Quotulatiousness

September 23, 2012

Canada is open for (shady) business

Filed under: Business, Cancon, Law — Tags: , , , — Nicholas @ 10:03

The Economist looks at the relative level of difficulty in setting up a shell corporation in various jurisdictions and how easy it is to create an untraceable shell:

Shell companies — which exist on paper only, with no real employees or offices — have legitimate uses. But the untraceable shell also happens to be the vehicle of choice for money launderers, bribe givers and takers, sanctions busters, tax evaders and financiers of terrorism. The trail has gone cold in many a criminal probe because law enforcers were unable to pierce a shell’s corporate veil.

The international standard governing shells, set by the inter-governmental Financial Action Task Force (FATF), is clear-cut. It says countries should take all necessary measures to prevent their misuse, such as ensuring that accurate information on the real (or “beneficial”) owner is available to “competent authorities”. More than 180 countries have pledged to follow it. A study* scrutinises the level of compliance worldwide. The results are depressing.

Posing as consultants, the authors asked 3,700 incorporation agents in 182 countries to form companies for them. Overall, 48% of the agents who replied failed to ask for proper identification; almost half of these did not want any documents at all. Contrary to conventional wisdom, providers in tax havens, such as Jersey and the Cayman Islands, were much more likely to comply with the standards than those from the OECD, a club of mostly rich countries. Even poor countries had a better compliance rate, suggesting the problem in the rich world is not cost but unwillingness to follow the rules (see chart). Only ten out of 1,722 providers in America required notarised documents in line with the FATF standard.

August 20, 2012

Why scam artists will never miss a meal

Filed under: Business, Economics — Tags: , — Nicholas @ 15:59

Megan McArdle on the perpetual lure of getting something for nothing:

…fraudsters and Ponzi schemers do not succeed at their scams merely because we let them. Recent financial frauds have big dollar signs attached, but at their heart, they’re often not much different from Nigerian email scams or a three-card monte game. They work best when they let the mark believe he’s getting away with something — often something illegal, or at least dishonest. It’s an old saw that “you can’t cheat an honest man,” but it’s mostly true. We are most vulnerable to Ponzi schemes and other confidence tricks when we start to believe that we can cheat the universe — that we can get something for nothing. The best con men succeed mostly because we are so desperate to believe them.

Even spectacular cases of financial fraud usually turn out to be remarkably banal in their execution. Embezzling grotesque sums rarely seems to require dazzling financial wizardry; all it takes is some basic clerical skills and a willingness to deceive.

After Peregrine Financial imploded last July, the firm’s president, Russell Wasendorf, confessed in a note related to a botched suicide attempt how he had misappropriated what seems to be more than half of his clients’ funds. The fraud was breathtaking in its audacity, and its simplicity: Wasendorf had been intercepting the bank statements and counterfeiting new ones using Photoshop and Excel. When auditors and regulators started confirming balances with banks, Wasendorf opened a P.O. box and put the address on the fake bank statements. When regulators started looking at online banking statements, he learned to fake those, too.

Bernie Madoff’s strategy wasn’t much more technically sophisticated than Wasendorf’s. And yet it seems to have been going on since at least the late 1980s, in large part because Madoff’s investors wanted an essentially guaranteed return of more than three times the annual rate of U.S. economic growth. They wanted, in short, to make quite a lot of money without working.

May 14, 2012

The shady back alleys of the wine trade

Filed under: Law, USA, Wine — Tags: — Nicholas @ 10:41

Benjamin Wallace (who wrote the fascinating book The Billionaire’s Vinegar, mentioned here in connection with a lawsuit), has a lengthy article in New York magazine about shady practices in the rare wine business, and the even shadier practitioners:

Among a privileged set, though, Kurniawan’s quirks and résumé gaps were of much less interest than his generosity. After one tasting, Wasserman hailed him for having “poured the sickest lineup of wines I have ever had in one evening” and told him that “the scepter, the crown, the ermine cape is yours.” Meadows, too, became a beneficiary of Kurniawan’s largesse, through which he tasted wines even he had never encountered. Grateful, he took pains to field Kurniawan’s often arcane queries about labeling and capsule nomenclature. “I thought at the time, ‘Jesus Christ, he must take these bottles to bed,’ ” Meadows says. Soon, he was publishing tasting notes based on Kurniawan bottles, lending his blue-chip imprimatur to the young man and his wines. Robert Parker, the world’s most powerful wine critic, also drank them and pronounced Kurniawan “a very sweet and generous man.”

[. . .]

In October 2004, Kurniawan posted on Parker’s website under the header “Last weekend where I tried to kill John Kapon with legendary wines!!” He wrote about an extravagant four-day run in New York in which he and a group of wine lovers had gorged on priceless Bordeaux and Burgundy. Kurniawan had brought with him what seemed an inexhaustible supply of hyperrarities from a “magic cellar” — including two cases of the extremely rare 1945 Romanée-Conti—which he said he’d bought from a collector in Asia for $2 million. Every night, the group would drink from Kurniawan’s stash and then end up at Cru, the Greenwich Village restaurant with a 150,000-bottle wine list, which stayed open as late as 3 a.m. as Kurniawan ordered one expensive bottle after another off the list.

For instance, Kurniawan didn’t mention the five FedEx packages he received from Cru that year, containing the empty bottles from his wild nights at the restaurant. It wasn’t unusual for a customer to take away a memorable bottle after it was spent. But over the course of Cru’s six-year run until it closed in 2010, no other customer ordered as many bottles and then systematically claimed the empties. Kurniawan was building a bottle museum in his garage, he explained to the sommelier.

Though Kurniawan presented himself publicly as a mere wine lover, a buyer and not a seller, by the time he made his splash on the wine boards, he was already consigning at auction. And problems had cropped up. As early as 2003, Internet entrepreneur Eric Greenberg was threatening to sue online auction site Winebid over some “suspect/bad mags,” e-mailing, “My goal is to bury the consignor’s reputation in the wine world.” Soon after, he reported that he had spoken to the consignor, Rudy Kurniawan, and was convinced that he, too, had been duped by whoever sold him the wine.

H/T to Bob Tarantino for the link.

March 6, 2012

This is why I haven’t been covering the robocallpocalypse

Filed under: Cancon, Politics — Tags: , , , , — Nicholas @ 10:23

Margaret Wente in the Globe & Mail brings a sense of proportion to the robo-call “crisis” in Canadian politics:

What’s happened to my country? I went away for a couple of weeks and all hell broke loose. I came back to find that someone named Poutine stole the last election. At first I thought this was a typo, that they meant Putin. But no. It turns out that Russia is a shining beacon of democracy compared to Canada. Apparently, our country has been hijacked by “the most comprehensive electoral fraud in our nation’s history” (Pat Martin, NDP critic). Voter suppression — lying, cheating and general chicanery — has driven us into “uncharted waters” (Bob Rae, Liberal Leader).

I certainly don’t wish to make light of voter fraud. But this fraud seems to have been engineered by the Keystone Kops. Not a single voter claims to have been prevented from voting. No ballot boxes appear to have been stuffed. Nobody was fraudulently elected. There weren’t even any hanging chads. Elections Canada says 31,000 Canadians have complained, but the vast majority of these complaints (“somebody called me at 10 p.m.”) seem trivial.

The dirty trickster at the heart of this evil scheme turns out to be someone with the nom de plume of Pierre Poutine (real identity unknown). Mr. Poutine and his henchmen were not personally directed by Stephen Harper but are widely thought to have been channelling him. In Guelph, Ont., they engineered a bunch of robo-calls that directed people to show up at non-existent voting stations. This tactic was evidently intended to discourage people who didn’t support the Conservatives from voting. It was so effective that the Liberal candidate won by a margin of 11 per cent.

February 22, 2012

Peter Gleick’s career self-destruction

Filed under: Environment, Law, Media, Politics, Science — Tags: , , — Nicholas @ 09:01

Megan McArdle’s post yesterday at The Atlantic on the further revelations in the Heartland Institute caper, where Peter Gleick’s confession of wire fraud is the central bit of news:

You receive an anonymous memo in the mail purporting to be the secret climate strategy of the Heartland Institute. It is not printed on Heartland Institute letterhead, has no information identifying the supposed author or audience, contains weird locutions more typical of Heartland’s opponents than of climate skeptics, and appears to have been written in a somewhat slapdash fashion. Do you:

A. Throw it in the trash

B. Reach out to like-minded friends to see how you might go about confirming its provenance

C. Tell no one, but risk a wire-fraud conviction, the destruction of your career, and a serious PR blow to your movement by impersonating a Heartland board member in order to obtain confidential documents.

As a journalist, I am in fact the semi-frequent recipient of documents promising amazing scoops, and depending on the circumstances, my answer is always “A” or “B”, never “C”.

It’s a gross violation of journalistic ethics, though perhaps Gleick would argue that he’s not a journalist — and in truth, it’s hard to feel too sorry for Heartland, given how gleefully they embraced the ClimateGate leaks. So leave ethics aside: wasn’t he worried that impersonating board members in order to obtain confidential material might be, I don’t know, illegal? Forget about the morality of it: the risk is all out of proportion to the possible reward.

[. . .]

Gleick has done enormous damage to his cause and his own reputation, and it’s no good to say that people shouldn’t be focusing on it. If his judgement is this bad, how is his judgement on matters of science? For that matter, what about the judgement of all the others in the movement who apparently see nothing worth dwelling on in his actions?

When skeptics complain that global warming activists are apparently willing to go to any lengths — including lying — to advance their worldview, I’d say one of the movement’s top priorities should be not proving them right. And if one rogue member of the community does something crazy that provides such proof, I’d say it is crucial that the other members of the community say “Oh, how horrible, this is so far beyond the pale that I cannot imagine how this ever could have happened!” and not, “Well, he’s apologized and I really think it’s pretty crude and opportunistic to make a fuss about something that’s so unimportant in the grand scheme of things.”

After you have convinced people that you fervently believe your cause to be more important than telling the truth, you’ve lost the power to convince them of anything else.

January 28, 2012

Photoshopping images is so passé: using game footage is the new trend

Filed under: Gaming, Media, Military, Politics — Tags: , , , , — Nicholas @ 11:35

At the BBC website, Phil Coomes shows some side-by-side images of real events and modern FPS game images. The recent flap over clips from the game Arma 2 being cited as genuine film captured from the IRA is only the first of many incidents we should expect to encounter, as games get better (and advocates remain as dedicated to advancing their causes as ever):

Today we are used to seeing real time reports from across the globe, technology has advanced and anyone with an internet connection can travel to far-off places, even imaginary worlds, from their armchair.

The world of video games has progressed too. Some seem real, as highlighted by a recent Ofcom ruling that ITV misled viewers by airing footage claimed to have been shot by the IRA, which was actually material taken from a video game.

Labelled “IRA Film 1988”, it was described as film shot by the IRA of its members attempting to down a British Army helicopter in June 1988. However, the pictures were actually taken from a game called Arma 2.

[. . .]

So I went through my photos taken from various combat zones, and attempted to replicate them in a computer game.

The game Arma 2 was ideal — it’s more of a war simulation than an all-out blaster, with the correct uniforms, vehicles and weapons as well as varied terrains and bang-bang firefights.

Plenty of hours fiddling within the gaming environment, alongside Ivan who developed the game, produced some pretty remarkable results.

In some cases it is actually quite hard to tell the difference between my photographs and the computer version, which is deeply worrying. The level of detail is so precise that the virtual war zone is as convincing as the real thing.

January 13, 2012

Google Kenya’s motto: Do <strike>no</strike> evil

Filed under: Africa, Law, Technology — Tags: , , , — Nicholas @ 11:40

Someone at Google has some explaining to do:

Since October, Google’s GKBO appears to have been systematically accessing Mocality’s database and attempting to sell their competing product to our business owners. They have been telling untruths about their relationship with us, and about our business practices, in order to do so. As of January 11th, nearly 30% of our database has apparently been contacted.

Furthermore, they now seem to have outsourced this operation from Kenya to India.

When we started this investigation, I thought that we’d catch a rogue call-centre employee, point out to Google that they were violating our Terms and conditions (sections 9.12 and 9.17, amongst others), someone would get a slap on the wrist, and life would continue.

I did not expect to find a human-powered, systematic, months-long, fraudulent (falsely claiming to be collaborating with us, and worse) attempt to undermine our business, being perpetrated from call centres on 2 continents.

H/T to Megan McArdle for the link.

Update: BoingBoing got a response to their post on this issue from Google’s Vice-President for Product and Engineering, Europe and Emerging Markets:

We were mortified to learn that a team of people working on a Google project improperly used Mocality’s data and misrepresented our relationship with Mocality to encourage customers to create new websites. We’ve already unreservedly apologised to Mocality. We’re still investigating exactly how this happened, and as soon as we have all the facts, we’ll be taking the appropriate action with the people involved.

November 1, 2011

Long Island Rail Road: “The scandal isn’t what’s illegal — but what’s legal

Filed under: Law, Politics, Railways, USA — Tags: , , , , — Nicholas @ 12:37

Nicole Gelinas points out that the Long Island Rail Road (LIRR) pension scam is only part of the problem:

Last week, the feds indicted 11 Long Island Rail Road retirees and their alleged associates in a “massive fraud scheme” to steal a billion dollars through fake disability claims. But the bigger outrage is that for decades the LIRR has held state taxpayers and riders hostage — thanks to outdated Washington labor laws.

The first inkling of the scandal came in 2008, when a press report noted that nearly every LIRR worker retired early, getting an MTA pension and a federal benefit. Looking into the anomaly, federal prosecutors unearthed evidence that at least two doctors and other “facilitators” had for years signed off on fake injuries and ailments so that workers could take their pensions.

[. . .]

The state’s fear of an LIRR strike helps drive up the railroad’s costs. Last year, the Empire Center reported, the average LIRR worker pulled in $84,850 — not including benefits.

That’s more than anywhere at the MTA except headquarters — and 23 percent more than subway and bus workers make. Seven of the top 10 people who made more in overtime than they did in regular wages hailed from the LIRR — including one conductor who tripled his $75,390 salary. Plus, workers pay nothing for health benefits.

October 31, 2011

China’s increased output of scientific papers masks deeper problems

Filed under: China, Media, Science — Tags: , , , — Nicholas @ 12:01

Colby Cosh linked to an interesting press release from the Chinese Academy of Sciences, which shows a surge in published papers from China, but a significant drop in the rate at which those papers are cited:

Chinese researchers published more than 1.2 million papers from 2006 to 2010 — second only to the United States but well ahead of Britain, Germany and Japan, according to data recently published by Elsevier, a leading international scientific publisher and data provider. This figure represents a 14 percent increase over the period from 2005 to 2009.

The number of published academic papers in science and technology is often seen as a gauge of national scientific prowess.

But these impressive numbers mask an uncomfortable fact: most of these papers are of low quality or have little impact. Citation per article (CPA) measures the quality and impact of papers. China’s CPA is 1.47, the lowest figure among the top 20 publishing countries, according to Elsevier’s Scopus citation database.

China’s CPA dropped from 1.72 for the period from 2005 to 2009, and is now below emerging countries such as India and Brazil. Among papers lead-authored by Chinese researchers, most citations were by domestic peers and, in many cases, were self-citations.

Being published is very important for sharing discoveries and advancing the careers of the scientists, but it’s more important that those publications be read and referenced by other scientists. Self-citations are akin to self-published works: it doesn’t guarantee that the work is useless, but it increases the chances that it is.

Perhaps worse than merely useless publication is the culture of corruption that has grown up around the scientific community:

In China, the avid pursuit of publishing sometimes gives rise to scientific fraud. In the most high-profile case in recent years, two lecturers from central China’s Jinggangshan University were sacked in 2010 after a journal that published their work admitted 70 papers they wrote over two years had been falsified.

[. . .]

A study done by researchers at Wuhan University in 2010 says more than 100 million U.S. dollars changes hands in China every year for ghost-written academic papers. The market in buying and selling scientific papers has grown five-fold in the past three years.

The study says Chinese academics and students often buy and sell scientific papers to swell publication lists and many of the purported authors never write the papers they sign. Some master’s or doctoral students are making a living by churning out papers for others. Others mass-produce scientific papers in order to get monetary rewards from their institutions.

October 23, 2011

What to do when “Tech Support” calls you

Filed under: Humour, Law, Technology — Tags: , , — Nicholas @ 11:39

crshbndct recounts the heart-warming story of his recent call from “Tech Support”:

“Good Morning Sir, I am calling to inform you that you have serious issues with your pc and that we can help you fix them”

“Really? I just got it working today (had been having a nightmare of a time with video drivers)”

“Yes, Sir, but do not worry, we can help you to fix this problems”

(Realising its a scam, but willing to play along)

“Oh OK well that’s good. How are you going to do that?”

“Well Sir, Your computer runs a thing called Windows XP, which has many viruses and malware and rootkits and things like this which infect your master root on your CPU and slow it down and causes problems with your computer which can cost a lot to fix. We can help you fix this really cheaply”
“Really cheaply?!?! That sounds fantastic!! How do I do it?”

California Democrats in sudden financial crisis

Filed under: Law, Politics, USA — Tags: , , — Nicholas @ 11:18

No, I’m not talking about the plight of the state itself, but the plight of hundreds of individual Democratic candidates whose political campaign funds may have been drained by the state campaign treasurer:

Stunning accusations that a top California Democratic campaign treasurer looted the war chests of her big-name clients have left candidates across the state scrambling to raise more money as election season looms.

Kinde Durkee, who controlled the funds of roughly 400 candidates and groups, ranging from Senator Dianne Feinstein to local Democratic youth clubs, was arrested in September and charged with fraud.

While the extent of the losses isn’t yet clear, the coffers of dozens of Democratic politicians have been frozen, prompting the crippled campaigns to ask the California Fair Political Practices Commission to permit further donations from contributors who have already given the maximum.

Feinstein, seeking re-election in 2012, has been forced to start from “square one” to raise campaign money, said Bill Carrick, political strategist and consultant to the Senator.

But a commission official said it wasn’t that simple.

“It’s quite clear that we can’t just say ‘the contribution limit is set aside’,” California Fair Political Practices Commission chair Ann Ravel said, adding that the commission’s legal team was researching what options were permissible by law.

September 29, 2011

Greek tax evasion: not a new problem at all

Filed under: Bureaucracy, Economics, Europe, Government, Greece — Tags: , , — Nicholas @ 09:28

In a New York Times article from last year, Suzanne Daley reported the rather amazing statistic from Athens:

In the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools.

So tax investigators studied satellite photos of the area — a sprawling collection of expensive villas tucked behind tall gates — and came back with a decidedly different number: 16,974 pools.

That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, points to the staggering breadth of tax dodging that has long been a way of life here.

H/T to Araminta Wordsworth for the link.

September 23, 2011

Solyndra: “They doubled down, just like some chump who lost his stake at the Vegas blackjack tables”

Filed under: Economics, Government, Politics, Technology — Tags: , , — Nicholas @ 10:55

Megan McArdle tries to figure out how Solyndra managed to spend nearly a billion dollars in two years:

By my count, Since September 2009, they borrowed $535 million from us to get their second fab up and running, raised $219 million in a private equity offering, got $175 million from issuing convertible promissory notes after their IPO was pulled, received $75 million in the last-ditch round where the DOE allowed their seniority to be subordinated, and maybe got a loan from a different bank. By the time they filed bankruptcy in August, my understanding is that they were basically out of cash.

The Washington Post‘s rather scathing new account, full of employees saying that post-loan, Solyndra started spending money like it was about to be discontinued, says the new facility for which we loaned them all that money cost $344 million to build. So it seems that in the space of two years, Solyndra managed to spend $344 million building a factory and $660 million . . . doing what?

September 20, 2011

China’s local and regional governments may be sitting on massive hidden debts

Filed under: China, Economics, Government, Law — Tags: , , — Nicholas @ 12:13

As with the US or Canadian government’s debt, not all debt is held at the federal level. It may take some digging to discover what the actual debt levels might be, but it’s possible. In China, however, as local governments are forbidden to issue bonds or to borrow from banks, they’ve had to become extremely creative in finding ways to borrow money for their pet projects. Not just creative — at least in some cases — legally dubious:

About 85% of Liaoning province’s 184 financing companies defaulted on debt service payments in 2010 according to a report from the province’s Audit Office. The report also noted that 120 of these borrowers, de facto government agencies, operated at a loss last year.

Since 1994, provinces and lower-tier governments have not been permitted to issue bonds or borrow from banks. Despite the strict prohibition, their debt has skyrocketed as local officials incurred obligations through LGFVs, local government finance vehicles. The central government’s National Audit Office said these companies, at the end of last year, had taken on 10.7 trillion yuan of debt. No one, however, knows the true amount of LGFV indebtedness, and some have calculated the real amount to be more than double the official figure.

Why the disagreement as to the amount of debt? Local governments have gone out of their way to hide borrowings, perhaps in part because of their doubtful legality. As famed economic journalist Hu Shuli points out, new local officials sometimes do not know the extent of obligations left by their predecessors. There have been a number of stratagems employed, from the issuance of illegal government guarantees to the transfer of funds in roundabout routes.

H/T to Jon, my former virtual landlord, for the link.

September 18, 2011

Solyndra: not just crony capitalism as usual

Filed under: Environment, Government, Law, Technology — Tags: , , , — Nicholas @ 12:28

Andrew C. McCarthy shows the difference between the collapse of Solyndra and ordinary crony capitalist use of government funds:

Homing in on one of the several shocking aspects of the Solyndra scandal, lawmakers noted that, a few months before the “clean energy” enterprise went belly-up last week, the Obama Energy Department signed off on a sweetheart deal. In the event of bankruptcy — the destination to which it was screamingly obvious Solyndra was headed despite the president’s injection of $535 million in federal loans — the cozily connected private investors would be given priority over American taxpayers. In other words, when the busted company’s assets were sold off, Obama pals would recoup some of their losses, while you would be left holding the half-billion-dollar bag.

As Andrew Stiles reported here at NRO, Republicans on the Oversight and Investigations subcommittee say this arrangement ran afoul of the Energy Policy Act of 2005. This law — compassionate conservatism in green bunting — is a monstrosity, under which Leviathan, which can’t run a post office, uses your money to pick winners and losers in the economy’s energy sector. The idea is cockamamie, but Congress did at least write in a mandate that taxpayers who fund these “investments” must be prioritized over other stakeholders. The idea is to prevent cronies from pushing ahead of the public if things go awry — as they are wont to do when pols fancy themselves venture capitalists.

[. . .]

The criminal law, by contrast, is not content to assume the good faith of government officials. It targets anyone — from low-level swindlers to top elective officeholders — who attempts to influence the issuance of government loans by making false statements; who engages in schemes to defraud the United States; or who conspires “to defraud the United States, or any agency thereof, in any manner or for any purpose.” The penalties are steep: Fraud in connection with government loans, for example, can be punished by up to 30 years in the slammer.

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