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Entries in Investigation (5)

Tuesday
Aug282012

Probe Launched into Validity of Energy Drink Makers' Claims

John Nordell/The Christian Science Monitor via Getty Images(NEW YORK) -- Are consumers being misled by the makers of energy drinks?  That's what New York's attorney general hopes to find out.

Citing a person familiar with the matter, the Wall Street Journal reports Eric Schneiderman has issued subpoenas to the makers of at least three energy drink products asking for information on marketing and advertising practices. The companies in question are PepsiCo, the maker of AMP; Monster Beverage; and Living Essentials LLC, which produces 5-hour Energy.

Beverage marketers claim these drinks quickly and effectively boost energy.  And consumers seem to be buying into these promises.  Last year alone, sales of the drinks amounted to nearly $9 billion, according to Beverage Digest.

Investigators want to know whether those sales are based on false or misleading claims.

Schneiderman issued the subpoenas last month but, as the Journal notes, the probe is still in its early stages and could grow to include more companies.

Copyright 2012 ABC News Radio

Sunday
Apr222012

Wal-Mart de Mexico Engaged in Widespread Bribery, NYTimes Reports

Justin Sullivan/Getty Images(NEW YORK) -- A senior Wal-Mart lawyer claims the company’s largest foreign subsidiary, Wal-Mart de Mexico, engaged in widespread bribery totaling over $24 million, The New York Times reported.

Wal-Mart de Mexico reportedly used bribes to obtain permits all over the country to build stores quickly and dominate the market. When Wal-Mart’s headquarters in Bentonville, Ark., was informed of the suspicions of bribery, an investigation was launched which unearthed that there was “reasonable suspicion to believe that Mexican and USA laws have been violated,” wrote the top investigator in a confidential report, according to The Times.

But Wal-Mart shut down the investigation, did not inform law enforcement in Mexico or the United States, and did not discipline any of the employees involved in the scandal, according to The Times.

Wal-Mart said today though that it has been investigating the situation since last fall.

“In the fall of last year, the Company, through the Audit Committee of the Board of Directors, began an extensive investigation related to compliance with the [U.S. Foreign Corrupt Practices Act (FCPA)],” said David Tovar, Wal-Mart’s Vice President of Corporate Communications, in a statement.

The Times claims Wal-Mart informed the U.S. Justice Department that it had begun to investigate possible violations of the FCPA only after the company learned of The Times’ reporting in Mexico.

Tovar said that because the investigation is ongoing, the company cannot respond to the allegations in detail.

“We are working hard to understand what occurred in Bentonville more than six years ago and are committed to conducting a complete investigation before forming conclusions. We don’t want to speculate or weave stories from incomplete inquiries and limited recollections, as others might do.”

The FCPA prohibits US companies from bribing officials in other nations to get business.

Copyright 2012 ABC News Radio

Monday
Mar192012

TaxMasters Inc. Files for Bankruptcy

ABC News(WASHINGTON) -- The well-known and controversial tax advisory firm, TaxMasters Inc., filed for bankruptcy Monday morning, just as it was preparing to head to court to defend itself from charges of deceptive practices leveled by the Texas attorney general.

The Houston-based company, best known for a national advertising campaign that made the company's bearded, red-haired founder Patrick Cox a recognizable figure, was the subject of an ABC News investigation in April, in which customers had alleged that the company persuaded them to pay large upfront fees, but never delivered on promises of helping them resolve their tax problems. The commercials boast that the company's staff of former IRS agents and tax professionals "have helped many good people just like you."

But Texas Attorney General Greg Abbott said the ads have been misleading. He filed a multi-count civil case against TaxMasters, accusing it of deceiving its customers and violating the state's debt collection laws.

"In the midst of a national economic downturn, TaxMasters used a nationwide marketing campaign to offer services for distressed taxpayers who needed help dealing with the IRS," Abbott said. "A state investigation and nearly 1,000 customer complaints indicate that the defendants routinely misled customers about the nature of their tax resolution service agreements – and worse, attempted to enforce those improper agreements through unlawful debt collection tactics."

ABC News made repeated attempts to contact the company and its founder last week, as word began circulating that it was in financial distress. TaxMasters' customers had reported to KTRK, the owned-and-operated ABC News station in Houston, that they were not able to get responses when calling about their tax filings, and one described visiting the company's office, only to find the doors locked. A telephone sales agent told an ABC News reporter that the company "was not taking any new sales," but would not discuss the company's dire finances any further.

Within the past month, the landlord that owns the building where the company is headquartered sued alleging that Taxmasters failed to pay its January rent. A contracting firm handling construction work at the office also sued the company alleging it had not been paying its bills. Videos on the company's website displaying the well known TaxMasters advertisements featuring Cox were no longer working. Recent filings with the Securities and Exchange Commission carry a warning that the company's earlier financial statements are being amended and should no longer be relied upon.

A spokesman for the Texas Attorney General told ABC News the state was preparing to head to court Monday morning in its civil case, but had not heard anything specific about TaxMasters' financial status. Court papers filed Monday morning indicate that TaxMasters has filed for bankruptcy with between $1 million and $10 million in liabilities.

The TaxMasters ad blitz has been a driving force in the company's soaring corporate revenues. The company, which went public in 2010, brought in $45.7 million, a three-fold increase in two years, according to filings with the Securities and Exchange Commission. The company linked "an increase in advertising expense" to "increased sales volume" in its year-end filing.

The Minnesota attorney general's office, which has also been investigating the firm, told ABC News that many of the company's employees are skilled telemarketers who have little knowledge of the complicated tax issues faced by people who have fallen behind in filing their returns or making tax payments.

"This is a company [that] is taking advantage of people, and unfortunately when people see it on TV, they do believe in it," Minnesota Attorney General Lori Swanson told ABC News. "When you call, you think you're talking to a tax professional. You're really talking to just a salesperson who's trying to get you to sign up."

Cox declined to be interviewed by ABC News, and in a written statement he did not address the specific allegations in the two states' lawsuits. TaxMasters has denied the allegations in the lawsuits and Cox said the company "prides itself on honest customer service, a transparent process with our customer, and seeking fair treatment from the IRS."

At the heart of the problem, says Attorney General Swanson, is a requirement that customers pay an upfront fee ranging between $2000 and $8000.

"When you pay these upfront, advanced fees, now you're signed up, you're stuck, and the promised help doesn't materialize," she told ABC News.

Audio tapes of some sales calls, turned over to the attorney general by TaxMasters, prove the point, she says.

Salespeople tell potential customers TaxMasters is 97 or 98 percent successful in reducing the amount of taxes owed.

"You're owing $19,000," the TaxMasters salesman tells a customer on a recording provided to ABC News by the attorney general.

"I mean we can get you down to basically next to nothing," he continues. "I think we are the most successful tax resolution company. We're 97 percent successful," the salesman says.

"Not true," said Attorney General Swanson. "It's another falsehood of this company. These salesmen tell people that to sign them up, but they don't deliver on those promises."

The IRS says only a small number of taxpayers ever qualify for such a substantial reduction in taxes owed.

Copyright 2012 ABC News Radio

Tuesday
Nov152011

Email: DOE Asked Solyndra to Delay Layoff Notice Until After Election

Ken James/Bloomberg via Getty Images(WASHINGTON) -- An email quoted by congressional investigators Tuesday suggests that the Obama administration asked solar firm Solyndra, the flagship of its green energy program, to postpone the announcement of job layoffs until after the 2010 midterm elections.

The House Energy and Commerce Committee's oversight subcommittee has been investigating the federal government's $535 million loan to Solyndra, which was backed by a major Obama fundraiser, to determine whether politics played any role in how the loan was awarded or restructured. The Department of Energy, which had made the California solar panel maker its first loan guarantee recipient, has maintained that the loan was awarded and administered based on its merits.

But the Republican majority on the subcommittee quoted an email provided by Argonaut Private Equity, the investment firm that backed Solyndra and is owned by Obama fundraiser George Kaiser, that the Republicans say shows that the Energy Department wanted to delay the announcement of Solyndra's layoff of 180 workers until the day after the Nov. 2, 2010 elections. According to the subcommittee, the layoffs were announced on Nov. 3, 2010, the day after the GOP landslide.

In early October, Solyndra was having financial problems and informed the Energy Department that it would need additional funds to keep operating. On Oct. 25, 2010, according to an email quoted by the subcommittee, Solyndra CEO Brian Harrison told the DOE that he had "received some press inquiries about rumors of problems," and also notified DOE that he wanted to tell employees about upcoming layoffs on Oct. 28.

According to a memo prepared by the subcommittee, Harrison's email was forwarded to Jonathan Silver, then head of the DOE Loan Programs Office, and to Energy Secretary Chu's chief of staff. Silver forwarded the email to Ron Klain, then Vice President Biden's chief of staff, as well as Carol Browner, then head of the White House climate change office, and another White House staffer.

On Oct. 30, 2010, according to the memo, "advisors for Argonaut Private Euity, Solyndra's largest investor, discussed the status of talks with DOE about the restructuring of the Solyndra [loan] guarantee." The subcommittee quotes an Argonaut email that says DOE "did push very hard for us to hold our announcement of the consolidation to employees and vendors to Nov. 3rd -- oddly they didn't give a reason for that date."

The subcommittee's memo says, "Several emails produced by Argonaut to the Committee reference the fact that the layoff announcement was postponed because of the November 2 elections." The memo does not quote from those emails or give dates.

The subcommittee also didn't release any of the emails quoted in the memo. Last week the Republican majority on the Energy and Commerce committee took heat from minority members for releasing incomplete emails in an attempt to make the Obama administration look bad. The Democrats said a fuller view of the emails in question actually presented evidence that the administration worked to avoid political meddling in the Solyndra deal.

The Energy Department said Tuesday that the latest email disclosure does not dispel its point: That the award to Solyndra was awarded on merit, not politics.

"The Republican report cites internal email from Argonaut about the timing of a press release," spokesman Damien LaVera wrote in reply to questions from iWatch News and ABC News. "But as the 180,000 pages of documents that the Department of Energy turned over to the Committee indicate, the Department's decisions about this loan were made on the merits, based on extensive review by the experts in the loan program -- and nothing in this Republican Committee memo changes that."

The DOE's Solyndra loan guarantee was announced in March 2009, two months into the Obama presidency, and heralded as a sign that a traditionally slow-moving agency could more rapidly spur projects benefiting the environment and economy. In its quest to award and later support its first guarantee recipient, the Energy Department ignored warnings from government staffers, outside analysts and even Solyndra's own auditor that it was, at best, a risky bet.

Earlier this year, with Solyndra swimming in debt, the Energy Department agreed to a refinancing that pushed back the company's payoff date -- and, notably, let investors including Kaiser stand in line first for reimbursement should the company fail. Those investors infused $75 million into Solyndra as DOE refinanced the company's debt this February. Under a pact between the parties, this round of investors will collect first in bankruptcy, and the government next.

Energy Secretary Steven Chu, who signed off on that agreement, will testify before the House Energy and Commerce oversight subcommittee Thursday. Jonathan Silver, head of the Energy Department's loan program, resigned from his post after testifying before the subcommittee earlier this year.

Copyright 2011 ABC News Radio

Tuesday
Sep202011

SEC Subpoenas Firms on Possible Insider Trading before US Downgrade

Ryan McVay/Thinkstock(WASHINGTON) -- Federal financial regulators have reportedly stepped up their investigation into cases of possible insider trading before the U.S. government's credit rating was downgraded last month.

Citing people familiar with the matter, The Wall Street Journal says the Securities and Exchange Commission wants to know more about traders who bet the stock market would tumble just before Standard and Poor's downgraded the U.S. from its triple-A rating on Aug. 5.  Those trades could have been hugely profitable.

SEC regulators have issued subpoenas, demanding more information from hedge funds, specialized trading shops and other firms, according to the Journal.  But it may be difficult to prove wrongdoing -- the downgrade was rumored for weeks, especially in the hours before the announcement was made.

Copyright 2011 ABC News Radio







ABC News Radio