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Category: Crime

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CDR Financial Products founder pleads guilty in municipal bond case

A Beverly Hills financial firm and its founder pleaded guilty to federal criminal charges that they defrauded government agencies by steering investment contracts to firms that paid them kickbacks.

David Rubin, 50, and his company, CDR Financial Products Inc., were accused of running sham auctions for government agencies looking to invest money raised through municipal bond offerings. The contracts were awarded to favored firms that secretly paid kickbacks to CDR, not always the firm offering the highest returns, the government alleged.

Rubin, who sobbed at Friday’s plea hearing in New York, is scheduled to be sentenced April 27. He had unsuccessfully requested a delay in his trial to be with his wife, who is dying of cancer, Bloomberg News reported.

Two former CDR executives are scheduled to stand trial on similar charges next week in federal court in Manhattan.

Rubin developed a niche helping local, county and state agencies invest money raised from bond issues for such things as school or road construction.

Because government agencies typically don't need to use the money immediately, they often hire companies such as CDR to arrange short-term and longer-term deals to invest the funds.

The indictment alleged that CDR engaged in a pay-to-play scheme in which investment companies secretly paid CDR kickbacks to win government contracts. The alleged scheme cost the government agencies money because the contracts did not always go to investment providers offering the best return, the indictment said.

Rubin is the 10th person to plead guilty in an ongoing federal investigation of the municipal bond industry, the Justice Department said in a news release.

Federal prosecutors had amassed almost 800,000 tape recordings and 125 million pages of documents during a three-year investigation of CDR, defense lawyers said earlier this year, according to Bloomberg News.


CDR, execs indicted in bid-rigging case

CDR looks to move muni bid-rigging case

CDR, at root of Richardson probe, no stranger to lawsuits

-- Stuart Pfeifer 

Consumer Confidential: Prices come down, shoplifting goes up

Here's your Happy-Festivus Friday roundup of consumer news from around the Web:

-- And down they come -- prices, that is. Half off at the entire store at Ann Taylor. Sixty percent at Gap. Forty percent off almost everything at Abercrombie & Fitch. Aggressive last-minute deals in the days before Christmas are good for procrastinators, but they could be an alarm bell for the retail industry. While scattered markdowns are standard every year, discounts across entire stores -- which analysts say are more widespread than last year -- suggest merchants are stuck with too much merchandise. Many retailers entered the season with fully loaded shelves. Now they're scrambling to move inventory. Among the deals to be had, Toys R Us announced new markdowns on dozens of items for Friday and Saturday. (New York Times)

-- But apparently not all shopping is paid for. During the four weeks leading up to Christmas, an estimated $1.8 billion in merchandise will be shoplifted this year, according to the Global Retail Theft Barometer, a survey of retailers worldwide. That's up about 6% from $1.7 billion during the same period last year. Sticky fingers are common during the holidays. The crowded stores and harried clerks make it easier to slip a tablet computer into a purse or stuff a sweater under a coat undetected. But higher joblessness and falling wages have contributed to an even bigger rise this year. People steal everything from necessities to luxuries they can no longer afford. (Associated Press)

-- And if you're going to be returning anything (paid for or otherwise), keep in mind that there are rules to follow. Some items -- especially electronics -- have a shorter return window. Target has shortened its return time for tablets, netbooks, e-readers, cameras and camcorders to 45 days, down from 90 days last year. Also, shoppers who return gifts without receipts or other proof of payment may end up receiving the current selling price of the item, which may be lower than what was paid. In other cases, the retailer may decline the return all together. Retailers estimate that holiday returns will total a record $46.3 billion this year, up 4% from last year and 10% from two years ago. (SmartMoney)

-- David Lazarus

Photo: Discounts are growing as retailers scramble to move inventory. Credit: Scott Eells / Bloomberg


Scam watch: Computer virus warning, Ponzi scheme, fake BBB email

Here is a roundup of alleged cons, frauds and schemes to watch out for.

Computer virus warning -- The Federal Trade Commission has started mailing refunds to 300,000 consumers who were victims of a scam in which they were tricked into buying unnecessary software to remove nonexistent viruses and spyware from their computers. The perpetrators of the scheme caused ads to appear on victims’ computers, informing them that a “system scan” had detected viruses and other threats that needed to be removed immediately. In December 2008 the FTC obtained a court order putting a halt to the scheme. The FTC alleged that the defendants conned more than 1 million consumers into buying software products such as Winfixer, Drive Cleaner and Antivirus XP to remove the malware the bogus scans had supposedly detected. Consumers who believe they are entitled to a refund or have questions may call the settlement administrator toll free at 1-877-853-3541 or visit for more information.

Ponzi scheme -- A San Diego investment manager was arrested on charges that he ran a $25-million investment fraud, in which he falsely claimed that he made huge profits trading stocks. Federal prosecutors alleged that Robert L. Holloway lost millions trading stocks, diverted more than $1 million of investors’ money to himself and used new investor money to pay returns to early investors. The scheme operated from 2005 to 2007, prosecutors said. Holloway, 54, is charged with four counts of wire fraud and one count of filing a false tax return.

BBB emails -- The Better Business Bureau is cautioning businesses and consumers about an email that falsely claims to be from the BBB and could infect computers with damaging viruses. The email subject line reads, “Complaint from your customers,” and contains a link to a site not affiliated with the consumer protection group. Consumers should not click on the link because it could cause their computers to be infected with a damaging virus. Anyone who has already clicked on the link should have their computers scanned for spyware, viruses or other potential problems, the BBB said. The group is working with law enforcement to determine the source of the emails.


L.A. radio talk host indicted in alleged Ponzi scheme

Scam watch: Discount electronics, telemarketers

Scam watch: Cyber Monday, pre-IPO fund, tech support

-- Stuart Pfeifer

Photo: A laptop computer. Credit: John Adkisson / Reuters 

California, Nevada team up to investigate foreclosure fraud

Atty. Gen. Kamala Harris to join California's foreclosure probe with Nevada's investigation
California and Nevada, two states at the heart of the nation’s housing crisis, will join forces to investigate allegations of foreclosure fraud and other types of mortgage improprieties.

The agreement to share resources and work jointly is the latest sign that the nation’s state attorneys general want to be out front in cracking down on bank practices the housing crisis — from the selling of mortgage-backed securities to the handling of foreclosures.

At a joint news conference in Los Angeles on Tuesday, California Atty. Gen. Kamala D. Harris and Nevada Atty Gen. Catherine Cortez Masto said their offices would share litigation strategies and evidence would link their offices' civil and criminal teams.

The announcement comes less than a week after Massachusetts said it was suing the nation’s five largest mortgage servicers over alleged foreclosure illegalities. The move marked the first such litigation to be filed by a state.

Harris' office has opened a number of its own probes of the mortgage business. Investigators have subpoenaed information from Fannie Mae and Freddie Mac as part of a wide-ranging inquiry into lending and foreclosure practices in the state, The Times has previously reported. Her office also is investigating Bank of America and its mortgage arm Countrywide Financial, along with Citibank, seeking information on their sale of mortgaged-backed securities in California.

The new alliance between Harris and Masto comes as banks are working to strike a deal with a coalition of attorneys general who are working to seek relief for consumers allegedly wronged by faulty mortgage servicing and foreclosure practices.

Harris formally withdrew from those talks earlier this year. Masto has said Nevada officials would evaluate any proposal the talks might produce but would also push ahead with their own work. New York, Delaware, Kentucky and Minnesota also have signaled they are unhappy with the direction of the talks with the banks. All of those states have expressed concern that the banks could be let off too easily.


Banks' foreclosure activity picks up

California AG subpoenas Freddie, Fannie

BofA settles mortgage suit for $315 million

-- Alejandro Lazo

Photo: California Atty. Gen. Kamala D. Harris. Credit: Brian van der Brug/Los Angeles Times

Judge throws out convictions of Azusa company executives

Lindsey photo

A federal judge in Los Angeles overturned the corruption convictions of the top two executives of Lindsey Manufacturing Co., an Azusa power equipment firm, saying prosecutors’ misconduct prevented a fair trial.

In a lengthy and scathing ruling, U.S. District Judge A. Howard Matz said Justice Department attorneys allowed an FBI agent to present false testimony to a grand jury, inserted false statements into search warrant applications and unlawfully intercepted emails between a defendant and a defense attorney.

Matz said the misconduct was so flagrant that prosecutors should not be permitted to retry Lindsey Manufacturing executives Keith Lindsey and Steve K. Lee.

“Dr. Lindsey and Mr. Lee were put through a severe ordeal. Charges were filed against them as a result of a sloppy, incomplete and notably overzealous investigation,” Matz said in his ruling. He had issued a tentative ruling Monday and made that ruling final Wednesday.

“The government team committed many wrongful acts. It should not be permitted to escape the consequences of that conduct.”

In May, a federal jury in Los Angeles convicted Lindsey and Lee of charges alleging that they violated the Foreign Corrupt Practices Act by paying a middleman to bribe officials with a state-owned power company in Mexico in order to obtain the company’s business.

Jan L. Handzlik, the defense attorney, said the judge’s ruling helped correct an injustice. He had argued that Lindsey officials were unaware of the bribes.

“This is a great day for the Keith Lindsey and Steve Lee. They never once wavered in their belief of their innocence,” Handzlik said. “It is also a great day for the fair administration of justice. Without an independent judiciary and courageous, fair-minded judges, days like this would not be possible.”

Matz also said he was not impressed with the evidence presented at trial. Prosecutors had argued that Lindsey and Lee authorized payments to a Mexican company, knowing it would be used to bribe officials with the country’s power company. Matz said he heard no direct evidence of that intent.

“The case against the Lindsey defendants was far from compelling,” the judge said.


Corruption convictions of Azusa firm's executives may be dismissed

Azusa firm, two execs convicted of Mexican bribery scheme

U.S. cracks down on firms that pay bribes to foreign officials

Photo: Lindsey Manufacturing makes power transmission equipment. Credit: Lindsey Manufacturing

McGruff the Crime Dog fights fake fashions, drugs, entertainment

ImageCrime-fighting canine McGruff is looking to take a bite out of counterfeiting.

The talking cartoon dog, sporting his trademark trench coat, is part of a new anti-counterfeiting campaign from the National Crime Prevention Council and the Bureau of Justice Assistance that aims to put a face to the victims of counterfeit movies, fashions, medicine and other goods.

The campaign seeks to dispel any ideas that counterfeiting is a victimless crime. "It costs the U.S. economy tens of billions of dollars each year, deprives people of their livelihoods, encourages criminal activities by gangs and organized crime groups, and sometimes results in serious illness or injury," the campaign webpage explains.

One ad depicts a styishly dressed young woman -- toting fake designer purse, watch, bracelet, scarf and sunglasses -- and asks: "What do your fake fashions say about you?"

"I'm a phony," the ad concludes.

Another ad shows a sad-looking woman holding film equipment. "That pirated movie you just bought ... cost someone her job. Pirated goods put jobs at risk."

The ads appear to alternatively attempt to pluck at the heartstrings, inspire fear or rouse worries of public embarrassment. Its slogan: "Counterfeits hurt. You have the power to stop them."


Can good online reviews be bought?

Video: David Lazarus on the case of the counterfeit bill

U.S. ambassador warns China: Foreign businesses feel unwelcome

-- Shan Li

Photo: Anti-counterfeiting campaign ad. Credit: National Crime Prevention Council, Bureau of Justice Assistance

Corruption convictions of Azusa firm's executives may be dismissed

Lindsey photo

A federal judge in Los Angeles has issued a tentative ruling that would dismiss the corruption convictions of executives at an Azusa power transmission equipment maker because of misconduct by prosecutors.

U.S. District Judge Howard Matz said he expected to issue a final ruling on Wednesday.

In May, a federal jury convicted Lindsey Manufacturing Co., its president, Keith Lindsey, and vice president, Steve K. Lee, of violating the Foreign Corrupt Practices Act, which make it a crime for U.S. firms to bribe foreign government officials.

Prosecutors had argued that the company hired a salesman in Mexico to bribe an official with the country's state-owned electricity utility to secure business for the company. Lindsey makes emergency electricity towers.

In May, defense attorneys asked Matz to dismiss the convictions because of “intentional government misconduct,” accusing FBI agents of making false statements in testimony to a grand jury and in a request for a search warrant.

Justice Department prosecutors were aware the testimony was false and did not correct it, defense attorney Jan L. Handzlik argued in the dismissal motion.

A government attorney acknowledged that the prosecution had made some missteps during the case.

“We regret those mistakes,” Justice Department attorney Jeffrey Goldberg told Matz at a hearing Tuesday, according to Bloomberg News. “We strive to get it right every time, and in this case we didn’t get it right every time.”

Matz's tentative ruling would dismiss the case with prejudice, meaning prosecutors would not be permitted to seek a second trial. Their only option would be to appeal Matz’s ruling.

Thom Mrozek, a spokesman for the U.S. attorney’s office in Los Angeles, declined to comment Wednesday.

“We are awaiting the court’s final ruling.  We will review when it is finalized,” Mrozek said.


U.S. cracks down on firms bribe foreign officials

Azusa firm, two execs convicted of Mexican bribery scheme

Avery Dennison case a window on the pitfalls U.S. firms face in China

-- Stuart Pfeifer

Photo: Lindsey Manufacturing Co. makes power transmission equipment Credit: Lindsey Manufacturing Co.


Notary in Las Vegas foreclosure fraud case found dead

A bank-owned home for sale in Las Vegas

A notary who was set to be sentenced for her part in a massive foreclosure fraud investigation was found dead in her Las Vegas home Monday.

Tracy Lawrence, 43, had pleaded guilty to one count of notarizing the signature of an individual not in her presence, a misdemeanor with a potential prison sentence of up to one year, as well as a fine of up to $2,000.

Lawrence had pleaded guilty to participating in an alleged scheme being investigated by the Nevada attorney general’s office in which tens of thousands of fraudulent documents were filed between 2005 and 2008 with the Clark County Recorder's Office. Two Orange County residents have been indicted in that investigation, accused of directing the operation.

Lawrence was scheduled to appear before a judge at 8:30 a.m. Monday. When she did not appear, investigators with the attorney general's office visited her home and found her dead, said Jennifer Lopez, a spokeswoman with the office of Nevada Atty. Gen. Catherine Cortez Masto.

Officer Jacinto Rivera, a Las Vegas Metropolitan Police Department spokesman, said that Lawrence's death was not being investigated as a homicide.


Banks' foreclosure activity picks up

Many Americans say they will have to work until they're 80

Victims of improper foreclosure practices can submit claims

— Alejandro Lazo

Photo: A bank-owned home for sale in Las Vegas. Credit: Robyn Beck / AFP / Getty Images


Cyber Monday: Feds seize 150 websites in counterfeiting crackdown

Federal authorities have seized 150 Web domain names they said were used to traffic counterfeit brand-name merchandise
Federal authorities have seized 150 Web domain names they said were used to traffic counterfeit brand-name merchandise.

The website seizures targeted the illegal sales of a host of counterfeit products, including professional sports jerseys, golf equipment, DVDs, shoes, handbags and sunglasses, authorities announced Monday.

Visitors to the sites now find a banner that says the domain name has been seized by federal authorities and that copyright infringement is a federal crime.

During the investigation, federal law enforcement agents made undercover purchases of a host of products from online retailers, officials said. In most cases, the goods were shipped directly into the United States from suppliers in other countries.

If the trademark holders confirmed that the purchased products were counterfeit, seizure orders for the domain names of the websites that sold the goods and associated websites were obtained from federal judges, authorities said.

"The sale of counterfeit goods cheats consumers and robs legitimate businesses -- both large and small -- of the fruits of their hard-earned work," said Assistant Atty. Gen. Lanny A. Breuer, who oversees the Justice Department's criminal division. "We will not tolerate those who seek to profit by abusing the Internet and stealing intellectual property at the expense of authors, artists and inventors. The Department of Justice will continue to work aggressively to combat intellectual property crime."

The seizures were part of an ongoing investigation authorities dubbed "Operation In Our Sites," which targeted online counterfeiting and piracy. Since its launch in 2010, the operation has seized 350 domain names that were allegedly used to sell counterfeit goods.

Agencies involved include the Justice Department, Immigration and Customs Enforcement and the FBI.


Scam watch: Cyber Monday, pre-IPO fund, tech support

Stocks surge, boosted by American shoppers, European leaders

Black Friday: Holiday weekend shoppers set sales, traffic records

-- Stuart Pfeifer

Photo: Counterfeit apparel bearing Burberry tags in Hong Kong. Credit: Bobby Yip / Reuters

Federal financial fraud prosecutions tumble to lowest level in 20 years

Financial criminals are facing the lowest number of federal prosecutions in at least 20 years, according to a new report.

The government has filed 1,251 new prosecutions against financial institution fraud so far this fiscal year, according to the Transactional Records Access Clearinghouse at Syracuse University. If the same pace holds, federal attorneys will file 1,365 such cases by the end of the year –- the lowest number since at least 1991.

The report, compiled from Justice Department data gleaned through the Freedom of Information Act, considers crimes involving crooked mortgage brokers, bank executives with something to hide and accounts hiding illegal activity.

The expected volume of prosecutions by the end of 2011 would be 2.4% smaller than that of last year, 28.6% thinner than that of five years ago and less than half the amount from a decade ago. The number of federal bank fraud cases has slipped every year since 1999.

While U.S. Attorneys kept busy in districts such as Miami, Manhattan and Seattle, six of the country’s 90 districts, including Indianapolis and Baton Rouge, filed no financial fraud cases at all.

But that doesn’t mean the government isn’t keeping busy with other types of criminal prosecutions, which have nearly doubled in two decades.


Raj Rajaratnam gets 11-year term in Galleon insider trading case

Ex-Oregon congressman Wester Cooley pleads guilty to tax evasion

-- Tiffany Hsu

Photo credit: Jorge Silva / Reuters

Scam watch: Social Security, malware, investments

Here is a roundup of alleged cons, frauds and schemes to watch out for.

Social Security -- Thieves have been impersonating Social Security Administration employees in an attempt to steal seniors' personal information, AARP said in a recent bulletin. The con artists call seniors, claim to be updating their records and ask for seniors’ Social Security numbers, birth dates and bank account numbers, AARP said. Consumers should never disclose such information over the telephone to strangers, AARP said. If concerned, consumers can call or visit a Social Security office to verify that the contact was legitimate.

Malware -- The U.S. attorney’s office in Manhattan has charged seven international suspects -- six from Estonia and one from Russia -- with operating an Internet fraud scheme that infected more than 4 million computers worldwide with malicious software, or malware. At least 500,000 computers in the U.S. were infected during the scheme, which ran from 2007 until October, the U.S. attorney’s office said in a news release. The malware enabled the suspects to hijack Internet searches and re-route computers to certain websites and advertisements that paid the suspects for Web traffic. The scheme generated $14 million in illegitimate income for the suspects, the news release said. Victims’ computers were infected with the malware when they visited certain websites or downloaded certain software to view videos online, according to an indictment.

Investment fraud -- The Securities and Exchange Commission has accused a San Diego investment advisor of failing to disclose that his firm received a 10% commission whenever clients invested in a nonpublic stock offering he promoted. The SEC said it has initiated administrative proceedings to determine whether Western Capital Pacific Management and its president, Kevin James O’Rourke, inappropriately profited when clients purchased shares of Ameranth Inc. in 2005 and 2006. The company paid Western Pacific a 10% “success fee” each time it directed a client to purchase shares of its nonpublic stock, the SEC said. In addition, the SEC accused O’Rourke and the firm of misrepresenting the liquidity of a hedge fund they operated.


Scam Watch: Acne treatment, StubHub email, real estate loans

Scam watch: Credit cards, weight-loss supplement, chimney sweeps

Scam watch: Facebook lottery, unclaimed money, foreclosure rescue

-- Stuart Pfeifer

Photo: The Securities and Exchange Commission. Credit: Bloomberg


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