FTC Delays “Red Flag” Rule Again for Physician Offices

The FTC has announced that it will further delay the enforcement of its so-called “Red Flags” rule until a federal appeals court rules on a lawsuit filed by the American Bar Association.

The FTC rule designates physician offices and certain other businesses as creditors, thus requiring them to submit written identity theft mitigation and prevention strategies.

The American Medical Association, American Osteopathic Association and Medical Society for the District of Columbia filed a lawsuit seeking to exempt medical offices from having to comply with the rule.

The FTC announced a joint legal stipulation with AMA, AOA and the Medical Society for the District of Columbia that places the groups’ lawsuit on hold until the federal appeals court issues its ruling on the ABA case.

FTC also has agreed to delay enforcement of the rule for physicians for an additional 90 days after the “re-opening date”, when the federal appeals court rules on the ABA case.

Recession Sparks Jump in Work-At-Home Scams

Chester Mazzoni has pleaded guilty in US District Court for the Northern District of Ohio to criminal charges of conspiracy to commit mail fraud related to the work-at-home scheme.

He faces up to five years in prison when he is sentenced in August.

Mazzoni used a work-at-home medical billing scam, EDI Healthclaims Network, and persuaded thousands of people to pay up to $6,000 for training and materials to start allegedly lucrative businesses.

Work-at-home scams have been around for decades, but the economic downturn has given them a new urgency for both businesses and the unemployed.

Complaints to the FTC about work-at-home scams are increasing faster than fraud complaints overall, up from 4,004 in 2006 to 7,955 last year.

Supreme Court’s Rulings Limit Corporate Fraud Cases

In four high-impact decisions, the Supreme Court has significantly limited the scope of federal laws used by prosecutors and plaintiffs in pursuing alleged corporate fraud.

The high court re-defined the “honest services” criminal fraud statute to cover only bribes and kickbacks, instead of the range of illicit activities prosecutors have used the law to punish.

Critics slammed the honest services fraud rulings, in particular, as another sign of the pro-corporation tilt of the current Supreme Court.

Obama announces legislative pact with Senate leaders on financial reform bill

President Barack Obama announced he has reached a deal with Congressional leaders this morning on legislation aimed at putting stricter rules on securities trading and Wall St., in general.

AP reports the President shook hands with Congressional negotiators on the deal at 5:39 a.m., just before he embarked to an economic summit in Toronto, Canada.

The legislation will still have to pass a Senate vote before it reaches his desk for signature, but Obama assured reporters he’d get the bill he agreed to this morning.

AP indicates the sweeping legislation is the strictest new laws imposed on financial institutions since the Great Depression. The deal forces banks to spin-off the risky but lucrative derivatives trading business.

It would also establish warning systems for financial risks to consumers, preventing financial and investment firms from lying to people about the potential for their investments.

Car dealers may be exempt from new federal laws on loans

Car dealers may be exempt from a new set of laws aimed at regulating businesses who offer consumer loans.

According to an NPR report, the National Auto Dealers Association appears to have won a lobbying battle in Washington to get car dealers exempt from laws under the new Consumer Financial Protection Board.

One of the goals of the new regulatory agency is to protect consumers from high-risk loans, or loans which have inflated interest rates, or are otherwise fraudulent. Businesses which offer loans or credit in any way would also be responsible for developing strategies to ensure consumers would have their financial privacy secured.

Several industries have fought to get out from under this new agency’s microscope. More regulations means more money spent by businesses to meet these new laws, and the automobile industry is in financial tatters.

The CFPB is mainly concerned with Wall St. fraud, and car dealers pitch loans to consumers on the notion that they’re not connected to those firms when, in fact, they are.

Madoff Employees Accused of Perpetuating Fraud

Two of Bernard L. Madoff’s former back office employees have been accused by federal prosecutors of knowingly perpetuating the fraud.

The accusations leveled against former employees Annette Bongiorno and JoAnn Crupi are aiming for $5 million in asset.

Ms. Bongiorno worked as a superviser in Mr. Madoff’s back office, where she spoke with clients about their accounts while Ms. Crupi took in client funds.

The women joined Mr. Madoff’s firm in 1968 and 1983.

AR Capital Group Founder Sentenced

AR Capital Group Inc’s Alan Fishman has been sentenced to 37 months in prison for his role in stealing from investors.

Fishman, 50, and Daniel Ledven, 38, a principal at the firm, pleaded guilty in March to one count each of conspiring to commit securities fraud

AR Capital raised about $20 million from individual investors in its purported hedge fund, claiming the money would be invested in international real estate companies and used for leveraged trading.

About $18 million of the money was wired to bank accounts in the Ukraine.

FTC settles false advertising charges with 16 mortgage rescue companies

The Federal Trade Commission announced this week it has reached settlements with 16 companies accused of falsely advertising mortgage and loan assistance.

According to an AP report, the settlement bars these companies from participating in mortgage-rescue operations in the future.

The FTC also announced it filed a $11.4 million contempt order against the operator of three of these companies for disobeying a previous court order.

The companies reaching settlements with the FTC were accused of falsely advertising and misleading consumers into believing they were participating in a federal program to assist homeowners with mortgage payments.

Instead, the companies would enlist customers, take the deeds to homes and collect a negotiated “rent” while it handled the mortgage.

AP released the names of only a few firms which reached a settlement: Federal Loan Modification Law Center LLP, Apply2Save Inc., New Hope Modifications and Fedmortgageloans.com.

Former mortgage company CEO accused of massive fraud scheme using TARP funds

A former mortgage company executive has been accused of defrauding the federal TARP fund and leading to the collapse of one bank.

According to a Bloomberg report, Lee Farkas, the former chairmat at Taylor, Bean & Whitaker Mortgage Corp. has been accused of operating a $1.9 billion fraud scheme.

FBI investigators arrested Farkas earlier this week in Ocala, Fla., outside of a gym he owns. He is accused of deceiving the federal government’s Troubled Asset Relief Program (TARP) by covering up shortfalls at his mortgage company.

The scheme is believed to have helped the failure of Colonial Bank, one of the largest in the country in 2009.

Farkas sold Colonial Bank $400 million in fake mortgage assets, and hid mortgage loans that were losing value or had no worth at all.

A lawyer for Farkas said his client will fight the federal fraud charges.

BP Faces Securities Fraud Suits Over Oil Spill

BP now faces more than 225 lawsuits in 11 states, as litigation from businesses, individuals and investors continues to increase almost two months after the Deepwater Horizon oil rig exploded.

Almost all the lawsuits also name Transocean Ltd, which owned the rig, along with Cameron International Corp and Halliburton Energy Services Inc, which provided the rig’s blowout prevention equipment and cementing services, respectively.

Three lawsuits claiming securities fraud were also filed by BP investors in federal courts in Louisiana.

The lawsuits claim the company and its officials inflated share values by issuing “materially false and misleading statements” about BP’s safety record and protocols, and that BP’s actions cost investors more than $56 billion in share value.