Articles Posted in Financial Fraud

dominos pizza fraudWhile everyone enjoys a nice slice of the pie, Domino’s Pizza has had a corporate insider file a detailed whistleblower report with the SEC against top-level officers and various staff members. This case involves general misconduct and an alleged scheme involving misleading franchisors and fraudulent investments.

On February 19, 2019, the franchise community website Blue MauMau reported that “[a] corporate insider has filed a well-documented whistleblower report with the [SEC] against Domino’s Pizza, its top-level officers, and various staff members.” Domino’s allegedly forced an unapproved advertising increase to franchisees in order to pay a $1.85 billion Securitization Transaction to gain higher stock prices and dividends.

Details of this case came directly from a concerned insider at Domino’s Pizza who noticed the presence of possible misconduct and decided to blow the whistle on this major pizza chain.

tax havenReports from London have shown that nearly a third of the billionaires located in Britain plan to or have already moved to areas considered tax havens. In addition to this sudden shift, there is also talk of an investigation into political party bankrolling from those that have chosen to relocate, as well as the delay in a vote involving the end of secret company ownership in offshore territories.

According to the Times news, 28 out of the 93 recorded British billionaires have been found through public record to have moved or been in the process of moving to a tax haven within the last decade.

Tax havens are locations in the world in which taxation is extremely light or sometimes even non-existent. Examples of these are the Channel Islands or countries like Switzerland and the United Arab Emirates that pay little to no tax.

Lumber Liquidators lied to investors after a“60 Minutes” Episode and has agreed to pay a total penalty of $33 million. The payment is for filing a materially false and misleading statement to investors regarding the sale of its laminate flooring from China to its customers in the United States about the chemicals used in its wood products including formaldehyde. In 2013 and 2014, CARB informed Lumber Liquidators that flooring samples collected from its California stores failed deconstructive testing for formaldehyde emissions.  Lumber Liquidators’ own deconstructive tests of the same products yielded similar results.

A U.S. laminate supplier informed Lumber Liquidators that it tested a Chinese laminate sample purchased from one of Lumber Liquidators’ stores in the United States and that the sample emitted high levels of formaldehyde.  Lumber Liquidators took only limited steps to determine the validity of the suppliers’ concerns, and instead sought to generate support for its position that deconstructive testing was not a valid test method, the company admitted.

Lumber Liquidators, a public corporation headquartered in Toano, Virginia, and one of the largest retailers of flooring products in the United States, entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the Eastern District of Virginia charging the company with securities fraud.  The case was primarily focused on the fact that Lumber Liquidators knowingly filed a false and misleading statement to investors broadly denying the allegations featured in a March 2015 episode of 60 Minutes, and affirming that the company complied with California Air Resources Board (CARB) regulations.

town financial fraudThe New York town of Oyster Bay has been granted a settlement by the Securities and Exchange Commission (SEC) that will allow for no fines relating to a 2017 SEC lawsuit involving alleged financial fraud. This agreement is contingent on the assurance that the town hire a municipal finance consultant to review bond disclosures for three years.

The town of Oyster Bay as well as their former town supervisor John Venditto, who was not involved in the settlement, have been accused of defrauding investors by keeping vital information from them, including side deals with local restaurants to indirectly guarantee private loans. Those investigating the case have stated that during the time of the 2017 suit Oyster Bay was not disclosing loan guarantees that totaled $20 million during 26 securities offerings in the years 2010 to 2015

Allegations such as these could have resulted in much harsher punishments for the town, as they have in the past with other fraud cases. However, Oyster Bay received a light settlement that allowed them to avoid fines and seek professional financial assistance for up to three years. Initially, though the SEC sought to impose a court-appointed consultant for a five-year period with the power to prevent borrowing, but this was changed throughout the settlement.

Australia whistleblower lawsThose looking to report corruption, fraud, tax evasion, and other forms of misconduct in the corporate world can finally get the protection they deserve as new whistleblower laws in Australia clear federal parliament.

Corporate whistleblower laws introduced in late 2017 have managed to pass the lower house in early 2019. These laws put into place offer greater protection for anyone wishing to voice concerns about fraudulent activities within a division of the corporate world.

Corporate crime is an illegal act that is committed by a company or business with the goal of giving the company a boost or advantage they normally would be unable to receive. Examples of this are all over the world and are committed by even some of the best-known brands. Many in the U.S. may even recall back in 2014 when Rite Aid, one of the largest drug stores, was required to pay almost 3 billion for violating the False Claims Act by allegedly using gift cards to sway those on Medicare and Medicaid to switch their prescriptions to their pharmacies. This would be considered an act of bribery, and one of the many types of corporate crime. Corporate crime has cost many countries a considerable amount, and so whistleblowers, those who have set out to inform others about illicit activity, are one of the best defenses we have to fight against this type of crime.

insider tradingAccording to the Securities and Exchange Commission’s 2018 Annual Report, 262 tips were received from whistleblowers regarding insider trading and resulted in a total of 56 charges throughout the year. As one of the SEC’s most successful years in combating insider trading, it is evident that the combination of whistleblower tips and modern technology are the key to securing the integrity of the securities market.

What is Insider Trading?

According to the SEC’s Investor.gov, “Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security. Insider trading violations may also include “tipping” such information, securities trading by the person “tipped,” and securities trading by those who misappropriate such information.”

money-laundering-300x200Two for the most popular apps for millennials and travelers are now being used to launder money for criminal elements. Airbnb and Uber are playing host to a new scheme that turns ill-gotten gains into clean and hard to track cash or cryptocurrency.

Money Laundering Scheme

Add Airbnb and Uber to the growing list of ways criminals are hiding money these days. Experts told CNBC that fake Uber drivers, questionable Airbnb hosts, and cryptocurrency specialists are being recruited via the dark web.

Google-tax-evasion-300x200Google, a renowned international technology company, was found to be using a Dutch shell company in order to reduce its foreign tax bill in 2017 by shifting $24 billion, 19.9 billion euros, of its revenue from royalties to Bermuda. The amount shifted in 2017 through the Netherlands was 4 billion euros more than what was documented in 2016. This information is according to documents filed at the Dutch Chamber of Commerce.

To further explain how this worked, Google used the subsidiary in the Netherlands, Google Netherlands Holdings BV, to shift their revenue made outside of the United States, their home country, to an affiliated base in Bermuda, which is essentially a known tax haven where companies are not required to pay an income tax. This base is called Google Ireland Holdings, and the tax strategy used here is known as the “Double Irish, Dutch Sandwich”. Surprisingly, this is a legal strategy which has allowed Google, who is owned by Alphabet, to avoid US income taxes and European withholding taxes, saving a large portion of their overseas profits.

When addressed through calls and emails about this shifting situation, Google stated that “We pay all of the taxes due and comply with the tax laws in every country we operate in around the world,” and continued in detail to say “Google, like other multinational companies, pays the vast majority of its corporate income tax in its home country, and we have paid a global effective tax rate of 26% over the last 10 years.”

Economics-300x200Economics was once viewed as the most valuable intellectual training for determining the health of the world’s financial system, now those truths are being challenged by hard to predict leaders and nations. After the Cold War, economics rose to the top of the sciences and was seen as a powerful force “that could make and unmake nations,” according to Fareed Zakaria in his essay, The End of Economics? So, what’s changed?

Fareed said, “modern-day economics had been built on certain assumptions: that countries, companies, and people seek to maximize their income above all else, that human beings are rational actors, and that the system works efficiently.”  However, he concludes behavioral economics showed that markets, people, and even nations don’t always behave rationally, he says, “As we try to understand the world of the next three decades, we will desperately need economics but also political science, sociology, psychology, and perhaps even literature and philosophy.”

Fast Moving Example

elder-financial-abuse-300x200Elder financial abuse is on the rise with thousands falling victim each year and millions more vulnerable. According to an in-depth report by the Wall Street Journal, U.S. banks reported a record 24,454 suspected cases of elder financial abuse to the Treasury Department in 2018. That’s more than double the cases reported just five years ago.

Elder Financial Abuse on The Rise

It’s little wonder that elder financial abuse is on the rise, according to the American Bankers Association, people over 50 represent only one-third of the population but account for well over half of the bank accounts and 70% of bank deposits. Recently federal and state laws have been requiring banks to keep better tabs on elder financial abuse, but the chance for abuse is only growing: