| #526 - December 26, 2007 |
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| #526 Updated: 12/25/07 9:33 a.m. Ex-Soka finance chief accused of embezzlement ocregister.com | 12/21/07 | Marla Jo Fischer ALISO VIEJO – The former finance director of Soka University of America has been indicted on charges he embezzled $1.7 million from the private university over seven years, according to a federal indictment unsealed today. Kiyoshi Hatanaka, 52, of Aliso Viejo had worked for a Big Seven accounting firm before becoming Soka's finance director in 1990, a university spokeswoman said. He left his job in January 2006, spokeswoman Wendy Harder said, after allegations arose that he had created sham university accounts at a Los Angeles bank, moved money into the accounts, and then cashed $10,000 checks from them. Hatanaka could not be reached for comment this afternoon. His public defender, Chase Scolnick, declined to comment. Hatanaka came with Soka when it moved from Calabasas to open a 103-acre hilltop campus in Aliso Viejo. The university is affiliated with the largest Buddhist sect in Japan, but attracts students from the U.S. and around the world. Assistant U.S. Attorney Lawrence Kole said evidence showed Hatanaka gambled large sums of money during that period at casinos in Temecula and Las Vegas. Hatanaka is scheduled to be arraigned in U. S. District Court in Santa Ana on Jan. 2, and could face trial in February, Kole said. He was indicted on eight counts of embezzlement and eight counts of money laundering; each count carries a maximum sentence of 10 years. Kole said the bank became suspicious of irregularities and contacted officials at Soka, which then contacted federal authorities. Soka's Harder said the bank expressed concern about transfers that were not approved by multiple people. She said the university hired a new chief financial officer in 2005, and put Hatanaka in charge of endowment accounts. Among the reforms created by the new financial officer was a procedure requiring multiple signatures and approvals on bank transfers, Harder said. Hatanaka is suspected of taking interest money out of endowment accounts, then moving money around in a way that made it less likely to be detected by university auditors, Harder said. "We're working now to recover the money," Harder said. "We did recover about a million dollars of the loss through insurance." Fake vintners selling fraud by the bottle chicagotribune.com | 12/21/07 | Bob Secter So much for "in vino veritas," that famous old Roman proverb about there being truth in wine. A counterfeit scare is souring the refined world of serious wine collectors, a well-heeled niche that prides itself on sophisticated taste and discriminating palates. Top collectors now fear they have been fooled into stocking cellars with hard-to-spot knockoffs passed as rare vintages that can command tens of thousands of dollars per bottle. FBI officials in Chicago say an agent assigned to the art and antiquities fraud unit has joined a broader national probe into counterfeit bottles, with one focus on a prestige 1921 Bordeaux from France's Chateau Petrus vineyard. "They are being sold for upward of $75,000," FBI Chicago spokesman Ross Rice said. These days, most collectors buy their wines at auctions, and Chicago is a major center of the business. Three magnums of 1921 Petrus were among the featured draws to a recent Chicago sale. A magnum is double the size of a standard wine bottle. In an unusual move, auctioneer Edward Brooks pulled those and several other bottles out of the bidding at the last minute, after a competitor raised complaints about their authenticity. The suspect bottles were put in the auction by a Texas collector despite warnings from a Dallas wine broker that they might be fake, the broker told the Tribune. The Chicago controversy is hardly an isolated case. In the last 18 months, some of the nation's best known collectors have sued dealers and auction houses, accusing them of peddling fakes or being less than diligent in trying to prevent their sale. One suit involved clarets that sold for more than $100,000 per bottle and were billed as having been rescued from the stocks of Thomas Jefferson when he lived in Paris in the 1780s. As scandals go, this is one that casual sippers who wouldn't know "Two Buck Chuck" from Lafite Rothschild can watch from the sidelines. The targets are mostly rich, tend to think of themselves as quite savvy and typically buy expensive lots at wine auctions, a booming business that earns fat commissions Fake vintners selling fraud by the bottle for specialty houses. Wine counterfeiting has grown increasingly bold. David Molyneux-Berry, an expert in faked rare wine, said he was told by the owner of one French chateau that in 1947, it produced just five magnums of a famous red. "One auction house alone sold eight in one auction," Molyneux-Berry told a recent industry conference in the Napa Valley in California. "Eighteen have been sold in the last three years." Wine collecting was long a toy for high society, but with more bidders and soaring prices, it has become a prime target for counterfeiters. The dot-com boom of the 1990s and the current economic surge in China and Russia have created new waves of wealthy entrepreneurs with extravagant tastes and money to burn. William Edgerton, one of the nation's most experienced wine appraisers, said the counterfeit problem is of recent vintage and a consequence of a remarkable run-up in demand for premium labels. Nowadays, wines once considered good $10 table varieties are selling for thousands, Edgerton explained. "Lipitor is faked. Viagra is faked," Edgerton said. "High prices attract counterfeiters, and the higher they get the more attractive it is." Many of today's collectors have been passionate about their wine for years, but they have been joined by a new breed of speculators who snap up top vintages for the investment value and bragging rights. Wine collecting has its own culture and peculiarities, which greatly complicate the task of policing counterfeits. Connoisseurs like to track what they call provenance, essentially the resume of a bottle of fine wine: when and where it was made, who has owned it, how it has been stored. But provenance can get fuzzy with older European wines, and it is those brands that counterfeiters prey on. Record keeping was spotty at European wineries until recent decades. Discarded bottles can be found in antique stores and flea markets. Desktop publishing makes it easier to craft dead-on copies of old labels. What's more, many collectors lack the skill, the means and the nerve to pinpoint fakes. The gold standard for checking on authenticity is to pull the cork and literally consume the investment -- something a speculator might be loath to do. Even that isn't sure fire. Wines age differently, and few people know what a 75-, 100- or 200-year-old vintage is supposed to taste like. A genuine antique could be divinely subtle or sadly unpleasant. The furor over counterfeits was kicked off two years ago by wealthy Florida industrialist William Koch, who hired a squad of experts, including Edgerton and Molyneux-Berry, to vet his 40,000-bottle collection. They concluded that 5 percent were fake, including a set of four bottles from the controversial Jefferson collection. That collection became an international sensation two decades ago when a flamboyant European dealer, Hardy Rodenstock, claimed to have found a trove of old bottles inscribed with "TH. J." in a bricked-in Paris cellar. One of the bottles sold at auction in 1985 for a record $156,000. Koch acquired his set for more than $500,000. Also flagged as a phony in Koch's collection was a magnum of what was purported to be 1921 Chateau Petrus. One of Koch's investigators secured a testimonial from an official of the French vineyard that it didn't bottle in magnums that year. Last year, Koch began filing lawsuits over the fakes he believed were in his cellar, including the Petrus. Last summer, Dallas wine dealer Jim Leeuw said he was approached by a customer who wanted to sell off part of his collection, including three magnums of 1921 Petrus. Leeuw said he declined to broker the sale, warning that the Petrus and several others in the collection might be counterfeit. By October, however, the Texas consignment was featured prominently in a catalog advertising an auction at Chicago's Columbia Yacht Club run by Brooks, whose Lake Forest-based firm is called Edward Roberts International. A competitor, Kensington's Wine Auctioneers and Brokers Inc. of Chicago, raised a fuss after spotting the 1921 Petrus and other wines it considered suspect in the catalog. Kensington owner Jennifer Laks said she asked Brooks to pull the wines and, when he initially balked, papered regulatory agencies with complaints. Frank Komorowski, an Ohio physician and prominent collector, said Brooks called him asking for advice. During the conversation, Brooks told Komorowski she had been contacted by federal agents about the bottles, Komorowski said. Minutes before the Oct. 28th auction was to begin, Brooks removed from the sale all the bottles from the Texas collector. He declined to say whether he had spoken with investigators. Brooks declined to reveal the identity of the Texas collector, as did Leeuw. Brooks said he was committed to exhaustively researching the bottles before putting them back up for sale, but he cautioned that there is a lot of conflicting opinion about their validity and that it is extremely difficult to verify. "We are trying to do as much due diligence as we can," he said. Laks saw it differently. "In just a five minute search on the Internet it was easy to figure out that bottles like these are really questionable," she said. "The auction business lives on its credibility, and customers expect more from us than caveat emptor." Fraud Seen as a Driver In Wave of Foreclosures online.wsj.com | 12/21/07 | Michael Corkery ATLANTA -- Skyrocketing foreclosures are a testament to how easy it was to borrow from mortgage lenders in recent years. It may also have been easy to steal from them, to judge from a multimillion-dollar fraud scheme that federal prosecutors unraveled here in Atlanta. The criminals obtained $6.8 million in mortgages from Bear Stearns Cos., including a $1.8 million mortgage to Calvin Wright, a New Yorker who told the investment bank that he and his wife earned more than $50,000 a month as the top officers of a marketing firm. Mr. Wright submitted statements showing assets of $3 million, a federal indictment alleged. In fact, Mr. Wright was a phone technician earning only $105,000 a year, with assets of only $35,000, and his wife was a homemaker. The palm-tree-lined mansion they purchased with Bear Stearns's $1.8 million recently sold out of foreclosure for just $1.1 million. Bear Stearns, meanwhile, posted the first quarterly loss in its 84-year history as it wrote down $1.9 billion of mortgage assets yesterday. Fraud goes a long way toward explaining why mortgage defaults and foreclosures are rocking financial institutions, Wall Street and the economy. The Federal Bureau of Investigation says the share of its whitecollar agents and analysts devoted to prosecuting mortgage fraud has risen to 28%, up from 7% in 2003. Suspicious Activity Reports, which many lenders are required to file with the Treasury Department's Financial Crimes Enforcement Network when they suspect fraud, shot up nearly 700% between 2000 and 2006. In 2006, losses from fraud could total a record $4.5 billion, a 100% increase from the previous year, says Arthur Prieston, chairman of the Prieston Group, which provides lenders with mortgage-fraud insurance and training. The surge ranges from one-off cases of fudging and fibbing to organized criminal rings. The FBI says its active mortgage-fraud cases have increased to 1,210 this year from 436 in 2003. In some regions, fraud may account for half of all foreclosures. "We've created a culture where a great many people know how to take advantage of the system," says Mr. Prieston. Yet the system itself bears blame. The evolution of mortgages into a securities instrument turned loan origination into a competition. Caution gave way to a push for speed and volume. Embroiled in an all-out war for market share, issuers reduced barriers to credit, for example, by offering so-called "statedincome" loans, which require no proof of income. "The statedincome loan deserves the nickname used by many in the industry,the 'liar's loan,' " says the Mortgage Asset Research Institute, which works with lenders to prevent fraud. A recent review of a sampling of about 100 stated- income loans revealed that almost 60% of the stated amounts were exaggerated by more than 50%, MARI says. It didn't take a rocket scientist to steal a fortune from mortgage lenders in recent years. That much is clear from the Atlanta scheme. It was perpetrated in large part by a 23-year-old college dropout named Gregory Jerome Wings Jr., aka G-Money. His accomplices included a young nightclub owner, along with the director of an underground documentary called "Crackheads Gone Wild," a cautionary tale about drug addiction. Their scam was garden variety: recruit borrowers with good credit to apply for gigantic loans, often of the stated-income variety, using false income and asset statements. Find a mortgage broker willing to submit false information, and find appraisers who will approve inflated values. The perpetrators line their pockets with the proceeds, using some as down payments or for future renovations. Some buyers diverted proceeds to themselves through shell companies. The brazenness of the scheme is illustrated by the case of Mr. Wright, the New York telephone worker who posed as a highly paid executive to obtain a $1.8 million mortgage from Bear Stearns. Recruited into the scheme by an acquaintance in Atlanta, Mr. Wright, with the help of ring leaders, diverted hundreds of thousands of dollars from that Bear Stearns mortgage to himself, to Mr. Wings and to others in the scheme, according to a federal indictment. In the very same week, Mr. Wright obtained a $1.9 million mortgage on a second value-inflated mansion near Atlanta, this time from BankFirst, a unit of Minneapolis-based Marshall BankFirst Corp. This deal also brought enormous spoils to Mr. Wright, Mr. Wings and other accomplices. "It was so easy, it's incredible," says Akil Secret, attorney for Mr. Wright, who has pleaded guilty to bank fraud and is awaiting sentencing. 'Seemed Clean and OK' As profits from the scheme fattened their wallets, these young men became the envy of their peers, especially since their actions involved none of the dangers of street crime. "You see a guy who is 23 and he's driving a fancy car. You go into clubs and everyone seems to know him, and you kind of want to be like him," says defense attorney Rickey Richardson, explaining how his client, Daryl Smith, got involved in the scheme. "This wasn't drugs. This wasn't guns. This seemed clean and OK." In the wake of their downfall, debate has been intense about how such an unaccomplished group could defraud top-tier financial institutions out of millions. Prosecutors call the scheme sophisticated, noting its reliance upon forged and falsified documentation. Lenders agree. Bear Stearns says the scheme evaded its antifraud efforts by supplying false information at every step of the application process. "We as an industry cannot eliminate fraud entirely," Tom Marano, head of mortgages and asset-backed securities for Bear Sterns, said in a statement about the Atlanta ring. "We can and do continue to develop systems and detection techniques that evolve with the complexity of criminal schemes.'" (Excerpt) Couple Charged In Embezzlement dunndailyrecord.com | 12/20/07 | Kim Lambert One area couple likely won't have a merry Christmas this year: The husband and wife have been arrested for suspected embezzlement. Marjorie Spence Benson, 41, and her husband, Danny Earl Benson, 44, both of Meadow Oak Circle, Smithfield, have been arrested for allegedly taking $69,892.83 from D.G. Langdon and Sons Inc. in Angier. Mrs. Benson is facing 210 counts of felony embezzlement, which include 135 check transactions and 75 credit card purchases. Her husband is charged with one felony count of obtaining property under false pretenses. The couple, formerly of Angier, were placed in the Harnett County Jail under secured bonds of $22,000 for Mrs. Benson and $2,000 for Mr. Benson. Mrs. Benson was employed as the payroll officer at D.G. Langdon and Sons, a landscaping contractor on North Raleigh Street in Angier, since 2005. According to financial statements, she allegedly began taking money from her employers, Deborah and Dess Langdon, in September 2005. Angier Police Detective William Coats said he documented 75 credit card transactions Mrs. Benson processed fraudulently. She allegedly obtained the corporate credit card online in her name, unauthorized and unknown to Mr. and Mrs. Langdon. Mrs. Benson allegedly admitted to police that she wrote corporate checks in her name, cashing them and keeping the money for personal gain. In several of the 135 check transactions, Mrs. Benson reportedly kept employees' names on file in corporate books after the workers left the company, Detective Coats said. She would then write checks made out to the previous employees, cashing them for her personal use. Because Mrs. Benson was the sole bookkeeper of the company, she had exclusive access to computerized accounts. After allegedly cashing checks made payable to former employees, she would alter the computerized payroll system, according to Detective Coats. She transferred names from the payroll check register to a legitimate business account after the payroll checks were cashed, police said. Detective Coats said over a 22-month period, Mrs. Benson splurged by taking family vacations to Florida, the Kennedy Space Center and a Bermuda cruise, going on extravagant shopping sprees, having personal massages and buying tickets to the show, "Dancing with the Stars." The Langdons first became aware of financial discrepancies in July 2007, according to Angier Police. Mrs. Benson was reportedly vacationing with her family when a questionable credit card statement was delivered by mail. Mrs. Langdon opened the corporate financial statement, leading her to question numerous unauthorized charges and purchases reportedly made by Mrs. Benson, Detective Coats said. When Mrs. Benson returned to work the following week, she was confronted by her employers about the unauthorized purchases. Detective Coats said Mrs. Benson reportedly admitted her wrongdoing to the Langdons and was fired immediately. Mr. Benson's faces one felony count of obtaining property under false pretenses. He allegedly took one fraudulent check to a local bank, knowingly cashing it. The check had been made out to his wife with both signatures endorsed on the back; Detective Coats said he has the check as evidence. Detective Coats said he has been researching the case for nearly three months. Financial statements indicate that the money was taken over a period of almost two years with the last transaction taking place in July 2007. "I have worked extensively on investigating this case since September of this year," he said. "It has been a very intense, ongoing investigation." Angier Police Chief Jay Dudley said he feels confident justice will be served. "It's very unfortunate," Chief Dudley said. "Our main concern as law enforcers is for the victims and for the recovery of their losses." ________________________ |