Fraud

Another multi-billion fine for Wells Fargo – $3.7 billion this time.

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Image courtesy of Adobe Stock.

Been a while since I tuned into the shenanigans at Wells Fargo. A mere 100 million here and another 100 million there just doesn’t break into the headlines. Well this time is 3.7 billion. Yeah, billion with a B.

12/20/22 – Wall Street Journal – Wells Fargo to Pay Record CFPB Fine to Settle Allegations It Harmed Customers – Wells was able to combine a variety of violations into one big settlement. They closed out a number of investigations with this multibillion settlement.

Range of issues includes “illegally assessed” fees and interest on car loans and home loans. Overdraft fees were improperly applied. Some vehicles were repossessed as a result of the shenanigans. Overdraft fees replied even though there is enough money to cover the transactions.

Settlement consists of $2 billion restitution and a $1.7 billion fine from CFPB, which is a record for the agency.

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Another multi-billion fine for Wells Fargo – $3.7 billion this time.Read More »

Two former KPMG partners involved in PCAOB inspection leak fiasco surrender their CPA licenses.

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Image courtesy of Adobe Stock.

There’s an old saying that the wheels of justice grind slowly, but they grind very fine. In the accounting world the wheels of justice don’t even start to turn until the criminal justice wheels have ground everyone into powder.

Effective this past August and November two of the key former partners from KPMG involved in the PCAOB inspection cheating scandal surrendered their licenses.

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Two former KPMG partners involved in PCAOB inspection leak fiasco surrender their CPA licenses.Read More »

Updates on insider trading by federal judges and senior staff of Federal Reserve.

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Image courtesy of Adobe Stock.

Previously discussed Financial conflict of interest on the federal bench and stock trading by presidents of regional Federal Reserve Banks. Alternate headline – Is there any group of powerful people who bother to follow the rules?

The Wall Street Journal reported that 131 judges had an investment in one or many stocks of litigants who appeared in front of them.

Two presidents of regional Federal Reserve Banks were trading stocks during the tumultuous early months of the pandemic.

Two updates in the news recently. First, the situation with judges is worse than it appears. Second, restrictions have been placed on extremely senior staff of the Fed prohibiting them from owning individual stocks.

Wall Street Journal – 10/21/21 – Fed Imposes New Restrictions on Officials’ Investment Activities – The new rules will apply to the seven governors sitting on the board of the Federal Reserve, the 12 presidents of the regional Federal Reserve Banks, and an unspecified number of senior staff who work with the rate-setting committees.

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Behold the creativity of cheaters.

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Need to fabricate an excuse to bail on your meeting? There’s an app for that. Image courtesy of Adobe Stock.

I am continually amazed at the creativity of cheaters. A few examples in the news recently:

  • Restaurant offering receipts with menu items relabeled as office supplies
  • Generate disruptions to get out of a zoom meeting
  • Fake Covid test results

I mentioned these for the laughter value and more importantly for the educational value.

The stories are amusing. If you work in the finance area or are leading an organization, having an awareness of these schemes might help you recognize one if presented to you.

Your entertainment and anti-fraud training for the day:

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Final two sentences announced in KPMG inspection list theft scandal include no jail time; there are lots of consequences though.

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Image courtesy of Adobe Stock.

The final two sentences have been handed down in the KPMG fiasco for stealing PCAOB inspection lists.

Spoiler alert: no jail time.

Thoughts in last half of this post on other consequences they have earned.

Recap of perps:  Status of players in KPMG fiasco from leaked PCAOB inspection files.

 

Thomas Whittle

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Recap of fines for major banking fiascos.

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Image doing that to seventy billion dollars. Intentionally. Image courtesy of Adobe Stock.

It is so sad to say, but a reality never-the-less, there are so many major banking fiascos with such a wide range of willing participants that it is impossible to keep straight the players and disasters and fines based just on memory.

So, that means I have a spreadsheet to track the willful disasters I’ve been following.

My tally does not include all the billions of dollars paid to settle mortgage issues arising from the Great Recession. That is another massive set of disasters all by itself.

Here is my running tally of the amount of stockholder equity wasted for a range of different debacles. Amounts in millions of dollars:

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Recap of fines for major banking fiascos.Read More »

Yet another banking fiasco. This time Goldman Sachs

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Image courtesy of Adobe Stock.

There is a long list of banking scandals in the last decade or so with a long list of banks choosing to play in each of the fiascos.  Plenty of banks have joined multiple schemes.

The time I’ve allocated to watching the apparently unending disasters has been concentrated on the money laundering and interest rate / exchange rate / pricing manipulation messes, along with the unending variations of cheat-your-customer plans at Wells Fargo.

Until now I’ve not been focused on the bribery disaster involving 1MDB’s shenanigans in Malaysia. If you’ve not tuned in, you can categorize this mess in the international corruption and bribery sector of bank fiascos.

Goldman Sachs was apparently full-in with the bribes and corruption. Wall Street Journal on 10/22/20 summarizes the mess:  Goldman Pays Billions – And Takes Millions From Top Execs – To End 1MDB Scandal.

On 10/23/20 Goldman settled up with the U.S. and several other national governments. The bank agreed to clawback $174M from several executives.

They also admitted breaking U.S. corruption laws, specifically with a plea of guilty to charges of conspiring to violate antibribery laws. To keep the parent company in business it was actually a subsidiary of Goldman who entered a guilty plea. Only two executives have been hit with criminal charges.

The feds say billions were stolen from 1MDB and bribes aggregating $1.6B were paid to various government officials around the world.

Financial penalties paid by Goldman:

  • $2.9B – US Department of Justice and other regulators around the world
  • $2.5B – government of Malaysia
  • $0.154B – Federal Reserve Bank
  • $5.545B – total of above

From browsing headlines it looks like there are a few other fines but those are in the mere $50M or so range. Chump change for the big banks.

So, five and a half billion dollars of stockholder money burned by bribery and corruption. The irritated populists will loudly remind us that only two executives, merely two, have drawn criminal charges in the U.S.

Status of players in KPMG fiasco from leaked PCAOB inspection lists.

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Image courtesy of Adobe Stock.

As refresher, some time back senior level staff from KPMG worked to illegitimately gain access to the list of engagements which were going to be subject to inspection by PCAOB. You can catch up on the news by reading my posts with tag of Big 4.

This is old news at this point. Those of us interested in the ethical failure still want to monitor the status of the players. Previous list, found here, has been reworked since it was getting a bit cumbersome to update and confusing to read.

The five KPMG staff and one PCAOB staff who were charged are listed below with their status at various times. Updates will be mentioned as time passes and this page updated with new status.

Overall status:

  • 10/19/20 – 1 released from prison, 1 sentenced & awaiting deportation, 2 awaiting sentencing, 2 convictions on appeal.
  • 12/13/20 – 4 sentenced (of whom 1 released from prison, 1 to serve house arrest after deportation, 2 on probation/supervised release) and 2 convictions on appeal.

Updates:

  • 10/18/20 update – David Britt was sentenced to six months home confinement to be served from his new home in Australia after he is deported from the United States.
  • 12/13/20 update – Thomas Whittle sentenced to two years supervised release and Brian Sweet sentenced to time serviced, three years probation, and to-be-determined restitution.
  • 1/4/22 – Brian Sweet and David Britt surrendered their CPA license to the California Board of Accountancy in 11/21 and 8/21, respectively.

Participants and their status:

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More updates on major bank fiascos. Another billion here. Three billion there.

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Painting on side of Concord stage coach at the Wells Fargo museum in San Diego. Photo by James Ulvog.

It has been a long time since I did an update on the money wasted by major banks in violating sundry laws and regulations. Last update was all the way back in February.

Today’s news about JPMorgan throwing away another billion can got me to thinking about what other biggies have been in the news.

9/29/20 – Wall Street Journal – JPMorgan Paying $920 Million to Resolve Market And Pollution Probes – These fiascoes keep showing me the creative brilliance of crooks.

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More updates on major bank fiascos. Another billion here. Three billion there.Read More »

Brief survey of costs from Volkswagen’s diesel fiasco.

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Image courtesy of Adobe Stock.

Haven’t talked about the massive Volkswagen diesel fraud much on this blog. Just don’t have enough time to cover every business fiasco. Time for a brief recap of the financial cost of the cheating mess.

Here is a fast tour from the guilty plea in 2017 to the latest estimate of total costs in 2019.

3/10/17 – Wall Street Journal – Volkswagen Pleads Guilty to Criminal Charges in Emissions-Cheating Scandal.  Good recap of the VW confession:

Key tidbits:

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Alleged arson illustrates the fraud triangle

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Analyze fraud in terms of opportunity, motivation, and rationalization. Image courtesy of Adobe Stock.

A current trial alleging arson and insurance fraud provides CPAs an educational read on the fraud triangle.

Consider these articles if you want more background or to see my sources:

A fellow woke to fire in his home, packed a few belongings, called 911, tossed a couple suitcases out the window he broke with his cane, then climbed out the window to save his life.

That’s what he told fire officials and his insurance company.

The fully involved fire, which from a photo looks to have destroyed the home, caused around $400,000 of damages.

Technology can rat you out

His pacemaker told a different story.

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In case you hadn’t hear, those telephone calls claiming to be from the IRS demanding you immediately pay back taxes are a scam.

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Wouldn't it be nice if the phone id actually was that accurate for every call? Image courtesy of Adobe Stock.
Wouldn’t it be nice if the caller ID was actually that accurate for every call? Image courtesy of Adobe Stock.

(Cross-posted from my other blog, Nonprofit Update, so you may refer your clients to an article that provides depth on how to avoid becoming victim of recent scams.)

The most frequent scam in 2016 was the phone calls saying “This is the IRS and if you don’t pay your past due taxes this instant we will send someone to your house to arrest you right now.”

There are many things wrong with those calls.

As a starter, your first contact with the IRS will never be by phone. You will instead get a letter explaining what the IRS thinks you messed up.

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Update on Panama Papers – 11/22

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Image courtesy of DollarPhotoClub.com
Image courtesy of DollarPhotoClub.com

Either there hasn’t been much going in the money laundering news or I’ve not paid enough attention. On the other hand, governmental investigations are run behind the scenes. Perhaps the regulators are working out of sight.

Here are a few articles I’ve noticed in the last few months.

7/28 – U.S. Prosecutors Probe ‘Panama Papers’ Law Firm’s Employees – Leaks say Department of Justice has opened an investigation of various staff in the D.C. office of Mossack Fonseca.

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Update on Panama Papers – 11/22Read More »

Guess we might want to reallocate blame for that $5 billion trading loss at Societe Generale

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Sometimes it's complicated. Photo courtesy of Adobe Stock.
Sometimes it’s complicated. Photo courtesy of Adobe Stock.

One thing I’ve learned while being in leadership at my church is that a conflict that appears simple to outsiders is usually far more complicated and messy and ugly than it appears, with blame for a conflict sometimes belonging to the party that appears innocent.

I’m slowly catching on that maybe that idea sometimes applies to massive financial fiascos. (Yeah, yeah, I know. I usually catch on really slow.)

Who is at fault?

Back in January 2008 a trader, Jérôme Kerviel, engaged in €50B of unauthorized trades for Société Générale and hid his trades. That’s fifty billion euros. He admits to making fake entries to hide his admittedly unauthorized trades.

Unwinding the trades cost the bank €4.9B.

I recall at the time that the story line was he was a rogue, a scoundrel, etc., doing all this by himself, etc., single handedly pulling off a huge scam, etc, cleverly wending his way between those tight internal controls, etc.

Criminal sentence

Previously, Mr. Kerviel was tried and convicted on criminal charges. His initial sentence was five years, which was reduced to two years (I think it was 2 but maybe was 3).

He served five months in prison, according to the following article.

Wrongful termination

Well, multiple parts of the French judicial system are saying that allocating the blame is a bit more complicated.

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Yet another banking fiasco – Opening two million fake accounts to meet sales targets

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Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.
Wells Fargo Concord stagecoach. Notice the only suspension for running over rough roads is those leather straps under the passenger compartment. Those didn’t smooth out the rocks and bumps very much. April 2012 photo by James Ulvog.

Deep sigh. Another banking fiasco hit the papers yesterday. The Wall Street Journal reported Wells Fargo to Pay $185 Million Fine Over Account Openings.

The bank will pay a mere $185M to settle claims brought by OCC, CFPB (Consumer Finance Protection Bureau, the new creation of the Dodd-Frank legislation), and LA city attorney.

This scheme involved customer-facing employees opening fake bank accounts in the name of existing customers without the customer’s permission. Another variation is opening a fake account in the name of a nonexistent customer. Article says sometimes money would be transferred from a customer’s account into the new, fake account with occasional NSF fees because there wasn’t enough money in the legitimate account to cover legitimate checks.

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