_________::::___#508 - November 19, 2007________________
FRAUDBARON.com
The Anti-Fraud Professionals'
Source for Fraud News
#508 Updated: 11/19/07 10:26 a.m.

White-collar crime is paying less than it used to, observers say
stamfordadvocate.com | 11/18/07 | Staff Writer

"In accounting and financial fraud, we're seeing stiffer sentences than before because of
public outrage," said Charles Cray, director of the Center for Corporate Policy in
Washington, D.C., which was established in 2003 to focus on policies on corporate crime
and accountability. "There's also more interest by prosecutors to pursue cases."  The
Sarbanes-Oxley Act, federal legislation passed in 2002 in response to a rash of corporate
scandals, including the infamous Enron case, was enacted to reform accounting procedures
and governance. But it also augmented "the reach and potential sting of federal criminal
law," said John Steer, member and vice chairman of the U.S. Sentencing Commission.
As Congress has voiced concern about corporate transgressions, resources have been
allocated to federal prosecutors around the nation, including the one led by Kevin
O'Connor, U.S. attorney for Connecticut.  "We're seeing more prosecutions since the
scandals of 2001-2002 - Adelphia, WorldCom and Enron.  The Department of Justice was
quick and responsive and backed it up by putting more bodies out in the field - prosecutors
and investigators," O'Connor said. "I think that's a powerful deterrent to corporate
America. The thought of jail is very scary to them. Most can't envision themselves going to
jail."  Document destruction and securities fraud have received increased attention, he said,
adding that the frenzied atmosphere in his office has calmed as corporate boards have
become more vigilant in overseeing accounting procedures.  "It's beginning to slow down
because corporate America woke up and got the message. There will always be
temptations because of the pressures," said O'Connor, whose office prosecuted more
hedge fund-related crimes in the past two years. Five hedge fund cases have been
investigated, he said. "These are not easy cases," O'Connor said, referring to accounting
fraud and market-manipulation cases.  "They're very document- and time-intensive."
Convincing a jury that a defendant in such cases is guilty is difficult, he said, because of the
complicated nature of the evidence and testimony.  Financial fraud will continue, Cray said,
criticizing federal legislation such as the Private Securities Litigation Reform Act passed in
1995 as an example of tort reform that allowed some companies to hide questionable
activity. "There was a wave of tort reform that curbed the ability of defrauded investors to
get their day in court," he said.  Even when cases are resolved without prosecution, the
executives involved can be permanently scarred. An investigation is penal and stressful,
said James Bergenn, a partner and co-chairman of the whitecollar practice unit at Shipman
& Goodwin in Hartford. Some subjects are blackballed from their industries, he said.
If the actions of a few overzealous executives have not resulted in criminal action, those
who believe they are affected by actions at the executive level often bring civil suits, he
said. Sarbanes-Oxley requires individuals to report a transgression when they believe one
occurs.  "Because of Sarbanes-Oxley, the world changes," Bergenn said. "People have to
bark about it. There's a lot of that going on. The principal change as a result of Sarbanes-
Oxley is when you smell a rat, you react. There are a lot of people scared out of their minds
out there while they are being investigated."  For example, some practices once used in the
insurance industry are no longer acceptable, and those involved are subject to penalties,
he said. But the U.S. Sentencing Commission wanted to make it clear that it was serious
when addressing criminal provisions involving white-collar crime through the Sarbanes-
Oxley Act. Analyzing past sentencing practices, the commission noted inequities between
sentences for "bluecollar" and white-collar crimes, Steer said.  "For example, generally
speaking, blue-collar theft and property destruction offenses were being sentenced more
severely than 'white-collar' fraud offenses that caused comparable dollar harm," he
wrote in the commission's sentencing implementation report regarding the Sarbanes-Oxley
Act.  The commission included new offenses involving destruction of corporate records,
securities fraud and falsification of financial reports. The act enhances penalties or
expanded the reach of existing criminal statutes, including quadrupling the maximum
penalty for mail and wire fraud from five to 20 years in prison.  Commission members had a
goal of getting stiffer sentences for corporate officers and directors of publicly traded
companies who commit fraud or related offenses.  "The net effect of these changes is to
increase sentences for corporate officers/directors by at least two levels over the former
guidelines," Steer wrote.  Corporate officers will face "much more severe punishment," he
said, if found guilty of corporate fraud or obstruction of justice. (Excerpt)

CEO OF START-UP COMPANY SENTENCED TO 30 MONTHS IN PRISON FOR TAX
EVASION
FBI.gov | 11/16/07 | Press Release
OAKLAND - United States Attorney Scott N. Schools announced that yesterday afternoon
John Frances Griffin was sentenced to 30 months in prison for his guilty plea to two counts
of tax evasion. These charges are the result of an investigation by the Internal Revenue
Service Criminal Investigation and the Federal Bureau of Investigation.   John Frances
Griffin, 43, of Orinda, California, was indicted by a federal grand jury on May 18, 2006, and
charged with three counts of mail fraud. On November 30, 2006, a superseding indictment
was returned charging Mr. Griffin with two counts of tax evasion. On April 26, 2007, a
second superseding indictment charged Griffin with fifteen counts of mail fraud, one count of
wire fraud, and two counts of tax evasion. In the plea agreement, Mr. Griffin pled guilty to
both counts of tax evasion.  According to the plea agreement, Mr. Griffin was the Chief
Executive Officer of VaporTech, Inc., a start-up company located in Livermore, California,
involved in the research and development of technology which converts fuel to hot water,
high quality steam, or superheated water vapor. As CEO, Mr. Griffin recruited investors and
ran the day-to-day operations of VaporTech. He received a monthly salary and had
possession of the corporate debit card and bank account. Mr. Griffin also raised over $2.5
million from investors. During the calendar years 2004 and 2005, Mr. Griffin received taxable
income in excess of $1,198,700 yet failed to file federal income tax returns. Mr. Griffin
admitted that he evaded the assessment and payment of his income taxes by paying for
personal items with cash, cashier's checks, and the company's debit card. He also cashed
his salary checks instead of depositing them.  United States District Judge Claudia Wilken
ordered Mr. Griffin to pay $746,615.83 in restitution to the victim Vapor Tech and to pay a
$5,000 fine. Judge Wilken also ordered Mr. Griffin to forfeit numerous items, including
$75,000, expensive jewelry including a $30,359 diamond ring and a $3,425 gold tennis
bracelet, electronic equipment, and thousands of dollars worth of clothing and wine.
Maureen Bessette is the Assistant U.S. Attorney who is prosecuting the case with the
assistance of Cynthia Daniel. The prosecution is the result of an investigation conducted by
the Internal Revenue Service - Criminal Investigation (IRS-CI) and the Federal Bureau of
Investigation.

After embezzlement scandal, company helps with soccer team's trip to Hawaii
ocala.com | 11/17/07 | C. J. Risak
OCALA - Sweet dreams are made of this.  Earlier this week, The Ocala Lightning, a girls
under-11 champion soccer team that is part of the Big Sun Youth Soccer League, had little
hope of being able to compete as scheduled in the American Youth nationals in Honolulu
next summer. That's because their league's finances are in ruins as a result of an
embezzlement scandal involving a former league official. On Monday, after a three-month
investigation, Ocala police charged Priscilla Annette Bellcase, 40, with fraud for allegedly
stealing at least $79,000 from the league's bank account. Bellcase is a former Big Sun
board member and treasurer. She is currently free after posting a $1,000 cash bond. FOX
News picked up the story about the alleged embezzlement and the impact on The Ocala
Lightning, and that report was seen by Jeff Eisenstadt, president of Cumberland Packaging
Corp., of Brooklyn, N.Y., makers of Sugar in The Raw Premium Hawaiian Turbinado Sugar.
"The news of this unfortunate situation struck a chord, and I immediately thought there
must be a way to help send these girls on the dream trip to Hawaii that they so deserve,"
said Eisenstadt Friday.  So on Friday, the company's founder, Marvin Eisentadt, and
executive vice president, Steven Eisentadt, came to Ocala and presented a $30,000 check
to Lightning coaches Robert Miles, Amin Kahn, and Big Sun President Brian Behan, that will
cover the entire cost of the team's trip to Hawaii. "Our team and the entire community were
shaken by the recent situation. The kids and their families have been working so hard to
raise funds for the league," said Miles. "I can't tell you how much this means to the girls,
their families and the Big Sun Youth Soccer League. Another volunteer is expected to come
on board to help solicit more corporate sponsorships. And even though the amount taken
was considerable, a plan has been set up to repay all outstanding debts within 18 months.
(Excerpt)

Ex-Natchez school board member sentenced in embezzlement case
clarion-ledger.com | 11/17/07 | Associated Press
NATCHEZ — James Coleman, a former Natchez-Adams School Board member, has been
sentenced to 20 years for two counts of embezzlement.  Circuit Judge Forrest "Al" Johnson
on Friday ordered Coleman to serve five years in prison with 15 years probation. Coleman,
convicted of embezzling money from Mississippi River Corporation, also was ordered
to pay $175,000 in restitution.  Two of Colemans co-defendants were also sentenced in
Fridays hearing.  Edwin Hardin and Gary Kingsberry were Colemans co-workers and
helped him funnel stolen money through their accounts, prosecutors said.  Coleman stole
$605,000 from his former employer, according to an indictment.  Kingsberry will serve three
years in jail. Hardin will serve one year in jail.  Prosecutors said Coleman helped 16 of his co-
workers to falsify their work hours so that they could be paid for hours they did not actually
work. In exchange the workers gave Coleman a percentage of the stolen money,
prosecutors said.  On Oct. 31, Coleman pleaded guilty to two counts of embezzlement after
being indicted on 16 counts.

Ten Things About Fraud Control
deloitte.com | 11/07/07 | website
Many companies have become more focused on preventing and detecting fraud over the
last several years due to new regulatory requirements, board pressure and increased
media coverage. But in the absence of detailed standards for fraud controls, diversity of
practices has increased. This has left some companies uncertain if their practices are
comparable with those of their peers or if they are missing out on some successes achieved
by leading organizations.  To address these questions, the Deloitte Forensic Center, in the
summer of 2007, formulated a survey and engaged a professional survey firm to conduct it,
receiving responses from 277 senior executives involved in fraud control. We asked these
executives to rate their company’s effectiveness in key areas of fraud control. The
questions were designed to identify the practices of leading organizations in a variety of
aspects of fraud control.  This booklet provides an executive summary of our analysis of the
results of the survey, highlighting the key ways in which companies differentiate
themselves in their approach to fraud control. A full report, "How Executives View the 'Fraud
Control Gap,'" is available upon request.

Miami condo at ground zero in mortgage fraud
reuters.com | 11/13/07 | Tom Brown
MIAMI (Reuters) - At first glance, the 43-story building in Miami's international
banking district seems little different from other high-rise condominiums
overlooking the turquoise waters of Biscayne Bay.  But the 643-unit condo known as the
Club at Brickell is a leader in mortgage foreclosures and it appears also to stand at ground
zero in a blizzard of fraud that may lie behind many of the failed loans threatening to bury
the U.S. property market.  America's subprime mortgage crisis is partly due to predatory, or
aggressive, lenders, hard-sell tactics by mortgage brokers and an easing of underwriting
standards in the $10 trillion home-loan industry. But fraud accounts for a sizable share of
the bad bets on mortgages, according to many industry experts, and lenders may have
been victimized as much as anyone else.  "The lenders are holding the bag now, that's
what we're finding out," said Glenn Theobald, head of a mortgage fraud task force formed
in south Florida's Miami-Dade County in September.  Mortgage scams involve a cartel of
inside players -- colluding property appraisers, real-estate brokers and accountants willing
to draw up fake income statements and tax returns -- who recruit people with good credit
histories to serve as a decoy or "straw buyer" in a real-estate deal.  The conspirators
inflate the price of the property, to get the biggest loan possible, pay the sellers the
original price and then pocket the excess loan money as "cash back" at the closing of the
deal.  The decoy buyer is paid off -- often with just $5,000 -- and the property is quickly
abandoned to foreclosure, said Theobald, a senior official with the Miami-Dade Police
Department. "It's an epidemic," said Nancy Hogan, a veteran realtor and former head of
the Florida Real Estate Commission.  "The cash back, the fraud for profit, is what has been
so rampant," she said. The Club at Brickell has the highest current number of foreclosure
proceedings involving any single south Florida property. There may be other properties in
the United States that hold the distinction of being riddled with more cases of apparent
mortgage fraud than the Club.  But Doug Dewitt, a real estate broker contracted to work
with several lenders on the valuation and disposal of foreclosed properties, said nearly 70
percent of the sales or closings at the Club over the last 18 months were questionable.  
That works out to more than 200 possibly shady deals in a single building, he said. The
dubious transactions all fit a pattern that Theobald said should trigger "bells and whistles"
for law enforcement anywhere -- time and time again properties that failed to sell for
months when listed at around $450,000 were pulled from the market and then suddenly
sold for more than $800,000. (Excerpt)

Petaluma woman arrested for embezzlement at Marin business
argus-courier.com | 11/14/07 | staff writer
A Petaluma woman was arrested Tuesday for allegedly embezzling more than $400,000
from a Corte Madera car dealership.  Shannon Louise Tallchief, 39, was arrested by Sonoma
County Sheriff’s Department personnel at her residence on Tuesday for stealing the money
from Marin Acura over a three-year period. She was taken to Marin County Jail, where her
bail was set at $450,000.  An arraignment is scheduled for Wednesday, Nov. 14. If
convicted of the charges, she could face up to five years in prison.  Tallchief started working
at the dealership in 1992, and was in charge of payroll, accounting and cash transactions.
Last year, a substitute bookkeeper filling in for Tallchief discovered that the money was
missing.  Investigators subsequently found that Tallchief had embezzled over $439,000 by
taking cash; giving herself payroll advances that weren’t paid back; receiving excessive
bonuses; transferring money from Marin Acura’s account into her personal account by using
the dealership’s checking account to make payments on her personal accounts; and issuing
unauthorized checks to herself.  Tallchief used the money to pay bills and make purchases,
said Deputy District Attorney Linda Wiltong.  Claiming she had “an addiction,” Tallchief
acknowledged the thefts in correspondence with Marin Acura. She apologized for her
behavior, and asked for forgiveness.  After the discovery, Tallchief was fired, and sold her
home in Rohnert Park for $770,000. She then sent Marin Acura a check for $25,000.

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Joeseph T. Wells, CFE, CPA