| #544 - January 28, 2008 |
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| #544 Updated: 1/28/08 7:44 a.m. SocGen was warned about rogue trader last year news.yahoo.com | 1/28/08 | Andrew Hurst and Thierry Leveque Exchange officials warned Societe Generale about Jerome Kerviel's deals late last year, a Paris prosecutor said, piling pressure on the French bank to explain how his rogue trades were not uncovered earlier. SocGen, France's second-biggest bank, was also hit by lawsuits over a director's share sale that was made before the biggest rogue trading scandal in history broke, and over the way it unwound Kerviel's 50 billion euros ($74 billion) of bets into last week's sliding markets at a cost of 4.9 billion euros. After examining preliminary evidence, a public prosecutor said 31-year-old Kerviel had admitted hiding his activities from superiors, but had said other traders also played fast and loose with bank rules. Prosecutor Jean-Claude Marin also said Eurex, a derivatives exchange owned by Deutsche Boerse, questioned Kerviel's trading positions in November, but that the former back office worker had been able to fool his employer. "Eurex alerted Societe Generale in November 2007 about the positions taken by Jerome Kerviel. Questioned by the bank, he produced a fake document to justify the risk cover," Marin said. Eurex said its processes and controls "functioned correctly at all levels, also in this case." SocGen, which in recent years has become a global leader in financial derivatives trading, has said it was completely in the dark about Kerviel's alleged illicit trades until it spotted a discrepancy on January 18, triggering an internal investigation. In a new political twist to the scandal, Bank of France chief Christian Noyer revealed that he delayed telling the government about it for several days because he feared a leak. "I considered that the huge size of the position meant that any risk of an involuntary leak -- involuntary of course -- should be removed because that was the major risk that could happen in the first hours," he told BFM radio in an interview. Kerviel told police he concealed his trades because he wanted to enhance his reputation as a trader, not out of any desire to hurt the bank, prosecutor Marin told a news conference. Kerviel's lawyer has hit back at suggestions that he alone masterminded the world's biggest trading scam from his desk. "He has not embezzled anyone, he hasn't taken a cent for himself and he was just doing his job as best he could," Christian Charriere-Bournazel told Reuters on Sunday. He said Kerviel had been doing a trader's job by taking on risk, and accused the bank of setting him up for a "lynching." The prosecutor said he had requested that Kerviel, who turned himself in for questioning on Saturday, be held in temporary detention. Kerviel was taken in a silver van with darkened windows from the financial police headquarters in southeast Paris to appear before a judge, who will decide whether to place him under formal investigation. This is a step short of formal charges. The lawyer, Frederik-Karel Canoy, said SocGen should have informed its shareholders and the markets about its difficulties before embarking on a massive selling spree that hurt investors. He alleged insider trading and market manipulation. Both Canoy and small shareholder activist group APPAC also said they had filed complaints about the sale of a million shares by a SocGen director, Robert Day, on January 9 and January 10. SocGen said Day sold the shares well before fraud was found. Canoy, a maverick lawyer who has been a thorn in the side of several large companies, is already suing SocGen for negligence. (Excerpt) Local Faces Embezzlement Charge dailynexus.com | 1/25/08 | Katherine Weber A former credit card processing company employee was arraigned on Wednesday after she was charged last week with allegedly embezzling up to $559,000 over the past three years. The 43-year-old suspect, Charlene Cortez-Avila, gave herself up to the Santa Barbara County Sheriff’s Dept. willingly on Jan. 17, after a warrant was issued for her arrest in connection to the disappearance of more than $500,000 from her former employers, Card Payment Solutions of Santa Barbara. Suspicions of embezzlement arose last July when Card Payment Solutions discovered that funds were missing from its records. Cortez-Avila became a primary suspect when suspicious transactions between Card Payment Solutions and its banking institution led to her personal account. Since October 2004, Cortez-Avila allegedly embezzled up to $52,000 a month. According to the Sheriff’s Dept., investigations indicate she was allegedly rerouting money exchanged between Card Payment Solutions and its banking institutions directly into her personal account. Sheriff’s Dept. Sergeant Alex Tipolt said that if Cortez-Avila is convicted, the court will decide her sentencing based on any losses the victimized parties incurred. “It depends on if the money is recoverable or not,” Tipolt said. “It depends on the decision by the judge. It will be determined in court.” Records show that the amount of monthly transfers gradually increased. It was only after three years that Card Payment Solutions discovered an inconsistency in its merchant losses. Card Payment Solutions’ management filed a police report with the Santa Barbara County Sheriff’s Dept., which eventually acquired a search warrant for Cortez-Avila’s bank accounts. Once it was confirmed that Cortez-Avila’s accounts were the source of the alleged conflict, detectives obtained a warrant for her arrest. Cortez-Avila is currently being held at the Santa Barbara County Jail on a bail of $557,000.00 - a bail equivalent to the amount she allegedly embezzled. Senior Deputy District Attorney Arnis Tolks said the defendant’s past will also have an impact on her sentencing if she is found guilty. “Cortez-Avila has not remained free of prison custody within the past five years,” Tolks said. Ex-county staffers charged with fraud suntimes.com | 1/26/08 | STEVE PATTERSON Three former Cook County government employees conspired with two ministers and others in a fraud scheme that siphoned more than $2 million from banks and taxpayers, prosecutors said Friday. Rudy Sanchez, who retired after running the county’s job training program, was criminally charged, along with two politically connected deputies in that department, Ronald Harper and Roberto Rivera. All worked in the Cook County Board President’s Office of Employment Training program and all were involved in approving funds to go to a sham training program run by two Downstate men, prosecutors said. Charles Koen, a convicted felon and purported civil rights leader who runs United Front Inc. in the St. Louis area, and Alex Brooks are accused of running the sham training program to provide job skills in carpentry. Koen and Brooks identified themselves as ministers with Christian Hope Church, 7543 S. Aberdeen. Prosecutors said when Employment Training Program underlings found empty buildings and no training going on, they were pressured by Sanchez, Harper and Rivera to certify United Front as a legitimate training program. Harper, who has ties to former Cook County Board President John Stroger and Commissioner Deborah Sims, is accused of going on a site visit and approving United Front to receive funds, despite no signs of training. Harper’s son, attorney Amiel Harper, said Stroger and Sims accompanied his father on that visit. Sims denied that. Stroger died last week. Harper, a Chicago Heights resident whose wife once worked for Sims, is also accused of shaking down a trucking firm for kickbacks, telling its owner it was “how business is done in the county.” The scandal in the Employment Training office comes two years after Shirley Glover, a former financial manager in that office, was charged with stealing more than $180,000 from the program, prompting State’s Attorney Richard Devine to say then that there was “significant looseness” in oversight of those working there. Glover pleaded not guilty and is awaiting trial. Devine said Koen and Brooks secured $1.6 million in fraudulent loans and got more than $400,000 in funds through the county and city for programs they never put on. Also charged in the scheme are United Front employees Joyce Norfleet, 61, and Dorothy Taylor, 49, both of Chicago, and Ronnie Marshall, of Milwaukee. Six of the defendants appeared in court Friday, but prosecutors said Marshall is missing, and Sanchez is awaiting extradition from New Mexico. Ex-manager charged in embezzlement southbendtribune.com | 1/27/08 | ANITA MUNSON PLYMOUTH -- Edward Soike, a former park manager at Jellystone Campground, 7719 Redwood Road, has been charged with taking more than $116,000 from the park from 2005 through August of last year. Soike turned himself in to authorities Wednesday after a warrant was issued on the Class C felony charge in Marshall Superior Court I Tuesday. He was held Wednesday in the Marshall County Jail on bond of $20,000 cash or $100,000 surety. In the affidavit of probable cause filed with the court, Soike is alleged to have told investigators that "he did have extensive control over the money flowing into and out of the Jellystone Park bank accounts" and that "he exerted unauthorized control over large amounts of cash from the cash deposits and also from the bank accounts" of the park "without the permission, or knowledge of the park board." Jellystone was incorporated in 1936 by Marshall County Membership Corp. The affidavit also states that Soike told investigators he had been taking the money to pay off an unknown blackmailer who threatened to "disclose certain items of embarrassing information" to the park board. Soike allegedly told police "he would take large amounts of cash of approximately $25,000.00 and place it in a bag and leave it behind a trash can in a public park under the instructions of the anonymous caller."Soike allegedly told investigators he made those drops about five times, accounting for all of the missing money. Detective Lt. Ward Byers of the Marshall County Sheriff's Department stated in the affidavit that Soike, in 2006, made "numerous trips" to Las Vegas and "was also a frequent visitor to the Blue Chip" (casino) in Michigan City. Byers said in the affidavit that Soike racked up a gambling loss at Blue Chip during the first eight months of 2007 in excess of $20,000. Soike served as manager at Jellystone from the fall of 2005 until August of 2007. Vt. business owners told to protect their pockets timesargus.com | 1/27/08 | Peter Hirschfeld In December 2006, a small architecture firm in Rutland noticed some unnerving financial discrepancies. Engineers hired by NBF Architects hadn't received their scheduled payments, even though the amounts due had been deducted from the firm's checking account. "We started to get calls from certain engineers not getting their payments, and that started to make us wonder, 'Why not?'" said John Berryhill, an architect at NBF. By the time Berryhill and his partners realized what was going on, the recently hired bookkeeper had skimmed about $30,000 from company coffers. For the seven-employee operation, whose past projects include the Marble Valley Regional Transit Center and St. Peter Church in Rutland, the losses were devastating. "The woman was stealing from us," Berryhill said. "We're still trying to recover from it." NBF Architects is among the scores of Vermont companies targeted annually by their own employees. David Silverman, senior vice president at Union Bank, hosted a seminar last week to help local business owners vaccinate themselves from what he calls an "epidemic" of embezzlement. Several dozen business people attended the event at the bank in Morrisville. "The bank is … sort of a center of financial affairs," Silverman said. "And one of the things we see is … fraud perpetrated by insiders in businesses." Silverman says that a large number of embezzlement cases in Vermont go unreported. Many businesses don't file complaints with law enforcement because they are wary of the bad publicity that comes with a public airing of employee corruption. He said they instead try to handle employee stealing in- house. "We see restaurants losing money left and right," Silverman said. "If the night shift is lugging tenderloin or lobster tails, it doesn't take many of those to put a restaurant in the hole." The seminar, which featured William McSalis, a special agent for the Federal Bureau of Investigation, was focused on proactive steps businesses can take to protect themselves from embezzlers. But, he said, actually implementing them can be tricky. McSalis said good employees understandably recoil at scrutiny of their integrity. Good business people, meanwhile, must protect their assets from would-be thieves. In 2006, the average embezzling incident cost businesses about $30,000, enough to wobble the finances of even bigger-sized companies. McSalis said preventing employee theft is far easier than undoing the harm once it's done. "Sure, there's restitution. But the problem with restitution is you can't get blood from a turnip," McSalis said. "If some guy spends it on wine, women and song in Las Vegas, the money is gone." McSalis said separating key financial duties makes it far more difficult for employees to take advantage. The person writing checks, he said, should never be the person reconciling bank accounts. Since money isn't the only item of value in many companies, according to McSalis, the person responsible for shipping inventory should not be the person counting inventory. McSalis, who investigates fraud cases for the FBI, said employers can trust their charges without offering easy access to quick cash. Allowing one person to handle the check-writing and bookkeeping duties, he said, can seduce a basically good person into doing something bad. "Some locks simply keep honest people honest," McSalis said. "A lot of employees would not get themselves jammed up if the owner … simply had safeguards in place." Silverman said mandatory vacation policies will also deter would-be embezzlers. "When an employee is pulling a scam, they're always there to monitor the scam," Silverman said. He said many employers don't discover thefts until after the employee has departed the company. By insisting on time out of the office, Silverman said, business owners can have unfettered access to accounting behavior of their employees. At Union Bank, as at other banks, all employees must take a minimum of two weeks vacation each year. "When somebody is out the office, that's when the scam falls apart," Silverman said. Silverman said checks and valuable assets should be kept under lock and key. And if an employer suspects embezzlement, McSalis said, he or she should not be afraid to install a hidden or overt camera in the workplace. ________________________ |