Just after obtaining the information—and right before an earnings release—Oleksandr Dorozhko purchased 630 put options on IMS’ common stock, according to Reuters. The next day IMS’ stock dropped by 28 percent and Dorozhko earned $287,346 after selling the options.

The SEC filed a complaint against Dorozhko in late 2007, but on January 7, 2008, the District Court denied the SEC’s motion for a preliminary injunction, according to a statement by the SEC. The Court concluded that “Dorozhko’s alleged ‘stealing and trading’ or ‘hacking and trading’ does not amount to a violation … because Dorozhko did not breach any fiduciary or similar duty ‘in connection with’ the purchase or sale of a security.”

Upon appeal, the U.S. Court of Appeals for the Second Circuit thought otherwise, saying “that nothing in the U.S. Supreme Court’s jurisprudence or prior decisions of our Court expressly imposes a fiduciary-duty requirement on the ordinary meaning of ‘deceptive’ where the alleged fraud is an affirmative misrepresentation rather than a nondisclosure.”

After the case was sent back to the District Court, the judge ordered the $580,000 penalty.

The latest in a decade-old lawsuit, today’s ruling upheld the decision of a lower court that had to decide whether Taco Bell or TBWA was responsible for paying tens of millions of dollars in damages to Wrench, the ad firm that came up with the idea of “Psycho Chihuahua,” which later became the internationally-known Taco Bell Chihuahua.

A good description of the events leading up to the trial can be found in today’sappellate court’s decision. To sum it up, a licensing executive from Taco Bell approached Joseph Shields and Thomas Rinks, the founders of Wrench, after seeing the concept of Psycho Chihuahua at a trade show. He thought it would be a good fit for an upcoming Taco Bell ad campaign.

After price negotiations between Taco Bell and Wrench fell through, Taco Bell turned to their primary ad agency, TBWA, to create a mascot and theme for an upcoming $500 million ad campaign. Taco Bell gave TBWA materials related to Psycho Chihuahua to develop a similar idea for the campaign.

When Shields and Rinks saw the now famous “Yo Quiero Taco Bell” Chihuahua on TV in 1998, they quickly sued Taco Bell.

The two creators of Psycho Chihuahua won the suit and a $42 million judgment.

Taco Bell, after initially entering a “joint defense agreement” with TBWA, then sued the agency, asking for “full indemnification.” Because Taco Bell gave the Psycho Chihuahua materials to TBWA, the judge ruled that Taco Bell was fully liable for the $42 million in damages awarded to Wrench. Taco Bell appealed and lost again with today’s ruling.

Asked whether or not Taco Bell will appeal to a higher court, further dragging out this case, a company spokesperson said, “We just received the opinion today and are reviewing our options.”

Now, Oregon wants a piece of that pie – a piece to the tune of $82 million, or 60 percent of the punitive damages (which came out to $137 million). Naturally, Adidas is opposed to the idea. Less naturally, Payless is also opposed to it. According to the Bloomberg article, Payless is challenging Adidas’ injunction request, saying that it is too broad.

If it ends up getting the $82 million, Oregon will reportedly use the money for a “restitution fund for crime victims.”

DISH did win the case, but didn’t get the 10 figure outcome that company lawyers hoped for. Instead, after one day’s deliberation by the jury, NDS was ordered to pay $46.69 for reverse engineering one of DISH’s smart cards and $1,000 in punitive damages.

Both sides are calling this a victory. DISH says they won the case, which they did, but their legal fees clearly outweigh what they earned. And, let’s be honest, this is going to do zero damage to NDS’ credibility. NDS claims a victory because they don’t have to pay one billion dollars to DISH. As NDS attorney Richard Stone said after the jury’s verdict came in, “We’ve been completely vindicated on this whole lawsuit.”

Authorities discovered Jin was carrying about $30,000 in cash as well as over 1,000 confidential electronic and paper proprietary documents, all belonging to her former employer, known only in federal documents as “Company A.” According to the indictment against her, Jin was storing the information on a laptop, various hard drives, a thumb drive and a number of data CDs when her luggage was searched.

“We have to be vigilant in preserving the integrity of trade secrets to provide an honest playing field among business competitors, whether foreign or domestic. Trade secrets often are a business’s most valuable assets, and protecting them from theft and betrayal is a high priority for law enforcement,” Patrick J. Fitzgerald, the U.S. Attorney for the Northern District of Illinois, said in a statement released on Wednesday.

While an official release from the Department of Justice claims that Company A spent “hundreds of millions of dollars on research and development for the proprietary information” that Jin had in her possession, reports by the Chicago Tribune and Information Week both put that price tag at $600 million. If convicted, Jin faces a maximum penalty of 10 years in prison and a $250,000 fine for each charge.

The department found that 3M was shaving six percent off its tape products (the company’s advertised one-inch tape actually came out to 0.94 of an inch), violating the state and federal Fair Packaging and Labeling Act, according to the Fresno County deputy district attorney who prosecuted the case. As part of the settlement, 3M agreed to pay $600,000 in civil fees, $75,000 to a state trust fund benefiting various California weights and measures offices and $18,000 to the Department of Measurement and Standards, according to one report.

As with most settlements, 3M didn’t admit or deny guilty, but in this case it won’t be that easy to get off the hook: one only needs a ruler to figure out that they were, in fact, misrepresenting the size of their tape. The company agreed to remove the one-inch and other inaccurate labels from its tape products. Crisis averted.

A whopper of a sentence came in on Monday for the Chinese-born engineer who last May was convicted of conspiring to hand over U.S. military secrets to China. Chi Mak, 67, was given 24 1/2 years for smuggling top secret data, acting as an unregistered foreign agent in the U.S., attempting to violate export control laws and lying to the FBI, according to a story by Fox News. Mak’s defense asked for 10 years in prison while prosecutors asked for 30, though he could have been sentenced with as many as 35 years based on his convictions.

U.S. District Judge Cormac J. Carney presided over the ruling. Mak reportedly asked the judge for leniency before the sentence came in. Carney had this to say:

“He’s a very humble man, a very warm man and he wants to be helpful, but it’s those traits and that persona that allowed him to pass information to the People’s Republic of China.”

He added:

“I do believe a high-end sentence is appropriate here.”

According to the Fox News story, Mak worked for Anaheim-based naval defense contractor Power Paragon. He was arrested late in 2005. Both his wife, Rebecca Laiwah Chiu, and brother, Tai Mak, pleaded guilty last year as well. Chiu is currently serving three years in prison while Tai Mak faces a 10 year maximum.

Mak’s attorney said they will file an appeal.

Indiana resident James M. DiBlasio woke up to more than a hangover the morning after a three-day drinking binge. At some point during the 72 hours that he was drunk he managed to hack into the Denver-based server of his employer, Ski.com, and change various data such as flight reservations and contact information. According to a statement by DiBlasio’s attorney, H. Michael Steinberg, he woke up the morning after “wondering what he had done, and trying to fix the area he had damaged.”

DiBlasio was convicted of two felonies for hacking into his employer’s computers. He originally faced 10 charges, fines between $100,000 and $250,000 and up to three years in prison if convicted, however that was reduced following a plea agreement. Fortunately for Mr. DiBlasio, he only has to pay $13,096 in monthly installments of at least $250 as well as spend six months under house arrest followed by three years of probation.

Ski.com president Harry Peisach took a soft-hearted tone when asked about the event. The Aspen Times reports:

“We’re happy there’s a resolution … I’m sorry what happened to him but it was important for us to present this to law-enforcement authorities and this was the appropriate course for them to take.”

On top of wearing an electronic monitoring device, DiBlasio “will not be allowed to have a cordless telephone, an answering machine, or any other ‘special services’ related to telecommunications,” the judge ruled.

“Alpha has suffered and continues to suffer irreparable damage as a result of defendant’s misappropriation of Alpha’s confidential, proprietary and trade secret information.”

Vance hasn’t shown up to any of his eight scheduled court appearances, maybe because he was so busy acquiring jobs at rival companies. In 2005, according to the Herald Tribune, he worked for Florida-based Alpha Mining Systems, Alpha’s China-based competitor Guizhou Tire Co. and United Arab Emirates-based Al Dobowi Group. His job description? Hand over secret Alpha documents to its rival firms, including design blueprints, and advise rivals’ clients that they now can get Alpha designed tires directly from Guizhou.

There’s no word on whether Vance can afford to pay the $19.7 million fine or not (as the Herald Tribune puts it, he may not have the “wherewithal”). It’s also unclear how Vance got the idea to work for Alpha’s overseas rivals in the first place – whether he was disgruntled and reached out to them, or the other way around. Whatever the case, he’s been barred “from working in mining worldwide or contacting his current employers or any current or former customers of Alpha.”

There is one minor fault in the story worth noting: The Herald Tribune states, “Del-Nat Tire Corp. and American Tire Corp. were buying a combined average of $1.9 million per month from Alpha until April 2005, when they stopped buying anything.” American Tire Corporation fervently denies having ever heard of Alpha, yet alone conducting business with the company. So, for all of you conducting business with ATC, don’t worry they’re in the clear.

A San Jose U.S. District Court grand jury indicted Lan Lee, 42, of Palo Alto and business partner Yuefei Ge, 34, of San Jose for allegedly developing microchips through their company, SICO Microsystems Inc., based on stolen designs. They are accused of reaching out to Chinese government agencies for funding, including a branch of the Chinese military.

Mountain View-based NetLogic Microsystems Inc. and the San Jose office of Taiwan Semiconductor Manufacturing Co. are two of the companies from which Lee and Ge allegedly stole classified documents.

Only three people have ever been found guilty of economic espionage in the United States – all were from Silicon Valley.

The study says that companies with over $5 billion in revenue lost more than $20 million on average due to fraud-related damages over the past three years. One in ten large companies lost over $100 million due to fraud over the same period.

Andres Antonius, President of Kroll Consulting Group, said the high amount of damage is due to increased “globalization and heightened public sensitivity.”

Antonius goes on to elaborate:

“More and more companies- not just Fortune 100 organizations- are doing business all over the globe. It’s a major challenge to understand different legal frameworks and different cultural approaches to doing business.”

According to the study, the most common type of fraud is loss of physical assets.

The agreement also gives Mueller and his family permission to use the jet for “reasonable” personal trips. Company spokesman Bob Toevs said the new perks show Qwest’s appreciation for Mueller’s family situation.

According to a report released by Corporate Library, an organization that studies governance issues, only 28 of 215 companies studied allow for a CEO’s family and friends use of a corporate jet.

Read the full story from the Rocky Mountain News here.

Commentary: Why would it be worth it to the new CEO of a company which just had its former CEO convicted of illegal insider trading to negotiate a contract that allows his stepdaughter to use the corporate jet to get to school? There must be 50 commercial flights a day from Denver to the SF Bay area. Maybe it’s a minor issue, but as you can see by visiting the Rocky Mountain News website, it plays perfectly to the media that wants to make a big deal out of it. And it sets a poor tone for other employees at the company.

The Michigan State Police expect to have a decision whether or not disciplinary action will be taken. So far Chamberlain-Gordon has not had any of her regular duties restricted.

Commentary: Is it really a smart idea to cheat on a spouse who is also a professional forensics scientist?

The company reported on July 3rd that the administrator illegally downloaded the information and sold it to a third party data broker, who in turn sold the data to various marketing companies.

Fidelity National confirmed that the unnamed employee had been fired.

Commentary: Over 3.5 million credit card accounts were taken along with over 1.4 million credit card numbers. This is a prime example of how one employee can cause significant damage to a large corporation, their reputation, and their clients.

Collins allegedly proposed to Dollar General to push forward a $10 million transaction on IBM electronic cash registers in order to increase IBM’s financial revenue for the year, as well as Collins’ bonus during that period. After Dollar General’s accounting firm determined that would have a negative impact on it’s earnings for the same fiscal year, they rejected the proposal. Collins offered to have IBM buy Dollar General’s outdated cash registers for $11 million to negate the company’s loss. Dollar General then repaid the money by an increase in the amount the company paid for the new IBM electronic cash registers.

This was deemed an illegitimate purchase as IBM never intended to use the equipment and ultimately destroyed it. In turn, all of IBM’s expenditure was repaid and Dollar General minimized the negative effect on its earnings for the fiscal year 2000.

Read the entire SEC report here.

Commentary: This is a good learning example for compliance and ethics officers to use with employees for training purposes.

According to prosecutors, Fabian’s alleged scheme defrauded his former employer, the government consulting company Maximus Inc., as well as an equipment leasing company called Solarcom.

Fabian has presented himself as a successful entrepreneur, who started an activity-based cost and information technology consulting company which was later sold to Maximus in 2000. While at Maximus as an executive he supposedly made fraudulent sale-leaseback transactions for purchasing computer hardware and software. Prosecutors allege the equipment was either never purchased or much cheaper products were purchased. His arraignment is scheduled for Sept. 28. Read more about it in Forbes.

Commentary: In business over the years we have noticed that sometimes the people who are bragging most about their success are the ones whose success is based upon fraud and false pretenses. Sadly, that could be the case there. What many people did not realize that Fabian was also the campaign finance co-chair for the presidential campaign of Mitt Romney. And yes, he did resign from that position as well.

Reportedly, the three lower-level managers were taking large bribes from flooring vendors out of Asia in return for featuring these vendors’ products in Home Depot stores.

Home Depot is cooperating with law enforcement authorities who are looking into the situation – prosecution against these employees is a possibility.

The company released a statement adding to their stance on the situation:

“Maintaining our ethical standards is of utmost importance to the Home Depot and is something we enforce strongly.”

O RLY?

Unfortunately, crashing housing and home renovation markets aren’t the only things buffeting Home Depot. The company has also been fighting ethics, compliance and governance scandals on multiple fronts:

(1) Paying a CEO $225 million while employees were continually laid off and the stock declined (Nardelli, who was later terminated after he refused to answer questions at the annual shareholders’ meeting).

(2) The subject of wrongful termination lawsuits by former employees in Maryland and Alabama who claim that they were fired in retaliation for blowing the whistle on Home Depot, accusing the company of pumping up its financials with fraudulent product return procedures (which the SEC is now investigating).

(3) Admitting this past December that the company had engaged in improper stock option backdating for 26 years.

Commentary: We talked to a number of companies that have done business with Home Depot, and many of them repeated stories that indicated a broad culture of ‘browbeating’ and unreasonable demands being made by purchasing personnel at the company. Interestingly, such culture doesn’t appear to be limited to store merchandising – it extends elsewhere in the company as well. For example, we heard about the IT department demanding free products from vendors for the company simply so the vendor can promote Home Depot as a client.

We are also told that the company has virtually ZERO ethics and compliance training or programs.

Schetty, concerned that Rohm and Haas would steal Technic’s bid with Intel, convinced unnamed Technic and Amkor employees to sabotage Rohm and Haas’ test at an Amkor facility in the Philippines. Schetty is looking at a possible maximum sentence of 10 years in prison, 3 years probation and a $250,000 fine. He agreed to pay $15,536 in restitution to Rohm and Haas.

Read the full article.

Commentary: Talk about going to extremes to stop the competition. Schetty actually convinced Technic employees that it was ‘good business’ to destroy a rival’s product. Another example of how one employee can ruin an entire company (even their own).

The lawsuit in U.S. District Court in Manhattan sought an order to force Lloyd’s to expedite Wynn’s claims for reimbursement and restoration costs for Picasso’s 1932 work, “Le Reve,” by providing him with an appraisal report or initial damages assessment.

Wynn’s representatives told Lloyd’s in November that the painting was worth $139 million the day before Wynn damaged it in his Las Vegas office on Sept. 30, but was believed to be worth no more than $85 million afterward.

In 1997, Wynn paid $48.4 million for the painting depicting Picasso’s mistress, Marie-Therese Walter.

Wynn has described the damage to the canvas as a thumb-sized flap and said it was “the world’s clumsiest and goofiest thing to do.”

Lloyd’s has already agreed to pay $90,000 to restore the painting, a consultant fee of $21,000 related to the restoration and increased security that was required during the process.

Commentary: This is flat-out ridiculoous. Billionaires behaving badly. We would advise Mr. Wynn to suck it up and drop the suit.