Without sounding like a prophet, frauds like; Inflating prices of land and other assets purchased, falsifying inventory, hiding of related party relationships/ transactions, fraudulent reclassification of expenses, misuse of debts collected and paying of kickbacks are all prevalent in many companies in Sri Lanka at different scales. The finance companies that went bust had all of the above at a significant level and the ones that are mismanaged are still continuing with these kinds of frauds. However, one thing for certain, many of these fraudsters will go unpunished until the regulatory bodies develop to an advanced stage with less external influence and more courage.
The following website had many punishments meted out in the US. Many of them remind of issues close to home, that go unpunished and in many instances considered as good strategies by corporates. The reference site is:
#1. Former Executives of Financial Group Sentenced for Roles in Fraud Scheme
On February 14, 2013, in Houston, Texas, Gilbert T. Lopez, Jr., former chief accounting officer of the Stanford Financial Group Company, and Mark J. Kuhrt, former global controller of the Stanford Financial Group Global Management, were each sentenced to 240 months in prison and three years of supervised release. Lopez was further ordered to pay a $25,000 fine. Both men were convicted by a jury on November 19, 2012 to one count of conspiracy to commit wire fraud and nine counts of wire fraud. According to court documents, Lopez and Kuhrt helped Robert Allen Stanford perpetrate a fraud scheme involving Stanford International Bank (SIB). Stanford was previously sentenced to 110 years for his role. As part of the scheme, Lopez and Kuhrt kept the misuse of SIB assets hidden from the public and worked behind the scenes to prevent the misuse from being discovered. They also helped Stanford falsely represent to SIB customers that Stanford had infused hundreds of millions of dollars into SIB when in fact he had not. As part of that effort, Lopez and Kuhrt helped design a fraudulent real estate transaction that involved falsely inflating parcels of land purchased at $63.5 million to a purported value of $3.2 billion.
#2. Former Chief Operating Officer Sentenced for Insider Trading, Fraud and Obstruction Of Justice
On May 9, 2014, in Central Islip, New York, Sandra Hatfield was sentenced to 84 months in prison, three years of supervised release and ordered to forfeit some $1.8 million in illicit profits. Hatfield, the former Chief Operating Officer of DHB Industries, Inc., and her co-defendant, DHB founder David H. Brooks, were convicted in September 2010 on nine counts of conspiracy, insider trading, securities fraud, and obstruction of justice arising out of a $200 million fraud. Subsequently, Hatfield pleaded guilty to filing a false income tax return. According to court documents, Hatfield and others conspired to loot DHB, a supplier of body armor to the U.S. military and law enforcement agencies. Specifically, Hatfield helped Brooks hide the related party status of Tactical Armor Products and siphon more than ten million dollars from DHB to support a thoroughbred horse-racing business. Hatfield also engaged in accounting fraud schemes designed to increase the net income and profits that DHB reported in its press releases and filings with the Securities and Exchange Commission by falsely inflating the value of DHB’s existing inventory, adding non-existent inventory to the company’s books and records, and fraudulently reclassifying expenses.
#3. CEO of Debt Collection Agency Sentenced for Role in Multi-Million Dollar Fraud Scheme
On December 19, 2013, in Bridgeport, Conn., Peter Pinto, of East Quogue, N.Y., was sentenced to 48 months in prison and five years of supervised release. Pinto pleaded guilty on May 11, 2012 to one count of conspiracy to commit wire fraud, bank fraud and money laundering and wire fraud for his role in a multimillion dollar fraud scheme at Oxford Collection Agency, where Pinto served as Chief Executive Officer. According to court documents and statements made in court, Oxford Collection Agency was a private financial services company that engaged in accounts receivables management, primarily debt collecting. Businesses and other entities contracted with Oxford to collect debts on their behalf. Oxford collected debts from consumers under the pretense that it would report all such collections to its clients and remit the appropriate amount to the client. However, Pinto and other Oxford executives routinely caused Oxford to collect debts that were never remitted to its clients. The co-conspirators referred to these unremitted collections as a client’s “backlog.” To hide the backlog, co-conspirators would make periodic fraudulent collection reports to certain clients that under-reported the amount of funds collected. Pinto and others diverted various funds from their client remittances and used them for their own needs. Oxford’s victims lost more than $10 million as a result of this scheme. The investigation also revealed that Oxford sometimes obtained and retained business with its banking clients by paying bribes and kickbacks to bank officials. Five other Oxford executives have pleaded guilty, including Pinto’s father and Chairman of the Board, Richard Pinto. Richard Pinto was sentenced to 60 months in prison. The other defendants await sentencing.