29 Sep

Internal Investigations and the Use of Auditors and Accountants

When whistleblowers report potential ethics violations within companies, the first step the company must take is an internal investigation. The best internal investigations are independent and led by outside counsel, for a variety of reasons.

But what about the part of the investigation that involves analyzing accounting records, financial statements, and SEC filings? Management often wants to use internal finance professionals or their outside auditors for this task. It seems to make sense to utilize the expertise of people who are already familiar with the company’s finances. Read More

18 Sep

The Fun Continues in the Medifast Litigation

Lainie E. Cohen, Esq.

Lainie E. Cohen, Esq. arriving for my deposition (click to see full size)

UPDATE: On February 17, 2010, Medifast Inc. filed suit in US District Court, Southern District of California, alleging defamation, violation of California Corporations Code, and unfair business practices. On March 29, 2011, Judge Janis Sammartino dismissed all of Medifast’s claims against me in her ruling on my anti-SLAPP motion.

For nearly two years, Medifast (NYSE:MED) and its lawyers have known that I am not an appropriate target for a lawsuit. Nonetheless, they have pursued their malicious civil suit against me. Since the suit was filed, Medifast has been made aware of all the reasons why they shouldn’t be suing me:

  • I never said anything false about the company
  • I’m not aware of anything false that my co-defendants said, and which I later reprinted on this blog (and reprinting the writings of others does not make me responsible for those writings)
  • Every bit of evidence produced during discovery shows that I was not part of any conspiracy, and that I actually went out of my way to make sure that false statements or assumptions weren’t made or published about Medifast

But why let a little thing like the truth get in the way? Read More

14 Sep

The Future of Financial Investigations

From my Thought Leadership series at Securities Docket:

What is at the heart of almost every securities case, whether the case is pursued by the government or a private party? It is a trail of money. The difficulty in prosecuting or defending a securities case is the fact that there is voluminous financial data that must be culled, analyzed, and presented in a way that proves the case.

For the last three decades, securities and financial fraud cases have been evaluated by forensic accountants using manual processes. The financial investigators compared accounting data with source documents, ultimately trying to prove the source and use of funds. Read More

13 Sep

Follow the Money, Find the Fraud

Forensic accounting has been around for decades, but only in the last ten years have people become aware of the profession on a wide scale. Many of the techniques used by forensic accountants to investigate fraud and analyze the numbers are the same today as they were decades ago.

Computers have made things easier, as we can track, sort, and manipulate data faster. While software solutions for analyzing data, managing documents, and following the money are being used in investigations, they’re not being used to their full potential. This is obviously a missed opportunity for clients. Read More

12 Sep

Whistleblower Provisions Under Dodd-Frank

There has been lots of chatter about the whistleblower provisions under Dodd-Frank. A whistleblower  can earn 10% to 30% of any penalty the federal government imposes against a company. And companies have to be very careful, because there are anti-retaliation provisions in the legislation too.

One problem with this legislation that I hadn’t thought about is the impact it could have on employees using fraud hotlines. One of the most common ways that fraud is detected within companies is via tips from employees, vendors, or customers. An anonymous hotline helps encourage the reporting of these tips. Read More

08 Sep

Sentences Handed Down in International Multimillion-Dollar Fraud Scheme

Thomas Huddleston Jr. – Corporate Counsel at Law.com

A lesson for would-be criminal masterminds: When looking for victims to scam, try someone other than the U.S. government.

A group of Kenyan nationals learned that the hard way Aug. 19 when U.S. District Judge John Copenhaver, Jr. doled out jail time ranging from 9-72 months for co-conspirators in a multimillion-dollar, international fraud and money-laundering scheme that targeted state governments. Read More

02 Sep

Who is Short Selling Medifast stock?

UPDATE: On February 17, 2010, Medifast Inc. filed suit in US District Court, Southern District of California, alleging defamation, violation of California Corporations Code, and unfair business practices. On March 29, 2011, Judge Janis Sammartino dismissed all of Medifast’s claims against me in her ruling on my anti-SLAPP motion.

So who is short selling Medifast (NYSE:MED) stock? I’m not, but apparently plenty of other people are. (No, Medifast, I have no idea who it is, nor do I care who it is. That’s your problem. Not mine.)

As my readers already know, Medifast is on the hunt for anyone who would dare to say something less than flattering about the company. I’m being sued, along with others, for having a low opinion of Medifast’s Take Shape For Life (TSFL) division. Shame on me for voicing my negative opinion of a multi-level marketing scheme, and Medifast will MAKE ME PAY for daring to oppose them.

I am happy to report, however, that I’m not the only one who questions Medifast’s business model. Last week an article was posted at Fool.com about the amount of short selling activity around Medifast. Short selling is a bet that a company’s stock price will fall, and some like short selling overvalued companies. Read More