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2 Ill. men accused of running $15M fraud scheme
Criminal Law | 2009/01/08 06:36
Two men passed themselves off as foreign currency traders to swindle customers out of $15 million, which they used to pay for a lifestyle that included strip clubs, jewelry and private jets, according to a criminal complaint unveiled Wednesday in federal court.

Charles G. Martin, 43, of Glencoe, Ill., and Malibu, Calif., was arrested Tuesday night in the Los Angeles area, and John E. Walsh, 60, of Lake Forest was picked up Wednesday morning on a criminal complaint charging them with wire fraud.

A court order closed their One World Capital Group LLC in December 2007 and froze its last $636,815 of assets. The two men operated a "Ponzi-like" scheme diverting money out of customer accounts and into their pockets, prosecutors said.

The criminal complaint was filed in U.S. District Court on Tuesday.

One World was formed in 2005 and had offices in Winnetka and New York, prosecutors said. Martin and Walsh misled customers and federal regulators to conceal the fact that they siphoned off money customers thought was being used for currency trades.

Credit card and bank records show Martin spent more than $1 million at a strip club and restaurants, nearly $1 million at hotels and $1 million renting private jets, prosecutors said. He also purchased a fleet of luxury vehicles, donated hundreds of thousands to celebrity charity events and hired bodyguards, they said.



Google cuts temporary workers but murky on details
Venture Business News | 2009/01/08 04:37
Google Inc. has jettisoned a substantial number of temporary workers in a recent austerity drive spurred by the recession, although the Internet search leader still intends to spend billions of dollars during the next two years on product research, development and acquisitions.

The spending plans were outlined in a regulatory filing that also provided some clues about the magnitude of a recent payroll purge targeting Google's legion of contractors and other workers who aren't considered full-time or part-time employees.

The filing to the Securities and Exchange Commission was submitted on Dec. 15, but it was made on paper, leaving it unavailable through the various Web services that track reports to the agency. The Associated Press obtained a copy of the records this week.

A key section of the filing is being kept confidential because Google maintains it contains trade secrets, but the publicly accessible parts provide some information that hadn't previously been disclosed.

For instance, Google revealed it currently has 24,400 employees, including 4,300 interns, temporary workers and contractors. That contrasts sharply with the roughly 10,000 contractors that Google co-founder Sergey Brin said the company had in October. "It's really high," Brin said in an Oct. 16 interview with the San Jose Mercury News.

Google acknowledged in late November that it planned to significantly reduce the number of its contractors and retain all of its full-time employees.

But the company wouldn't specify how many of the temporary workers were being dumped, feeding rampant speculation among bloggers and even industry analysts. Published estimates of the cost-cutting's impact ranged from a few hundred to all 10,000 of Google's contractors.



Chinese democracy activist sentenced to 6 years
International | 2009/01/08 04:36
A 65-year-old democracy activist who tried to set up an opposition party in China has been sentenced to six years in jail, a human rights group said Thursday.

A court in Hangzhou, a prosperous city in eastern Zhejiang province, sentenced Wang Rongqing on Wednesday on charges of subverting state power for organizing the banned China Democracy Party, according to Chinese Human Rights Defenders.

Wang was detained in June, two months before the Olympic Games started, the group said. Wang's brother, Wang Rongyao, confirmed the sentence. The Hangzhou Intermediate People's Court could not be immediately be reached for comment.

Wang has been repeatedly harassed and detained by police during his years of activism, which started in the late 1970s as China's hard-line Maoist era came to a close and some started calling for democracy. He was detained for two months in 1999.

"He was not in good physical condition and he stood in court with the assistance of the police, but he was in good spirits," said Zou Wei, a friend and fellow dissident of Wang who was in court Wednesday.

Founded by dissidents in mid-1998, the China Democracy Party was quashed just six months later by the Communist Party, which allows no challenge to its political monopoly. Dozens of activists were arrested and sentenced to up to 13 years in prison, most on charges of subverting state power.



Burris' best bet could be federal court
Political and Legal | 2009/01/08 02:35
If Senate Democrats stick to their refusal to seat Roland Burris as a senator from Illinois, his best bet could be getting a federal judge to force open the Senate's doors.

Burris would be relying on a constitutional provision listing just three, easily met qualifications for the job and a 1969 Supreme Court decision rebuking the House for excluding an elected, though scandal-tarred, lawmaker.

So far, Senate leaders are unwilling to seat Burris because he was named by Illinois Gov. Rod Blagojevich, ensnared by allegations of corruption, to replace President-elect Barack Obama in the Senate.

Democrats and Obama have said the federal corruption charges against Blagojevich would strip credibility from anyone he appointed to the seat, although they do not question the integrity of Burris, a former Illinois attorney general. Blagojevich denies federal accusations that he tried to sell Obama's seat.

Senate Democrats are relying for the moment on a technicality — the refusal of the Illinois secretary of state to sign paperwork making Burris' appointment official. Burris' lawyers first are asking the state Supreme Court to take care of that problem.

But it is far from clear that Senate Majority Leader Harry Reid, D-Nev., would then relent and welcome Burris as a new colleague.



Madoff scandal, SEC role under scrutiny
Securities | 2009/01/08 01:37
Two more months of mortgage payments and retiree Allan Goldstein says he'll be broke, just another victim in what may be the biggest Ponzi scheme in history.

Goldstein, 76, was among the thousands of investors who trusted Wall Street figure Bernard Madoff with their money while counting on federal regulators to protect the investing public from fraud.

"Somewhere inside of me was the thought that this was a regulated industry. It wasn't. The warning flags were just pushed aside," Goldstein told a House panel Monday.

Red flags were raised to the Securities and Exchange Commission over a decade but weren't pursued, and Republican and Democratic House members said that reflected deep, systemic problems at the market watchdog agency.

Goldstein, a retired New York fabrics distributor, was among the witnesses as the House Financial Services Committee looked into why the SEC failed to uncover what may be a swindle amounting to $50 billion.

Goldstein testified that "everything I worked for over a 50-year career is gone." He held an IRA retirement account with Madoff's firm for 21 years.

Now, he says, he's been forced to cash in life insurance policies to cover his mortgage, but "just can't make it" past April. The only choice he says he has is to sell his home — which he fears he won't be able to do in a housing market that has collapsed.

In a New York City courtroom Monday, a federal prosecutor asked that Madoff be jailed pending trial, saying the disgraced financier violated an agreement with the court by mailing watches, jewelry, cufflinks and mittens worth more than $1 million to relatives and friends. The judge said he would rule on the request after both sides submitted written arguments.



Federal judge indicted on additional sex charges
Legal Business | 2009/01/07 09:18
U.S. District Judge Samuel Kent, the first federal jurist indicted on sex crimes, is now facing more serious charges.

Kent was set to be arraigned Wednesday, a day after a federal grand jury in Houston added three new charges to the indictment it issued in August that accuses him of making unwanted sexual advances toward his former court case manager.

The new charges — aggravated sexual abuse, abusive sexual contact and obstruction of justice — allege Kent engaged in unwanted sexual contact with a second former court employee and later lied about it to investigators.

"There is a gag order in the case which prohibits the parties from making any sort of comment with the exception of stating without elaboration what the defense is to these new charges," said Dick DeGuerin, Kent's attorney. "They are untrue and we believe the product of intense pressure and threats brought against the complainant."

In a press release, the Justice Department only gave a brief description of the additional charges against Kent.

Kent, who was released on his own recognizance after last year's indictment, is still on the bench.

Jury selection in Kent's trial on the initial charges against him was set to begin Jan. 26. It was not immediately known if the new charges would delay the trial.

If convicted, Kent faces up to life in prison and a fine of up to $250,000. He is the first federal judge to be indicted in the last 18 years.

Kent initially faced two counts of abusive sexual contact and one count of attempted aggravated sexual abuse following a U.S. Justice Department investigation into complaints by case manager Cathy McBroom.



RI judge hears arguments in music downloading case
Intellectual Property | 2009/01/07 09:17
A Rhode Island couple whose son is accused of illegally sharing songs online should not be forced to surrender their home computer for inspection because it would violate their right to privacy, their lawyer argued at a federal court hearing Tuesday.

Joel Tenenbaum, a 25-year-old Boston University graduate student, is accused by the Recording Industry Association of America of downloading at least seven songs and making 816 music files available for distribution on the Kazaa file-sharing network through 2004.

The recording industry's lawsuit against him is part of an aggressive campaign targeting people who share music online. The industry says it has lost more than $3 billion because of peer-to-peer networks that enable Internet users to share large numbers of songs online.

Record company lawyers believe Tenenbaum downloaded the songs on his parents' computer in Providence and urged a federal magistrate on Tuesday for permission to copy the machine's hard drive for proof of copyright infringement.

"The information on the computer is directly relevant and material to the underlying claims in this case," said attorney Daniel Cloherty.

But Charles Nesson, a Harvard Law School professor representing Arthur and Judie Tenenbaum and their son, said the computer contains information protected by attorney-client privilege and holds other sensitive and personal material that has nothing to do with the case.

"You can hardly imagine anything more intrusive than asking anyone to disgorge a computer," said Nesson, who is also challenging in U.S. District Court in Boston the constitutionality of a federal copyright law that the music industry has used to target song-swappers.

Nesson also argued that the computer was not the one on which the alleged downloading took place. Judie Tenenbaum has said in an affidavit that the couple bought the computer after their son had left home, and that he had used it only occasionally to check his e-mail during visits.



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