Category Archives: Financial Fraud

Keeping Internal Investigations Independent and Conflict-Free

By David Smyth on May 23rd, 2013 Posted in Accounting Fraud, Auditors, Financial Fraud, Investigations

Internal investigations can arise in a number of different ways and can concern a number of different subjects. Allegations of financial misconduct, employment-related missteps, and breaches of fiduciary duty, among others, can all lead a company in that direction. Grand jury subpoenas, search warrants, target letters, media reports, whistleblower claims, audit reports, and routine risk… Continue Reading

SEC Sues Auditor for Failing to Audit

By David Smyth on November 9th, 2012 Posted in Accounting Fraud, Auditors, Financial Fraud, Microcap Fraud, Non-scienter-based Violations

This world has a lot of problems that require fixing, but I dare say that scratch-off lottery tickets is not one of them. Still, that is the problem that Lee Cole and Linden Boyne ventured to solve through Electronic Game Card, Inc. (EGMI), a company that tried to develop credit card-sized electronic games that could… Continue Reading

Second Circuit Eases Aiding and Abetting Standard for SEC

By David Smyth on August 14th, 2012 Posted in Accounting Fraud, Financial Fraud, SEC Litigation

To prove an aiding and abetting claim against a defendant, the SEC has to prove three things: (1) a securities law violation by a primary party; (2) knowledge of the violation by the aider and abettor; and (3) “substantial assistance” by the aider and abettor in the achievement of the primary violation. It is a… Continue Reading

SEC Charges Thornburg Mortgage Executives with Financial Fraud

By David Smyth on March 30th, 2012 Posted in Accounting Fraud, Auditors, Financial Fraud, SEC Litigation

Perhaps the SEC, at least for the time being, is finding its groove with respect to financial fraud matters. For the second time in a two-month span, the Commission has brought a case for fraudulent disclosures regarding the health of a residential loan portfolio. In January, the SEC filed suit against Florida-based BankAtlantic and its… Continue Reading

SEC Sues BankAtlantic for Mischaracterizing Its Residential Loan Portfolio

By David Smyth on February 24th, 2012 Posted in Accounting Fraud, Financial Fraud

A curious aspect of the SEC’s enforcement program in recent years has been the lack of significant accounting fraud cases. The Enforcement Division has created a number of specialized units, including ones studying structured products and hedge funds, but dismantled its financial fraud task force in 2010, reasoning that accounting fraud was the specialty of… Continue Reading