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Fraud Updates
PCB News
Fraud Updates 2008
16 December
The news that Mr Madoff, a former chairman of the Nasdaq Stock Market, is being investigated for allegedly perpetrating what is already being called Wall Street's biggest fraud - as much as $50bn is said to be at stake - is likely to be the first of many investigations that erupt during this recession.
The investigation is believed to have been sparked by the failure of funds controlled by Mr Madoff to meet large redemption demands from investors that have been prompted by the credit crunch. The central allegation appears to be that Mr Madoff raised funds from new investors to pay returns to existing investors; rather than generating those returns from investments. When he was faced with numerous investors demanding the return of their investments and no new money to replace it, the edifice came tumbling down.
Steven Philippsohn, the senior partner of city firm, PCB Litigation, and chairman of the Commercial Fraud Lawyers Association, said:
"This is the tip of the iceberg and an early example of the news that we are going to get very used to hearing during this recession. As the credit crunch bites, more and more problems will come to light. The problem in respect of any fraud is that the knock on effect will be ruinous. In deciding the most effective way of recovering losses, victims need to consider the nature an accuracy of the information provided, the duties owed by the agents who introduced or sold the funds and the remedies that are available in the countries in which claims could be brought. The case highlights the need for effective controls and effective deterrents. Where fraud is involved, there is an immediate need to identify and attach assets of accountable parties. This includes not only the fraudster but also those who allowed it to happen such as those who misrepresented and missold the product."
Steven’s comments have appeared in the Guardian and the Dow Jones and he has appeared on Sky News, BBC World TV and BBC Radio 5 Live to comment on the case as it has developed.
9 December
It has been reported that Huang Guangyu who has an estimated fortune of $6bn and is the chairman of China's biggest electrical appliance retailer, Gome Electrical Appliance Holdings Ltd, is being investigated amid allegations of insider dealing and money laundering. According to the company, its chief financial officer was also being questioned.
The allegations appear to involve significant sums of money in the region of 70 billion yuan and a number of other companies as the China Securities Regulatory Commission is reported to have confirmed that a company controlled by Mr Huang, Beijing Eagle Investment Co Ltd, is suspected of manipulating the share prices of Sanlian Commercial Co Ltd, and Beijing Centergate Technologies Co Ltd.
The investigation looks to have spread to a number of other individuals according to one news agency to include Mr Huang’s elder brother who is the Chief Executive of Beijing Towercrest Group and the Chairman of Beijing Centergate Technologies Co Ltd.
It will be of interest to see how the Chinese authorities tackle issues which have long been a problem for other countries.
| February 2009 | November 2008 |