pression yeah so how do we deal with this in a way that doesn't make us look like the largest banana republic in the world i'm looking at your congress. now on monday's show we looked at the latest drama surrounding herbalife the multibillion dollar nutritional supplement distributor that many have accused of being a pyramid scheme shareholders and consumer activists are calling on regulators specifically the federal trade commission to step up and do something about it now joining me is a man who knows a thing or two about fraud it's white collar crime expert and convicted felon now sam what do you think of companies like herbalife an amway and even avon whose entire business model is based soley on multi-level marketing if i within my

retirement from crime i'd start a multi-level marketing company put horribly based in utah because china doesn't want to. really so i feel as though that says a lot given that you who are a self-proclaimed former white collar crime or convicted white collar criminal is multi-tiered marketing a fraud. it's a quasar. scheme to defraud people out of this money basically it's a business of selling hope most of these people that are recruited don't make any money and even the ones that do make money if you factor in the time that they put into it it's below minimum wage you get a better living flipping hamburgers at mcdonald's. ok well here is someone who would agree with your activist investor bill ackman he's been extremely vocal about herbalife being a pyramid scheme and his fund pershing square capital it's so sure of it that he's taken a one hundred billion dollars short position in the company now the question is why

would such a sophisticated investor be so vocal about a potential pyramid scheme if they weren't absolutely positively certain that it was in fact a pyramid scheme well i believe that i believe that it's a pyramid scheme i don't think that herbalife is going to sue acme because then they'd be open up to discovery because that would give documents subpoena power and you know you don't want to pissed off short so we're going through your books and records no you certainly do not which is actually already done there's lots of presentations that he's done that kind of put evidence this but they recently talked about getting into the company's internal books and records you know you know which is still one of the publicly traded company terms so it's now here's the question you know price waterhouse cooper they've come in and they've looked at the books they're new auditors and they've given them a clean bill of health and herbalife they certainly have plenty of cash cash flow to fund my value at various ways a good price. i'm sorry to interrupt you price waterhouse coopers looking at the books as kind of like k p m g looking or crazy or these books when we were through ads as a criminal i used to brag about what it did for the initial reports it's

a nonevent in fact the big four accounting firms they feel between twenty five and forty nine percent of what it's inspected by the p.c.'s will be nonevent wow well if you think about enron we like their accountants they're pretty stand up accountants before. now but back to my question what i want to say you know herbalife they certainly have the cash flow to to fund this buyback effort that they're talking about but by taking on new debt they now have the ability to accelerate that effort is this a good thing or does it just give them another tool yet another tool for taking advantage of a stock price that's trading below where they believe it should be who did the we need to legalize form of stock manipulation they're buying. the stock to act meant to punish them to punish what sells in the short term it works but in the long term it destroys the company's long term business prospects ok and i mean that's a problem obviously now we could talk about herbalife forever but i think people

might get bored of it so i want to turn now to j.p. morgan who get bored of it now we recently learned that the bank c.e.o. jamie dimon received a whopping seventy four percent raise this year and take it home now a total of twenty million dollars that's up from the eleven point five million he got the year before now mind you this is the same year the very same year that j.p. morgan was fined over twenty billion dollars by the justice department and i want to read you this quote matto you wrote an article in rolling stone saying quote the biggest news to me was how brutal an indictment jamie's raise was on the obama holder justice department which continues to profoundly misunderstand the mindset of the finance villains they claim to be regulating now here's the question sam do you think matt tavi is exaggerating or is there some merit to his argument. actually he's been quite nice our justice department has turned into tax collectors you commit a crime you don't do time there's no confidence crime without consequences will you do if you pay a small fortune

a relatively small fine. of the billions of dollars in gotten gains and to jamie dimon to get a raise after they settled with the justice department is kind of like giving eric holder the middle finger. sam when you really think. you know the justice the justice department was bragging about the settlement thirteen billion dollars who so what does that i mean get a few weeks later he gets a seventy five percent seventy four percent raise that's sticking that's giving them the middle finger pretty much there and i would say now another fraud case that's making headlines lately is the hewlett packard autonomy deal now h.p. purchased the british software maker in two thousand and eleven but has since told authorities that it's found serious accounting errors in the company seriously eighty percent off accounting error is now in twenty twelve h.p. took an eight point eight billion dollar accounting charge tied to the takeover and said quote serious accounting improprieties represented about five billion of that write down how can a ten billion pound ten billion pound because it was conducted in pounds the merger

go through with accounting fraud on this scale it just seems too massive. well you know as a as a retired crook so to speak never underestimate the stupidity of big institutional investors of big corporations h.p. ignored warning signs that were that were publicized by both short sells is also an independent research firm green analytics that questioned autonomy's revenue accounting questions its capitalization of certain course way before h.p. took it over the ignored the warning signs they relied on the integrity of order to financial statements autonomy's ordered that financial statements it's kind of like when vic the palmeri took over crazy and relied on the integrity of our order to financial statements to find empty boxes wall h.p. found the equivalent of the empty boxes at autonomy because time and time again people get this sense of false security from big for what it's there worthless but

here's the thing publicly traded companies you would think that the audit would have to be more secure regulated know what it's first what it's not as not as secure as you think they offer us of all the world what it's a misleading term it should even be quoted in the world it's well it is is a limited compliance review that's going to catch material or is designed to catch material errors but unintentional material i was in there was it's not directly designed to catch fraud and because we still quarrel or that's the public is under the impression that that's the real work that they're doing but they don't really do what it's of public so we traded companies now quickly i want to talk about insider trading specifically the sac capital trial and michael mart homa how do you feel about the way the trials been handled so far and specifically do you think that he's going to be found guilty. i believe will be found guilty the defense is making the same old same old dog given that the witness i think it's sidney gilman

i think his name is the main witness has faulty memory every witness has a little bit of faulty memory who if you recall exactly the events of the past looks too rehearsed. the only thing i would say that steve coleman was smart enough never to use e-mails for criminals e-mails or evil he was smart enough not to use an e-mail when he spoke to matthew martoma for twenty minutes after more tell more allegedly received that inside information about why if you want now i want to ask you why is it been so difficult for prosecutors to convict steve cohen personally of insider trading they've gotten a lot of other you know him but not him why because in every case even in the crazy any case you need a lot of witness a lot of coconspirator that was there that can testify against his fellow coconspirator in you had steinberg which is the person i was just recently convicted he wasn't cooperating he had direct access to cohen you have martoma was

not cooperating who had the wrecked access to those who are calling i will tell you this that if more tomer is convicted the friends are going to fry is this very like when they don't like losing the big fish now final question yes or no do you think insider trading should even be illegal i think it should be legal it's it's kind of like you know the american economy is really a casino but the casino to run the fair game you don't want somebody having a mark that could cause an insider trading just like a mock deck of cards well said are right sam and i thank you so much for your insight and time that was white collar crime expert sam antara. thank you for having me on up next francine mcconnell is back talking about creative accounting and those who seem to be getting away with it you won't want to miss that conversation so stay tuned and then add harrison joins me to talk knocked up past and present in today's big deal but as we head to a quick break here is a look at some of the closing numbers of the bell stick around.

through. the day. it was a little very hard to take out a little. longer than that or back with that hurt right there. little. league. little.

little. list of the. is there a new cold war brewing pitting the west against russia what is being called a reset relations at the start of the obama presidency today is in tatters western media and politicians are determined to between russia and the worst possible light even to the point of undermining the sochi games what more these new cold warriors hoping to achieve. is obviously more for the latest because it's paying. women wanted to avoid rape they really need to buy guns environ how to use them. this is the one that i want to go with them once again it's the field for women definitely a target of the gun lobby and one you don't want to kill them not one that killing

not even if somebody would you would piss with her. i'm noticing more and more and that's really scary marketing tactics which implies that women have some sort of moral obligation to own guns to protect their family and young girls shoot out here too so we do have a pink or. more kids young kids choke on food than are killed by firearms if being armed made us safer in america we should be the safest nation on earth were clearly not the safest. the few. economic ups and downs in the final months day the new york sang i and the rest because i take it will be everything we own all things.

now continuing with our accounting theme today we turn now to an earlier conversation with writer and independent blogger francine mckenna now she spoke to us about the lack of interest in accounting fraud and about accounting irregularities at zynga specifically about internet company with all the games now of no after the bernie madoff scandal the f.c.c. eliminated completely got rid of an accounting fraud task force to pursue made off like investment advisors and market manipulators and that's just just what the charges against steve cohen seem to be about so i started by asking her what she thinks about the season four spent accounting fraud. for the made off scandal vs

the c.v.a. apparently eliminated in accounting fraud task force to pursue made off like investment advisers and market manipulators as well now that's what the charges against steve cohen today seem to be about but what do you think about this as the season foresman of accounting fraud in the in the first place. well again one sarbanes oxley was passed in two thousand and two there was this sort of warm and fuzzy feeling that we would have no more corporate fraud everyone was too afraid to see opposing c.e.o.'s were too afraid because they had to sign on the dotted line for their internal controls. that auditors were now on notice and had sort of the power end in. behind them of the law are to deal with their client strictly and make sure that they told the line in particular on internal controls however again there was a complete lack of enforcement and the auditors have gone right back to where they were probably even worse than they were before enron in terms of doing all kinds of

other consulting and tax services for our clients and capra my eyes in their integrity and their independence. we really did not see the kind of reduction in accounting fraud however the r.c.c. for example did not. focus on those and forstmann so not only missed the made our scandal but once they realized that they had missed the major. scheme they went back and focused specifically on that and said oh we don't have any more accounting fraud because. companies are not restating their accounts when they find errors and mistakes companies and auditors are the ones that define whether or not they've made a mistake that's significant enough or a restatement it's sort of self-serving to say that because they're not deeming the mistakes they make the manipulation that maybe ends up surfacing too large to ignore if they don't focus on that and they don't admit it therefore there must not

be any fraud what happened was dad frank introduced the whistleblower provisions and they could no longer ignore the fact that whistleblowers were starting to charge them for still exists and now they've reestablished the fraud task force and now they said. going to go back and look at accounting fraud it's like regulators they just kind of doubled down on their mistake if you will now two years ago you wrote a widely read piece called social media's phony accounting which detailed the accounting methods of zing who the makers of farmville run by pincus now can you briefly describe to our viewers what happened there and preferably in layman's terms if you could well again ernst and young is the predominant auditor of these new sort of social media social networking technology companies ernst and young go out it's facebook it's google it's group here in chicago which was another accounting

disaster and xenia in particular was doing something sort of funny. and how it actually valued. it's revenue how it actually recognized its revenue under the guise of saying they were in a new business and they could actually look and say they were selling these virtual goods like tractors and farm implements related to some of their games like farmville they would recognize the revenue from selling those. toys basically there as i'm going to is that people play with in different ways made up those rules ernst and young in the pre i.p.o. stage when they were trying to figure out how are they going to operate how are they going to do that and so when you have an art or that's predominant in particular industry and they get involved with a lot of companies at the i.p.o. stage they set everything up for them and they're able to sort of

a sterilisation an argument for how they're going to do things and that's the one and then ends up getting accepted by the industry because who can argue with the auditor and so really incredible now the single case that shows us how difficult accounting is for most people to understand do you think the complexity of accounting makes prosecutors shy away from concentrating on accounting based fraud . well i think that unfortunately accounting gets a bad rap for being sort of boring and technical and tedious it really is pretty fundamental certainly the rules are made in order to deliberately obscure and i have to. make it something that people shy away so one of my major criticisms is that a lot of media. take the shot it firms word for how things work and what is going on in a particular company when someone comes under scrutiny that's like asking the world to guard the henhouse they're the ones that are giving the ok on that and they're

the ones that are telling journalists there's nothing to see here move along it's not a big deal and it's nothing unusual and so i think that business journalist really need to take a little time if you want to stay on this you really need to educate yourselves so that you can be bulldozed by those that are really are doing so for their own self interest knowledge is power that's for sure now what kind of c.e.o. and c.f.o. behavior are previous legal problems do you think of the warning signs of potential counting frauds that auditors could focus on. well one of the things that the c.c. has actually acknowledged is that many many companies not even just the ones in the technology arena but many companies are using nonghet measures that means not generally accepted accounting principles. measures that they make up in order to

give investors and the public and media the perception that they're doing a lot better than they really are the reason why we have accounting standards is so that there is a level playing field that you can look at apples and you can look at oranges and you can equate the financial information that's coming out when companies start making their own measures you can't really compare one company to another you're really making a decision to take their company's management word for it and if you look at some of the compensation packages especially in some of the new technology companies you can completely understand why management might want you to think that there are a lot more successful and keep pumping up their stock and keep making sure that they can are borrow money etc so you have to be very very skeptical in particular when a company is using too many nonstandard measures to try to explain away the things that they're doing wrong francine well said and we thank you for your time and your

insight please come back on the show very soon there's always a lot of accounting to discuss and with tax season just around the corner we know we're going to get but thank you thank you so much thank you. that was financial journalist and blogger francine mckenna time now for today's big deal. mr edward harrison joins me now to discuss free trade and free trade agreements specifically now in yesterday's big deal we spoke about a new bridge connecting detroit michigan to ontario canada as a controversy in free trade today we want to talk about the trade agreement that makes this very bridge viable now just over twenty years ago the north american free trade agreement between the us canada and mexico went into effect twenty years

later nafta has become a template among advocates of free trade but not is a contentious issue because of the impact it has had on businesses and jobs in america and in mexico now independent presidential candidate ross perot famously said in one thousand nine hundred two in a debate with george h.w. bush and bill clinton that nafta would quote create a giant sucking sound as jobs left the u.s. manufacturing world for mexico here's how he put it. in your factor south the border pay a dollar an hour for labor hire young probably put that to someone who's been in business for a long time you've got about three or four a about an hour for your labor. i have no healthcare that's the most expensive single album i can have cars have no environmental controls no pollution controls and no retirement. and you don't care about anything but my good money there will be a general sucking sound going south so try and seconds on a couple of those ninety nine you tell i'm very old ok twenty years later some

economists talk of the hundreds of thousands of jobs lost and downward pressure on us wages at the same time other economists talk about lower prices that have resulted from competition and the canadian embassy in the united states once commissioned a study which showed seven point one million american jobs supported by a trade with canada ed what about the giant sucking sound did not to destroy the job market here i don't think that you can lay the blame at the feet of nafta it definitely has created a situation where we're competing against mexican labor the lowest rungs of the labor force and you know there's going to be suffering sell out of sorts and that's why economists are saying that you know many millions of jobs or hundreds of thousands of jobs at a minimum have been lost but you know you saw the thing from canada i think seven point one million jobs given the fact that canada is only thirty five million people seems like a bit of a stretch very big and those numbers are not awesome basically they're saying that

you know seven point one million jobs are connected to a tree with the united states and therefore you know they can use that as a padded number to say you know we're this important but it gives you the sense that you know trade is important and in fact we've seen sri between the united states canada and the u.s. you know triple quadruple rates on period it just took twenty years now nafta has increased trade between canada the u.s. and mexico as ed was saying man in one thousand nine hundred three before now after the u.s. export of one point one hundred fifty four billion dollars to mexico and canada and imported one hundred seventy four. billion by two thousand and six fifty percent of mexico's exports and forty five percent of its import wages with the u.s. and forty five percent of its imports were with us now which is just their imports twenty twelve the u.s. export to hundred ninety two billion lots of numbers here two hundred ninety billion dollars that imported three hundred twenty four billion to canada alone total us not to trade is over one trillion dollars ed the u.s.

is exporting grain and poultry now to mexico and the poultry lobby is very excited about nafta during this trade is good is it not so i think that the whole thing about poultry and grain that's exactly the problem you know because they had a little card saying you know we the united states with enormous farm subsidies can go into into mexico with our subsidized corner subsidize poultry and basically wreak havoc in places like us and so forth where you have to. or having problems and so you know immediately. came into into being we had a huge tequila crisis they called it one thousand nine hundred four where we were you know robert rubin larry summers bill clinton the whole gang got together and build out mexico this is just i don't think it's necessarily a coincidence is the fact that you know we were having all this do you regulate all

of this free trade and you know the whole thing blew up finally free trade friend or foe i think i'm a friend in general but i think there are problems well said that's all over now but you can see all segments featured in today's show on you tube youtube dot com slash two of us are two also love hearing from you so please check out our facebook page facebook dot com slash boom bust our teeth also tweet out us at aaron aides at edward n.h. talk about free trade for all of us here of the us thanks for watching see you next time. in one corner of the wall street superhero jamie the table and diamond drug goes wild. and in the other corners the evil no good they refused to hell below

long-term capital management always dick the gorilla fold who. their immediate the slightest think that paulson will be rescued this stage rumble in the wall street jungle with a seven or billion times out of the audience tricks yes the game is rigged. the united states has significant technological agile for the rest of their wild and it is now using that absolute spy on the rest of the wall then there was the deal between the u.s. and england where u.s. spy agencies couldn't spy on people in the u.s. but british a spy agencies could spy on people in the u.s. so the two governments said alright each of us will spy on the other citizens and then we'll trade and that way we'll be surveilling our own people so this is what

i think of as the scandal. of the plane. the olympic spirit travels with the flame from its birthplace in greece. joining james brown for an elemental fund it. because journey around russia and beyond. where are supposed to go.

right from the street. first street. and i think a trip. on a reformer splitter. an instrument. to be a mother. in law. and

sorts time n. solve the olympic flame will complete its epic journey in a few hours to get the winter games skyway. planned that stein talks with the taliban it's revealed of ghana stance been sworn to secure peace with militants behind closed doors while washington tries to keep some kind of military grip in the alliance rivage by ten years of war. and britain's leader. told to get a grip on american spying after senior parliament figures say u.s. bases on the territory are getting away with taking liberties.