CD: What broad trends have you seen in corporate fraud, both globally and within your region of focus, in recent years?

Maloney: It has been well publicised that regulators have focused in recent years on fraud types such as insider trading, bribery and corruption, and cases connected to the financial crisis, particularly in the US. These areas represent fraud types that certainly have increased in visibility and, perhaps, frequency in recent years. However, while regulators’ focus is a relevant indicator of corporate fraud trends, instances of certain other fraud types have also remained steady, or increased. For example, there has been a steady stream of Ponzi-scheme type frauds in recent years, both large frauds like Madoff, and other investment-schemes smaller in comparison to Madoff but significant in their own right, particularly to those affected by them. The recent financial crisis and related decline in financial markets helped expose some of these matters, and since markets have now largely rebounded regulators will need to be more vigilant in pursuing these frauds.

Cornmell: There have also been a number of cases and investigations related to so-called ‘Chinese reverse mergers’, whereby a China-based business merges into a US public registrant shell company, and then publicly reports financial results that are alleged to be significantly misstated. In the UK, there have been a disproportionate number of frauds related to alternative investment schemes, potentially driven by investors being drawn to riskier investment schemes in today’s low interest rate environment. 

Oct-Dec 2013 issue

Navigant Consulting

Debevoise & Plimpton