Regular readers might recall I'm collecting examples of massive frauds as raw material — there's a book I'm due to write next year that has some, ahem, interesting observations on the subject — and today the
comics fishwraps newspapers have got two beautiful ones.
First, the one everyone in the USA has already heard of: the Broadcom indictment has gone surreal. Not only have Federal prosecutors charged Broadcom's co-founder Henry T. Nicholas III with a huge stock-option backdating scam (which forced his company to write down $2.2Bn in profits last year), but they've served a second indictment, alleging that "the billionaire drugged his business cohorts, hired prostitutes and maintained a drug warehouse" as the Associated Press puts it.
Stock-option backdating is hum-drum, tedious fraud; the perp is an executive, and what happens is, they notice that their company stock is soaring and they think "why can't I get some of that action?" So they fake some paperwork granting themselves an option to buy shares today at whatever price they were trading at a couple of years ago, and they back-date it. Stock options: fine. Back-dated stock options with a forged dateline: not so hot. This is generally stupid and foolish and greedy, and it's what drags them into court — auditing and oversight regulations require corporations to keep an eye on what options their executives are being awared — but it's merely venal.
Henry transcended mere venality, though, "jetting around the world in his two private planes, building a secret lair under his house and hiring strippers to party at a private warehouse stocked with cocaine, methamphetamine and ecstasy." So let's get clear about what we're looking at: a billionaire master criminal with a secret bunker. And for Carl Hiaasen, or maybe Christopher Moore, twist on the tale: "In 2001, Nicholas smoked so much marijuana during a flight on a private jet between Orange County and Las Vegas that the pilot had to put on an oxygen mask, the indictment states."
I am shocked, shocked! That our upright captains of industry could spend their (alleged) ill-gotten gains on such a debauched and hedonistic lifestyle. (Where do I git me some of them Broadcom stock options ..?)
And now for the slightly more obscure fraud that proves that the Scriptwriter in the Sky has been trying to get into TV drama: "Viren Rastogi, the businessman behind a global metals trading fraud that duped 20 banks - including West LB, JP Morgan Chase and Dresdner Bank - out of $750m (£383m), has been jailed for nine and a half years."
This one is even more surreal, because it's a classic boiler room scam gone metastatic, and indeed multinational:
Rastogi and his family were using "boiler rooms" around the world to manufacture a bogus paper trail to support their metals trading scam. Unbeknown to the lending banks and auditors, Rastogi was in control of more than 200 supposed trading counterparties at "brassplate" addresses in more than 20 different countries.In 1996-97 they were showing an annual £1Bn turnover (US $2Bn or thereabouts in today's money; $1.75Bn back then) and Rastogi was paying himself a cool megabuck a year as CEO.
Instead of shipping millions of tonnes of metals around the world, the web of bogus transactions simply churned cash lent from the banks - with a proportion being salted away in a maze of offshore trusts in the British Virgin Islands.
They were busted when they used the same fax machine to send paperwork from twenty of their fake companies to their auditors, PriceWaterhouseCooper, who (to their credit) noticed that something smelly was going on; once the investigation got under way it snowballed, with the Serious Fraud Office taking an interest. Oh, and the TV Screenwriter twist? Would you believe in a chief investigator (in a British crime thriller) called "Paige Rumble"? Not in the BBC Drama department, that's for sure ...