Financial and Investment Fraud

December 21, 2018

Audit firm Crowe LLP and associated individuals have settled SEC charges arising from significant failures in audits of Corporate Resource Services, Inc., which went bankrupt in 2015 following the disclosure of $100 million in unpaid payroll tax liabilities.  The SEC found that Crowe's audit team identified pervasive risks in its audit of Corporate Resource Services, but failed to take required steps in response.  Crowe will pay a penalty of $1.5 million and retain an independent compliance consultant.  SEC

December 21, 2018

40 states have entered in to a $68 million settlement with UBS for its fraudulent conduct in the manipulation of the London Interbank Offered Rate (LIBOR).  The manipulation resulted in the government entities paying inflated prices for swaps and other financial instruments that were linked to LIBOR. Governmental entities with LIBOR-linked swaps and other LIBOR-linked financial instruments with UBS will be notified if they are eligible to receive a distribution from the settlement fund.  See: CA AG; CT AG; FL AG; NJ AG; NY AG; PA AG

December 21, 2018

Randall Gilbertson was sentenced to 12 years in prison following his conviction on numerous counts related to his manipulation of the stock price of Dakota Plains Holdings, Inc., a company he founded, in a reverse merger of Dakota Plains into a publicly traded shell company, Malibu Club Tan.  Gilbertson was also ordered to pay restitution of over $15 million.   USAO MN

December 19, 2018

Multiple individual defendants associated with a fraud perpetrated against Minneapolis-area Starkey Laboratories, Inc., are facing sentencing following guilty pleas and convictions.  Jerome Ruzicka, the former president of Starkey, orchestrated a scheme to steal millions from the hearing aid company, including through the use of sham companies and dummy entities through which the defendants directed funds for their own benefit, and through the award of restricted stock in affiliated companies.  Ruzicka will be sentenced to seven years in federal prison.  USAO MN

December 19, 2018

Following charges brought by the CFTC in 2016, Haena Park and companies affiliated with her, Phaetra Capital GP LLC, Phaetra Capital Management LP, and Argenta Group LLC, have been ordered to pay $23 million in restitution to defrauded investors in commodity pools operated by defendants.  Park made material misrepresentations and omissions concerning her trading expertise, and the defendants made and issued false documents to conceal their trading losses and misappropriations of investor funds, in addition to commingling funds and failing to operate the commodity pool as a separate legal entity.  CFTC

December 17, 2018

Jonas Knopf, former chief executive officer of Madison Financial Services (MFS) and a licensed insurance producer, was charged for his alleged role in conspiring to defraud three Blue Cross Blue Shield health care insurance affiliates of more than $10 million. According to the government, Knopf and others created 11 sham companies under MFS, the parent company. They allegedly claimed to be doing business in the Pennsylvania and Washington, D.C., area and were created for the single purpose of marketing health insurance coverage to people Knopf claimed to be his employees, when in actuality, they were not. The alleged conspiracy began in Pennsylvania in 2009 but was stopped in 2013 after an internal BCBS investigation discovered false information submitted by Knopf and his co-conspirators through the various faux companies. The government charges that Knopf’s “clients,” or fake employees, paid him exorbitant insurance premiums and also provided him with money for payroll. Knopf then issued bogus payroll checks, attempting to create the impression that they were bona fide employees being paid for providing services. The alleged conspiracy continued until January 2017.  DOJ

December 18, 2018

The Trump Foundation has entered in to an agreement with the State of New York to dissolve under judicial supervision.  The attorney general's lawsuit against the Foundation will continue, with the state seeking millions in restitution and penalties, including a bar on President Trump and his three eldest children from serving on the boards of other New York charities.  NY AG

December 17, 2018

UBS Financial Services Inc. has agreed to pay a $5 million penalty to the SEC, and a $10 million penalty to the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) and Financial Industry Regulatory Authority (FINRA), to resolve claims that it failed to file required Suspicious Activity Reports (SARs) for transactions suspected to involve fraud or with no apparent lawful purpose.

December 14, 2018

A debt-relief telemarketing operator has been permanently banned from both industries and ordered to pay over $23 million to the FTC and State of Florida for violating the Federal Trade Commission Act, Telemarketing Sales Rule, and Florida Deceptive and Unfair Trade Practices Act. Under the guise of multiple shell companies, Kevin Guice and his associates sold fraudulent debt relief services to more than 10,000 unsuspecting consumers, often by calling phone numbers on the FTC's National Do Not Call Registry. In one scheme, telemarketers falsely claimed to be able to substantially and permanently lower credit card interest rates in exchange for an upfront fee of between $500 to $5,000. In another scheme, telemarketers again falsely claimed to be able to access non-existent government funds to pay off credit card debt in exchange for another upfront fee of between $2,500 to $26,000. Proceeds from the $23 million judgment will be used to pay restitution to consumers harmed by these fraudulent schemes. FTC; FL AG