Fraud
22 September 2011
Preliminary calculations by federal prosecutors indicate that convicted former Gov. Rod Blagojevich potentially faces 30 years to life in prison under federal sentencing guidelines, but that is no guarantee that the government will seek that stiff of a sentence, according to sources.
According to lawyers knowledgeable about the guidelines, Blagojevich's sentence could be pushed higher in particular by the money he sought to extort in the series of fraud schemes for which he was convicted. Even though the schemes fell short, Blagojevich could be held accountable for the "intended" gain, adding substantially to his sentence, they said. Blagojevich was convicted of seeking more than $1.5 million in bribes.
Numerous other factors could come into play as well at sentencing, including his breach of the public trust and whether the judge concludes that Blagojevich lied under oath when he took the stand at his retrial.
In a statement issued Thursday, the U.S. attorney's office confirmed that it had submitted its "calculation of the advisory sentencing guidelines" to the probation office, but it declined to reveal if its calculation for Blagojevich was 30 years to life in prison.
Blagojevich's attorneys will now do their own calculation. And then the probation office will recommend a sentencing range -- usually a spread of months -- to the judge. Both sides could then argue their points in written filings as well as at Blagojevich's sentencing, scheduled at this point for Oct. 6.
In the end, U.S. District Judge James Zagel will make the final decision. Since the sentencing guidelines are advisory, he will have wide discretion to invoke the sentence he regards as most just and fair.
Patrick Collins, a former federal prosecutor who helped win the conviction of former Gov. George Ryan, said the government's sentencing calculation is meant to show the judge what the prosecution thinks a potential sentence could be, but it is not cast in stone.
"In the George Ryan case, we did not ask the court to impose a sentence equal to our calculation," he said.
Ryan is serving a 6 1/2-year sentence in prison.
A federal jury convicted Blagojevich in June on 17 of 20 wire fraud, bribery, attempted extortion and conspiracy counts. The ex-governor also was convicted at his first trial in 2010 on one count of lying to the FBI. That jury deadlocked on all the other counts, leading to the retrial.
22 September 2011
IF previous rogue traders are anything to go by, notoriety and possibly even a Hollywood film await the person behind the EUR 1.66 billion UBS fallout.
Nick Leeson hit the headlines in 1995 when he single-handedly destroyed 233-year-old Barings Bank, which proudly counted the Queen as a client.
Leeson's early career was a success, quickly making an impression with Barings and being promoted to the trading floor.
He was appointed manager of a new operation in futures markets on the Singapore Monetary Exchange and was making millions for Barings by betting on the Nikkei Index.
But things began to unravel when he started making losses and set up a secret account to hide them.
The trader began taking more risks to recoup his losses but problems spiralled out of control and he fled, leaving behind a devastating financial hole and a note on his desk saying: "I'm sorry."
He was eventually arrested in Frankfurt, Germany, where he tried to escape extradition to Singapore.
He failed and was sentenced to six and a half years by a Singapore court.
Leeson wrote a book which became a Hollywood film starring Ewan McGregor and Anna Friel. In 2006, he was appointed chief executive of Galway United Football Club, stepping down last January.
Last year, Societe Generale trader Jerome Kerviel was convicted of being responsible for losing the bank around EUR 4.9bn.
Kerviel, 34, also wrote a book, Trapped In A Spiral: Memoirs Of A Trader.
At trial, he claimed the bank knew about the risk-taking. The bank, in turn, said Kerviel made bets of up to EUR 50bn -- more than SocGen's total market value -- on futures contracts on three European equity indices, and falsified offsetting transactions to mask the size of his bets.
Kerviel was sentenced last year to three years in prison although he remains free because he has lodged an appeal. He is reportedly working as an IT technician in the Parisian suburbs.
His moody Gallic good looks and story won sympathy across France, with women wearing T-shirts with the slogan "Jerome Kerviel's girlfriend".
Another read: "Jerome Kerviel, 4,900,000,000 euros. Respect."
Other episodes included:
- In 2002, John Rusnak, a currency trader at US bank Allfirst, based in Baltimore, Maryland, then a subsidy of AIB, pleaded guilty to fraud amounting to $691 million (EUR 500m). He was sentenced to seven-and-a-half years in prison after doing a deal with prosecutors;
- Toshihide Iguchi, a former car dealer, lost more than $1bn at Japanese bank Daiwa, in fraudulent trading over 11 years from 1984 onwards.
- In 1991, the Bank of Credit and Commerce International (BCCI) was seized by regulators, after auditors reported huge losses from illegal loans to corporate insiders and trades.
The bank collapsed with debts of more than Pounds 8bn (EUR 9.1bn) and about 250,000 savers lost money.
- Yasuo Hamanaka, a trader at Sumitomo Corporation, one of Japan's largest banks, lost the company $2.6bn in unrecorded copper market trades.
Known as "Mr Five Percent" for the share of the global copper market he controlled, he was jailed for eight years in 1996.
- In Britain, 90,000 investors were left out of pocket after Morgan Grenfell fund manager, Peter Young, who controlled Pounds 1.5bn of funds, broke City rules by investing in high-risk unlisted European securities.
22 September 2011
A pharmacist takes a 30-day prescription and inputs it as four weekly prescriptions-quadrupling the Medicaid dispensing fee; a fraud ring obtains a list of Medicare patients who recently underwent hospital outpatient procedures and starts submitting phony claims, threatening the lives of parties who expose the scheme; the local news reports that five teachers who find a pharmacy to dispense large prescriptions for narcotics covered under the school health plan subsequently sell the drugs. What do these three stories have in common? They are all real fraud incidents.
The health care industry estimates that somewhere between $70 billion and $230 billion of medical care spending is fraudulent. And while electronic medical records (EMR) are being hailed as a way to save money, they actually are making it easier to commit fraud. Much as the digitization of health records has eased information exchange between legitimate parties, it also has given fraudsters an easier path to patient data. The rate of fraud based on exposure to health data was 7 percent in 2009, up from 3 percent in 2008.
It's increasingly important for insurers and government agencies to get savvy about using analytics to thwart fraud. Too often medical fraud is caught by happenstance, unless the fraudster gets very greedy. A daughter reviewing her aged father's Medicare statements might notice equipment he never received and report the situation. Or the pharmacist trying to ratchet up dispensing fees does so with such reckless abandon that the reimbursing agency, or someone on the pharmacist's staff, can't help but notice.
By using text analytics and sophisticated data mining software (which includes predictive modeling, outlier detection and social network analysis), organizations don't need to rely on tips and extreme outliers. Instead, they can quickly home in on fraudsters and stop the fraud-often before the reimbursement check is cut.
Keeping Information Integrity
We know that medical office administrators are sometimes coached to make sure office visits are coded properly for maximum reimbursement. And no one wants a doctor who spends 45 minutes with a patient to get reimbursed as a Level 1 visit. But electronic medical records make it easy to preset all visits at the highest reimbursement level, with the onus on the harried provider to select a lower, more appropriate level. Pre-filled templates can lead to "checking all the boxes" on the exam sheet to "upcode" the visit further, generating the highest charge. And it is very easy for offices to cut and paste information from one record into another.
When coupled with demographic errors (putting in a higher age than the patient is), EMRs don't just make it easy to commit fraud; they can lead to medical errors that threaten the patient's lives and cost more precious medical dollars. It can also cost individual patients money if they later apply for life insurance and their medical records are littered with mistakes that make them seem older or sicker.
Necessary Technology
Advanced analytics are necessary to find and effectively root out fraud, waste and abuse. But the type of analytics that spits out a crude list of possible investigation targets isn't much use. Payers, both government and private, need:
Text analytics. Very critical to finding problems in the "notes" section of EMRs. When every diabetic patient over the age of 65 has the exact same wording on their records from one practice, it's a tip-off that fraud or errors might be occurring.
Intelligent outlier detection and predictive modeling. A high-volume, 24-hour pharmacy is likely to have more weekly prescriptions than a less busy pharmacy. Analytics that take into account volume and population demographics will do a better job of avoiding false positives.
Social network analysis. This helps claim payers, for example, find patterns of ownership in different billing entities. If one entity is under investigation, others with related ownership can face additional scrutiny. Social network analysis also helps unearth the kind of multiparty fraud schemes that involve the theft of patient records, abuse of prescription coverage and collusion among doctors, patients and pharmacists.
The examples at the beginning of this column all were (or could have been) discovered earlier by the appropriate advanced analytics. Investigators will always be involved, and so will tips-but the basis of early identification of the cases is the use of advanced analytics.
EMRs have tremendous potential to lower health bills and improve care, but they also provide new options for fraudsters. Advanced analytics are the key to spotting billers who are submitting medical records that are fabricated or overstated to support erroneous or fraudulent claims billing.
Credit: By Julie Malida
22 September 2011
Congressional investigators said today that promoters of health frauds and quack remedies were cheating elderly Americans out of more than $10 billion a year.
The House Select Committee on Aging, reporting on the results of a four-year investigation, said that merchants selling quack remedies were ''no longer quaint and comical figures'' but were well-organized, sophisticated, persistent entrepreneurs running a big profitable business.
The report estimated that elderly people spent $4 billion to $5 billion a year on bogus cancer cures, $2 billion a year on questionable arthritis cures and at least $2 billion a year on worthless products designed to counteract the effects of aging. The investigation was supervised by Representative Claude Pepper, Democrat of Florida, the former chairman of the committee.
Two Agencies Criticized
''The Food and Drug Administration, once a formidable force in controlling quackery, now directs less than 1 percent of its budget to the control of quackery,'' the report said. ''The Federal Trade Commission's efforts to control misleading advertising are even less significant and have diminished in recent years to the point where they are almost nonexistent.''
The report praised one agency, the United States Postal Inspection Service, as aggressively investigating quack products sold in violation of Federal law.
A spokesman for the food and drug agency said that in the last fiscal year it spent $1.8 million, or one-half of 1 percent of its $362.7 million budget, investigating quackery. Agency officials said they did not have enough money or employees to investigate ''economic frauds'' that posed no direct threat to customers' lives.
Neal J. Friedman, a spokesman for the trade commission, said the criticism of his agency was not justified. He said the agency had taken action to stop sale of several over-the-counter medications promoted through false advertising.
The report said that people 65 years old and older accounted for less than 12 percent of the nation's population but were the victims of 60 percent of all health-care frauds. Hearing Is Set by Panel
Mr. Pepper issued the report to draw attention to a hearing to be held Thursday by the Subcommittee on Health and Long-Term Care, of which he is chairman.
''Over 75 percent of the products reviewed by the committee,'' Mr. Pepper said, ''were found to be dangerous or potentially harmful. In addition to the loss of money paid for nonexistent cures, individuals who purchase these products are exposing themselves to hazards ranging from blindness to the acceleration of cancer, aggravation of arthritis, convulsions, heart palpitations, insulin shock and death.''
The report described numerous products sold as cures for arthritis. They included ''moon dust,'' which proved to be nothing more than sand; cow-manure poultices; copper and magnetic bracelets; an extract from from a New Zealand mollusk called a ''green- lipped mussel;'' New Zealand; a metal box containing a 150-watt light bulb called the ''spectrochrome;'' a device called the ''inducto-scope,'' said to relieve pain in the joints through magnetic induction, and the Kongo Kit, consisting of two hemp mittens that could be worn on the hands and rubbed over the afflicted parts of the body.
For cancer and diabetes there was a tube costing $300 that contained a penny's worth of barium chloride. It was called the ''miracle spike'' and was to be worn around the neck.
Some of the nostrums have been on the market for years, according to the report, and others have been removed from the market, under pressure from the Government, only to reappear a few years later in a slightly different form.
The study said there were hundreds of clinics in the United States and Mexico ''organized to distribute discredited and unproven remedies.'' Most, it said, offer diet therapy, potions and drugs.
''There is increasing evidence that a proper diet can reduce the risk of cancer,'' the report said. But it added that ''no diet cures cancer'' and some of the dietary regimens recommended by quacks are ''so nutritionally deficient or toxic'' that they have caused death or serious illness.
Mr. Pepper offered more than a dozen specific recommendations for combating such quackery. Congress, he said, should increase criminal penalties for the promotion of unproven remedies. The penalty, he said, should be increased to at least five years in prison and a $5,000 fine for each violation. Under current law, penalties vary, but rarely exceed one year in prison and a $1,000 fine.
The Florida Congressman said the Federal Government should develop the scientific capability to evaluate ''unproven remedies,'' so it would not have to rely so much on clinical trials sponsored by drug companies. In addition, he said the Government should establish a clearinghouse to collect and disseminate information about unproven remedies.
Congress, he said, should also give the Postal Service authority to issue civil subpoenas for books and records needed in investigations of mail fraud. State governments, he said, should establish or increase criminal penalties for the sale of quack remedies, strengthen laws against the unauthorized practice of medicine, and require charities and foundations to disclose more information about their own finances.
22 September 2011
After losing her job as a computer operator -- with no savings, no credit and few prospects -- a 25-year-old Morris County woman found a classified ad in a national magazine offering fast, guaranteed personal loans of as much as $25,000.
Early last year she sent the Florida-based company $500, borrowed from her mother, as a fee to secure a $5,000 loan. She has not had any response.
"I was so desperate I didn't stop to think," said the woman, who spoke on condition of anonymity because, she said, she is ashamed of having allowed someone to bilk her. Feeding on Desperation
What happened to her is happening to people across the region. Fueled by a lingering recession that has made credit tight and people desperate, loan frauds that dangle the prospect of quick cash for an upfront fee are the fastest-growing category of consumer complaints throughout the metropolitan area, consumer agency officials said.
The agencies said that beyond advance-fee loan frauds, they had been inundated with complaints about other schemes that target individuals stretched to their financial limit.
In the mildest cases, consumers answering ads offering job information receive lists culled from old newspaper want ads, the officials said, and are bilked of the cost of a telephone call to a 900 number. Unemployed workers have paid bogus job consultants advance fees to process applications, the officials said, and homeowners facing foreclosure have sent fake credit companies overdue mortgage payments.
But in the worst cases, they said, homeowners have been tricked into signing second mortgages when they thought they were signing low-interest debt consolidation loans; some now face losing their homes.
"There is a very direct correlation between the recessionary economy and the increase in the types of consumer fraud we're seeing," said Emma Byrne, the director of New Jersey's Divison of Consumer Affairs.
Robert Winter, director of New Jersey's Division of Criminal Justice, said today's cases are reminiscent of those that were prevalent during the recession in the mid-1970's but became less frequent when times got better.
"In the 80's, we had a lot of over-the-counter securities stock fraud," he said. "Now, the victims are much more sympathetic."
The victims range from the urban poor to suburban homeowners, consumer officials said. In Connecticut, many are white-collar workers who have lost their jobs or are working part time and are hard-pressed to meet their bills, said Attorney General Richard Blumenthal.
In New York, where the fastest-growing fraud category involves advance-fee mortgage loans, most of the victims are homeowners in Queens and on Long Island, said Ed Saslow, chief of the Attorney General's Criminal Prosecutions Bureau. And in New Jersey, the victims are most often "those who can afford it least," said Ms. Byrne. "They're seniors, non-English speaking and the urban poor." Mortgage Tricks
Last week, the New Jersey Attorney General, Robert J. Del Tufo, ordered a licensed Bergen County home-repair contractor and a finance company to answer charges that they defrauded 12 homeowners by luring them into signing second mortgages on their homes when the homeowners thought they were signing applications for low-interest debt consolidation loans. The companies, Maywood Builders and Sterling Resources, have been ordered to appear before an Essex County Superior Court judge on March 5.
For Anna Brocal of Paterson, the resolution of the case cannot come too soon. Ms. Brocal said her mother was tricked into signing a $22,700 second mortgage loan by men who came to their home offering to replace windows at low cost.
"They said they worked for the Government," Ms. Brocal said. "The way they were talking, they made it sound so real." Ms. Brocal said that after asking her mother, Maria Brocal, whether she had credit cards, the men offered to give her a loan at 15 percent interest that would consolidate all her credit-card debt and cover the cost of replacing the windows. "When she signed the papers, my mother didn't know it was for a second mortgage," Ms. Brocal said. She added that her father is on Social Security, that the family's only additional income is from a rental apartment in their two-family house and that they had no intention of acquiring a second mortgage.
"These are the kinds of frauds we're seeing," said Ms. Byrne. "They hit people absorbed with three major costs -- home, car or health." Nationwide Fraud
Far from being limited to the New York region, the rash of frauds is nationwide, according to the Council of Better Business Bureaus in Arlington, Va. Last year, the agency received more than 300,000 complaints from consumers and small-business owners who paid advance fees of $100 to $10,000 for "guaranteed" loans, said a spokeswoman, Dianne Ward.
In most cases, the culprits are not caught and the victims do not recoup their losses. Attorney General Blumenthal said Connecticut has put one fraudulent advance-fee concern out of business in the last year and is investigating others. But, Mr. Blumenthal said, while his office recommends five-year sentences in such cases, judges are reluctant to send first-time offenders to prison.
Senator Joseph I. Lieberman, a Connecticut Democrat who heads the Governmental Affairs Committee's Subcommittee on Consumer and Environmental Affairs, has proposed that Congress outlaw advance fees for consumer and small-business loans offered by unregulated companies. But until such legislation is in place, consumer agencies say, fast-moving schemers will prove unwieldy to curb.
The New Jersey Attorney General's office has closed down two advance-fee loan operations and 11 companies that operate 900 numbers. Last month the office won a conviction against Timothy Burke, alias Robert Chapman, on charges that he had persuaded owners who were about to lose their homes because of missed mortgage payments to make the payments to his company, First Jersey Equities.
But Mr. Winter of the Divison of Criminal Justice said such cases are hard-won. "The general rule of thumb is white-collar criminals in the state system are continually given less time," he said. Ms. Brocal, whose parents face the possibility of foreclosure if they are forced to pay for a second-mortgage loan, says it is high time a law is passed.
"We paid $400 for one window, when it was worth about $75," Ms. Brocal said. "It sounded good at first, but we were scammed."
As the economy has worsened, fraud schemes have proliferated. Manuel and Maria Brocal were said to have been tricked into signing a second mortgage on their home in Paterson, N.J., by men who came to replace windows. They held their grandchildren, Edwin, 2 years old and Cecilia, 4 months. (F.N. Kinney for The New York Times) (pg. B4)
22 September 2011
2011 SEP 24 - (VerticalNews.com) -- Research and Markets (http://www.researchandmarkets.com/research/058a0d/fifth_annual_id_pr) has announced the addition of Javelin Strategy & Research's new report "Fifth Annual ID Protection Services Scorecard: Increased Focus on Antivirus, Social Media, Child and Medical Identity Theft, Yet Prevention Still Lags" to their offering.
In Javelin's fifth annual identity protection report, we examine the rapidly changing ID protection services industry. Product innovation and future fraud concerns driving that innovation are addressed in this report along with a look at what some of the top ID protection products are offering. Trends in the industry include the growing role of antivirus software in the ID protection space, the future of fraud and social media, and how vendors are addressing child identity theft and medical ID fraud.
Twenty-four of the top products were evaluated in this report based on their consumer-facing prevention, detection, and resolution capabilities. Products were split into three major categories: ID protection services branded and offered through a financial institution, ID protection services offered through one of the three major credit bureaus, and ID protection offered through an independent vendor. Most products have gravitated toward a more holistic approach to addressing ID protection, offering both personal information monitoring as well as credit monitoring.
Primary Questions
What are existing criminal trends related to card fraud, and how can ID protection vendors mitigate them?
Which vendors have the best consumer-facing prevention, detection, and resolution capabilities?
Which practices have been widely adopted by vendors, and which practices should be adopted?
How have vendors changed their consumer-facing practices since 2010?
Where is the industry heading, and what are possible future security trends?
Keywords: Finance and Financials, Investing and Investments.
This article was prepared by Investment Weekly News editors from staff and other reports. Copyright 2011, Investment Weekly News via VerticalNews.com.