Global Corruption
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Tobacco Companies Avoided Billion in Taxes

Tobacco Companies Avoided Billion in Taxes | Global Corruption |
Tobacco makers were able to avoid paying billions of dollars in federal excise taxes by reclassifying their roll-your-own tobacco products as pipe tobacco, and small cigars as large cigars, according to a new government report and witnesses at a Senate hearing Tuesday.
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Global Corruption
Corruption is a particularly viral form of cancer. It is caught here and there but it reappears somewhere else as soon as vigilance is relaxed. It is not eliminated, just driven underground. The corrupt merely suspend their operations temporarily. It lingers, hovering always in the background for its next opportunity.
- Gerald E. Caiden
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Corruption Eruption E-Magazine > > > "On Planet Corruption every day a new Eruption"

Corruption Eruption E-Magazine >   >  >            "On Planet Corruption every day a new Eruption" | Global Corruption |

*** Key findings from PwC's 17th Annual Global Economic Crime Survey

*** Cyber crime: the Achilles heel of the business world
*** Ukraine’s $19-billion question of debt and corruption

*** FBI announces campaign to crack down on public corruption

*** Ukraine’s $19-billion question of debt and corruption

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Environmental Protection Agency overpaid $1 million for call center

Government investigators believe Environmental Protection Agency officials may have paid a contractor nearly $1 million more than they should have for operating a telephone hotline that processed fewer calls than claimed.

The EPA inspector general said it received a hotline tip about possible contract fraud in its information office. That office handles inquiries from the general public and internal EPA customers, using a contractor to provide call center services.

At one point, the agency relied on the number of calls and emails the center was receiving to approve a jump in prices. At another, the agency cited the number of reported issues, which could have been the subject of multiple calls or emails to justify lower prices.

The inconsistent decision-making “increases the risk that the EPA may be overcharged for call center services,” the IG said.

The EPA was also spending more than it was making on the call center. Losing money prompted the agency to use the number of issues, not the volume of calls, as an excuse to lower its contract price even though the call volume had not fallen below the minimum levels needed to make such a change.
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TVA inspectors say contractor overbilled federal utility for nuclear work

TVA inspectors say contractor overbilled federal utility for nuclear work | Global Corruption |
Tennessee Valley Authority inspectors claim that one of its biggest nuclear contractors overbilled the federal utility by more than $2.4 million for work at unfinished plants.

Bechtel Power Corp. submitted bills to TVA for ineligible labor, travel and housing expenses as part of more than $580 million of non-craft work conducted by the contractor and its partners, according to audits recently completed by TVA's inspector general.

The Chattanooga Times Free Press ( ) reports Bechtel is helping TVA finish a second reactor at the Watts Bar Nuclear Plant. It previously performed engineering work at the unfinished Bellefonte Nuclear Plant, the newspaper reported.

In a statement Saturday, Bechtel spokeswoman Charlene Wheeless said, "We are committed to ensuring that costs are billed correctly and will carefully review these findings."

TVA Inspector General Richard Moore said Bechtel overbilled TVA for $923,231 in labor hours and payroll additions, $938,928 in ineligible or unsupported relocation and travel bills and $204,336 in improper subcontractor costs at the Watts Bar nuclear plant near Spring City, Tennessee.

The overcharges were part of $520 million in Bechtel bills the Inspector General's office reviewed from 2010 to 2013 when TVA paid the engineering firm to help design, engineer and oversee some of the work on TVA's $4.2 billion project at Watts Bar by the end of 2015.

In a separate audit, TVA auditors found another $204,336 was paid for ineligible labor and living expenses from Bechtel's work with Sargent & Lundy LLC to perform engineering work at the Bellefonte nuclear plant in Hollywood, Alabama.
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Afghanistan’s Bitter Future - The Globalist

Afghanistan’s Bitter Future - The Globalist | Global Corruption |
The United States has spent $104 billion on reconstruction in Afghanistan over the last 13 years. Approximately $62 billion of this total has been used to support the Afghan National Security Forces (ANSF).

Nobody knows how much of this U.S. taxpayer cash has been stolen. Nobody seems to be confident that the U.S.-funded programs can be sustained as the U.S. winds down its Afghan engagement.

At the end of 2014 – in a few days’ time – U.S. combat operations in Afghanistan will officially end. John F. Sopko, Special U.S. Inspector General for Afghanistan Reconstruction (SIGAR), recently noted that more than 10,000 U.S. military personnel will remain, but in a training and support role.

He is worried that, despite the vast aid provided by the United States to help Afghanistan build a democratic and secure nation, the massive effort will unravel.
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Former OIG supervisor sentenced to federal prison

Former OIG supervisor sentenced to federal prison | Global Corruption |
The former supervisor for the Department of Homeland Security’s Office of Inspector General’s McAllen field office has been sentenced to more than three years in federal prison.
Eugenio Pedraza appeared Monday before U.S. District Judge Andrew S. Hanen, who handed down the sentence. In March, Pedraza was found guilty of conspiracy and five counts of falsifying government documents.
Pedraza was found guilty of conspiring with DHS-OIG special agent Robert Vargas and former special agent Wayne Ball, of falsifying documents to impede an internal inspection of his office in September 2011. Ball was convicted of falsifying documents in January 2013.
Vargas has a non-prosecutorial agreement with the government and was a witness against Pedraza during the trial.
Pedraza was also found guilty of ordering special agent Rolando Gomez to forge a memorandum of activity regarding the “deactivation” and deportation of a confidential source. Gomez is on paid administrative leave and reached a non-prosecutorial agreement with the government as well.
In addition, Pedraza was found guilty of directing special agent Marco Rodriguez, who was initially charged in the indictment, to forge memorandums of activity on two cases, one alleging a prisoner was working with a Border Patrol agent to move drugs and immigrants into the United States and another about an unknown CBP officer accused of helping pregnant Mexican women get into the country to give birth.
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Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud | FINalternatives

After the Madoff investigation, there was a great deal of fallout from Congress and in the media about our findings and concerns about the SEC and its inability to uncover Madoff’s Ponzi scheme. One of the comments made by SEC officials at that time was that the Madoff case was “a perfect storm” of circumstances that led to the commission’s failure. The sense was that this lapse was a once-in-a-lifetime event that could and would never be replicated.
However, not long after the Madoff investigation, I kept hearing about another Ponzi scheme that had been perpetrated by a Texan named Allen Stanford that had just come to light, and there were worries that perhaps the SEC was derelict in uncovering this fraud, as well. When I learned more about Stanford’s fraud, and that the SEC had examined his operations on multiple occasions, I became concerned.
My understanding was that Stanford had been registered as both an investment advisor and a broker-dealer in Texas and was affiliated with an offshore investment bank in Antigua. The Antiguan bank evidently offered Stanford’s customers certificate of deposit (CD) accounts with relatively high and very steady interest rates. This sounded much like Madoff in that returns being given were simply “too good to be true” and required scrutiny by the SEC. Eventually, my office conducted two investigations of the circumstances surrounding the Stanford Ponzi scheme and found that although the SEC did, in the end, uncover the fraud, SEC officials had been aware of concerns about Stanford’s actions for many years before they took action in court to try to stop the Ponzi scheme.
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Why It’s So Hard to Fix Medicare Fraud

Why It’s So Hard to Fix Medicare Fraud | Global Corruption |
John and David Mkhitarian found a soft spot in Medicare’s defenses against fraud: Inspectors aren’t required to visit medical providers deemed to present a lower risk of fraud and abuse.

So the cousins used exchange students to create some 70 bogus laboratories, clinics and physician practices, then enrolled the companies in the program with the stolen identities of doctors, prosecutors assert. Medicare paid out $3.3 million over about two years.

Both Mkhitarians pleaded guilty to health-care fraud conspiracy. David was sentenced in September to seven months in prison, and John will be sentenced in February.

Their case illustrates a vulnerability in the nearly $600 billion taxpayer-funded program: Vetting of new providers often is inadequate. An inspection of the Mkhitarians’ companies might have stopped the scheme before it started.

Shortcomings in Medicare’s efforts to stop fraud, abuse and waste have come into focus since April, when the Centers for Medicare and Medicaid Services, the agency that runs the program, made public medical-provider billing records for the first time since 1979. The disclosure followed a legal effort by The Wall Street Journal.

CMS must strike a delicate balance: reducing fraud and abuse as much as possible without restricting access to medical care for the 50 million people who depend on the program. “Preventing fraud, abuse and waste are priorities” and “hold equal importance with creating and maintaining transparent and viable patient-doctor relationships,” CMS said in a written statement.
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Top Fraud Predictions for 2015: Technology will shape the fight

Technology will give fraudsters an edge in 2015, but it will also provide new tools for organizations and investigators. Three of our experts weighed in on digital currencies, information security and other issues that will help shape the effort to prevent and detect fraud in the new year:

Technology will increase the sophistication of fraud schemes. This is an existing trend that will accelerate in 2015, according to ACFE Regent Gerard Zack, CFE, Managing Director – Global Forensics for BDO Consulting. “More and more we are reacting to reports of fraud with, ‘how did they do that?’” Zack said. “It’s a reflection of schemes becoming more complex and capitalizing on technology, including some of the new technology deployed by companies in the interest of improving efficiency. While simple frauds still exist, we are seeing a distinct proliferation of more complex fraud schemes.”
But technology (like data analytics) will also help catch tomorrow’s frauds. Zack is quick to note that for fraudsters, technology is a double-edged sword – as it will also be leveraged by the professionals trying to catch them. “There will be more breakthroughs in the use of technology to detect fraud – particularly in the use of visual analytics and also in the use of tools to mine unstructured data.”
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Kentucky Businessman Pleads Guilty in Manhattan Federal Court to $53 Million Tax Scheme and Massive Fraud That Involved the Bribery of Bank Officials | OPA | Department of Justice

Kentucky Businessman Pleads Guilty in Manhattan Federal Court to $53 Million Tax Scheme and Massive Fraud That Involved the Bribery of Bank Officials | OPA | Department of Justice | Global Corruption |
U.S. Attorney Preet Bharara for the Southern District of New York and Deputy Assistant Attorney General David A. Hubbert for the Tax Division of the Department of Justice announced that Wilbur Anthony Huff, a Kentucky businessman, pleaded guilty today in Manhattan federal court to various tax crimes that caused more than $50 million in losses to the Internal Revenue Service (IRS), and a massive fraud that involved the bribery of bank officials, the fraudulent purchase of an insurance company, and the defrauding of insurance regulators.  Huff pleaded guilty this afternoon before U.S. District Judge Naomi Reice Buchwald.

“Today’s guilty plea ensures that Wilbur Huff will be punished for perpetuating a vortex of fraud – complete with bribery, tax crimes that caused $53 million in losses to the IRS, the fraudulent purchase of a company, and the defrauding of insurance regulators,” said U.S. Attorney Bharara.  “Those who might be tempted to follow in Huff’s criminal footsteps should understand that this office and our law enforcement partners will aggressively pursue and root out fraud wherever we find it.”

Huff, 53, of Caneyville and Louisville, Kentucky, pleaded guilty to one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, which carries a maximum penalty of three years in prison, one count of aiding and assisting with the preparation and presentation of false and fraudulent tax returns, which carries a maximum penalty of three years in prison, one count of failing and causing the failure to pay taxes to the IRS, which carries a maximum penalty of one year in prison, and one count of conspiracy to (a) commit bank bribery, (b) commit fraud on bank regulators and the board and shareholders of a publicly-traded company, and (c) fraudulently purchase an Oklahoma insurance company, which carries a maximum penalty of five years in prison.  He is scheduled to be sentenced by Judge Buchwald on April 8, 2015, at 2:30 p.m. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  As part of his plea, Huff also agreed to forfeit $10.8 million to the United States and to provide restitution in the following amounts to victims of his crimes: $70,100,000 to the Receiver for Park Avenue Property and Casualty Insurance Company; $4,857,266.62 to the Federal Deposit Insurance Corporation (FDIC); $597,420.29 to Valley National Bank (the successor of Park Avenue Bank); and $53,094,219 to the IRS.
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Former FBI Special Agent Pleads Guilty to Bribery Scheme | OPA | Department of Justice

Former FBI Special Agent Pleads Guilty to Bribery Scheme | OPA | Department of Justice | Global Corruption |
“Robert Lustyik discarded the FBI’s principles of ‘fidelity, bravery, and integrity,’ and sold his badge to the highest bidder,” said Assistant Attorney General Caldwell.  “Greed has no place in public service or law enforcement.  The Department of Justice will root out corruption wherever it takes hold, and hold accountable those who abuse the public’s trust for personal gain.” 

“Robert Lustyik today admitted to conducting a bribery scheme in which, for his own personal gain, he secretly sold information and documents to which he had access as an FBI agent,” said U.S. Attorney Bharara.  “Lustyik betrayed our system of justice: he breached not only the law, but also his sworn oath, and the great trust and confidence placed in him by citizens and colleagues.  For his criminal conduct he now faces, as he must, serious, commensurate penalties.”

“The Department of Justice Office of the Inspector General is committed to working with our law enforcement partners to identify, investigate, and bring to justice all DOJ employees who engage misconduct,” said Inspector General Horowitz.

Robert Lustyik, 52, of Westchester County, New York, pleaded guilty to all five counts in the indictment against him, including conspiracy to engage in a bribery scheme, soliciting bribes by a public official, conspiracy to defraud the citizens of the United States and the FBI, theft of government property, and unauthorized disclosure of a Suspicious Activity Report.
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Background check fails as ex-convict lands HUD job, embezzles $800,000

Background check fails as ex-convict lands HUD job, embezzles $800,000 | Global Corruption |

Brian Thompson had a criminal record spanning more than two decades, but that didn’t stop him from getting an office job at the Department of Housing and Urban Development earning nearly $90,000 per year.

His extensive criminal history only came to light in recent days after federal prosecutors outlined convictions and charges of armed robbery, theft and larceny against Thompson, who now faces federal prison time for embezzling more than $800,000 from HUD during his short stint as a federal worker.

Now HUD officials are scrambling to figure out how he landed his job, which he was allowed to resign nearly two months after his embezzlement conviction.

“We are reviewing the portion of the Personal Identity Verification (PIV) process that HUD controls to understand why there were no background flags,” agency spokesman Jereon M. Brown wrote in an email Tuesday. “Something should have definitely come up during the background check.”

The U.S. attorney’s office in Washington filed a sentencing memo in Thompson’s case this week outlining theft and larceny arrests and convictions spanning from 1984 to 2007. He also had an armed robbery conviction in 1980 that resulted in probation; a 1998 misdemeanor conviction for check deception; a felony 2008 conviction for receiving stolen property; and probation violation reports filed in 1999, 2000 and 2001, according to prosecutors.

Yet HUD hired him as a GS-13 loan guarantee specialist within the Office of Public and Indian Housing at HUD on May 23, 2011.

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Meet Peru’s New 'Narco-Governors'

Meet Peru’s New 'Narco-Governors' | Global Corruption |
Following December 7 run-off elections, Peru has now elected at least six governors under investigation or facing charges for crimes ranging from embezzlement to drug trafficking, which undermines the legitimacy of regional government in many parts of the country. 

In spite of the stir created by revelations in the run-up to Peru's October elections that hundreds of candidates had either been convicted of a crime or linked to the drug trade, voters elected at least six governors allegedly involved in criminal activity. InSight Crime profiles some of Peru's new "narco-governors," as one analyst called them, as well as some of the country's other allegedly criminal elected leaders.
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School Principals Next Target For Anti-Graft Project Of Chinese Government

School Principals Next Target For Anti-Graft Project Of Chinese Government | Global Corruption |

The Communist Party leaders of China have been trying to figure out where corruption has started and so they decided to launch an anti-graft campaign resulting in school principals being investigated in order to bring down any offender.

According to the Xinhua News Agency, school principals are being taken down because some of them have been taking bribes during the past year. There are a total of seven school principals from the city of Shenzhen currently under investigation.

The news agency pointed out that one of those charged was identified as Lu Jingfeng, a former principal who is the party secretary of Shenzhen's Vocational School of Technology. Lu is also a winner of numerous awards such as the "National Outstanding (Communist) Party Worker Award".

The Discipline Inspection Commission said that Lu cannot be reached for any comment but a teacher at the said school said that Lu is indeed being investigated and is no longer working for the school.

Most principals being subjected to the investigation have been accused of taking bribes that amount to hundreds of millions of yuan. One of the former principals was behind bars for 10 years for taking 210,000 yuan.

The report added that the most common factor for taking in bribes had to do with school admissions when principals took in students who are not qualified in the school. However, offering Principals cash in exchange of admitting a student has been a practice for urban Chinese parents. Most of these parents are those that want to enroll their children in high-quality schools.

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Government watchdogs generate billions in actual and potential savings in 2014

Inspector generals almost always pay for themselves by recovering money from fraud and recommending ways to save money. Note: Savings on large agencies extend beyond the viewing area of the chart. Data for Treasury's IG was not available.

The 14 inspector generals' offices returned almost $11 billion to the U.S. Treasury. (iStock Photo)
Taxpayers could save as much as $43 billion if officials running the biggest federal departments would do what their internal watchdogs recommended in 2014.

That $43 billion would be about $27 returned for every dollar invested in the work of 14 of the 15 inspectors general overseeing White House cabinet-level departments. Together, the budgets of the 14 IGs amount to more than $1.6 billion, according to their semiannual reports to Congress.

Total returns on investment were calculated by adding potentially avoidable costs identified by the IGs to amounts actually recovered. Then, the total was divided by their annual budgets. The Department of Treasury IG has yet to release its report, so it was excluded from calculations for this article.

That’s up from about $21 per dollar invested in 2013, according to the Council of the Inspectors General on Integrity and Efficiency.

The 14 watchdog offices returned almost $11 billion to the U.S. Treasury as a direct result of their investigative work. They also made management recommendations worth more than $32 billion in savings.

Such recommendations included actions such as implementing tighter controls and oversight to decreasing improper payments. Those alone represent almost $20 returned for every taxpayer dollar invested.

Despite their success, however, the IGs face two main barriers. First, the watchdogs are limited in their actions. Despite the potential savings, departments are not obligated to follow their auditors’ recommendations.

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New York's Top Cop Scores as Credit Suisse Faces $10 Billion Mortgage Fraud Suit

New York's Top Cop Scores as Credit Suisse Faces $10 Billion Mortgage Fraud Suit | Global Corruption |

Credit Suisse Group AG (CSGN) was ordered to face a $10 billion lawsuit by New York’s attorney general accusing the Swiss bank of fraud in the sales of mortgage-backed securities before the 2008 financial crisis.

A New York State Supreme Court justice rejected the bank’s request to dismiss the case, a move that gives leverage to Attorney General Eric Schneiderman to demand internal bank documents and force a settlement. New York demonstrated the bank may have engaged in misconduct, Justice Marcy Friedman said in a Dec. 24 decision, allowing the suit to head toward trial.

In addition to forcing Zurich-based Credit Suisse to defend itself or settle, the ruling may strengthen Schneiderman’s hand in punishing other banks for bad behavior tied to the recession.

Elizabeth DeBold, a spokeswoman for Schneiderman, said the lawsuit is part of an effort to pursue “accountability for those who contributed to the near collapse of our economy.” Drew Benson, a spokesman for Credit Suisse, said yesterday in an e-mail that the bank will appeal the ruling.

New York sued Credit Suisse in November 2012, claiming Switzerland’s second-largest bank misrepresented the risks of investing in mortgage-backed securities. Last year, the bank argued that New York missed a three-year deadline for suing. The state countered that it had six years to file its complaint.

Eric Schneiderman, attorney general of New York.
If the bank had won, Schneiderman would have faced a new roadblock as he considers similar multibillion-dollar claims against Wall Street firms.

Armed with the Martin Act, New York’s powerful anti-fraud statute, Schneiderman has pursued banks while introducing programs to relieve struggling homeowners and stem a rise in foreclosures. He claimed Credit Suisse knew about “pervasive flaws” in the screening of residential loans underlying mortgage securities it sold, but assured investors they were safe because it wanted to expand its business.

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Postal worker health fraud rises as mail volume falls

Postal worker health fraud rises as mail volume falls | Global Corruption |

For seven years, postal worker Colette Lee collected nearly $250,000 in federal benefits after telling the government she was disabled as a result of a work-related injury.
What the Baltimore woman didn't disclose was a medical history that included injuries in four auto crashes that occurred before she claimed benefits under the Federal Employees Compensation Act.
Lee, 49, faces sentencing in U.S. District Court in Baltimore in February after pleading guilty last month to a single count of making a false statement to obtain those benefits. She could face a maximum sentence of five years.
"This case is an insult to taxpayers and honest government employees," said Maryland U.S. Attorney Rod J. Rosenstein.
Lee's scheme is part of a broader increase in health care fraud in the U.S. Postal Service, according to its inspector general, even as employment, the volume of mail and the number of new claims for benefits have dropped.
The Office of the Inspector General says its agents opened 693 cases in which health care fraud was alleged in fiscal year 2013 and 592 in fiscal 2012. The inspector general said those cases brought the Postal Service $51.9 million in medical and disability judgments and prevented $289.7 million in future losses.
In Lee's case, federal prosecutors showed that she withheld information about her medical condition from the time she was hired by the Postal Service in 2003. Not only did she conceal her history of injuries in crashes, but also that she had been in physical therapy and had undergone CT scans.
Lee first submitted a disability claim in 2007 and followed it up with three more over the next 21/2 years. Between 2007 and January 2014, she collected lost wages and other benefits from the government, she said in the plea agreement. Lee also admitted that she received food stamps illegally from 2010 to 2012 and failed to disclose that she was receiving those benefits.

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Kentucky businessman pleads guilty to $53 million tax fraud

Kentucky businessman pleads guilty to $53 million tax fraud | Global Corruption |
A Kentucky businessman pleaded guilty on Tuesday to perpetrating a $53 million tax fraud, conspiring to bribe bank executives and scheming to defraud regulators, in a case that stemmed from a U.S. investigation of a failed New York bank.

Wilbur Huff, 53, faces 12 years in prison at his sentencing in April and agreed to pay nearly $140 million in forfeiture and restitution.

Huff, whom Manhattan U.S. Attorney Preet Bharara called a “vortex of fraud” in a statement on Tuesday, pleaded guilty in Manhattan federal court to four counts, including failing to pay taxes, impeding the administration of Internal Revenue Service laws and conspiracy.

A co-defendant in the case, Allen Reichman, is scheduled to go to trial in March.

The case grew out of a probe into Park Avenue Bank, which went under in March 2010. The bank’s former president, Charles Antonucci, became the first person to be convicted for stealing U.S. government bank bailout funds from the Troubled Asset Relief Program, or TARP, when he pleaded guilty in October 2010.

The bank’s senior vice president, Matthew Morris, pleaded guilty in October, according to prosecutors.

From 2008 to 2010, Huff controlled O2HR, a Florida payroll management company. Huff stole money that client companies paid to O2HR to cover federal taxes and workers’ compensation and used it for his own personal expenses, including mortgages, designer clothing and luxury cars, prosecutors said.

In addition, prosecutors said Huff and Morris conspired with Antonucci to bolster Park Avenue Bank’s capital by concocting false transactions that made it appear as though the bank had received a $6.5 million cash infusion. The fake capital investment made it easier for Antonucci to secure TARP money, according to the government.

Huff bribed Morris and Antonucci to provide him with fraudulent letters of credit that caused Park Avenue Bank to issue millions of dollars in loans to his companies, among other financial benefits, prosecutors said.

Huff, Morris, Antonucci and Reichman, an executive at an unnamed investment bank in New York, also conspired to defraud Reichman’s firm into providing a $30 million loan to finance Huff’s purchase of an Oklahoma insurance company, according to authorities.

The men hid the source of the financing from insurance regulators in order to circumvent Oklahoma law, prosecutors said.
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Unchecked fraud increasing

President Obama's unilateral executive action on immigration will make hundreds of thousands, perhaps more than a million, illegal immigrants eligible for federal transfer payments. That will be done primarily through two widely used programs — the Earned Income Tax Credit, or EITC, and the Additional Child Tax Credit, or ACTC.

As it turns out, those two programs already are among the most corrupt and fraud-ridden in the federal government. A newly released report from the inspector general of the Internal Revenue Service confirms that the EITC is plagued by fraud and also reveals for the first time that the ACTC is even worse.

The two programs, intended for low-income workers, provide what is known as refundable tax credits. That means they give workers a tax refund that is larger than their tax liability. So a family with a tax bill of $1,000 might receive an EITC “refund” of $5,000. The ACTC works similarly for low-income workers with children.

Supported by both political parties over the years, the programs were intended to encourage work and strengthen families. Their growth has been extraordinary in recent years.

According to the inspector general, the IRS paid out $63 billion in EITC benefits in 2013. Of that, 24 percent, or about $15 billion, was given improperly to people who were not qualified to receive those subsidies.

The IRS paid out $26.6 billion in ACTC credits in 2013. The inspector general reports the child credit improper payment rate for that year was somewhere between 25.2 percent and 30.5 percent — worse than the EITC.

Both Congress and the president have ordered the IRS to crack down on improper payments. But the agency doesn't appear to be trying very hard. “The estimated EITC improper payment rate has remained relatively unchanged since fiscal year 2003, and the amount of EITC claims paid in error has grown,” according to the inspector general.

The report estimates there has been somewhere between $124 billion and $148 billion in improper EITC payments in the last decade. That's more than the federal government pays for, say, veterans' benefits, or the justice system, or agriculture, or transportation in any given year. And it is all wasted.
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Stopping the flow of corruption

First, in many countries, corruption and human rights are tightly bound. The chance to profit from corruption is why many authoritarian leaders seize and cling to power. It becomes the glue that holds their regimes together, giving them spoils to distribute while turning their cronies into criminals who could be exposed and punished if they turn disloyal. It is also among the issues most likely to fuel popular resistance to authoritarianism, as we’ve seen from Tunisia to Russia and Venezuela. Any strategy to promote democracy and human rights must have the fight against corruption at its heart.

Second, we can’t fight corruption abroad if we don’t stop its proceeds from flowing through our companies and banks. We already work hard to return illicitly acquired assets to benefit the citizens of such countries, generally after the leaders who stole them have left office. But this kind of “departure tax” for falling autocrats is not enough: We must do more to deny safe haven to such funds while corrupt leaders are still in power. One way to do that is to prevent the registration of anonymous shell companies on our shores.

The Treasury Department recently took a significant step toward limiting the use of such companies by proposing a regulation that would require financial institutions to collect and verify the identity of the people behind company accountholders. President Obama’s 2015 budget includes a much more far-reaching proposal: It would require all companies to identify their “beneficial ownership” — the human beings who own or control them — to the IRS as part of a routine tax filing and make that information more readily available to law enforcement. Congress should enact this proposal now to ensure that our legal and financial systems are not used to hide corruption and facilitate autocracy overseas.
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Ten former PennDOT employees charged in $1.2 million fraud case: Land Line Magazine

Ten former PennDOT employees charged in $1.2 million fraud case: Land Line Magazine | Global Corruption |
Eight highway inspectors and two permit managers who worked for the Pennsylvania Department of Transportation have been charged in criminal court for their alleged roles in a $1.2 million corruption and bribery scheme.

Chargers against the men were filed in state court on Dec. 17. As many as 27 federally funded maintenance and construction contracts in Pennsylvania may be affected, according to a news release from the U.S. Department of Transportation’s Office of Inspector General.

The complaints allege that Alex Morrone, former PennDOT permits manager, and William Rosetti, former Philadelphia County permit manager, demanded kickbacks from project inspectors while requiring them to falsify time, attendance and payroll records to generate illicit cash flow, according to the news release from OIG. They also allege that the corrupt inspectors were paid more than $500,000 through false payroll and invoice submissions. Additionally, two leading inspection firms, CMC Engineering and CZOP Corp., were allegedly paid more than $700,000 for their employees’ unearned overtime.

In addition to Morrone and Rosetti, those charged included PennDOT inspectors Frank DiMichele and Generoso Palmieri, and consultant inspectors Joseph DiSimone, John Cavanaugh, John Laspada, Brandon Grosso, David Betzner, and Christopher Lauch.

The complaints also state that project inspectors performed home improvement services for PennDOT officials while payroll records falsely indicated that they were performing inspection duties. In addition to the monetary fraud, the state grand jury contended that the scheme jeopardized safety because paid project inspectors, hired to protect the public and Pennsylvania highway infrastructure, were often absent from job sites and therefore failed to perform inspection duties.
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China needs own metrics for corruption fight

China needs own metrics for corruption fight | Global Corruption |
China's anti-corruption net is catching "tigers", senior corrupt officials as well as "flies" or corrupt officials at grassroot level. On Monday, the Communist Party of China's Central Commission for Discipline Inspection announced that Ling Jihua, a senior Party official and national political advisor, is under investigation for "suspected serious disciplinary violation". Before that, other high-ranking officials, including former top security chief Zhou Yongkang and former deputy military head Xu Caihou, were also investigated for suspected corruption.

China's crackdown on corruption has been well publicized. But despite Chinese top leader Xi Xinping saying that he is committed to rooting out all forms of corruption, China has not been able to convince some Western analysts of the efficacy of the anti-corruption campaign.

In fact, Transparency International's 2014 Corruption Perceptions Index says the early stage of China's war on corruption is not registering well in certain metrics. This led to a 20-place fall for China in the global rankings placing it in the company of Algeria and Suriname and behind the likes of Zambia, Liberia and Panama. Regional peers have experienced similar volatility. Japan has progressed and regressed at regular cycles, although the country's overall trend in the past 20 years is positive. Even Singapore, consistently among the world's least corrupt countries, has slipped in recent years.

In contrast, the region's another big power, India, has seen a modest improvement in the 2014 index. Corruption has been a visible issue in India in recent years, and the country's performance has improved modestly over that time. It still ranks low on the list but has been steadily, if slowly, rising since the 1990s, so the recent surge may be due in part to higher expectations related to these and other events.

What accounts for the discrepancy between improved anti-corruption efforts and low performance in certain corruption indexes? China has made a concerted effort but is losing the early gains. India has also taken steps to curb corruption, with only marginal results in the indexes. Therefore, are recent accusations of Chinese officials by pro-Western bias in global corruption ratings warranted?

The issue behind this seeming disconnect is not how corruption is defined, but how it is detected and measured, and the corrupt prosecuted. Notions of corruption are fairly universal, even between the East and West. Personal gain (typically financial) resulting from abuse of power, circumvention of procedure, undue political influence and non-disclosure of assets can all be defined as corrupt practices. Nevertheless, the procedures through which corruption cases are prosecuted emerge from differences in governance cultures.
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United States Congressman Michael Grimm Pleads Guilty to Causing the Filing of a False and Fraudulent Tax Return | OPA | Department of Justice

United States Congressman Michael Grimm Pleads Guilty to Causing the Filing of a False and Fraudulent Tax Return | OPA | Department of Justice | Global Corruption |
False and Fraudulent Tax Return
Earlier today, United States Congressman Michael Grimm pleaded guilty at the federal courthouse in Brooklyn, New York, to aiding and assisting the preparation of a false tax return.  Since 2011, Grimm has served as a member of the United States House of Representatives representing New York’s 11th Congressional District, which includes the borough of Staten Island and parts of the borough of Brooklyn, in New York City.  When sentenced, Grimm faces a prison term of up to three years.  In connection with his guilty plea, Grimm also agreed to pay restitution to the Internal Revenue Service (IRS), the New York State Department of Taxation and Finance, and the New York State Insurance Fund (NYSIF).  Today’s guilty plea proceeding took place before the Honorable Pamela K. Chen, United States District Judge, Eastern District of New York.

The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office, and Richard Weber, Chief, IRS- Criminal Investigation.

“With today’s guilty plea, Michael Grimm has admitted that while running his business he chose lies and deception over honest dealings with federal and state authorities as well as his own employees.  In addition to pleading guilty to causing the filing of a false tax return for his restaurant, Grimm has signed a statement admitting to the conduct underlying every charge filed against him.  Michael Grimm has now publicly admitted that he hired unauthorized workers whom he paid “off the books” in cash, took deliberate steps to obstruct the federal and state governments from collecting taxes he properly owed, cheated New York State out of workers’ compensation insurance premiums, caused numerous false business and personal tax returns to be filed for several years, and lied under oath to cover up his crimes.  He will now be held to account for all of his actions that led to those charges,” said U.S. Attorney Lynch.  “This guilty plea makes clear that we and our partners in the FBI and the IRS will vigorously investigate and prosecute fraud wherever we find it, and that no one is above the law.”  Ms. Lynch expressed her appreciation to the Public Integrity Section of Department of Justice, the Northern Criminal Enforcement Section of the Tax Division of the Department of Justice, the New York State Insurance Fund, the New York State Department of Taxation and Finance, and the New York State Department of Labor for their assistance in the investigation.

FBI Assistant Director-in-Charge Venizelos stated, “As an elected official, Grimm was responsible for deciding how taxpayers' money should be spent, yet he chose not to pay his fair share of taxes while operating his business.  Adding insult to injury, while serving as a Member of Congress, Grimm lied under oath in an effort to conceal his criminal activity.  The public expects their elected officials at all levels of government to behave honorably, or at a minimum, lawfully.  As his guilty plea demonstrates, Grimm put self-interest above public service.”
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Bank Leumi Admits to Assisting U.S. Taxpayers in Hiding Assets in Offshore Bank Accounts | OPA | Department of Justice

Bank Leumi Admits to Assisting U.S. Taxpayers in Hiding Assets in Offshore Bank Accounts | OPA | Department of Justice | Global Corruption |
A major Israeli international bank admitted that it conspired to aid and assist U.S. taxpayers to prepare and present false tax returns to the Internal Revenue Service (IRS) by hiding income and assets in offshore bank accounts in Israel and elsewhere around the world.  A deferred prosecution agreement between the Bank Leumi Group and the Department of Justice was filed today in the Central District of California that defers prosecution on a criminal information charging the bank with conspiracy to aid and assist in the preparation and presentation of false tax returns and other documents to the Internal Revenue Service.  This unprecedented agreement marks the first time an Israeli bank has admitted to such criminal conduct which spanned over a 10 year period and included an array of services and products designed to keep U.S. taxpayer accounts concealed at Bank Leumi Group’s locations in Israel, Switzerland, Luxembourg and the United States.

The Bank Leumi Group’s parent company is Bank Leumi le-Israel, B.M.  Bank Leumi le-Israel is one of Israel’s largest banks, with subsidiaries in seven countries and more than 13,000 employees.  Other subsidiary banks entering into this deferred prosecution agreement include The Bank Leumi le-Israel Trust Company Ltd., the oldest and largest of all bank trust companies in Israel; Leumi Private Bank S.A., a Switzerland-based subsidiary; Bank Leumi (Luxembourg) S.A., a Luxembourg-based subsidiary; and Bank Leumi USA, a FDIC-insured, full-service commercial bank with offices in California, Florida, Illinois and New York.

According to documents filed in the case, to account for their criminal conduct, Bank Leumi Group will pay the United States a total of $270 million. Of this total payment, $157 million represents a penalty for U.S. taxpayer accounts held at Leumi Private Bank in Switzerland.  This $157 million penalty is consistent with the department’s Swiss Bank Program, which permits certain Swiss Banks to avoid prosecution by making a full and complete disclosure of their U.S. taxpayer-held accounts and paying substantial penalties.  The agreement further provides that Bank Leumi Luxembourg and Leumi Private Bank will cease to provide banking and investment services for all accounts held or beneficially owned by U.S. taxpayers.
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The Hard Facts of Global Corruption Action

Action  rarely follows rhetoric when it comes to global corruption
It takes two to tango to rob national treasuries and undermine global commerce: the government officials and politicians who take the bribes and, of course, the corporations who pay the bribes.
Just how rotten current conditions are is evident from two new reports – Transparency International’s index of bribe taking and a comprehensive OECD analysis of corporate bribe paying.
Transparency International’s 2014 Corruption Perceptions Index (CPI) covering 175 countries reveals that more than two-thirds score less than 50 points on a scale, where 100 is fully clean of corruption and 1 is the very opposite.
If one looks, for example, at emerging market economies, where to an increasing degree governments have publicly pledged to attack corruption, then the picture remains bleak. Levels of perceived corruption in most emerging market countries are very high, with the great majority having CPI scores of less than 50, including the four BRICS.
Many executives at multinational corporations have long acknowledged the significant risks of doing business with government partners in many emerging market countries, but these are so often offset by considerations of both the very large size and especially the potential of these markets.
Wal-Mart, for example, is now engaged in a multi-year, multi-million dollar internal investigation of allegations that its executives paid bribes in a range of emerging market countries, including Mexico, Brazil and India.
Most corporations, I hope, nevertheless find ways to do business honestly, but as a new study by the OECD shows, many companies are willing to shave their profits significantly to pay bribes and win deals.
The OECD reviewed the cases of 400 corporations that have been investigated for bribing foreign government officials – investigations that took place in some of the 41 countries that signed the OECD Anti-Bribery Convention that first came into force in 1998 and that makes it a criminal offense for a company to bribe a foreign government official.
The OECD said that on average the bribes paid equaled 10.9% of the total transaction value and 34.5% of the profits, equal to $13.8 million per bribe.
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Nonprofit contracting official indicted on bribery charges

Nonprofit contracting official indicted on bribery charges | Global Corruption |
The former chief of contracts for International Relief & Development (IRD) in Arlington Va., one of the largest non-governmental organizations to work in Iraq and Afghanistan, has been indicted on federal bribery charges.

George E. Green, 57, was charged with steering contracts to an Afghan subcontractor as part of an agricultural program funded by the U.S. Agency for International Development (USAID). IRD had received a cooperative agreement to administer the agricultural program for the federal agency.

Green did not respond to an email seeking comment Friday.

“He pled not guilty at his arraignment and we will investigate the case and prepare a defense,” said Green’s lawyer, assistant federal defender Robert Arrambide. His attorney declined to discuss the charges.

Prosecutors say Green accepted $66,000 in bribes in exchange for directing work to the Afghan subcontractor. Some of the money was wired to a car dealer in San Severino Marche, Italy, in an attempt to conceal the payments, according to the indictment. Green, of Carrollton, Tex., allegedly structured cash deposits into his bank and credit card accounts to avoid federal currency reporting requirements.

Green was indicted Tuesday by a grand jury in Texas, charged with one count of conspiracy to structure financial transactions, one count of wire fraud and three counts of receiving bribes in connection with a program receiving federal funds. If convicted on all counts, Green faces a maximum of 55 years in prison.

In recent years, IRD has been one of the largest recipient of grants and cooperative agreements of any nonprofit organization funded by the USAID. The majority of IRD’s funding — 82 percent of $2.4 billion–went to USAID projects in the war zones, most of them in Iraq and Afghanistan.
Monica S Mcfeeters's curator insight, December 23, 5:05 AM

Does anyone think excessive campaign donations should be considered brides rather than granted a free pass by both the supreme court with Citizens United and the recent budget bill Congress just put into effect?