.

It said one call came just before the market closed that day, immediately after Gupta had disconnected from a phone link to the board meeting where Goldman approved the investment. Goldman announced the Berkshire stake after markets closed.

Rajaratnam's trades in Goldman based on these tips resulted in more than $900,000 of profit, the SEC said.

(Reporting by Jonathan Stempel in New York; additional reporting by Matthew Goldstein, Grant McCool and Phil Wahba in New York; Joe Rauch in Charlotte, North Carolina and Jessica Wohl in Chicago; editing by Dave Zimmerman and John Wallace)


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Freddie Mac exec facing possible SEC charges (Reuters)

By Corbett B. Daly and Rachelle Younglai Corbett B. Daly And Rachelle Younglai – Thu Feb 24, 8:09 pm ET

WASHINGTON (Reuters) – A top Freddie Mac (FMCC.OB) executive received notice the government may file charges against him for allegedly violating securities laws in the years leading up to the housing bust, according to a regulatory filing released on Thursday.

Executive Vice President Don Bisenius received a "wells notice" from the Securities and Exchange Commission that the agency is considering filing an enforcement action against him for possibly violating federal securities laws and related rules in 2007 and 2008.

The revelation comes just days after a former Freddie Mac chief financial officer Anthony Piszel also received a similar warning from the SEC. Piszel, who was the mortgage giant's CFO between 2006 and 2008, was forced to resign earlier this month from CoreLogic Inc (CLGX.N), where he was working as the company's chief financial officer.

Freddie Mac and sister entity Fannie Mae (FNMA.OB) have both been under investigation since September 2008 for their role in the mortgage crisis.

The government-controlled entities have been subpoenaed for documents as part of a federal grand jury into their accounting. The SEC and the Federal Bureau of Investigation have also been probing the companies for possible corporate fraud.

"Management has determined that, as of the date of this filing, we have ineffective disclosure controls and procedures and a material weakness in our internal control over financial reporting," Fannie Mae said in a separate filing, also released on Thursday.

FREDDIE MAC SEEKS $500 MILLION; FANNIE MAE $2.6 BILLION

Freddie Mac also said it would need another $500 million from taxpayers after reporting its sixth straight quarterly loss, though it would pay more than three times that amount back to the government in interest on money already borrowed from the government.

Fannie Mae, the largest provider of U.S. residential mortgage funds, said in its filing it would need an additional $2.6 billion from the Treasury Department but would pay an almost equal amount back to taxpayers.

The U.S. Treasury took control of Freddie Mac and Fannie Mae at the height of the financial crisis in September 2008 as losses mounted from mortgages gone bad.

Under their takeover terms, the companies must make a 10 percent dividend payment on the government loans, much as credit card borrowers must make minimum monthly repayments.

Fannie Mae said it lost $2.1 billion in the final three months of last year. The fourth-quarter loss, about $0.37 per share, includes a $2.2 billion dividend payment the company paid to the government.

Smaller Freddie Mac reported a loss of $113 million in the fourth quarter, a tiny fraction of the double digit billions the firm lost in the quarters immediately after the government seized it more than two years ago.

The fourth-quarter loss, about $0.53 per share, includes a $1.6 billion dividend payment Freddie Mac paid to the government.

The two firms are now on the hook for about $134 billion in combined taxpayer aid, excluding dividend payments.

As a result of Freddie Mac's small draw and large repayment, the latest $3.1 billion combined request for new cash is smaller for the first time than the $3.8 billion combined interest payment required.

The plan to put them into conservatorship was meant to be temporary, though it is likely to be years before a long-term replacement structure takes shape.

(Reporting by Corbett B. Daly and Rachelle Younglai; Editing by Bernard Orr)


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SEC may file charges against Freddie Mac exec (Reuters)

WASHINGTON (Reuters) – A top executive at mortgage finance giant Freddie Mac (FMCC.OB) received a "Wells Notice" from the Securities and Exchange Commission that the agency was considering filing an enforcement action against him, according to an SEC filing released on Thursday.

The filing said Executive Vice President Donald Bisenius, who heads the single-family mortgage unit, may have violated federal securities laws and related rules in 2007 and 2008.

(Reporting by Corbett B. Daly and Rachelle Younglai; Editing by Leslie Adler)


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SEC sets charges in "portfolio pumping" scheme (Reuters)

NEW YORK (Reuters) – A U.S. regulator charged two financial firms and three individuals with violating federal securities fraud laws over an alleged "portfolio pumping" scheme to manipulate prices of several small U.S. stocks, generating more than $63 million of illegal proceeds.

The U.S. Securities and Exchange Commission said it filed civil charges against Hunter World Markets Inc, a Beverly Hills, California-based broker-dealer and principals Todd Ficeto and Florian Homm.

Also charged were Colin Heatherington, a hedge fund trader who lives in Canada, and Hunter Advisors LLC, a company controlled by Ficeto, the SEC said.

(Reporting by Jonathan Stempel in New York; editing by Andre Grenon)


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Friday, February 25, 2011

Conservatives face election charges (Reuters)

OTTAWA (Reuters) – In an embarrassing development for the Conservative government, four senior party officials have been charged with violating financing rules during the election campaign that brought it to power in 2006.

The Commissioner of Canada Elections, the nonpartisan officer who is responsible for ensuring compliance with federal election rules, is also bringing charges against the Conservative Party itself.

The news broke ahead of what many political observers expect will be an election early this year. The minority government needs the backing of at least one opposition party to pass key legislation, such as next month's budget, and that is far from certain. Should the budget be defeated, a new election would be called immediately.

Polls indicate the Conservatives would retain power if an election were held now, albeit with another minority.

Elections Canada, the overall body supervising federal elections, said in a statement on Friday the four officials had willfully broken the $18.3 million spending limit placed on political parties during federal campaigns.

The agency contends the party had illegally assigned national advertising expenditures to local candidates, who have their own separate campaign spending accounts. In 2008, police raided Conservative headquarters looking for evidence.

In a civil case last year regarding these advertising expenditures, the Federal Court ruled that the local Conservative candidates had not broken election financing rules, but Elections Canada is appealing the ruling.

Finance Minister Jim Flaherty, asked about the story in a news conference in Halifax, played down what he termed "administrative charges."

Querying why the Conservatives had been singled out, he said: "Our party followed the same steps as the other political parties."

In fact, anyone found guilty of the latest charges could face jail time. The current charges are being laid under the Canada Elections Act, and the first court hearing will be on March 18.

"They don't fall under the criminal code, but they are certainly not 'administrative'," said Dan Brien, spokesman for the Public Prosecution Service of Canada.

Prime Minister Stephen Harper has since appointed to the Senate two of the four campaign officials who were named on Friday.

The Liberal Party said the charges were the latest sign of scandal in a government that won power promising to be more accountable.

"This is a million-dollar scam. It's not small potatoes," Liberal leader Michael Ignatieff charged in a news conference on a campaign-style swing he was making in the Toronto area.

($1=$0.98 Canadian)

(Reporting by David Ljunggren and Randall Palmer; editing by Rob Wilson)


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Sunday, February 20, 2011

U.S. charges 111 in largest Medicare fraud crackdown (Reuters)

WASHINGTON (Reuters) – The U.S. government on Thursday charged 111 doctors, nurses and other defendants with Medicare crime schemes that exceeded $225 million in false billings, the largest health care fraud crackdown so far.
Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius announced the charges in the latest of a series of cases brought by the Obama administration as health care fraud has emerged as an important political issue.
About 45 million elderly and disabled Americans are enrolled in taxpayer-funded Medicare plans, which have come under fire from critics who say the government pays too much to the companies running them and that they are subject to fraud.
Medicare reform represented a key part of the sweeping year-old health care law championed by Democratic President Barack Obama, but opposed by many Republicans in Congress.
The latest charges covered defendants in nine cities. In addition to arrests, law enforcement agents also executed 16 search warrants.
The defendants were charged various crimes, including conspiracy to defraud the Medicare program, false claims, kickbacks and money laundering, administration officials said.
They said the alleged schemes involved various medical treatments, tests and services, such as home health care, physical and occupational therapy and medical equipment.
"Although today marks a critical step forward in combating and deterring illegal activity, our work is far from over," Holder said. Fraud has accounted for as much as an estimated $60 billion a year in the Medicare program.
A top FBI official, Shawn Henry, said 2,600 health care fraud cases were under investigation and that organized crime groups have been increasingly linked to the alleged schemes.
Sebelius said $4 billion was recovered last year, and the government's Medicare Fraud Strike Force was recently expanded to nine cities, with the addition of Dallas and Chicago.
(Reporting by James Vicini; Editing by Cynthia Osterman)
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