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Phillip E. Southwood, Jr., former owner of Southwood Industries, Inc., a holding company for Jefferson Liquor in Poway, Calif., was sentenced in federal court today to 12 months and one day in prison for multiple bankruptcy-related crimes, according to a press release from the U.S. Attorney’s Office for the Southern District of California. Southwood was also ordered to pay $119,000 in restitution. Following a referral from the U.S. Trustee’s Office and a lengthy investigation by the Federal Bureau of Investigation, Southwood was indicted on six counts of fraud involving his personal chapter 7 bankruptcy, including bankruptcy fraud, making false oaths in bankruptcy, and making false statements under penalty of perjury in bankruptcy. After a two-week jury trial before U.S. District Judge M. James Lorenz in January 2016, the jury deliberated for several hours and found Southwood guilty on all 6 counts. According to the evidence proven at trial and court documents, Southwood devised a scheme to defraud his creditors by voluntarily filing a false and fraudulent bankruptcy petition. From at least December 2007 and continuing up to and including March 5, 2009, Southwood caused a number of acts to be undertaken in furtherance of his fraudulent scheme.

A new study from the University of Iowa demonstrates for the first time that financial misdeeds at companies decrease markedly in the years after whistle-blowers come forward with information about wrongdoing inside their operations, according to a Saturday editorial in the New York Times. New research by Jaron H. Wilde, an assistant professor of accounting at the University of Iowa’s Tippie College of Business, found a sharp and lasting drop in financial wrongdoing at companies that were subject to whistle-blower investigations. The whistle-blower program at the Securities and Exchange Commission heard from 4,218 tipsters in fiscal 2016, up 40 percent from the number who came forward in 2012. The SEC has awarded $136 million to 37 whistle-blowers since its program’s inception in 2011; it says that enforcement actions arising out of these tips have resulted in almost $900 million in financial remedies, much of which went to wronged investors.

The U.K.’s Serious Fraud Office (SFO) closed its investigation of corruption allegations against Soma Oil & Gas Holdings Ltd. for lack of sufficient evidence, even if there are still reasons to suspect misconduct, the Wall Street Journal reported today. The investigation comes just two months after a London court, doing a judicial review of the case at Soma Oil’s request, ruled that it couldn’t order the SFO to expedite or terminate its investigation into the company. Soma had urged the SFO to resolve its investigation because the uncertainty was a hindrance when it needed to raise fresh financing to meet contractual obligations. The SFO had opened investigations in mid-2015 into allegations that Soma had made “capacity building payments” to the government of Somalia in 2013 to develop oil fields in the country, which had been raised in a report from the United Nations Somalia and Eritrea Monitoring Group. The company, which is privately owned and was set up expressly to pursue oil and gas exploration in Somalia, cooperated fully with the investigation and vigorously denied wrongdoing.

Bernard Madoff’s victims are set to receive a $342 million payout from the trustee unwinding his epic Ponzi scheme, financed in part by a settlement with the estate of one of the con man’s oldest friends, the late Beverly Hills billionaire Stanley Chais, Bloomberg News reported yesterday. The distribution, if approved by a judge, would be the eighth since Madoff’s arrest on Dec. 11, 2008. Trustee Irving Picard’s lawsuits and settlements with banks and wealthy investors have recovered about $11.5 billion for thousands of victims who lost $17.5 billion in principal. The latest round of checks is being funded by settlements reached in recent months with investors who profited from the scam, including Chais’s estate, which agreed in October to pay $277 million to resolve claims against the money manager who funneled cash from his own customers into Madoff’s Ponzi scheme. Chais, who died in 2010, wasn’t charged with wrongdoing. The proposed distribution will be considered for approval on Jan. 12 hearing in U.S. Bankruptcy Court in Manhattan, according to the statement.

The Supreme Court ruled yesterday that a person could still be convicted of bank fraud even if they never targeted the bank directly or the institution did not suffer financial loss, The Hill reported today. In a unanimous decision, the court’s fifth of the term, the justices said it is “sufficient” that the victim — here, the bank — was deprived of its right to use the property while the actual subject of the theft was a third party. The case, Shaw v. United States, centers on Lawrence Eugene Shaw, who was convicted of 17 counts of bank fraud for stealing a Taiwanese businessman’s Bank of America account information and draining his account of $307,000 over a four-month period in 2007. Shaw used a fake PayPal account that he created in the businessman’s name and joint savings accounts he opened using his father’s name. He argued, however, that he shouldn’t have been convicted because he never intended to defraud Bank of America. In fact, Bank of America never lost money. PayPal reimbursed the bank for the $131,000 it returned to the businessman, Stanley Hsu. In the end, PayPal bore the loss of $106,000, and Hsu lost over $170,000 for failing to notify the bank of the fraudulent transactions within 60 days. In delivering the opinion of the court, Justice Stephen Breyer called Shaw’s argument unpersuasive.

Leaders of Dallas’s Forest Park Medical Center face criminal charges after federal prosecutors said they paid roughly $40 million worth of bribes and kickbacks to health-care professionals who agreed to send patients to the high-end hospital, the Wall Street Journal reported on Saturday. A federal grand jury indicted Forest Park Medical executives of paying surgeons, primary-care doctors, chiropractors and others for patient referrals. Prosecutors say the bribes also included sporting event tickets, custom cowboy boots, free carwashes and deals on medical office building space, according to the newly unsealed 44-page document filed in U.S. District Court in Dallas. Prosecutors said the bribes brought business into Forest Park Medical Center, enabling it to bill medical insurers and government-administered health care programs like Medicare for more than $500 million between the facility’s 2009 opening and 2013, according to the indictment. After years of declining revenue, the hospital shut down in October 2015. It was sold out of bankruptcy to another hospital operator earlier this year. Read more. (Subscription required.) 

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

A federal bankruptcy judge yesterday dismissed lawsuits by the trustee liquidating Bernard Madoff's firm to recoup funds from Koch Industries Inc., the company controlled by billionaire brothers Charles and David Koch, and dozens of other defendants, Reuters reported yesterday. Bankruptcy Judge Stuart Bernstein said that defendants in most of the 88 lawsuits could keep money that Irving Picard, who is liquidating Bernard L. Madoff Investment Securities LLC, traced to the swindler but was sent outside the United States. Picard had sought to recover hundreds of millions of dollars from foreign entities that had received Madoff-linked money from other foreign transferees, including "feeder funds" operated by Fairfield Greenwich Group and Tremont Group Holdings, as well as the Kingate feeder funds. But in an 87-page decision, Judge Bernstein dismissed a majority of Picard's claims against the "subsequent foreign transferees" because of international comity, the need to let other countries enforce their own laws. He also dismissed dozens of claims, including against affiliates of HSBC Holdings Plc and UBS Group AG, based on "extraterritoriality," because the defendants had insufficient ties with the United States. Read more. 

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case.