Archive for Corporate Fraud
While Snooping Continues to Rise, IT Security Is Making It Harder for Insiders to Get Around Controls That Protect Highly-Sensitive Information
NEWTON, Mass. & LONDON–(BUSINESS WIRE)–The results of Cyber-Ark® Software’s fourth annual “Trust, Security and Passwords” global survey show that 35 percent of respondents believe their company’s highly-sensitive information has been handed over to competitors. Thirty-seven percent of the IT professionals surveyed cited ex-employees as the most likely source of this abuse of trust. While perhaps not surprising that disgruntled workers top the list, it’s noteworthy that 28 percent suspected “human error” as the next most likely cause, followed by falling victim to an external hack or loss of a mobile device/laptop, each at 10 percent. The most popular information shared with competitors was the customer database (26 percent) and R&D plans (13 percent).
Cyber-Ark’s fourth annual “Trust, Security and Passwords” global survey is the result of interviews conducted in the Spring of 2010 with more than 400 senior IT professionals both in the US and UK, mainly from enterprise-class companies.
There was little year-over-year change in the number of respondents who suspected the loss of intellectual property to a competitor, indicating that more needs to be done to protect companies’ most valued assets. Additionally, to address vulnerabilities related to human error that could expose a proprietary database or financial information, organizations must employ additional layers of control such as the ability to grant privileges to sensitive data and systems on-demand. This limits “innocent” mistakes by allowing access to information only when users need it to perform a particular task or query.
Snooping On the Rise, but Access Is Getting More Difficult
The research also confirmed that snooping continues to rise within organizations both in the UK and the US. Forty-one percent of respondents confessed to abusing administrative passwords to snoop on sensitive or confidential information – an increase from 33 percent in both 2008 and 2009. When examining the information that people were willing to circumvent the rules to access, US respondents targeted the customer database first (38 percent versus 16 percent in the UK) with HR records most alluring to UK respondents (30 percent versus 28 percent in the US).
Despite the rise, there was also the admission that organizations are trying to better curb snooping and are installing stronger controls to prevent these incidents. Based on this year’s survey, 61 percent responded they could circumvent those controls – a decrease from 77 percent in 2009. Additionally, 88 percent of IT professionals believe their use of these privileged accounts should be monitored, however only 70 percent of organizations actually attempt to do so – with one-third turning a blind eye to what’s happening within their networks and therefore failing to meet regulatory and compliance requirements. Insider sabotage, unfortunately and rather disconcertingly, has increased from 20 percent last year to 27 percent this year.
Speaking about the results, Cyber-Ark’s Executive Vice President Americas and Corporate Development Adam Bosnian commented, “While we understand that human nature and the desire to snoop may never be something we can totally control, we should take heart that fewer are finding it easy to do so, demonstrating that there are increasingly effective controls available to better manage and monitor privileged access rights within organizations. With insider sabotage on the increase, the time to take action has already passed and companies need to heed the warnings.
“It is the organization’s obligation to protect its sensitive information and intellectual property. Failing to do so, in our opinion, makes the company as bad as those who are abusing their privileged positions. Let’s face it, you might as well sell the information to the highest bidder yourself – that way at least you’ll have some control over who’s got it!,” continued Bosnian.
IT Confess to Being the Best at Snooping
The survey found that 67 percent of respondents admitted having accessed information that was not relevant to their role. When asked what department was more likely to snoop and look at confidential information, more than half (54 percent) identified the IT department, likely a natural choice given the group’s power and broad responsibility for managing multiple systems across the organization. Of note, this is an up-tick compared to the 35 percent who identified the IT department as likely suspects in 2009, a number that had decreased from 47 percent in 2008. Respondents identified Human Resources the next curious at 11 percent, followed by administrative assistants.
Note to editors:
This survey was conducted with more than 400 IT administrators at Infosecurity Europe 2010 and RSA USA 2010. To download a detailed report of the survey results, please visithttp://www.cyber-ark.com/constants/white-papers.asp.
About Cyber-Ark
Cyber-Ark® Software is a global information security company that specializes in protecting and managing privileged users, applications and highly-sensitive information to improve compliance, productivity and protect organizations against insider threats. With its award-winning Privileged Identity Management (PIM) and Highly-Sensitive Information Managementsoftware, organizations can more effectively manage and govern application access while demonstrating returns on security investments. Cyber-Ark works with more than 600 global customers, including more than 35 percent of the Fortune 50. Headquartered in Newton, Mass., Cyber-Ark has offices and authorized partners in North America, Europe and Asia Pacific. For more information, visit www.cyber-ark.com.
REET BHARARA, the United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR., the Assistant Director in Charge of the New York Field Division of the Federal Bureau of Investigation (”FBI”), announced that SERGEY ALEYNIKOV was indicted today on charges related to his theft of proprietary computer code concerning a high-frequency trading platform from his former employer, Goldman Sachs.
ALEYNIKOV was previously arrested and is expected to be arraigned in Manhattan federal court at a later date.
According to the Indictment filed today in Manhattan federal court: From May 2007 to June 2009, ALEYNIKOV was employed at Goldman Sachs as a computer programmer responsible for developing computer programs supporting the firm’s high-frequency trading on various commodities and equities markets. Goldman Sachs had
obtained the high-frequency trading system in 1999, when it acquired Hull Trading Company, the previous owners of the system, for approximately $500 million. Since acquiring the system, Goldman Sachs modified and maintained the system, and took significant measures to protect the confidentiality of the system’s computer programs, including firewalls to limit access to the firm’s computer network, and limiting internal access to
the high-frequency trading program. Goldman Sachs’ high frequency trading system generates millions of dollars per year in profits for the firm. Goldman Sachs takes several measures to protect the system’s source code, including requiring all Goldman employees to agree to a confidentiality agreement.
In April 2009, ALEYNIKOV resigned from Goldman Sachs and accepted a job at Teza Technologies (”Teza”), a newly-formed company in Chicago, Illinois. ALEYNIKOV was hired to develop Teza’s own version of a computer platform that would allow Teza to engage in high-frequency trading. ALEYNIKOV’s last day of employment at Goldman Sachs was June 5, 2009.
Beginning at approximately 5:20 p.m. on June 5, 2009 –ALEYNIKOV’s last day working at Goldman Sachs — ALEYNIKOV, from his desk at Goldman Sachs, transferred substantial portions of Goldman Sachs’s proprietary computer code for its trading platform to an outside computer server in Germany. ALEYNIKOV encrypted the files and transferred them over the Internet without informing Goldman Sachs. After transferring the files,
ALEYNIKOV deleted the program he used to encrypt the files and deleted his computer’s “bash history,” which records the most recent commands executed on his computer.
In addition, throughout his employment at Goldman Sachs, ALEYNIKOV transferred thousands of computer code files related to the firm’s proprietary trading program from the firm’s computers to his home computers, without the knowledge or authorization of Goldman Sachs. ALEYNIKOV did this by e-mailing the code files from his Goldman Sachs e-mail account to his personal e-mail account, and storing versions of the code files on his home computers, laptop computer, a flash drive, and other storage devices.
On July 2, 2009, ALEYNIKOV flew to Chicago, Illinois, to attend meetings at Teza’s offices, bringing with him his laptop computer and another storage device, each of which contained Goldman Sachs’s proprietary source code. ALEYNIKOV was arrested on July 3, 2009, as he arrived at Newark Airport following that visit.
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ALEYNIKOV, 40, is charged with one count of theft of trade secrets, one count of transportation of stolen property in foreign commerce, and one count of unauthorized computer access.
If convicted on these charges, ALEYNIKOV faces a maximum sentence of 25 years in prison. Mr. BHARARA praised the investigative work of the FBI in this case. Mr. BHARARA also thanked Goldman Sachs for its
cooperation in the investigation.
U.S. Attorney PREET BHARARA added: “Sergey Aleynikov allegedly stole confidential computer code from his employer joining a rival company. In today’s information age, a theft of valuable intellectual property represents a serious breach of economic security. This Office is committed to working with the FBI to pursue the theft of intellectual property and prosecuting the perpetrators before they can cause further harm.”
FBI Assistant Director-in-Charge DEMAREST stated: “Proprietary information and trade secrets are sometimes the most valuable assets of a business. The computer code Aleynikov copied was worth millions. But the theft of such assets is usually much harder to detect than the theft or embezzlement of tangible assets, because the thing stolen is not physically missing, it’s duplicated. The FBI is committed to policing the theft of trade secrets.”
This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant United States Attorneys JOSEPH FACCIPONTI and REBECCA ROHR are in charge of the prosecution.
WASHINGTON – Former co-owners of a New Jersey-based computer services provider were each sentenced to 27 months in jail for participating in a conspiracy to defraud the federal E-Rate program, the Department of Justice announced today.
Benjamin Rowner and Jay H. Soled, former owners of DeltaNet Inc., were also each sentenced to pay $271,716 in restitution, jointly and severally, to the Universal Service Administrative Company (USAC). They were sentenced by U.S. District Court Judge Blanche M. Manning in Chicago. Rowner and Soled pleaded guilty on July 10, 2008, to one count each of criminal conspiracy. According to court documents, Rowner and Soled, together with their co-conspirator, Leonard Douglas “Doug” LaDuron, conspired to defraud the E-Rate program by submitting false and misleading statements and concealing material facts from the USAC, a non-profit corporation. In some instances, these false statements were submitted by wire transmission, e-mail and U.S. mail. The department said that the conspiracy, which began in 1999 and ran at least until 2003, affected at least 13 schools across the country.
Rowner and Soled’s co-conspirator, LaDuron, former owner of Kansas area companies Serious ISP Inc., Myco Technologies Inc. and Elephantine Corporation, pleaded guilty in the U.S. District Court in Kansas City, Kan., on June 29, 2009, to one count of conspiracy to defraud the E-Rate program and one count of making a false statement to the U.S. Department of Housing and Urban Development. LaDuron was sentenced on Dec. 16, 2009, to serve 57 months in jail and to pay $238,607 in restitution.
The E-Rate program was created by Congress in the Telecommunications Act of 1996 and is administered by the USAC, under the auspices of the Federal Communications Commission (FCC). The program provides subsidies to economically disadvantaged schools and libraries. Depending on the financial needs of applicant schools, the program pays 10 to 90 percent of the cost for Internet access and telecommunications services, as well as internal computer and communications networks.
Today’s sentencing is a result of an investigation conducted by the Antitrust Division’s Chicago Field Office, the FBI and the FCC with assistance from the U.S. Attorney’s Office for the District of Kansas. Anyone with information concerning violations of the E-Rate program or other related anticompetitive conduct is urged to call the Antitrust Division’s Chicago Field Office at 312-353-7530 or visit http://www.justice.gov/atr/contact/newcase.htm
Punishing Lawyers in Corporate Frauds
Posted by: | CommentsPeter J. Henning, a professor at Wayne State Law School, specializes in issues related to white-collar crime and follows them for DealBook’s White Collar Watch.
Joseph P. Collins, a former partner at the international law firm Mayer Brown, received a seven-year prison sentence for his role as the lead attorney for the failed futures trading firm Refco Inc., whose collapse as a result of accounting fraud cost investors and lenders more than $2 billion. Mr. Collins was convicted of conspiracy, wire fraud and securities fraud in July 2009 for his role in the stunning demise of Refco only weeks after the firm’s initial public offering.
The company hid debts owed by its chief executive, Phillip R. Bennett, from a buyout firm in an leverage buyout in 2004 and then in the public offering in 2005. In addition to Mr. Collins’s conviction, Mr. Bennett received a 16-year sentence, and Refco’s former president, Tone N. Grant, was sentenced to 10 years for their role in the accounting fraud.
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USS Expands Globally To Meet Loss Prevention Demand
Posted by: | CommentsLoss Prevention Leader Announces International Rollout to 17 Countries and Further Expansion to Europe, Middle East and Africa
RANCHO CUCAMONGA, Calif.–(BUSINESS WIRE)–Loss prevention technology leader, USS Corporation announced today plans for global expansion in response to a growing demand for loss prevention technology across the United States and abroad. The official opening of its Europe, Middle East and Africa (EMEA) Headquarters in Belgium on January 4 kicked off a 24-month international rollout that will expand the company’s reach to 17 countries, then throughout Europe, the Middle East and Africa by 2012.
“Our new headquarters overseas and our international team of representatives are available to strategize with business owners and loss prevention professionals to customize a loss prevention program using the latest technology.”
“Businesses around the world have faced significant increases in shoplifting, and organized retail crime has been on the rise,” said Adel Sayegh, President and Chief Executive Officer for USS Corporation. “As the economy recovers, these same businesses are seeking solutions to protect their inventories and guard their futures.”
“USS’ global expansion enables the company to better serve current U.S. based customers who have an established international presence and who are in the process of expanding internationally. Expansion abroad also opens USS to emerging opportunities with new international customers,” said Sayegh.
USS® EMEA Headquarters
Corporate fraud is up 200% in region
Posted by: | CommentsFRAUDSTERS hit the region’s businesses and the public sector big time over the past year, with the amount of money lost up 200%.
Accountants BDO say the total was £12.3m, compared with £4m in 2008, contributing to the £2bn barrier being broken for the first time in the UK as a whole. Nationally, the amount lost by businesses and the public sector to larger frauds increased last year by 76%, with both the number and size of frauds increasing dramatically.
Worryingly, BDO predicts that this rise is just a precursor of things to come, and warns that annual reported corporate fraud could treble within the next three years. This, the firm suggests, will be the result of management uncovering fraud as the recession sharpens their focus on questioning costs and tighter cashflow and credit making frauds harder to hide… MORE
Corporate espionage case moves forward
Posted by: | CommentsA federal judge has upheld most of a Hacienda Heights’ counter-lawsuit against Seiko Epson that claims the printing giant used a spy to gain trade secrets while illegally cracking down on the local firm’s right to sell recycled products.
The ruling was a victory for two-year-old Hacienda Heights-based Green Project, a 13-employee company that recycles and sells used ink and toner cartridges.
In July, the firm alleged in U.S. District Court in Oregon that Seiko Epson sent an investigator named Herbert W. Seitz, who trespassed into its Hacienda Heights headquarters and used a false identity to obtain price lists and other information from Green Project’s sales department.
Green Project’s lawsuit was a response to Seiko Epson’s original suit in April, claiming that Green Project and several similar firms infringed on their copyrights…. MORE
WASHINGTON — The United States has filed a civil False Claims Act complaint against drug manufacturer Johnson & Johnson (J&J) of New Brunswick, N.J., and two of its subsidiaries, Ortho-McNeil-Janssen Pharmaceuticals Inc. and Johnson & Johnson Health Care Systems Inc., the Justice Department announced today. The complaint alleges that these companies paid millions of dollars in kickbacks to Omnicare Inc., the nation’s largest pharmacy that specializes in dispensing drugs to nursing home patients. In November 2009, the United States, numerous states, and Omnicare entered into a $98 million settlement agreement that, among other things, resolved Omnicare’s civil liability under the False Claims Act for taking kickbacks from J&J.
In its complaint against J&J, the United States alleges that the company paid kickbacks to Omnicare to induce the nursing home pharmacy company to purchase and recommend J&J drugs, including the anti-psychotic drug Risperdal, for use in nursing homes. According to the complaint, J&J understood that Omnicare’s pharmacists reviewed nursing home patients’ charts at least monthly and made recommendations to physicians on what drugs should be prescribed for those patients. The government further alleges that J&J knew that physicians accepted the Omnicare pharmacists’ recommendations more than 80 percent of the time, and that J&J viewed such pharmacists as an “extension of [J&J’s] sales force.”
The United States alleges that, in order to induce Omnicare and its pharmacists to recommend J&J drugs, the company paid kickbacks to Omnicare in numerous ways. First, the complaint alleges that J&J entered into agreements with Omnicare by which Omnicare was entitled to increasing levels of rebates from Johnson & Johnson so long as Omnicare implemented specific programs to increase the prescriptions of J&J drugs. Second, the complaint alleges that J&J paid Omnicare millions of dollars for “data,” much of which Omnicare never provided. According to the complaint, the true purpose of these payments was to induce Omnicare to recommend J&J drugs. Third, the complaint alleges that J&J made various other substantial kickback payments to Omnicare, calling the payments “grants” and “educational funding,” even though their true purpose was to induce Omnicare to recommend J&J drugs.
“We will pursue those who break the law to take advantage of the elderly and the poor,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “Kickbacks such as those alleged here distort the judgments of health care professionals and put profits ahead of sound medical treatment.”
The United States filed its complaint in two consolidated whistleblower lawsuits presently on file in the District of Massachusetts.
Assistant Attorney General West thanked the collaborative efforts of the Justice Department’s Civil Division, the U.S. Attorney for the District of Massachusetts, the Office of Inspector General of the Department of Health and Human Services, the Food and Drug Administration Office of Criminal Investigations and the Federal Bureau of Investigation .
Three men have been charged in a conspiracy to ship items from the United States to Iran, in violation of the International Emergency Economic Powers Act (IEEPA) and in violation of U.S. sanctions imposed on the country of Iran, announced George S. Cardona, Acting United States Attorney in Los Angeles; Steven M. Martinez, Assistant Director in Charge of the FBI in Los Angeles; Miguel Unzueta, Special Agent in Charge for the U.S. Immigration and Customs Enforcement (ICE) Office of Investigations in Los Angeles; and Linda K Enders, Acting Special Agent in Charge of IRS – Criminal Investigation’s Los Angeles Field Office.
An indictment returned by a federal grand jury in the Central District of California on December 30th, 2009, charges Jiraiir Avanessian, 56, of Glendale, and Farhoud Masoumian, 42, of Tehran, Iran, with multiple violations related to a conspiracy to violate IEEPA and the Iranian trade embargo, including smuggling, money laundering, and other crimes. Avanessian was arrested Monday, January 11th, at his Glendale residence without incident. An arrest warrant has been issued for Masoumian.
A third man, Amirhossein Sairafi, of Iran, was charged in a criminal complaint filed in U.S. District Court in Los Angeles on January 4th, 2010, for his role in the scheme to violate IEEPA and the Iranian trade embargo. Sairafi was arrested earlier this week in Frankfurt, Germany, upon entering that country, by German law enforcement authorities, based on a provisional arrest warrant.
According to the indictment and the criminal complaint, Avanessian, who was born in Iran, is the owner and operator of XVAC, a company located in Glendale, California. Avanessian allegedly corresponded with Masoumian and Sairafi via e-mail for at least two years to arrange the export of high-dollar vacuum pumps and pump-related equipment to Iran through a free trade zone located in the United Arab Emirates.
According to the International Emergency Economic Powers Act (IEEPA), U.S. persons are prohibited from exporting such technology to Iran without a license and without authorization from the Department of Treasury, Office of Foreign Assets Control (OFAC). Moreover, according to sanctions imposed by the United States; specifically, a trade embargo pursuant to the Iranian Transactions Regulations (ITR), it is illegal to export, sell or finance such technology to Iran or the government of Iran from the United States.
The indictment alleges that, on multiple occasions, Avanessian received orders for goods and various technology sought by Masoumian on behalf of individuals in Iran. Avanessian allegedly purchased the goods and arranged to ship the goods to the United Arab Emirates, making it appear that the U.A.E. was the ultimate destination. Sairafi would then send the same goods from the location in the U.A.E. to Iran.
Avanessian falsely undervalued the shipments sent to the U.A.E. to reflect a value under $2,500, the threshold for filing requirements known as “shipper’s export declaration” forms, and in order to avoid greater scrutiny by Customs officials, according to the indictment.
As part of the conspiracy, Masoumian, Avanessian and Sairafi re-labeled the contents of the shipments in order to mask the true contents and to avoid interception by U.S. Customs officials. In most cases, according to the indictment, Avanessian prepared air waybills indicating his shipments contained “spare parts” and that no shipper’s export declaration was needed because the commodity value was under $2,500.
Throughout the conspiracy, Avanessian received several hundred thousands of dollars that were deposited into his American bank account via international money transfers from Masoumian, according to the indictment.
“The FBI is responsible for preventing and investigating the illegal export of U.S. secrets to foreign countries, in violation of the International Emergency Economic Powers Act and imposed sanctions,” said Steven M. Martinez, Assistant Director in Charge of the FBI in Los Angeles. “Agents in Los Angeles are committed to identifying and bringing to justice individuals intent on stealing this country’s critical assets at the expense of America’s security and the U.S. economy.”
“One of ICE’s top enforcement priorities is preventing sensitive technology from falling into the hands of those who might seek to harm America or its interests,” said Assistant Secretary John Morton, who oversees U.S. Immigration and Customs Enforcement (ICE). “The illicit trade of this kind of equipment to Iran or other countries that have repeatedly violated our export laws must be controlled. ICE will continue to aggressively pursue these criminals by working shoulder to shoulder with our law enforcement counterparts to combat this threat.”
“The indictment of Mr. Avanessian and Mr. Masoumian, on charges including violations of the International Emergency Economic Powers Act and international money laundering, demonstrates federal law enforcement’s resolve to identify, investigate, and prosecute those individuals that are willing to trade in and profit from the sale of technical goods to embargoed countries,” stated Linda K. Enders, acting Special Agent in Charge of IRS – Criminal Investigation’s Los Angeles Field Office. “IRS-Criminal Investigation brings to bear the financial expertise that is critical in following the money that moves internationally to support these operations, further enabling the successful prosecution of those willing to violate the law and trade with embargoed countries.”
Avanessian was in court in Los Angeles Monday afternoon for his initial appearance before a U.S. Magistrate and was remanded to federal custody.
If convicted on all counts, defendants Avanessian and Masoumian face a statutory maximum sentence of 615 years and 525 in prison, respectively.
A provisional arrest warrant has been issued for Masoumian and federal agents are seeking his whereabouts. Sairafi is currently being held in the custody of German authorities.
This case is an ongoing investigation by the FBI, the IRS, and ICE, and will be prosecuted by the United States Attorney’s Office in Los Angeles. Agents with the Department of Commerce and U.S. Customs and Border Patrol (CBP) provided assistance during the investigation. Outside the United States, law enforcement authorities in Germany, as well as the FBI’s Legal Attaché and the ICE Attaché Office in Germany, provided considerable assistance during this investigation.
An indictment or criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
Nora R. Dannehy, United States Attorney for the District of Connecticut, announced that SUSAN A. CURTIS, 48, and GARY J. STOCKING, 43, of Naugatuck were arrested today by the Internal Revenue Service – Criminal Investigation Division and the Federal Bureau of Investigation on criminal complaints charging them with bank fraud and money laundering. The charges stem from an alleged scheme to defraud Webster Bank of approximately $6.2 million.
CURTIS and STOCKING were arrested this morning in Naugatuck and appeared before United States Magistrate Judge Donna F. Martinez in Hartford. Judge Martinez ordered both CURTIS and STOCKING detained pending a detention hearing that is scheduled for Friday, January 15, at 12:30 p.m.
According to statements made in court, the Government alleges that CURTIS, a former employee of Webster Bank, together with STOCKING and others devised a scheme to defraud Webster Bank of approximately $6.2 million between 2002 and May 2009. The Government alleges that CURTIS and STOCKING set up sham companies called “New House LLC” and “Equity LLC” and represented to Webster Bank that the companies and STOCKING were brokers. In fact, records reflect that neither STOCKING nor the two companies were ever registered as brokers in the State of Connecticut. As a result of the false representations, Webster Bank released approximately $5 million to the sham companies. In addition, it is alleged that CURTIS diverted monies, totaling approximately $1 million, to Equity LLC that were, in fact, due to Webster Bank for property improvements.
U.S. Attorney Dannehy noted that the investigation into this alleged scheme is ongoing.
If convicted, CURTIS and STOCKING face a maximum term of imprisonment of 30 years on the bank fraud charge and 10 years on the money laundering charge.
U.S. Attorney Dannehy stressed that a complaint is only a charge and is not evidence of guilt. The defendants are entitled to have this matter presented to a grand jury and, in the event an indictment is returned, they are entitled to a trial at which it will be the Government’s burden to prove guilt beyond a reasonable doubt.
This matter is being investigated by the Internal Revenue Service – Criminal Investigation Division and the Federal Bureau of Investigation.
