arrested the founder of German investment firm K1 Group, Helmut Kiener

Police arrested the founder of German investment firm K1 Group, Helmut Kiener, in connection with a fraud investigation at the firm, a local prosecutor said Thursday.
European and U.S. authorities are investigating whether K1 embezzled millions of dollars from several global banks, including J.P. Morgan Chase & Co., Barclays PLC, BNP Paribas SA and Société Générale SA, the prosecutor said.arrested Helmut Kiener, the founder of the K1 hedge fund, which is suspected of bilking numerous banks, including Barclays Capital, JPMorgan Chase, BNP Paribas and Société Générale, out of about $400 million.That came after prosecutors and police raided Mr. Kiener’s office and home Wednesday in the course of an investigation into suspected fraud and breach of trust at K1 Global, a fund registered in the British Virgin Islands.The state prosecutor, Dietrich Geuder, based in the Bavarian town of Würzburg, said that Mr. Kiener was awaiting a hearing Thursday and that another unidentified suspect was being investigated.BNP, the largest French bank, would only say that ‘‘at the request of the authorities, we are cooperating with them.’’ JPMorgan Chase and Barclays declined to comment, given that the investigation is ongoing. Société Générale said its exposure was ‘‘negligible.’’All four banks’ losses were accounted for on their balance sheets already, indicating that the investigation has been under way for some time.
Mr. Kiener, a psychologist who founded the K1 fund of funds after starting out in marketing in the late 1980s, claimed on his Web site a growth rate of more than 844 percent since 1996, the year he began. While some of the money he solicited may have been put to good use, generating legitimate returns over the period, prosecutors believe that at least a part were used in unauthorized ways.Handelsblatt, the German newspaper, said Mr. Kiener may have used the money to swell the apparent size of the fund, a tactic closer to that of Bernard L. Madoff than Raj Rajaratnam. Calls to Mr. Kiener’s home in Aschaffenburg, near Frankfurt, went unanswered.This is not the first time Mr. Kiener has attracted the notice of German authorities. BaFin, the country’s financial regulator, has tried several times since 2001 to block his funds from doing business with German investors.

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Authorities accuse Stanford of leading a $7 billion Ponzi scheme by promising inflated returns to about 28,000 investors

lawyer tracking down money lost in what authorities say was a massive Ponzi scheme run by R. Allen Stanford says he hopes to gain control of more than $1.5 billion that would be then returned to fleeced investors.Court-appointed receiver Ralph Janvey filed a report in federal court in Dallas late Wednesday outlining his plan to go after the $1.5 billion and provide allegedly defrauded Stanford investors a return of as much as 20 cents on the dollar.But John Little, a lawyer appointed to represent investors, said Janvey's recovery goal is "something of a fantasy" and that investors should prepare to get back as little as 2 cents on the dollar.
Authorities accuse Stanford of leading a $7 billion Ponzi scheme by promising inflated returns to about 28,000 investors on certificates of deposits at his Antiguan bank. The Securities and Exchange Commission said Stanford instead used the money from new investors to pay off old ones. They also accuse him of skimming more than $1 billion to fund his lavish lifestyle.Stanford denies the allegations. His attorney did not return a message left by The Associated Press.Janvey, who is winding down Stanford's businesses and collecting a pot of money to return to investors, has about $71 million in cash on hand. He is pursuing the rest through lawsuits and other means, such as liquidating nearly $51 million in Stanford assets, including the sale of the Stanford Bank of Panama, according to court papers.
Janvey is also attempting to lay claim to about $335 million in foreign accounts. Courts in Canada have sided with Janvey, but courts in the United Kingdom are favoring liquidators appointed by the government of Antigua. The fate of those accounts remains uncertain.Whether the receiver reaches his goal of $1.5 billion hinges on a federal appeals court approving his plan to pursue nearly $900 million in claims against investors and former financial advisers. The appeals court is scheduled to hear arguments on the case Monday.A federal district judge in July ruled that Janvey could not go after the principal that people invested in the CDs. The SEC and other parties have asked the appeals court to limit Janvey's ability to pursue claims to people who profited from Stanford's alleged scheme. Janvey also wants to go after investors who lost money.Little said he believes a total recovery of around $150 million is more realistic than the $1.5 billion Janvey wants to get, in part because the courts rarely permit a receiver to go after investors who are "net losers." The SEC branded Janvey's plan to sue net loser investors as "an extraordinarily expensive effort" that is "not necessary or appropriate in the first place."Kristie Blumenschein, an attorney in Janvey's Dallas law firm, acknowledged that "the ultimate success of these efforts is necessarily uncertain."In other court filings, the SEC is opposing Janvey's latest request for payment for fees and expenses. Janvey asked for $8.9 million for June through August to pay himself and the large team of lawyers and consultants he hired to wind down Stanford's businesses and unravel his alleged schemes. That would bring his total bill from mid-February to the end of August to nearly $30 million.Little, meanwhile, filed a request for nearly $240,000 in fees covering his work from July through September. Janvey opposes Little's fee request, but the SEC, Stanford and other defendants do not.Besides the civil case in Dallas, Stanford and some executives of the Stanford Financial Group are accused in a criminal indictment in Houston of orchestrating the alleged fraud. Stanford and executives Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt have pleaded not guilty to various criminal charges in Houston, including wire and mail fraud.The three executives are free on bond; Stanford remains jailed.
James M. Davis, Stanford's former chief financial officer, pleaded guilty to three counts: conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct the investigation.

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Tom Petters and his organization nearly imploded eight years before

Tom Petters and his organization nearly imploded eight years before federal authorities were told that he was at the center of a huge Ponzi scheme.
In the first day of testimony at Petters' trial in St. Paul, executives from General Electric Credit Corp. (GECC) and big-box retailer Costco told jurors Thursday that they determined in 2000 that Petters had created false documents to stave off an impending financial catastrophe. The documents included purchase orders for electronic goods and copies of bogus checks.The witnesses told of a $50 million line of credit with GECC set up by a subsidiary of Petters Co. Inc. in 1998 that by 2000 was having trouble repaying its debts.Jack Marrone, a GE executive in Chicago, testified that Petters wrote checks to the company in an effort to clear up the matter, but the checks bounced.Paul Feehan, GE Capital's manager of corporate lending at the time, testified that he called Petters directly to discuss his company's mounting financial troubles. "I got a series of promises. There was always a new excuse and the excuses kept piling up," he said.Feehan said he and Marrone wrote Costco to check on the inventory of electronics goods that Petters claimed to have bought with the money he borrowed. Petters immediately called back and "read me the riot act," Feehan said. "He was very adamant that I stay away from Costco."
As the credit line languished, Feehan said he'd call the Petters company several times a day, maybe a dozen times a week, demanding payment. The company eventually did settle up, and the GE lending unit terminated the line of credit.
Scott Haggbloom, a merchandise buyer for Costco, said the purchase orders submitted by Petters to GE were for quantities and dollar amounts much larger than normally handled by the retailer."I don't write many purchase orders for over $1 million," Haggbloom said when shown a purchase order for goods totaling $5 million.
Government prosecutors are trying to show jurors that Petters submitted bogus Costco purchase orders and other documents to GE Capital in an attempt to hold off the company's collection efforts. The pattern continued over the next decade until Deanna Coleman, one of Petters' top executives, told authorities in September 2008 that he was running a mammoth Ponzi scheme, prosecutors contend.Proving that Petters used bogus purchase orders and other documents to obtain credit as early as 2000 might undercut his defense team's efforts to portray him as an innocent victim of corrupt executives in his company. The defense argues that those subordinates worked with unsavory, outside business associates to perpetrate a $3.5 billion investment fraud.Prosecutors are also trying to demonstrate Petters' direct involvement with fraudulent documents, and that Coleman (named Deanna Munson at the time) operated more as an administrator than a decision-maker.The government's witnesses testified Thursday that most of their business dealings were with Petters directly, although Coleman's name surfaced occasionally in documents entered into evidence.
"I don't even know who Deanna Munson is," Feehan said.
Marrone acknowledged approving loans based on inventory assurances from Coleman. When the checks bounced, he said he talked to Petters.
In 2000, the government says, GE Credit learned that Petters had been submitting bogus documents to make it look like Costco was paying for his company's merchandise when no such deals took place.After the GE unit confronted Petters, he and Robert White, one of his executives who has pleaded guilty in connection with the alleged Ponzi scheme, sent GE Credit eight company checks totaling $38.5 million. Despite Petters' assurances that the Petters Co. Inc. checks were good, they bounced, the government says.The trial, in U.S. District Court in St. Paul, is expected to last up to six weeks. If convicted of the conspiracy, fraud and money laundering charges he's facing, Petters, 52, could spend the rest of his life in prison.

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charged CDR Financial Products and its founder and chief executive, David Rubin,

charged CDR Financial Products and its founder and chief executive, David Rubin, with secretly manipulating the competition among banks and other investment firms for the lucrative business of helping governments raise money. The indictment said the participating banks then kicked back part of their profit to Mr. Rubin and his firm.The charges were the first in a wide-ranging antitrust investigation of the municipal bond business that has been in progress for several years. Federal investigators in New Mexico had previously looked at CDR’s involvement in bond sales in that state, as well as its contributions to Gov. Bill Richardson. The attention prompted Mr. Richardson to withdraw from consideration as President Obama’s commerce secretary, but the government eventually decided not to pursue criminal charges against him.From at least the late 1990s, the indictment said, Mr. Rubin and his firm, based in Beverly Hills, engaged in a variety of schemes that shortchanged the Internal Revenue Service and imposed hidden costs on local governments. In some cases, they increased their profit by adding derivatives to the bond transactions,only to have the derivatives sour, leaving local governments with unexpected bills.
Two other CDR executives, Zevi Wolmark, the former chief financial officer, and Evan Andrew Zarefsky, a vice president, were also indicted. All three men are residents of California, but their firm worked nationwide.A spokesman for Mr. Rubin and CDR, Allan Ripp, said, “The allegations that the government is making are a fiction.”
“There is no way that CDR could have been carrying out the kind of dramatic conspiracy that is alleged,” Mr. Ripp added. He said he was unable to respond to individual charges because the activity dated back many years and the indictment did not identify those suspected of conspiring.
“It’s hard to connect the dots,” Mr. Ripp said.
A lawyer for Mr. Zarefsky, Daniel L. Zelenko, said, “the government just doesn’t understand the municipal bond industry, and these charges show that. Mr. Zarefsky did absolutely nothing wrong.”Municipal bonds, which are issued by states as well as municipalities, are a primary means for governments to finance their operations. The interest on the bonds is tax-exempt, so the I.R.S. has special rules for how the money is handled.The indictment said CDR and its co-conspirators routinely violated those rules and subsequently certified falsely that the transactions had followed the rules.Local governments that took the certifications at face value ended

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