Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Comments from Scott London interview – part 3

leave a comment »

This is the third in a series of posts describing comments in an interview of Scott London during a four-hour CPE session on June 26. The first post explained the goal of this series is to organize a number of comments in the session. The course was presented by The Pros & The Cons.

Status with Bureau of Prisons

As an aside, the Bureau of Prisons has an Inmate Locator Service, which provides public disclosure of federal inmates.

On July 10, Scott London is listed in their database. His register number is 64641-112.

His status is Not in BOP Custody with a release date of Unknown.

Back to the interview…

The sting

Let’s step outside the interview.  At a time I’ll tie in later, the SEC called Mr. Shaw. He poured out the whole story.

Then the FBI got involved and the sting started.

Back to the interview.

In early 2013 Mr. London received three or four phone calls from Mr. Shaw asking for more information.

On the surface, he was trying to start the insider trading again. At a deeper level, this obviously would have been part of the sting. Obviously, those calls would have all been recorded.

Mr. London said no each of the first several times.

Eventually he agreed and started passing nonpublic information again. That is the information we can read about in the criminal information and statement of facts.

Later I’ll cross link the dates.

The sting resulted in a confrontation, confession, criminal charges, and photo splashed on the front page of the Wall Street Journal.

Was the sting necessary?

Michael Sallah, an investigative journalist with the Washington Post, was one of the interviewers. He thinks the SEC needed to go through the sting with Scott London to have enough information to bring criminal charges. Without photographs, passing of currency, and recorded conversations they would only have been able to bring a civil suit. Criminal insider trading is hard to prove.

Mr. London disagreed with that assessment. He indicated that he would have confessed immediately when confronted. That is likely true. However, no federal agents knew that.

Let’s ponder what the feds had before the sting.

Mr. Shaw’s apparently an active trader. Activity in his accounts would indicate that a small handful of his presumably large number of trades were home runs. They happen to correspond to major public information being released, but that could just be incredibly good luck or clever insight.

They had no paper trail linking Mr. London to Mr. Shaw.

They had no recorded conversations.

The payoffs to Mr. London were in currency. That a lot of money floats around in Mr. Shaw’s business is no big deal. He’s a jeweler and will frequently pay customers in cash for items they want to sell. I am confident he gets paid in cash often. He deals with lots of cash.  There would be no way to trace cash flows in his business and link them to Mr. London.

What did the feds have before the sting?

All they had to support the case was Mr. Shaw verbally blaming a friend who happened to be a partner in a Big 4 firm.

Yea, right, the feds were likely thinking.

When you think about it from that direction, there’s no way the feds could have brought a criminal indictment against Mr. London without the sting.

I doubt they could have brought a successful civil charge.

I can picture what the SEC was thinking early on. If they brought a case, the target could simply deny it, and the SEC would have to drop their case because they wouldn’t be able to prove anything. Who would a jury believe? A jeweler trying to avoid a civil charge or a trusted Big 4 CPA with absolutely no blemishes on his record and absolutely no links to the trading other that shared golf tee times.

Picture this as the basis for debate in the jury room: flat-out denials from the accused combined with a complete lack of any physical, financial, or electronic evidence whatsoever. How well would that go for the feds?

Previous posts:

Next post: The worst day of his life.

Written by Jim Ulvog

July 11, 2014, 8:08 am at 8:08 am

Posted in Audits

Tagged with

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: