L&G employee arrested by FSA in trading probe

A 44-year-old man employed at Legal & General Investment Management, one of the UK’s largest investment firms, has been arrested by the Financial Services Authority (FSA) in connection with a two-year probe into insider trading.

It is the regulator’s ninth arrest in two years in connection with its largest operation against alleged insider trading, the Financial Times reports.

The man is believed to have been a trader who worked at LGIM for several years.

This latest arrest, of a City individual, is part of the FSA’s investigation into deals spanning three years to 2010 in shares in companies including Paragon, Barclays, Scottish & Newcastle, National Express, Petrofac, Wolseley and Collins Stewart.

In March 2010, more than 140 officers carried out dawn raids on 16 addresses across London and the south-east seizing documents and computers.

Seven men were arrested: Julian Rifat, a trader at hedge fund Moore Capital; Martyn Dodgson, a corporate adviser at Deutsche Bank; Graeme Shelley, a broker at Novum Securities; Clive Roberts, trader at Exane BNP Paribas; Iraj Parvizi, an Iranian-born businessman and investor in small-cap stocks; Ben Anderson, a private stock broker; and Andrew Hind, a director of Deskspace Offices. The FSA then arrested an eighth man in April 2011.

The regulator is investigating spread bets on shares of at least 500 companies between October 2007 and January 2010 that allegedly made profits of at least £21.6m, the FT reports.

All individuals arrested were interviewed under caution and then released on bail. They have not been charged with any offence, and are believed to deny any wrongdoing.

The FSA, which is in the process of being split into two agencies by the government, has stepped up efforts to clamp down on insider trading in recent years. It has so far secured 11 convictions and is in the process of prosecuting 16 other individuals for alleged insider dealing, which is a crime with a maximum sentence of seven years.

Deception and Fraud by dishonest staff rises 41 per cent in just twelve months

The latest annual report by the fraud prevention service, CIFAS, has highlighted an alarming spike in ‘dishonest’ staff and internal fraud, with dishonest actions by staff to gain a benefit by theft or deception rising 41pc in twelve months.

The report went on to reveal that dishonest bank staff are increasingly preying on their elderly customers, with CIFAS saying that there had been an “alarming increase” in the level of fraud committed by employees, with a third of it involving the theft of cash from customer accounts.

“Many of these fraudsters steal from elderly and more vulnerable account holders,” said Richard Hurley, from CIFAS. “The perpetrators’ actions are as bad as muggers in the street.”  This surge must also underline how prevalent the danger actually is. To assume that staff committing fraud will not affect your organisation is pure folly.  Mr Hurley went on to say “The damage done by fraudsters who sit within an organisation is not just upon a balance sheet but also on staff and customer morale, reputation and can even result in regulatory and legal sanctions.”

Arjun Mehdi, Staff Fraud Adviser at CIFAS, said that the number of dishonest actions by staff to gain a benefit by theft or deception had risen 41pc in twelve months. He said that there was a trend for longer-serving staff to engage in fraud, after spending several years working out a bank’s systems. “They systematically hit certain accounts knowing that they will not be noticed,” he said.

He added that one particular trend was for cashiers to cream off some of customers’ deposits when they take cash into a branch. This was particularly common when dealing with elderly customers, he said.

Derek French, from the Campaign for Community Banking, said “there has been a big difference” as a higher turnover of bank employees had led to a “lack of commitment and loyalty” from staff.

Mr Mehdi said that in many cases the staff who had perpetrated a fraud had cited their own gambling debts as a reason for their actions.

FRAUD BREAKS THROUGH £2BN BARRIER

Fraud losses rise from £1.4bn to £2bn in 2011, the highest figure yet.  The number of reported fraud cases rose steeply last year, with cash-strapped businesses keen to cut costs in the economic downturn uncovering £2bn in losses, research shows.

The annual FraudTrack report by BDO, the professional services firm, collates data from all serious fraud cases which involve £50,000 or more. There were 413 reported cases in the 12 months between December 2010 and November 2011. This compared with 372 cases totalling £1.4bn in the equivalent 2009-2010 period.

There were substantial increases in tax fraud and fraud in the retail sector, which now represents 12 per cent of all cases compared with 2 per cent in 2010.

Simon Bevan, head of fraud at BDO, said it was no surprise that reported fraud was up because when the economic climate was difficult and companies were cutting costs, fraud was more likely to be uncovered.  “Tax fraud is consistently high and this tends to be in the form of VAT fraud, such as carousel fraud. This obviously [affects] the public sector and we know that this is a key focus for the coalition government, which has voiced its intention to cut the tax deficit,” he said.

Some 30 per cent of reported fraud – compared with 12 per cent in 2009 and 18 per cent in 2010 – is committed by suppliers and customers, with an average cost per supplier/customer fraud of £7.7m.

However, employee and management fraud as a percentage of the total has been steadily decreasing over the past 4 years, and now stands as a low of just 5.5 per cent.  BDO believes the figure reflects the fact whistle-blowers tend to keep their heads down at times of high unemployment.  The same is true for Employee fraud, which is down to 10% from 14% last year with an average fraud of £1.4m

Fraud in the financial services sector also fell as a proportion, accounting for 27 per cent of all reported fraud – the lowest percentage in the past five years. Mr Bevan said this was because financial services companies had invested heavily in systems and technology to prevent and track fraud.

Cases of corruption are steadily increasing, from less than 1 per cent of the total in 2009 to just under 2 per cent in 2010 and 4 per cent in 2011.  This rise can be attributed to the implementation of the Bribery Act which means prosecutors now have greater powers to bring more corruption cases.

Further information can be found here

PwC economic crime survey shows internal fraud on the rise

65% of reported internal frauds were committed by middle managers, an increase of 38% since 2009

 PricewaterhouseCoopers Global Economic Crime Survey 2011 (GECS) has revealed that economic crime is soaring as firms across the world cut back on their fraud detection, while senior executives made up almost half of the respondents who didn’t know if their organisation had suffered a fraud.

The findings, launched in Belfast this week, showed that 51% of firms in the UK have reported such a crime, a significant increase on the 43% of victims recorded in last year’s survey.  Perhaps most worrying is that Middle management are rewarding themselves – they are responsible for two-thirds of economic crimes.

Ian McConnell, from PwC, said that the most worrying element of the survey was the extent to which UK public and private sector organisations were falling victim to so-called white-collar fraud.  Over a third of organisations said their own employees were responsible for the largest frauds, with the typical employee fraudster being male, aged between 31 and 40, educated to below degree level and having worked for the organisation for three to five years.

BANK WORKERS JAILED FOR £1.4M FRAUD

Two Barclays bank workers have been jailed for a £1.4 million fraud of elderly customers.

Bank manager Karl Dean Edwards, 43, and personal banker Andrew Waters, 26, were each sentenced to five years imprisonment at Birmingham Crown Court. Both pleaded guilty to conspiracy to defraud at earlier hearings following an investigation by West Midlands Police.
A force spokeswoman said Edwards, of Crookbarrow Road, Norton, Worcester, and Waters, of London Road, Norbury, Croydon, were paid by an organised crime team to siphon money from the bank accounts of wealthy customers.
She said: “The investigation dates back to May 2006, when Edwards and Waters conspired together to identify and then access bank accounts belonging to three Barclays customers in order to steal £1.4 million from their accounts.”
Police said the bankers used false identification documents and forged papers to set up accounts in the names of the victims’ relatives. They would then move money from the victims’ accounts into the false accounts before transferring the sums into an offshore bank account.
Edwards was manager at the Hagley Road branch of Barclays in Birmingham, where the victims banked. Waters worked at the firm’s Croydon branch.
Joseph Murphy, 36, and Nathan Denton, 37, who were part of the organised crime team, were sentenced alongside the bankers.
Murphy, from Carshalton, Surrey, was imprisoned for three years and nine months. Denton, from Water Orton, Staffordshire, was sentenced to four-and-a-half years.
Detective Constable Simon Hughes from the economic crime team said: “The bankers deliberately targeted elderly wealthy victims who rarely checked their bank accounts.
“One victim had not been to the bank for over 20 years. The bankers used their position of trust and access to confidential customer information as a vital link in the fraud.”

Friday November 18,2011

LEGAL SECRETARY ADMITS £500,000 THEFT

A former legal secretary faces jail after pleading guilty to plundering a client’s account to the tune of nearly £500,000.

Leanne Harris, 25, wrote false cheques out in the name of a Mr Harris, depriving Joan Watson of more than £419,000 of her money.
She committed the offences while working at Arscotts Solicitors in Lansdowne Place, Hove, East Sussex, which has since gone under with the loss of up to 36 jobs.
At Hove Crown Court, Harris admitted committing five counts of fraud between November 2008 and May last year against Ms Watson. Harris also pleaded guilty to the theft of £64,815 between August 2007 and April 2010 from Miriam Turnbull over whom she had power of attorney.
Some time before joining Arscotts, Harris set up her own company through which she approached charities offering a free wills service.
The court was told that it was believed to have been through this service that she came into contact with Ms Turnbull.
Prosecutor Michael Warren did not open the details of the Crown’s case.
But defence counsel Lewis Power QC said Harris and her husband had been in financial strife, struggling to repay loans, meet bills and pay a mortgage.
Sentencing was adjourned by judge Michael Lawson QC for psychiatric reports but Mr Power said the starting point for sentencing of Harris, of Gildredge in Whitesmith, near Lewes, would be four years in jail.
Harris, clutching a Karen Millen handbag and wearing a grey skirt, was released on conditional bail until sentencing on January 27.

Friday November 25,2011

HIDDEN SCANDAL OF SCHOOL FRAUDS COSTING MILLIONS

MILLIONS of pounds are being stolen by staff in charge of vast education budgets in Britain’s schools. The fraud is often written off by head teachers and governors embarrassed by a scandal they failed to spot.

Recently, a finance manager stole more than £288,000 from Fibbersley Park Primary School at Willenhall near Walsall, West Midlands. She spent the cash on holidays and home improvements.

William Simmonds, chief executive of the National Association of School ­Business Management, said: “It is astounding this fraud went unchallenged for four years, but this case is just the tip of the iceberg.

“Ministers got rid of the Financial Management Standard which required school accounts to be signed off by an independent auditor at the end of the year. Now, only academies have to be audited externally while all other schools just fill in their own accounts.

“Eventually it usually is spotted but since a lot of the amounts being taken fraudulently will be little and often, it sometimes slips through the net for quite a while.

“Local education authorities do not want to talk about it as it doesn’t look good for them, and more often than not the stolen money is written off and the ­scandal hidden away.”

Kerry Smith, 43, began stealing from Fibbersley Park as soon as she became its £20,000-a-year finance officer in 2007.

No one noticed when she forged the deputy head’s name on cheques and for more than four years she signed 140 of them. The cheque stubs claimed the money had settled school bills. In fact 119 were made payable to her directly and to credit card firms she used.

The married mother-of-three squandered the cash on luxury holidays to New York, Cyprus and Sri Lanka and on designer clothes and handbags. Smith also upgraded her home in Bilston, near Wolverhampton, to the standard of those ­featured in ­luxury magazines.

Her fraud was spotted last November when a financial adviser found the school accounts should have been £70,000 in the black rather than £14,000 in the red.

Immediately Smith admitted theft and 12 counts of fraud. Earlier this year she was jailed for three years and four months.

Her case is not a one-off. In 2007 a head teacher stole at least £90,000 by claiming false expenses from the special school he ran for five years. He spent the cash on trips to the races and overnight stays at a yacht club.

Currently there are investigations into fraud in schools in Kent and Lincoln, both involving ­substantial sums.

In March this year a former head teacher who was knighted for services to education was arrested over claims he and his senior colleagues mismanaged more than £1million of school funds.

Sir Alan Davies, who was knighted in 2000, was arrested in relation to conspiracy to defraud Copland Community School in Wembley.

He and six colleagues have been bailed until next March.

Mr Simmonds said: “I feel this is an area which has to be strengthened and as quickly as ­possible. The Audit Commission has produced a leaflet to help schools manage their accounts and to keep a good eye on what is ­happening with the huge budgets that they have to manage.

“If all schools had to be externally audited this should bring this problem to an end, or at least catch things early before massive frauds can be ­committed.”

 

Sunday December 4,2011  By Hilary Douglas

LAWYER FACES JAIL IN £17.5M FRAUD

Princess Diana used firm for divorce

A FORMER partner at Princess Diana’s law firm was facing a long jail sentence last night for his part in a spectacular £17.5million fraud.

Kevin Steele used his position at the solicitors which acted for Princess Diana in her divorce, to help a conman pull off the swindle.

A Swiss bank handed over the cash after hearing it would be used to fund development of a Turkish resort.

Steele, 51, played a crucial role by endorsing fraudster Michael ­Shepherd’s claim that he had access to £76.4million in Swiss accounts.

The lawyer even tricked three ­fellow partners at his prestigious law firm into counter-signing an undertaking that Shepherd was worth a fortune.

Phoney paperwork produced by Steele persuaded the EFG private bank to approve the loan.

Jurors at London’s Southwark Crown Court were told Shepherd, 50, and his accomplice Mark Pattinson, 37, both admitted fraud.

Yesterday, they found Steele guilty of conspiracy to commit fraud and guilty of fraud by abuse of his position.

Judge Graham Wood, QC, freed Steele on bail for a pre-sentence report but told him: “As you know, you face a substantial custodial sentence and your position as a solicitor obviously makes it worse.”

Steele, of Esher, Surrey, denied the charges and insisted he acted in good faith but was duped by Shepherd.

The court heard how Shepherd was no more than a moderately successful entrepreneur when he dreamt up the scam. Pattinson forged paperwork claiming Shepherd had a fortune in the Zurich-based bank BJB.

Steele, named as having power of attorney over the money, helped draft two of the bogus documents.

David Aaronberg, QC, prosecuting, told the jury: “What Shepherd did was to pretend that he was a phenomenally successful businessman enjoying huge personal wealth.

“Shepherd did not have a penny piece invested in BJB.” Mr Aaronberg said it was the “spectacular use” of the bogus paperwork which persuaded EFG to hand over the money.

Shepherd, of Lancaster, and ­Pattinson, of Preston, Lancs, will be sentenced with Steele next month.

Serious Fraud Office director Richard Alderman said: “I welcome today’s verdict. It’s a victory for honesty and fair dealing in business.”

Tuesday December 6,2011 By John Twomey

Ex-Goldman Sachs Director Gupta Charged in Galleon Probe, and faces 20 years in prison

Rajat Gupta, a former Goldman Sachs Group Inc. (GS) director is accused of feeding tips to Galleon Group LLC co-founder Raj Rajaratnam, was charged in an indictment that made him the highest-ranking executive arrested in a US crackdown on insider trading.

Gupta, who also sat on the board of Procter & Gamble Co. (PG) and led McKinsey & Co., was charged with five counts of securities fraud and one count of conspiracy to commit securities fraud in an indictment unsealed last week in Manhattan federal court.

The indictment alleges that Gupta, 62, of Westport, Connecticut, was a close friend and business associate of Rajaratnam’s who made multimillion dollar investments with him and also passed him inside information after attending board meetings from 2008 through January 2009. The tips generated “illicit profits and loss avoidance” of more than $23 million, the U.S. Securities and Exchange Commission alleged in a lawsuit filed yesterday.

“Rajat Gupta was entrusted by some of the premier institutions of American business to sit inside their boardrooms, among their executives and directors, and receive their confidential information so that he could give advice and counsel,” said Manhattan U.S. Attorney Preet Bharara, whose office is prosecuting the case.

The case shows that corruption has “insinuated itself into the boardrooms of elite companies,” Bharara said.

By Patricia Hurtado, David Glovin and Chris Dolmetsch - Oct 27, 2011

http://www.bloomberg.com/news/2011-10-26/ex-goldman-sachs-director-gupta-said-to-face-insider-trading-probe-charges.html

SFO launches whistleblowing hotline to ‘flush out fraud’

Companies face the prospect of having suspect practices reported to the UK’s fraud investigator by their staff or even by lawyers and accountants under a new anonymous hotline designed to encourage whistleblowing.  The Serious Fraud Office said on Tuesday that it had created a confidential service to report suspicions of fraud and corruption by those with “some inside knowledge”.

The SFO said on Tuesday that individuals with inside knowledge of suspect business practices could call the new “SFO Confidential” hotline or fill in a new online form.

The agency said the new hotline would complement its national fraud reporting service for victims. But it is keen to ensure strong cases are not clogged up in the system.

“Company executives, staff, professional advisors, business associates of various kinds or trade competitors can talk to us in confidence,” said SFO Director Richard Alderman.

“I have set up a special team to make the SFO readily accessible to whistleblowers, with trained staff sympathetic in dealing with any anxieties people might have about coming forward.”

The SFO, which receives public funds of only around 30 million pounds per year to investigate and prosecute complex fraud, has to rely in part on whistleblowers to successfully prosecute fraud.

The agency, which has been given more teeth with the Bribery Act, promised to protect a whistleblower’s identity. However, people could contact it anonymously if preferred, it said.

The Bribery Act, which came into force in July, makes failure to prevent bribery — whether it is committed by staff, subsidiaries or “associated persons” anywhere in the world — a criminal offence.

It also clamps down on so-called “facilitation payments” — often used to oil the wheels of business by speeding up services such as visa applications — and “disproportionate” hospitality.

Whistleblowers who call the hotline number can talk through their concerns with an SFO Confidential adviser. Their identity will be securely protected, and contact can be made anonymously if preferred.

The SFO Confidential contact number is 020 7239 7388 and operates from 9.00 a.m. to 5.00 p.m. Monday to Friday.

Further information is available on the SFO website. Reports can also be emailed to confidential@sfo.gsi.gov.uk

 

(Reuters – Reporting by Kirstin Ridley; Editing by Greg Mahlich)