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:
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:
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.
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
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.
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.
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 cangot me to thinking about what other biggies have been in the news.
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.
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.
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.
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.
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.
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.
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.
That threaten its business phrase in the headline actually means could take down the entire firm.
There are three major cases, each with a serious enough impact, that an adverse ruling in any one could take out the firm. One is in court now, another expected next February, with the final one in court within a year.
Work with me as I try to process through the cases. Here is the thumbnail version.
Two lawsuits over one client
Taylor Bean & Whitaker Mortgage Corp allegedly generated massive amounts of fraudulent loans, a large portion of which were sold to Colonial Bancgroup. Both companies failed during the financial crisis.
PwC audited Colonial Bank and allegedly did not discover the bad loans that their client, Colonial Bank, bought from PwC’s non-client Taylor Bean.
An ongoing challenge for law enforcement in pursuing charges against bankers is actually getting convictions at trial. Even manipulating Libor is a tough sell to juries.
For those who wanted to see bunches of bankers in prison stripes, keep in mind there is that hurdle of persuading a jury a crime was committed. It may be difficult, but is possible to do.
In their research they have only found 2,400 Americans who ran money through companies set up by Mossack Fonseca, none of them high-profile, and apparently none of them from the political world.
Article tells the tale visible from correspondence for a few people who had already built a private fortune and then decided to park money overseas.
The basic asset protection shell structure includes two entities: a for-profit into which money is moved from the US, and a Panamanian based foundation which receives a contribution from the first shell, thus protecting the money from litigation, taxation, or disclosure.
