DENVER (AP) -- Joe Nacchio, a former AT&T executive tapped to transform Qwest Communications into a major telecommunications competitor, was convicted Thursday of 19 of 42 insider trading charges after one-time top executives described his relentless drive to meet revenue projections without revealing financial risks.

http://biz.yahoo.com/ap/070419/qwest_nacchio_trial.html?.v=19

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SAN JOSE, Calif. (AP) -- The Securities and Exchange Commission filed civil charges Tuesday against two former Apple Inc. officers over their alleged roles in backdating stock options. The agency immediately announced a settlement with one of them.

http://biz.yahoo.com/ap/070424/apple_stock_options.html?.v=6

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NEW YORK, April 12 (Reuters) - Ernst & Young LLP [ERNY.UL], the auditor, will pay $9.08 million to settle an investor class-action lawsuit stemming from an accounting scandal at PNC Financial Services Group Inc. (PNC.N: Quote, Profile , Research), court papers show.

Thursday's settlement probably ends five years of litigation that stemmed from the Pittsburgh bank's alleged hiding of bad loans, according to Barry Weprin, the plaintiffs' lead lawyer. Roughly 22,000 PNC investors have recovered approximately $203 million for their losses, he said.

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070412:MTFH54264_2007-04-12_20-30-30_N12184904&type=comktNews&rpc=44

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The Yomiuri Shimbun

Tokyo metropolitan government officials have inspected an elderly nursing home that had unlawfully employed Filipino women on tourist visas after falsely informing authorities the workers were Japanese to meet legal staffing requirements, it has been learned.

Two of the five nighttime workers were Filipino, but the home created false documents and told the metropolitan government they were Japanese. The Filipino workers were employed until the end of February, and as many as 100 had worked at the home over the past five years.

http://www.yomiuri.co.jp/dy/national/20070503TDY02003.htm

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May 3 (Bloomberg) -- A Credit Suisse Group investment banker was charged with feeding advance tips on nine corporate acquisitions, including a $32 billion bid for TXU Corp., to investors who made illegal bets, U.S. federal prosecutors said.

Hafiz Naseem, 37, who worked on a team of energy bankers in the Swiss firm's New York offices, was arrested today and charged with insider trading on deals the bank advised, the U.S. Attorney's Office in Manhattan said in a statement. The scheme allegedly netted more than $7 million.

Recipients of the tips included a Pakistani banker who passed them to ``certain high-profile financial executives'' in that country, the U.S. Securities and Exchange Commission said in a related civil lawsuit today.

``Naseem seriously abused his position of trust with Credit Suisse and its clients by blatantly stealing market-moving information,'' Rose Romero, director of the SEC's Fort Worth office, said in a statement. ``Naseem schemed to line his own pockets, as well as the pockets of others, with unlawful profits to the detriment of innocent shareholders.''

The case stems from a probe of insider trading in TXU call options days before Kohlberg Kravis Roberts & Co. and Texas Pacific Group announced the largest-ever leveraged buyout in February. In court documents, the SEC also identified three other people who allegedly made similar well-timed trades.

``We are shocked and extremely disappointed that an employee would violate not only our trust, but the trust of our clients,'' Zurich-based Credit Suisse said in a statement. ``We immediately brought the activities of this employee to the attention of the relevant authorities.''

Naseem's lawyer, Craig Warkol, didn't immediately respond to an e-mail message seeking comment.

http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aQ2UlVh0v_SI

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WASHINGTON (AP) -- Federal and state authorities are investigating suspicious options trading in Dow Jones & Co. stock prior to an announcement last week of News Corp.'s $5 billion bid for the financial news publisher.

News last Tuesday of the $60-per-share bid by Rupert Murdoch's company sent Dow Jones shares soaring. A spokesman for Dow Jones, which publishes The Wall Street Journal, said Monday that it has received a subpoena from the New York attorney general's office and a request for information from the Securities and Exchange Commission regarding options trading.

Dow Jones will "cooperate fully" with the authorities, company spokesman Howard Hoffman said.

SEC spokesman John Nester declined to comment, as did Jeffrey Lerner, a spokesman for the New York attorney general, Andrew Cuomo.
http://biz.yahoo.com/ap/070507/news_corp_dow_jones_probe.html?.v=3

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NEW YORK (AP) -- The Securities and Exchange Commission Tuesday accused two Hong Kong residents of using inside information to buy $15 million of Dow Jones & Co. stock ahead of an announcement that News Corp. was seeking to buy the company.

The lawsuit in U.S. District Court in Manhattan named as defendants Kan King Wong and Charlotte Ka On Wong Leung, a married couple living in Hong Kong.

According to the lawsuit, Wong and his wife, Charlotte, bought 415,000 shares of Dow Jones stock in the two weeks prior to the announcement last week that News Corp. had offered to buy Dow Jones.

http://biz.yahoo.com/ap/070508/news_corp_dow_jones_probe.html?.v=2

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May 14 (Bloomberg) -- Siemens AG, embroiled in a six-month corruption probe, was ordered by a German court to pay 38 million euros ($51 million) as two former managers were found guilty in a bribery case.

Andreas Kley, an ex-finance chief at Siemens's power- generation unit, and Horst Vigener, a former consultant to the company, were convicted today by the regional court in Darmstadt on charges related to payments of 6 million euros to managers of two Enel SpA units to win orders. Siemens was ordered to give up some of the profits it made from the sales.

``For Siemens, this verdict is a real problem and I am afraid there are many others to follow,'' Guenter Heine, a German professor of criminal law at the University of Bern in Switzerland, said in a telephone interview. ``Things seem to have got out of hand at Siemens -- there is not just one murky character, it rather looks like a systematic problem.''

http://www.bloomberg.com/apps/news?pid=20601100&sid=ajnSUeam8CTA&refer=germany

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ATLANTA (AP) -- A former Coca-Cola secretary convicted of conspiring to steal trade secrets from the world's largest beverage maker was sentenced Wednesday to 8 years in federal prison.

Joya Williams, 42, faced up to 10 years in prison on the single conspiracy charge in a failed scheme to sell the materials to rival Pepsi for at least $1.5 million. She was convicted Feb. 2 following a jury trial in U.S. District Court in Atlanta, where The Coca-Cola Co. is based.

A co-defendant, Ibrahim Dimson, was sentenced to 5 years in prison.

Forrester's sentence for Williams was more severe than the 63- to 78-month sentence recommended by federal prosecutors and federal sentencing guidelines.

He said the seriousness of the crime necessitated a departure from the guidelines, which federal judges are not bound by.

"I can't think of another case in 25 years that there's been so much obstruction of justice," the judge said of Williams' conduct.

http://biz.yahoo.com/ap/070523/coca_cola_trade_secrets.html?.v=17

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SAN FRANCISCO (AP) -- Hewlett-Packard Co. has settled federal securities charges alleging the company illegally concealed the reason a director resigned just before its boardroom spying scandal erupted.

The SEC found that HP violated mandatory disclosure rules in the way it announced venture capitalist Tom Perkins' May 2006 resignation from the board.

The agency filed settled administrative charges Wednesday. The settlement does not include a fine or admission of guilt by HP, only an agreement by the company not to violate the SEC's reporting requirements in the future.

"HP acted in what it believed to be a proper manner," Michael Holston, HP's executive vice president and general counsel, said in a statement. "However, we understand and accept the SEC's views and are pleased to put this investigation behind us."

Perkins quit in protest of the spying tactics used to ferret out the source of boardroom leaks to the media. HP disclosed the resignation in a regulatory filing but did not mention the reason Perkins quit.

The SEC found the departure stemmed from a dispute over the company's corporate governance and handling of sensitive information, thus requiring HP to include a reason in its regulatory filing on the matter.

"The company viewed this as a personal dispute between a director and the chairman and opted to stay silent about the disagreement," said Marc Fagel, associate regional director of the SEC's San Francisco office. "But the failure to make the required disclosures deprived investors of important information about the management of the company by its board of directors."
http://biz.yahoo.com/ap/070523/hewlett_packard_directors.html?.v=3

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http://agonist.org/comment/reply/27843/119422

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June 6 (Bloomberg) -- Tomson Group Ltd., developer of China's costliest residential project, is under investigation for allegedly faking sales of Tomson Riviera apartments. Trading of the company's stock was halted today after plunging 10.5 percent.

Tomson Riviera, comprising 220 luxury apartments on the eastern bank of Shanghai's Huangpu River, is one of four projects being probed, the Shanghai Housing and Land Administration Bureau's official Zhou Pingying said by phone today.

The crackdown on Tomson is a move by the Chinese government to limit real estate prices, especially among luxury villas and apartments in major cities, as Premier Wen Jiabao tries to allay concern that property prices may have soared beyond the reach of average buyers. The government restricted land supply for villas and raised stamp duty taxes to curb speculation.

Tomson sold a unit at Riviera in August last year for 130 million yuan ($17 million), or a record 130,000 yuan per square meter, the highest price quoted for an apartment in China. Sales of that unit and two others have all been annulled, according to the regulator's Web site.

The developer may have posted fake sales to help with their marketing, state-owned Shanghai Securities News reported today, citing the Shanghai Housing and Land Administration Bureau.

The regulatory office's Zhou declined to say if Tomson had faked its sales. Tomson's project manager Roger Feng didn't answer calls made by Bloomberg to his cellular phone. Tomson's receptionists said the project is still on sale and they haven't been informed of the investigation.

http://www.bloomberg.com/apps/news?pid=20601089&sid=aE1a3Pd8CGiA&refer=china

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BUELACH, Switzerland (AP) -- All 19 managers and consultants accused in the collapse of former national carrier Swissair were acquitted Thursday.

The defendants in Switzerland's largest corporate trial all had denied charges that included damaging creditors, mismanagement, making false business statements and forging documents.
http://biz.yahoo.com/ap/070607/switzerland_swissair_trial.html?.v=3

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June 6 (Bloomberg) -- French regulators are examining whether Deutsche Bank AG enabled hedge funds to trade on inside information, destroying tapes and failing to keep written records of phone conversations when lining up buyers for a 2002 Vivendi Universal SA securities sale.

This is the fourth time since April 2006 that European regulators have targeted Germany's biggest bank for allegedly breaking securities rules that led to market manipulation or allowed hedge funds to engage in insider trading. The company was fined a year ago by U.K. regulators for misleading investors about a stock offering. French officials accused Frankfurt-based Deutsche Bank in January of improperly leaking information about a securities sale and two months later Spanish regulators made similar allegations.

In the Vivendi case, Deutsche Bank and four hedge funds that allegedly traded on inside information may have to pay 9 million euros ($12.2 million) in fines, five people with direct knowledge of the case said. Deutsche Bank faces as much as 3 million euros in sanctions, while the hedge funds may have to pay 1.5 million euros each, the people said. The combined fines would be the biggest in France related to improper trading. Deutsche Bank denies all the allegations, said two people involved in the case.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a15vStgtYfIA&refer=exclusive

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NEW YORK (AP) -- A federal judge on Wednesday ordered Adelphia cable TV company founder John Rigas and his son, Timothy J. Rigas, to report to prison on Aug. 13, nearly three years after they were convicted in one of the largest corporate frauds in U.S. history.

Both men had been free while appealing their sentences, but Judge Leonard Sand said the time had come for the two to start paying their debt to society. "Too much time has elapsed," he said.

In May, the 2nd U.S. Circuit Court of Appeals in Manhattan upheld the convictions of the 82-year-old Rigas and his 51-year-old son on charges of securities fraud, conspiracy to commit bank fraud and bank fraud.

John Rigas was sentenced to 15 years in prison, and Timothy Rigas, the company's former chief financial officer, was sentenced to 20 years. The sentencing judge, citing the elder Rigas' poor health, said the term might be cut short if he serves at least two years.

At trial, prosecutors said the Rigas family used the company as their personal piggy bank, withdrawing millions of dollars to finance everything from 100 pairs of bedroom slippers for Timothy Rigas to more than $3 million to produce a film by John Rigas' daughter. Prosecutors said John Rigas once even spent $6,000 to fly two Christmas trees to New York.

http://biz.yahoo.com/ap/070627/adelphia_fraud.html?.v=5

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MONTGOMERY, Ala. (AP) -- Former Alabama Gov. Don Siegelman was sentenced to more than seven years in federal prison and former HealthSouth CEO Richard Scrushy got nearly seven years Thursday in a bribery and corruption case that the judge said damaged public trust in state government.

Supporters of both men had testified at their sentencing hearing, describing the positive impact they have had in Alabama during their careers, as attorneys pleaded with U.S. District Judge Mark Fuller to show mercy.

"While it is true the good far exceeds the bad, I must impose a fair punishment to reassure all that come before this court that justice is blind," Fuller said in sentencing Siegelman.

Both men were immediately taken into custody after the judge denied defense requests to let them remain free while they appeal.

The two once-prominent figures in politics and business were escorted out of the courtroom by U.S. marshals and were not allowed to talk to family members. Scrushy's family cried quietly in the courtroom. Siegelman's wife, Lori, left immediately.

Asked by reporters about her husband's sentence and being immediately taken into custody, she said, "I expected it." She got into her car without further comment.

Siegelman was fined $50,000 due immediately and ordered to pay $181,325 in restitution to a state agency where prosecutors said kickbacks were made. He is to perform 500 hours of community service when his sentence of seven years, four months is completed.

Scrushy was fined $150,000 due immediately, plus ordered to pay restitution of $267,000 to United Way of Central Alabama. He also was ordered to perform 500 hours of community service after serving six years and 10 months in prison.

http://biz.yahoo.com/ap/070628/siegelman_trial.html?.v=16

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these guys pay to get Yahoo to place this story as most popular on their weekend front page?

Story:

Glancy Binkow & Goldberg LLP, Representing Shareholders of Dendreon Corporation, Announces Update to Shareholder Lawsuit -- DNDN
Friday June 29, 8:30 pm ET

LOS ANGELES, June 29, 2007 (PRIME NEWSWIRE) -- Glancy Binkow & Goldberg LLP -- representing shareholders of Dendreon Corporation -- announces 25 days remaining to move to be a lead plaintiff in the shareholder lawsuit. All persons and institutions who purchased or otherwise acquired the common stock of Dendreon Corporation (``Dendreon'' or the ``Company'') (NasdaqGM:DNDN - News) between March 30, 2007 and May 8, 2007, (the ``Class Period''), may move the Court not later than July 24, 2007, to serve as lead plaintiff; however, you must meet certain legal requirements.
If you wish to receive a copy of the Complaint, or have any questions concerning your rights or interests with respect to these matters, please contact Michael Goldberg, Esquire, of Glancy Binkow & Goldberg LLP, 1801 Avenue of the Stars, Suite 311, Los Angeles, California 90067, by telephone at (310) 201-9150, Toll Free at (888) 773-9224, or e-mail to info@glancylaw.com, or visit our website at http://www.glancylaw.com.

The Complaint charges Dendreon and the Company's chief executive officer with violations of federal securities laws. Among other things, plaintiff claims that defendants' material omissions and dissemination of materially false and misleading statements concerning the Company's performance and prospects caused Dendreon's stock price to become artificially inflated, inflicting damages on investors. Dendreon is a biotechnology company that engages in the discovery, development and commercialization of novel therapeutics that harness the immune system to fight cancer. The Company's most advanced product candidate for FDA marketing approval is Provenge, an active cellular immunotherapy. The Complaint alleges that during the Class Period defendants failed to disclose or indicate, among other things, that: (i) study D9902A, a Phase III clinical trial for Provenge, was not a complete clinical trial due to the limited number of enrolled patients, and therefore it lacked complete statistical significance; (ii) as a result of the foregoing, study D9902A was not comparable to earlier studies; (iii) the Company's studies failed to show that Provenge slowed the spread of prostate cancer; (iv) the Company had significantly changed how it categorized in its financial statements a contract with Diosynth Biotechnology for commercial-scale quantities of antigen; and (v) this change in accounting allowed the Company to manipulate its financial statements and make Dendreon appear financially stronger and more attractive to investors.

On May 9, 2007, the Company disclosed that it had received from the FDA a Complete Response Letter, commonly referred to as an ``approvable'' letter, concerning approval of the Biologics License Application (BLA) for Provenge. The Company revealed that the FDA had requested additional clinical data in support of the efficacy claim contained in the BLA, as well as additional information concerning the chemistry, manufacturing and controls section of the BLA. This news shocked the market, causing Dendreon stock to plummet $11.41 per share -- a more than 69% drop -- to close on May 9, 2007 at $6.33 per share, on unusually heavy trading volume.

Plaintiff seeks to recover damages on behalf of Class members and is represented by Glancy Binkow & Goldberg LLP, a law firm with significant experience in prosecuting shareholder lawsuits, and substantial expertise in actions involving corporate fraud.

If you are a member of the Class described above, you may move the Court, not later than July 24, 2007, to serve as lead plaintiff, however, you must meet certain legal requirements. If you wish to discuss this action or have any questions concerning this Notice or your rights or interests with respect to these matters, please contact Michael Goldberg, Esquire, of Glancy Binkow & Goldberg LLP, 1801 Avenue of the Stars, Suite 311, Los Angeles, California 90067, by telephone at (310) 201-9150 or Toll Free at (888) 773-9224 or by e-mail to info@glancylaw.com.

More information on this and other class actions can be found on the Class Action Newsline at http://www.primenewswire.com/ca

http://biz.yahoo.com/pz/070629/122263.html

This is an advertisement for a lead plaintiff. Hardly a story at all.

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CHICAGO (AP) -- For all the sexy testimony about a Bora Bora vacation on the company's dime and a lavish Park Avenue apartment bought at a suspiciously low price, the center of the case against former media baron Conrad Black comes down to a decidedly unglamorous topic: Non-compete payments.

Black has denounced the U.S. government's case as "pure fiction," a terse comment he made in French to Canadian reporters as he left U.S. District Court here Wednesday after the 3 1/2-month trial went to a jury.

But it is the jury's review of factual documents, thousands of them, about payments from newspaper sales that is likely to determine whether the 62-year-old former head of the Hollinger International newspaper empire goes to jail.

The Hollinger case, while drawing less attention in this country than the Enron, Tyco and WorldCom scandals, continues a trend of top management of major corporations being held more accountable for their conduct.

Black and fellow ex-Hollinger executives Jack Boultbee and Peter Atkinson, along with Chicago lawyer Mark Kipnis, are accused of participating in schemes in which more than $60 million was siphoned from the company. Most of that was from payments received in exchanges for promises not to compete with the new owners of U.S. and Canadian newspapers the executives had just sold. All have pleaded not guilty.

Black and former Hollinger International vice presidents Boultbee and Atkinson got the money along with the company's No. 2 man, F. David Radler, who has pleaded guilty and was the government's star witness. Radler was promised a lenient 29-month sentence for testifying.

Kipnis, who is accused of helping to engineer the payments, never pocketed any of them. But he received $150,000 in bonuses under Black.

The big question the jury must answer: Were they legitimate non-compete payments or were they a smoke screen for ripping off the company, as the government contends?

Non-compete payments are commonplace in the newspaper and other industries, with buyers wanting to ensure they're not paying millions to sellers just to see them remain in the same market as competitors. It is virtually unheard of for them to end up as the focus of a criminal trial.

http://biz.yahoo.com/ap/070701/black_trial.html?.v=3

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DENVER (AP) -- Prosecutors recommended Friday that former Qwest chief executive Joe Nacchio serve a maximum of seven years and three months in prison for completing $52 million in illegal stock sales when his telecommunications company was at financial risk.

In a brief filed late Friday, government attorneys also recommended Nacchio serve three years probation and be fined a maximum of $19 million.

"Any less severe sentence would fail to provide just punishment, to promote respect for the law, and to protect the public," prosecutor James Hearty wrote on behalf of the legal team.

In a separate brief, defense attorney Herbert Stern asked U.S. District Judge Edward Nottingham to impose an unspecified lesser sentence which he said was warranted because of the effect a lengthy prison term would have on the health of two of Nacchio's family members.

Stern said the situation was explained in detail in a sealed report from the U.S. Department of Probation that was submitted to the judge.

Nacchio also could be required to forfeit millions under a civil forfeiture action filed after he was convicted. Prosecutors want Nottingham to require the one-time CEO give back $52 million of "ill-gotten gains" while defense attorneys argue it should be no more than $1.8 million.

http://biz.yahoo.com/ap/070707/qwest_nacchio_trial.html?.v=2

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NEW YORK (AP) -- Complying with anti-money laundering laws has been much more expensive than banks anticipated, and some still aren't meeting all requirements, a new survey says.

Banks around the world saw compliance costs jump an average of 58 percent over the past three years -- more than in the previous three years, and higher than the 43 percent increase banks predicted in 2004, said a survey commissioned by Swiss cooperative KPMG International.

Among the six regions surveyed, North American banks saw the highest percentage cost increase, with costs rising 71 percent over the last three years. The Middle East and Africa region was close behind with a rise of 70 percent. Banks' compliance costs rose 58 percent in Europe; 37 percent in Asia; 59 percent in Central and South America; and 60 percent in Russia.

Most of the money went toward buying technological systems and hiring experienced personnel to monitor transactions, said the KPMG report, which did not measure the dollar value of the costs.

"A lot of institutions were not automated to the degree regulators were expecting them to be," said Teresa Pesce, U.S. partner at KPMG's forensic practice.

North America respondents said they predict a cost increase of 28 percent in the next three years. Globally, costs are expected to increase 34 percent in the next three-year period.

http://biz.yahoo.com/ap/070708/anti_money_laundering_costs.html?.v=2

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July 14 (Bloomberg) -- The U.S. Securities and Exchange Commission began an informal inquiry into Whole Foods Market Inc. Chief Executive Officer John Mackey's Internet chat room comments about the company and its competitors, a person with knowledge of the probe said.

Mackey posted anonymous messages on Yahoo! Inc.'s financial chat boards from 1999 to 2006 using the name ``rahodeb,'' an anagram for Deborah, which is his wife's name. Some of his comments, which exceeded 1,000, praised Whole Foods' stock while criticizing the company's rivals, including Wild Oats Markets Inc.

Mackey said the smaller rival ``had lost their way'' and was ``floundering'' in a message dated March 28, 2006.

Whole Foods is the largest U.S. natural-foods grocer, and Wild Oats is No. 2. Whole Foods offered in February to buy Wild Oats for $565 million.

In a March 10, 2006, posting, ``rahodeb'' touted Whole Foods' growth plans and said the company might top a sales goal it announced a month earlier.

``The upgraded prediction of $12 billion is most likely conservative,'' he wrote. ``Won't surprise me if the number ends up closer to $14 billion in 5 years.''

Later that year, he predicted further gains for the stock in the event that the company maintained its compound annual growth rate of sales.

``If Whole Foods continues to grow at close to a 20 percent CAGR over the next decade or so then you'll see the stock price continue to rapidly grow because the earnings are going to continue to rapidly grow,'' he said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRjNWozIVVVs&refer=home

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NEW YORK (AP) -- A federal judge dismissed charges Monday against 13 former KPMG employees in what the government had described as the largest criminal tax case in U.S. history, saying the prosecutors prevented them from presenting their defenses.

U.S. District Judge Lewis A. Kaplan said the dismissal was necessary because the government coerced KPMG to limit and then cut off its payment of the onetime employees' legal fees.

The case resulted after the government investigated what it described as a tax shelter fraud that helped the wealthy escape $2.5 billion in U.S. taxes.

Yusill Scribner, a spokeswoman for federal prosecutors, said the government had no comment.

Kaplan said the case will proceed to trial against three former employees who had not established that KPMG would have paid their defense costs even if the government had left the company alone in regards to defense costs. He also let the case proceed against two defendants who were not employed by KPMG and whose rights were not affected.

Kaplan said the Department of Justice "deliberately or callously" prevented many of the defendants from getting funds for their defense, blocking them from hiring the lawyers of their choice.

"This is intolerable in a society that holds itself out to the world as a paragon of justice," Kaplan said, adding that he reached his conclusion "only after pursuing every alternative short of dismissal and only with the greatest reluctance."

http://biz.yahoo.com/ap/070716/kpmg_tax_shelters.html?.v=3

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By Paul McDougall
InformationWeek
July 24, 2007 12:00 PM

Microsoft teamed up with the FBI and Chinese authorities to help bust up a major ring of software counterfeiters operating from the city of Guangdong in southern China, Microsoft disclosed Tuesday.
The gang is allegedly responsible for manufacturing and distributing more than $2 billion in fake Microsoft software, the company said.

Microsoft said the investigation was the largest of its kind in the world, and it was led by China's Public Security Bureau and the U.S. Federal Bureau of Investigation. Microsoft and its partners and customers in China also helped out, the company said.

The counterfeiters were illegally copying and selling code and Certificates of Authenticity for a range of popular Microsoft products, including Windows Vista, Office 2007, Windows XP, and Windows Server. The fakes were distributed to locations around the world, including Los Angeles, from where they were shipped to other parts of the United States, Microsoft said.
http://www.informationweek.com/news/showArticle.jhtml?articleID=201200779

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DENVER (AP) -- A federal judge on Friday sentenced former Qwest Communications chief executive Joe Nacchio to six years in prison for his insider trading conviction.

U.S. District Judge Edward Nottingham also ordered Nacchio to forfeit $52 million in assets he gained in illegal stock sales, imposed a maximum $19 million fine and ordered him to serve two years' probation after serving his sentence.

http://biz.yahoo.com/ap/070727/qwest_nacchio_sentencing.html?.v=10

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WASHINGTON (AP) -- Conflicts of interest may still be rampant on Wall Street, with a new study showing that nearly two-thirds of investment-firm analysts received favors from executives of companies they cover and suggesting that the companies get favorable ratings in return.

The academic study published Friday outlines a culture of blatant back-scratching on Wall Street as company executives bestow professional and personal favors on analysts -- putting them in touch with top executives of other companies, recommending them for a job -- and their companies receive positive ratings and evade stock downgrades. At the same time, executives punish analysts for negative reports by refusing to answer their phone calls or their questions.

For their study, management professor James Westphal of the University of Michigan and accounting professor Michael Clement at the University of Texas sent 4,500 questionnaires to financial analysts between 2001 and 2003 and follow-up surveys to hundreds of executives at the large and mid-size public companies covered by the analysts.

The 51-page study, to be presented at the Academy of Management's annual meeting next month, found that the more a company's earnings slipped below analysts' consensus forecasts, the more favors the company's executives showered on the analysts covering it -- especially at big investment firms.

The study comes four years after a crackdown by the Securities and Exchange Commission, then-New York Attorney General Eliot Spitzer and other state regulators exposed Wall Street conflicts that skewed analysts' research, and forced the big investment firms to alter their research practices and pay a total $1.4 billion in a landmark settlement. The regulators found that analysts at the powerhouse investment firms -- including Citigroup, Merrill Lynch and Credit Suisse -- misled investors with stock recommendations designed to win their firms investment-banking business and lucrative fees.

more:

http://biz.yahoo.com/ap/070727/analyst_conflicts.html?.v=5

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LOUISVILLE, Ky. (AP) -- Three attorneys accused of bilking their clients in a diet drug settlement must repay at least $62.1 million in settlement funds and interest, a judge ruled Friday.

Special Judge William Wehr ordered William J. Gallion, 56, Shirley A. Cunningham Jr., 52, and Melbourne Mills Jr., 76, to repay $42 million taken from the settlement and $20.1 million in interest. Wehr said the interest was 8 percent over the six years the attorneys had the funds.

The attorneys are being sued by about 400 former clients who claim the lawyers took too much money as part of a $200 million fen-phen settlement.

Gallion and Cunningham own a 20 percent stake in Curlin, who won the second leg of the Triple Crown in May.

A federal grand jury indicted the attorneys last month, charging them with conspiring to commit wire fraud in representing more than 400 people in a lawsuit over the diet drug. The lawyers, who were temporarily suspended from practicing law by the Kentucky Bar Association, have pleaded not guilty. Federal prosecutors want the lawyers to forfeit any assets they have to pay restitution to their former clients.

Wehr previously ruled that the three attorneys breached their duty to their clients. A trial to determine punitive damages has been delayed while the criminal case, scheduled for trial in October, is resolved.

Wehr, in a four-page ruling, said Cunningham, Gallion and Mills overpaid themselves by misappropriating about $64 million from the settlement. Wehr said $20.5 million of that is still being contested, and another $1.5 million is justifiable legal fees.

Angela Ford, a Lexington-based attorney representing the former clients, said the ruling is what her clients have been waiting for.

http://biz.yahoo.com/ap/070803/lawyers_fen_phen.html?.v=3

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SAN FRANCISCO (AP) -- Former Brocade Communications Systems Inc. Chief Executive Gregory Reyes was convicted Tuesday of defrauding investors in the first stock options backdating case to go to trial.
The guilty verdict on all counts is an important validation of the Justice Department's options backdating probe, which has so far led to criminal charges against at least 10 executives. Reyes' case was seen as an important test of whether a jury considers it a crime deserving of jail time.

Assistant U.S. Attorney Tim Crudo declined to comment, as did members of the jury.

After denying a long-pending defense motion to have the case dismissed for lack of evidence, U.S. District Judge Charles Breyer scheduled Reyes' sentencing for Nov. 21. He could face a decade or more in prison.

The trial lasted six weeks and went to the jury on July 30.

Some observers wondered whether the government's case would be harmed by the firing of Kevin Ryan -- the Northern California U.S. attorney who brought the charges against Reyes and was investigating backdating allegations against other technology companies and executives. Ryan was fired as part of the Bush administration's purge of eight U.S. attorneys.

Instead, Reyes' conviction could embolden prosecutors. The federal government has reportedly been considering criminal charges against former executives at Apple Inc., KLA-Tencor Corp. and Broadcom Corp., companies that have all acknowledged stock options shenanigans.

Backdating refers to the practice of selecting favorable dates in the past when the company's stock price was low, and retroactively pegging options grants or contracts to buy shares to those dates. The goal is to boost the recipient's potential windfall, and it's only illegal if it's not properly disclosed and accounted for.

Reyes was charged with 10 felony counts of securities fraud.

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NEW YORK (AP) -- Johnson & Johnson, the health-products giant that uses a red cross as its trademark, sued the American Red Cross on Wednesday, demanding that the charity halt the use of the red cross symbol on products it sells to the public.

Johnson & Johnson said it has had exclusive rights to use the trademark on certain commercial products -- including bandages and first-aid cream -- for more than 100 years.

It contends that the Red Cross is supposed to use the symbol only in connection with nonprofit relief services.

The suit, filed in U.S. District Court in New York, marked the breakdown of months of behind-the-scenes negotiations and prompted an angry response from the Red Cross.

"For a multibillion-dollar drug company to claim that the Red Cross violated a criminal statute ... simply so that J&J can make more money, is obscene," said Mark Everson, the Red Cross president.

Johnson & Johnson began using the red cross design as a trademark in 1887 -- six years after the creation of the American Red Cross but before it received its congressional charter in 1900. The lawsuit contends that the charter did not empower the Red Cross to engage in commercial activities competing with a private business.

"After more than a century of strong cooperation in the use of the Red Cross trademark. ... we were very disappointed to find that the American Red Cross started a campaign to license the trademark to several businesses for commercial purposes," Johnson & Johnson said in a statement.

It said these product include baby mitts, nail clippers, combs, toothbrushes, hand sanitizers and humidifiers.

The Red Cross said that many of the products in question were part of health and safety kits, and that profits from the sales -- totaling less than $10 million -- went to boost Red Cross disaster-response efforts.

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NEW YORK (Reuters) - U.S. regulators are scrutinizing the books of some top Wall Street brokers and investment banks for subprime-mortgage losses, according to a report in the online version of the Wall Street Journal.

Under review by the U.S. Securities and Exchange Commission is whether the firms are calculating the value of subprime-mortgage assets in a consistent way, as well as customer assets, such as those held for hedge funds, according to the report, which cited people familiar with the inquiry.

The regulatory checks, which are expected to include Wall Street's five biggest investment banks including Goldman Sachs Group

Neither Goldman Sachs nor Merrill Lynch could immediately be reached for comment.

The added scrutiny comes amid some subprime-mortgage cracks surfacing at some large investment firms. Swiss bank UBS AG was forced to shut down Dillon Read Capital Management less than two years after its launch following losses on mortgage markets. And Bear Stearns Cos shares, and its reputation, were slammed as two of its mortgage funds suffered losses, outflows and then filed for bankruptcy.

Both analysts and investors have raised questions over whether there are unreported subprime-mortgage and collateralized-debt obligation losses lurking on firms' books. Added scrutiny may also help pinpoint whether hedge funds have accurately reported their results to investors, the Journal said, citing one person knowledgeable with the inquiry.

Regulatory cross-checks of how firms calculate subprime-mortgage assets could boost the accuracy of reports to investors, according to the report.

Marking subprime assets to market is troublesome since they aren't easily bought or sold, making it tricky to put an accurate price on them, the Journal reported.

Ann Rutledge, a principal with R&R Consulting, a structured finance consultancy in New York, told the Journal: "No one really knows how to price asset-backed securities and CDOs and that's a real problem in the market now."
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Aug. 16 (Bloomberg) -- A global manhunt launched by Johnson & Johnson has tracked to China counterfeit versions of an at- home diabetes test used by 10 million Americans to take sensitive measurements of blood-sugar levels.

Potentially dangerous copies of the OneTouch Test Strip sold by J&J's LifeScan unit surfaced in American and Canadian pharmacies last year, according to federal court documents unsealed in June. New Brunswick, New Jersey-based J&J, the world's largest consumer-health products maker, learned of the counterfeit tests after 15 patients complained of faulty results last September.

Tipped off by J&J, the U.S. Food and Drug Administration issued a nationwide consumer alert in October without disclosing the link to China. While no injuries were reported, inaccurate test readings may lead a diabetic to inject the wrong amount of insulin, causing harm or death, the agency said. Fake medicines are a $32 billion global business, says the World Health Organization, and the FDA says it ran 54 counterfeit investigations in 2006, almost double the year before.

``Growth in counterfeit medicines and devices is probably the biggest health threat besides infectious disease,'' says Peter Pitts, director of the Center for Medicines in the Public Interest in New York and formerly an FDA official investigating knockoff drugs.

The court filings disclose, for the first time, that China is the source of about one million phony test strips that have turned up in at least 35 states and in Canada, Greece, India, Pakistan, the Philippines, Saudi Arabia, and Turkey.
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Aug. 16 (Bloomberg) -- A small South Carolina parts supplier collected about $20.5 million over six years from the Pentagon for fraudulent shipping costs, including $998,798 for sending two 19-cent washers to an Army base in Texas, U.S. officials said.

The company also billed and was paid $455,009 to ship three machine screws costing $1.31 each to Marines in Habbaniyah, Iraq, and $293,451 to ship an 89-cent split washer to Patrick Air Force Base in Cape Canaveral, Florida, Pentagon records show.

The owners of C&D Distributors in Lexington, South Carolina -- twin sisters -- exploited a flaw in an automated Defense Department purchasing system: bills for shipping to combat areas or U.S. bases that were labeled ``priority'' were usually paid automatically, said Cynthia Stroot, a Pentagon investigator.

C&D and two of its officials were barred in December from receiving federal contracts. Today, a federal judge in Columbia, South Carolina, accepted the guilty plea of the company and one sister, Charlene Corley, to one count of conspiracy to commit wire fraud and one count of conspiracy to launder money, Assistant U.S. Attorney Kevin McDonald said.

Corley, 46, was fined $750,000. She faces a maximum prison sentence of 20 years on each count and will be sentenced soon, McDonald said in a telephone interview from Columbia. Stroot said her sibling died last year.

Corley didn't immediately return a phone message left on her answering machine at her office in Lexington. Her attorney, Gregory Harris, didn't immediately return a phone call placed to his office in Columbia.
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Aug. 21 (Bloomberg) -- Bank of America Corp., Deutsche Bank AG and Credit Suisse Group were sued for $2 billion by a trustee for Refco Inc. for their alleged roles in a conspiracy that drove the futures trader into bankruptcy.

Also named in a complaint filed today in Illinois state court in Chicago were law firm Mayer, Brown, Rowe & Mawe, accounting firms Grant Thornton LLP, Ernst & Young LLP and PricewaterhouseCoopers LLP, and former Refco Chief Executive Officer Phillip Bennett, who faces an October trial in Manhattan federal court for fraud, trustee Marc Kirschner said.

``This conspiracy went on for seven years, and as it turned out, many of the most well-known names in law, finance and accounting were involved,'' Kirschner said.

Refco filed the 15th-largest bankruptcy in U.S. history in October 2005, a week after claiming that Bennett, 59, concealed $430 million in company debt in the months after its August 2005 initial public offering. The Refco litigation trusts, created while the company was in bankruptcy, have already sued closely held buyout firm Thomas H. Lee Partners and related parties seeking $945.5 million in damages.

The complaint filed today also names former Refco Capital Markets CEO Santo Maggio, former Chief Financial Officer Robert Trosten and former Refco Group Ltd. President Tone Grant.

`Round-Trip Trades'

The trustee alleged that participants in the conspiracy took part in so-called ``round-trip trades'' that hid losses at Refco.

Kirschner claimed that the trades, in which Refco allegedly borrowed money to hide its losses, included Liberty Corner Capital Strategies LLC, a hedge fund manager in Summit, New Jersey that closed in 2006; Ingram Micro's CIM Ventures unit; Beckenham Trading; CS Land Management, a company related to Coast Asset Management LP in Santa Monica, California; EMF Core Fund Ltd.; and Delta Flyer Fund LLC, both related to EMF Financial Products, as well as ``various principals in those firms.''

Kirschner said there were three phases of fraud over the seven-year period alleged in the 158-page complaint.

The first phase created an illusion that Refco was financially sound; the second maintained that illusion with the round-trip trades; and the third enabled insiders to line their pockets with substantial fees, he claimed.

``The scheme could only have worked with this cadre of outside advisers,'' Kirschner said.

`Structured'

Mayer Browne, based in Chicago, ``structured and documented the round-trip loans,'' Grant Thornton, also based in Chicago, ``blessed the financial statements and audited them despite knowing the true nature and extent of the fraud,'' and New York- based Ernst & Young ``generated false tax returns and had complete knowledge of the scheme,'' Kirschner alleged.

``The investment banks facilitated the cashing out of interests,'' he added.

Kirschner said investigations by the trusts relied on work done by the creditors' committee during Refco's bankruptcy.

U.S. Bankruptcy Judge Robert Drain authorized the committee to look into Refco's IPO as well as Thomas H. Lee's 2004 leveraged buyout of the futures trader for $507 million.

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WASHINGTON (AP) -- Two major airlines were fined $300 million apiece Thursday after admitting they conspired to fix prices on international flights and agreeing to help prosecutors investigate other airlines.

British Airways PLC, Britain's largest airline, and Korean Air Co., South Korea's national carrier, pleaded guilty to antitrust conspiracy charges. They acknowledged colluding with rivals over cargo rates and fuel surcharges, which were added to fares in response to rising oil prices. That meant higher costs for international shippers and passengers.

U.S. District Judge John D. Bates said the case "involved considerable commerce and reflected long-term and widespread conduct involving major airlines and players."

Both saw their potential fines reduced because they cooperated with Justice Department investigators. Korean Air's fines could have been twice as high and British Airways could have faced fines closer to $900 million, but the Justice Department and the judge credited the company with cooperating.

"Any anticompetitive behavior is to be condemned at British Airways or at other companies. It will not be tolerated and we remain vigilant in this respect," British Airways Chief Executive Willie Walsh said in a statement released after court.

Korean Air released a statement saying it was "committed to antitrust compliance" and was taking steps to make sure the conduct was never repeated. Neither company addressed the extent of its cooperation or how widespread the practice was in the industry.

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Aug. 24 (Bloomberg) -- European Union regulators extended an examination of credit rating companies' role in helping create ``structured finance'' instruments such as the subprime-mortgage bonds that are roiling debt markets.

The Committee of European Securities Regulators in Paris today pushed back a deadline for public comments to Sept. 10, to seek more input after a rout in U.S. mortgage bonds spread across global credit markets. The regulators' group also said it may call a public hearing.

Declines in bonds backed by mortgages and other assets have renewed scrutiny of the so-called credit rating agencies, such as Moody's Investors Service and Standard & Poor's, and whether there is a conflict of interest in advising issuers how to create bonds to earn a desired rating.

The regulators extended the review ``as recent market developments have stressed the important role of CRAs in the structured finance business,'' CESR said in a statement.

``It is CESR's intention to seek clarification during the meeting on the CRAs' role in the U.S. subprime mortgage crisis,'' the regulators' group said of a plan to meet with the rating companies in October.
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BENTONVILLE, Ark. (AP) -- A former Wal-Mart executive who was sentenced to home detention in a fraud case got off too light and must be sentenced again, an appeals court ruled Tuesday. Prosecutors had argued U.S. District Judge Robert T. Dawson failed to consider the gravity of Tom Coughlin's offense while giving him credit as a pillar of the community.

The 8th U.S. Circuit Court of Appeals agreed, saying the sentence of 27 months of home detention and 33 months of additional probation was too lenient.

"Perhaps Coughlin's family ties and station in the community, as well as his lofty corporate position of trust and power, exacerbate the nature of his crimes, especially for Coughlin's victims: Wal-Mart, and more generally, American businesses," the court wrote in a split decision.

Coughlin, a protege of company founder Sam Walton, was a 28-year employee who rose to the No. 2 job at Wal-Mart Stores Inc., world's biggest retailer. He retired in January 2005.

Months later, the company based in Bentonville, Ark., accused him of using Wal-Mart money and gift cards to pay for about $500,000 in personal items that ranged from hunting trips and hunting dog training to clothes, alcohol and work on his car.

Coughlin pleaded guilty to five counts of wire fraud and one count of filing false tax returns -- all felonies -- in January 2006.

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CHICAGO (AP) -- Ace Hardware Corp. discovered an approximately $154 million shortfall on its books while preparing to convert from retailer-owned cooperative to for-profit corporation and likely will have to restate its financial results for the last five years, President and CEO Ray Griffith said Wednesday.

Ace has called off the conversion plan and hired an audit consulting firm to help rectify an accounting problem which appears to date to 2002, Griffith told The Associated Press. The company may have to forego returning profits to store owners this year as a result, he said.

He said no money or inventory is missing but the Oak Brook, Ill.-based company has not been able to determine the source of what he characterized as a "significant accounting error."

Ace notified the dealers who own its 4,600 stores of the problem in letters Wednesday from Griffith and its board of directors.

The chief executive said an internal review of the company's financial documents found that its inventory total is $154 million less than its general ledger balance -- the company's primary method for recording its financial transactions. The final total is expected to be somewhat less.

He said the error amounts to "an overstatement of gross margin that resulted in an overstatement of gross profits that resulted in an overpayment of patronage dividends."

"There is no missing money, there is no missing inventory, there is no evidence of theft," Griffith said in a telephone interview. "Obviously we're upset, but we feel very confident that it's a manageable situation and that our business is sound. We're still a very viable business, our comp sales are doing well. This is an accounting issue."

The company's board of directors hired Protiviti Inc., he said, to find and reconcile the error.

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Sept. 6 (Bloomberg) -- Maurice ``Hank'' Greenberg, former chief executive officer of American International Group Inc., will testify to the U.S. Securities and Exchange Commission about whether he had a role in the insurer's accounting improprieties, two people familiar with the matter said.

Greenberg is slated to testify within a month as part of an SEC probe into practices that resulted in AIG paying $1.64 billion to settle federal and state investigations, said the people, who declined to be named because the SEC inquiry isn't public. Greenberg declined to comment, according to spokesman Ken Frydman. SEC spokesman John Nester didn't comment.

The planned testimony comes more than two years after Greenberg invoked his Fifth Amendment right to avoid self- incrimination when questioned by investigators from the SEC and then-New York Attorney General Eliot Spitzer. Greenberg, 82, denies any wrongdoing and will ``answer all questions'' from the SEC, CNBC reported earlier today.

``They may be giving him one last chance to testify before they make an enforcement recommendation,'' said Jacob Frenkel, a former SEC enforcement lawyer. ``Greenberg probably concluded it's now in his best interests to tell his version of what happened rather than to leave a void.''

The SEC sent a subpoena to Greenberg last month, CNBC said.

Lee Wolosky, a lawyer for Greenberg, didn't comment. AIG spokesman Chris Winans declined to comment.

Greenberg was CEO of New York-based AIG, the world's largest insurer, until March 2005, two months before Spitzer sued him and AIG for accounting fraud.

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Sept. 7 (Bloomberg) -- General Electric Co., the world's second-largest company by market value, delayed an auction of its Japanese consumer lending unit Lake, six people briefed on the decision said.

A first round of non-binding offers, scheduled for Sept. 3, was postponed after some potential buyers complained about media leaks, two of the people said. They declined to be identified as talks are private. GE aims to start the auction within 60 days, one of the people said.

GE is trying to exit the industry after courts gave borrowers more scope for demanding interest refunds, leading to a combined $14 billion loss at Japan's four largest consumer lenders last year. Fairfield, Connecticut-based GE ranks sixth in Japan with about $6 billion of outstanding loans, behind Citigroup Inc.

Japan's regulators took aim last year at consumer lenders and their interest rates that ran as high as 29 percent, after aggressive marketing created a cycle of debt, with borrowers obtaining loans from one firm to repay another.

A law was passed in December capping the maximum interest rate at 20 percent. Lenders' costs then surged after courts opened the door for customers to claim interest refunds and as stricter accounting rules required more reserves against such claims.

Japan's four largest consumer lenders by assets, led by Aiful Corp., lost a combined $14 billion in the fiscal year ended March 31. Aiful announced 1,900 job cuts in March and said it would close 1,520 outlets to trim costs. Citigroup said in January it was shutting about 80 percent of its consumer-loan network in Japan.

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WASHINGTON (AP) -- An investigation by federal and state regulators of "free lunch" investment seminars aimed at seniors has found high-pressure sales pitches masquerading as educational sessions, pervasive misleading claims for unsuitable financial products, and even fraud.

Much of the blame goes to investment firms for failing to properly supervise their employees who put on the seminars for seniors, according to the report of the investigation being made public Monday. By law, the sales pitches made at the seminars and the materials provided to participants must be approved by a brokerage or investment firm's supervisors.

The examination by the Securities and Exchange Commission, state regulators and the securities industry's self-policing organization, the Financial Industry Regulatory Authority, covered seven states that have large numbers of retirees: Alabama, Arizona, California, Florida, North Carolina, South Carolina and Texas.

The investigation, which ran from April 2006 to June 2007, focused on 110 investment firms and branch offices that sponsor sales seminars for seniors with free meals.

SEC Chairman Christopher Cox called the investigation's findings "a wake-up call for securities regulators, the financial-services industry and, especially, older investors."

The SEC and our fellow regulators intend to put a stop to this," Cox said in a statement. "We will step in whenever false claims are being made. We will {not? sic} sanction crooks who try to feast on the life savings of older investors."

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Sept. 11 (Bloomberg) -- Marsha Slotten's bad news came in April by e-mail, from a tipster warning that the company holding her retirement nest egg had collapsed.

After racing in a panic to the office of Southwest Exchange Inc. outside Las Vegas, she found a locked door and a sign saying the staff was ``in training.'' It never reopened.

``I was devastated,'' said Slotten, 58, who said she was forced to cancel early retirement after the disappearance of $2.74 million she made selling a strip mall. ``I thought I knew what I was doing, but now my nest egg, my retirement plan, is gone.''

The real estate broker is among hundreds of investors who lost the proceeds of property sales because two companies went bankrupt during criminal investigations.

The two were among thousands of mostly unregulated U.S. firms that hold money between commercial-property sales. Their collapse led to dozens of lawsuits and calls for regulation.

The intermediaries are known as 1031 exchanges, named for a provision of U.S. tax law that defers capital gains taxes if the seller of a property buys another like it within six months.

Exchanges are used by Fortune 500 companies, partnerships, individuals and investment trusts. More than 338,500 sellers deferred $73.7 billion in taxes in 2004, the latest year for which Deloitte & Touche LLP has data, the accounting firm said.

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OMAHA, Neb. - Online brokerage TD Ameritrade Holding Corp. said Friday one of its databases was hacked and contact information for its more than 6.3 million customers was stolen. A spokeswoman for the Omaha-based company said more sensitive information in the same database, including Social Security numbers and account numbers, does not appear to have been taken.

The company would not share many details of its investigation, including when the hack took place, because it is still looking into the theft and cooperating with investigators from the FBI, Securities and Exchange Commission, Financial Industry Regulatory Authority and local authorities.

But Ameritrade has known about the problem at least since late May when two of its customers sued the brokerage in federal court because they were receiving unwanted e-mail ads on accounts used only for Ameritrade.

The data on Ameritrade's servers may have been vulnerable for an extended period of time dating back at least to last October, according to the lawsuit filed by lawyer Scott A. Kamber. The company said Friday the problem had recently been fixed.

The plaintiffs in the lawsuit had wanted the court to order Ameritrade to tell its customers about the data problem, but Ameritrade issued its release before a hearing could be held. The plaintiffs are also seeking damages and are trying to qualify as a class-action lawsuit.

"They preferred putting out a press release with their own language in it rather than have the court order them to put out a release with our language," Kamber said.

Ameritrade officials did not immediately respond to a message left Friday afternoon with questions about the lawsuit.

Earlier in the day, Ameritrade spokeswoman Kim Hillyer said the company discovered the breach in its system during a routine review of complaints about e-mail ads.

"As soon as we found the issue and were able to stop it, we made plans to notify clients," Hillyer said.

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Sept. 18 (Bloomberg) -- The U.S. Securities and Exchange Commission is examining hedge funds for signs of insider trading, demanding information about relationships between managers, employees, family members and public companies.

SEC officials told hedge funds to list clients and workers who serve as officers or directors of publicly traded companies, along with the names of any relatives who hold such posts, according to a 27-page letter to industry executives obtained by Bloomberg News. The SEC confirmed its authenticity.

``The SEC is really drilling down, trying to get very specific information that might give them leads on insider trading,'' said Nora Jordan, a lawyer at New York-based Davis Polk & Wardwell who represents hedge funds in SEC examinations. ``Some of the information that they have asked for has never been asked for before, and many clients are not keeping it.''

Unusually high trading in shares and options before takeover announcements by companies including TXU Corp. and Dow Jones & Co. has intensified scrutiny of how market-moving information spreads among hedge funds, investment banks and leveraged buyout firms. The SEC's office of compliance and inspections referred 223 cases of potential securities violations to the agency's enforcement division during the latest fiscal year.

The SEC's New York office started using the new examination letter, which is more extensive than previous versions, after lawmakers including U.S. Senator Charles Grassley questioned the agency's record in detecting illegal trading.

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WASHINGTON (AP) -- Freddie Mac, the nation's second-largest financer of home mortgages, is paying a $50 million fine to settle civil securities fraud charges brought by federal regulators in a four-year accounting lapse.

In addition, four former executives at the government-sponsored company settled negligent conduct charges by agreeing to pay a total of $515,000 in civil fines and to make restitution totaling $275,548. They are former president and chief operating officer David Glenn, ex-chief financial officer Vaughn Clarke, and former senior vice presidents Robert Dean and Nazir Dossani.

"We take these charges seriously, and that's why the Freddie Mac of today is a very different company than the Freddie Mac of the past," said Richard Syron, Freddie Mac's chairman and chief executive officer.

McLean, Va.-based Freddie Mac neither admitted nor denied wrongdoing under the accord with the Securities and Exchange Commission announced Thursday, but it agreed to refrain from future violations of securities laws.

An accounting scandal erupted at Freddie Mac in June 2003 when it disclosed that it had misstated earnings by some $5 billion -- mostly underreporting them -- for 2000-2002 to smooth quarterly volatility in earnings and meet Wall Street expectations.

The company's top executives -- Glenn, Clarke and then-chairman and chief executive Leland Brendsel -- were ousted. The events shocked Wall Street, where Freddie Mac long had enjoyed a reputation as a steady performer and reliable corporate player.

Freddie Mac paid a then-record $125 million civil fine in 2003 in a settlement with the Office of Federal Housing Enterprise Oversight, which blamed management misconduct for the faulty accounting.

In September 2004, an equally stunning accounting scandal came to light at No. 1 mortgage finance company Fannie Mae. Regulators eventually imposed limits on the two companies' multibillion-dollar mortgage debt holdings, which they have been seeking to have lifted as a way to provide cash to the mortgage market in the recent turmoil.

Fannie Mae was fined $400 million in May 2006 in a settlement with OFHEO and the SEC -- one of the largest civil penalties ever in an accounting fraud case.

Fannie and Freddie were created by Congress to make mortgages affordable and pump cash into the market by buying blocks of home loans from lenders and bundling them into securities for sale to investors worldwide.

In a lawsuit filed in federal court in Washington, the SEC said Freddie Mac "engaged in a fraudulent scheme that deceived investors about its true performance, profitability and growth trends."

"As has been seen in so many cases, Freddie Mac's departure from proper accounting practices was the result of a corporate culture that sought stable earnings growth at any cost," SEC Enforcement Director Linda Thomsen said in a statement. "Investors do not benefit when good corporate governance takes a back seat to a single-minded drive to achieve earnings targets."

The SEC said the $50 million Freddie Mac agreed to pay will be distributed to shareholders injured by the alleged accounting fraud. The settlement with the company is subject to court approval.

In a separate action Thursday, OFHEO issued a consent order against Clarke, under which he agreed to cooperate with the agency in its proceedings against other former Freddie Mac executives. Clarke also agreed to pay a $125,000 civil fine -- which OFHEO deemed to have been satisfied by his payment of the same amount under the SEC accord -- and to forego any bonuses owed him by Freddie Mac.

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Oct. 10 (Bloomberg) -- A former broker at Morgan Stanley, the second-largest securities firm, was suspended for 30 months and censured by the New York Stock Exchange for making improper trades on the accounts of sick and elderly customers.

Adam Lazarus, 46, made unauthorized securities trades from June 2001 to December 2003 while working at a Morgan Stanley branch office in New York, the NYSE said in a hearing board decision released today. With four accounts, Lazarus made trades that were ``unsuitable given the customers' age, circumstances'' and tolerance for risk.

The case is ``related'' to four others at the same Morgan Stanley branch office at 330 Madison Ave. in New York, the NYSE said in its statement. In May, Morgan Stanley was fined $500,000 by the NYSE for failing to appropriate supervise the office. The firm didn't admit or deny wrongdoing.

``While Lazarus engaged in unsuitable and unauthorized trading in the accounts of some customers who were sick and elderly,'' other brokers in the office ``did so in the guardian accounts established for the long-term care of children injured at birth or childhood, and they did so under the supervision of their branch manager,'' according to the statement.

In February, the NYSE said another former Morgan Stanley broker, John Steigerwald, cheated child medical-malpractice victims by making unauthorized bond trades in their accounts. The NYSE censured and permanently banned Steigerwald.

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HARTFORD, Conn. (AP) -- Connecticut's attorney general said Friday that he has subpoenaed the nation's three largest debt-rating agencies as part of an investigation into possible anticompetitive practices.

Attorney General Richard Blumenthal confirmed that his office issued subpoenas Oct. 10 to Standard & Poor's, Moody's Investor Services and Fitch Ratings Service.

The investigation focuses on whether the credit-rating agencies are using their dominant position to unfairly raise prices or exclude competitors in violation of Connecticut's antitrust laws, he said.

"Assuring debt ratings are honest and untainted is vital to investors, companies and government," Blumenthal said.

Standard & Poor's referred questions to parent company McGraw-Hill Cos., which disclosed the subpoena in its third-quarter report filed with the Securities and Exchange Commission.

"As stated in our 10Q filing, S&P received the subpoena on Oct. 16, and we are responding," said Frank Briamonte, a spokesman for McGraw-Hill.

Messages seeking comment were left with Fitch and Moody's.

Blumenthal said Friday his investigation is reviewing allegations that some companies rated an issuer's debt against its wishes, then ordered the issuer to pay for the service or face a possible poor rating.

His office also is reviewing whether some credit-rating agencies pressured issuers into exclusive contracts under threat of a downgrade, and whether contracts that offer a discount in return for exclusivity violate Connecticut's antitrust laws by locking out other debt raters.
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Nov. 1 (Bloomberg) -- South Africa's financial services regulator fined HCBC Holdings Plc trader Neil Stacey and hedge fund manager Michael Berman 2 million rand ($300,000) each for rigging share prices, the first time it's imposed such a penalty.

A panel chaired by Judge Frikkie Eloff found that Stacey, head of sales trading at HSBC's Johannesburg-based unit, helped Berman manipulate the stock of two South African property companies in March 2005, according to a copy of the judgment on the Financial Services Board's Web site. It was the first time that the Enforcement Committee had heard a case.
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Nov. 5 (Bloomberg) -- Lawrence Salander, an owner of the Salander-O'Reilly Galleries LLC, filed for personal bankruptcy protection as did his wife, citing creditor claims of at least $50 million as New York prosecutors investigate his business.

Creditors with $4.6 million in claims filed an involuntary petition against Salander-O'Reilly Galleries Nov.1. The Manhattan district attorney's office searched Salander's Upper East Side townhouse and the gallery last week as part of a criminal investigation based on customer complaints about fraud.

``It's not surprising because both they and the gallery had a lot of debt that seemed to be connected,'' said Dean Nicyper, a lawyer representing Earl Davis, the son of artist Stuart Davis, who seeks $2.9 million from Salander and the gallery.

Gallery clients, such as Davis, tennis star John McEnroe and former New York Observer Publisher Arthur Carter, sued Salander claiming he pocketed all proceeds of art sold on consignment, promised guaranteed investment profits while paying back little or nothing, and reneged on loans, bills and credit-card charges.

Salander's filing for Chapter 11 protection listed an address in Millbrook, New York, as his home address. Salander lawyer John Moscow declined comment on why his client filed for personal bankruptcy or on whether a petition on the galleries own behalf is imminent.

Among the couple's largest unsecured creditors were other galleries and art institutions, including Curtis Galleries Inc., with a claim to $7.7 million and Frelinghuysen Morris Foundation, with a claim to $3.1 million. Sotheby's has a claim for $640,000, the petition filed Nov. 2 in bankruptcy court in New York showed.

Sandra Lane had a claim for $4 million and Carol F. Cohen had a claim for $3.6 million, according to the petition.

First Republic Bank, which Merrill Lynch & Co. bought in September for $1.8 billion, lent about $59 million to Salander and his galleries and to an investment fund that said it arranged to buy all of Salander O'Reilly's Renaissance art, according to property records.

http://www.bloomberg.com/apps/news?pid=20601088&sid=a.95n8ZwIPv8&refer=culture

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ALBANY, N.Y. (AP) -- New York Attorney General Andrew Cuomo said Wednesday that he has issued subpoenas to government-sponsored lenders Fannie Mae and Freddie Mac in his investigation into what he claims are conflicts of interest in the mortgage industry.

Cuomo said he wants to know about loans Fannie Mae and Freddie Mac purchased from banks, including Washington Mutual Inc. The subpoenas also seek to find out how the government-sponsored companies handle appraisals.

Cuomo said Fannie Mae and Freddie Mac have agreed to his demand that an independent examiner, subject to the attorney general's approval, review all Washington Mutual appraisals and mortgages done with the two government-sponsored lenders.

"In order to fulfill their duty to consumers and investors, Fannie Mae and Freddie Mac must ensure that Washington Mutual's mortgages have not been corrupted by inflated appraisals," Cuomo said.

"Our expanding investigation into the mortgage industry has uncovered that Washington Mutual improperly pressured appraisers to provide inflated values that best served the lender's interest," Cuomo said. "Knowing this, Fannie Mae and Freddie Mac cannot afford to continue buying Washington Mutual mortgages unless they are sure these loans are based on reliable and independent appraisals."

Fannie Mae and Freddie Mac were created by Congress to make home ownership affordable for low- and middle-income people.

"If true, the appraisal practices described in the complaint would violate Fannie Mae's requirements for loans we purchase from lenders or securitize," said Brian Faith of Fannie Mae.

"It is against our interest to purchase or guarantee mortgages with inflated appraisals, and so it is in Fannie Mae's interest that these appraisal practices be investigated," he said. "If the examiner determines we own or guarantee mortgages with inflated appraisals, our guide states that the lender must buy back the loans that do not meet our standards and requirements.

http://biz.yahoo.com/ap/071107/cuomo_mortgages.html

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