Business Crimes Hotline

CALIFORNIA

Conspiracy and Falsifying Records

Sandra Miller Christie, the former Vice President of Advertising for Advanced Marketing Services, Inc., an advertising services company, pleaded guilty to one count of conspiracy and one count of falsifying records.

The charges resulted from Christie's alleged participation in a scheme to defraud AMS's clients and to fraudulently inflate AMS's publicly reported net income. Specifically, Christie and her co-conspirators (who had previously pleaded guilty) allegedly schemed to fraudulently reduce the number of mailings for which certain clients had contracted, and to cut the production and distribution of certain publications without notifying AMS's advertising customers that the circulations had been reduced. In order to account for the scheme, Christie allegedly falsified books and records and ordered another AMS employee to do the same. After the criminal inquiry began, AMS reached a settlement with overcharged customers and restated its earnings.

Ten-Count Indictment Against Former Operations Manager

Jamie Watkins, the former operations manager of the Santa Ana office of the firm's & Touche, was arrested on charges alleging that she exploited the firm's expense-reimbursement programs to defraud the firm out of more than $500,000.

The ten-count indictment charges that Watkins used multiple schemes to cheat Deloitte & Touche out of money through the expense-reimbursement program. In one scheme, Watkins allegedly used her corporate credit card to purchase personal items, knowing that the firm would pay for the items. In a second scheme, Watkins allegedly submitted fraudulent expense-reimbursement forms for business-related charges on her corporate credit card when no such charges existed. To further both schemes, Watkins allegedly created false invoices and generated phony receipts.

Former Director Pleads Guilty to Stealing Trade Secrets

A former Director of Information Technology at Lightwave Micro-systems, Inc., pleaded guilty to stealing trade secrets contained on his company's back-up tapes and offering them for sale to a competitor.

The defendant admitted that he stole the back-up tapes after his employer, Lightwave, announced it was ceasing operations. After stealing the tapes, he created a false Internet persona and offered the tapes for sale. The FBI was notified and monitored communications between the defendant and a proposed purchaser. The FBI traced the false Internet persona to the defendant's residence, leading to the execution of a search warrant and the discovery of the illegal tapes. The defendant faces 10 years in prison.

MICHIGAN

Executive Pleads Guilty to Misprision of Felony

John P. O'Leary, the former Senior Vice President for Corporate Finance of MCA Financial Corporation, pleaded guilty to misprision of felony for concealing MCA's scheme to defraud its investors and lenders. Patrick D. Quinlan, the former Chairman and CEO of MCA, was sentenced to 10 years in prison for his role in the fraud.

MCA purchased low-income housing in Detroit and subsequently sold the properties, at marked-up prices, to partnerships and LLCs controlled by MCA. The partnerships and LLCs often failed to make their monthly payments to MCA, or paid in an incomplete or untimely manner. MCA's institutional lenders and external auditors were deceived by O'Leary's directive to MCA employees to construct databases that contained false payment information reflecting payments from the partnerships and LLCs to MCA that were never made. As a result, millions of dollars of sham assets and revenues were included in MCA's financial reports.

NEW YORK

Conspiring to Tamper with a Witness for a Federal Grand Jury

The former senior compliance officer at Merrill Lynch & Co., Inc., Benjamin D. Grimaldi, pleaded guilty to a felony charge of conspiring to tamper with a witness who testified before a federal grand jury.

The grand jury was investigating Merrill Lynch's alleged involvement in a securities stock scheme called “front-running,” which occurs when a stockbroker provides others outside the brokerage firm, such as a day trader, with a tip that a customer of the brokerage firm had placed a large order. A trader can use the information to anticipate market movement resulting from the order and obtain a position in the stock before the order is executed. In pleading guilty, Grimaldi admitted that he told an assistant to lie to the grand jury about the use of a “squawk box,” a system in which brokers contacted outside traders by phone and allowed the traders to hear the customer's order as it was broadcast through an internal speaker system at Merrill. Grimaldi also instructed another employee to withhold information from the grand jury about Merrill Lynch's use of the squawk box in the office under investigation.

NEW YORK

Former WorldCom Executive Sentenced

Buford “Buddy” Yates, the former director of general accounting at WorldCom, was sentenced to 1 year and 1 day in prison for his role in the company's fraud.

Yates was sentenced pursuant to his guilty plea to fraud for assisting WorldCom in overstating its earnings. After declaring Yates to have been “perhaps the least useful” of those cooperating with the government, the judge announced the sentence. The extra day added to the year-long sentence will delay the possibility of a reduction in the prison term until close to the release date. Yates and four other WorldCom executives have pleaded guilty to fraud and helped build the government's case against the former WorldCom CEO, Bernard Ebbers.

CALIFORNIA

Conspiracy and Falsifying Records

Sandra Miller Christie, the former Vice President of Advertising for Advanced Marketing Services, Inc., an advertising services company, pleaded guilty to one count of conspiracy and one count of falsifying records.

The charges resulted from Christie's alleged participation in a scheme to defraud AMS's clients and to fraudulently inflate AMS's publicly reported net income. Specifically, Christie and her co-conspirators (who had previously pleaded guilty) allegedly schemed to fraudulently reduce the number of mailings for which certain clients had contracted, and to cut the production and distribution of certain publications without notifying AMS's advertising customers that the circulations had been reduced. In order to account for the scheme, Christie allegedly falsified books and records and ordered another AMS employee to do the same. After the criminal inquiry began, AMS reached a settlement with overcharged customers and restated its earnings.

Ten-Count Indictment Against Former Operations Manager

Jamie Watkins, the former operations manager of the Santa Ana office of the firm's & Touche, was arrested on charges alleging that she exploited the firm's expense-reimbursement programs to defraud the firm out of more than $500,000.

The ten-count indictment charges that Watkins used multiple schemes to cheat Deloitte & Touche out of money through the expense-reimbursement program. In one scheme, Watkins allegedly used her corporate credit card to purchase personal items, knowing that the firm would pay for the items. In a second scheme, Watkins allegedly submitted fraudulent expense-reimbursement forms for business-related charges on her corporate credit card when no such charges existed. To further both schemes, Watkins allegedly created false invoices and generated phony receipts.

Former Director Pleads Guilty to Stealing Trade Secrets

A former Director of Information Technology at Lightwave Micro-systems, Inc., pleaded guilty to stealing trade secrets contained on his company's back-up tapes and offering them for sale to a competitor.

The defendant admitted that he stole the back-up tapes after his employer, Lightwave, announced it was ceasing operations. After stealing the tapes, he created a false Internet persona and offered the tapes for sale. The FBI was notified and monitored communications between the defendant and a proposed purchaser. The FBI traced the false Internet persona to the defendant's residence, leading to the execution of a search warrant and the discovery of the illegal tapes. The defendant faces 10 years in prison.

MICHIGAN

Executive Pleads Guilty to Misprision of Felony

John P. O'Leary, the former Senior Vice President for Corporate Finance of MCA Financial Corporation, pleaded guilty to misprision of felony for concealing MCA's scheme to defraud its investors and lenders. Patrick D. Quinlan, the former Chairman and CEO of MCA, was sentenced to 10 years in prison for his role in the fraud.

MCA purchased low-income housing in Detroit and subsequently sold the properties, at marked-up prices, to partnerships and LLCs controlled by MCA. The partnerships and LLCs often failed to make their monthly payments to MCA, or paid in an incomplete or untimely manner. MCA's institutional lenders and external auditors were deceived by O'Leary's directive to MCA employees to construct databases that contained false payment information reflecting payments from the partnerships and LLCs to MCA that were never made. As a result, millions of dollars of sham assets and revenues were included in MCA's financial reports.

NEW YORK

Conspiring to Tamper with a Witness for a Federal Grand Jury

The former senior compliance officer at Merrill Lynch & Co., Inc., Benjamin D. Grimaldi, pleaded guilty to a felony charge of conspiring to tamper with a witness who testified before a federal grand jury.

The grand jury was investigating Merrill Lynch's alleged involvement in a securities stock scheme called “front-running,” which occurs when a stockbroker provides others outside the brokerage firm, such as a day trader, with a tip that a customer of the brokerage firm had placed a large order. A trader can use the information to anticipate market movement resulting from the order and obtain a position in the stock before the order is executed. In pleading guilty, Grimaldi admitted that he told an assistant to lie to the grand jury about the use of a “squawk box,” a system in which brokers contacted outside traders by phone and allowed the traders to hear the customer's order as it was broadcast through an internal speaker system at Merrill. Grimaldi also instructed another employee to withhold information from the grand jury about Merrill Lynch's use of the squawk box in the office under investigation.

NEW YORK

Former WorldCom Executive Sentenced

Buford “Buddy” Yates, the former director of general accounting at WorldCom, was sentenced to 1 year and 1 day in prison for his role in the company's fraud.

Yates was sentenced pursuant to his guilty plea to fraud for assisting WorldCom in overstating its earnings. After declaring Yates to have been “perhaps the least useful” of those cooperating with the government, the judge announced the sentence. The extra day added to the year-long sentence will delay the possibility of a reduction in the prison term until close to the release date. Yates and four other WorldCom executives have pleaded guilty to fraud and helped build the government's case against the former WorldCom CEO, Bernard Ebbers.