In this recent blog, Ram discusses the Report of the Auditor General of Guyana. Ram note that “the Audit Office considered it necessary to address audit issues in the Office of the President – one of the serial offenders when it comes to misuse of public funds – in fifty paragraphs running over twelve pages”.

Here is the blog.

http://www.chrisram.net/?p=545

The SEC charged Atlantis Technology Group of Fort Lauderdale, Fla., which claimed to offer Internet protocol television and video phone services, and Quri Resources, Inc., a purported mining company headquartered in Miami and operating in Ecuador, with violating the anti-fraud provisions of the securities laws.

Both complaints were filed in U.S. District Court for the Southern District of Florida. According to the SEC, Atlantis made “grossly misleading claims” in numerous press releases from at least Aug. 7, 2009 through April 5, 2010.

For example, press releases claimed that the company’s subsidiary, Global Online Television Corp., offered internet protocol television services to consumers and had relationships with television networks and others to offer their content to Atlantis subscribers. The SEC says neither was true.

Company CEO Christopher Dubeau allegedly wrote the press releases, then “repeatedly sold Atlantis stock into the inflated market, earning at least $240,000,” according to the SEC.

The SEC is seeking permanent injunctions against Atlantis and Dubeau, civil penalties, and an order requiring Dubeau to disgorge his ill-gotten gains. The SEC also seeks a penny stock bar and an officer and director bar against Dubeau.

In the complaint against Quri Resources, the SEC pointed to press releases claiming, for example, that the company was ready to begin drilling on a mining project in Ecuador with a probable gold reserve worth over $1 billion; it had signed letters of intent to acquire two valuable mining projects in Arizona; and it had acquired a second mining project in Ecuador and anticipated producing gold within three months.

The SEC alleged there was no way to know the value of the gold without detailed exploration, there was no project in Arizona and only one in Ecuador, which was not developed. “Quri had no money, was never able to raise any funds, had no reasonable expectation of any funding, and was heavily indebted,” the SEC said.

Company CEO Jaime Santiago Gomez allegedly “dumped over half a million shares of Quri stock on the unsuspecting public, selling Quri stock in unregistered transactions, earning at least $17,500 from the sale of the stock,” according to the SEC.

The SEC is seeking an injunction, disgorgement, civil penalties, and a penny stock bar.

The fourteen defendants are:
ZVI GOFFER, who formerly worked at The Schottenfeld Group LLC (“Schottenfeld”), a broker dealer in New York, New York, and currently operates a trading firm called Incremental Capital (“Incremental”), in New York, New York; ARTHUR CUTILLO, an attorney at the law firm of Ropes & Gray LLP in New York, New York; JASON GOLDFARB, an attorney in New York, New York; CRAIG DRIMAL, who worked in the offices of the Galleon Group (“Galleon”), in New York, New York, but is not employed by Galleon; EMANUEL GOFFER, who formerly worked at Spectrum Trading LLC, a trading firm in New York, New York, and currently is associated with Incremental in New York, New York; MICHAEL KIMELMAN, currently associated with Incremental in New York, New York; DAVID PLATE, formerly employed by Schottenfeld, and currently associated with Incremental in New York, New York; and ALI HARIRI, a Vice President of Atheros Communications, Inc. (“Atheros”) in California; DEEP SHAH, who was formerly employed by Moody’s Investors Service, Inc. (“Moody’s”), in New York, New York; STEVEN FORTUNA, formerly a Managing Director of S2 Capital LLC (“S2 Capital”), a hedge fund based in Boston, Massachusetts; ALI FAR, founder of Spherix Capital LLC (“Spherix”), a hedge fund based in California; RICHARD CHOO-BENG LEE, former President of Spherix; ROOMY KHAN, a California trader who served at certain times as a paid consultant to a hedge fund based in New York, New York; and GAUTHAM SHANKAR, a proprietary trader at Schottenfeld in New York, New York.
The Goffer Insider Trading Network

The US Attorney Alleges that in exchange for payments, and using prepaid cell phones, ZVI GOFFER operated an insider trading network through which he obtained, passed on to others, and traded on material, nonpublic information (the “Material Information”) regarding mergers and acquisitions of public companies

In order to achieve its success it appears that the office has done, and is continuing to engage in extensive outreach to the twenty one counties in the State. Although the NJ OMIG is understaffed at only 83% of its full compliment, the office has already exceeded expectations. The NJ OMIG was given a budget of $3.7 million of which the New Jersey Tax payers are shouldering $1.7 million and it was anticipated that NJ OMIG would offset its operating cost through $25 million in savings from Enhanced Medicaid Fraud prevention. NJ OMIG appears to have exceeded expectations.

In producing a report in just seven months, the NJ OMIG has inadvertently placed a spot light on the New Jersey’s Office of Inspector General (“NJOIG”). As I disclosed last week, the New Jersey’s Inspector General has not issued any investigative reports in 11 Months. Additionally, the representation made by the NJOIG to the Legislative Budget Committee (“LBC”) appears to be at odds with the record. Specifically, the LBC was told that there were “several large and small scale investigations and reviews, going forward in FY 09.” However, I could only identify three investigations all of which were reported by December 9, 2008.

Much has changed in New Jersey since I first raised questions about the NJOIG. One hopes that the NJOIG provides a good report to citizens of New Jersey shortly.

Last April, Lindsey pleaded guilty to two counts of mail fraud, and Elliott, pleaded guilty to misprision of a felony.

In his capacity as the owner and president of NTC, Lindsey, created and managed an investment product, the Noble Alternative Income Fund (“NAIF”). Lindsey promised customers of NTC who owned NAIF accounts, interest payments of at least 12 percent per year, payable on a periodic basis or as a lump sum when their accounts were closed. He used money in NAIF accounts to make loans to company in Colorado, Sierra Factoring, Inc. (“Sierra”). After Sierra stopped making payments on the loans in August 2006, NTC’s ability to make payments to the NAIF account holders was adversely affected. Thereafter, Lindsey diverted more than $780,000 in funds that belonged to new customers of NTC—for whom new NAIF accounts were created—to make payments to existing NAIF account holders. Lindsey also concealed the true value of the NAIF accounts by causing quarterly account statements to be mailed to the NAIF account holders that falsely stated that the market value of their respective accounts was at least equal to the amount of their original investment. Elliott’s conviction for misprision of a felony relates to her failure to disclose that mail fraud offense to a judge or a law enforcement official.

Lindsey also attempted to replace the impaired Sierra investments before the NAIF account holders learned their money had been lost through the sale of high value life insurance policies, some of which were fraudulent. In that regard, in approximately August 2006, Lindsey agreed to pay a fee to a resident of Florida, each time the resident of Florida referred a person who purchased a high value policy through an insurance company that was partly owned by Lindsey, Balcarres, LLC. To earn his fee, the Florida resident was required to provide financial statements and other documents to Lindsey to demonstrate that an applicant had a personal financial net worth that was at least equal to the face value of the policy he or she wished to purchase.

From October 2006 to October 2007, the resident of Florida induced a number of people to submit applications for policies. Before each application was submitted to an insurance company, Lindsey, the resident of Florida, and the applicant agreed that the applicant’s policy would be owned by a trust, and that the beneficial interest in the trust would be sold to NTC for an agreed upon amount of money that would be paid to the applicant by the resident of Florida. The resident of Florida and Lindsey defrauded the insurance companies to whom the applications were submitted by knowingly providing false information about each applicant’s personal financial condition and/or concealing each applicants present intention to sell their policy. As a result of that conduct, Lindsey received commissions totaling approximately $5.5 million and paid approximately $2.1 million to the resident of Florida.

On or before June 23, 2008, Mary Jane Cooper (“Cooper”), the Inspector General of the State of New Jersey provided written testimony to the State Budget and Appropriations Committee outlining the IG’s office Fiscal Year 2008 activities and projected plans for Fiscal Year 2009.  New Jersey’s fiscal year starts on July 1.

Cooper represented that “[i]n addition to several large and small scale investigations and reviews, going forward in FY 09, OIG will continue its detailed review of the internal controls in place at the State authorities pursuant to Executive Order No.41 (Codey).  Additionally, OIG will complete its review of ongoing matters that resulted from the review of the Department of Corrections Inmate Dental Services Contract. OIG will also undertake investigations as requested by the Governor and consider those matters requested by the leadership at State departments and agencies and appropriate for OIG’s review or investigation.”

Accordingly, Copper issued a Letter to Attorney General Anne Milgram, Victims of Crimes Compensation Agency and published two reports, one related to the aforementioned Department of Corrections Inmate Dental Services Contract, entitled Supplemental Report: Department of Corrections- Inmate Health Services  and the  2008 Summary and Analysis of State Authorities’ Employee Benefits. All of this was done by December 9, 2008.  Since that time, the OIG’s office has been surprisingly silent. One wonders about the status of the “several large and small scale investigations and reviews, going forward in FY 09.” Are we to conclude that the IG described the last two reports as “several”? One hopes not.

Let’s fast forward to the current fiscal year. On or before July 1, 2009, Cooper advised the same budget committee that “Since the Office of the Inspector General (OIG) last appeared before the Legislative Budget Committees, the office has issued several reports and publications concerning its various investigations and reviews conducted.” To my chagrin, the OIG lists the letter and the two reports. So the OIG’s believes that two plus one equals several.  

So what has OIG (17 Staffers) been working on since December 2008? The New Jersey OIG has been working on a review of the Victims of Crime Compensation Agency (VCCA) operations as Treasury had expressed to OIG concerns that VCCA may or may not be following sound fiscal policies and procedures. And guess what? OIG’s review is nearing completion and a report is being drafted (almost a year from the date of the letter to the AG).  In other words, VCCA was really in a mess and all that happened was that the Executive Director was fired. Yes, only in New Jersey. I am not going to hold my breath and waiting for the report.

Don’t despair, I have good news.  The Inspector General was recently asked by the Governor to serve as a member of the New Jersey Accountability Task Force (“Task Force”), which is charged with assuring transparency and accountability in the distribution of over $17 billion of federal stimulus funds in New Jersey on the state and local level. The OIG’s has generously offered, and the Task Force has magnanimously accepted, to assign OIG staff and the use of any office resources that are necessary and appropriate to assist the Task Force in the successful oversight of the billions of dollars in federal stimulus funds coming to New Jersey. No news here. That’s what all the OIG around the country are doing.

New Jersey has been labeled the most corrupt state, so I am surprise by the lack of reports from the OIG. We spent 1.4 million on the OIG in the last fiscal year and all we got in return was two reports and letter.  Are they no corrupt State employees to investigate?  The OIG received ninety-two (92) complaints and we have zero (0) reports out of those complaints. Yes, in the most corrupt state, you give me ninety two allegations and I will give you bumpkins, nada, zilch.  Here is the kicker, in March 2009, State Comptroller Matt Boxer said the economic stimulus spending in New Jersey was “ripe” for misuse.  Hey Matt, I agree. Maybe the problem is that we are in an election year and you can’t publicize corruption by State employees.

Palermo worked as an aide to Fumo in the early 1970s, when Fumo was director of a Pennsylvania agency, and, again, as chief of staff in Fumo’s legislative district office in Philadelphia. Palermo admitted that, beginning in or about July 1999, he submitted an invoice each month to the SDAC which fraudulently represented that he was entitled to payments under the contract in exchange for legitimate consulting services provided to the SDAC when, in fact, he provided little or no services to the Senate at all.

Palermo’s benefactor was found guilty on March 16, 2009 of 137 counts of conspiracy, fraud and obstruction of justice after a five-month trial. Prosecutors argued at trial that Fumo defrauded the state Senate and two nonprofits of more than $4 million by, among other offenses, using Senate staffers and nonprofit resources for personal or political gain. Surprisingly, Fumo was sentenced to four and a half years in prison (12 days per felony). Myrna DeVoren, a juror in the corruption trial says she was “surprised and baffled” by the sentence.  Prosecutors were considering appealing the conviction.

At trial, Prosecutors argued that Fumo padded his payroll with superfluous staff including friends put on the senate payroll who performed little or no legitimate senate work. He “used numerous senate employees to attend to his many personal needs.” Additionally, they charged that Staff on the senate payroll acted as his housekeeper, his cleaners, kept his personal accounts, managed refurbishment of his houses, ran personal errands, looked after him on vacations, and drove him everywhere.

Further, Fumo gave senate equipment including laptop computers to friends, family members and girlfriends.

Vincent Fumo