(If you missed Part 1, you can find it here)

So, what about the CFO of ZZZZ Best? In part one I wrote about the headlines that many may have seen in any business or auditing class teaching about famous stock frauds. But in this particular case, there is so much more to it than that. I have to say, after doing some brief research on this story, I am amazed that things go so out of hand with some of the highest paid regulators and auditors on the case without anyone blowing the whistle.

Mark Morze was a tax accountant and one of the guys that created the thousands of fraudulent documents to fool multiple accounting firms. He got into loan brokering and raising money for some of his clients. He was introduced to Barry after hearing he needed money for expansion. He was charging 5% to broker loans.

As the CEO of a $300mm company by the age of 20 in the 1980s, he committed one of the most publicized fraud cases on Wall Street by the time he was 22, convicted of 57 counts of fraud and off to federal prison for 25 years. Since then, he’s been helping fraud agencies to crack cases. So, how did he do it?

Barry Minkow is the famous con man behind ZZZZ Best Carpet Cleaning, a business he founded at 16 years old. He eventually took it public and he himself was at a time worth approximately $100MM. So what happened? He simply leveraged banks, lied to investors, cooked his books, and leveraged his auditors against themselves by asking, “You don’t want to be the one to lose the ZZZZ Best account do you?” He fabricated some 20k+ documents to fool investors, auditors, banks, etc.

Just when I thought I'd heard every possible Lenny Dykstra horror story, I came across this NY Post review of Nailed!: The Improbable Rise and Spectacular Fall of Lenny Dykstra, and I am completely blown away at the depth of Dykstra's narcissistic depravity. So depraved, in fact, that Dykstra inspired a 24-year veteran of the LAPD to describe him as "among the top three most egregious criminals he’s come across in his 24 years on the force."

Like most of you, I chuckled to myself over the various Dealbreaker takedowns of Dykstra as his behavior grew more and more bizarre. Randall Lane gave him the treatment in The Zeroes, detailing how Dykstra cheated him after engaging him to create a brand magazine for Dykstra along the lines of Trader Monthly. It was mildly entertaining to watch a guy once described by Jim Cramer as "one of the greats" spiral out of control, a willing victim of his own massive ego.

What I never realized was just how dark things got behind the scenes. I'm talking about stalking, forgery, extortion, and attempted rape for starters. According to the new book, he abused everyone he came in contact with, including his own mother and son. What I once found mildly amusing now seems pretty sickening.

I'm really getting tired of writing about this stuff. I'm serious. It's really starting to wear on me. Fraud and criminal wrongdoing has become so prevalent on Wall Street over the past decade that no one even bats an eye at it anymore. In fact, 24% of Wall Street execs surveyed by Labaton Sucharow admitted that fraud is now a necessary component of success on the Street. If that statistic doesn't at least give you pause then you're probably one of the bad guys.

24 percent. That's just incredible to me. 70% of those surveyed said that regulators were so incompetent that they provide no deterrent to fraud whatsoever. In other words, there's a lot of reasons not to commit fraud but a fear of getting caught isn't one of them. It's a total free-for-all these days, and every bank on the street seems to be involved at the highest levels - be it the LIBOR scandal, MF Global, yesterday's news about PFGBest, or any of dozens of other blatant cases of fraud that have gone unpunished over the past five years.

The story of Citigroup is one of greed and stupidity for nearly their entire history (if you doubt that you haven't read Exile on Wall Street). So I guess we shouldn't be shocked to find out that upper management at Citi sold their own people down the river and exposed them to indefensible positions in arbitration in order to make a buck. But the former Smith Barney guys didn't take it lying down, and openly revolted through emails revealed over the past few days. The emails bear out what has long been suspected: Sallie Krawcheck may have been fired for going to bat for clients who lost up to 97% of their investment in what Citi management touted as a completely safe muni bond alternative. Watch these two videos and then ask yourself: At what point do regulators just take Citi out back and shoot it?

Happy Thanksgiving, guys! I thought I'd take this market holiday to cover the mechanics of the brokerage relationships in the futures markets, especially as they relate to the potential impact of MF Global's missing millions. With the tally now over $1.2 billion in missing customer funds and former CEO Jon Corzine being called before Congress next week, things could get very ugly very quickly.

We had a thread last week about Barnhardt Capital Management deciding to shut down in the wake of the MF Global bankruptcy. You can say what you will about Ann Barnhardt, she is certainly...how shall I say this...eccentric, but it would be a mistake to dismiss the points she made in her letter to investors explaining why her firm was shutting down. If the relationship between IBs and FCMs is no longer intact, then it's impossible to have any faith in the futures markets.

Let me back up and explain the roles of the different players in the futures market. First, you have the exchanges themselves. This is where all the trading happens. The job of the exchange is to provide an orderly market for the given commodities that exchange handles. Aside from membership and transaction fees, the exchanges don't handle any actual money. In other words, you can't just walk down to the CME with two grand in your pocket and buy a corn contract.

At an ethics class in my undergrad, we were once asked how many of us suspected or actually witnessed cheating in some form or another. A supermajority of kids had suspected peers of cheating, while about half of us claimed to have actually seen it. Hence the title of this post, dear monkeys--it's no longer a question of whether cheating goes on, but how much of it.

No doubt if we took a poll here on WSO we'd find the same thing--we've all been there. If you see a kid get up from a final exam seven or eight times with a smartphone, it isn't because he has a going problem. Is this good preparation for work?

It's not often something shocks me in the world of finance any more, but it happened yesterday. Omer Rosen, a former corporate derivatives guy from Citigroup, aired some very dirty laundry. How dirty? I've got a former boss doing nine years in the Federal pen today for running a similar scam. I'm not sure what shocked me more: the nonchalance towards the complete and utter breach of any semblance of fiduciary duty, or the fact that the author actually came out and admitted it. Without further ado, here's the article:

Legerdemath

My post on quitting banking yesterday drew many interesting and well-thought out comments, but one really stuck in my head after reading this article. It was the comment by A Posse Ad Esse which stated he'd quit banking the moment he compromised his morals. I'm sure many of you feel the same way. What you might not realize is how big a sewer some aspects of banking have become.

For the younger members who don't know or the older guys who can't remember, Kenneth Starr was the lawyer who tried to get Bill Clinton impeached a little over a decade ago. America obsessed about Bubba and Monica, with Mr. Starr as the ringmaster who enjoyed his 15 minutes of fame as much as anyone.

Today, we get news of another Ken Starr. Kenneth Ira Starr, that is. Dubbed "mini-Madoff" by the media, Mr. Starr is the investment adviser (arrested on May 27th of this year) accused of bilking his jet set clientele out of over $59 million dollars. If you recall, Starr was found hiding in his closet as the FBI kicked down the doors, claiming that he thought "it was a home invasion".

I've got nothing concrete on this, but there's a rumor Goldman is willing to cough up $5 BILLION to make the fraud case go away. That's right, kids, NINE FUCKING ZEROES. That is unbelievable. I saw it at the bottom of the Daily Short Report and I'm wondering if it's even possible. Anyone have anything on this???

From Barry Ritholtz's blog:

http://www.ritholtz.com/blog/2010/05/gs-seeks-to-p...

Sam Antar is a bad man. I don't expect many of you to recognize the name because even I was still a teenager when he was executing massive securities fraud. He was one of the criminal masterminds behind New York's famous Crazy Eddie scam. He was a CPA, and he was the CFO of Crazy Eddie, and he readily admits to securities fraud, skimming, money laundering through a technique he calls the "Panama Pump", and a variety of other crimes. He's a convicted felon.

The thing that makes Sam Antar interesting to me is that he's so up front about his crimes. He makes no excuses for his behavior, honestly believes he's going to Hell, and now assists law enforcement in the prosecution of white collar crimes and criminals. He maintains a blog about white collar fraud and he writes for Seeking Alpha from time to time.

He was recently interviewed by Phil's Stock World and I thought you guys would be fascinated by this glimpse into the twisted soul of a con man. It's rare to come across a guy like Sam Antar, who is so willing to discuss what he did, and I think we can learn a lot from his insights into the criminal mind. He explains how things like Bernie Madoff happen, how easy it is to distract an auditor from finding out what's really going on with your books, and how to inflate a companies earnings by committing less fraud pre-IPO.