Normal tech support phone call: "Press 1 for help with e-mail. Press 2 to have your password reset."

Madoff tech support phone call: "Hello, how can I help you dummy up some trading records today?"

The investigation of Bernie Madoff's fraudulent financial empire is leading to more arrests. Jerome O'Hara and George Perez, both computer programmers employed by the Ponzi schemer, were arrested by the FBI on Friday morning. The charges include conspiracy for falsifying books and records. They are accused of doing the deed for the boss and accepting hush money -- in the form of 25% raises and net bonuses of $60,000 -- to keep the scam afloat.

Continue reading Two more arrests in Madoff saga

Two more arrests in Madoff saga originally appeared on BloggingStocks on Fri, 13 Nov 2009 18:20:00 EST. Please see our terms for use of feeds.

Bernie Madoff is getting used to his new neighbors. Gone are the days of Montauk and Manhattan, and he isn't sharing his space with topless dancers.

Now, he says goodnight to a drug pusher, chills with a former mobster, and hangs with a convicted spy ... and these guys are probably saying, "I hang around with Bernie Madoff." The former financier Ponzi schemer spends his evenings walking laps around the prison track at the Butner Federal Correctional Complex, not far from Raleigh, N.C.

Continue reading Madoff: Chillin' with mobsters and spies

Madoff: Chillin' with mobsters and spies originally appeared on BloggingStocks on Thu, 22 Oct 2009 12:00:00 EST. Please see our terms for use of feeds.

You'll never believe who's dropping dimes to the feds!

Sam Antar, formerly the CFO of Crazy Eddie, known in the New York area for over-the-top commercials that scared the hell out of kids (well, me at least), knows his way around a questionable balance sheet. For 15 years, he was the executive chef of book-cooking, ultimately taking a guilty plea to conspiracy and obstruction of justice charges. He stayed out of the clink by taking the stand on the government's side at a 1993 trial, ultimately sending his cousin, Eddie Antar to prison for seven years or so.

Crooks make the best cops, so to speak, and Antar is putting his skills to work. He's out hunting for accounting fraud and sending his analyses off to the SEC. On his blog, the former CFO laid out what he called a "bulletproof case" against Overstock.com (NASDAQ: OSTK) - a company that the SEC had been investigating since 2006. The inquiry has been reopened.

Continue reading Crazy Eddie's crazy ex-CFO investigates Overstock

Crazy Eddie's crazy ex-CFO investigates Overstock originally appeared on BloggingStocks on Wed, 07 Oct 2009 09:30:00 EST. Please see our terms for use of feeds.

Bank of America (NYSE: BAC) CEO Ken Lewis has managed to survive a massive decline in shareholder value, two government bailouts, a raft of shareholder lawsuits, SEC investigations, civil fraud charges, and a wave of populist angst about the company's business practices.

But now CNBC reports that experts are questioning whether Lewis will be able to hang on as investigations of the company's acquisition of Merrill Lynch intensify. The FBI is reportedly taking a look, which suggests that criminal charges could follow.

Continue reading Will legal woes finally lead to the end of Ken Lewis' reign of terror?

Will legal woes finally lead to the end of Ken Lewis' reign of terror? originally appeared on BloggingStocks on Tue, 22 Sep 2009 13:10:00 EST. Please see our terms for use of feeds.

The Bank of America (NYSE: BAC) CEO's "What's a Guy Got to Do to Get Fired Around Here" campaign took a new twist this weekend when The New York Post reported that the FBI and the Justice Department were taking a look at his company's controversial acquisition of Merrill Lynch.

That's just the icing on a great week for Mr. Lewis that included a District Court Judge's rejection of the company's settlement with the SEC and a set of subpoenas issued to by the New York attorney general to five of the company's directors. Of course that was nothing compared to Warren Buffett's characterization of Mr. Lewis as an "ironic hero" whose sheer incompetence saved the global financial system while destroying his own company.

Continue reading FBI interested in Bank of America's Merrill Lynch deal

FBI interested in Bank of America's Merrill Lynch deal originally appeared on BloggingStocks on Mon, 21 Sep 2009 13:30:00 EST. Please see our terms for use of feeds.

According to a report released yesterday, U.S. mortgage fraud reports increased 36% last year. According to the FBI, suspicious activity reports increased to 63,713 during fiscal 2008 from 46,717 a year ago.

California and Florida had the highest number of suspicious reports, which some attribute to the fact that the housing market has dropped and credit has dried up in those regions.

According to the agency, reports filed through March put fraud reports on track to top 70,000 during the current fiscal year ... not a good sign.

Continue reading Mortgage fraud rampant -- who will clean up this mess?

Mortgage fraud rampant -- who will clean up this mess? originally appeared on BloggingStocks on Wed, 08 Jul 2009 13:50:00 EST. Please see our terms for use of feeds.

Can you believe this! The Securities and Exchange Commission is investigating its own employees. It's gotten so bad that the SEC had to establish new rules for employee trading. Right now the SEC has at least two employees under investigation for possible insider trading. The FBI had to be notified and may also be called in to conduct investigations of possible insider trading.

Would you believe that employees can trade the stocks of companies they are investigating? Yes, as of now that's true. So guess what the SEC is doing to correct the problem? They will employ an outside firm to track employee trading in real time. Another new rule will be that employees cannot trade stocks of companies under investigation and will require them to get clearance before making any trade. From this we can infer that employees have been trading stocks of companies under investigation right along.

Continue reading SEC investigating its own employees for insider trading

SEC investigating its own employees for insider trading originally appeared on BloggingStocks on Sun, 24 May 2009 10:10:00 EST. Please see our terms for use of feeds.

This post is part of a feature in which we wonder whatever happened to some notorious financial felons. See all 17.

How does the head of one of Archer Daniels Midland's (NYSE: ADM) fastest-growing divisions, a virtual shoo-in to be the company's next president, end up embezzling $9 million dollars while simultaneously acting as an informant for the Federal Bureau of Investigation? And how does the highest-level executive to turn whistleblower receive a sentence much harsher than those of his co-conspirators despite pleas for leniency and clemency from everyone from the FBI and the Justice Department to congressmen, university professors, and even a baseball hall-of-famer?

Sounds like the stuff of motion pictures, doesn't it? And that's exactly what this true story will be in September of 2009 with the release of The Informant, a Warner Brothers film directed by Steven Soderbergh and starring Matt Damon as whistleblower turned felon, Mark Whitacre. The movie is based on one of several books written about the case.

When the FBI began an investigation of ADM in 1992, Whitacre admitted that he and other executives were involved in a multinational price-fixing scheme. For the next three years, he helped the FBI gather evidence. Despite that, however, Whitacre was convicted in 1998 for wire fraud, tax evasion, and money laundering. The sentence of more than 10 years in prison was considered excessive by many, given his cooperation with the investigation and the fact that he suffered from bipolar disorder (the pressure drove him to attempt suicide at one point). Whitacre served eight and half years, reportedly as a model prisoner. To this day, efforts continue to win a pardon for Whitacre.

Continue reading Financial Felons: Mark Whitacre

Financial Felons: Mark Whitacre originally appeared on BloggingStocks on Fri, 21 Nov 2008 14:10:00 EST. Please see our terms for use of feeds.

Talking about the seedy side of subprime lending at the height of the bubble seems redundant -- like talking about Jeffrey Dahmer's dark side. But a piece in BusinessWeek looks at an especially sleazy side of the industry: "Dozens of former brokers and wholesalers say the trading of sexual favors was so common that it came to be expected."

Wholesalers reportedly offered loan underwriters sexual favors in exchange for approving questionable mortgage applications.

The scenes described in the piece sounds like something straight out of the movie Boiler Room: brokers sitting in the middle of an office shredding some documents and altering others in plain view of their supervisors and harassment and termination for anyone who protested the illegality.

While there were scattered lawsuits and reports of impropriety while all this was happening, no one really paid attention to it until after the music had stopped. A huge portion of the homeowners who are currently facing foreclosure participated in some form of mortgage fraud that was condoned by industry insiders.

In October of 2004, Chris Swecker, former FBI Assistant Director of the Criminal Investigation Division, told House Financial Services Subcommittee on Housing and Community Opportunity that "The potential impact of mortgage fraud on financial institutions and the stock market is clear. If fraudulent practices become systemic within the mortgage industry and mortgage fraud is allowed to become unrestrained, it will ultimately place financial institutions at risk and have adverse effects on the stock market."

That's exactly what happened, but too much money was being made, and too many lap dances being given, for anyone to care.

Mortgage Sluts: The extra-seedy side of subprime originally appeared on BloggingStocks on Sat, 15 Nov 2008 17:40:00 EST. Please see our terms for use of feeds.

I recently talked to a business owner who was in the process of raising capital. To this end, she paid a $20,000 upfront fee to a finder (a person who brokers equity investments and loans).

The result? Nothing. The finder said that a variety of banks were not interested in the deal.

Oh, and that $20,000 fee? Unfortunately, that was non-refundable.

With the credit crunch -- and slowing economy -- entrepreneurs are certainly having trouble raising money. But, there also appears to be a rise in so-called "advance fee schemes" (this is according to a recent piece in the Wall Street Journal, which is a paid publication).

In fact, the FBI is investigating the matter (and also has some helpful resources on its website). Although it could actually be pretty tough to prove fraud. Essentially, there must be evidence that the finder had no intention of raising the capital.

Continue reading Entrepreneur's Journal: When raising capital, beware of the 'advance fee' scheme

Entrepreneur's Journal: When raising capital, beware of the 'advance fee' scheme originally appeared on BloggingStocks on Sun, 06 Jul 2008 14:00:00 EST. Please see our terms for use of feeds.

A lot of people have believed that Countrywide (NYSE:CFC) could not have come by all of those profits during the last few years without looking the other way on some loans. Indeed, according to The Wall Street Journal, "A federal probe of Countrywide, the nation's largest mortgage lender, is turning up evidence that sales executives at the company deliberately overlooked inflated income figures for many borrowers."

In the cases of may of these mortgages, borrowers did not have to show proof of income or tax returns.

The FBI, which has been looking into all of this, believes that there was some fraud in the level of income loan officers reported that their clients had. That would make getting a mortgage easier, assuming the lender lied in the right direction.

The probe also raises the question of whether Countrywide had to say something about these loans and their problems in its public company filings.

These investigations always go the same way. The government finds that some mid-level people played fast and fancy with the rules. Then they want to know how far up the chain the practice was approved.

Maybe some people in the Countrywide executive suite are sweating.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 Letter.

A little bad behavior at Coutrywide (CFC) originally appeared on BloggingStocks on Wed, 30 Apr 2008 10:24:00 EST. Please see our terms for use of feeds.

The FBI says that deceptive practices at hedge funds and some banks may have made the subprime disaster worse. According to Reuters, the head of the agency said the bureau's investigation of potential fraud in the U.S. home mortgage industry now encompasses 19 companies in "cases that may have a substantial impact on the marketplace."

While insider trading and accounting fraud may be part of any charges which emerge, one of the biggest single issues may be the sales practices of the firms which sold subprime paper to their clients. The subprime instruments were often presented as having high credit ratings and safe risk profiles. Of course, it didn't work out that way. Another problem may be whether mortgage banks were completely honest in what they told home-buyers about how their loans would work as their interest rates increased over time.

Some of the investigation is a witch hunt. Large banks which took subprime instruments onto their balance sheets had plenty of genius-level analysts who could have examined the products. At most firms, so one skipped that part. Caveat emptor and all that. Individuals who took on home mortgages sold by people who did not want them to read the small print is another matter.

Rumors are that Goldman Sachs (NYSE:GS) and and Morgan Stanley (NYSE:MS) could be targets of the probe. Countrywide (NYSE:CFC) is already under investigation. One news report on the potential scandal said that FBI head man Robert Mueller told a meeting of lawyers "that their corporate clients should come forward and admit any wrongdoing before the FBI or Justice Department become involved.."

That'll be the day.

Douglas A. McIntyre is an editor at 247wallst.com.

As the FBI steps in, the subprime witch hunt begins originally appeared on BloggingStocks on Fri, 18 Apr 2008 09:40:00 EST. Please see our terms for use of feeds.

The FBI is probing whether Countrywide Financial (NYSE: CFC) committed securities fraud by making false statements about the mortgage bank's deteriorating financial position.

The Wall Street Journal (subscription required) reports that a "potential issue facing the company is whether it has been candid in its accounting for losses. People familiar with the matter said that Countrywide's losses may be several times greater than it has disclosed."

Aside from the potential civil and criminal issues at stake, the investigation could kill the takeover of Countrywide by Bank of America (NYSE: BAC). It is not clear whether the mortgage company can make it as an independent operation if the big bank withdraws it offer. If auditors and the government determine that CFC losses are much greater than represented, it might drive the mortgage firm into insolvency.

The Bank of America deal is probably the only way that Countrywide shareholders can get any money for their shares. The company's stock has dropped from a 52-week high of $42.24 to just above $5, which is not much above its 52-week low.

The news reports of the FBI probe is likely to push shares lower. If new, significant losses have to be reported, the price of CFC's stock may go to zero.

Douglas A. McIntyre is an editor at 247wallst.com.

FBI examines Countrywide Financial statements originally appeared on BloggingStocks on Sat, 08 Mar 2008 12:10:00 EST. Please see our terms for use of feeds.

FBI calls mortgage fraud 'substantial' originally appeared on BloggingStocks on Fri, 01 Feb 2008 10:22:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• The Wall Street Journal reported that the FBI has opened criminal inquiries as part of an investigation over subprime mortgage issues. The probe into 14 companies will focus on accounting fraud, insider trading and securitization of loans.
• The Wall Street Journal also reported that Merck and Co Inc's (NYSE: MRK) osteoporosis treatment Fosamax is facing increasing scrutiny and lawsuits, as a growing number of patients allege the drug causes a condition called ONJ.
• According to a Federal judge, antitrust supervision of Microsoft Corporation (NASDAQ: MSFT) should be extended for two years longer than originally planned, until November 2009, the Financial Times said. The supervision was imposed as part of its landmark settlement in 2002, when Microsoft was accused of failing to produce an adequate licensing arrangement for certain protocols essential for rivals to work their own products through the Windows operating system.

• The Economic Times reported that Ford Motor Company (NYSE: F) has decided not to retain any stakes in its Jaguar and Land Rover divisions after selling them to India's Tata Motors Limited (NYSE: TTM), according to sources.

Newspaper wrap-up: com: Ford may not hold onto any portions of Jaguar, Land Rover originally appeared on BloggingStocks on Wed, 30 Jan 2008 08:00:00 EST. Please see our terms for use of feeds.

Just in case you thought our public officials were doing a decent job, here's some more evidence that they're not: a Justice Department audit released today found that FBI wiretaps set up to eavesdrop on suspected criminals are sometimes cut off by the phone companies because the agency doesn't pay its phone bills on time.

This is our Federal Bureau of Investigation -- I can't even imagine what kind of gaffes happen at other agencies. According to the Associated Press: "In at least one case, a wiretap used in a Foreign Intelligence Surveillance Act investigation 'was halted due to untimely payment,' the audit found. FISA wiretaps are used in the government's most sensitive and secretive criminal investigations, and allow eavesdropping on suspected terrorists or spies."

Great -- the agency's failure to pay bills results in lost evidence, and sometimes prohibits us from learning about terrorist activities. There was even one FBI employee who stole money that was supposed to be used to pay for wiretaps.

This is indicative of some internal controls problems in Washington, and as politicians talk tough about keeping tabs on terrorist activities, remember -- it's all just talk if they don't pay the phone bills.

FBI wiretaps dropped after government fails to pay phone bills originally appeared on BloggingStocks on Thu, 10 Jan 2008 17:23:00 EST. Please see our terms for use of feeds.

Thanks to the blog of the brilliant Floyd Norris over at the New York Times for this fascinating tidbit.

The FBI set up a fake hedge fund to invest in crappy penny stocks with the intent of losing a ton of money. It also cut a deal with a shady stock promoter to receive a kickback for buying the shares -- a pretty clear case of market manipulation.

The investment declined in value from $91,580 to $12,800 -- and the promised kickback never came. Great work guys! As Norris writes, "taxpayer dollars at work."

I'm all for cracking down on stock fraud, but you really have to wonder about this -- did the FBI really need to blow nearly $80 thousand of our money to prove that microcap fraud is alive and well? And if the promoters involved are like a lot of other promoters I've read about, the money probably went right up his nose or offshore somewhere -- and no matter what any order to "disgorge ill-gotten gains" says, that money is probably gone.

But still: Another good reason to avoid heavily promoted penny stocks. If the FBI invests in them for the sole purpose of losing money, that's probably a bad sign.

Maybe that was the reason all those state pension funds bought subprime debt. If not, it should have been.

FBI creates money-losing hedge fund ... to prove penny stock fraud exists? originally appeared on BloggingStocks on Sat, 08 Dec 2007 09:40:00 EST. Please see our terms for use of feeds.

WellCare Health Plans Inc. (NYSE: WCG), a provider of managed care services to government-sponsored healthcare programs, closed at $115.17. The U.S. Department of Justice announced that law enforcement personnel with the FBI, the U.S. Office of Inspector General and Florida Attorney Generals Medicaid fraud control unit participated in the execution of a federal search warrant of WCG's Florida headquarters. WCG option volume was heavy over the last five trading days. WCG overall option implied volatility of 44 is above its 26-week average of 35 according to Track Data, suggesting larger price risks.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Option update: WellCare Health volatility up due to federal probe originally appeared on BloggingStocks on Thu, 25 Oct 2007 10:35:00 EST. Please see our terms for use of feeds.

Continue reading Spammers under attack

Spammers under attack originally appeared on BloggingStocks on Thu, 19 Jul 2007 08:21:00 EST. Please see our terms for use of feeds.

The Federal Bureau of Investigation says that the Internet has all but dissipated the international boundaries to crime. The nature of today's free world trade and the infrastructure that trade freedom requires have opened wide new avenues of exploitation for crooks and confidence games of many kinds. The worst part is that yesterday's mugger with a mask and a gun has become today's friendly banker who is offering you a low interest loan. The tactics are changing but the result is the same. Someone wants a chunk of your bank account... or the whole thing.

The Internet Crime Complaint Center, a partnership between the FBI and the National White Collar Crime Center issued a composite list of the top ten Internet facilitated crimes. Of all Internet associated crimes reported, auction fraud was number one, holding that spot with 44.9% of the total reported crimes. Non-delivery of goods came in a distant second at 19% of the total. Check fraud, credit card fraud and computer fraud combined for about 12% of the total. Financial center fraud, identity theft, investment fraud and child pornography rounded out the field with about 5% combined total.

Continue reading Oh! Is this your wallet? Stalking White Collar Crime

Oh! Is this your wallet? Stalking White Collar Crime originally appeared on BloggingStocks on Tue, 24 Apr 2007 18:19:00 EST. Please see our terms for use of feeds.