14 Feb

A Simple Anti-Fraud Training Outline

Education is a highly effective fraud prevention technique for companies. Studies have shown that companies with anti-fraud educational programs in place can cut their fraud losses in half. By educating employees, management is giving them the tools to help look for and stop fraud. This information helps them know what behavior is acceptable and not acceptable.

The training does not have to be elaborate. It simply has to show employees what to look for, highlighting the most common areas of abuse.  A company’s training session could (should?) include things like this:

  • Introduction to fraud: Provide the basics about fraud, how it is committed, and how it affects the company.
  • Areas of the company most vulnerable to fraud: Tell employees about the most at-risk areas and assets of the company so they can be on the lookout.
  • Common ways that fraud could be committed at the company: Give concrete examples of some of the most common frauds that employees might witness.

Read More

12 Feb

Multi-Level Marketing is Not Like Corporate America

Fans of multi-level marketing (MLM) often say that it is just like corporate America! There are levels of employees and managers… Corporate America is a pyramid and MLm is no different. That’s a faulty analysis. When I call MLM a pyramid scheme, I am not calling that because the management structure looks like a pyramid. I am calling it a pyramid scheme because of how it functions.

A pyramid scheme is a pay-to-play scam. People pay to become a part of it, and they pay continually through minimum purchases that are required to remain a qualified member of the scheme. MLM is based on the continuous recruitment of people into the scam using the promise of making money, despite the fact that more than 99% of participants in MLM actually lose money. MLMs sell a fake opportunity. While they appear to be focused on selling products or services, those things are simply a front to make the “opportunity” look like a legitimate business. Sadly, MLM is not a business. Read More

04 Feb

Evaluating the Income of a Business

It’s not unusual to want to confirm the income of a business in litigation. Whether it’s a divorce, a business breakup, a wage claim, or other matter that involves accurately reporting business income, it may be necessary to attempt to verify that income.

I frequently work withe clients who claim that the reported income of a business is artificially low. For example, a spouse who runs a small business may make the income of the business look lower than reality in order to reduce spousal support payments and/or reduce the value of the business for the division of assets.

In a business divorce, a party may falsely report lower income to reduce the value of the business and therefore the amount necessary to buy out the other owner(s). A wage claim involving commissions and bonuses that relate to sales volumes may need a verification of income if the company is accused of underreporting sales.

How do we do this? Read More

30 Jan

Lifestyle Analysis: Existence of Unusual, Non-Recurring Expenses

 When doing a lifestyle analysis for a divorce or child support case and evaluating historical spending, we sometimes run into unusual expenses that may be considered one-time (or non-recurring). What do we do with these?

Expenses that are not expected to recur should be excluded from the marital lifestyle.  The rationale is simple: If an item will not recur, either due to the end of the marriage or some other relevant factor, it is not part of the lifestyle that must be funded post-divorce.

Examples of items that should be excluded from the marital lifestyle could include: Read More

28 Jan

Why Multi-Level Marketing Companies are Pyramid Schemes

I often hear: “Pyramid schemes are illegal! If XYZ Company was a pyramid scheme, the government would shut them down!”

Yes, pyramid schemes are illegal. No, our government generally doesn’t shut down pyramid schemes masquerading as multi-level marketing.

MLM is a type of pyramid scheme that our government allows to operated. Is it ignorance? Or is it deliberate? I don’t know, but it seems that educating consumers is the best way to fight against pyramid schemes which try to hide the nature of their activity by calling themselves “multilevel marketing” or “network marketing” or “home based businesses.”

Watch this video to learn more.

22 Jan

Investigating Investment Frauds and Schemes

Despite the proliferation of information available about phony investment schemes and the dire warnings given regularly by news reporters, consumers continue to become victims of these scams on a regular basis. The perpetrators of investment schemes dream up stories explaining their unusually high rates of return on money, and people with money to invest with them.

These high investment returns typically amount to guarantees in excess of 10% per year. Often they are to the point of ridiculous, offering a 30% or 40% annual return. As a fraud investigator, it is clear to me that these offerings are bogus, because any investment that legitimately generated such returns would not be much of a secret to the rest of the world. But consumers, who are often eager to protect and grow their nest eggs, are all-too-willing to believe that such an investment is the answer to their money problems. Read More

18 Jan

Dividing MacKenzie Bezos’s Fortune

We keep hearing about the divorce of Jeff and MacKenzie Bezos and how “his” fortune of $135 to $140 billion related to Amazon will be divided.

People are speculating that there is no pre-nuptial or post-nuptial agreement. Amazon was started after the couple was married, so the assets may be owned jointly and subject to a 50/50 split.

As we often see in cases in which the husband is the “moneyed” spouse (the one with the business involvement and the one whose name is on the paychecks), people talk about how much he will have to “give” his wife in the divorce. But where community property is involved, the spouses own the property jointly. Neither is “giving” property to the other. Instead, the property is divided. Read More

16 Jan

Manual Cash Disbursements and Fraud

Companies typically have a standard way of initiating cash disbursements like payments to vendors or employees. Often this involves entering an invoice into the accounting system, ensuring proper approval for payments, and then generating the electronic transfer or check. Sometimes invoices are entered at scheduled intervals and payments are issued on certain days of the week.

Any disbursement that falls outside of these procedures could be considered a manual disbursement. That is, it is initiated manually and issued under special circumstances.

Probably the most common type of manual disbursement occurs in a company that has an accounts payable process through which all vendor payments should flow. Suppose a vendor drops off materials and needs to be paid immediately for that delivery, and there is not a chance to get the vendor payment through the regular accounts payable process. A check will be cut directly to the vendor, and the accounting system is updated later. This is a classic example of a manual disbursement. Read More