International Law

Spare a Billion Dollars?

Posted on January 19, 2009
Image via WikipediaOn the Saytam fraud in India, Nirmalya Kumar writes:"How could the cash and deposits have been manipulated? PwC made the situation worse by saying "The audits were conducted by Pricewaterhouse in accordance with applicable auditing standards and were supported by appropriate audit evidence...

Franchise Sales Registration

Posted on January 19, 2009
Image via WikipediaRubert Barkoff, one of the Legal Deans of Franchising in the United States, writes:"I would encourage the NASAA Franchise and Business Opportunities Project Group to keep close watch on this problem in the following months, and to encourage practitioners to submit to them situations where they perceive that examiners have become unnecessarily strict or have simply missed the mark, so that the Projects Group can have a better feel for the types and extent of these problems, and take corrective measures...

Friday Fraud News You Can Use

Posted on January 16, 2009

Apologies To Robin Hanson

Posted on January 16, 2009
Image via WikipediaI used to frequent Robin Hanson's blog Overcoming Bias.  Then, I disengaged partly because I could not understand the practical import of his view about common knowledge and rational disagreement, like this."But this does seem a handy opportunity to repeat that while disagreement isn't hate, it is disrespect...

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Wealth Builders Jailed

Posted on January 16, 2009
Image via WikipediaFrom a San Diego FBI PRess release: United States Attorney Karen P. Hewitt announced that today United States District Court Judge Thomas J. Whelan sentenced Ricky D. Sluder to serve 188 months in federal prison and ordered him to pay $44,872,152...

Criminal Charges laid against Fake Franchisors

Posted on January 15, 2009
Image by lumierefl via FlickrThe news that five individuals working for the business opportunity seller Global Resources, originally charged with violating Florida's business opportuity disclosure laws, are now facing a criminal indictment is welcome news...

Global Resources Criminal Indictment - Facing 20 Years

Posted on January 15, 2009
Image via WikipediaFrom the US Department of Justice, Southern FLorida, Press Release on the Global Resources fraud.Five people have been indicted by a federal grand jury in Miami relating to the individuals' participation in a fraudulent business opportunity sales operation, the Justice Department and the U...

James G. Ossie and CRE Capital: Ponzi Allleged

Posted on January 15, 2009
Image via WikipediaFrom the SEC Press release about the CRE Capital Ponzi scheme:On January 15, 2009, the Securities and Exchange Commission ("Commission") filed a Complaint For Injunctive and Other Relief ("Complaint") in the United States District Court for the Northern District of Georgia against CRE Capital Corporation ("CRE") and James G...

Strategic Responses to Disclosure Information

Posted on January 15, 2009
Image via WikipediaOne of the oddities about franchise disclosure laws is this: more disclosure law produces less actual due diligence. This is not the intended consequence. First, let's review the case against the current disclosure laws regarding the sale of franchises, business opportunities and income earning opportunities...

NakedShorts: Ripped from the headlines

Posted on January 14, 2009
Image by Getty Images via DaylifeGreg Newton, writing as the Naked Short, has rare praise for a new book entitled Dear Mr. Buffett, written by Janet Tavakoli."Chicago derivatives consultant Janet Tavakoli is a rare jewel in the financial markets. Arguably best known for weighty textbooks with such alluring titles as 'Structured Finance & Collateralized Debt Obligations,' she has a nice sideline in delivering uniquely pungent commentary on credit-related conundra in venues including her own website, US Securities and Exchange Commission comment filings, and on-the-record in the allegedly grown-up media where "people familiar with the matter" usually lurk...

Beyond Fear and Greed in the MarketPlace

Posted on January 14, 2009
Image via WikipediaAnthony Pratkanis testified to the US Senate's special committee on aging, answering in part a question about how fraud is possible."We find that con criminals profile their victim's psychological and other characteristics to find their Achilles' heel (and we all probably have one) to construct the exact pitch that is likely to be most effective with each victim...

What is the difference between and a game theory model and reality?

Posted on January 13, 2009
Game Theory is an exercise in modeling strategic interaction between intentions. Strategic interaction is familiar to transactional lawyers, who must make contingency plans based upon what they think the other parties might do, and implement those plans into contractual language...

American Investors Network Ponzi Judgment

Posted on January 13, 2009
Image via WikipediaFrom the SEC Press release on the Innovative Projects Ponzi scheme.On Jan. 8, 2009, the Honorable Robert E. Blackburn, United States District Court for the District of Colorado, entered a final judgment against defendants Jarrod W. McMillin and Innovative Projects, Inc...

Paul Wilmott's on Economic Theory

Posted on January 13, 2009
Image via WikipediaPaul Wilmott has an amusing rant about financial economists, which is cruel but fair."My failure led me to think about economists, as opposed to economics, and they're much easier to figure out. This is how it works. An economist starts with a few axioms, ones that bear a vague similarity to a small part of the human condition under restricted situations and in an idealized world...

Inside Franchisors Salaries

Posted on January 13, 2009
Image via WikipediaThe Wall Street Journal had an interesting article about franchising."FranData found that franchisers with more than 500 units have the highest base pay. By specialty, the highest-paid managers were those running legal departments or overseeing site selection for a franchise's outlets...

Dubai gives new meaning to "Cooling out the Marks"

Posted on January 12, 2009
Image by Getty Images via DaylifeGreg Newton, of the always reliable, Naked Shorts claims Dubai is a ponzi scheme."Speaking of rapidly unspooling Ponzi schemes, let's head, hotfoot, to Dubai, the crane-enveloped entrepôt and money-launderer to a world with rather less money than it thought...

Tales of Puffery and Trickery

Posted on January 12, 2009
Image by gcarricks via FlickrHow would you like to earn $90,000 for two months of work? How? Publish some puffery about some desirable vacation hotspot, suggest that there is a real estate development project, hint that the project is exclusive, fail to publish prices and then ...

How to Avoid a Strategic Illusion and Other Mistakes

Posted on January 12, 2009
Image via WikipediaI want to make an observation about a strategic inference that we often overlook, sometimes paying a heavy penalty. The inference is easy to state: when considering if A is consistent with B, no matter how convincing the story ends up being, always check whether (not A) is also consistent with B...

When Not to Trust Your Gut.

Posted on January 08, 2009
Image via WikipediaOne of the major themes on this site has been to trust your gut when it comes to business opportunity due diligence. The mind can too easily be swayed by con criminals waving the phantom dream which becomes even more solid than the actual coin of the realm...

Gen-See Capital Corp. and Richard S. Piccoli Ponzi Halted

Posted on January 08, 2009
Image via WikipediaFrom the SEC Press Release on the Gen-See Ponzi scheme:The Securities and Exchange Commission announced today that it has filed an emergency civil enforcement action to halt an ongoing affinity fraud and Ponzi scheme orchestrated by Buffalo-based Gen-See Capital Corporation a/k/a Gen Unlimited ("Gen-See") and its owner and president, Richard S...

Tyler Cowen: Don't Trust Your Gut?

Posted on January 08, 2009
Image via WikipediaI was somewhat taken aback by Tyler Cowen's claim at money.cnn that you cannot trust your gut in uncertain times, especially if the uncertainty is due to market fraud.I strongly believe that this claim is wrong: gut trumps brains for detecting fraud, and I have written on why before...

When Magical Thinking Works - It's Not a Secret

Posted on January 08, 2009
Image via Wikipedia In 1959, Evon Z. Vogt and Ray Hyman wrote "Water Witching". It was a fascinating objective review of the practice of water witching -using a forked stick to find or indicate an underground source of water. The book was reprinted in 1979 and 2000, and despite our technological advances, it appears that dowsing is still with us...

Simple Advice to Avoid a Madoff?

Posted on January 07, 2009
Image via WikipediaStephen Greenspans's essay on Gullibility, over at Skeptic, is an examination of gullibility and an examination of the Madoff Fraud. Stephen concludes his lenghty piece with saying"I think it would be too easy to say that a skeptical person would and should have avoided investing in a Madoff fund...

Joel Steinger and Mutual Benefits Viatical Ponzi

Posted on January 07, 2009
Image via WikipediaFrom the SEC Press Release on the the Mutual Benefits Viatical Ponzi Scheme "On January 5, 2009, the United States Attorney for the Southern District of Florida announced the Indictment of Joel Steinger, Steven Steiner, Michael McNerney and Anthony Livoti, Jr...

How the SEC Missed the Madoff Fraud - Not!

Posted on January 07, 2009
Image via WikipediaMore on single issue explanations for the Madoff fraud, this time from the NY Post, blaming the SEC investigator who headed up the Madoff investigation."Markopolos gave the investigators a long memo that flatly said that "Madoff Securities is the world's largest Ponzi scheme...

The End of Newspapers - Hard to Predict?

Posted on January 07, 2009
Image via WikipediaThere has been a great deal of discussion about whether the financial crisis was foreseeable or not,how probable or not. This strikes me as the wrong question. The right point of view, prior to say the subprime crash, would be to start from the fact that the subprime mortgage market had crashed and then ask what must have been the case for this to have happened...

Long Live Smart Regulation.

Posted on January 06, 2009
Image via WikipediaDavid Sloan Wilson thinks that our current economic situation is a reflection of our bankrupt economic thinking."The collapse of our economy for lack of regulation was preceded by the collapse of rational choice theory. It became clear that the single minimalistic principle of self-interest could not explain the length and breadth of human behavior...

Anthony A. James: Ponzi

Posted on January 06, 2009
Image via WikipediaFrom the SEC Press Release on the James Asset Ponzi schemeOn December 23, 2008, the United States Attorney for the Eastern District of Michigan filed criminal charges against Anthony A. James, a South Florida investment adviser. The indictment charges James with two counts of mail fraud in connection with a multi-million dollar misappropriation and Ponzi scheme...

When it is not too good to be true.

Posted on January 06, 2009

The Regulator Fallacy

Posted on January 06, 2009
Image via WikipediaI am critical of regulators who blame victims of fraud, by cautioning them that "if it sounds too good to be true, then it probably is." This "advice" makes the victim of a con criminal feel that there was some simple check by which they could have avoided the con criminal...

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