Accountants Behaving Badly: Insider Trader Settles with SEC, Embezzler Gets Jail Time, Maritime Thief

Plus, accountant’s tax fraud conviction upheld in court, and a Canadian accountant is banned by financial regulator.

SEC charges biotechnology company CPA with insider trading [SEC]
Jana Faith Kiena, CPA, a former contract accountant in the revenue recognition group at biotech company Illumina, will pay about $374,000 to settle insider trading charges for using confidential information about disappointing company revenues to unlawfully trade securities.

According to the June 5 SEC settlement order, during a late June 2019 meeting, an Illumina accounting manager told Kiena and others that the company would have disappointing revenues for its second quarter of 2019. Shortly after the meeting, Kiena bought a total of 50 short-term out-of-the-money Illumina put option contracts.

On July 11, 2019, Illumina announced that its second quarter revenues would be lower than expected and updated its full-year revenue guidance. As a result, the stock price dropped, and Kiena sold the 50 option contracts, netting her $249,227. According to the SEC order, Kiena voluntarily reported her Illumina securities trading to SEC staff in August 2019 and cooperated in the SEC’s investigation.

Without admitting or denying the charges, Kiena agreed to a cease-and-desist order, to pay disgorgement of $249,227 and a civil money penalty of $124,613, and isn’t allowed to appear or practice before the SEC as an accountant for two years.

Whitewright accountant sentenced for federal violations in embezzlement scheme [Justice Department]
Beverly Diane Cross, a former accountant at MicroFab in Texas, was sentenced to eight and a half years in federal prison on June 3 for embezzling hundreds of thousands of dollars from the company.

Cross, 50, who pleaded guilty to wire fraud on Dec. 4, 2019, was sentenced to 102 months in jail and ordered to pay $620,408.14 in restitution.

Authorities say from 2015 through June 2019, Cross falsified payroll data and other company documents to pay herself unearned salary amounts and undue expense reimbursements. During the last two years of her fraud scheme, the average monthly amount of money she embezzled from the company totaled around four times her monthly salary. On one occasion, she bought a car from another MicroFab employee for her son, but stole the precise amount of money from MicroFab to purchase the car.

Cross’s actions resulted in a loss of approximately $620,000, several employees being given salary reductions, and two employees losing their jobs.

Ludington man pleads guilty to stealing from the Lake Michigan Carferry and filing false tax returns [Justice Department]
Paul Piper, the former financial controller for Lake Michigan Carferry, pleaded guilty to bank fraud and filing a false tax return on June 2 after admitting to defrauding the company, which operates the SS Badger ferry between Ludington, MI, and Manitowoc, WI.

Here are the gory details:

Piper, 58, defrauded various financial institutions and Lake Michigan Carferry in an amount between $550,000.00 and $3,500,000.00, by overriding normal accounting systems and writing checks directly to himself and to two of his affiliated businesses, Piper Tax & Accounting and Piper Group. Piper either forged the signatures of company owners on these checks or used a signature stamp without the authorization of the owners. Piper hid these transactions in the accounting system by booking these checks to an insurance expense code and by otherwise making false entries to balance company accounts.

Additionally, Piper filed false personal income tax returns with the Internal Revenue Service because he knowingly failed to include the income he stole from the Carferry, and other income earned from his tax business, on his federal income tax returns. As part of his plea agreement, Piper agrees to pay to the IRS $363,926.00 in past-due taxes, plus penalties and interest.

His sentencing is scheduled for Aug. 11.

5th Circ. upholds accountant’s tax fraud conviction [Law360]
The Fifth Circuit on May 28 upheld the conviction of Carl Nicholson, an accountant who was sentenced to five years in prison on 11 federal tax offenses, saying a trial court did no wrong when it accepted prosecutors’ evidence against him.

Carl Nicholson

The three-judge panel found in a published opinion that evidence produced on behalf of the U.S. government during Nicholson’s trial to back up its allegations of tax fraud was permissible. The panel also determined that the court did not violate the fairness of Nicholson’s trial by falsely telling the jury he would call witnesses during his defense.

Nicholson, a former CPA who ran his own firm from 2013 to 2015, was charged in 2018 with an 11-count indictment. The allegations were for filing false tax returns for himself and others, improperly claiming corporate tax deductions on life insurance payments for a client’s trust, and mischaracterizing payments for family travel as business expenses, according to court documents.

Following a four-day trial, Nicholson was found guilty in May 2019 on all counts and sentenced to 60 months in prison and three years of supervised release. The trial court also ordered Nicholson to pay restitution.

Surrey accountant banned by financial regulator for part in condo scheme [Business in Vancouver]
Vasant Pragjibhai Patel, a Chartered Professional Accountant from Surrey, British Columbia, is now permanently prohibited from conducting securities-related business in any capacity with a mutual fund dealer, according to a settlement agreement reached with the Mutual Fund Dealers Association of Canada.

He was also issued a $25,000 fine, and he must pay costs of $5,000, according to the MFDA ruling on June 2.

Patel was cited as having played a key role in a high-profile alleged illegal real estate marketing scheme that left some buyers high and dry.

He admitted he engaged in unauthorized sales and investment activity “by recommending or making referrals to at least 15 individuals to invest in, or loan money to, a real estate development project” and “by registering a company and serving as the president and a director of the company” contrary to regulations.

Patel, according to the agreement, also admitted he made “false or misleading statements” to MFDA investigators about what he knew about the scheme.

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