Alberta Fleeced by Enron

Well you know the good ship of state in Alberta is teetering towards toppling and leaking like a sieve when its main propagandist gives it a good backhand slap.

Edmonton Sun columnist Neil Waugh the apologist for all things Klein and Tory has thrown up his hands in disgust over the cover up by the government of the fleecing it got from Enron when it deregulated the energy market. See his Edmonton Sun columns: March 10, 2005 Powerful question where he asks:

When first confronted with the Project Stanley allegations, Market Surveillance Administrator Martin Merritt - a watchdog without a government leash - reviewed the Snohomish/California allegations and declared them old news. Then he turned his guns on the media, accusing us of "mischaracterizing the allegations."

Just 20 days later - on the first day the legislature gets down to business - Merritt suddenly changed his tune. There's going to be an investigation after all.

"The MSA has requested and obtained materials filed in proceedings before FERC," Merritt gulped. The Cantwell tapes. But instead of an Alberta-based probe, he turned it over to the feds' weak sister Competition Bureau. Then he took another shot at published "articles and commentary."

Short hours later, the Tory butt-covering started in the legislature. Surely a coincidence. And the premier quickly ducked and let the B-Team take over.

"Albertans have not been impacted in any financial way," blustered Energy Minister Greg Melchin. But how does he know? Especially after Justice Minister Ron Stevens - when asked if his notorious Gang that Couldn't Shoot Straight has launched an investigation - blurted "at this point in time there is no intention to proceed with anything."

Yesterday, Opposition Leader Kevin Taft met the same brick wall.

"I don't get involved in the mechanics of an investigation," the premier snapped.

Melchin blathered on about "legislated hedges."

Even the man who should be on the case, Auditor General Fred Dunn, is handcuffed. The Market Surveillance Administrator has been conveniently tucked away out of his jurisdiction.

"Why do the people of Alberta have to rely on the County of Snohomish to protect their rights?" wondered Taft. Why indeed?

and in his March 17, 2005 column, How serious are we? Alberta talks tough on crime, but ignores power allegations he continues the spanking:

In a week when a New York court declared Edmonton's own Bernie Ebbers guilty in the massive WorldCom securities fraud, Alberta Solicitor General Harvey Cenaiko summoned the province's police chiefs to his office.

He vowed to crack down on criminal conspiracies.

"Gangs are a breeding ground for organized crime," stormed our Harv. "Organized crime crosses all boundaries and affects everyone."

He joined Justice Minister Ron (Get Tuff) Stevens in his law-and-order manifesto. Our Harv and Tuff mean business. Or at least they say they do.

"We are targeting crime bosses through co-ordinated efforts," Cenaiko blustered on. He talked about "aggressive action already taken."

It all sounds so wonderful, until yet another Enron horror story shows up, this time from deep in the heart of Texas. And you realize just how pathetic the Alberta Tories are these days.

Especially with the Enron bigwigs Ken Lay and Jeff Skilling about to be the next alleged corporate fraudsters to undergo the tough love concept of the United States Department of Justice and President George Bush's Corporate Fraud Task Force.

OUCH that must hurt, could hear that ring throughout the marble halls of the Legislature.

The privatization and deregulation of energy in Alberta has been its billion dollar boondoggle, the equivalent of the Ferderal Gun Registry. No one wanted it, not the public sector or the private sector, and certainly not the public. It was driven by ideology (See my article Wild West Buy Out, Steve West aka Prince of Darkness, Kleins drinking buddy and his promoter of the privatization of everything) and it has been a failure in reducing costs but a success in making huge profits for the utility companies.

And now it has been revealed that Enron set up a price fixing fraud in Alberta using the deregulated market to set up a sting it would later use in Texas and Califronia. The gutting of the public purse by Enron first happened in Alberta, thanks to the ill informed, poor planning and oversight of the Klein team.It has taken an American court case to reveal the fact and the Klein gang now has egg on their face.

And now they are covering their asses, claiming this fraud is no big deal. After all it wasn't their fault it was the, wait for it, the Federal Governments fault. Yep fleece us with deregualtion, get fleeced by Enron pass the buck to the Feds.

The Official Opposition Liberals have taken them to task over Enron in the house last week. The NDP have made energy deregulation their cause popular, and now both opposition parties have a literal smoking gun. Will this kevlar government feel the pain, well when its allies like Waugh give it a good smack down, you know they are in trouble. Big Trouble, with a capital T and its spelled ENRON.

Waugh continues his attack in the Edmonton Sun where he writes about TransAlta the private utility corporation which pushed deregualtion because it had a license to market electricity into and out of the U.S. Along with it being private it is a holding company for ex government politicians, it was that way under the Socreds and remains so under the Tories.

TransAlta was the power behind West, in the push to privatize electrical marketing in Alberta. They hoped to be able to trade blended electricity into Canadian and American markets, since they were the only Canadian utility licensed to do so. Ron Sothern of ATCO the other private utility company as well as EPCOR and ENMAX the City of Edmonton and Calgary publicly owned utilites opposed the deregulation.

And while Transalta and the public utilities have made oddles of profit on the deregulated market it is us as taxpayers and consumers who have borne the brunt of the burdern with massive cost increases in electricty as well as having to shell out infrastructure costs for expanding the electrical generation base in the province. After all we were told that deregulation would be good for consumers.

Yeah, consumers like Enron.


Sun, March 20, 2005
Power struggle
TransAlta gets no help from Tories in shaking off taint of Enron scandal
By Neil Waugh -- For the Edmonton Sun

With friends like these, who needs enemies? TransAlta Utilities and the Alberta Tories have this relationship going. They're not exactly attached at the hip. But a lot of prominent PCs are on its board.

Former provincial treasurer - and reported heir apparent for the premier's job - Jim Dinning was an executive vice-president until he curiously resigned Jan. 1 to head up a small bank based out of High River.

Last week TransAlta's name came up in the legislature. This is not a good thing. Especially when it's linked with former Enron Canada president Rob Milnthorp and ex-Enron general counsel Mark Haedicke.

Haedicke, among other things, is suffering the wrath of ex-Enron workers who lost their jobs and pensions after he got a $750,000 bonus, days before the big power marketer went bankrupt. Enron is now facing charges that it rigged the California power market in 2000.

The Alberta Liberals went on the attack after they found what they claimed was a damning e-mail in the mountains of Enron files and transcripts recently released by the United States Federal Energy Regulatory Commission.

The document was called "Project Stanley" - the code name Enron execs invented to allegedly manipulate energy markets in California and Texas. And, if you believe the attorney general of California Bill Lockyer, honed their illegal craft, fixing the Alberta market in the early days of Ralph Klein's botched energy-deregulation regime.

'Low profile'

It talked about keeping a "relatively low profile until we settle Project Stanley." And the 2000 memo referred to "recent meetings" with the Alberta government and TransAlta. That sent the Liberals off on a fishing trip for what Grit Leader Kevin Taft says are 5,600 pages of Enron documents in the government's possession.

Instead of giving them up, the Tories naturally stonewalled. Unlucky TransAlta got caught in the crossfire. "The intent is to try and slander," yelped Alberta Energy Minister Greg Melchin. "We still are looking for evidence."

He sure has a funny way of going about it.

"Until a month ago I'd never heard of Project Stanley," said TransAlta legal affairs director Sterling Koch. (Although TransAlta was involved in litigation with Enron at the time.) But he sure has heard of Bill Lockyer. Probably too much.

On May 30, 2002, the crusading attorney general, on behalf of the "people of the state of California," launched a massive suit against TransAlta Energy Marketing Inc., owned by TransAlta but registered in Delaware.

In it he talked about the "skyrocketing electricity prices, widespread blackouts, utility bankruptcy and massive economic upheaval" that hammered his state in 2000. It alleged that the TransAlta spin-off "through unjust, unreasonable and illegal overcharges and price-gouging, received unprecedented profits at the expense of consumers, ratepayers, businesses and the state of California."

As you can see, Bill doesn't pussyfoot around.

In his latest quarterly report - after all the happy news came out - TransAlta president Steve Snyder gave his shareholders the latest Golden State update. The claims were dismissed. An appeal was denied last October.

A parallel investigation by FERC in June 2003 ordered TransAlta to "justify certain trading activities in California." A document filed with the regulator specifically asked TransAlta if it participated in Enron market-fixing scams like "Death Star, Load Shift, Get Shorty and Fat Boy."

TransAlta denied it.

Overcharge claim

"TransAlta does not participate in and has nothing to gain by doing these types of trades," Snyder said at the time. But the company is still arguing over $46 million that California power authorities claim TransAlta overcharged them.

"The courts have dismissed their claim," said Koch. But he might have spoken too fast.

"We're just trying to get our money back," California attorney general spokesman Tom Dresslar snapped last week.

The battle continues. With no help from the Alberta Tories.

Predicting intentional accounting misreporting

by Alvin Lee, Singapore Managment University

Credit: Alvin Lee

In the U.S. Securities and Exchange Commission (SEC) 10-K annual report filing for its financial year ending July 31, 2008, American jewellery retailer Zale Corporation ('Zales') mentioned the words 'advertising' or 'advertisement' 17 times. A year later, those same words showed up more than twice as often at 41 times.

By then, the SEC had begun investigations after the company delayed posting fourth-quarter results. Zales was subsequently found to have improperly capitalised television advertising costs from 2004 to 2009 although few had noticed what was going on.

In a method featured in new research by SMU Assistant Professor of Accounting Richard Crowley, this intentional misreporting would have sent alarm bells ringing well before the SEC started asking questions.

"They're 97th percentile or higher in our model in every single year from the second year of misreporting onwards," says Professor Crowley, referring to the machine learning technique featured in the paper "What are You Saying? Using Topic to Detect Financial Misreporting". "97th percentile here means that their score on our misreporting detection model was higher than 97 percent of U.S. public companies."

He adds: "The model is run yearly, so that means that for each year of 2005, 2006, ... 2009, Zales scored a higher misreporting detection score than 97 percent of public companies that year."

What's the word?

Professor Crowley explains that the research completely ignores the numbers—"If managers are going to misreport the numbers, they're going to do it in a believable fashion"—and instead looks at what is written instead, which the research refers to as the 'topic'.

Together with Professors Nerissa Brown and Brooke Elliott from Gies College of Business at the University of Illinois Urbana-Champaign, Professor Crowley analysed over 3 billion words in 10-K filings from 1994-2012 to see how reliably certain topics predicted intentional misreporting. In certain samples, the research improved prediction of intentional misreporting by 59 percent.

"The one key difference when you're discussing things when you're lying is that you're very intentional on the topics you pick to discuss," he elaborates, pointing to the example of Enron.

"They just talk about increases in income and they have an enormous amount of discussion about that," Professor Crowley observes. Enron's 1999 annual report serves as a prime example, citing "acceleration of Enron's staggering pace of commercial innovation" for a 28 percent revenue increase to US$40 billion from a year ago, as well as a 37 percent jump in net income before non-recurring items to US$957 million.

Professor Crowley singles out a phrase that Enron used often in their 10-K's: "compared with". He explains:

"Companies are always saying things like, 'This is our income in 2011 compared with income in 2010,' and they're always giving forecasts about income, gross margins etc.

"But then you have income taxes, non-interest income, profit, those are just the general phrases that show up. When we picked out the most representative sentences for each of these topics, we found phrases such as 'operating profit was $122.1 million in 2011 compared with $113.9 million to 2010, an increase of 7.8 percent.' This is an extremely common structure to see in these documents.

"So when we talk about Enron, they have sentences like that, but they have a lot more of them than anybody else has ever done, both in 1999 and across the entire history of our sample."

Given the purported number of deals Enron had that generated all that revenue, it might make more sense to read in its annual reports things such as acquiring sources for its energy contracts, Professor Crowley notes. Instead, it largely "talked about revenue figures and income figures", he observes.

So is there a tipping point of the number of times a topic appears that is a red flag? Or the kinds of words used?

"There is no constant sort of barometer for this," Professor Crowley tells the Office of Research and Tech Transfer. "I can't just say if they talked about it X percent of the time, we got them. It depends on a lot of factors. And a lot of these factors are industry-specific, and some are firm-specific.

"[It also depends on whether] you're in a recession versus if you're not in a recession. Likewise, if you're a financial company versus a healthcare company, or a phone company versus a steel manufacturer, [the topics to look for] should all be different."

You can't game what you don't know

Professor Crowley and his collaborators employed over 20 different text-based variables in their predictive model, including the use of the Fog Index for readability.

While intuition would suggest an easy to read 10-K to be transparent, Professor Crowley counters by saying "it could be because they left out all the details". Similarly, positive sentiments like those expressed by Enron could be signals of intentional misreporting, although it is impossible to be 100 percent sure.

"It takes just six seconds to run through a 10-K with our model," Professor Crowley says while noting that the SEC has adopted parts of his model to uncover intentional misreporting. But the question must be asked: Can firms looking to mislead the market study the algorithm to beat the SEC at its own game?

"The one nice thing about this algorithm is that it changes every year," he elaborates, pointing to the combination of words that make up the topics that the algorithm works on. "Companies don't know what the regulator's target would be, even if they're using our algorithm."

"The benefit of that is that if you're a company trying to manipulate, you don't know what the target is either."

New research pinpoints intentional financial misreporting

---

More information: Nerissa C. Brown et al. What are You Saying? Using Topic to Detect Financial Misreporting, SSRN Electronic Journal (2016). DOI: 10.2139/ssrn.2803733

CRIMINAL CAPITALI$M

Forensic linguistics reveals the playbook of trust

New research shows how trust develops in real time - and how it is managed, repaired, and maintained in conversation, to ensure future collaboration.

University of Birmingham

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New research has revealed the linguistic moves made by energy traders to manipulate trust and encourage collusion in illicit activity, misleading clients and officials, and supporting forms of corruption that spanned many organisations.

Forensic linguists from the University of Birmingham looked at how trust develops in real time, and how it is managed, repaired, and maintained in conversation, to ensure future collaboration.

The study, published by Cambridge University Press, used records from the Enron scandal.  This was no ordinary fraud, and it went beyond creative accounting.  Enron traders secured the trust of people working in external organizations to gain access to and control energy infrastructure, artificially constraining supply and driving up market prices.

These coordinated market moves were often discussed and arranged on the phone – and the clandestine conversations were taped, creating a ‘corpus’ of transcripts that is the world’s largest collection of spoken language records from illegal activity. 

Linguistic analysis of these transcripts, led by Dr Matteo Fuoli, showed a larger share of speech by Enron traders dedicated to trust management compared to external speakers. 

It also revealed a playbook of trust-related moves, which fell into five basic categories: bond, build, confide, probe, and repair. 

Dr Fuoli said: “Access to covert conversations is rare.  The size of the corpus meant we were able to produce a comprehensive framework for conversational tactics that can be used to build and manage trust and legitimize wrong-doing.” 

The analysis showed ‘bond’ moves predominated in the conversations, with Enron traders fostering emotional connection, and projecting a persona of a friendly and supportive listener. 

The ‘build trust’ moves provided rational arguments about why the listener should trust the speaker, including boasting to project competence. 

Unsurprisingly, Enron traders used ‘confide’ moves, including sharing privileged information, significantly more often than external speakers, and while ‘probe’ moves were mostly used by external speakers, Enron speakers used ‘repair’ moves frequently, and these were primarily defensive (justification, or shifting the blame), with apologies and outright denials being rare.

Dr Fuoli is part of Lingsight, a team of world-class linguists from the University of Birmingham, UK, with a track record that includes major publicly-funded research projects and collaborations with top technology firms. 

Dr Matteo Fuoli: “The framework has a diagnostic potential and can inform practical interventions in combating fraud such as phishing or romance scams, but also online radicalization in extremist discussion forums, and ideological harm networks like incel.  It could also be used to identify the roles and relationships within a specific criminal network.”

“Similarly, studying the trust dynamics within extremist or ideological harm networks online could deepen our understanding of how and why individuals are drawn to these groups and guide the development of well-informed social policies and educational interventions.”

Enron E Texts Wiped

Ok conspiracy freaks this ones for you. It's Deja Vu, this is like the missing minutes off the Nixon tapes.

The company handling electronic document production in the Enron civil suits says a software bug may have erased text in e-mails produced for discovery in the case over an 18-month span.

Software Bug my ass. This is what happens when you outsourcee/privatize your email and IT services.

Applied Discovery Inc., a Bellevue, Wash.–based division of LexisNexis, says one client has reported a problem so far. And lawyers handling the Enron litigation said it was too early to predict the potential impact. But several of the lawyers, speaking on condition of anonymity, said that if the problem was widespread and had corrupted the discovery process, it could cost tens of millions of dollars to fix and could foul up both pending and settled Enron litigation.

Convienant that. No alleged bribery was reported.



Alsop See:

Enron



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Enron, e-mailo, etextxt, software, bug, Applied-Disvcovery, Inc., US, law, courts, civilsuit

Government defends hiring consulting firm KPMG to find ways to save money

ONE WORD:ENRON

Story by Elizabeth Thompson  • CBC

 The federal government is defending a contract it awarded to international professional services company KPMG, saying the company helped the Natural Resources department identify ways it could save money on real property and information technology.

"There are times when you actually need an external perspective to help you to think about how to find cost efficiencies … There are times where organizations are actually used to doing things in a certain way and an external perspective can help you find efficiencies," Natural Resources Minister Jonathan Wilkinson told reporters Tuesday on his way into cabinet. 

"And that was what this was all about, to actually help us reduce costs."

Wilkinson's comments came in the wake of news reports saying the government paid KPMG nearly $670,000 to find ways to save money — and after the the Trudeau government announced an initiative to tighten spending and reduce its reliance on outside consultants.

Wilkinson said KPMG's contract predates that initiative.

"The contract was issued well before budget 2023, which was the commitment around reducing consulting," he said. "So it happened a long time ago and the focus was actually on helping us reduce costs on real property and IT."

Miriam Galipeau, spokesperson for the Natural Resources department, said the contract was awarded in July 2022 "to produce analyses on cost-saving opportunities, specifically in IT and real property."

She said the department was also able to leverage its pre-existing contract with KPMG to "support [the department's] proposal to the Treasury Board due in October 2023."

She said between the work done by KPMG and the department's own internal analysis and assessment of programs, Natural Resources was able to come up with proposals that could see potential savings of $5 million a year starting in 2026.

In the House of Commons, NDP MP Gord Johns tabled a question asking for details of any contracts awarded to outside firms for help in identifying spending cuts. In response, Natural Resources provided details of two tasks assigned to KPMG — one valued at $325,000 that was due Aug. 25, 2023 and another at $344,650, due Oct. 31, 2023.

The first task was to find ways to optimize IT costs; it produced three reports related to cost reduction opportunities in areas such as IT contracting, desktop cloud-based computing and software asset management.

Titles for the second task were marked simply "TBD" (to be determined).

No other government department indicated that it had hired an outside company to help it find cost savings.

Treasury Board President Anita Anand says details of how the government plans to cut costs will be tabled soon.

(The Canadian Press/Adrian Wyld)© Provided by cbc.ca

Anita Anand said she has taken steps since being named Treasury Board president to reduce the government's reliance on outside consultants and issued guidance for government departments on outsourcing.

She said the guidelines "require anyone considering using external consultants to ensure that they follow those guidelines, including undertaking a review of whether those services can be performed within the Government of Canada, and also to ensure that this is absolutely necessary within the context in which it is being proposed.

"All in all, what we are trying to do is to ensure that we take a risk-based approach to the use of external consultants."

Anand said details of how the government plans to reduce its spending will be tabled soon in the House of Commons.

Kevin Dove, spokesperson for KPMG, declined to comment

Finance.yahoo.com

https://finance.yahoo.com/news/22-years-63-billion-enron-173348320.html

22 years after the $63 billion Enron collapse, a key audit r... 

Jul 26, 2023 ... Deloitte, PwC, KPMG, and EY did not respond to Fortune's requests for comment. 'Completely unacceptable'. For audits conducted by all accounting ....

Ft.com

https://www.ft.com/content/95a0c80b-1262-42c3-ac5b-bb693e06d3c4

Big Four post strongest performance since Enron as advisory ... 

Dec 8, 2021 ... KPMG's 10% jump in revenue takes aggregate turnover at top firms to $167bn for 2021.

Theguardian.com

https://www.theguardian.com/news/2018/may/29/the-financial-scandal-no-one-is-talking-about-big-four-accountancy-firms

The financial scandal no one is talking about - The Guardian 

May 29, 2018 ... Just four major global firms – Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG – audit 97% of US public companies and all ...

Get ready for Enron II: Republicans are re-opening the energy market to underhanded dealing



Published 30 mins ago

on January 22, 2020


By Sarah Okeson, DCReport @ RawStory
- Commentary
Thanks for your support!
This article was paid for by reader donations to Raw Story Investigates.


Neil Chatterjee, head of the Federal Energy Regulatory Commission, is taking our nation back to pre-Enron days when the commission was so weak it didn’t even explicitly prohibit manipulating energy markets.

Under Chatterjee, a former Mitch McConnell aide, the number of new investigations was halved – to 12 – in fiscal 2019, compared with the previous year. The commission reached just two settlement agreements for $14 million, a sixth or less of the annual average for penalties since 2007.


“Several recent actions seem to indicate that the commission may not be fully committed to finding, stopping, and punishing manipulative acts that can stifle competition and result in unjust and unreasonable prices,” Sen. Maria Cantwell (D-Wash.) and four other Democratic senators wrote to FERC commissioners.

Chatterjee, who also previously lobbied for the National Rural Electric Cooperative Association, told senators that annual averages vary and dropped in part because of the effectiveness of FERC enforcement.

“Our focus and priority continues to be addressing market manipulation and protecting our markets,” Chatterjee said.

FERC is pursuing three cases that total about $85 million in penalties, interest and amounts the companies would have to repay.

Former President George W. Bush signed the Energy Policy Act after the bankruptcy of Enron, the Houston energy company that cooked its books to hide billions of dollars in debt. Enron’s former CEO, Jeffrey Skilling, who was convicted of insider trading and other charges, was released from prison in 2018

The Energy Policy Act gave FERC the power to fine companies up to $1 million a day per violation. Energy companies and trade associations such as the Electric Power Supply Association and Energy Trading Institute have argued in court that the fines should be thrown out because the commission is taking too long to assess penalties.

In May, the commission stopped issuing public notices about alleged violations, saying “the potential adverse consequences … for investigative subjects are no longer justified.” The commission voted in 2009 to issue public notices under former President Barack Obama.

FERC also eliminated its Division of Energy Market Oversight which was part of its enforcement efforts. The division oversaw our country’s natural gas and electric power markets and related energy and financial markets.

Chatterjee’s predecessor as chairman, attorney Norman Bay, had been the commission’s director of enforcement. He resigned in January 2017 after Trump named then-commissioner Cheryl LaFleur as the acting chair.

Before FERC enacted market behavior rules there was no explicit prohibition or definition of market manipulation in FERC rules, regulations or orders or statutes administered by the commission.

In fiscal 2018, FERC opened 16 investigations into market manipulation, the most for any year in the past decade, and recovered almost $150 million in civil penalties and disgorgement of profits.

CRIMINAL CRYPTO CAPITALI$M

Editorial: The FTX saga is hard to understand, but the greed behind it isn't

2022/12/05

CEO of FTX Sam Bankman-Fried testifies during a hearing before the House Financial Services Committee at Rayburn House Office Building on Capitol Hill Dec. 8, 2021, in Washington, D.C.. - Alex Wong/Getty Images North America/TNS

Back in 2001, precious few Americans could have explained what Houston-based Enron did as a company and how it got so spectacularly wealthy. But when it filed for a record-breaking bankruptcy, Americans got schooled fast about not putting their trust and money behind swaggering, fast-talking con artists. But fools and their money regrouped over the years, and along came FTX, a $32 billion cryptocurrency exchange that repeated many of Enron’s mistakes and yielded the same abysmal results. We suspect that a lot of investors who lost their shirts in the FTX failure would have trouble explaining exactly what FTX did, and that’s largely because the entire cryptocurrency industry is built on fantasy.

Even the person in charge of the company, Sam Bankman-Fried, didn’t understand it completely. “I didn’t know exactly what was going on,” he told The New York Times last week in a DealBook video interview. A year ago, Bankman-Fried was worth an estimated $26.5 billion. Today, the 30-year-old might have around $100,000 in assets. “I’ve had a bad month,” he told The Times.

The losses he and his investors suffered are far more complex to explain than what happened at Enron. That company actually dealt in a tangible asset — energy — but was guilty of creating fake companies and shuffling money-losing accounts among them to hide its financial losses. In the case of FTX, it was an exchange where people bought and sold imaginary cryptocurrency, whose value was based on nothing that anyone could see or touch. And yet millions of people around the world poured billions of real dollars into it.

When the imaginary world of cryptocurrency and FTX came crashing down, investors demanded their real, tangible money back. But it was gone. That prompted the equivalent of a bank run that exposed the myth behind everything Bankman-Fried was doing. He invented currency. When that wasn’t enough, he invented an exchange for other invented currencies. As long as everyone believed in the myth, the money poured in.

Company officers apparently used FTX assets to take out real loans to make investments in real, money-based enterprises. When the run on the bank began, they apparently began using customers’ money to pay off other customers — a Ponzi scheme, in other words. Former President Bill Clinton was among the prominent personalities who got burned by associating themselves with FTX.

To his credit, though, Clinton gave a talk at the FTX headquarters in the Bahamas reportedly warning all involved to “do right by it in the regulatory space,” meaning to make sure FTX operations abided by U.S. securities and banking regulations. Because the industry took off way before U.S. regulators could catch up, it’s not clear what they can do now to hold FTX officials legally accountable.

That shouldn’t stop Congress from trying. The internet isn’t going away anytime soon, nor will its imaginary currency market.

US Justice Dept. requests independent review of FTX collapse


The Justice Dept. has requested an independent investigation into the collapse of FTX, formerly the second-largest cryptocurrency trading platform in the world. Miami-Dade county is seeking a new naming partner for the FTX Arena, shown here. Photo by B137/Wikimedia Commons

Dec. 2 (UPI) -- The Department of Justice has requested an independent review of the circumstances leading to the implosion of the cryptocurrency exchange FTX, which filed for bankruptcy in November after failing to maintain adequate liquidity to match investments.

"The questions at stake here are simply too large and too important to be left to an internal investigation," U.S. Trustee Andrew Vara said in a filing in Delaware federal bankruptcy court Thursday.

John Ray III, who replaced FTX founder Sam Bankman-Fried as CEO in November, is conducting an internal investigation into the company's collapse. Ray previously oversaw the return of some investor assets during the liquidation of Enron.

FTX was the worlds second-largest cryptocurrency trading platform until it was reveled that it lacked the funds to match investments.

"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," Ray wrote in FTX's bankruptcy filing in November.

While the Department of Justice said it did not dispute Ray's "qualifications, competence or good faith," it believes his role in the company may prevent him from representing the interests of all investors.

"An examiner could -- and should -- investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct and mismanagement," Vera wrote in Thursday's filing.

LA REVUE GAUCHE - Left Comment: Search results for FTX 

Criminal Capitalism The Story of 2006

In business the stories of 2006 that dominated the news were about the continuing expose of criminal capitalism, as a way of doing business.

Not as an abberation but as the way business is done, until someone is caught.

Whether with their fingers in the till or by refusing to pay for services rendered.

Though this business review missed my favorite story about the high tech media company that gave out backdated stock options to dead board members. Even Joe Volpe couldn't top that.


Corporate Crime Was the news story of 2006.

Conrad Black missed his three-peat as Canadian Business Newsmaker of the year, finishing a solid second behind Finance Minister Jim Flaherty, while the fallen media lord awaits trial in March in Chicago on charges of racketeering, money laundering, fraud and tax evasion.

But Black enlivened 2006 with a theatrical libel case against biographer Peter Newman, winning a statement of regret and dropping a $2-million lawsuit. Later in the year, the publishers of a new muckraking Black biography gleefully quoted his published opinion of the book in their advertising: "smut-mongering... malodorous pot-boiler... sewage."

In a more uplifting piece of litigation, Victoria's Secret sued Canadian lingerie retailer La Senza in March, seeking $1 million for alleged violation of its push-up-bra intellectual property. The suit was dropped late in the year as Victoria's Secret parent company Limited Brands bought La Senza for $710 million.

The year's corporate legal misadventures featured an admission in May by WestJet Airlines that its "highest management levels" were involved in a scheme to steal sensitive information from Air Canada, which had sued for $220 million. WestJet paid $5.5 million in costs and made a $10-million donation to charity.

Canadian-born former WorldCom CEO Bernie Ebbers, 65, drove his Mercedes-Benz up to the gates of a Louisiana prison to start a 25-year term for the telecom company's US$11-billion fraud.

On the same late-September day, Andrew Fastow was sentenced to six years for his role as chief financial officer in the 2001 collapse of Enron Corp. A month later, ex-Enron CEO Jeffrey Skilling got a 24-year sentence.

Enron founder Kenneth Lay had died of heart failure in July, after being convicted with Skilling in the massive fraud.

America didn't have a monopoly on the fallen mighty: the founder of Korea's collapsed Daewoo conglomerate, Kim Woo-choong, was sentenced to 10 years for embezzlement and fraud. He was also ordered to disgorge US$22 billion.

And Hyundai Motor chairman Chung Mong-koo spent two months in jail before apologizing for setting up slush funds with embezzled money.

Lower on the pecking order of commercial criminality, a California couple who put a severed finger into a bowl of Wendy's chili and tried to extort money from the fast-food chain received prison sentences in January. Jaime Plascencia got a 12-year term and Anna Ayala received a nine-year sentence. On the bright side, she bragged that other prisoners were asking for her autograph.

Wendy's International was in the news again in March when it spun off Tim Hortons Inc. in an initial public offering that had investors lining up like deprived caffeine junkies at Canada's favourite doughnut-shop chain. The issue price in Toronto was $27 and the stock peaked at C$37.99 on its first day. It dipped under $27 during the summer before ending 2006 in the $33 range.

Back on the crime beat, as gasoline prices topped US$3 a gallon last spring, service stations across America reported fuel-related offences ranging from driving off without paying to posing as an employee and draining gasoline from underground tanks.

It was the worst of times for David Edmondson, who resigned as CEO of Radio Shack in February after it came to light that his claim to have university degrees in theology and psychology was false. His departure came after a 62 per cent tumble in the U.S. electronics retailer's quarterly earnings. In June, Edmondson was sentenced to 30 days in jail for drunk driving.

In another case of impaired judgment, Jim Whitehouse, a former RBC Dominion Securities vice-president, had his wrongful-dismissal suit quashed. He had been fired for drunkenly taking a prostitute to the firm's Calgary office at night and leaving her there alone after a dispute over her fee.

See

Criminal Capitalism Blog

Too Greedy

Bring Out Your Dead

Conrad Black

Money Laundering Canadian Style

Bank Theft

Credit Card Fraud

Primitive Accumulation of Capital

Corporate Crime

White Collar Crime

Criminal Capitalism

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White Collar Crime Reporter 1

In Canada it is fashionable for Acccounting Companies like Ernest and Young, and KPMG to publish annual reports on corporate fraud, and the losses incurred through white collar crime.

Of course they focus on the employee theft and fraud, not real corporate fraud or true white collar crime, of which these same companies and their coprorate clients like Enron have been implicated.

They like the banks involved, CIBC, Royal Bank, pay a fine and go on their merry way. While ordinary folks charged with shoplifting, B&E, or other none violent property crimes go to jail.

Even in the recent rash of cases in the U.S. like Enron where corporate executives go to jail, these are rare occasions compared to the usual treatment corporate crime gets, which is little or no attention. Until they impact society as whole, as Enron did.

Want to be a corporate criminologist? 
Prepare for the cold winds of
academic Siberia. 

The American Society of Criminology held its 50th Annual Meeting recently
in Washington, D.C. The program for the meeting lists 503 sessions. Fewer
than ten of those sessions dealt in any way with issues of white-collar
and corporate crime.

Laureen Snider, a Professor of Sociology at Queen's University in
Kingston, Ontario, Canada, attended the conference. She anticipated the
dearth of papers on corporate crime. The title of her paper: "The
Sociology of Corporate Crime: An Obituary."

Snider's point: while corporate crime itself might be increasing around
the globe, the study of corporate crime by academics has been declining
rapidly over the years.

If academics study in the field of white collar crime, they study not the
crimes committed by corporations, but crimes against corporations -- the
traditional white-collar crimes of theft, embezzlement and the like, plus
newly defined white-collar crimes such as "theft of time."

Instead of focusing on criminal pollution, or the manufacture of hazardous
pharmaceuticals that kill, or illegal union-busting by major corporations,
the few researchers studying white collar crime are looking at how
employees steal from employers.

"If, for example, you take too long on your coffee break, of if you surf
the net when you 'should' be looking at something that is directly
relevant to the employer's interest, you are guilty of the offense of
theft of time," Snider says. "You are stealing the employer's money by
taking their time."

This focus fits well with a power structure that rewards ideas supportive
of the corporate domination of society, while punishing those who would
question that domination.

Snider is one of the world's handful of corporate criminologists --
academics who focus primarily on the study of corporate crime. She is the
author of Bad Business: Corporate Crime in Canada (Nelson, 1993 and is the
editor, along with Frank Pearce, of Corporate Crime: Contemporary Debates
(University of Toronto Press, 1995).

Corporate criminologists like Snider tend to be found in out of the way
places, like Kingston, Ontario, Canada, or Adelaide, Australia, or
Scranton, Pennsylvania. For some reason, the big city major universities
in the United States find it inconvenient to put up with a corporate
criminologist.

David Friedrichs is a corporate criminologist who has settled in at the
University of Scranton in Scranton, Pennsylvania.

There, he has written Trusted Criminals: White Collar Crime In
Contemporary Society (Wadsworth Publishing, 1996), the most comprehensive
text book on the subject.

Corporate crime and violence inflicts far more damage on society than all
street crime combined? So why are Snider and Friedrichs in the tiny
minority of criminologists?

Friedrichs says the reasons are complex, but one reason is that there is
no broad-based social movement against corporate crime. 

One major reason why corporate crime gets little attention from reporters,
academics and government officials has little to do with complexity, and
more to do with the simple reality of corporate power. Big corporations
have marinated our formerly independent institutions in corporate cash and
influence.

Why should reporters tackle tough issues of corporate power and crime when
such a foray might lead to loss of job, income and family support? Why
should an academics study corporate crime when government funding sources
send signals that such study is unwelcome? And why should a Justice
Department researcher propose to keep track of corporate crime statistics,
knowing that business politicians lurk in the hallways, waiting to make
life miserable?

Snider makes the obvious point that "certain ideas are much more
appealing" to the powerful ruling interests.

"The idea of corporate crime is one that is simply unappealing to business
elites," she says. "Ever since it was first invented by Edwin Sutherland,
the concept of white collar crime, and specifically corporate crime, has
been actively resisted. Corporations have certainly argued, if they have
had to face up to the idea at all, that corporate executives are not
criminals. We have reserved the concept of 'criminal' for people we think
are different from ourselves."

The result: our prisons are filled with the poor, the minorities  and the
underrepresented.

In law, as in modern corporate life, you get what you pay for.


See

Criminal Capitalism Blog

Too Greedy

Bring Out Your Dead

Conrad Black

Money Laundering Canadian Style

Bank Theft

Credit Card Fraud

Primitive Accumulation of Capital

Corporate Crime

White Collar Crime

Criminal Capitalism

Find blog posts, photos, events and more off-site about:
criminology, Enron, corporate-crime, white-collar-crime, sociology, fraud, KPMG, Ernst&Young, accounting, scandal, criminal-capitalism, workers, employees, theft, crime,