Corporate Fraud – How Corporations And Big Companies Lie About Their Financial Condition

frCorporate fraud refers to large organizations that deceive their investors, analysts and auditors about the real financial condition of a corporation. Corporate fraud results not only in financial losses of the investors, but also creates great potential damage to the U.S. economy.

Such fraud may be accomplished through:

  • manipulation of share prices
  • control of financial datafraud
  • artificially inflated financial performance
  • false indicators
  • different valuation measurements

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FBI – Frauds From A to Z

The FBI has just recently released a revised list of frauds on their web page entitled: Frauds From A to Z.  The topics covered range from Adoption Scams and Credit Card Fraud to Insurance and Internet Fraud.  For most categories, the FBI website provides both an overview of the fraud itself and tips for how to avoid being caught up in the fraud.

EXAMPLE:  Lottery Fraud

If it sounds too good to be true, it usually is a fraud.  Americans are defrauded out of $120 million annually in Lottery Scams.

Here are a few examples of how the schemes work:

  • You receive a call, an e-mail, or a letter telling you that you’ve won a large sum of money in a foreign lottery you don’t remember entering. To claim your “winnings,” you’ll have to provide your bank account number so your winnings may be deposited into your account.
  • You’re told you’ve won a sizable lottery and are asked to wire a few thousand dollars to a “customs agent” to cover duties and taxes. But after wiring the money, you’re contacted again and told you must send even more money to collect your prize.
  • You receive a congratulatory letter in the mail along with a check for $5,000. You’re instructed to cash the check, then wire a portion of the funds to a foreign address to cover taxes and fees, keeping the remaining money as your “lottery winnings.” A few days after doing so, your bank notifies you that the check was counterfeit and you now must repay it the $5,000.



High Profile Insider Trading Case – Former Goldman Director Rajat Gupta


If you don’t believe that the government is coming down very hard on those Wall Street folks who engage in insider trading, just watch the following Wall Street Journal video about the Rajat Gupta case

Gupta, the former global head of the consulting firm McKinsey & Company, as well as a former director at both Goldman Sachs and Proctor & Gamble, has been charged with conspiracy and securities fraud, in a government investigation that so far has resulted in 59 convictions.  What is somewhat unique in this high profile case is that government investigators do not have actual recordings of Mr. Gupta passing insider information but they are using a combination of phone records, trading records and wire taps of Raj Rajaratnam and Rajat Gupta to compare the information on these recordings to Mr. Gupta’s actions.

The Gupta case has all of the intrigue that was associated with the trials of Ivan Boesky                  

in the 1980’s. Possible witnesses in the Gupta case include such high profile people as Lloyd C. Blankfein, the Chief Executive of Goldman Sachs; Gary D. Cohn, the bank’s president; A.G. Lafley, the former CEO of Proctor & Gamble; Kenneth I. Chenault, CEO of American Express; Bryon Trott, the former Goldman banker who oversaw Warren Buffett’s investment; and Steven Peikin, a Sullivan & Cromwell lawyer.