News & Politics

Cheaters, Scammers, Fraudsters, Insider Traders: A Financial HiJinks Roundup


Oh fraud, how could we live our lives without it! Here now comes a list of financial crime cases out of federal court in Manhattan and Brooklyn that we have had the keen pleasure to follow so far this year.

And as we read, we must pause from time to time in awestruck admiration at the inventiveness of some of these people. What a wonderful contribution they have made to society!

1. Why just yesterday we learned that the founder of Return-a-Pet LLC, Eric Stein, was sentenced to just over five years in prison for stealing $500,000 from investors and clients. Stein claimed he would move mountains to find your lost pet, and had phony testimonials drawn up to “prove” it, but of course he just took a fee up front and never delivered. Too bad for Snuggles!

2.Also yesterday, Paul Sullivan, a financial advisor from Long Island was arraigned for diverting investments from a group of clients to pay other clients. Kids, that’s called a Ponzi Scheme. He was allegedly caught on video, after being confronted by an irate client, saying, “What I did was completely illegal, completely wrong … everything I’ve done was wrong, was illegal, I have nothing to say.” Talk about courage!

3. Raymond Bitar, the chief executive of the online gambling site Full Tilt Poker, was arrested in a much larger Ponzi-like scheme. While we’re not all that sure that online poker should be illegal here–they are legal outside the U.S.–what Bitar allegedly did was fairly slimy. The company told gamblers that their money would be placed in a separate fund which they could use to gamble from. Instead, Bitar’s people raided those funds to pay company operating expenses and enrich themselves to the tune of $340 million.

4.Some of the cases involved our most “trusted” financial institutions. Gary Foster, formerly a Citigroup Vice President, got eight years for embezzling $22 million from his own company. He made up fake documents and computer entries to hide his theft. He used the money on real estate and a Ferrari and a Maserati.

5. This one is a lot smaller, but liked this guy’s spunkiness: Irving Scheib, a guy from California, bought an old baseball glove off of E-Bay for $750. He then worked up a story, and claimed it was Babe Ruth’s favorite glove, and actually got a buyer at a price of $200,000. He claimed it was a family heirloom that Rith had been given to actor Robert “Father Knows Best”Young in 1944. Here’s Scheib’s best line: Ruth was so affectionate towards this glove he slept with it under his pillow in the orphanage.” Scheib pleaded guilty.

6. What list like this could be complete without a Madoff? On June 29, Peter Madoff, brother of ultimate financial con-artist Bernard Madoff, finally pleaded guilty to securities fraud and conspiracy. He’s going to jail for a long time for falsifying reports to mislead investors and regulators.

7. The Long Island-based software company FalconStor needed business, so the folks voer there conspired to pay $300,000 in bribes to employees of J.P Morgan, the giant investment bank, to get them to purchase $12 million in software licensing contracts. We don’t want to stereotype bankers or anything, but what did they get? “Gift cards, golf memberships and golf-related benefits.” What some people won’t do get intoa country club! Our favorite bit of the bribe? A $100,000 deposit into a gambling account in Las Vegas.

8. In June, the feds took down a ring of internet scammers who had figured out a way steal credit card, bank account and personal identification off of hundreds of thousands of people across the globe. This item gets the best nicknames: among those arrested were “Cubby,” “Kabraxis,” “Josh the God,” and “theboner1.”

9. Nicholas Spano, the long-serving Westchester County state senator, was sentenced to a year in prison for filing false tax returns to cover up his taking of what were essentially bribes for getting state business for an insurance company. The scam started in 1996. By 2003, he was making more than $100,000 a year off the scheme.

10. And finally, we have Rajat Gupta, a former member of the boards of director of Goldman Sachs and Proctor and Gamble, being convicted of insider trading. Gupta was friends with the infamous Raj Rajnaratam of the Galleon Group. Gupta passed on sensitive inside info to his friend who then traded on it and made a lot of money.

These are just a few of the cases over the past month or so. The story isn’t that they are rare. It’s that there are so many of them that it’s hard to keep track.


Archive Highlights