Business Insider promoted the idea that LuLaRoe is making women rich. While there ARE a handful of women who are making a ton of money from the company, only an incredibly tiny fraction of participants can make this type of money. Why? Simple math. If you’re making a 3% to 5% commission on your downline (as you’ll see below), it takes $700,000 of wholesale purchases by your downline to earn $35,000 in a month. (I realize that various bonuses change the math, but I’m using these numbers to simplify things.)
Imagine how many people need to be in the downline and how much they each need to buy to generate this volume. Simple math tells you that everyone below the woman earning $35,000 can’t build a pyramid of this size. There simply aren’t enough people on the planet, and there are only so many customers available for each distributor.
Let’s talk about some of the specifics downfalls to this fake business.Continue reading
Winning a case against an auditing firm when there is a sizeable fraud (such as the Koss Corp. embezzlement) or the collapse of a Ponzi scheme (such as the Bernie Madoff case) is not easy. Simply because there is a fraud, a business failure, or a pyramid scheme collapse, the auditors are not necessarily at fault. The auditors may have carried out their professional responsibilities exactly as they should have, but they still did not uncover the fraud.
How does a fraud go undetected by auditors? The first thing to remember is that audits are not designed to find fraud, so they rarely do. Equally important, is the fact that frauds are deliberately (and often effectively) covered up by those perpetrating them. Particularly in the case of executives embezzling or perpetrating financial statement fraud, they are keenly aware of exactly how the auditors do their work, and take careful steps to avoid detection.
Technically speaking, auditors are not engaged to find fraud. They are engaged to give an opinion on the financial statements, and whether they are fairly stated. The auditors are required to perform certain procedures related to fraud, essentially assessing the risk of fraud and increasing the testing of the financial statements as there is a greater perceived risk of fraud. The auditors are not specifically engaged to (or expected to) find fraud, under the current auditing standards.Continue reading
Income tax returns are an important piece of financial information in a divorce or child support case. There is so much information that can be obtained from the tax returns, and if we have several years of data, we can make comparisons from year-to-year. In the video below, Tracy talks about the financial data she analyzes on the income tax returns and what these items may tell us about the financial situation of the family.
A forensic accountant may be needed in a case alleging securities fraud. In the video below, Tracy discusses some of the particular issues that the accountant may evaluate and how to find the right expert for your case.
It has become commonplace to hear news stories of Ponzi schemes being uncovered. Investment scams and Ponzi schemes are all too common. Investors are lured in with promises of high returns. People in or nearing retirement find these investments enticing, especially as their retirement funds in the stock market have taken many hits in the last few years.
As I wrote in my book Expert Fraud Investigation: A Step-by-Step Guide, investors are becoming victims of these scams despite the proliferation of information available about phony investment schemes and the dire warnings given regularly by news reporters. Perpetrators of investment schemes dream up stories explaining their unusually high rates of return on money, and get high net worth people to invest with them. Often these people are investing their entire savings with scammers.
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 this investment is the answer to their money problems.Continue reading
It’s clear that there is a time and place for management to occasionally override a control. Everything in business is not routine, and there are times when special situations require special treatment. It would be silly to prohibit management from ever overriding the policies and procedures that are in place. There has to be guidance in place to direct employees when they may consider overriding controls.
However, it’s important to recognize that the override of controls should be the exception rather than the rule. Employees should be able to circumvent the system only on an infrequent basis, and these instances must be actively monitored to determine if the override process is being abused.
For example, there may be a policy specifying levels of approval before a payment can be issued. What if the person who normally approves the payment is on emergency sick leave and a payment needs to be made? There must be a process for getting an alternate employee to approve the payment. This transaction should then be flagged for later follow-up to determine that the payment was still proper. In this case, there is a need for overriding the normal control, but this is something that should happen infrequently.
After completing a lifestyle analysis for a divorce case, a written report is often requested. In the below video, Tracy describes the information she puts in her written reports, which often includes things like background information, documents utilized, important estimates, and methodology used.
The full episode is shown below, and is well worth the time spent watching. John Oliver mentions companies like Mary Kay, Herbalife, Market America (Shop.com), Jeunesse, and Youngevi. The producers did an excellent job of honing in on the important facts about an industry that is made intentionally confusing (in order to conceal their fraud, of course).