30 Nov

Milwaukee Fraud: Securities fraud tied to Quad employee

For the second time in recent history, illegal stock trading has been tied to an employee of Quad/Graphics Inc. It is alleged that a securities broker had an employee steal copies of unpublished BusinessWeek issues, and used information from the “Inside Wall Street” column to make some stock trades.

Specifically, it is alleged that broker David Pajcin used BusinessWeek information to make 10 trades. Each of those 10 trades saw Pajcin selling his stocks the day before the magazine became available to the public.

Quad says that it has safeguards in place, both electronic and physical, to protect the copies of BusinessWeek before they hit the newsstands.

The last time Quad employees snagged advance copies of BusinessWeek, they got themselves prison sentences.

Story here.

30 Nov

Forensic Accounting: A New Twist on Bean Counting

Written by Tracy L. Coenen, CPA, CFF

Wisconsin Law Journal

Reprinted in the Kansas City Daily Record

Traditional accountants and auditors have long been referred to as “bean counters.” Some may take offense at the phrase, but if they’re being honest, they admit that it is a simplistic but accurate representation of the work they do.

Your average, everyday accountants and auditors are generally engaged to count the beans. They take a look at the numbers, make sure they all add up, and possibly issue a report saying how and why the numbers add up. Read More

28 Nov

Fraud alerts and identity theft

Those who have been the victims of identity theft have the option of putting a fraud alert on their credit reports from the 3 credit bureaus. Is it worth the hassle?

In all honesty, a fraud alert on a credit report provides only a small amount of security. It is simply a statement that your identifying information has been compromised. Your phone number is attached to the fraud alert, and any business offering credit to you should call that number prior to the issuance of a new account.

The whole purpose of the fraud alert is to curb identity theft by preventing others from fraudulently receiving credit in a victim’s name. But the fraud alerts are only as good as the businesses paying attention to them. Companies offering credit are NOT legally obligated to act upon fraud alerts. Some lenders grant credit without investigating, and some even grant credit without ever pulling a full credit report.

So what do I recommend? If your identifying information has been compromised (i.e. your wallet has been stolen, your social security number was released, etc.) then I recommend putting the fraud alert on your credit bureaus.

Even though it appears that lenders are not doing a very good job of following through on fraud alerts, it is one layer of protection that I recommend utilizing. Above and beyond that, those who have been victims of identity theft need to be continuously and proactively monitoring their credit reports for suspicious activity.

27 Nov

Click Fraud

Entrepreneur Magazine‘s December issue includes a short article about click fraud. What is click fraud, you say?

Companies can advertise their wares via pay-per-click advertisements. These are usually very short, with a few key words and a link to the advertisers website. Using services such as Google, the companies pay each time someone clicks on one of their ads.

Many of the pay-per-click (PPC) services track the clicks, and can detect some level of fraudulent clicking. This includes multiple clicks from the same IP address or rapid, repetitive clicking. This type of clicking is generally done in an attempt to increase the charges to the advertiser or to increase the revenue of the website that posted the ad.

Read the article here.

More interesting info on click fraud is also found here on the CNET News.com site. They say that Google created a “fraud squad” to monitor potential click schemes.

24 Nov

Match.com and Yahoo Personals Sued For Fraud

A federal lawsuit against match.com accuses the company of luring customers into subscription renewals via emails from fake suitors. It is alleged that employees of match.com sent emails to members and went on sham dates in order to get subscribers to extend their subscriptions.

A separate lawsuit accuses Yahoo of posting fake profiles to boost the number of apparent subscribers.

Who knew so many people were looking for love? Check this out:

  • Match.com reports 15 million members worldwide.
  • The first six months of 2005, date-seekers in the U.S spent $245.2 million on online personals and dating services.

Full article at Reuters.

22 Nov

Milwaukee Fraud: Bielinski Brothers Part Two

The second part of this fraud story involving Bielinski Brothers Builders Inc. touches on the more personal side of the fraud. The brothers were defrauded by their CEO, Robert Brownell, who was responsible for a total loss of between $10 million and $20 million.

The brothers had a gut feeling that something was wrong. They noticed that Brownell’s office door was closed more often. Other employees also signaled that there were problems with Brownell.

Brownell, an employee who was with the company for almost 10 years had betrayed their trust. They considered him to be more than just an employee; he was also a friend.

How do the owners begin to trust employees again? Can they afford not to? They still have a business to operate, and at that company’s size, it would be impossible not to have people in positions of trust. On the bright side, this situation has seemed to re-inspire the brothers and remind them why they’re in business.

Full text of the story here.

20 Nov

Milwaukee Fraud: Bielinski Brothers Builders Inc.

Those familiar with internal fraud (i.e. committed by your own employees) know it is expensive, particularly when it involves executives. The executives have more access to information and assets, and that leads to bigger frauds.

Bielinski Brothers, a large builder of homes in southeastern Wisconsin, apparently didn’t suspect one of their own. Robert Brownell worked for the company for 10 years, most recently as CEO with a $175,000 annual salary plus perks.

It is known that Brownell conspired with Robert Mann of Mann Brothers Construction to exploit the billing process. Also involved was a partner at the law firm of Michael, Best & Friedrich, named Michael Gral. Currently, ten players in the fraud have been charged federally. A really cool graphic illustrates how the players were connected to Brownell.

The known losses to Bielinski Brothers are at least $10 million, and some suspect the actual losses could be as much as $20 million. The money stolen by Brownell has not been found, and none of the obvious vices (drugs, gambling, infidelity) have been identified.

Full text of the story from the Milwaukee Journal Sentinel is found here.

17 Nov

E-commerce fraud is going up.

A survey released by Cybersource, a provider of electronic payment services, says that merchants will lose $2.8 billion to online fraud this year. Yikes!!! The threat is growing, but apparently companies aren’t doing much more in the way of personnel.

Full story here.

15 Nov

Saving Money With Proactive Fraud Prevention

Written by Tracy L. Coenen, CPA, CFF

Family Ties – Newsletter of UW-Madison Family Business Center

Cost-saving measures are often attractive to businesses. If a company with annual revenue of $10 million could eliminate a $600,000 expense, would management be interested? It can be done, and internal fraud prevention is the key.

Companies lose an estimated 6% of revenue each year to fraud committed by employees. With today’s amazing shrinking margins, 6% could be a company’s entire profit for the year. That loss figure doesn’t even include the costs of investigating and litigating the cases. Read More

10 Nov

Prevention & Detection: Fraud

Yesterday I had an opportunity to emcee an event focused on the prevention and detection of corporate fraud. The event was sponsored by Jefferson Wells International, The Business Journal of Greater Milwaukee, BDO Seidman, and Foley & Lardner.

Our fraud event drew a crowd of about 75 professionals from companies in the greater Milwaukee area. The keynote speaker was James Finch, the Special Agent in charge of the Milwaukee office of the FBI. On the one hand, I was surprised at how low “white collar crime” is on the FBI’s list of priorities. On the other hand, all resources are limited, so it is no wonder that the agency must prioritize.

The most interesting speaker (in my opinion) was Nancy Sennett of Foley & Lardner, speaking on SEC investigations. We got an overview of the process and a bit of general advice on how companies should cooperate with the investigation. It became clear to me that the best thing a company can do when they get that dreaded phone call from the SEC is to call a qualified lawyer. Qualified means lots of direct experience with this process.

Thanks to all the speakers and attendees for providing a thought-provoking afternoon!