Posts Tagged ‘fraud’

How A Bunch Of Really Smart Kids Ruined Everything (Volume 1)

Wednesday, December 22nd, 2010

“Repo 105″ – like Four Loko, but more dangerous to the health of your company.

Ever wonder how enormous old financial firms suddenly bite the dust? Well, the answer (according to the man suing Ernst & Young for civil fraud)  is that they do stupid things with the help of accountants.

According to New York Attorney General Andrew Cuomo, giant accounting firm Ernst & Young helped their client Lehman Brothers hide billions of dollars in debt so that it would look like a healthier company than it really was. For seven years. Until (surprise!) Lehman went bankrupt in 2008.

Lehman owed a lot of people a lot of money (like, billions of dollars). But they didn’t want to go around telling people about it.

mathemagician-by-kf6gpe.jpg

credit: kf6gpe

So (according to the lawsuit) Ernst & Young helped them hide their little debt problem with a ninja accounting tactic called “Repo 105.” Basically, Lehman would sell off a bunch of their assets and use the money to pay off some debt. That day was a good day, because when they had to show their financial reports to the world, it looked like they didn’t owe billions of dollars.

But – here’s the genius part – the next day, they would buy back the assets they sold at an even higher price, taking on more debt than they had before.

In exchange for its creative accounting services, Ernst & Young received $150 million in fees from Lehman between 2001 and 2008. Ernst says it was just using “generally accepted accounting principles,” which makes you wonder what other firms have been drinking. Cuomo says it will be paying those fees back to the State of New York by the time he’s done with them.

Schemer Buys Yacht, Hangs With Celebs, Is Jailed For 50 Years

Wednesday, June 16th, 2010

A prominent Florida lawyer is the latest example of what not to do as an investor, a business person, or a generally moral person.

  • 47 year-old Scott Rothstein was convicted on charges of money laundering, conspiracy to commit bank transfer fraud, and criminal conspiracy related to the financial system.
  • Rothstein managed to buy several houses, cars, and a yacht before he was caught. He also befriended celebrities and politicians, including Arnold Schwarzenegger.
  • Rothstein used new investors’ money to pay off earlier investors, and just like Bernie Madoff’s famous  Ponzi scheme, he left countless investors with immense losses.

Facts & Figures

  • Rothstein’s fraudulent investment scheme was worth more then $1 billion.
  • He was sentenced to 50 years in prison.
  • Rothstein forged the signatures of at least three federal judges.

Best Quote

“This rags-to-riches-to-jail saga is a humbling reminder of what can happen when greed and ambition run amok.”  - Wifredo Ferrer, U.S. Attorney

Money Laundering is…

Tuesday, October 20th, 2009

Money laundering is when someone passes illegally received money through banks, businesses, or other institutions so that it appears to have been acquired legally. You launder dirty money to make it appear clean.