Monday, December 29, 2008

A New Year’s Message from a Convicted Felon: While you hope, criminals prey

My cousin Crazy Eddie Antar taught me that “people live on hope.” As white collar criminals, we preyed on your hopes and dreams by feeding you our spin and lies.

Investors demand confident leadership and strong financial performance from company managements. They want to hear management exuding confidence about their company’s future business prospects. Eddie and I built an image of strong and confident leadership by promising investors a prosperous future backed up by our phony financial reports.

As criminals, we considered the humanity of investors as a weakness to be exploited in the cold-blooded execution of our crimes. We measured our effectiveness by the comfort level of our victims.

My cousin Eddie and I built walls of false integrity around us to gain the trust of our victims. We claimed that Crazy Eddie's accounting policies were "conservative." In addition, we gave huge sums of money to charity and were involved in many popular social causes in an effort to make investors comfortable with us. While we were in effect, “helping old ladies cross the street,” we were heartlessly executing a massive fraud that wiped out the life savings of thousands of investors and ultimately caused a few thousand people to lose their jobs.

Eddie Antar and I never had a single conversation about morality or right and wrong. We simply did not care about the victims of our crimes. Our conversations only focused on the successful execution of our cold-blooded schemes to defraud investors.

At Crazy Eddie, we committed our crimes simply because we thought we could execute them successfully. We took advantage of investor's hopes, dreams, and aspirations for a better future. More importantly, we fully exploited investor's lack of skepticism that resulted from the wall of false integrity we built around ourselves.

Hope is a fine human quality that motivates us to build a better future. Unfortunately, criminals consider your hope as an exploitable weakness to aid them in the successful execution of their crimes.

Do not get mesmerized by neatly packaged story lines and well researched sound bites written by professional high paid media consultants. Criminals know how to “talk the talk and walk the walk” as they inspire you with false promises of a prosperous future.

In the New Year, please do not let criminals exploit your hopes and dreams. In addition, you are cautioned to apply the same advice to our elected officials from all sides of the political spectrum who exploit your hopes with inspiring rhetoric to sell you flawed solutions to major problems facing our nation.

Have a skeptical New Year.

Written by:

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Other blog posts of interest

Managing Earnings: Playing the Numbers Game

The Art of Spinning: How to Identify Possible White Collar Criminals or at Least Unethical and Deceitful People Who You Should Avoid

Advice about Trust from a Convicted Felon

Advice from a convicted felon: How the government investigates and prosecutes white collar criminal cases

A Warning to Wall Street Analysts from a Convicted Felon

Warning from a Convicted Felon: Don't Be Fooled by People Who Flaunt Their Integrity

Limiting Auditor Liability is Plain Dumb

Why White Collar Criminals Do Not Fear Today's FBI

Advice to President-Elect Barack Obama about Combating White Collar Crime From a Convicted Felon

Is there really more white collar crime today? No.

Saturday, December 13, 2008

Is there really more white collar crime today? No.

Advice about white collar crime from a convicted felon: A bad economy causes many white collar crimes to float to the surface.

Once, I asked a N.Y.C. police officer assigned to the harbor patrol, why are so many dead bodies are pulled out of the rivers around Manhattan every spring. He explained to me that many of these people did not actually die during the spring. Instead, many of these people really died during the previous winter.

During the winter, if a person is killed and the dead body is dumped into the river or if a person commits suicide by jumping into the river from say a bridge, their bodies will sink to the bottom of the river because the water temperature is cold. When spring arrives, the water heats up and the dead bodies float to the top of the river surface. The harbor police then retrieve those bodies that are also known as “floaters.” Therefore, just because we find dead bodies in the spring, does not mean they died at that time. Instead, they probably died during the winter.

The same principle applies to white collar crime. White collar crime is always around in both good and bad economic times. Such crimes are either less noticed during a good economic climate or more noticed during a bad economic climate, like the situation we face right now. In a relatively good economy, white collar crime is easier to execute and harder to uncover. In a relatively bad economy, many white collar crimes in progress implode upon themselves because they become unsustainable. Bad economies, like warm water for dead bodies, brings many white collar crimes to the surface.

It is unfortunate that the majority of white collar crimes are uncovered because they implode upon themselves, instead of the result of effective work by internal auditors, external auditors, and audit committees. We simply do not have enough adequate effective measures in place, to prevent most white collar crimes. Even when internal controls and checks and balances are present, they are often circumvented by criminals taking advantage of the lack of skepticism of those persons responsible for compliance and oversight.

Worse yet, during a strong economy, our regulators and policy makers often ignore or pay little attention to crime prevention resources and regulations that can actually reduce the amount of white collar crime. Often white collar law enforcement resources are reduced and regulations are watered down, in the name of efficiency and regulatory relief, to promote economic growth.

However, the consequences of such actions become apparent later, as the we enter into a recession. At that time, many white collar crimes implode upon themselves, become known to us, and are reported in the media. By the time we find out about a certain white collar crime, it is too late to undo the damages it caused and return lost money to its victims.

Many of the white collar crimes in the headlines today, were perpetrated for years, before they became known to us. We should measure the occurrence of white collar crime by the dates they were executed, instead of indictments and convictions that follow many years later. The crimes reported today, have roots far into the past. The same can be said about the problems facing our economy today, such as the credit meltdown.

In the mean time, think about the about the recently announced criminal investigation of Bernard L. Madoff and the problems at Freddie MAC (NYSE: FRE).

To be continued….

Written by,

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Disclosure: As the cold-blooded criminal CFO of Crazy Eddie, I committed my crimes simply because I could. I took advantage of the gullible trust of my victims and their lack of skepticism.

Other blog posts of interest

Managing Earnings: Playing the Numbers Game

The Art of Spinning: How to Identify Possible White Collar Criminals or at Least Unethical and Deceitful People Who You Should Avoid

Advice about Trust from a Convicted Felon

Advice from a convicted felon: How the government investigates and prosecutes white collar criminal cases

A Warning to Wall Street Analysts from a Convicted Felon

Warning from a Convicted Felon: Don't Be Fooled by People Who Flaunt Their Integrity

Limiting Auditor Liability is Plain Dumb

Why White Collar Criminals Do Not Fear Today's FBI

Advice to President-Elect Barack Obama about Combating White Collar Crime From a Convicted Felon

Wednesday, December 10, 2008

Barry Minkow Releases New Document to Show Microsemi Exec Peterson Lied

In a video posted on YouTube, a confident Barry Minkow, co-founder of the Fraud Discovery Institute, charged Microsemi Corp. (NASDAQ: MCSS) President and CEO and STEC Inc. (NASDAQ: STEC) Board Member James J. Peterson with "stock fraud."

Minkow said that Peterson knowingly "lied" in a Microsemi press release, when Peterson "categorically" denied Minkow's background report last week that he falsified his academic credentials in reports filed with the Securities and Exchange Commission. Minkow said that Peterson "knew it was a lie. He did it to salvage the stock price."

Minkow held in his hand a "Verification of Enrollment" that contained Peterson's birthday (information redacted), social security number (information redacted), and student identification number that was signed by the Brigham Young Registrar. The new document verified Minkow's background report that showed Peterson had falsified his academic credentials, stating there were "No degrees awarded at BYU as of December 9, 2008," to Peterson.

On December 3, 2008, Barry Minkow released a background report of Microsemi Chief Executive Officer and STEC Board Member James Peterson, showing that Peterson did not receive a "B.A. in business administration and an M.B.A. from Brigham Young University," as claimed in STEC's proxy filing with the SEC.

In response to Minkow's report, Microsemi issued a press release that same day stating:

I am working directly with the University to clarify this situation,'' Peterson said. "It appears that the background check there may have mistakenly been made with the name 'James J. Patterson,' not mine, as stated in a Seeking Alpha report.''

Peterson further questions the reliability of tipster Barry Minkow, a convicted felon who spent seven years in prison for fraud, as the source for the reports. Minkow uses his tips as a means to profit from "put options'' he buys on companies he researches. He uses a disclaimer on the factual accuracy of his reports.

"I have every reason to expect that Brigham Young will investigate this allegation shortly and officially confirm my degrees,'' Peterson said.

Minkow publicly discloses on his web site, to the media, and law enforcement agencies that he legally purchases put options before he issues his reports to bet a company's stock will decline after such reports are issued.

In addition, Peterson probably read my blog posted, earlier that day, which was also syndicated on Seeking Alpha. While I correctly spelled his last name several times, I misspelled his last name once in a paragraph towards the end of that post.

However, the background check by Minkow was done under the name "James J. Peterson" and not "James J. Patterson," as suggested by Peterson. The birthday and social security number (redacted from the report) is clearly Peterson's and does not belong to anyone else.

Minkow's report that Peterson falsified his academic credentials was verified by a Brigham Young University spokesperson before it was released and reported in Bloomberg News and the Wall Street Journal. After, Peterson categorically denied Minkow's report, a Brigham Young spokesperson reaffirmed to Bloomberg News that Peterson did not obtain any degrees from the school.

On December 5, 2008, Microsemi issued another press release in support of its embattled President and CEO James J. Peterson. See below:

Microsemi Corporation (NasdaqGS: MSCC - News) announced today that its Governance Committee of its Board of Directors is currently reviewing the status of the academic credentials of its President and Chief Executive Officer, James J. Peterson, and intends to work to resolve such status. Microsemi Board Chairman Dennis Leibel emphasized that Mr. Peterson has the full support of the Board and there are no plans to alter his role as President and Chief Executive Officer of Microsemi. "I want to assure our shareholders that Jim's educational credentials in no way reflect on the strength of Microsemi, which has been an industry leader. The Board's continuing support of Jim Peterson re-affirms our backing of his strategies, operational excellence and proven executive leadership,'' he said.

Note: Bold print and italics added by me.

In his YouTube video, Minkow responded, "We decided to help the board of Microsemi" investigate the status of Peterson's academic credentials. He said:

We will post the document from the school on our web site, so maybe the Board of Microsemi will not have to work too hard to conclude their investigation that their CEO lied and put it on the wire.

The press release hinted that even if Peterson falsified his educational background, as reported by Minkow and reasserted by Brigham Young University, Peterson is still assured his job at the company.

Apparently, Board Chairman Dennis Leibel is trying to hedge the company's position, just in case Peterson cannot substantiate his educational credentials by saying, "I want to assure our shareholders that Jim's educational credentials in no way reflect on the strength of Microsemi...." In others words, he is implying that it is OK for the President and CEO of a public company to lie in SEC filings about his educational background and in a subsequent press release by denying that he lied in SEC filings.

With Barry Minkow's latest document from Brigham Young University, Microsemi Board President and CEO James J. Peterson faces increasing pressure to resign and the company's Board of Directors faces pressure to fire Peterson, absent his resignation. Meanwhile, Minkow has contacted the SEC and the FBI and forwarded his reports to them.

Minkow's YouTube Video is below:

Last week, Broadcom (NASDAQ: BRCM) fired Senior Vice President Vahid Manian and a day later Manian resigned from the Board of Directors of STEC, after Minkow issued a similar background report showing that Manian lied about receiving a “B.S.E.E and an M.B.A from the University of California, Irvine” as claimed in a Broadcom proxy filing and an STEC proxy filing with the SEC.

Vahid Manian and James Peterson are long-time friends dating back to when Peterson hired him at Silicon Valley in the mid-1990s. They both served on STEC's board of directors and were members of that company's audit, compensation, and nominating committees, before Manian resigned from the board. STEC faces the grim prospect of losing two of its six board members and two of four members of its audit, compensation, and nominating committees.

Written by:

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Other blog posts of interest:

12/03/08: Barry Minkow Reports More Corporate Scoundrels Misrepresenting Credentials

12/03/08: Broadcom Executive Fired Today For Phony Credentials, While Microsemi Executive Remains Under Scrutiny

12/04/08: Manian Resigns From STEC, A Day After Broadcom Fires Him For Phony Credentials

Disclosure:

I am not short or long any of the companies named in this blog post. However, the Fraud Discovery Institute and/or Barry Minkow may have a short position in the companies mentioned in this blog post. Please read the Full Disclaimer on FDI for Profit Status from Minkow's web site.

Over a year ago, I provided funds to Fraud Discovery Institute (FDI) to help pay costs of its investigations, though I had no control over any monies spent. I am not an owner, manager, employee, or consultant of Minkow or FDI and I have not received any compensation from them.

Index to White Collar Fraud Blog Posts

Other Blog and Media Reaction to my Blog

Monday, December 08, 2008

Does Democratic Leadership Inaction on Rangel Render Promises of "Change" a "Bait and Switch" Tactic?

Corruption and unethical behavior by politicians is a cancer that slowly and deliberately destroys the integrity of our government institutions and ultimately threatens the stability of our Republic.

The Democratic Party which will control the Presidency, the Senate, and the House of Representatives has a unique opportunity to show that they are really serious about possible corruption and changing the way Washington does business.

However, they must start in their own backyard and immediately remove Harlem Congressman Charles B. Rangel from his position as House Ways and Means Chairman, until a full and thorough investigation of his finances is completed for possible tax and ethics violations.

Otherwise the Democrats are sending a clear message – anything goes for our friends and allies, especially powerful friends in Congress. Worst yet, inaction by the Democratic leadership on issues of possible corruption and unethical behavior will render President-elect Barack Obama's much touted promises of "change," nothing more than a "bait and switch" tactic to get votes.

The House Ways and Means Committee is in charge of writing tax legislation, and bills affecting Social Security Medicare, and other entitlement programs and Charles B. Rangel (D – NY) is the committee’s powerful chairman. As I will detail below, an examination of recent financial transactions by Rangel shows a troubling pattern of him using his office to enrich his own personal self-interests at the expense of taxpayers and voters. In addition, it has been reported that he took certain tax exemptions that he was not entitled to and failed to disclose certain income on his tax returns and congressional disclosure forms.

Campaign money steered to Rangel's son

Politico reported that from 2004 to 2007, Charles Rangel steered almost $80,000 in campaign funds to his son Steven Rangel’s internet company for a pair of web sites. Those web sites were so poorly designed that an expert estimated that they should not have cost Rangel's campaign more than $100 to develop.

According to Politico:

Steven Rangel’s design for his father’s National Leadership PAC site appears to have been slapped together in a hurry, intermittently updated and never spell-checked. An apologetic note near the top of the site warns readers that the page is undergoing “routine maintenace [sic]” and cautions that “much of our content is currently unavailable.”Another button urges visitors to “Give Contribuition [sic].”

The site “is a one pager with a third party site taking donations,” said Jamie Newell of 7AZ Web Design, a company that creates sites for a wide array of businesses in Washington. “For something of that standard, I would not pay more than $100.”
Apparently, Mr. Rangel campaign overpaid his son $79,900 or about 790 times in excess of what he could have paid anyone else for similar work. During 2006 election cycle, Rangel paid more money than any other House member to develop web sites. Rep. Ralph Regula (R-Ohio) and since-ousted Rep. Christopher Shays (R-Conn.) were distant second and third “runners-up, shelling out $44,000 and $30,000 for their websites.”

Using a rent stabilized apartment in NYC as a campaign office

The New York Times reported that Charles Rangel used a rent-stabilized apartment as a campaign office in violation of New York State and City regulations that require rent-stabilized apartments to be used only as a primary residence by tenants. Meanwhile, in that same building, Rangel occupies not just one, but four rent stabilized apartments at below market rents.
According the New York Times article:

Mr. Rangel, the powerful Democrat who is chairman of the House Ways and Means Committee, uses his fourth apartment, six floors below, as a campaign office, despite state and city regulations that require rent-stabilized apartments to be used as a primary residence.

Mr. Rangel, who has a net worth of $566,000 to $1.2 million, according to Congressional disclosure records, paid a total rent of $3,894 monthly in 2007 for the four apartments at Lenox Terrace, a 1,700-unit luxury development of six towers, with doormen, that is described in real estate publications as Harlem’s most prestigious address.

The current market-rate rent for similar apartments in Mr. Rangel’s building would total $7,465 to $8,125 a month, according to the Web site of the owner, the Olnick Organization.

The Olnick Organization and other real estate firms have been accused of overzealous tactics as they move to evict tenants from their rent-stabilized apartments and convert the units into market-rate housing.
Since the landlord has discretion over renting the additional rent-stabilized apartments, amounts paid below current market value by Mr. Rangel may also violate House rules on accepting gifts in excess of $100.

Simultaneously, using both rent stabilized apartments and his Washington property as a primary residence

Worst yet, the New York Post reported that Charles Rangel claimed his Washington DC home as his primary residence and took a homestead exemption, while at the same time he used his rent stabilized apartments as his primary residence. As detailed above, NY rent laws require rent stabilized tenant’s apartments to be their primary residence. In Washington DC, only primary residences qualify for the homestead exemption. Rangel cannot it have it both ways.

Failure to federal taxes on rental income from a property he owns in the Dominican Republic

Another New York Times article reported that Charles Rangel failed to pay federal taxes, state, and local income taxes on rental income of $75,000 from a beachfront house he owns in the Dominican Republic. Rangel failed to disclose the rental income on both his personal income tax returns and his Congressional financial disclosure form. Yet, Mr. Rangel is chairman of the House Committee that writes tax legislation.

Troubling campaign contributions to further his personal interests

The Washington Post reported that Charles Rangel solicited “donations from corporations with business interests before his panel, hoping to raise $30 million for a new academic center that will house his papers when he retires.” Rangel and C.C.N.Y President Gregory H. Williams agreed to name the new academic center, the Charles B. Rangel School of Public Service at C.C.N.Y., in the Congressman’s honor.

Charles Rangel violated congressional regulations when he used his official letterhead to solicit contributions for his pet project. A New York Times editorial scolded Rangel, stating:

Mr. Rangel plainly violated congressional regulations when he used his official letterhead to solicit support for his academic center from scores of business and foundation leaders.
According to the Washington Post:

Ethics experts and government watchdogs say it is troubling that one of the nation's most powerful lawmakers would seek money from businesses that have interests before the committee he leads. Rangel's panel has broad jurisdiction over tax policy, trade, Social Security and Medicare.
It turns out that in one specific case, Mr. Rangel was instrumental in preserving a lucrative tax loophole that benefited Nabors Industries (NYSE: NBR). At the same time, the company’s chief executive, Eugene M. Isenberg, pledged $1 million to the project.

The New York Times reported, that originally, “Mr. Rangel was among dozens of representatives from both parties who bitterly opposed” the lucrative tax loopholes that companies like Nabors Industries was seeking. After receiving the pledge from Nabors CEO Isenberg, Rangel now fought to protect those tax loopholes “saving Nabors an estimated tens of millions of dollars annually and depriving the federal treasury of $1.1 billion in revenues over a decade, according to a Congressional analysis by the nonpartisan Joint Committee on Taxation.”

What should be done?

Charles Rangel claims that he welcomes an investigation into his finances. According to CQ Politics:

Insisting he has done nothing wrong despite a growing list of questions about his financial dealings, embattled House Ways and Means Chairman Charles B. Rangel said Monday he welcomes a thorough ethics committee investigation of all the allegations against him.

“Everything that’s been said they should look at ... bar nothing,” the veteran New York Democrat said.
However, Charles Rangel has not offered to step down as Chairman of the House Ways and Means Committee, while an investigation of his questionable transactions is conducted. Meanwhile, House Speaker Nancy Pelosi (D - CA) has resisted calls for Rangel to step aside as Chairman while the investigation continues.

Pelosi wants a quick investigation of Rangel's financial dealings. Instead, there should be a thorough investigation, even if it takes time to complete and Rangel should step down as Chairman of the House Ways and Means Committee, pending the outcome of such investigation. The New York Times reported that:

The relatively quick timetable that Mrs. Pelosi outlined was striking, given that previous internal inquiries in Congress have tended to drag out for years.
A hurried investigation is unacceptable and it will have no credibility, whereas a careful, detailed, and thorough investigation will have credibility.

If Rangel refuses to step down as Chairman of the House Ways and Means Committee and Pelosi continues to resist removing him from that post, it will have rendered Democratic Party promises of "change" to nothing more than a "bait and Switch tactic" to get elected.

At Crazy Eddie, we used to "bait" customers by promising to "beat any price" to get them into the store. Likewise, did the Democrats use the prospect of "real change" in Washington to bait voters to elect their candidates?

When the customer finally arrived at a Crazy Eddie store, our sales people used to "switch" them to higher profit merchandise. Likewise, will the Democrats, who will control the Presidency, Senate, and House switch back to politics as usual and give special preferences to their powerful friends and allies on issues of possible corruption and ethics violations?

In an editorial today, the Washington Times, pointed out:

Almost immediately after House Speaker Nancy Pelosi threw down the gauntlet Jan. 17, 2006, saying Democrats "[w]ill create the most open and honest government in history," would those words be put to the test.
To House Speaker Nancy Pelosi, talk is cheap and action speaks louder than words.

Written by,

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Disclosure

I am a registered Democrat in New York. Convicted felons have the right to vote in New York (but they don't serve on juries, which I don't mind). I have voted for both Democrats and Republicans and have written about questionable behavior by Democrats and Republicans.

Other Blog Posts of Interest

11/30/08: New York Democratic Party Leadership Takes Money from Same-Sex Marriage Supporters and Won't Deliver on Promises

11/16/08: Advice to President-Elect Barack Obama about Combating White Collar Crime From a Convicted Felon

08/18/08: Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne Pays Utah Attorney General Mark Shurtleff to Defame a Blogger

Thursday, December 04, 2008

Manian Resigns From STEC, A Day After Broadcom Fires Him For Phony Credentials

Updated

This evening, STEC Inc. (NASDAQ: STEC) announced that Vahid Manian resigned as a director of the company, a day after he was fired from Broadcom (NASDAQ: BRCM) for falsifying his educational background in reports filed with the Securities and Exchange Commission. In an 8-K report filed with the Securities and Exchange Commission, STEC disclosed:

On December 4, 2008, STEC, Inc. (the “Company”) received notice from Vahid Manian of his resignation as a director of the Company to be effective as of the end of December 31, 2008. Mr. Manian is also a member of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. The Company has commenced a search for a replacement to fill the vacancy that will be created by Mr. Manian’s resignation.

On Wednesday, December 3, 2008, Fraud Discovery Institute co-founder Barry Minkow released details of a background investigation showing that Broadcom Corp. Senior Vice President and STEC Inc. Board Member Vahid Manian did not receive a “B.S.E.E and an M.B.A from the University of California, Irvine” as claimed in a Broadcom proxy filing and an STEC proxy filing with the SEC.

That evening, Broadcom fired Vahid Manian and issued a terse one-sentence statement:

On December 3, 2008, the employment of Vahid Manian, Senior Vice President, Global Manufacturing Operations of Broadcom Corporation and an officer and/or director of various Broadcom subsidiaries, was terminated. A search has commenced to find his successor.

Meanwhile, Microsemi Corporation (NASDAQ: MSCC) President and CEO James J. Peterson continues to categorically deny Minkow’s report that he has misrepresented his degrees from Brigham Young University in filings with the SEC. However, Brigham Young has re-verified that he did not receive a degree.

According to a Bloomberg News article by Ian King:

Microsemi Corp. Chief Executive Officer James Peterson didn’t receive any degree from Brigham Young University, according to the school’s registrar, repeating his position after Peterson said he expected to be vindicated.

“We have tried to look at everything that Mr. Peterson has said and tried to look for any possibility,” Jeffrey Bunker, registrar of the Provo, Utah, school, said today in a phone interview. “All of our records and information clearly verify and reverify what we stated earlier, that he did not receive a degree.”

James J. Peterson is a long-time friend of Vahid Manian, who was fired from Broadcom and resigned as a director of STEC after Minkow reported that Manian falsified is educational background. Peterson and Manian worked together at Silicon Systems in the mid-1990s and it was Peterson who hired and vetted Manian for that job. Both Peterson and Manian served together on the board of directors of STEC and were members of its audit, compensation, and nominating committees, before Manian resigned from STEC today.

Update:

Late this evening, Microsemi issued a press release supporting its embattled President and CEO, James J. Peterson. The press release hinted that even if Peterson falsified his educational background, as reported by Minkow and reasserted by Brigham Young University, Peterson is still assured his job at the company. See below:

Microsemi Corporation (NasdaqGS: MSCC - News) announced today that its Governance Committee of its Board of Directors is currently reviewing the status of the academic credentials of its President and Chief Executive Officer, James J. Peterson, and intends to work to resolve such status. Microsemi Board Chairman Dennis Leibel emphasized that Mr. Peterson has the full support of the Board and there are no plans to alter his role as President and Chief Executive Officer of Microsemi. "I want to assure our shareholders that Jim's educational credentials in no way reflect on the strength of Microsemi, which has been an industry leader. The Board's continuing support of Jim Peterson re-affirms our backing of his strategies, operational excellence and proven executive leadership,'' he said.

Note: Bold print and italics added by me.

Apparently, Board Chairman Dennis Leibel is hedging the company's position, just in case Peterson cannot substantiate his educational credentials by saying, "I want to assure our shareholders that Jim's educational credentials in no way reflect on the strength of Microsemi...."

In others words, he is implying that it is OK for the President and CEO of a public company to lie in SEC filings. The Microsemi board is advised to read SEC Regulations on compliance with a company's code of ethics.

To be continued....

Written by,

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Other relevant blog posts:

12/03/08: Barry Minkow Reports More Corporate Scoundrels Misrepresenting Credentials

12/03/08: Broadcom Executive Fired Today For Phony Credentials, While Microsemi Executive Remains Under Scrutiny

Disclosure:

I am not short or long any of the companies named in this blog post. However, the Fraud Discovery Institute and/or Barry Minkow may have a short position in the companies mentioned in this blog post. Please read the Full Disclaimer on FDI for Profit Status.

Over a year ago, I provided funds to Fraud Discovery Institute (FDI) to help pay costs of its investigations, though I had no control over any monies spent. I am not an owner, manager, employee, or consultant of Minkow or FDI and I have not received any compensation from them.

Index to White Collar Fraud Blog Posts

Other Blog and Media Reaction to my Blog

Wednesday, December 03, 2008

Broadcom Executive Fired Today For Phony Credentials, While Microsemi Executive Remains Under Scrutiny

Broadcom Executive Vahid Manian Fired

Broadcom Corp. (NASDAQ: BRCM) fired Senior Vice President Vahid Manian after a background report issued by Barry Minkow, co-founder of the Fraud Discovery Institute, uncovered him using phony educational credentials in filings with the Securities and Exchange Commission. Broadcom simply issued a terse one-sentence statement saying:

On December 3, 2008, the employment of Vahid Manian, Senior Vice President, Global Manufacturing Operations of Broadcom Corporation and an officer and/or director of various Broadcom subsidiaries, was terminated. A search has commenced to find his successor.

Broadcom could have at least thanked my dear friend Barry Minkow for uncovering lies by its Senior Vice President that the company was incapable of finding. No surprise in their lack of gratitude.

In my last blog post, I detailed how a background check by Minkow exposed that Broadcom Corp. Senior Vice President and STEC Inc. Board Member Vahid Manian did not receive a “B.S.E.E and an M.B.A from the University of California, Irvine” as claimed in a Broadcom proxy filing and an STEC proxy filing with the SEC.

So far, STEC (NASDAQ: STEC) has issued no statement about Manian’s status as a Director of that company. Marian also serves on STEC's audit, compensation, and nominating committees.

Microsemi Executive James J. Peterson "Categorically Denies" Falsifying Credentials, While Brigham Young Spokeswoman Reaffirms Findings in Minkow Report

In another press release issued today, Microsemi Corporation (NASDAQ: MSCC) President and CEO James J. Peterson categorically denied “published reports that he has misrepresented his degrees from Brigham Young University.”

According to another background check by Minkow, Microsemi Chief Executive Officer and STEC Board Member James Peterson did not receive a "B.A. in business administration and an M.B.A. from Brigham Young University" as claimed in STEC's proxy filing with the SEC.

According to that press release, Peterson said:

I am working directly with the University to clarify this situation. It appears that the background check there may have mistakenly been made with the name 'James J. Patterson,' not mine, as stated in a Seeking Alpha report.

Peterson probably read my earlier blog post this morning that was syndicated on Seeking Alpha. While I correctly spelled his last name several times, I misspelled his last name once in a paragraph towards the end of that post.

However, the background check by Minkow was done under the name "James J. Peterson" and not "James J. Patterson," as suggested by Peterson. In addition, the birthday and social security number (redacted from the report) is clearly Peterson's and does not belong to anyone else.

In Microsemi's press release, Peterson was also quoted as saying:

I have every reason to expect that Brigham Young will investigate this allegation shortly and officially confirm my degrees.

However, Bloomberg News went back and re-interviewed Brigham Young spokeswomen Carri Jenkins after Peterson's statements, above, denying that he falsified his educational credentials:

Brigham Young spokeswoman Jenkins said in an interview after the statement that she checked degree records again and couldn’t find any record of a degree for Peterson. She said she had been checking the right name.

“We are always very careful when we release this kind of information,” she said.

Note: Bold print and italics added by me.

Therefore, Brigham Young spokesperson Carri Jenkins reaffirmed background reports by Barry Minkow and his Fraud Discovery Institute that Peterson falsified his educational credentials.

Both Executives Also Serve on Board of Directors of STEC Inc.

Both Vahid Manian and James J. Peterson also serve on the board of directors, audit, compensation, and nominating committees of STEC Inc. As detailed above, while Broadcom fired Manian, STEC has taken no action, to date, to remove him from its board.

Worst yet, two of six board members of STEC Inc. and two of four members of its audit, compensation, and nominating committees used phony credentials in SEC filings, according to the Fraud Discovery Institute background reports.

According to today's Bloomberg article, "Peterson said he had vetted and hired Manian when the two worked for Silicon Systems Inc." Both Peterson and Manion worked at Silicon Systems in the mid-1990s.

As a minimum, Peterson failed to adequately vet the credentials of his long-time pal Manian, who lied to him about his educational background for several years. Is it possible that Peterson colluded with Manian to cover-up Manion's false educational background? Is it possible that they both colluded with each other to lie about both of their respective backgrounds?

To be continued....

Written by:

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Disclosure:

I am not short or long any of the companies named in this blog post. However, the Fraud Discovery Institute and/or Barry Minkow may have a short position in the companies mentioned in this blog post. Please read the Full Disclaimer on FDI for Profit Status.

Over a year ago, I provided funds to Fraud Discovery Institute (FDI) to help pay costs of its investigations, though I had no control over any monies spent. I am not an owner, manager, employee, or consultant of Minkow or FDI and I have not received any compensation from them.

Barry Minkow Reports More Corporate Scoundrels Misrepresenting Credentials

According to new background checks conducted by Barry Minkow, co-founder of the Fraud Discovery Institute, two more executives misrepresented their educational credentials in regulatory filings: Broadcom Corp. (NASDAQ: BRCM) Senior Vice President Vahid Manian and Microsemi Corporation (NASDAQ: MSCC) Chief Executive Officer James J. Peterson.

Worst yet, both executives sit on the board of directors of STEC Inc. (NASDAQ: STEC). Therefore, two of six board members of STEC Inc. and two of four members of its audit committee used phony credentials in SEC filings, according to the Fraud Discovery Institute background reports.

Vahid Manian

According to the first background check, Broadcom Senior Vice President and STEC Board Member Vahid Manian did not receive a “B.S.E.E and an M.B.A from the University of California, Irvine” as claimed in a Broadcom proxy filing and an STEC proxy filing with the SEC.

A Bloomberg News article by Ian King provides additional details:

Broadcom Corp. Senior Vice President Vahid Manian didn’t earn degrees from the University of California that are listed in his company biography, according to the school’s registrar.

Manian, who oversees global manufacturing at Broadcom, attended the University of California at Irvine between September 1979 and August 1983, but wasn’t awarded any degrees, said Mark Fonseca, who is responsible for privacy issues in the school registrar’s office, in an interview. Manian’s biography on Broadcom’s Web site says he has bachelor’s and masters of business administration degrees from the school.

Fonseca said Manian attended classes for four years, but didn’t graduate. He said he isn’t allowed by law to disclose why Manian didn’t receive a degree. Fonseca said the school had no record of Manian studying for an MBA.

Manian also sits on the board of STEC Inc., a Santa Ana, California-based maker of storage drives. A regulatory filing for that company also lists undergraduate and MBA degrees from UC Irvine in Manian’s biography.

Broadcom, based in Irvine, California, makes chips for flat-panel televisions, mobile phones and computer-game consoles. Manian joined the company in 1996 as director of operations, according to Broadcom’s Web site. Before Broadcom, he worked at chipmaker Silicon Systems Inc.

Broadcom spokesman Bob Marsocci said he was looking into the matter. A message left on Manian’s assistant’s voicemail wasn’t returned.

“I am sure that Vahid went to UCI and graduated, he was there with my brother,” Manouch Moshayedi, STEC’S chief executive officer, said in a telephone interview.

James J. Peterson

According to another background check, Microsemi Chief Executive Officer and STEC Board Member James Peterson did not receive a "B.A. in business administration and an M.B.A. from Brigham Young University" as claimed in STEC's proxy filing with the SEC.

Another Bloomberg News article by Ian King reports:

Carri Jenkins, a spokeswoman for Brigham Young University in Provo, Utah, said Peterson took classes from 1978 to 1980, but didn’t receive any degrees. A regulatory filing for STEC Inc., a company where Peterson serves as a director, said he has bachelor’s and master’s degrees in business administration from Brigham Young University.

A U.S. government security clearance application form provided by Peterson lists his position at Microsemi and states that he has bachelor’s and MBA degrees from Brigham Young.

Peterson was awarded an associates degree in arts, sciences and general education from Ricks College in Rexburg, Idaho in December 1978, said Kyle Martin, registrar of Brigham Young University -- Idaho. In 2001, Ricks College became Brigham Young University Idaho, which is separate from the school in Utah, he said. As a former junior college, it couldn’t have conferred a higher degree, he said.

“That’s not correct,” Peterson said, referring to the information provided by Brigham Young. “I’ll contact them immediately.”

Military Service

Peterson said in a telephone interview that he earned credits during his military service that counted toward the degree from Brigham Young. He didn’t provide a university transcript after earlier saying he would.

Cliff Silver, a spokesman for Irvine, California-based Microsemi, referred inquiries to the CEO. The company makes chips for military and aerospace customers, according to its Web site.

On November 16, 2008, this blog reported that by Barry Minkow and his private investigation firm, the Fraud Discovery Institute, found eight instances company executives misrepresenting their academic credentials. According to Minkow, those individuals touting phony credentials are:

  • MGM Mirage (NYSE: MGM): Chairman and Chief Executive Officer Terry Lanni:
  • Trimble Navigation Limited (NASDAQ: TRMB): Executive Vice President and Executive Committee member Dennis Workman
  • Cabot Microelectronics Corp (NASDAQ: CCMP): Chief Information Officer James DeHoniesto
  • Tetra Tech Inc. (NASDAQ: TTEK): President Sam Wesley Box
  • Knight Capital Group Inc. (NASDAQ: NITE): Director and former Executive Vice President Robert M. Lazarowitz
  • Helix Energy Solutions (NYSE: HLX): President and Chief Executive Officer Owen Eugene Kratz
  • Life Partners Holdings (NASDAQ: LPHI): Director Harold E. Rafuse
  • PepsiAmericas (NYSE: PAS): President and Chief Executive Officer Kenneth E. Keiser

The Fraud Discovery Institute's background checks on the above executives can be accessed here.

Deceitful directors and officers of public companies have been forewarned by Barry Minkow:

If you lie about your resume, past experience, and qualifications for your present job and such lies show up in SEC filings, he will find out about it and expose you to investors and regulators.

Minkow and I believe that if you lie about your educational background, you are capable of lying about anything else, too. Investors require honesty from the fiduciaries running their companies. If Barry Minkow can find false credentials in corporate America where company gatekeepers have failed, what other more devastating internal control failures exist that we do not know of?

To be continued....

Written by,

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Disclosure:

I am not short or long any of the companies named in this blog post. However, the Fraud Discovery Institute and/or Barry Minkow may have a short position in the companies mentioned in this blog post. Please read the Full Disclaimer on FDI for Profit Status.

Over a year ago, I provided funds to Fraud Discovery Institute (FDI) to help pay costs of its investigations, though I had no control over any monies spent. I am not an owner, manager, employee, or consultant of Minkow or FDI and I have not received any compensation from them.