The expertise of most advisors usually stops short of forensic accounting or detecting client fraud. What do you do when there is evidence of missing assets or forgeries? To uncover intentional – and increasingly sophisticated – deceits, planners need to know about forensic accounting, financial planning, tax law and criminology.
WITH a nudge from their pastor, the 25,000 members of the New Birth Missionary Baptist Church near Atlanta opened their hearts, and their wallets, to Ephren Taylor. And why not, given his glittering credentials? Mr Taylor billed himself as the youngest black chief executive of a publicly traded company in American history. He had appeared on NPR and CNN. He had given a talk on socially conscious investing at the Democratic National Convention. Snoop Dogg, a rapper, had tapped him to manage a charitable endowment.
So when Mr Taylor’s “Wealth Tour Live” seminars came to town, faithful ears opened wide. Eddie Long, the mega-church’s leader, introduced Mr Taylor at one event with the words: “[God] wants you to be a mover and shaker…to finance you well to do His will.” Mr Taylor offered “low-risk investment with high performances”, chosen with guidance from God.
In the age of online hackers and ID theft, a low-tech scam thrives: check fraud. Fake-check scammers have honed schemes to be age-appropriate, preying on youngsters seeking jobs and seniors in need of cash. Stacey Delo and Andrea Coombes discuss. Video originally aired June 14, 2011.
Dedicating resources to fraud prevention is generally much more cost-effective than suffering the direct loss and aftermath of a white-collar crime. How well-versed are you in control measures that can help prevent fraud? Do you have what it takes to help your company or your clients ensure they are effectively managing the risk of fraud? Take this Fraud IQ quiz to see how your fraud prevention knowledge measures up.
A St. Louis-area financial investment handler was sentenced Friday to eight years in federal prison and ordered to repay more than $4.3 million to often-elderly clients he bilked of money he spent on such things as trips to strip clubs in neighboring Illinois, jewelry and credit card bills. Joshua Gould, 32, of University City, pleaded guilty in April along with David Rubin, 47, to federal wire-fraud counts alleging they embezzled about $1.5 million from a retired couple.
According to the American Bankruptcy Institute, the number of U.S. consumers filing for bankruptcy in 2010 increased 9 percent over the previous year to more than 1.5 million. This increase is no surprise given the current economic decline. The difficult unemployment situation, housing slump, high levels of consumer debt, tightened access to consumer credit, and stagnant income growth have forced many once financially stable individuals into bankruptcy. With increased bankruptcy filings, we can expect to see an increase in bankruptcy fraud. Certainly many — perhaps most — people are honest throughout the bankruptcy process, but there are still those who capitalize on their own misfortune by perpetrating bankruptcy fraud. According to FBI statistics, concealment of assets and related false statements make up more than 70 percent of bankruptcy frauds. This scheme occurs when a debtor omits or undervalues his assets on his bankruptcy schedules, thus depriving creditors of their share of the assets.
In a scathing report, a former chief executive of the California public employee pension fund was accused of pressuring subordinates to invest billions of dollars of pension money with politically connected firms.
A 17-month investigation also found that Federico Buenrostro Jr. — along with former pension fund board members Charles Valdes and Kurato Shimada — strong-armed a benefits firm to pay more than $4 million in fees to consultant Alfred J.R. Villalobos, who later hired Buenrostro.
The report, prepared for the California Public Employees’ Retirement System by Washington law firm Steptoe & Johnson, comes amid widening attacks on public employee pension funds in California, Wisconsin, Iowa and other states for providing lavish benefits that cash-strapped governments can no longer afford.
A prominent Austrian banker who portrayed herself for two years as one of Bernard L. Madoff’s biggest victims was accused on Friday of conspiring for 23 years to funnel more than $9 billion into his immense global Ponzi scheme. The accusations were made in a civil lawsuit that sought damages of $19.6 billion — the sum of the cash lost in a fraud that wiped out nearly $65 billion in paper wealth and ruined thousands of investors on almost every rung of the economic ladder. The central defendant in the complaint is Sonja Kohn, who was the hub of a complex network of European and Caribbean funds that channeled money to Mr. Madoff. A well-connected banker in her native Vienna, Ms. Kohn insisted she never suspected her trusted friend was running a global Ponzi scheme.
In some ways, detecting fraud is like pulling people out of the river AFTER they have fallen off the broken bridge. So here’s a thought: why not concentrate on fraud prevention? Or, to carry on with the analogy, “why not just fix the bridge?” Before we get too far along, I know that no matter what an organization does, there will always be those who perpetrate fraud and that stopping it all from happening isn’t even remotely realistic. Just like there will always be someone who finds a way to fall off the bridge! I know there is a lot we can do to help people walk a straighter line.
It is generally believed that fraudsters commit their acts because they do not think that they will be caught. Adding new rules or encouraging whistleblowers will not, in my opinion, cause fraudsters to change their ways. What can influence the outcome more effectively is putting detective measures in place, letting everyone know that they are on 24/7 and creating an environment where the risk of getting caught outweighs the possible gain of committing fraud to begin with. By detective measures, I am referring to leveraging data analysis technology to seek out indicators of fraud in an organization’s transactional data. When these measures are applied on a continuous basis (continuous auditing or monitoring) — and everyone is aware of their existence — detective measures become preventative in nature.
This idea isn’t new, as it is often cited in reports, articles, and in the Fraud Prevention Checklist contained in the ACFE’s 2010 Report to the Nations on Occupational Fraud and Abuse (p.80, item #3). “Is continuous auditing software used to detect fraud and, if so, has the use of such software been made known throughout the organization?” Yet according to the same ACFE report, the lion’s share of initial fraud detection is done by tip (46.2%).
Former Assistant Secretary of Housing under George H.W. Bush Catherine Austin Fitts blows the whistle on how the financial terrorists have deliberately imploded the US economy and transferred gargantuan amounts of wealth offshore as a means of sacrificing the American middle class. Fitts documents how trillions of dollars went missing from government coffers in the 90’s and how she was personally targeted for exposing the fraud. Fitts explains how every dollar of debt issued to service every war, building project, and government program since the American Revolution up to around 2 years ago – around $12 trillion – has been doubled again in just the last 18 months alone with the bank bailouts. “We’re literally witnessing the leveraged buyout of a country and that’s why I call it a financial coup d’état, and that’s what the bailout is for,” states Fitts.
Massive amounts of financial capital have been sucked out the United States and moved abroad, explains Fitts, ensuring that corporations have become more powerful than governments, changing the very structure of governance on the planet and ensuring we are ruled by private corporations. Pension and social security funds have also been stolen and moved offshore, leading to the end of fiscal responsibility and sovereignty as we know it.