Archive for December, 2009
Another US Ponzi Scheme Hits the Dust
As The Wall Street Journal reported on December 3, a Minnesota jury has found the operator of a $US3.65 billion Ponzi scheme guilty of all 20 counts of wire fraud, mail fraud, money laundering and conspiracy, potentially consigning him to life in prison without parole. The racket dates back at least a decade.
At the time that 52-year-old Tom Petters was arrested in October 2008 and indicted two months later, the allegations against him amounted to one of largest Ponzi schemes in US history. But New York financier, Bernard Madoff, confessed a few months later to a much bigger fraud – an estimated $US65 billion – and is now serving 150 years in prison. Petters, a gregarious businessman, started out selling stereo equipment in high school and later became a liquidator of overstocked goods before his company ventured into retail-based fraud.
The US government has accused him of promising fat returns to investors who lent him money to purchase surplus merchandise, then resell it to big-box retailers such as Wal-Mart Stores and Costco Wholesale. But there were no such transactions and profits funded his ‘extravagant’ lifestyle, which included lavish homes in several states, a number of expensive boats, Mercedes cars and also a Bentley. Moreover, he acquired a number of legitimate companies, including Polaroid Corporation and Sun County Airlines. It all came crashing down in late 2008 when longtime Petters Company employee, Deanna Coleman, approached the US Attorney in Minneapolis. She laid out the nature of the fraud and her role in it, and agreed to wear a recording device that picked up damaging conversations with her boss and others in the following days. She later pleaded guilty to conspiracy to commit fraud, and testified for the government in the trial. In all, three co-workers and four business partners pleaded guilty to aiding the scheme and several testified against Petters.
During the trial, 42 government witnesses testified, compared with 12 called by the defence. Ms. Coleman’s tape recordings were key to the prosecutors’ case. In one of the tapes, Petters is heard saying, “This is one big [expletive] fraud.”
Guarding Against Corporate Fraud
The Indian outsourcing firm, Satyam Computer Services, which was the subject of the country’s biggest corporate fraud scandal in January 2009, has been hit with a tranche of supplementary charges. According to India’s Central Bureau of Investigation, the extent of the total fraud now stands at around $US3 billion. What the Bureau has revealed provides a salutary warning to any company in virtually any country that this could be happening right under your nose. If you suspect that might be the case, call in experienced professionals without delay. A wide variety of methods, ranging from detailed transactional analysis to computer forensics can be used by these experts to give you a clear picture of reality.
The original charges against Satyam’s former chairman revolved around his admission that he had misrepresented the company’s financial condition by inflating assets and understating debts. This included a fictitious cash balance of more than $US1 billion. He stunned India’s financial world when he made his confession. At the time, Satyam was rated as India’s fourth-largest information technology services group by revenue, with world-wide clients like General Motors, Nestlé and General Electric.
The new charges show that others at Satyam had been creating fake customer identities and generating fake invoices against them to boost revenue figures. They had also forged board resolutions and obtained unauthorised loans that were used to buy properties. Investigators have found over 1,000 such properties, purchased by the accused with the siphoned funds and involving 2,430 hectares of land as well as housing plots and building space.
Open Slather on Corporate Secrets
A new trans-Atlantic survey has confirmed what many suspected: staff moving on to another job will often take much more than their payout with them. While you can’t stop employees carrying your company’s intellectual property out in their heads, there is something you can do to protect yourself before they leave. Call in a team of professional experts to show you how state-of-the-art technology and the intricacies of computer forensics can be used to pinpoint what’s being downloaded prior to an employee’s departure. If you see redundancies on the horizon, act well in advance.
Nearly half of the financial sector workers surveyed in New York and London admitted that they would take with them sensitive corporate information if they were sacked. The survey, carried out by management specialists Cyber Ark in November, also showed that just over 40 per cent had already taken sensitive data with them to their new jobs. Just under 40 per cent said they would download such information pre-emptively if they sensed that their position was at risk. Over 30 per cent revealed that they would not hesitate to pass on sensitive corporate data if that were to be instrumental in their gaining employment for friends and relatives. Topping the information-stealing list was customer-related information – which in its own right could contain highly sensitive records – followed by product information and company strategy.
As frightening as these figures are, even more so was the fact that a quarter of the workers surveyed acknowledged that in light of the current economic downturn they felt less commitment and loyalty to their employer. As the UK director of Cyber Ark put it, “employee confidence has been rocked. Many workers are willing to do practically anything to ensure job security or make themselves marketable – including committing a crime.” Not surprisingly, 85 per cent of those surveyed recognised that it was illegal to download company information. Nevertheless, of those who admitted they would steal data some also stated that they would take passwords and any other information they needed in order to continue accessing the network of their previous employer.
Seven Danger Areas To Watch For In A Hi-Tech World
With new technologies being introduced into your business environment at a dazzling pace, it’s easy to overlook the extent to which the divide between your employees’ work time and their private lives and ambitions is increasingly blurred. Some corporate managers wonder whether they can any longer define where it is. One American CEO recently observed that it’s more like a seismic fault line that’s expanded into an ever-widening corridor.
Here are a number of areas where you need to be aware of what your employees are doing. If you’re not sure how to monitor their activities, call in a team of experienced professionals who are sensitive to the privacy and legal issues sometimes involved. Using sophisticated equipment and new techniques like computer forensics, they will analyse all of your electronic traffic, access to your databases, incoming and outgoing mobile and text communications, business transactions and other relevant dimensions of your corporate operations in order to provide you with a map of what’s really going on. Once that’s established, they can also help you grapple with what needs to be done.
1. The Mobile Employee.
The widespread use of 3G wireless broadband means that much of what used to be done in your office can now be carried out almost anywhere. Smartphones, for example, have all but replaced the need for an office with a fixed line. While BlackBerry has contributed greatly to satisfying our addiction to mobile email, the market for staying connected while you’re out and about has expanded enormously. In a similar way, notebooks are increasingly coming with built-in 3G wireless for internet access on the road. If you have a fair percentage of your staff constantly outside your office you need to know whether you’re getting value for money from them, be it in customer relations terms or through recruiting new clients. Do you have any idea where they are when they’re outside your office? There are ways of checking.
