Lifestyle Analysis: Purpose and Process in Divorce Cases

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In this video, Tracy Coenen explains the purpose and process behind doing a lifestyle analysis in a divorce case. There are three main reasons why a lifestyle analysis may be done:

  • To determine the amount of money needed to continue living a lifestyle consistent with the lifestyle enjoyed during the marriage (This relates to child support and alimony.)
  • To find hidden sources of income
  • To find hidden assets

Changes to Sarbanes Oxley?

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This week an article in the Wall Street Journal explored whether there might be some changes coming for Sarbanes Oxley. With President Trump talking about rolling back regulations, business groups that want Sarbanes Oxley softened may get their way.

Sarbanes Oxley requires management to assess the internal controls over financial reporting (those things which are supposed to help prevent errors and fraud). Section 404(b) requires the auditors to evaluate that assessment and provide an opinion on it.

Some say the rule is too costly for smaller companies, while those in support of it say that it has helped ensure financial reporting integrity. Companies with a market cap under $75 million have never had to comply with Section 404(b). Possibly legislation could raise that threshold to $250 million or even $500 million. Continue reading

Multi-Level Marketing in Uganda

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No group of people, no matter how poor, are immune to the predatory practices of multi-level marketing (MLM) companies.  These companies are nothing but glorified pyramid schemes, causing financial losses for more than 99% who get involved.

A Chinese MLM called Tiens has set up shop in Uganda, despite the fact that the average income is $2 per day (so few people can afford overpriced snake oil). Tiens is using false income claims and lies about medical cures to recruit distributors.

Filmmaker Priya Biring did a 25 minute film on this MLM, entitled “Uganda’s Health Pyramid,”  and produced by Al Jazeera News.

Priya says the following in the article that accompanies the video: Continue reading

Financial Lies in Divorce

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Experienced family lawyers are familiar with the common ways spouses attempt to commit financial fraud in divorce: hiding or undervaluing assets, overstating debts, concealing income, and inflating or fabricating expenses. All of these are done in an attempt to get more than the spouse’s fair share in the property division, and to influence the amount of support that will be paid or received.

Successfully advocating for your client involves more than just knowing that these things occur during the divorce process. You must also be able to identify the red flags that indicate the financial issue(s) must be investigated further. Some are easier to spot than others, but once you have identified two or three red flags, it is time to get a forensic accountant involved. The financial analyst’s experience with fraud and deception will be invaluable in evaluating the red flags and determining if there is something of substance to investigate further.

Undisclosed Accounts
The most straightforward red flag is the discovery of undisclosed accounts. This could be direct evidence of a spouse attempting to conceal assets. However, the nature of the undisclosed account should be examined. Is it an old account that hasn’t been used in a long time? Is there little to no activity in the account? Is the balance in the account insignificant? In these situations, little weight should be given to the non-disclosure, since it is more likely an oversight. Continue reading

The Work of a Forensic Accountant

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If you’re new to the world of forensic accounting (also called investigative accounting), this video will give you an idea of the types of cases a forensic accountant might work on. There is quite a variety in the work, but most of it has something to do with fraud or litigation.

TelexFree: MLMs are Pyramid Schemes

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This week we heard news of $20 million (hidden in a box spring) being seized by the federal agents in its ongoing investigation of TelexFree, a multi-level marketing company that the government says was a massive Ponzi scheme. You can read all about the TelexFree case on Patrick Pretty’s blog.

News reports about TeleFree refer to it as a Ponzi scheme (also called pyramid scheme). What isn’t mentioned anymore is the fact that it operated as a multi-level marketing company, just like Amway, Mary Kay, Herbalife, LuLaRoe, and hundreds of other companies you hear about on a daily basis. While it is NOW acnowledged that TelexFree was a Ponzi scheme, there was a time when it operated exactly as these other MLMs do.

The FBI says the following about TelexFree: Continue reading

Divorce Issues: Calculating Spousal Support

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Each state has its own guidelines for calculating spousal support. Generally, factors which may be considered in determining alimony include:.

  • The length of the marriage
  • The needs of the recipient
  • The relative earnings of each party
  • Career sacrifices made to benefit the family (i.e. one parent gave up a career to raise children or one spouse worked so the other could complete a college degree)
  • The earning capacity of each party
  • The ability to pay spousal support
  • The lifestyle of the spouses during the marriage
  • The age of the parties
  • The property divided by the spouses
  • The ability of the recipient to earn income in the future

Continue reading

Personal Red Flags of Fraud

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As victims of occupational fraud reflect on crimes committed against their companies, they wonder if there were any signs that a fraud was occurring. They wonder how a trusted employee could steal from the company. Sadly, frauds are committed by people in positions of trust. What is it about those people that leads them to commit fraud?

Corporate thieves have many things in common with one another. There are many tell-tale characteristics about people and their lifestyles that signal the potential for fraud. These range from personal financial circumstances to attitudes on the job. A few of these traits alone do not indicate the potential for fraud, but the probability rises as we identify more of the characteristics.

Work Habits

Employees who steal from their employers often appear very dedicated. They work long hours and seem willing to take on extra responsibilities. For a normal person, these would be desired traits. An employee who helps accomplish more is seen as an asset to the company. For someone with the potential for fraud, however, these characteristics are worrisome.

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Loss and Failure Rates in Multi-Level Marketing (MLM)

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More than 99% of people lose money in multi-level marketing (MLM). In Chapter 7 of Dr. Jon Taylor’s book, The Case (For and) Against Multi-Level Marketing, he details the failure rates of participants in multi-lievel marketing companies. In order to analyze the true failure rates and to calculate actual profits or losses from participation in these (improperly termed) “business opportunities,” it is necessary to wade through confusing and incomplete disclosures and to estimate figures that are critical but not provided by the companies.

Dr. Taylor completes a thorough analysis of the numbers. Of the hundreds of multi-level marketing companies active in the United States, Dr. Taylor could find income disclosure statements for only 30 of them. What are the others hiding?

The analysis of these 30 income disclosure statements was completed through the following process:

1. Obtain Average Earnings Statistics – These purport to show the average earnings by distributor level.
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