WASHINGTON—Attorney General Eric Holder, Treasury Secretary Tim Geithner, Housing and Urban Development (HUD) Secretary Shaun Donovan, and Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro today announced that President Barack Obama has established by Executive Order an interagency Financial Fraud Enforcement Task Force to strengthen efforts to combat financial crime. The Department of Justice will lead the task force and the Department of Treasury, HUD, and the SEC will serve on the steering committee. The task force’s leadership, along with representatives from a broad range of federal agencies, regulatory authorities and inspectors general, will work with state and local partners to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims.

The task force, which replaces the Corporate Fraud Task Force established in 2002, will build upon efforts already underway to combat mortgage, securities and corporate fraud by increasing coordination and fully utilizing the resources and expertise of the government’s law enforcement and regulatory apparatus. The attorney general will convene the first meeting of the Task Force in the next 30 days.

“This task force’s mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from happening,” Attorney General Eric Holder said. “We will be relentless in our investigation of corporate and financial wrongdoing, and will not hesitate to bring charges, where appropriate, for criminal misconduct on the part of businesses and business executives.”

“Through the Financial Fraud Task Force, we are making clear that the Obama Administration is going to act aggressively and proactively in a coordinated effort to combat financial fraud,” said Treasury Secretary Geithner. “It’s not enough to prosecute fraud only after it’s become widespread. We can’t wait for problems to peak before we respond. We’re seeking comprehensive financial reform to create a more stable, safer financial system and stepping up our enforcement strategy. Doing so will help to stop emerging trends in financial fraud before they’re able to cause extensive, system-wide damage to our economy.”

“To give American families the protection and peace-of-mind they need, it’s clear the federal response must be as interconnected and multi-dimensional as the challenges we face,” said HUD Secretary Shaun Donovan. “No one agency is going to be able to stop financial fraud. This Task force will build upon many of the inter-agency collaborations already underway to protect consumers and restore confidence.”

“Many financial frauds are complicated puzzles that require painstaking efforts to piece together. By formally coordinating our efforts, we will be better able to identify the pieces, assemble the puzzle and put an end to the fraud,” said SEC Chairman Mary Schapiro.

The task force is composed of senior-level officials from the following departments, agencies and offices:

• the Department of Justice;
• the Department of the Treasury;
• the Department of Commerce;
• the Department of Labor;
• the Department of Housing and Urban Development;
• the Department of Education;
• the Department of Homeland Security;
• the Securities and Exchange Commission;
• the Commodity Futures Trading Commission;
• the Federal Trade Commission;
• the Federal Deposit Insurance Corporation;
• the Board of Governors of the Federal Reserve System;
• the Federal Housing Finance Agency;
• the Office of Thrift Supervision;
• the Office of the Comptroller of the Currency;
• the Small Business Administration;
• the Federal Bureau of Investigation;
• the Social Security Administration;
• the Internal Revenue Service, Criminal Investigations;
• the Financial Crimes Enforcement Network;
• the United States Postal Inspection Service;
• the United States Secret Service;
• the United States Immigration and Customs Enforcement;
• relevant Offices of Inspectors General and related Federal entities, including without limitation the Office of the Inspector General for the Department of Housing and Urban Development, the Recovery Accountability and Transparency Board and the Office of the Special Inspector General for the Troubled Asset Relief Program; and
• such other executive branch departments, agencies, or offices as the President may, from time to time, designate or that the Attorney General may invite.

In addition, the attorney general will invite representatives of the National Association of Attorneys General, the National District Attorneys Association and other state, local, tribal, and territorial representatives to participate in the task force through its Enforcement Committee.

The Federal Trade Commission has asked a federal court to issue a contempt order against BlueHippo, a company that collected more than $15 million from consumers based on claims that it would finance their purchases of new computers, but delivered neither the financing nor the financed computers, in violation of a 2008 court order. The FTC alleged that less than one percent of consumers who signed up with BlueHippo received the financed computers they applied for, and undisclosed conditions to redeem “store credits” were rigged to discourage consumers from using them.

In a contempt motion lodged with the court today, the FTC charged that BlueHippo has flouted a settlement reached with the agency last year, continuing to deceive thousands of financially strapped consumers with phony promises that it would help them purchase a computer even if they have credit problems. The FTC also is asking the court to order BlueHippo to compensate injured consumers and bar BlueHippo from similar conduct in the future.

“Years of broken promises by BlueHippo have left consumers seeing red,” said FTC Chairman Jon Leibowitz. “We’re putting companies like this on notice: If you mistreat consumers and thumb your nose at the courts, we will hold you accountable.”

The FTC reached a settlement with Baltimore-based BlueHippo in April 2008 that required the company to pay $3.5 million for consumer redress and barred the defendants from further deceiving customers. According to the FTC’s 2008 complaint, BlueHippo Funding, LLC and affiliate BlueHippo Capital, LLC offered to extend credit to consumers to finance purchases of personal computers and other consumer electronics with down payments of $99 to $124, and a year of weekly or bi-weekly payments ranging from $36 to $88. BlueHippo promised to deliver the product once the consumer made 13 weekly payments. But most consumers did not receive the computers they ordered in the time promised, even after they had made 13 weeks of payments, the Commission alleged. The Commission charged that BlueHippo’s marketing tactics were deceptive, and violated the FTC Act and other federal credit statutes.

Even after this settlement order was entered by the court, BlueHippo continued to deceive consumers, according to the FTC. The company aggressively marketed itself as a computer finance company and spent the rest of 2008 signing up customers and taking their money, but failing to provide them with financed computers. The FTC’s contempt motion alleges that between April and December of 2008, more than 35,000 customers contracted for BlueHippo’s computer financing deal. But the company provided, at most, a single financed computer, failing to provide financed computers even for 2,477 customers who managed to meet the companies’ conditions. Complaints about the company poured into the Better Business Bureau. On top of all that, BlueHippo failed to submit a report to the FTC showing how it was complying with the settlement, as required by the order.

Finally, in April, 2009, after the FTC notified the court that BlueHippo was violating the settlement, the company began ordering thousands of computers. Even so, the FTC alleges that BlueHippo failed to order computers for 1,015 of the 2,477 consumers who had qualified for financing by making 13 consecutive payments and completing the required paperwork. For the 1,462 consumers who finally received a computer, BlueHippo did not even order – let alone ship – the computers within the three- to four-week time frame the company had advertised. On average, it took about six months between the time these consumers qualified for their computers and the time BlueHippo ordered the machines, according to the FTC’s contempt motion.

The FTC’s contempt motion also charged that BlueHippo failed to disclose key aspects of its refund policy. In particular, the company promised that while consumers who canceled their order after seven days could not obtain cash refunds, they could get “store credit,” which could be used to buy desktop computers, laptops, monitors, software, and televisions. But it failed to tell consumers that they would have to send a money order to cover undisclosed shipping and handling fees, as well as taxes, even if they had more than enough store credit to cover these costs – and that they could only order one item at a time.

The contempt motion against defendants BlueHippo Funding, LLC; BlueHippo Capital, LLC; and Joseph Rensin was filed in the U.S. District Court for the Southern District of New York.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Read the original FTC press release here along with related documents

Attorney Failed to Turn Over Proceeds from Defendants’ Business Opportunity Involving Sale of Internet Kiosks to Consumers.

The Federal Trade Commission has filed civil contempt charges against an attorney who represented the marketers of an “Internet kiosk” business opportunity that turned out to be nothing more than a Ponzi scheme.

In its contempt action, the Commission charged that the attorney representing defendants in the case flouted a March 2009 federal court order that required him to turn over $238,300 to the FTC. The court had previously had determined that money given to the attorney as a retainer for his work on the case derived from the defendants’ proceeds from their illegal scheme. The court found that the FTC was entitled to that money, so that it could be used to reimburse victims of the scam.

In the March 2009 order, the court also imposed an $18.9 million judgment against the operators of the scam – Network Services Depot, Charles Castro, and several other defendants. The judgment upheld FTC charges that the defendants violated the FTC Act and the agency’s Franchise Rule by duping hundreds of consumers into buying Internet kiosk business opportunities with false promises of lucrative earnings. The judgment paved the way for the FTC to distribute more than $2 million to victims.

The civil contempt action against Jeffrey S. Benice and his law firm, Jeffrey S. Benice, a Professional Law Corporation, was filed in the U.S. District Court for the District of Nevada.

Copies of the March 2009 order and other court documents are available from the FTC’s Web site at http://www.ftc.gov/ and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Read the full press release here along with related documents.

Related: FTC Press Release about the 18.9 million dollar judgement 

"3HourProfits.com of Minnesota charged one Wilson consumer to begin applying their internet marketing concepts and claimed the consumer would start making a profit within the first three hours of work. After paying, the consumer was re-routed through PayDotCom.com to set up an account for the commissions she would make. The site would not let her log-in to set up, and after contacting 3HourProfits.com multiple times she has yet to receive a response or reimbursement for the $39 start up fee. 3HourProfits.com is also operating under the name of Force One Events, Inc. and they claim to be ‘ranked #1 on BBBReviews.org.’ BBBReviews.org is in no way associated with the Better Business Bureau. The name is misleading, but neither 3HourProfits.com nor Force One Events, Inc. is a BBB Accredited Business. Force One Events, Inc. has failed to respond to several complaints and has an “F” rating with BBB."

So, I decided I'd go check out the actual 3HourProfits site. And boy am I glad I did. I was treated to the funniest "As Seen On" claim I've ever seen. Tell me if you can figure out what it is in the image below:

Funniest "As Seen On" claim ever

As part of a continuing effort to identify the latest cyber crime trends and warn the public, the FBI today released the following information:

Within the last several months, the FBI has seen a significant increase in fraud involving the exploitation of valid online banking credentials belonging to small and medium businesses, municipal governments, and school districts. In a typical scenario, the targeted entity receives a “spear phishing” e-mail which either contains an infected attachment, or directs the recipient to an infected website. Once the recipient opens the attachment or visits the website, malware is installed on their computer. The malware contains a key logger which will harvest each recipient’s business or corporate bank account login information. Shortly thereafter, the perpetrator either creates another user account with the stolen login information or directly initiates funds transfers by masquerading as the legitimate user. These transfers have occurred as both traditional wire transfers and as ACH transfers.

Further reporting has shown that the transfers are directed to the bank accounts of willing or unwitting individuals within the United States. Most of these individuals have been recruited via work-at-home advertisements, or have been contacted after placing resumes on well-known job search websites. These persons are often hired to “process payments,” or “transfer funds.” They are told they will receive wire transfers into their bank accounts. Shortly after funds are received, they are directed to immediately forward most of the money overseas via wire transfer services such as Western Union and Moneygram.

Customers who use online banking services are advised to contact their financial institution to ensure they are employing all the appropriate security and fraud prevention services their institution offers.

The United States Computer Emergency Readiness Team (US-CERT) has made information on banking securely online available at: http://www.us-cert.gov/reading_room/Banking_Securely_Online07102006.pdf

Protecting your computer against malicious software is an ongoing activity and, at minimum, all computer systems need to be regularly patched, have up-to-date anti-virus software, and have a personal firewall installed. Further information is available at: http://www.us-cert.gov/nav/nt01/

If you have experienced unauthorized funds transfers from your bank accounts, or if you have been recruited via a work-at-home opportunity to receive transfers and forward money overseas, please notify the Internet Crime Complaint Center by filing a complaint at: http://www.ic3.gov.

For a detailed analysis of this scam please visit http://www.ic3.gov/media/2009/091103-1.aspx

10/29/2009 Department of Justice Press Release via the FBI website:

SAN JOSE, CA—Khalid Shaikh, a former CEO of YouSendIt Inc., was indicted by a federal grand jury yesterday with four counts of mail fraud, United States Attorney Joseph P. Russoniello announced.

The indictment states that between December 2008 and June 2009 Shaikh used the ApacheBench software program to launch four denial of service (DOS) attacks against YouSendIt’s servers. Each DOS attack temporarily rendered the servers incapable of handling legitimate network traffic and deprived YouSendIt’s customers use of the company’s services.

YouSendIt is a company based in Campbell, Calif., that is engaged in the business of digital content delivery through the Internet. YouSendIt enables users to send, receive and track large files of digital data. YouSendIt’s Web servers are located in San Jose. These servers are also used to facilitate interstate and foreign commerce and communication.

According to the indictment, when the company was established in 2004, Shaikh was one of YouSendIt’s founders. He served as the company’s chief executive officer until August 2005. Thereafter, Shaikh served as the company’s chief technology officer until he departed from YouSendIt in November 2006.

The maximum statutory penalty for each count of mail fraud in violation 18 U.S.C. §§ 1030(a)(5)(A) & (c)(4)(A) is five years imprisonment, three years of supervised release and a fine of $250,000, plus restitution if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Hanley Chew is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Legal Assistant Lauri Gomez, and Law Clerks Traci Lee and Lily Robinton. The charges are the result of a referral to and an investigation by the Federal Bureau of Investigation.

Please note: An indictment contains only allegations against an individual and, as with all defendants, Shaikh must be presumed innocent unless and until proven guilty.

PHILADELPHIA—Neal D. Saferstein, 36, of Mount Laurel, NJ, pleaded guilty today to four counts of an indictment stemming from a multi-million dollar telemarketing scam that defrauded as many as 400,000 small businesses out of as much as $75 million, announced U.S. Attorney Michael L. Levy. Saferstein was the President and Chief Executive Officer of  GoInternet.net, Inc. (“GoInternet”), which did business at 20 N. Third Street, and 6 Strawberry Street, in Philadelphia. GoInternet allegedly derived more than $75 million in gross revenues from a fraudulent telemarketing scheme that lasted from 2001 to 2004. Co-defendant Tyrone L. Barr, 35, of Philadelphia, was Vice President of Customer Service and Regulatory Affairs. Co-defendant Billy D. Light, 41, of Voorhees, NJ, was Chief Information Officer. Saferstein pleaded guilty today to one count of wire fraud, one count of mail fraud, and two counts of filing false tax returns. Sentencing is scheduled for February 2010.

According to the indictment, the entire GoInternet business model was designed to defraud customers and potential customers into making monthly $29.00 payments for Internet-related services without their knowledge or authorization. GoInternet’s telemarketers duped customers into receiving a welcome packet without disclosing that the mailing would trigger monthly bills unless the customer called to cancel. The packets were then designed to look like bulk business mail to prompt it to be disregarded or thrown away. GoInternet engaged in “cramming.” It would place monthly charges on its customers’ local telephone bills, without authorization, which customers routinely paid without noticing. By approximately 2003, GoInternet employed over 1,000 telemarketers and was signing on approximately 7,500 new customers every week. By the end of 2003, GoInternet’s customer base included more than 350,000 businesses.

Saferstein prevented customers from receiving notices disclosing the cost of services, and delayed and prevented refunds from going to customers that had been defrauded and were promised refunds. Barr created fake sales-verification tapes which were purported to contain the telemarketer’s call to the customer and the customer’s consent. Barr pleaded guilty to wire fraud and is awaiting sentencing.

In 2003, the Federal Trade Commission brought a civil proceeding regarding GoInternet’s practice of billing consumers for services without their authorization, which resulted in a $58 million judgment being imposed against Saferstein and GoInternet. Light admitted that Saferstein directed him to testify falsely before the federal district court in Philadelphia during the FTC proceedings. Light pleaded guilty to conspiracy to commit perjury and is awaiting sentencing.

Saferstein also used GoInternet corporate funds as if they were in his personal bank account, paying for significant personal expenses. He also failed to report income from the years 2000 to 2003 allegedly exceeding $1.7 million. In addition, the indictment charges defendant Saferstein with failing to pay over to the Internal Revenue Service more than $2.8 million in payroll taxes while he ran GoInternet.

Saferstein faces a maximum penalty of 46 years' imprisonment with a maximum fine of  $1 million.

Barr faces a maximum penalty of 20 years' imprisonment with a maximum fine of $250,000.

Light faces a maximum penalty five years' imprisonment with a maximum fine of $250,000.

The case was investigated by the Federal Bureau of Investigation, the Federal Trade Commission, the Federal Bureau of Investigation, the Internal Revenue Service and the U.S. Postal Inspection Service. It is being prosecuted by Assistant United States Attorneys Jennifer Arbittier Williams and Jason P. Bologna, and by FTC Special Assistant United States Attorney Larissa L. Bungo.

WASHINGTON, D.C. – Small businesses will play an important role in the nation’s economic future. The Office of Advocacy’s Small Business Profile for the United States, released today, provides details about small business employment, business starts and closings, bank lending in 2008, the demographics of business ownership, and firm and employment change by major industry and firm size.“The United States continues to depend on the health and ingenuity of its small business sector for the nation’s economic growth,” said Susan Walthall, Acting Chief Counsel for Advocacy. “In today’s economic climate, it is especially important for policymakers to keep small business concerns in mind as they formulate policy.”

In 2008, the United States saw an increase of 0.7 percent in GDP and a private sector employment decline of 0.7 percent. The U.S. profile also shows that:

Ø Small employers in the United States numbered 6 million in 2006 (latest data). There were also 20.8 million nonemployers, which increased to 21.7 million by 2007.

Ø Small businesses added 2.5 million net new jobs in 2005-2006. Overall, they employed 50.2 percent of the nation’s nonfarm private workforce in 2006.

Ø Businesses owned by women, and by Asian Americans, African Americans, Hispanic Americans, and Hawaiians and Pacific Islandeers all increased significantly over the most recent period for which Census data are available.

As additional small business data become available over the coming months, they will be incorporated in a new edition of the state profiles, to be issued in early 2010.

For more information and a complete copy of the state and territory small business profiles, visit the Office of Advocacy website at www.sba.gov/advo.

 

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The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The presidentially appointed Chief Counsel for Advocacy advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. For more information, visitwww.sba.gov/advo, or call (202) 205-6533.

Agency's First-Ever Web Site Devoted Exclusively to Investor Education

Washington, D.C., Oct. 22, 2009 — The Securities and Exchange Commission today launched its first-ever Web site devoted exclusively to investor education, providing investors with in-depth information and "top tips" on how to invest wisely, plan for the future, and avoid being scammed.

By visiting www.investor.gov, investors can access information in a user-friendly format that is specifically tailored to their needs. The site includes sections specifically for those just getting started investing, for those saving for a child's education, and for those planning for retirement. It also has a detailed "Seniors Care Package" section for senior citizens and caretakers.

In a welcome video on the new site, SEC Chairman Mary Schapiro says, "Investing information is available from thousands of online resources — some good, some not so good. Through Investor.gov, we are adding our own online voice to provide investors with unbiased and factual investing information."

Chairman Schapiro adds, "You'll find resources that can help you analyze your current holdings or even check the background of a registered financial professional."

Investor.gov also offers a section exclusively in Spanish, targeting the millions of Spanish-speaking investors in the United States. The "En Español" portion presents information about what to do if an investor feels that he or she has been a fraud victim, as well as a Spanish-language podcast explaining the history and functions of the SEC.

The site will be further enhanced with additional investor education resources in the coming weeks and months.

"Investor.gov will help you if you are invested in the market, are considering investing, or care for a relative who has retirement savings," said Lori Schock, Director of the SEC's Office of Investor Education and Advocacy. "Investor.gov provides an extensive collection of investor education materials, tools, calculators, checklists, as well as valuable investor alerts."

* * *

Investor.gov is the latest in a series of social media initiatives undertaken by the SEC. On the home page at www.sec.gov, visitors can sign up to receive information and instant e-mail alerts on more than 80 topics of interest to investors as well as other market participants. The agency also reaches investors online through other social media channels such as Twitter and YouTube:

• Investor Information: www.twitter.com/SEC_Investor_Ed
• News Releases and Alerts: www.twitter.com/SEC_News
• Enforcement Actions: www.twitter.com/SEC_Actions
• Careers at the SEC: www.twitter.com/SEC_Jobs
• You Tube channel: www.YouTube.com/SEC_Views

Washington, D.C., Oct. 22, 2009 — The Securities and Exchange Commission today announced that it will hold its annual forum on small business capital formation on November 19 at its Washington, D.C., headquarters.

The SEC forum will include both roundtable and breakout group sessions that are expected to focus on the economic recovery and the SEC's "accredited investor" definition for private and limited offerings. The roundtable participants and full agenda for the forum will be announced at a later date and posted on the SEC Web site.

"Since 1982, this annual event has served as an important way for the SEC and its staff to interact with the small business community and exchange ideas about how best to improve small business capital formation," said Gerry Laporte, Chief of the SEC's Office of Small Business Policy.

The all-day forum will begin at 9 a.m. ET, and roundtable sessions will be webcast on the SEC's Web site. During the breakout group sessions in the afternoon, participants will work together to formulate specific policy recommendations. The breakout group sessions will not be webcast, but those who cannot attend in person can still participate through a telephone conference call. Those wishing to participate in a forum breakout group, whether in person or by telephone conference call, need to register onlineby November 16, 2009.

The SEC is looking for suggestions on specific topics to be discussed at the forum and for recommendations to be considered by the forum breakout groups. Suggestions and recommendations can be e-mailed to the SEC's Office of Small Business Policy at SmallBusiness@sec.gov. Questions about the forum also may be sent to that e-mail address, or call (202) 551-3460 for more information.