The defendants used the information to file over 365 fraudulent federal tax returns in 27 states, according to U.S. Attorney John Wood.

Some of the money obtained through the conspiracy was wired to bank accounts in Kenya, where at least 12 of the defendants were born or held citizenship, Woods said. The money was then withdrawn from ATM machines within Kenya.

The tax returns were filed online through computers at public coffee shops and restaurants in order to conceal the conspirators’ identities. The filing fees were paid with credit cards opened in identity theft victims’ names.

Ten of the defendants are being held in custody, three are believed to have fled to Kenya and four have yet to be accounted for, prosecutors say.

Mr. Reyes had been accused of intentionally changing the grant dates for hundreds of stock option awards without disclosing the move to investors. Sentencing is scheduled for Nov. 21st and Reyes could face up to 20 years in prison and millions of dollars in fines.

The conviction is expected to embolden prosecutors to pursue similar cases.

Back in May, Brocade agreed to pay $7 million to settle civil fraud charges in connection with backdating. Reyes’ alleged accomplice and Brocade’s former head of HR, Stephanie Jensen, is still awaiting trial.

Commentary:The conviction was not surprising to us. You can read the original SEC compliant here. A review of the document will show that the SEC had a very strong case and that Mr. Reyes was pretty much a one-man compensation committee. Now the only question left is how much prison time he will get (unlike Take-Two’s CEO, who got off with probation, we are predicting actual prison time in this case). We are sure that prosecutors are reinvigorated.

Mr. Brant pleaded guilty in back February. He had been facing up to four years in prison but received a lighter sentence in exchange for his cooperation with prosecutors.

Commentary: That loud whoosh that you heard when this sentence was imposed? It was the collective “phew” of relief being exhaled by hundreds of other executives from the dozens of others companies under scrutiny for improper and illegal stock option backdating. The precedent sent by this “probation” as opposed to actual prison time is encouraging for them. On a separate note…five years probation? Five years of meeting with probation officer with conversations like this:

Probation Officer: “Ryan, are you staying clean?”

Brant: “Yes, Sir.”

Probation Officer: “I don’t want to catch you doing any more of that stock option stuff any more…”

Brant: “No, Sir.”

Probation Officer: “And don’t be hanging around with that bad crowd of executives who falsify documents…and put down that pen – it’s not good for you.”

ABB said the probe is uncovering payments of concern made in Asia, South America, and Europe (with a particular focus on Italy).

The company disclosed that it was investigating several cases of suspect payments and it was unclear whether they were linked. ABB said it had not made any provisions and it was not sure how much money could be involved.

Commentary: Gee… this must be an isolated incident (with payments of concern found only in ASIA, SOUTH AMERICA, AND EUROPE). We checked their website and they do not have operations in Antarctica, which could account for that continent’s exclusion. Our opinion is that this is pretty lame as ABB has had multiple scandals in recent years (such as a secret executive pay scandal in 2004 and a financial fraud scandal back in 2000). There really is no excuse at this point for not having a robust compliance program in place that could prevent the most basic of illegal business practices: bribery.

According to the SEC, Delta & Pine (which has since been acquired by Monsanto) paid $43,000 to officials of the Turkish Ministry of Agricultural and Rural Affairs via its subsidiary Turk Deltapine between 2001 through 2006. The SEC ruled that these payments were in violation of the FCPA, and that Delta & Pine did not keep accurate books and records in connection with the improper payments.

Commentary: Under the FCPA, it is accepted to make ‘facilitation’ payments of a reasonable size in order to secure a ‘routine’ government action. For example, a small ‘facilitation’ payment in order to get a business license expedited (as it appears was necessary here) or to get something cleared through customs, is not necessarily illegal. The law does not specifically list a dollar threshold at which point an allowable ‘facilitation’ payment becomes a bribe. However, $43,000 clearly is not small – thus why the SEC took issue with it.

Judge Edward Nottingham also ordered the ex-CEO, Joseph Nacchio, to pay a $19 million fine and forfeit $52 million in assets he gained from illegal stock sales.

In administering his sentence the judge summed it all up by saying, “The crimes the defendant has been found guilty of are crimes of overarching greed.”

Commentary: Chalk up another win to the Feds for this sentence. This is definitely a longer sentence than many expected (as the maximum that he could have received, seven years and three months, was only slightly more than he actually got).

Medtronic has been facing approximately 2,000 claims over battery defects in the defibrillators which are potentially fatal and had tried to keep the settlement confidential. The corporation, however, did reserve the right to pull out of the agreement if 90% of claimants did accept it.

In the past Medtronic recalled 87,000 defibrillators because of battery failures – but said that no deaths were linked to any failures of the devices. Plaintiff lawyers contend that Medtronic officials, despite know of the defects, continued selling flawed products for two years after learning in 2003 about the battery-failure glitches.

Commentary: Medtronic is hardly the only company having trouble with defibrillators however. Guidant (now owned by Boston Scientific) did a 2005 recall of over 100,000 defibrillators (and like Medtronic, the plaintiff bar is arguing that the company knew of the defects but hid them to protect sales – but unlike Medtronic, the Guidant defibrillators were linked to at least seven deaths). Just two weeks ago, Guidant agreed to pay $195 million to settle roughly 4,000 claims (which probably set the dollar range and motivation behind this similar settlement). The third-largest heart device maker, St. Jude, also conducted a monster recall of 75,000 defibrillators in 2005.

Care to know an interesting (and spooky) thought? The St. Jude recall was in part due to battery failures resulting from interference from cosmic rays!!! Better call Dr. Spock.

This new online tool, called BRIBEline, is backed by many leading organizations and companies such as Wal-Mart, International Paper, the World Bank, UPS, Tyco International, and Rolls-Royce.

BRIBEline (the acronym stands for the “Business Registry for International Bribery and Extortion”) is essentially an online survey that is available in 14 languages. While no names are required or collected, the survey asks participants to respond to ten multiple-choice questions. All information is kept anonymous so that reports cannot be used for legal investigations or prosecutions.

Ultimately, the information gathered through BRIBEline will be collected and publicly reported by TRACE in hopes of highlighting where the worst offenders reside in terms of country, ministry, or sector. This in turn will help companies target their compliance and anti-corruption efforts.

Commentary: We think that this is a fabulous tool that reflects the excellent leadership in anti-corruption demonstrated by TRACE’s leader, Alexandra Wrage. There has been a real dearth of information about where bribes are occurring, with companies limited to examining only their own experience and DOJ prosecution and investigation records.

We strongly encourage companies to get involved with BRIBEline and look forward to some of the interesting trends and information that come as a result.

Donlan pleaded guilty to one count of wire fraud and one count of tax evasion (he evaded paying some $2.2 million in taxes from the scam). Donlan and his wife, whose social security number was also used to set up the brokerage account, are also the subject of a pending civil suit that was filed in May by Wireless Facilities and the SEC.

The problem for Black was that Radler later decided to cooperate with the government as a witness for the prosecution – in exchange for a relatively lenient 29 month prison sentence.

Lord Black was convicted of three counts of mail fraud and one count of obstruction of justice (as Black has been captured on security videotape removing 13 boxes of documents from his Toronto offices, despite a court ban on taking away potential evidence). However, he was acquitted of the charges of racketeering and misuse of corporate perks, such as taking the company plane on a vacation to Bora Bora and billing the company $40,000 for a birthday party for wife.

The former CEO now faces up to 35 years in prison.

Many people following the trial were not aware that Black had three co-defendants: former Hollinger International vice presidents John Boultbee, Peter Y. Atkinson, and attorney Mark Kipnis, 59. These three each face up to 15 years in prison and fines of up to $750,000 (as they too were all found guilty of the three counts of mail fraud).

Commentary: Well, Mr. Black certainly kept it interesting along the way. During the trial he wrote a biography of Richard Nixon (and compared himself to Mr. Nixon as well – which is not a trial defense strategy we would have recommended). Other less-than-wise commentary during the trial included calling the prosecutors “Nazi’s” and saying that “corporate governance terrorists” were trying to steal his company.

To use a proper Canadian term (after all he was Canadian until giving up his citizenship), Lord Black is pretty much “hosed” when it comes to appealing. Part of the reason for such is that he was not convicted on ALL charges. When a jury convicts on some, but acquits on others, the courts generally view it to have been a reasoned and fair deliberation.

Commentary: The penalties levied against ACS were relatively light as the company voluntarily self-reported to the government inappropriate conduct by several former employees.

Mellon had a contract with the I.R.S. to process income tax returns and tax-payment checks. Its employees, feeling overwhelmed and unable to meet the deadlines, destroyed over 77,000 returns and checks whose net worth totaled $1.3 billion.

In a separate settlement in August, Mellon had agreed to take responsibility for the conduct of its employees. To date, the event has cost Mellon the I.R.S. contract in addition to the $18 million it took to cover lost interests and relocating the I.R.S. processing center.

Commentary: This is a costly case and a serious matter. Yet something about it still makes us laugh. The learning moment here? If you are feeling overwhelmed, under-appreciated, and behind schedule… don’t throw everything in the shredder to clear your backlog…just take a Prozac.

The executives were originally convicted on conspiracy and fraud charges during a December 2006 trial.

In U.S. District Court for the District of New Hampshire, Judge Paul Barbadoro sentenced former Enterasys CFO Robert J. Gagalis to 11 1/2 years in prison. Bruce D. Kay, another former Enterasys finance executive, was sentenced to 9 1/2 years in prison. The prior week, former Enterasys accountant Robert G. Barber was sentenced to just over 8 years in prison.

Gagalis reportedly tried to stand up and read a statement, but broke into tears. His attorney ended up reading it for him, in which he apologized for his actions and especially regretted the “sorrow, pain and anxiety his actions caused to his three children and his wife.”

In levying the sentences, Judge Barbadoro said: “These kinds of crimes endanger our markets. It is vitally important to me that we do everything we can to protect the integrity of our markets.”

The case dates back to May 2004 when the executives were indicted over allegations that they had artificially inflated revenues between March 2000 and December 2001 as Entrasys became an independent spin-off from the computer computer networking company, Cabletron.

The defendants had backdated and falsified documents and concealed terms of business transactions from Enterasys’ auditors, including creating false revenue by secretly investing company funds in other companies and having those companies to use the investment proceeds to buy Enterasys products.

According to DOJ, the loss to public investors due to these shenanigans was $97 million.

Read more about the case and its background here.

Commentary: WOW… We are against fraud just as much as the next guy, but even us were stunned by the length of these sentences. And more fun in “The Barber’s” courtroom is yet to come – with the former CEO of Entrasys and several others still awaiting sentencing.

David van Duyn, who worked as an anti-money laundering advisor for the company, accused Fidelity executives of instructing him to sidestep the Patriot Act, which laid out requirements for monitoring and reporting client transactions. To top things off, he accuses his former superiors of handing down orders to falsify documents. Duyn claims the company blatantly violated the Act and other laws intended to track money laundering and funding for terrorist networks.

Fidelity has countered with a suit of its own in an effort to prevent Duyn from divulging “confidential information” – which Fidelity insists would violate the company’s non-disclosure agreement signed by employees. The suit is in addition to its hurried efforts to stamp out from the public record any potentially damaging information or allegations surrounding its internal policies and possible negligence of customer accounts.

Commentary: Gotta hate it when the compliance officer himself is the whistleblower. That just doesn’t reflect well on the company. No wonder Fidelity is reportedly in a mad scramble to try and get all documents and filings related to the case put under seal.

According to media reports

The Audit Committee of the company said that it decided to launch the investigation after observing the FCPA settlement of competitor, Vetco Gra, as well as other recent press releases by Tidewater, Inc., Noble Corporation and GlobalSantaFe Corp. disclosing that they are conducting internal investigations into similar operations.

The lawsuit accused the company and several executives of filing misleading Sarbanes-Oxley Act certifications, Form 10-Q earnings reports and press releases with the U.S. Securities and Exchange Commission to illicit “clean” audit reports from its former auditor, KPMG LLP.

The District Court ruled that KPMG’s investigation, the main source of the shareholders’ allegations, was reliable – thus crediting the investigation’s findings of malpractice by company executives.

Commentary: This is simply an update of an ongoing case – but does reinforce what a hot button issue FCPA is in the current business climate.

The SEC also alleges that during this period Mercury also made fraudulent disclosures concerning Mercury’s “backlog” of sales revenues to manage its reported earnings, and structured fraudulent loans for option exercises by overseas employees to avoid recording expenses.

Linda Chatman Thomsen, Director of the Commission’s Division of Enforcement, said, “The array of fraudulent conduct at Mercury Interactive over an eight year period, including backdating dozens of stock option grants, backdating senior executive stock option exercises, structuring of overseas option exercises to conceal expenses and concealing the true nature of its earnings, deprived Mercury Interactive’s shareholders and the market of accurate information regarding executive compensation and the company’s accounting for stock options. The widespread and pernicious misconduct – including lying to shareholders, intentionally false accounting, and fraudulent stock options backdating – in this case warrants the significant sanctions imposed on the company and sought from the former executives.”

Commentary: Despite settling the corporate case, the SEC continues to pursue its case against the individual executives who orchestrated the fraudulent backdating, including former Chairman and CEO Amnon Landan, former CFOs Sharlene Abrams and Douglas Smith, and former GC Susan Skaer. These former execs can’t be feeling too great right now considering how strong a case the SEC has here, the length of time over which the fraudulent behavior occurred, and the fact that last month the first prison term was handed out to an executive over stock option backdating. In that case, the former GC of Comverse Technology was sentenced to just over 1 year in prison and ordered to pay $52 million in restitution.

The Federal Bureau of Investigation opened an investigation of Beazer after the Charlotte Observer newspaper reported on March 25 the company sold homes to low-income buyers who couldn’t afford them, using mortgages that were based on expectations the buyer’s income would rise.

Commentary: It pays to follow SEC filings closely as the company did not issue a press release about this, but simply mentioned it in a filing to the Commission. How did the stock do? Well, it dropped over 10% immediately once word leaked out – on 6x normal volume.

One is led to ask: “what’s going on with Beazer?”. This is the second senior executive fired for violation of the Code of Conduct this year (GC Kenneth Gary was canned back in February for: “for a pattern of personal conduct, which includes violations of company policies”).

Here is one example: Christian Deeb Rahaim, formerly a senior director of benefits for Enron’s HR department has been sentenced to 63 months in prison without possibility for parole. He has also been ordered to pay more than $2.9 million in restitution to Enron Creditors Recovery Corp.

Just another Enron employee going to jail? Yes, but not under the same circumstances.

Rahaim filed false invoices to Enron for consulting work – several years after the company had already filed for bankruptcy due to massive fraud.

According to prosecutors, Rahaim used fraudulent invoices, a Canadian mail-drop, and various corporate entities to trick Enron into depositing funds into accounts that he secretly controlled. He used this money to pay personal credit-card debt, open personal investment accounts, and buy a half-million-dollar home in Cypress, Texas.

In November 2005, alert employees of Bank One reportedly raised questions about Rahaim’s attempt to transfer an additional $1.8 million that Enron had recently wired to the bank.

Commentary: The further irony? Rahaim received a prison term longer than those of most defendants involved in Enron’s earlier misdeeds.

The Commission’s complaint alleged that 25 to 30 cents per barrel purchased by El Paso was illegally kicked back to Iraq in the form of a secret oil surcharge and that El Paso knew, or was reckless in not knowing, that illegal surcharges were made.

Without admitting or denying the Commission’s allegations, El Paso simultaneously consented to the entry of a court order ordering it to pay $5.4 million in disgorgement of profits and a civil penalty of $2.3 million.

Commentary: El Paso was at the mercy of DOJ and SEC on this one, as recorded telephone calls of El Paso officials and oil traders showed that the company knew that the surcharges that it was paying on purchases were being kicked back to Iraqi government officials. This case underscores the importance of maintaining an adequate system of internal controls to detect and prevent such payments, as well as to properly to record the nature of the any such related payments.