US Attorney on shady lawyers

Preet Bharara has offered an explanation for why more banks were not prosecuted in the aftermath of the mortgage meltdown : Shady lawyers.

At a breakfast sponsored by Crain’s New York, the US Attorney compared banks to the mob, explaining that the executives at the ‘top of the food chain’ often had plausible deniability that their actions could be criminal – in part because they had law firms that okayed the transactions.

As a PI who works closely with lawyers, I thought about how our professions are often put in the difficult position of having to uphold the law and maintain ethics, while at the same time getting the best possible result for clients – often rich and powerful ones – who are footing the bill.

Crain’s writer Aaron Elstein pointed out that, although Bhararawas speaking generally, his explanation paralleled the situation at Lehman Brothers. The firm spent $1.1 billion on ‘professional fees’. A substantial amount of that money went to Linklaters, the UK firm that finally agreed to sign off on the company’s complex financial transactions – after several US firms refused.

One moderator at the breakfast said that legal opinions were “bought and paid for” by banks.

Bharara explained: “There are lawyers who are prepared to be the firm that blesses something that they know may be fishy. And they know that the first firm wouldn’t bless it, the second firm wouldn’t bless it, the third firm wouldn’t bless it, the fourth firm wouldn’t bless it, and maybe the fifth firm located abroad somewhere will bless it. It’s a leap from that to proving beyond a reasonable doubt to a unanimous jury in America that someone knew they were committing a crime when they had the benefit of that opinion.”

I have had requests to do all kinds of illegal things – from wiretapping phones to hacking into bank accounts – and refused. I know that clients can be so desperate for results that they may pass me by in order to find an investigator who will.

But a shady shortcut is unethical, criminal, and never the answer. Clients need to trust that you will tell them the truth – even if it’s something that they may not want to hear – in a difficult situation. And I would NEVER want to be sitting in front of a judge and have something I did compromise a case – not to mention my reputation.


Beware Holiday Charity Scams

‘Tis the season of giving. . . but from Santa skimming the Salvation Army pot to Twitter appeals for fake flood victim relief, the holidays often bring out criminals who definitely believe that it is better to receive than give. After dealing with three charity scam cases in the past month, I thought this would be a good time for a refresher course on how to figure out if a charity is legit. So, before you pull out your wallet, check out these six tips.

1. Call the IRS.

Most tax-exempt organizations are required to file an annual return –  normally some variation of Form 990, with the IRS. Ask for literature from the charity, and check out the mission statement, board of directors and financial statements.

If the form isn’t available on the website, request a copy. Charities, except for churches and public charities whose annual gross receipts are less than $5,000, are also required to make form 501 (c) (3), which verifies their federal tax exempt status, available to the public.

When all else fails, sometimes it’s best to go straight to the source and call the IRS.

Yes, I was on hold for 45 minutes yesterday, but I was able to verify that the children’s organization I was checking out did NOT have federal nonprofit status. So the PayPal button on the ‘fundraiser’ bit of the website was most likely donating straight to the site owner’s shoe fund.

2. Check with watchdog groups.

Groups like the Better Business Bureau and CharityWatch have tips for giving wisely, and services that allow you to find legitimate charities. The CharityWatch Charity rating guide advises that legitimate charities have at least 60% of charitable donations going to program services.

More than 40% earmarked for administrative fees is often a red flag.

3. Beware of sound-alike names.

Many charities – especially those that pop up after natural disasters – mimic the names of reputable ones, and in at least one case flood victims were duped by scammers impersonating actual FEMA officers.

I never give out bank information, either over the phone or in person, to someone soliciting a donation. Instead, I ask the charity to email me information, or send it to my PO Box (more on this later).

4. Don’t be fooled by a figurehead.

Don’t let the fact that a charity is trendy, or everyone else on your Christmas card list is doing it, pressure you into not asking questions. Remember: This is how Madoff and Enron happened!

Fraud occurs at every level: The New York Times reports that a Jewish community leader was charged with stealing $7 million from one of the city’s most influential social service organizations.

5. Don’t be pressured into ’embedded giving’.

I first noticed this phenomenon when buying toilet paper at Whole Foods. At the checkout, right before I swipe my card I’m asked if I want to save the whales or stop genocide. At Petco, they phrase the appeal in a way in which it is almost literally impossible to say ‘no’: Will I give a dollar to help save a homeless pet?

I’ve had my weak moments, but since so-called ’embedded giving’ is often very hard to track, customers may be better off checking ‘no’ at the counter and sending a donation to a reputable pet charity or shelter instead.

6. Remember the difference between ‘non-profit’, ‘tax exempt’ and ‘tax deductible’.

A company can file with the California Secretary of State and be listed as a ‘non-profit’ corporation, but this has nothing to do with the charity’s federal tax exempt status. To find out if a company can legally take donations, it’s worth checking with the IRS.

And remember, some legitimate tax exempt groups that are politically active or involved in lobbying cannot receive tax deductible donations.


Lord of the Scam: The story of ‘Fast Eddie’


He was the international playboy who threw fantasy porn discos, filled swimming pools with cognac and entertained VIPs including Kate Moss and Princes William and Harry, but in reality ‘Lord’ Davenport – aka ‘Fast Eddie’ was a con artist who scammed his victims out of millions. The Daily Mail reports that the 46-year-old, who is currently doing an eight-year sentence for conspiracy to defraud, was the ringmaster of a £34.5million pound fraud.  But on his website, Davenport still claims to be ‘one of London’s most flamboyant and best known entrepreneurs as well as a true English gentleman from an established British family’. After attending one of his huge parties in his heyday, I believe he was able to pull off scams on such a grand scale by using many of the same techniques as Michael Caine’s posh con artist in Dirty Rotten Scoundrels. Read more

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