The Fraud Squad

The Fraud Squad

The Fraud Squad

A summary of what's in the major U.S. newspapers.
June 18 2005 5:47 AM

The Fraud Squad

The New York Times and the Washington Post lead with the conviction of former Tyco International Ltd. executives L. Dennis Kozlowski and Mark Swartz on charges of grand larceny, conspiracy, securities fraud, and falsifying business records. The Los Angeles Times leads with MasterCard's announcement that a security breach at a credit card processor gave hackers access to 40 million credit card numbers from all four major providers, at least 68,000 of which have already racked up fraudulent charges.

Kozlowski and Swartz were charged with embezzling $150 million from Tyco in the form of illicit bonuses and forgiven personal loans, as well as with making $430 million more by selling company stock after inflating its price with misleading financial statements. The WP hailed the convictions as a victory in the struggle to combat white-collar crime. The NYT piece, however, paints a far more sympathetic picture of the executives, focusing on the emotional verdict reading and on Kozlowski's attempts to rationalize his behavior from the witness stand. The NYT says that the guilty verdicts came "even as some have suggested that regulatory scrutiny and prosecutorial zeal have been too harsh on corporate America." The LAT fronts a much shorter piece, just recapping the facts of the case.

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The LAT's credit card story (along with similar pieces fronted in the NYT and the WP) gives a quick explanation of how credit card purchases are authorized by processors like CardSystems Inc. The piece then explains how a "rogue program" planted in the computer network of CardSystems compromised millions of card numbers. In all three stories, CardSystems says it uncovered the security breach, notifying the FBI and the credit card companies in late May. The NYT, however, writes that MasterCard claims to have discovered the flaw on its own, after being notified by several banks of unusually high numbers of fraudulent charges. All the papers write that card-issuing banks (and not credit card companies) are responsible for informing customers who may have been affected by the security breach. However, only the LAT points out that banks rarely do so, due to the cost of replacing cards, adding that it could cost more than $1 billion to replace all 40 million compromised cards.  

The WP off-leads with the news that the bird flu medication amantadine has been "rendered useless" by years of Chinese farmers using it to prevent outbreaks among their chickens. Due to the medicine's widespread, government-sanctioned use in China, the bird flu virus has mutated and developed immunity to the medication, which would have been the cheapest and most readily available in the event of a bird flu pandemic. The WP cities a World Health Organization warning that the virus carries the potential to kill tens of millions worldwide and that amantadine would have most likely been the most effective way to curtail an epidemic.

The NYT fronts Guidant's recall of 29,000 implanted defibrillators whose severe design flaws predispose them to shorting out instead of shocking the heart back into a normal rhythm. In the case of one of the three affected models, Guidant has known since 2002 that the device was prone to electrical failure. At least two deaths may have resulted from the design flaw. The recall only covers certain models and only those implanted before 2002. The NYT credits its own piece from last month with triggering the recall. No mention is made of any legal action pending against Guidant.

Iranian presidential elections will most likely go to a runoff for the first time in 26 years, the LAT reports, since no candidate has a majority of the votes. The candidates expected to advance to the runoff remain a bit of mystery, however. Reports from state media are saying that two conservatives, former President Hashemi Rafsanjani and Tehran Mayor Mahmud Ahmadinezhad, will compete in the runoff. Meanwhile, the camp of reform candidate Mostafa Moin begs to differ, citing returns from central Iran, where the votes have already been tallied and show Moin meeting Rafsanjani in the runoff. The LAT piece focuses on the Moin campaign, a minor miracle in and of itself since the highly conservative Council of Guardians had originally ruled that no reform candidates would be allowed to run. The article also touches on the problem of voter apathy in Iran, where the reform-minded are inclined to see voting in the country's heavily regulated elections as a tacit endorsement of a government that remains autocratic at its highest levels.

That's a Latte Money… Under the fold, the WP runs a cautionary tale of students who rack up big student loan debt by indulging their taste for a particular beverage: the $3 latte. Here, the Ant and the Grasshopper fable gets a caffeinated twist from anti-Starbucks activist Erica Lim, director of career services at Seattle University School of Law. Lim is on a mission to convince students to stop buying expensive coffee with student loan money, and she estimates that drinking homebrewed coffee instead would save $55,000 over 30 years.

Jesse Stanchak is a writer living in Washington, D.C.