DOCSLIB.ORG

United States District Court Northern District of Alabama Southern Division

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
United States District Court Northern District of Alabama Southern Division UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION In re HEALTHSOUTH CORPORATION ) Master File No. CV-03-BE-1500-S SECURITIES LITIGATION ) ) This Document Relates To: All Actions ) ) In re HEALTHSOUTH CORPORATION ) Consolidated Case No. CV-03-BE-1501-S STOCKHOLDER LITIGATION ) ) CLASS ACTION This Document Relates To: All Actions ) ) In re HEALTHSOUTH CORPORATION ) Consolidated Case No. CV-03-BE-1502-S BONDHOLDER LITIGATION ) ) CLASS ACTION This Document Relates To: All Actions ) ) JOINT SECOND AMENDED CONSOLIDATED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS [FACTUAL BASIS] DEMAND FOR JURY TRIAL TABLE OF CONTENTS Page INTRODUCTION ...........................................................................................................................1 The Scheme..........................................................................................................................3 Ernst & Young’s Participation in the Fraudulent Scheme...................................................5 Underwriters’ Knowing Involvement..................................................................................8 Financial Fraud ..................................................................................................................14 Medicare Fraud ..................................................................................................................15 Passage of the Balanced Budget Act and Defendants’ Sale of Stock and Notes...............16 Defendants Reinflate the Price of HealthSouth Stock .......................................................19 Transmittal 1753 ................................................................................................................20 JURISDICTION AND VENUE ....................................................................................................30 THE PARTIES...............................................................................................................................30 Stockholder Plaintiffs.........................................................................................................30 Bondholder Plaintiffs.........................................................................................................32 Defendant HealthSouth......................................................................................................33 Senior Officer Defendants .................................................................................................33 Employee Defendants ........................................................................................................40 Director Defendants...........................................................................................................44 Defendant Ernst & Young .................................................................................................49 Underwriter Defendants.....................................................................................................51 Additional Underwriter Defendants...................................................................................54 Individual Underwriter Defendants ...................................................................................59 Summary of Claims Against the Defendants.....................................................................63 Senior Officer Defendants’, Employee Defendants’ and Director Defendants’ Involvement in Scheme..........................................................................................64 - i - Page Insider Selling ....................................................................................................................67 Healthsouth’s Board of Directors Recklessly Allows the Misconduct to Occur and Continue Unabated..........................................................................................68 OVERVIEW OF THE SCHEME ..................................................................................................69 HealthSouth’s False Financial Statements.........................................................................70 The SARC Report Provides Further Details of the Accounting Misstatements................73 Contractual Adjustments/Improper Classification of Expenses ........................................75 Improper Entries on Facilities’ Results..............................................................................77 Acquisition Accounting .....................................................................................................80 Improper Accounting For Bonuses....................................................................................81 Investment Accounting ......................................................................................................82 Other Accounting Manipulations.......................................................................................84 Former HealthSouth Executives Disclose Facts of Wrongdoing ......................................89 The Balanced Budget Act of 1997...................................................................................100 HealthSouth’s Overbilling Fraud.....................................................................................106 The Qui Tam Actions.......................................................................................................107 The Devage Action ..........................................................................................................108 The Darling Action..........................................................................................................111 The Mandel Action ..........................................................................................................111 The Manning Action........................................................................................................111 HealthSouth Employees Complained to Their Supervisors About the Overbilling Fraud ....................................................................................................................112 Scrushy Knew that HealthSouth Was Improperly Billing Medicare When He Sold His Stock..............................................................................................................115 Scrushy Knew that Transmittal 1753 Would Have a Material Impact on HealthSouth’s Operations Before Selling His Stock to Repay His Loan ............116 - ii - Page The August 27 Press Release Causes HealthSouth Shares to Plunge in Price ................122 HealthSouth’s Document Destruction .............................................................................127 HealthSouth Falsely Claims Scrushy Is “Cleared”..........................................................128 DEFENDANTS’ USE OF THE INTEGRATED PUBLIC OFFERINGS TO CARRY OUT THEIR SCHEME – THE INVESTMENT BANKS INVOLVEMENT ................131 HealthSouth’s Integrated Public Offering Scheme..........................................................134 The March 1998 Integrated Public Offering....................................................................137 The June 1998 Integrated Public Offerings .....................................................................139 The September 2000 Integrated Public Offering.............................................................142 The February 2001 Integrated Public Offering................................................................145 The September 2001 Integrated Public Offerings ...........................................................147 The May 2002 Integrated Public Offering.......................................................................150 The Underwriter Defendants Are “Underwriters” and “Sellers” of the Notes ................152 HealthSouth and the Underwriter Defendants Improperly Exploited the Rule 144A Exchange Structure in a Scheme Intended to Evade the Registration Requirements of the Securities Act......................................................................158 HealthSouth’s Relationship with UBS, Citi/Salomon and Lorello and McGahan Compels the Inference that They Knew About and Actively Concealed HealthSouth’s Financial Fraud ............................................................................163 Defendants Lorello, McGahan and Capek Had Direct Knowledge of the Fraud at the Very Same Time Citi/Salomon or UBS Provided Investment Banking and Analyst Services for HealthSouth .................................................................180 ERNST & YOUNG’S PARTICIPATION IN THE MISSTATEMENTS ..................................184 E&Y’s Long Term Relationship with HealthSouth.........................................................185 E&Y’s False Classification of “Pristine Audits” as “Audit-Related” .............................206 FALSE AND MISLEADING STATEMENTS...........................................................................209 False and/or Misleading Statements Issued During the First and Second Quarters of 1997 .................................................................................................................211 - iii - Page Reasons Defendants’ Statements Issued During the First and Second Quarters of 1997 Were False and/or Misleading ....................................................................212 False and/or Misleading Statements Issued During the Third Quarter of 1997 ..............213 Reasons Defendants’ Statements Issued During the Third Quarter of 1997 Were False and/or Misleading.......................................................................................216
Load more

Recommended publications
  • U.S. V. Connie Moorman Willis
    Case 5:17-mj-01008-PRL Document 1 Filed 02/07/17 Page 1 of 14 PageID 1 AO 91 (Rev. 11/11) Criminal Complaint UNITED STATES DISTRICT COURT for the Middle District of Florida United States of America ) v. ) ) CONNIE MOORMAN WILLIS Case No. ) 5: 17-mj-1008-PRL ) ) ) Defendant(s) I CRIMINAL COMPLAINT I i I, 1~he complainant in this case, state that the following is true to the best of my knowledge and belief. On or about the date(s) of Feb. 4, 2011 through Jan. 25, 2016 in the county of Marion in the I Middle District of Florida , the defendant(s) violated: ! j Code Section Offense Description 18 u.s.c. 1 sec. 656 Theft by a Bank Employee 18 U.S.C. Sec. 1341 Mail Fraud Tnis criminal complaint is based on these facts: I I See attached affidavit. I lifl Continued on the attached sheet. Charles Johnsten, U.S. Postal Inspector Printed name and title Sworn to before me and signed in my presence. Date: ~-1 - :lo Ir City and siate: Ocala, Florida Philip R. Lammens, U.S. Magistrate Judge Printed name and title I ! Case 5:17-mj-01008-PRL Document 1 Filed 02/07/17 Page 2 of 14 PageID 2 S'FATE OF FLORIDA CASE NO. 5:17-mj-1008-PRL I IOUNTY OF MARION AFFIDAVIT IN SUPPORT OF A CRIMINAL COMPLAINT I, Charles Johnsten, being duly sworn, state as follows: INTRODUCTION 1. I am a United States Postal Inspector and have been so employed since I obcember 2016.
    [Show full text]
  • Identity Theft What to Do If It Happens To
    Identity Theft: What to Do if It Happens to You You apply for a credit card and get turned down because of a low credit score. Yet you know that you’ve always paid your accounts on time. A debt collector calls to demand payment on a six-month overdue account for a credit card you have never had. You receive a credit card in the mail that you’ve never applied for. What’s happening? You could be a victim of identity theft, where an imposter is using your personal information. The identity thief could use your personal information for any of the following: • They may call your credit card issuer to change the billing address on your credit card account. The imposter then runs up charges on your account. Because your bills are being sent to a different address, it may be some time before you realize there’s a problem. • They may open new credit card accounts in your name. When they use the credit cards and don’t pay the bills, the delinquent accounts are reported on your credit report. • They may establish phone or wireless service in your name. • They may open a bank account in your name and write bad checks on that account. • They may counterfeit checks or credit or debit cards, or authorize electronic transfers in your name and drain your bank account. • They may file for bankruptcy under your name to avoid paying debits they’ve incurred under you name or to avoid eviction. • They may buy a car by taking out an auto loan in your name.
    [Show full text]
  • Healthsouth Corporation: Fraud, Greed and Corporate Governance
    HealthSouth Corporation: Fraud, Greed and Corporate Governance Manmohan D. Chaubey, Ph.D. The Pennsylvania State University One College Place Du Bois, PA 15801 (USA) Tel: 814-375-4846 Fax: 814-375-4784 Email: [email protected] Case for ICMC2006 International Conference on Management Cases 4-5 December 2006 IMT Ghaziabad, India HealthSouth Corporation: Fraud, Greed and Corporate Governance During the 1990s, Richard M. Scrushy, the former CEO of HealthSouth Corporation, engineered many acquisitions of rehabilitation clinics, outpatient surgical care operators, nursing homes and other health care companies. In 2003, the Securities and Exchange Commission (SEC) accused the company and Scrushy of inflating earnings to the tune of $1.4 billion since 1999. In November 2003, a federal grand jury indicted Scrushy on 85 counts including conspiracy, securities fraud, money laundering and charges related to overstating HealthSouth’s earnings by nearly $3.0 billion. According to federal investigators, the company overstated earnings to meet analysts’ earning estimates, while hiding the accounting fraud from the auditors. However, questions were raised whether the auditors failed to find or simply overlooked the fraud at HealthSouth. Central to the investigation was the issue of what role Scrushy played in “cooking the books.” However, as the case unfolded, it highlighted many other issues such as: The role of Board of Directors in corporate governance; the role of the auditors; the effect of conflict of interest between an accounting firm and its consulting arm on auditing; whether the relationship between an investment bank and a company affects the quality of the bank’s research reports on the company; whether the executive compensation that overly relies on company’s earnings provides an incentive for committing such fraud; whether a strong leader can silence all voices of reason in an organization.
    [Show full text]
  • Fraud, Forgery and Vigilance in Banking Sector
    THAVAN IJREB Vol-1, No-2 Jan-Mar 2012 ISSN: 2277-1476 Fraud, forgery and Vigilance in Banking Sector Alekhya Reddy Student, HNLU, Raipur, [email protected] Abstract- Banks are the engines that drive the 1969 and 6 more on 15 April 1980. The Indian operations in the financial sector, which is vital banking system is indeed unique and perhaps for the economy. With the nationalization of has no parallels in the banking history of any banks in 1969, they also have emerged as country in the world.1 engines for social change and have become indispensable in a modern society. Banks play a The Indian Banking system performs a crucial critical role in economic development of a role in economic development of India through nation. The increase in banking operations is saving-investment.2Banks are the engines that now accompanied by an increase in frauds in drive the operations in the financial sector, the banking sector. In this paper the first chapter which is vital for the economy. With the deals with an introduction to banking and nationalization of banks in 1969, they also have related frauds. The second chapter focuses on emerged as engines for social change. After Fraud and Forgery, subsequently the Next Independence, the banks have passed through Chapter deal with Fraud and Forgeries in three stages. They have moved from the Banking sector with relevant legal provisions. character based lending to ideology based The fourth chapter deals with measures for lending to today competitiveness based lending prevention and detection of such discrepancies, in the context of India's economic liberalization followed by the vigilance in banking sector and policies and the process of linking with the the fifth chapter deals with Legal regime global economy.
    [Show full text]
  • What Is Securities Fraud?
    BUELL IN PRINTER PROOF 11/11/2011 5:38:12 PM Duke Law Journal VOLUME 61 DECEMBER 2011 NUMBER 3 WHAT IS SECURITIES FRAUD? SAMUEL W. BUELL† ABSTRACT As Rule 10b-5 approaches the age of seventy, deep familiarity with this supremely potent and consequential provision of American administrative law has obscured its lack of clear conceptual content. The rule, as written, interpreted, and enforced, is missing a fully developed connection to—of all things—fraud. Fraud is difficult to define. Several approaches are plausible. But the law of securities fraud, and much of the commentary about that body of law, has neither attempted such a definition nor acknowledged its necessity to the coherence and effectiveness of the doctrine. Securities fraud’s lack of mooring in a fully developed concept of fraud produces at least three costs: public and private actions are not brought on behalf of clearly specified regulatory objectives; the line between civil and criminal liability has become unacceptably blurred; and the law has come to provide at best a weak means of resolving vital public questions about wrongdoing in financial markets. The agenda of this Article is threefold. First, this Article illuminates and clarifies the relationship between securities fraud and fraud and structures a discussion of legal reform that more explicitly connects Copyright © 2011 by Samuel W. Buell. † Professor of Law, Duke University School of Law. I am grateful for the helpful questions and comments of Tom Baker, Sara Sun Beale, Stuart Benjamin, Ben Depoorter, Lisa Kern Griffin, Kim Krawiec, Dan Markel, James Park, and participants in workshops at Duke University School of Law, Willamette University College of Law, Notre Dame Law School, and Florida State University College of Law.
    [Show full text]
  • Mail and Wire Fraud: an Abbreviated Overview of Federal Criminal Law
    Mail and Wire Fraud: An Abbreviated Overview of Federal Criminal Law Charles Doyle Senior Specialist in American Public Law Updated February 11, 2019 Congressional Research Service 7-.... www.crs.gov R41931 SUMMARY R41931 Mail and Wire Fraud: An Abbreviated February 11, 2019 Overview of Federal Criminal Law Charles Doyle The mail and wire fraud statutes are exceptionally broad. Their scope has occasionally given the Senior Specialist in courts pause. Nevertheless, prosecutions in their name have brought to an end schemes that have American Public Law bilked victims out of millions, and sometimes billions, of dollars. The statutes proscribe (1) [email protected] causing the use of the mail or wire communications, including email; (2) in conjunction with a scheme to intentionally defraud another of money or property; (3) by means of a material For a copy of the full report, deception. The offenses, along with attempts or conspiracies to commit them, carry a term of please call 7-.... or visit imprisonment of up to 30 years in some cases, followed by a term of supervised release. www.crs.gov. Offenders also face the prospect of fines, orders to make restitution, and forfeiture of their property. The mail and wire fraud statutes overlap with a surprising number of other federal criminal statutes. Conduct that supports a prosecution under the mail or wire fraud statutes will often support prosecution under one or more other criminal provision(s). These companion offenses include (1) those that use mail or wire fraud as an element of a separate offense, like racketeering or money laundering; (2) those that condemn fraud on some jurisdictional basis other than use of the mail or wire communications, like those that outlaw defrauding the federal government or federally insured banks; and (3) those that proscribe other deprivations of honest services (i.e., bribery and kickbacks), like the statutes that ban bribery of federal officials or in connection with federal programs.
    [Show full text]
  • In Re: Healthsouth Corporation Securities Litigation 03-CV-1500
    UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION In re HEALTHSOUTH CORPORATION ) Consolidated Case No. CV-03-BE-1500-S SECURITIES LITIGATION ) ) CLASS ACTION ) This Document Relates To: ) APPENDICES TO JOINT AMENDED ) CONSOLIDATED COMPLAINT FOR ALL ACTIONS. ) VIOLATIONS OF THE FEDERAL ) SECURITIES LAWS In support of the allegations made in the Joint Amended Consolidated Class Action Complaint for Violations of the Federal Securities Laws [Factual Basis], plaintiffs hereby submit the following documents:1 Appendix 1: Members of HealthSouth’s Board and Board Committees Appendix 2: False and Misleading Statements Re HealthSouth’s Financial and Operating Results Appendix 3: Defendants' Insider Trading Appendix 4: 20A Contemporaneous Trades Appendix 5: Board Attendance for Selected Meetings Appendix 6: Summary of False Statements by UBS Appendix 7: Summary of False Statements by Citi/Salomon Appendix 8: HealthSouth’s Historical Acquisitions Daily Share Pricing – September 24, 1986 to September 5, 2003 Appendix 9: Defendants’ Insider Selling and Notes Offerings Daily Share Pricing: 10/03/1994 - 4/17/2003 Appendix 10: HealthSouth Corp. – Salomon Smith Barney Underwritings/ Loans/Analyst Reports and Daily Share Prices April 1997 to June 2003 Appendix 11: HealthSouth Corp. – UBS Underwritings/Loans/Analyst Reports Daily Share Pricing – July 1, 1996 - April 18, 2003 Appendix 12: Selected False or Misleading Statements Issued by HealthSouth, UBS and Salomon – Daily Share Pricing – January 2, 1997 to June 30, 2003 Appendix 13: Facts Related to Steve Schlatter Appendix 14: Facts Based on the Testimony of Martin Cohen Before the House Committee on Energy and Commerce, October 16, 2003. Appendix 15: BBA Provisions 1 Pursuant to the Court’s January 6, 2004 Order Regarding Electronic Service, oversized documents, Appendices 8 through 12, shall be served by overnight delivery.
    [Show full text]
  • FOR IMMEDIATE RELEASE May 9, 2019 for More Information, Contact
    FOR IMMEDIATE RELEASE May 9, 2019 For more information, contact: U.S. Department of Justice Office of Public Affairs 202-514-2007 U.S. Attorney’s Office Northern District of Florida 850-216-3845 [email protected] SUPERSEDING INDICTMENT ADDS DEVELOPER/ENTREPRENEUR TO RACKETEERING CONSPIRACY TALLAHASSEE, FLORIDA – A federal grand jury has returned a forty-seven count superseding indictment against suspended Tallahassee City Commissioner Scott Charles Maddox, 51, Tallahassee political consultant Janice Paige Carter-Smith, 54, and John Thomas Burnette, 42, all of Tallahassee, Florida. Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Lawrence Keefe of the Northern District of Florida, Special Agent in Charge Rachel Rojas of the FBI’s Jacksonville Field Office and Special Agent in Charge Mary Hammond of the IRS Criminal Investigation (CI) Tampa Field Office made the announcement. In December 2018, a federal grand jury charged Maddox and Carter-Smith in a forty-four count indictment for conspiring to operate a racketeering enterprise that engaged in acts of bank fraud, extortion, honest-services fraud and bribery. That indictment also charged Maddox and Carter-Smith with substantive counts of bank fraud, false statements to financial institutions, extortion, honest-services fraud, use of interstate facilities to facilitate bribery, false statements to federal officers, conspiracy to interfere with the lawful function of the IRS, and filing false tax returns. The superseding indictment adds Burnette as a defendant and charges him with participating in the racketeering conspiracy and extortion, honest services mail fraud, the use of facilities in interstate commerce to facilitate bribery, and making false statements to federal officers.
    [Show full text]
  • Employee Fraud Detection Under Real World Conditions
    Zurich Open Repository and Archive University of Zurich Main Library Strickhofstrasse 39 CH-8057 Zurich www.zora.uzh.ch Year: 2010 Employee fraud detection under real world conditions Luell, J Abstract: Employee fraud in financial institutions is a considerable monetary and reputational risk. Stud- ies state that this type of fraud is typically detected by a tip, in the worst case from affected customers, which is fatal in terms of reputation. Consequently, there is a high motivation to improve analytic de- tection. We analyze the problem of client advisor fraud in a major financial institution and find that it differs substantially from other types of fraud. However, internal fraud at the employee level receives little attention in research. In this thesis, we provide an overview of fraud detection research with the focus on implicit assumptions and applicability. We propose a decision framework to find adequate fraud detection approaches for real world problems based on a number of defined characteristics. By applying the decision framework to the problem setting we met at Alphafin the chosen approach is motivated. The proposed system consists of a detection component and a visualization component. A number of imple- mentations for the detection component with a focus on tempo-relational pattern matching is discussed. The visualization component, which was converted to productive software at Alphafin in the course of the collaboration, is introduced. On the basis of three case studies we demonstrate the potential of the proposed system and discuss findings and possible extensions for further refinements. Posted at the Zurich Open Repository and Archive, University of Zurich ZORA URL: https://doi.org/10.5167/uzh-44863 Dissertation Originally published at: Luell, J.
    [Show full text]
  • IN the DON EUGENE SIEGELMAN, Petitioner, Respondent. Petition for Writ of Certiorari to the United States Court of Appea
    No. 09- IN THE DON EUGENE SIEGELMAN, Petitioner, Vo UNITED STATES OF AMERICA, Respondent. Petition for Writ of Certiorari to the United States Court of Appeals for the Eleventh Circuit PETITION FOR WRIT OF CERTIORARI KEVIN DIGREGORY SAM HELDMAN MANATT, PHELPS & Counsel of Record PHILLIPS, LLP THE GARDNER FIRM, PC 700 12th St. NW, Ste. 100 2805 31st St. NW Washington, DC 20005 Washington, DC 20008 (202) 965-8884 REDDING PITT FARRIS, RILEY & PITT, LLP VINCENT F. KILBORN III Massey Bldg., Ste. 400 DAVID A. MCDONALD 2025 3rd Ave. North KILBORN, ROEBUCK & Birmingham, AL 35203 MCDONALD P.O. Box 66710 Mobile, AL 36606 WILSON-IEPES PRtNTING CO., INC. - (202) 789-0096 - WASHINGTON, D. C. 20002 Blank Page QUESTIONS PRESENTED 1. Under McCormick v. United States, 500 U.S. 257, 273 (1991), a connection between a campaign contribution and an official action is a crime "only if the payments are made in return for an explicit promise or undertaking by the official to perform or not to perform an official act. In such situations the official asserts that his official conduct will be con- trolled by the terms of the promise or undertaking." Does this standard require proof of an "explicit" quid pro quo promise or undertaking in the sense of actually being communicated expressly, as various Circuits have stated; or can there be a conviction based instead only on the inference that there was an unstated and implied agreement, a state of mind, connecting the contribution and an official action? 2. Does the "intent" clause of the obstruction of justice statute 18 U.S.C.
    [Show full text]
  • Comal County Sheriff's Office Financial Crimes Reporting Package
    Comal County Sheriff’s Office Financial Crimes Reporting Package Identity Theft, Forgery, and Credit Card/Debit Card Abuse are among the most difficult offenses facing citizens today. In our ongoing efforts to combat these problems the following information is being offered by the Comal County Sheriff’s Office, Financial Crimes Unit. Please refer to the “Frequently Asked Questions” section on the following pages to find answers to questions regarding these offenses. This section will also guide you to the specific forms that need to be completed for each specific offense. The forms are included in this packet. Please note that it is very important that all instructions are followed regarding these forms and that each form is completed thoroughly and accurately for the investigator(s) to perform an extensive, detailed, and well documented investigation. If you have questions that are not answered in the “Frequently Asked Questions” section, you can contact the Comal County Sheriff’s Office, Criminal Investigation Division-Financial Crimes Unit, Detective Richard K. Smith at 830-643-6685. Once you complete the forms, you can hand deliver, mail or fax to the following address or number: Comal County Sheriff’s Office Completed, notarized forms can ATTN: Financial Crimes Unit also be faxed to Criminal 3005 W. San Antonio Street Investigations at 830-608-8269, New Braunfels, Texas 78130 Attn: Financial Crimes Unit Please note the business hours are Monday-Friday 8:00am-5:00pm. Security video is used in the prosecution of most cases. Unfortunately some businesses do not keep video for extended periods of time. It is important that you make every effort to complete and return this Financial Fraud Package as soon as possible.
    [Show full text]
  • Check Fraud Working Group, a Subgroup of the Interagency Bank Fraud Working Group
    This booklet was prepared by the Check Fraud Working Group, a subgroup of the interagency Bank Fraud Working Group. That working group includes representatives from the Federal Bureau of Investigation, the Department of Justice, Federal Deposit Insurance Corporation, Federal Reserve Board, Internal Revenue Service, Office of the Comptroller of the Currency, Office of Thrift Supervision, U.S. Postal Inspection Service, National Credit Union Administration, and U.S. Secret Service. The Check Fraud Working Group was convened to provide a forum to explore ways to combat check fraud perpetrated against insured deposito- ry institutions. Check Fraud: A Guide to Avoiding Losses February 1999 1 Background schemes and presents tactics for use in combating check fraud. It cannot describe comprehensively all types of check fraud or check fraud schemes, because the variations are limitless. heck fraud is one of the largest challenges facing financial Although this booklet is a general guide, financial institutions institutions. Technology has made it increasingly easy for should look to state and local laws for other guidance. It can, criminals, either independently or in organized gangs, to C however, get bankers, tellers, operations personnel, and security create increasingly realistic counterfeit and fictitious checks as officers to think about the problem and show how they can help well as false identification that can be used to defraud financial protect their institutions from check fraud. institutions. The scope of the problem can be shown by some recent statis- Significant Terms tics. According to the U.S. Department of the Treasury, Financial Crimes Enforcement Network’s (FinCEN) 18 Month Some technical terms relating to checks and drafts2are worth Analysis of the Suspicious Activity Reporting System (SARS), defining.
    [Show full text]