Very recently, in Tokyo police has begun in investigation on Olympus' attempt to hide investment losses dating back to the early 1990s. The company tried to clean up its books with four different incidents within 2 years.
Aside from the police looking into this, Japan's Financial Service Agency, has launched an investigation with Olympus, this includes a hearing with auditors who signed off on Olympus' books and a government official familiar with this particular matter.
Olympus' auditor until recently in 2009 was KPMG. During the time in which KPMG was their auditor several of these transactions took place. Following the auditor of KPMG was Ernst and Young. A spokesperson for Ernst & Young stated that she is not allowed to comment on whether or not the firm is being questioned during this investigation.
Olympus needs to restate decades worth of earnings which could make it difficult for them post results for the quarter-ending. Olympus did however state to us that hid their investment losses in the early 1990s but then did try to clean it up between the years 2006 and 2008.
Since the CEO was ousted for raising questions about the four acquisitions , Olympus lost 3/4 of its market value, which could potential harm the 22,000 shareholders. If the shareholders are permanently damaged in this situation, they will turn away from investing in Japan again. Shares in Olympus has dropped dramatically to a total decline of 44%, however they are trying there best to avoid delisting.
Tokyo, Japan requires that if a company makes false statements that have a material impact, then that company is to be delisted. This is certainly a possibility for a Olympus since they covered up years of investment losses.
A senior portfolio manager at IT Investment Partners Corp. stated that markets are pricing in the fact the risk of delisting will be unavoidable, but however, political considerations could work to Olympus' advantage to help prevent the delisting.
If Olympus corrects the financial reports soon enough, much like Nikko Cordial Corp, the stock exchange could decide not to delisted the company. By doing this they could be saving themselves from covering up accounting fraud that was done purposely.
Thursday, November 10, 2011
CFTC, Liquidator to Examine MF
CFTC chairman, Gary Gensler, stated that regulators are taking all the necessary actions to get to the bottom of the shortfall of over $600 million in customer money at the securities firm MF Global Holdings Ltd. He also stated that the regulators will also "find out to the fullest extent possible the full accounting of these moneys."
Another sign of the ongoing investigation of NY securities downfall, the trustee overseeing the liquidation of MF Global seeking court approval to subpoena both current and former officers, along with both current and former directors, employees, and affiliates. The trustee is in charge of investigating the company along with employees for fraud, misconduct, and mismanagement.
PriceWaterhouse Coopers, which has been their outside auditor since 2007, gave MF Global a clean audit opinion, stating that the company's financial statements "present fairly, in all material respects." Along with this PwC also stated that MF Global's internal controls were effective and appeared to have no material weaknesses. Any fraud that occurred after the year-end audit, wouldn't necessarily be detected by the auditors.
Mr. Gensler said that segregation of customer moneys should be maintained at all times. Mr. Gensler defended the oversight agency, citing an action that resulted in a $10 million settlement.
MF Global failed to supervised risk on 4 different occasions between 2003-2008, as a result they agreed to submit an independent review of both risk management and compliance programs. At that time, they enacted procedures for risk monitoring, compliance, training, and audit procedures.
Since MF Global filed for bankruptcy it will be hard to discover the assets of thousands of business and investors, with 10 firms, who had ties to MF Global. These firms will receive a majority of the transfers and be able to distribute some back to clients. The transfers are the first step requested by the customers to receive over $5 billion assets owed to them by MF Global, with hopefully more steps to follow to help the customers get back what they lost.
Another sign of the ongoing investigation of NY securities downfall, the trustee overseeing the liquidation of MF Global seeking court approval to subpoena both current and former officers, along with both current and former directors, employees, and affiliates. The trustee is in charge of investigating the company along with employees for fraud, misconduct, and mismanagement.
PriceWaterhouse Coopers, which has been their outside auditor since 2007, gave MF Global a clean audit opinion, stating that the company's financial statements "present fairly, in all material respects." Along with this PwC also stated that MF Global's internal controls were effective and appeared to have no material weaknesses. Any fraud that occurred after the year-end audit, wouldn't necessarily be detected by the auditors.
Mr. Gensler said that segregation of customer moneys should be maintained at all times. Mr. Gensler defended the oversight agency, citing an action that resulted in a $10 million settlement.
MF Global failed to supervised risk on 4 different occasions between 2003-2008, as a result they agreed to submit an independent review of both risk management and compliance programs. At that time, they enacted procedures for risk monitoring, compliance, training, and audit procedures.
Since MF Global filed for bankruptcy it will be hard to discover the assets of thousands of business and investors, with 10 firms, who had ties to MF Global. These firms will receive a majority of the transfers and be able to distribute some back to clients. The transfers are the first step requested by the customers to receive over $5 billion assets owed to them by MF Global, with hopefully more steps to follow to help the customers get back what they lost.
Thursday, November 3, 2011
Occupy Wall Street Money Issues
The Occupy Wall Street group was originally group that was protesting and began out by just receiving donations of pizza, while they camped out in Lower Manhattan park. This group now however has received more than $500,000 in five weeks in just donations and doesn't know what to do with it.
The Occupy Wall Street protesters has received way more cash donations than anyone has ever imagined. With these donations several requests for spending have been prompted. Along with spending the donations, the money raised allowed protesters to considered taking the necessary steps to becoming an organization. This organization will be organized with both a board of directors as well as officers.
The group's finance committee has met with lawyers and accountants to determine which steps should be taken next to handle the money. Such steps include a tax-exempt status along with naming leaders and other issues. At this point in time the Occupy Wall Street can not spend any money or make any big decisions without consulting the General Assembly and a consensus is reached.
The next issue brought was having "meeting minutes show long." This was brought up with someone asking for $2,000 to have 92,000 stickers printed. This lead to many questions being asked such as why so many stickers? What are the stickers going to made of? And wouldn't be a waste of time and money to place these stickers all over the place. Over time, some stickers were purchased, but not nearly 92,000.
Currently, where the $500,000 goes is not solely up to the General Assembly. You may be wondering why not? Well according the Internal Revenue Service (IRS) the Occupy Wall Street doesn't even exist.
A few weeks ago the Occupy Wall Street group was able to gain tax-exempt status. This allowed donors to write off these contributions made. However, the Alliance for Global Justice, which granted them this status has no final say in the spending of the money and will have no say in the decision making of the spending, they will be able to intervene if they violate the tax-exempt status.
According to the finance committee of Occupy Wall Street, once donations were beginning to be received, they needed to keep documentation of this receipts and accounting for spending. They are currently working with a lawyer as well as an accountant in preparing a statement of cash flows that will soon be available online.
It seems incredible that a group who is protesting for so long was able to raise half a million dollars in just five weeks. It wouldn't be a surprise now if over time they were able to raise so much money that they need to become a real organization to keep a handle on something so simple as donations.
The Occupy Wall Street protesters has received way more cash donations than anyone has ever imagined. With these donations several requests for spending have been prompted. Along with spending the donations, the money raised allowed protesters to considered taking the necessary steps to becoming an organization. This organization will be organized with both a board of directors as well as officers.
The group's finance committee has met with lawyers and accountants to determine which steps should be taken next to handle the money. Such steps include a tax-exempt status along with naming leaders and other issues. At this point in time the Occupy Wall Street can not spend any money or make any big decisions without consulting the General Assembly and a consensus is reached.
The next issue brought was having "meeting minutes show long." This was brought up with someone asking for $2,000 to have 92,000 stickers printed. This lead to many questions being asked such as why so many stickers? What are the stickers going to made of? And wouldn't be a waste of time and money to place these stickers all over the place. Over time, some stickers were purchased, but not nearly 92,000.
Currently, where the $500,000 goes is not solely up to the General Assembly. You may be wondering why not? Well according the Internal Revenue Service (IRS) the Occupy Wall Street doesn't even exist.
A few weeks ago the Occupy Wall Street group was able to gain tax-exempt status. This allowed donors to write off these contributions made. However, the Alliance for Global Justice, which granted them this status has no final say in the spending of the money and will have no say in the decision making of the spending, they will be able to intervene if they violate the tax-exempt status.
According to the finance committee of Occupy Wall Street, once donations were beginning to be received, they needed to keep documentation of this receipts and accounting for spending. They are currently working with a lawyer as well as an accountant in preparing a statement of cash flows that will soon be available online.
It seems incredible that a group who is protesting for so long was able to raise half a million dollars in just five weeks. It wouldn't be a surprise now if over time they were able to raise so much money that they need to become a real organization to keep a handle on something so simple as donations.
Thursday, October 27, 2011
FBI finds $1B fraud of NY Rail Involving Hundreds of Workers
Hundreds of Long Island Rail Road employees have found a way to be a part of the $1 billion fraud. They have cheated there way to making money and not going to work. These employees were paying off their doctors to say that they were unable to work due to disabilities. However, these disable retirees were said to be seen playing tennis, shoveling snow, and working out in the gym for several hours.
Eleven of the doctors, including an orthopedist and a former union official were charged with "conspiracy in a decade long fraud" that had corrupted the pension system used by the employees. Hundreds of retired rail road workers declared themselves disabled to collect more money between the ages of 50 to 65.
One worker who complained of having severe hand, knee, shoulder, and back pain. While complaining of having this severe pain he was reportedly playing tennis and golf often. This individual was collecting $105,000 yearly, between his pension and disability payments. Another employee who reported similarly the same symptoms was seen shoveling snow for several hours and was collecting $108,000 in both pension and disability payments.
The complaint said that many workers who retired with disability payments worked an extremely high amount of overtime within 5 years before retiring. That is because this is when pension funds begin being calculated. The complaint also said that employees lied about their physical condition so that they can retire at an earlier age and receive the same salary as when they are working.
Prior to 2008, three doctors were responsible for 86% of the disability applicants. These doctors received between $800 and $1200 from each patient as they built up these cases by prescribing unnecessary therapies. This showed that these employees were unable to work and allowed them to collect disability payments.
This complaint was written by a special agent from the Office of the Inspector General for the federal Rail Road Retirement board. He estimated that "the fraudulent scheme could cause the RRB to pay unwarranted occupational disability benefits exceeding $1 billion if disbursed in full."
The complaint stated that 61% of these employees were between the ages of 50 to 55 during the years 2004 and 2008. This was a criminal investigation prompted by a 2008 New York Times investigation. During this investigation, Governor Andrew Cuomo said that "These arrests continue to show that we have zero tolerance for waste and fraud when it comes to pension systems."
These employees were cheating the system for several years and it is about time they were caught.
Eleven of the doctors, including an orthopedist and a former union official were charged with "conspiracy in a decade long fraud" that had corrupted the pension system used by the employees. Hundreds of retired rail road workers declared themselves disabled to collect more money between the ages of 50 to 65.
One worker who complained of having severe hand, knee, shoulder, and back pain. While complaining of having this severe pain he was reportedly playing tennis and golf often. This individual was collecting $105,000 yearly, between his pension and disability payments. Another employee who reported similarly the same symptoms was seen shoveling snow for several hours and was collecting $108,000 in both pension and disability payments.
The complaint said that many workers who retired with disability payments worked an extremely high amount of overtime within 5 years before retiring. That is because this is when pension funds begin being calculated. The complaint also said that employees lied about their physical condition so that they can retire at an earlier age and receive the same salary as when they are working.
Prior to 2008, three doctors were responsible for 86% of the disability applicants. These doctors received between $800 and $1200 from each patient as they built up these cases by prescribing unnecessary therapies. This showed that these employees were unable to work and allowed them to collect disability payments.
This complaint was written by a special agent from the Office of the Inspector General for the federal Rail Road Retirement board. He estimated that "the fraudulent scheme could cause the RRB to pay unwarranted occupational disability benefits exceeding $1 billion if disbursed in full."
The complaint stated that 61% of these employees were between the ages of 50 to 55 during the years 2004 and 2008. This was a criminal investigation prompted by a 2008 New York Times investigation. During this investigation, Governor Andrew Cuomo said that "These arrests continue to show that we have zero tolerance for waste and fraud when it comes to pension systems."
These employees were cheating the system for several years and it is about time they were caught.
Tuesday, October 11, 2011
Morningstar a Ponzi Scheme
When investors seek to take on more investments they will often look for the best company to do this with. Many investors will turn to Morningstar for this advice. However, it is believed that some think that Morningstar is giving false advice.
A lawsuit has been filed against Morningstar as a result of Morningstar being "reckless in giving a five-star rating to hedge a fund later." As a result of this the Securities and Exchange Commission labeled this a Ponzi scheme. If Morningstar had given a reasonable thought before giving a five-star rating, they would have noticed that a lower rating was necessary or no rating at all.
Morningstar is a company located in Chicago and for many years has been able to influence investors. Research has shown that Morningstar has been giving funds a higher rating than the firm actually deserves. In turn fund companies are taking these five-star ratings to help market there company as being a highly rated company.
Unlike mutual funds, hedge funds are not required to make standard public disclosures, which results in them being much less transparent. Morningstar rates these hedge funds based off of "self-reported data" as well as the firms acknowledgement. They will flag a fund when that fund begins to fall below certain standards, such as the use of a reputable independent auditor.
Morningstar is legally responsible to disclose information on why the fund received the rating it did. They do not need to audit the funds unless they promised that they would. This case is brought to court because it is believed Morningstar knew they were providing false information and continued with it.
Instead of Morningstar investing the money as they had promised, they operated as a Ponzi scheme. They used this money for personal expenses such as the defendent's luxary yacht rental and other unrelated things.
With this being said, it is important for investor's to be extremely cautious in the "less-than-transparent world of hedge funds." Those seeking to invest should go above and beyond ratings from Morningstar and do some research themselves. This can be done by requesting a standard due dilgence form from the fund firm. This form is known as Alternative Investment Management Association and provides a list of questions to be answered by the managers. Some of these questions include things like references of experience, team experience, and fees and contact information that would be helpful for the auditor.
Investor's should also request a copy of the fund's recently performed audits and make sure that an unqualified opinion has been provided by a well known auditing firm. They can also call the bank that holds funds money and be sure that they fund has a assets that it says it does. Investors should be very careful when using a hedge-fund firm.
A lawsuit has been filed against Morningstar as a result of Morningstar being "reckless in giving a five-star rating to hedge a fund later." As a result of this the Securities and Exchange Commission labeled this a Ponzi scheme. If Morningstar had given a reasonable thought before giving a five-star rating, they would have noticed that a lower rating was necessary or no rating at all.
Morningstar is a company located in Chicago and for many years has been able to influence investors. Research has shown that Morningstar has been giving funds a higher rating than the firm actually deserves. In turn fund companies are taking these five-star ratings to help market there company as being a highly rated company.
Unlike mutual funds, hedge funds are not required to make standard public disclosures, which results in them being much less transparent. Morningstar rates these hedge funds based off of "self-reported data" as well as the firms acknowledgement. They will flag a fund when that fund begins to fall below certain standards, such as the use of a reputable independent auditor.
Morningstar is legally responsible to disclose information on why the fund received the rating it did. They do not need to audit the funds unless they promised that they would. This case is brought to court because it is believed Morningstar knew they were providing false information and continued with it.
Instead of Morningstar investing the money as they had promised, they operated as a Ponzi scheme. They used this money for personal expenses such as the defendent's luxary yacht rental and other unrelated things.
With this being said, it is important for investor's to be extremely cautious in the "less-than-transparent world of hedge funds." Those seeking to invest should go above and beyond ratings from Morningstar and do some research themselves. This can be done by requesting a standard due dilgence form from the fund firm. This form is known as Alternative Investment Management Association and provides a list of questions to be answered by the managers. Some of these questions include things like references of experience, team experience, and fees and contact information that would be helpful for the auditor.
Investor's should also request a copy of the fund's recently performed audits and make sure that an unqualified opinion has been provided by a well known auditing firm. They can also call the bank that holds funds money and be sure that they fund has a assets that it says it does. Investors should be very careful when using a hedge-fund firm.
Tuesday, September 27, 2011
Employers Given a Break on Payroll by the IRS
Ever wonder if the business you work for considers you an employee or an independent contractor on the payroll?
For several years, businesses have been labeling some of there workers as independent contractors rather than employees of the business, which will lead to the Internal Revenue Service coming after them when it comes to payroll. However, in mid September the IRS has decided to give these employers a break.
The IRS has designed a new program which will allow these employers to make a small payment to cover past payroll taxes as well as reclassifying there workers to prevent this from happening in the future.
So, how exactly to you determine if a worker is an independent contractor or an employee of the business? The correct determination of a worker depends primarily on how much control and authority the employer has over its worker. Examples of an independent contractor could be an engineering consultant or a private investigator.
Now, you may be wondering why a business would classify a worker as independent contractor rather than employee. There is one main reason why a company would do this and that is it can save a company some money, some companies can even save up to 30% off their labor costs.
With this new program in place employers will now owe about 1% to the reclassified employees with no penalities. In order for a company to be able to participate in this new program a company must consistently represented actual employees as independent contractors for the past three years and can not be currently having a state or federal audit done.
The IRS intends for this program to be open to all companies no matter the size, however the expecting most of the applicants to be smaller businesses because they don't as strict a structure as the larger companies do.
Officials from the IRS, the Labor Department, and seven states around the country are working together to get this program under way. Currently the Labor Department is already investigating the home building industry where subcontractors often handle the work for the big builders in that industry.
This could present a larger issue in months to come because many employer's do not know how to properly classify their employees and that is why many of the employee's are misclassified.
For several years, businesses have been labeling some of there workers as independent contractors rather than employees of the business, which will lead to the Internal Revenue Service coming after them when it comes to payroll. However, in mid September the IRS has decided to give these employers a break.
The IRS has designed a new program which will allow these employers to make a small payment to cover past payroll taxes as well as reclassifying there workers to prevent this from happening in the future.
So, how exactly to you determine if a worker is an independent contractor or an employee of the business? The correct determination of a worker depends primarily on how much control and authority the employer has over its worker. Examples of an independent contractor could be an engineering consultant or a private investigator.
Now, you may be wondering why a business would classify a worker as independent contractor rather than employee. There is one main reason why a company would do this and that is it can save a company some money, some companies can even save up to 30% off their labor costs.
With this new program in place employers will now owe about 1% to the reclassified employees with no penalities. In order for a company to be able to participate in this new program a company must consistently represented actual employees as independent contractors for the past three years and can not be currently having a state or federal audit done.
The IRS intends for this program to be open to all companies no matter the size, however the expecting most of the applicants to be smaller businesses because they don't as strict a structure as the larger companies do.
Officials from the IRS, the Labor Department, and seven states around the country are working together to get this program under way. Currently the Labor Department is already investigating the home building industry where subcontractors often handle the work for the big builders in that industry.
This could present a larger issue in months to come because many employer's do not know how to properly classify their employees and that is why many of the employee's are misclassified.
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