Colonial Bank Founder Convicted of Fraud

The New York Times reports that a federal jury found Lee Farkas, former chair of Taylor, Bean & Whitaker, guilty of securities, bank, and wire fraud. The Justice Department characterized the crimes as one of the largest and longest-lasting bank fraud schemes in history. The fraud, estimated to total $2.9 billion, involved selling fake mortgages, overdrawing its accounts, and attempting to obtain $570 million in federal bailout funds through the TARP program. Six of Farkas’ associates pleaded guilty, and some testified against him at trial. Farkas could serve decades in prison for his crimes.

FBI Routing Out Securities Fraud

In Congressional testimony, Federal Bureau of Investigation Director Robert Mueller reported that, at the close of fiscal year 2010, the agency had over 2,300 open corporate and securities fraud investigations. Over 100 FBI agents are investigating corporate fraud, while over 200 are investigating securities fraud.



SOX, DFA Do Little to Turn Back the Tide on Fraud

Despite the Sarbanes-Oxley Act of 2002 and last year’s passage of the Dodd-Frank Act, business losses due to corporate fraud continue to rise. In addition to traditional forms of fraud, two others have grown in significance: business model fraud and business process fraud. An example of fraud in the business model is touting bundles of worthless subprime mortgages, while an example of fraud in the business process is when companies ignore an environmental law. The culprit? Even with a framework in place, many organizations do not have compliance or risk management oversight.



Citibank Execs May Face Fallout from Fraud Charges in India

According to Telegraph India, top Citibank executives may have some culpability under Indian law for alleged fraud perpetrated by Citi executives in India. Citibank Chairman William Rhodes and CFO Douglas Peterson have been named in a police “first investigation report” about a possible scam involving misappropriation of funds and sending fabricated portfolio statements to customers. Although there has been a push for a new law limiting liability for wholly owned subsidiaries, no such law is in effect, leaving Citibank execs vulnerable.

Madoff Auction Nets $2 Million for Ponzi Victims

For the victims of Bernie Madoff, who swindled clients out of $20 billion, the $2 million raised when Madoff’s personal possessions went on the auction block in New York was small consolation. According to Forbes, the second of two New York auctions featured items such as his wife’s jewelry, his grand piano, and his artwork. A final auction will be held in Florida for items from his former Palm Beach home. In the meantime, Bloomberg notes that trustee Irving Picard continues to go after Madoff’s cohorts. Picard latest lawsuits involve five of Madoff’s former employees, from whom he is hoping to get $48 million. This follows on the heels of 19 other lawsuits, totaling $15.5 billion, filed against Madoff’s family members, friends, and various feeder funds.