SEC investigation of a corporation

valerielynn

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I have this dilemma that I'm trying to figure out. I have parts of it figured it out but I'm struggling a bit with a certain part of it. I know what the SEC (U.S. Securities and Exchange Commission) is and I know what they do but I need to do a little research so I can figure out what types of things would raise some flags with the SEC, and cause them to open an investigation on a multinational corporation.

So I have these three characters named Patrick, Adam, and John and the three of them own a very successful multinational corporation. Patrick is now a senator and when he was running for senator, the business he and his friends started was suddenly under investigation by the SEC and it was discovered that John and Adam were doing some illegal and shady things within the business and they were sent to prison. But it was actually Patrick that was responsible for these illegal and shady activities but somehow he pinned it all on Adam and John and made it look like they were responsible for these illegal activities within the company. Patrick was investigated as well but he somehow made himself look innocent and also denied the fact that he knew anything about these illegal and shady business practices. But now it's coming back to haunt Patrick because there is someone who wants to destroy Patrick's political career, his family, and the business.

What I'm having trouble with is what kind of illegal or shady activity could have been going on inside the company? The only thing I can think of is embezzlement but I want to consider all possibilities so I can better develop this. Also since Patrick somehow covered up the fact that he was part of these illegal and shady activities what would be some ways that Patrick could hide this from the SEC or anyone else?
 
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CWatts

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Falsifying their earnings--"cooking the books"--immediately comes to mind. Read up on Enron and WorldCom for examples.

What type of business are they in? Is it privately held, or publicly traded on the stock exchange etc.?
 

cbenoi1

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o Insider knowledge / market manipulation. Ex: tipping a friend / family member of an upcoming event that would significantly change a company's valuation. Tanking a company on purpose so that stock derivatives get a much better valuation.

o Bribing officials. Either government officials, valuation agencies, or any auditing 3rd party. Taking an active part in an election or a political party above and beyond what is considered permitted in order to get government contracts.

o Mis-reporting of revenues or losses.

o Monopolistic behavior.

-cb
 

CWatts

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They need not be purely financial crimes.... That fertilizer plant in Texas had a huge record of safety violations but they were never enforced, so now several people are dead. It would even worse for his political career if an industrial accident or environmental disaster happened in the state that elected him Senator.

Bear in mind also that once he was elected, there are a lot of restrictions on what he can do with the company and even what stock he can own. Politicians are supposed to have their investments in a "blind trust" they can't directly control. (But if you don't think Dick Cheney was still running Haliburton when he was VP, I have some nice beach front property in Kansas to sell you....)
 

ironmikezero

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Sometimes SEC investigations (securities/stock manipulation, insider trading, etc.) can overlap with violations of banking laws which typically fall under the US Treasury Financial Crimes Enforcement Network (FinCEN). While not as well known as the SEC, it is an extremely efficient and effective intelligence/investigative operation with (among other responsibilities) a counter-terrorism mandate in pursuit of civil and criminal violators. They can and do operate globally.

http://www.fincen.gov/
 

King Neptune

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What does the corporation do besides break laws? That may be central to what laws they would break.

Failing to disclose something major that was coming up might cause an investigation.

Since it is a multinational bribing officials somewhere would be a problem. The most effective place to bribe someone would depend on what they do.
 

WeaselFire

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A typical SEC trigger for at least suspicion is earnings that don't fit within industry norms or a sudden profit increase without any significant business changes. These are things the computers kick out all the time.

A classic example would be a company that buys all its widgets from a specific manufacturer, often off shore, and sells the widgets for an extremely low profit. But the widget manufacturer, off shore and free from observation, is making triple profits. It also happens to be owned by the same company that is selling the widgets.

Then again, that's why the airlines are always operating at a loss...

Jeff
 

MythMonger

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What does the corporation do besides break laws? That may be central to what laws they would break.

Also, what were the characters' roles in the company? Were they CEO/CFO/COO?

How much of the company did each one own? Did one have a controlling share (51% or more) or did it take two or maybe all three of them to form a majority?

Also, does it have to be the SEC that cracks down on them? If it could be the IRS, that could give you other crimes to consider.
 
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Bing Z

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Why not insider trading? A little cliche perhaps but it's happening all the time, from Martha Stewart to Steven A. Cohen. The best parts are: a) it's common, so readers prolly understand the concept without the need of much explanations; b) it's easy to write with minimal research, great if this SEC thing is just a plot device.