Richardson Steps Down Because of a Scandal - What Else is New?

In the second scandal in recent weeks — where palms were allegedly greased to gain political favor — New Mexico Governor Bill Richardson has announced he is withdrawing his nomination to be President-elect Barack Obama's Commerce Secretary because of a grand jury investigation into how one of his political donors won a lucrative state contract.

The first scandal in recent weeks was, of course, Illinois Governor Rod Blagojevich allegedly attempting to sell President-elect Obama's recently vacated Senate seat.

The federal grand jury is investigating how a California company, which contributed to Richardson's campaign, won a $1 million transportation contract.

Governor Richardson — who like Governor Blagojevich is not stepping down from his position as governor — has stated he is confident the investigation will reveal he acted properly in the matter. His rationale, as stated in this Washington Post article, is that the investigation could take a long time and he doesn't want to get in the way of important work that needs to be done.

President-elect Obama accepted the resignation with deep regret and cited Richardson's long history of service to the country, both at the state and the federal level.

The federal grand jury investigation in question was announced in mid-December and revolves around whether or not CDR Products was awarded a 1.4 million contract after making contributions to Richardson's political action committees. The contributions of $100,000 were made in 2004 by CDR (based in 90210, Beverly Hills, CA) shortly before they obtained the contract.

Reports indicate that this case is part of a larger one involving the FBI's investigation into "pay to play" practices involving governent bonds. In another part of this investigation, the mayor of Birmingham, Alabama, Larry Lanford, has been indicted for taking hundreds of thousands of dollars in gifts and loans that led his city into bad investments and ultimately, bankruptcy.

Al.com just reported that corruption has dominated the news in Alabama in recent history. In a telling statement, the article noted that corruption deserved top billing in 2006 and 2007, also. Alabama Governor Don Siegelman continues to try to overturn his 2006 conviction on bribery charges, and their Chancellor, Roy Johnson, plead guilty in a federal investigation of corruption in the state's two-year college system.

The sad thing is that politicians being charged and convicted of fraud are becoming too common. From a congressman allegedly getting caught with $100,000 in his freezer, to a senator allegedly accepting $250,000 in gifts from an oil company executive — I sometimes wonder if I am living in a foreign land, where we would expect this to be the status quo. Please note, there are many more examples of public figures getting caught with their hands in the cookie jar in recent history. Please note also that the incidents of alleged corruption involve leaders of different political affiliations.

As we are only days now from President-elect Obama's administration taking office, we face the worst financial crisis since the depression. Not only are we experiencing a financial crisis, but many believe our nation is severely divided; and to top it off, we are at war.

President-elect Obama has spoken out many times on the evils of special interests and lobbyists, who seem to be able to control our government's destiny. Even after Wall Street laughed all the way to the bank (for years) when the mortgage crisis was created — it seems we are being held hostage to bail them out or face even more severe financial consequences.

Change is what is needed and hopefully that is what is about to occur. On his transition website, President-elect Obama is encouraging open government and soliciting us all to write in with our own ideas. I think this a good thing and we all should do it. Our nation was founded in part because of taxation without representation and if you think about it, an argument might be made that this what we've been seeing in recent history.

During the election, I struggled a lot with how to cast my vote; my uncle (who is a huge Obama advocate) sent me a YouTube video about Obama set to John Lennon's song, Imagine. For those of us who still remember his music, Lennon had another song called Gimme Some Truth. What we need now is to imagine our leaders are there for us and to stop finding reasons to lose faith in them.

This Year, Fraud Will Cost Businesses $994 Billion in the U.S.!

U.S. organizations lose about 7 percent of their revenues to fraud, according to the Association of Certified Fraud Examiners. When compared to the projected U.S. Gross Domestic Product for 2008 -- 7 percent equates to $994 billion.

In their just released Report to the Nation on Occupational Fraud and Abuse, the average case cost a business $175,000. In a quarter of 959 cases used to compile the study, the loss was $1 million or more. The most costly type of fraud was financial statement fraud -- more commonly known as cooking the books -- which cost organizations an average of $2 million.

Not surprisingly, smaller businesses suffered the greatest losses. I say not surprisingly, because smaller businesses normally can't afford dedicated resources to detect and prevent fraud. For small businesses, the average case studied cost about $200,000.

The most common type of fraud found in the study was corruption and the second most common was fraudulent billing. The average scheme wasn't detected for two years and the most common form of detection was from a human being tipping off management, or a business owner.

In the small business fraud model, check tampering was a common cause, also.

Businesses that had fraud controls did a lot better than businesses that didn't, according to the study. For instance, businesses that did surprise audits suffered an average loss of $70,000, while businesses that didn't suffered an average loss of $207,000. Other controls that made an impact cited in the report are anonymous hot lines, training management to detect fraud and hiring dedicated personnel to detect and resolve fraud.

According to the report, fraud perpetrators can be identified by the behaviors they display. These include living beyond their means, financial difficulties or even by trying to please their boss by making it appear that the business is doing better than it really is. Please note that in the case of larger corporations, the word "boss" can mean investors or shareholders.

Please note there are many more signs of dishonesty and recommended controls for small business owners. Another good resource to read about these subjects is put out by the National Association of Veterans' Research and Education Foundation.

The extensive report covers all type of fraud, whether they are financial, or otherwise. The three main categories it is broken down into are Corruption, Asset Misappropriation and Fraudulent statements. Corruption schemes entail bribery, conflicts of interest, illegal gratuities and economic extortion. Asset Misappropriation schemes (most common) cover cash manipulation, inventory theft, and fraudulent disbursements.

For those businesses, who can't afford hired help to deal with fraud, I guess this means a owner should check their books and accounts randomly without letting their employees know when they are going to do it. They should also diversify controls and oversight (separate key duties). No one person should have complete control over a revenue stream or valuable asset. Additionally -- there are third-party anonymous hot line services and if they are too expensive -- a creative small business owner might set up a telephone line with a voice mail and have some posters made.

So far as training management and employees on what to be aware of -- the current AFCE report is a wealth of information, also. A little awareness and knowledge of how fraud is facilitated can go a long way towards preventing it, as well as, giving your human resources the knowledge to spot and report it.

Most fraud is defeated by people, who are knowledgeable of what to look for. This is because fraud schemes rely on tricking everyone else to think nothing is going on.

On a final note, if you are a small business owner and detect fraud, I recommend leaving any legal recourse matters to someone who is familiar with how to do it. Handling these matters the wrong way can add to the problem by causing other losses, such as civil litigation or the protecting yourself against it. In any situation, where a crime is detected, the best thing to do is to contact the authorities and seek their assistance with it.

San Francisco Supervisor charged with bribery, extortion, mail and voter fraud!

There are some of us wondering how many more politicians will be caught with their hands in the cookie jar. In the past few years, quite a few of them seem making a mockery of the oath they took when they went into public service.

One of the San Francisco's own is being prosecuted for a host of fraud charges, including the fact that he himself committed voter fraud.

Karen Gullo at Bloomberg.com is reporting:

Ed Jew, a member of San Francisco's board of supervisors, was charged today with fraud, bribery and extortion for allegedly soliciting $80,000 from business owners in exchange for using his influence with the city's planning commission.

An indictment handed down today by a federal grand jury in San Francisco accuses Jew, 47, of soliciting bribes from Quickly tapioca drink shops in San Francisco, according to a statement by the U.S. Attorney's Office for the Northern District of California. In May, Jew accepted $40,000 in cash from Quickly representatives, prosecutors said.

SF Supervisor Ed Jew is also under investigation for committing voter fraud. SF Gate (Cecilia M. Vega, Jaxon Van Derbeken) reported in June:

Embattled San Francisco Supervisor Ed Jew surrendered to Burlingame authorities Tuesday night after San Francisco's chief prosecutor filed criminal charges against him and issued a warrant for his arrest, saying the lawmaker lied about where he lives in order to run for office.

Jew, who turned himself in with his bail bondsman at his side, posted $135,000 bail and was released.

The arrest and felony charges bring to a head a City Hall scandal that has dogged the rookie supervisor ever since FBI agents last month raided his city office, his residences and his Chinatown flower shop.

Interestingly enough, Wikipedia has a very detailed write-up on the ongoing Ed Jew saga, here.

Bloomberg.com story, here.

SFGate.com story, here.

More and More - The Jefferson Scandal Does Appear to be a Nigerian Fraud

In late May, I did a post about the Jefferson scandal - where money was discovered in a freezer - that was allegedly "earmarked" for the Vice President of Nigeria, Abubakar Atiku.

At the time, Vice President Atiku stated "that Jefferson was name dropping and obviously committing a 419 (Nigerian Penal Code for Advance Fee) scam."

For anyone that is unfamiliar with advance fee (419):

"Nigeria is one of main sources for all sorts of Advance fee fraud (419) fraud scams. The Advance Fee scam is where a ruse is used to get a victim to part with their money (nowadays normally via wire-transfer) in anticipation of riches (or sometimes love) to come. The best known is the "Nigerian Letter," but the activity has mutated into romance, lottery, auction, check cashing, work at home and reshipping scams."

I also wondered in the post, whether or not, the EFCC (Economic Financial Crimes Commission) would investigate further. Apparently, they did with assistance from the FBI.

Brian Ross of ABC news is reporting:

Acting on information provided by the FBI, Nigerian fraud investigators have now indicted Vice President Atiku Abubakar on 14 counts of corruption, involving tens of millions of dollars allegedly diverted from government accounts.

According to Nuhu Ribadu, head of a new anti-corruption squad created by Nigeria's president, $23 million of the diverted money is still missing. Ribadu said $6.7 million of the missing funds has been traced to a U.S. company tied to Congressman Jefferson's family.

Link to Brian Ross story, here.

Meanwhile both Congressman Jefferson and Vice-President Atiku still deny everything and Mr. Jefferson -- who is running for re-election -- has yet to be charged.

In the original AP story, two of Jefferson's associates have been found guilty of bribery and admitted giving Jefferson other money to bribe African officials. The story also reports some pretty "damning" statements Jefferson made while being taped without his knowledge.

I wonder if and when he (Jefferson) will be charged - $90,000.00 in a freezer is a little hard to explain - even if it is a drop in the bucket when compared to the 6.7 million alleged by the Nigerian investigation.

The EFCC site has a lot of coverage (from a Nigerian perspective) on Mr. Atiku's woes.

Sadly enough - Congressman Jefferson is leading in the polls:

Congressman Jefferson Race Gets National Eyes And New Orleans Ayes

Of note - Jefferson has lost the support of the Louisiana Democratic Party, which seems a wise move on their part.

Nigerian fraud is legendary on the Internet - and the EFCC has had a lot of success in "taking a bite" out of it. Here is a picture of Nuhu Ribadhu, who is in charge of the EFCC and managed the Nigerian part of this investigation:

Since most fraud today has a global reach, some might argue the EFCC is stopping people from being victimized, worldwide.

You can view Mr. Ribadhu's biography, here.