background check
Lack of due diligence in Massachusetts Ponzi scheme
01.10.10
The numerous Ponzi schemes unearthed
in 2009 highlight the point that some very sophisticated investors
skipped basic steps in conducting due diligence. Lawyer Jay L.
Fialkow and his partner, Jeffrey P. Ross, a Boston businessman, are
facing civil charged filed by Massachusetts Secretary of State for
failing to register as dealers-dealers or investment advisors while
referring clients to Richard L. Elkinson, who the SEC has charged with running a Ponzi scheme. The SEC
complaint alleges that Elkinson, of Framingham, Massachusetts,
lured 130 investors to invest $28 million with him through his
d/b/a Northeast Sales. Ross and Fialkow allegedly referred clients
to Elkinson (they dispute that charge, and claim they merely
introduced clients to Elkinson). Ross and Fialkow earned $319,000
in commissions from Elkinson, according to Mass SOS filings.
The Boston Globe highlights red flags: "In 1992 Elkinson declared bankruptcy, and court filings reflected a man with virtually no assets, and just $600 in a bank account. When Fialkow and Ross visited Elkinson at his office, they found a sloppy desk in a bedroom of his Framingham home, with a computer and a few papers that looked like contracts. Elkinson would call Ross and Fialkow’s office daily, asking if they had raised new money for him. The pair never received tax forms from Elkinson reporting their investment gains, as required by law, according to regulators. And a cursory check of public filings would have revealed that Elkinson never submitted incorporation papers for his company, Northeast Sales."
A Jan. 2006 letter to a CPA firm from the RossFialkow firm noted that Elkinson had earned 9-13% per contract, which ran 6 to 10 months--a tidy rate of return that sounds too good to be true.
The Boston Globe highlights red flags: "In 1992 Elkinson declared bankruptcy, and court filings reflected a man with virtually no assets, and just $600 in a bank account. When Fialkow and Ross visited Elkinson at his office, they found a sloppy desk in a bedroom of his Framingham home, with a computer and a few papers that looked like contracts. Elkinson would call Ross and Fialkow’s office daily, asking if they had raised new money for him. The pair never received tax forms from Elkinson reporting their investment gains, as required by law, according to regulators. And a cursory check of public filings would have revealed that Elkinson never submitted incorporation papers for his company, Northeast Sales."
A Jan. 2006 letter to a CPA firm from the RossFialkow firm noted that Elkinson had earned 9-13% per contract, which ran 6 to 10 months--a tidy rate of return that sounds too good to be true.
Sealing federal records
01.06.10
Reporter Michael Doyle did a nice summary of a year-long study by
Tim Reagan and George Cort for the Federal Judicial Center on the
practice of sealing federal cases.
Sealing federal records apparently is justified for almost any reason under the sun. Doyle notes the report findings: "There was one (criminal) case sealed because the defendant had a high profile. According to the judge, 'it seemed a good idea at the time.' Another reason for sealing: "A person of influence failed to respect the authority of an officer on federal land." Four civil cases were sealed to protect the reputation of doctors.
Sealing federal records apparently is justified for almost any reason under the sun. Doyle notes the report findings: "There was one (criminal) case sealed because the defendant had a high profile. According to the judge, 'it seemed a good idea at the time.' Another reason for sealing: "A person of influence failed to respect the authority of an officer on federal land." Four civil cases were sealed to protect the reputation of doctors.
FINRA BrokerCheck fixes gaping hole in database.
12.23.09
Our tests show that changes to FINRA's
Brokercheck have finally closed a major loophole in
a database long criticized as outdated and difficult to use
(previous editions were cumbersome: for example, users were
required --in an era when name searches are the norm on almost any
database--to specify past employers for a broker before checking
their background; otherwise the search did not work).
Some estimate that more than 15,000 individuals who left the securities industry after facing regulatory action did not have their disciplinary history available on BrokerCheck. Those records became available this month. Many of those former brokers returned to the business world in different capacities and, like stock market vampires, found new victims. Repeated scandals in 2009 finally forced the industry to make this necessary change.
Some estimate that more than 15,000 individuals who left the securities industry after facing regulatory action did not have their disciplinary history available on BrokerCheck. Those records became available this month. Many of those former brokers returned to the business world in different capacities and, like stock market vampires, found new victims. Repeated scandals in 2009 finally forced the industry to make this necessary change.
How to do a background check in Massachusetts
12.14.09
The big problem facing HR people is
balancing costs with coverage. For example, some firms offer a
"statewide criminal check" or even "national criminal check". Often
times they are simply checking a database of convictions only -- a
small universe of people compared to those who are charged. So if
your guy has a record of being charged with sexual assaults against
women in the workplace, but somehow pled out to misdemeanors or had
the cases dismissed, a statewide convictions database would give
you no reason to pause.
By searching the lower district courts for any cases filed, your background due diligence would allow you to find the cases and make your own evaluation. This is especially true in certain states such as Massachusetts, where the lower courts hear some felony cases, assaults, and various other serious crimes.
By searching the lower district courts for any cases filed, your background due diligence would allow you to find the cases and make your own evaluation. This is especially true in certain states such as Massachusetts, where the lower courts hear some felony cases, assaults, and various other serious crimes.
Equifax stops selling credit reports for employment background checks
10.30.09
Although allowed under the Fair Credit
Reporting Act, Equifax has stopped selling credit reports for
employment background checks.
Use of credit reports by employers has become more controversial as many people have been hammered in this poor economy and otherwise reliable employees are thrown into credit difficulty by layoffs, mounting bills, mortgage defaults. etc.
Use of credit reports by employers has become more controversial as many people have been hammered in this poor economy and otherwise reliable employees are thrown into credit difficulty by layoffs, mounting bills, mortgage defaults. etc.