SCAMS, FRAUDS AND EMBEZLEMENT

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SCAMS, FRAUDS AND EMBEZLEMENT

  1. 1. SCAMS, FRAUDS AND EMBEZLEMENTHow to prevent and deal with themPresentation for the Israeli Internal AuditorsDecember 2010Gary Miller, Partner and Fraud Group FounderMishcon de Reya
  2. 2. What do we mean byScam/Fraud/Embezzlement? False accounting  Misleading prospectuses Misrepresentation re: assets &  Self benefiting liabilities  Bribery Unfair competition  Theft Counterfeiting/IP Infringement
  3. 3. What’s the problem? INTERNAL & EXTERNAL FRAUD RISKS INTERNAL – MEUHEDET: November 2010 - multi-million dollar fraud and bribery – YESHIVA: November 2010 - multi-million dollar ID fraud – ARCADI GAYDAMAK: October 2010 - $173m fraud and money laundering – DELEK REAL ESTATE: August 2010 - $34.5m prospectus fraud
  4. 4. What’s the problem? EXTERNAL FRAUD RISK – ALLEN STANFORD - 2009 $8bn – MADOFF - 2008 $50bn – [one more required - 2010 if poss]
  5. 5. Where are Israeli companies most vulnerable? DOING BUSINESS OVERSEAS – WHY? – Different language – Different legal system – Different culture – Distance
  6. 6. Extent of vulnerability? $8 billion in bilateral trade (September 2010) Hotspots? – USA = $1.7bn – CHINA/HK = $1.2bn (combined) – INDIA = $307m – UK = $244m
  7. 7. How do Israeli Companies protect themselvesfrom fraud and corruption risk? Don’t do business overseas If you do - BE PREPARED!
  8. 8. How can you prepare yourselves? Fraud Response Plan (FRP) that works wherever you do business What’s the secret?
  9. 9. The Ten Commandments For Fighting Fraud Thou Shalt Investigate Before Thou Shalt Interrogate Thou Shalt Not Make Wrongful Use of the Police Thou Shalt Not Confuse Experience With Expertise Thou Shalt Norwich Thy Neighbour As He Would Norwich You Thou Shalt Freeze First And Litigate Later
  10. 10. The Ten Commandments For Fighting Fraud: Thou Shalt Search & Seize Whilst Thou Freezes Thou Shalt Keep Thy Friends Close But Thy Enemies Closer Thou Shalt Use Thy Windows Thou Shalt Get In Get Out And Get On With Life Thou Shalt Honour Thy Spouse….And Thy Lovers
  11. 11. The Ten Commandments In Action American property developer = Uncle Sam CEO = Quick Buck Bill Intermediary = Middle Man Lee Chinese Construction Company = Big Brother Chan = Little Brother Chin = Little Brother Lim
  12. 12. Ten Commandments in Action $100m construction contract signed by Bill Contractual disputes and huge delays Bill’s email reveals: – corrupt discussions between Bill and Lee – accounts in HK, BVI, Cayman and Canada
  13. 13. Ten Commandments in Action Search Order, Freezing Order and Passport Orders vs Bill & Lee in Caribbean Freezing orders and Norwich orders in HK, BVI, Cayman & Canada Bill and Lee’s accounts show $20m receipts Sharing out of $10m to Chan, Chin & Lim Further freezing and Norwich orders in HK against Chan, Chin & Lim The Story Continues……….
  14. 14. Moral of the Story Take your Bible with you when you travel Bad stuff happens Be ready when it does
  15. 15. SCAMS, FRAUDS AND EMBEZLEMENTHow to prevent and deal with them Gary Miller Partner, Fraud Group Founder gary.miller@mishcon.com DDI: +44 20 7440 7028

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