The latest news in the Koss Corporation fraud committed by ex-VP of Finance Sue Sachdeva is a lawsuit filed by the company against Sachdeva and auditors Grant Thornton. It’s unlikely that the company will collect much from Sachdeva, but the auditors are a great target because they have deep pockets (especially in the form of a professional liability insurance policy).

Everyone expected Koss to sue Grant Thornton. It’s just standard procedure to sue the auditors after a fraud is discovered. It never matters to the companies that audits are not designed to detect fraud and the auditors tell management this over and over.

It never matters to the companies that they are the ones responsible for establishing and maintaining internal controls over financial reporting, as well as putting procedures in place to prevent and detect fraud.

This was left as a comment on an article on this blog. I have no way to verify the accuracy of any of the information, but wanted to share it with my readers.

As of June 2010, UFF is all but out of business. They had their last round of lay offs at the home office just yesterday and are now down to about 8 people running both the client and agent support lines. Thats down from around 70 a year ago.

All of their last ditch efforts to boost sales have failed and the next round of lay offs in a couple of months from now will be when the company closes.

The MMA was a great product, but poor management, questionable business practices and just plain stupidity from the owners have got UFF to where it is today. As the company began to slide, and more and more of us were laid off, the owners continued to spend thousands of dollars on creature comforts for themselves around the office. It was sad to see.

I felt like I worked for some Wall Street, big bank executives who lived in some fantasy land and refused to change their life style while all of the “little people” around them were being laid off, or having their hours cut, etc. I wouldn’t be surprised to be standing next to one of them in the line at the unemployment office soon.

Guest Post by Ronald Kral, MBA, CPA, CMA
Managing Partner of Candela Solutions LLC

All organizations use some form and degree of monitoring in reaching strategic, operational, reporting and compliance objectives. Yet, many organizations do not fully leverage the power of monitoring in reaching objectives or in supporting their regulatory control assessments. This article explores monitoring in an effort to reap the benefits of cost-efficient and effective control systems.

The relevancy today is especially vivid considering the increase in modified or qualified external audit opinions pertaining to “going concerns”. While a company’s ability to continue functioning as a business entity relates primarily to operational objectives, it is achieved in large part through sound controls. Monitoring is a necessary component of the internal control process.

Let me start out this post by saying that I don’t like it when anyone is taken advantage of. Any individual, any group. I don’t like scammers who prey on the elderly, or those who speak English as a second language, or members of a certain religion or ethnic group, etc. It’s simply wrong.

However, I also don’t like sweeping generalizations that put a group of people in the status of “victim” without any hard facts to back it up.

Robert Kiyosaki is a best-selling author, but his advice is controversial. I’ve always thought he was heavy on hype, light on substance. Nonetheless, Kiyosaki’s “Rich Dad” brand is recognized by many and therefore worth a lot of money.

CBC’s Marketplace did an episode on their investigation of Rich Dad Education. And it’s very interesting, as well as horrifying. Kiyosaki licenses the “Rich Dad” name to a company called Whitney International (also called Whitney Information Network, and most recently “Tigrent“). Whitney has lots of complaints against it related to their “get rich” seminars.

Guest Post by Ronald Kral, MBA, CPA, CMA
Managing Partner of Candela Solutions LLC

Sound data, information and intelligence are clearly critical business success factors; however, is it getting to the right people? Too often we think of C-level decision makers as the ultimate end-user. Yes, they are collectively the company’s brain-trust and are directly responsible for executing strategy, but whom should be monitoring and why? The answer is the board of directors, who serves to protect and represent the interests of shareholders. The active engagement of directors needs to be the lynchpin of important corporate deliberation, which hinges on information. Now that we have the “who” and “why” identified, let discuss “how.”

First let’s be very clear on what “risk intelligence” entails. There are both macro and micro elements to this definition as used in this article.  From a macro standpoint it involves the governance structure, and relating policies and procedures, to help ensure that decision making is undertaken in the best interest of shareholders. From a micro standpoint, the decision making process hinges on the timeliness, accuracy and comprehensiveness of information. This includes the supporting data elements and assumptions. Data transparency (i.e., knowing the origin and history of information, assumptions,  ownership, biases and accuracy) is essential in making sound decisions. Finally, while “risk” is the possibility of an adverse event, “opportunity” is the possibility of a favorable event. These two potential outcomes are inseparable as every decision to create or protect shareholder value (i.e., opportunities) involves risk.

Recently, Representative Anthony Weiner (D-New York) issued a report on Goldline International to the SEC and FTC, claiming that Goldline is guilty of misrepresenting itself to buyers and charging astronomical prices for its precious metals.

The reason Goldline is being attacked? It buys advertising during Glenn Beck’s Fox News television show, and Glenn happens to think gold is a good investment. Since Beck is a harsh critic of the Democratic agenda, something had to be done to tarnish the reputation of him and his advertisers.

The report claims and “investigation” was done by Weiner’s people, but what they’ve done can hardly be called anything near “investigation.” For this reason, Barry Minkow and Fraud Discovery Institute did an investigation into Goldline of their own. The work was completely unpaid, and was simply done out of a desire to set the record straight on the real bad actors here.

I participated in the investigation, giving my opinion on multi-level marketing company Numis Network (which also sells gold and silver coins), and investigating the prices charged by competitors of Goldline for some of the more common coins.

The report on our findings is lengthy, but contains everything you need to verify what we’ve found. There are links to relevant data, and attachments supporting our conclusions.

What did we find about Goldline International? It’s not the fraud. The people investigating on behalf of Weiner are the real frauds, providing only part of the story in their report to the SEC and FTC, apparently in order to make the company look bad (and therefore fulfill Weiner’s political agenda).

Here is a summary of what we found:

• Allegation: Weiner criticizes Goldline because of complaints on the website Ripoff Report lodged by consumers who say Goldline representatives improperly hold themselves out as investment advisors.
• What Weiner didn’t tell you: Ripoff Report says (in response to the consumer complaints) that you can feel completely confident doing business with Goldline. Weiner gave us only half of the story in his report.
• Allegation: Goldline grossly overcharges for its products
• What Weiner didn’t tell you: Our sampling of coins listed in the Weiner report showed that Goldline’s prices were very comparable to those of six competitors. He also forgot to mention that companies are free to set whatever prices they like for their products.
• Allegation: Goldline says they’ll buy back your gold and silver, but doesn’t “guarantee” that
• What Weiner didn’t tell you: It is against the law for Goldline to offer a buyback guarantee. If they offered such a guarantee, they would be in violation of securities laws because their salespeople are not licensed broker dealers.
• Allegation: Goldline salespeople misrepresent themselves and imply that they are investment advisors, which would mean they have a fiduciary duty to those buying from them.
• What Weiner didn’t tell you: In the Risk Disclosure section of Goldline’s website, it very clearly states “Goldline’s employees are not licensed as investment advisors and are not authorized to recommend the purchase or sale of any product or investment other than the products specifically sold by Goldline.”
• Allegation: Goldline has “hidden fees” for things like storage of your gold, mailing your gold to you, and selling your gold.
• What Weiner didn’t tell you: The fees charged by Goldline are anything but hidden.  The Goldline website has at least 5 statements about the fees and how they’re calculated
• Allegation: Goldline confuses customers regarding the buyback of their gold.
• What Weiner didn’t tell you: Goldline clearly states that it will buy back gold at their current bid/purchase price.  The words “bid” and “purchase” price have a clear meaning and are not in any way confusing.

Fraud Discovery Institute also looked into the backgrounds of the Goldline International executives, and could find nothing sketchy.

What’s the bottom line here? The Weiner report was meant to smear Glenn Beck and Goldline. And he might have been successful if FDI hadn’t been willing to put in countless hours on the issues and getting to the real truth. Goldline International is not the fraud. Weiner is.

As with most multi-level marketing companies, Numis Network purports to offer a business opportunity that can generate high earnings for an individual. The “product” being sold by Numis is collectible coins. As an investment, gold and silver coins have values that are fairly easy to determine with a few minutes and an internet connection. The value of a “collection,” however, is not so easy to assess. The value of a “collection” varies from owner to owner, so it is hard to put a price tag on it.

Numis Network is careful not to call its coins investments, as that creates regulatory problems in addition to the ease of objectively valuing the investment (and coming to the conclusion that Numis is not the place for a serious coin buyer).