At the end of last month, I decided to do a post summarizing
some of those more recent accounts and I
put a headline on it that said, “This Month in Corruption: Snapshots of the
Public Trust Betrayed.”
In the back of my mind was that I could turn
this into a regular feature. But, unsure
as to whether the bad behavior pipeline was really as full and as fast-flowing as I
perceived it to be, I held off on designating “This Month in Corruption” a regular
feature.
Well, my concerns about supply were exaggerated, to say the
least. Herewith the ill-cultivated fruits of
January, as presented by the State House News Service:
Postal Worker's Steroid-Import Enterprise. On January 4, a federal
postal worker copped a plea concerning the purchase and importation of
illegal anabolic steroids. According to
a press release from the Office of the U.S. Attorney for Massachusetts, John A.
Psehoyas, age 54, pleaded guilty to one count of importing a controlled substance
and agreed to resign from the U.S. Postal Service.
“Psehoyas was a customer service supervisor at the
Lynnfield, Mass. Post Office,” the release related. “From August 2014 to March 2016, Psehoyas purchased
anabolic steroids, a controlled substance, from online sources. He had the parcels containing steroids
shipped to him from China, Turkey and Romania.
The parcels were addressed to multiple addresses to avoid suspicion, but
Psehoyas tracked the parcels using a USPS tracking system.”
U.S. District Court Senior Judge Douglas P. Woodlock is
scheduled to sentence Psehoyas on April 6.
Rating Agency Rapped for
Fees-Motivated Analyses. On January 17, Attorney General Maura Healey announced
that Moody’s, the big credit analysis and rating agency, will pay $12 million
to Massachusetts in relation to its conduct in the rating of securities
packaged as mortgage loans. This was part
of an $863-million-plus settlement Moody’s made on January 13 with 22 states.
While Moody’s emphasized its independence and objectivity,
Healey’s office noted, it “allowed its analysis to be influenced by its desire
to earn lucrative fees from its investment bank clients and assigned credit
rating to risky assets packaged and sold by Wall Street investment banks that
failed to disclose the risks posed by those securities.
Moody’s put out a statement declaring that it “stands
behind the integrity of its ratings, methodologies and processes,” and adding that “the
settlement contains no finding of any violations of law, nor any admission of
liability.”
A Bank’s 'Secret
Commissions' Scheme. On January 18,
the Office of the U.S. Attorney for Massachusetts announced that State Street
Corporation had entered into a deferred prosecution agreement under which it
would pay a $32.3 million criminal penalty to resolve the government’s criminal
investigation into a scheme to defraud at least six of the bank’s clients
through secret commissions applied to billions of dollars of securities trades. State Street also agreed to offer an equal
amount as a civil penalty to the federal Securities and Exchange Commission.
“State Street cheated its customers by agreeing to charge
one price for its services and then secretly charging them something else,”
said Acting U.S. Attorney William D. Weinreb.
Acting Assistant Attorney General David Bitkower chimed in, “The
bank fundamentally abused its clients’ trust and inflicted very real financial
losses.”
Also quoted in the release was Harold H. Shaw, Special Agent
in Charge of the Boston Field Division of the FBI, who said, “State Street
engaged in an elaborate overcharge scheme which resulted in millions of
ill-gotten profits and violated the trust of their clients. This agreement…demonstrates the FBI’s
commitment to aggressively pursue financial fraud, uncover schemes that undermine
investor confidence, and hold financial institutions accountable.”
A ‘Shell Game’ in
the Hedges. On January 18, Massachusetts Secretary of State Bill Galvin
moved to bar three Cambridge-based hedge funds and Yasuna Murakami, the man who
operates them, from any securities business in Massachusetts. Secretary Galvin alleged that the
funds operated as Ponzi schemes.
Murakami took about $15.3 million into the funds from
at least 47 investors, Galvin maintained.
“This case represents a classic example of a shell game of
moving the money from one investor to another with some left over to fatten the
coffers of the money manager,” Galvin said.
“It is yet another example of how rogue actors use every trick in the book
to entice otherwise sophisticated investors to turn over their money based on
promised high returns.”
In addition to barring Murakami and his firm from the securities
business, Galvin’s office is seeking to disgorge “all of the profits from the alleged
wrongdoing,” provide the investors with restitution, and levy an administrative
fine.
Owww! The Pain of Bad Billing
for Dental Work. On January 25, the
Office of Attorney General Healey announced that a Newton dentist, Dr. Julia
Faigel, had agreed to pay $475,000 to the state’s Medicaid program (MassHealth)
to resolve allegations of improper billing for work performed at 21
different dental offices the doctor owned and operated.
There was a “pattern of problematic billing” in these
offices that “cost MassHealth thousands of dollars and violated state
regulations,” Healey announced.
A Cherry-Picking Financial Advisor. On January 25, a Waltham-based financial advisor agreed to
plead guilty in connection with defrauding his clients by engaging in a
multi-year “cherry-picking” scheme.
Michael J. Breton, age 52, managing partner of an investment advisory firm, Strategic Capital Management, had been facing charges of securities fraud, reports the Office of the Acting U.S. Attorney for Massachusetts.
According to that office, “Breton
allegedly purchased shares in those companies shortly before the earnings
announcements and then allocated the shares after the earnings announcements. Thus, Breton allocated the shares to one of
his accounts or to the client accounts after knowing whether the company had
announced positive or negative news about its earnings, which determined whether
the trade was likely to be profitable in the short term, Throughout the scheme, Breton allocated more
profitable trades to himself and allocated unprofitable trades to his clients,
thereby stealing more than $1.3 million in potential profits from his clients.”
Variable Annuities of the 'Unsuitable' Variety. On January 30, Secretary of State Bill Galvin ordered
LPL Financial LLC to offer approximately $2.5 million in restitution to
retirees and other older investors in the health care field in connection with
the sale of unsuitable variable annuities.
The order also featured a $975,000 fine against LPL.
Last month, the Secretary of State’s Securities Division
charged LPL with failure to supervise one of its investment advisers “who sold
variable annuity products to clients which were unsuitable for the clients,”
Galvin’s release stated.
“The facts in this case make clear that seniors and retirees
continue to be prey to unscrupulous advisers targeting 401(k) and 403(b)
roll-over assets to gain high commissions on unsuitable products,” Galvin said.
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