5 Latest Financial Scandals

By Remi Alli | April 27, 2010 AAA

Simply tune into any news program these days, and financial frauds appear more commonplace than felonious assaults. Besides Goldman Sachs, there are many other business frauds using similar tactics take money from taxpayers like you.
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  • Bank of America
    State Attorney General of New York Andrew Cuomo filed a civil complaint against the country's biggest bank, Bank of America, and its former CEO Kenneth Lewis and CFO Joe Price, for fraudulently misleading the United States government as well as its shareholders.

    BOA is accused of deliberately withholding information regarding its billions of dollars in losses from BOA's fall 2008 acquisition of Merrill Lynch during the government bank bailout in order to deceive shareholders to invest billions, and obtain a bigger federal bailout and larger amounts of tax payer TARP money.

    The same day of this suit filing, the SEC charged Bank of America a fine for failing to disclose losses and inaccurately paying employees, which the company agreed to settle by paying $150 million to shareholders.

    While the charges are similar, Attorney General Cuomo's complaint is detailed with specific allegations and actual names of the parties involved. A spokesperson for BOA claims that the charges are without merit.

  • Medicare
    There is a growing sector - an illegal sector - that is rising out of the Medicare system.

    Organized criminals, strapped with guns, have been hiring or becoming Medicare providers. Instead of helping Medicare beneficiaries, criminals sell the medical equipment for hundreds of thousands of dollars. The guns and ammunition generally seen in the streets seem out of place in the health care sect, yet there main use is to threaten witnesses from testifying against them.

    United States Attorney General Eric Holder's investigative fraud unit has stated that they have been working on Medicare fraud in hopes of better vetting new Medicare providers.

  • Facebook
    The suit against Facebook CEO Mark Zuckerberg by three old Harvard classmates, Divya Narendra and the brothers Tyler and Cameron Winklevoss, was almost settled.

    The point of contention began when Harvard peers claimed they had hired Zuckerberg to help them with the programming aspect of their social network idea, called ConnectU. Zuckerberg allegedly postponed work on their project until he was able to launch his own similar project, soon to be known as Facebook.

    Although Judge Woodlock found Zuckerberg innocent on the grounds that "dorm room chit-chat does not make a contract," the story turned when Facebook agreed to a settlement of roughly $65 million, $20 million in cash and 1.25 million shares.

    It is alleged that evidence of Zuckerberg's plan to postpone ConnectU in order to implement a similar idea can be found on his computer in emails and chats to confidants, therefore, a motion to subpoena Zuckerberg's hard drive was requested. In light of this new evidence, Plaintiffs have spent even more tax money seeking an appeal. About Facebook, Cameron has stated, "I think it is safe to say the chapter is not closed on the matter." (Not fazed by the news? Then you should check out Alternative Ways To Invest In Facebook.)

  • Vaughan Company Realtors
    Former president Douglas Vaughan of the Vaughan Company Realtors is charged with fraud for the realtor's alleged involvement in a Ponzi scheme, selling more than $70 million worth of securities in the way of promissory notes for real estate investments that currently cannot be accounted for.

    SEC alleges that Doug Vaughan violated policies by selling the promissory notes without a securities license and transferring majority of investors' money to Vaughan Company's operating business account. Investors' money was ultimately used to fulfill promissory note holder obligations as well as Vaughan Company's other business costs, instead of actual real estate investments. The suit alleges that the firm's equity was actually 20-times less than what was told to its investors. (To learn more, see What Is The Difference Between A Ponzi And A Pyramid Scheme?)

  • Securities Exchange Committee
    SEC workers are paid an average of $85,000 to over $200,000 per year with the duty to ensure Wall Street businesses, like Goldman Sachs and Bank of America, practice fair and honest business ethics. Thus, they have the power to bring civil charges if companies are found to not uphold legal business practices.

    Ironically, these very SEC workers are accused of their own fraud after allegedly watching hours of pornographic videos on company time and company computers, yet charging taxpayers as if they were performing their actual services.

    To make matters worse, it's been reported that 17 out of the 33 accused SEC workers are senior management; a classic case of "do as I say, not as I do."

The Scandals Continue
From reality TV to financial scam reports, entertainment has changed drastically over the years to reflect our changing reality. In the same way, recessions and financial scams tend to have a direct relationship; when times are tough, people are more inclined to find money by any means. Similar to an appealing product advertised in glitzy infomercials; trust your instincts with any and all companies. If you're sensing hidden agendas in a business, check it out and stay away! (To learn more, check out Playing The Sleuth In A Scandal Stock.)

Find out what else is making news this week, in Water Cooler Finance: Buffett's Armed And Greece Keeps Falling.)

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