Trader found guilty in Apple trading fraud

appleDavid Miller, institutional trader was found guilty in the Apple Trading fraud. On October 25, 2012, the day Apple was scheduled to announce its earnings for the quarter, co-conspirator of David Miller wrote the order in such a way that Miller could later claim he misinterpreted it. Miller would then execute a trade for 1,000 times the number of shares written in the order. If the trade proved profitable, Miller and his co-conspirator would share in the profits. If the trade proved unprofitable, Miller would claim human error, leaving Rochdale holding the losing position.

A former Rochdale Securities trader, the 40-year-old David Miller entered a guilty plea in a Hartford, Connecticut court . In addition to the criminal proceedings, Miller also faces a related civil fraud lawsuit, filed against him by the Securities and Exchange Commission.

On October 25, Miller bought 1.625 million Apple shares ahead of the company’s earnings report, hoping to profit if the stock price went up. Asked by his superiors about the purchase, Miller said that the trade was for a customer that had ordered only 1,625 shares.

Apple’s share prices dropped that day, though — despite the company’s profits being up 25 percent — and Miller and Rochdale were left down $5.3 million. Due to the unsuccessful bet, the suddenly undercapitalized firm ceased operations shortly thereafter, with its staff leaving or being let go in November 2012. In February, the firm asked that the state of Connecticut, the SEC, and other regulators withdraw its registrations.

Prosecutors contend that Miller also defrauded another brokerage when he induced it to sell 500,000 Apple shares, some of it reportedly in hopes of hedging against the Rochdale purchase.

The Federal Bureau of Investigation picked up Miller on wire fraud charges in December.

Source: Reuters

KPMG ex-partner in Insider Trading

kpmgEx-Partner of KPMG was charged with insider trading by Securities Exchange Comission. The comission alleged that Scott London, Ex-Partner of KPMG tipped Bryan Shaw with confidential details about five KPMG audit clients and enabled Shaw to make more than $1.2 million in illicit profits trading ahead of earnings or merger announcements.

KPMG Ex-partner helps friend in Insider Trading

The two men had met at a country club several years earlier and became close friends and golfing partners. London has said that he provided the inside information about his clients to help Shaw overcome financial struggles after his family-run jewelry business began faltering in the economic downturn. In exchange for the illegal trading tips, Shaw paid London at least $50,000 in cash that was usually delivered in bags outside of his Encino,  jewelry store. Shaw also gave London an expensive Rolex watch as well as other jewelry, meals, and tickets to entertainment events.

London, who worked at KPMG for nearly 30 years, recently informed the firm that he was under investigation by the SEC and criminal authorities for insider trading in the securities of several KPMG clients. The firm immediately terminated him.

According to the SEC’s complaint filed in federal court in Los Angeles, London began providing Shaw with nonpublic information in October 2010 and the misconduct continued for the next 18 months. Shaw and London communicated almost exclusively using their cell phones, although on at least one occasion London disclosed nonpublic information in the presence of others during a golf outing.

According to the SEC’s complaint, London was the lead partner on several KPMG audits including Herbalife and Skechers USA, and he was the firm’s account executive for Deckers Outdoor Corp. Therefore, London was able to obtain material, nonpublic information about these companies prior to their earnings announcements or release of financial results.

The SEC alleges that London also gained access to inside information about impending mergers involving two former KPMG clients – RSC Holdings and Pacific Capital. London tipped Shaw with the confidential details. Shaw made nearly $192,000 by purchasing RSC Holdings stock the day before its Dec. 15, 2011, merger announcement. He made more than $365,000 in illicit profits from his well-timed purchase of Pacific Capital securities prior to a merger announcement on March 9, 2012.

Read the SEC Complaint here

 

Lloyds considering action against KPMG

KPMG LooydsLloyds banking group is considering legal action against KPMG in HBOS Bank Audit. Accountancy giant KPMG in the UK is under scanner over the audit work that gave HBOS, banking and insurance company, ‘a clean chit’ in the run-up to its collapse.

Lloyds Banking Group Considering action against KPMG

The Financial Reporting Council (FRC) confirmed it would consider launching an investigation of KPMG’s role following last week’s damning Parliamentary Commission report on HBOS.

The move will come once the Financial Conduct Authority (FCA) presents its findings on the bank’s failure in the autumn, the Daily Star reports.

It comes as a further blow to KPMG after it was forced to quit as auditor of two US firms, nutritional products group Herbalife and footwear maker Skechers amid an FBI investigation into alleged insider trading involving a former employee.

KPMG, which audited HBOS’ accounts throughout the years leading up to the financial crisis, said they stood by the quality of their audit work at HBOS.

Lloyds Banking Group, which rescued HBOS at the height of the banking meltdown, is also reportedly considering legal action against KPMG for failing to spot the black hole in its accounts.

The Parliamentary Commission on Banking Standards said last week that a combined total of 28 billion pounds had been invested into HBOS by the taxpayer and Lloyds.

HBOS was brought to its knees by reckless lending and billions of pounds of bad debts, but KMPG signed off its accounts in 2008, the report added.

Source: Yahoo Finance

CPA Suspended in ADMI Fraud case

ADMI fraudCalifornia based CPA was suspended from practicing before SEC on account of ADMI fraud case. Bishop is a sole practitioner CPA who conducted audits of the financial statements for Asthma Disease Management Inc [ADMI] for the fiscal year ended May 31, 1993 through the fiscal year ended May 31, 1999.
In ADMI fraud, former president, CEO, and chairman of the board, alongwith two of its directors, engaged in a fraudulent marketing scheme in which they issued false press releases, fraudulently inflated ADMI’s assets and disseminated misleading information in Commission filings by omitting the auditor’s going concern opinion and by failing to disclose significant stock-based executive compensation and related party transactions. The complaint further alleges that Bishop aided and abetted the fraud by improperly booking a material asset on ADMI’s balancesheet, by failing to review ADMI’s Forms 10-K before or after they were filed with the Commission, and by failing to conduct her audit of ADMI’s financial statements in accordance with generally accepted auditing standards.

ADMI Fraud case

  • In February and March 2000, ADMI, Young and Anderson issued false and misleading press releases, claiming ADMI had obtained contracts with three HMOs to provide physician training for asthma treatment services when no such contracts existed.
  • Anderson personally benefited from his role in the dissemination of the false press releases by selling 93,000 shares of ADMI stock for $59,973 when the market price was artificially inflated by the false information in the press releases.
  • ADMI and Young fraudulently inflated its assets by at least 70% in Commission filings. In its Forms 10-K for the fiscal years ended May 31, 1998 and May 31,

Keyuan Petrochemicals – Story of another reverse merger fraud

keyuan

Keyuan Petrochemicals Fraud

The SEC alleges that Keyuan Petrochemicals, which was formed through a reverse merger in April 2010, systematically failed to disclose to investors numerous related party transactions involving its CEO, controlling shareholders, and entities controlled by management or their family members. Keyuan also operated a secret off-balance sheet cash account to pay for cash bonuses to senior officers, travel and entertainment expenses and an apartment rental for the CEO, and cash and non-cash gifts to Chinese government officials. Continue reading