Articles Posted in Financial Fraud

Bloomberg news has reported that the FBI is openly soliciting stock exchange workers to blow the whistle on front running and manipulation via high speed computers.

So called high frequency stock trading in which firms use sophisticated technological tools and computer algorithms to trade securities in fractions of seconds is considered market manipulation and illegal.

The United States Securities and Exchange Commission(SEC) has a number of enforcement investigations of high frequency and automated trading.

IBM has announced the creation of a fraud and financial crimes prevention business combining big data analytics, business acumen and data visualization.  The global market for financial fraud detection well exceeds $8 billion per year and that is growing quickly.

Hackers penetrated many major computer systems last year to the tune of millions. Continue reading

The top management of Flagstar Bancorp Inc. have been sued in a shareholder derivative action in Michigan Federal Court in which it is alleged that they breached fiduciary duties and were unjustly enriched all following the $133 million False Claims Act settlement with the Department of Justice.

The $133 million settlement related to allegations that the bank improperly endorsed federally insured mortgage loans that eventually defaulted and also falsely certified its loan underwriting practices to federal housing authorities.

That lawsuit also alleged that the bank used unqualified employees to approve mortgage loans backed by HUD, approved loans that did not comply with HUD and Federal Housing Administration underwriting requirements.

Comfort Friddle began work for Home America Mortgage in 2004. Now, the mother of three is known as the whistleblower engine behind the $320 million settlement between the Department Of Justice and Home America Mortgage and its parent company.

The two companies will pay $320 million to resolve a case alleging fraud relating to bilking the Housing and Urban Development FHA Mortgage program, designed to encourage home ownership/  Allegations included falsification and manufacturing loan documents, disregarding HUD regulations and more.

Friddle said that she saw young bank tellers who said they were making over $30,000 per month all qualifying for loans.

Florida psychiatrist Patricia Hough, who helped to building two Caribbean medical schools is accused of using accounts at UBS AG, the largest Swiss bank and elsewhere to hide income from the IRS to the tune of $34 million according to tax authorities.  The case, pending in federal court in Fort Meyers is the largest in dollar value of any case to reach trial since the offshore crackdown by the IRS began.

Dr. Hough is accused of conspiring  to use secret Swiss accounts to hide the millions made when they sold the schools.

Prosecutors accused her of conspiring with Swiss financial adviser Beda Singenberger and UBS banker Dieter Luetoff to hide the moneys.

The homes of twenty people holding Swiss accounts with HSBC’s private bank were raided today as part of a major investigation into the UK lender’s role in helping wealthy people hide their money from tax authorities. The raids took place in Belgium and Antwerp and were for the purpose of gathering information to strengthen the case against HSBC.

In December last year, HSBC paid $2 Billion in fines to the US authorities after the Department of Justice said that over $881 in drug trafficking money from Mexican and Columbian drug cartels had been laundered through the bank’s US operations.

HSBC’s private banking arm has been accused of creating offshore accounts for Belgian residents trying to avoid paying taxes on savings they held in Switzerland.

For some reason, the press has latched on to the idea that they should “out” the name and position of the whistleblower who was awarded the $14 million last week by the Securities and Exchange Commission, the largest award of its kind. Today alone, I received three calls from major well known financial and business media reporters asking me if I knew who it was and if the case was mine. It is not my case and not my client, sorry about that.

Although information is circulating as to who this person may be, I explained the importance of that part of the SEC whistleblower program which does protect the name and identity of the whistleblowers who come forward to reveal major financial fraud. So even if I knew, I wouldn’t say. It affects the effectiveness and future of the entire program to keep this information private.

The fact is that the government knows far too little about the massive financial wrongdoings of our banks, hedge funds, equity lenders and financial representatives. The only way they find out what really happens beneath the surface is from insiders with detailed information and corroborative evidence.  Without this information, the government can’t begin to deter this fraud which harms so many and creates the uneven playing field which encourages insider trading and false filings.

Last week, the Securities and Exchange Commission awarded a confidential whistleblower the highest sum to date for reporting on a fraudulent hedge fund that had bilked moneys from hundreds of investors. The amount received by the whistleblower was $14 million.

While the name of the whistleblower was not revealed and no information about the financial fraud released, it has become known that the whistleblower was reporting on a hedge fund and that the sums of moneys involved were quite  substantial.

The award itself was large but not as large as some of the amounts soon to be awarded, according to sources close to the SEC. This is exactly what the agency is hoping would occur as information on major fraud is hard to come by and usually only revealed by those close to the wrongdoers.

When the Securities and Exchange Commission announced the highest award to date for an S.E.C. whistleblower, 14 million and when the agency refused to reveal his or her name as part of it’s unique secrecy doctrine, the field of play concerning financial fraud was altered immediately. Prior to this award the amounts rendered to whistleblowers were so small it was ridiculous. $50,000 was the top award in August 2012.

Now, individuals working in hedge funds, banks, equity houses, bond trading operations and publicly traded companies know they can reveal large fraud and still retain their positions, not revealing their identities except to their lawyers. That is a big change.

In addition, the awards are expected to increase based on the amounts of fraud detected and the penalties assessed. Whistleblowers can yield up to 30% of the government recovery.

The Securities and Exchange Commission announced today an award of more than $14 Million to a whistleblower whose information led to an enforcement action that recovered substantial investor funds.

The whistleblower, who chose not to be identified, which is allowed under the SEC whistleblower program, revealed fraud by a financial company, the name of which has not been released yet. In addition, the SEC has not revealed the case name in order to protect the identity of the whistleblower. Under the SEC program, a whistleblower may receive up to 30% of what the government recovers if he or she reveals original and unique information not known to the government concerning financial fraud.

More information about this case is expected to be revealed in weeks to come.