20 Nov

Once Again, Audits Don’t Find Fraud (But Short Sellers Do)

Anyone who is being honest will tell you that financial statement audits don’t find fraud. On the rare occasion they do, but by and large audits are not designed to detect fraud and the auditors don’t have enough fraud detection training.

One solution to this problem is the engagement of forensic accountants to look for fraud. But companies don’t seem to interested in going the extra step.

Today Hewlett-Packard announced that an internal investigation revealed accounting fraud by Autonomy, a company that was acquired by HP last year for more than $10 billion. More specifically, the company said: Read More

20 Nov

Kevin Trudeau and the First Amendment

Kevin Trudeau is a charlatan with a colorful history of interaction with the authorities. Over and over, he has been found misleading consumers via infomercials (his main method of self-promotion), but now he would have you believe that he’s just a victim of the man who is trying to take away his First Amendment right to free speech.

In the early 1990s, Trudeau pleaded guilty to larceny and did time for stealing money via consumers’ credit cards. In 1996, Trudeau had legal troubles relating to his participation in Nutrition For Life, a multi-level marketing company that was accused of being a pyramid scheme. Read More

13 Nov

More on Committing Bankruptcy Fraud

We’ve been discussing here the case of Jennifer McKinney (aka MckMama) and Israel McKinney (dba Kieran’s Contracting) and their alleged fraud perpetrated on the bankruptcy court. Questions have been raised about the likelihood of the McKinneys facing criminal charges, despite a quiet resolution to their original bankruptcy filing (they have waived bankruptcy and can never have those debts discharged in bankruptcy in the future) and the related case filed by trustee Gene Doeling objecting to the discharge of their bankruptcy (resolved with the McKinneys paying $3,500, the value of some of the assets they failed to disclose, and therefore were non-exempt and could be used to pay creditors).

The bankruptcy of Todd Brunner, a Milwaukee area landlord, was thrown out by a judge earlier this year after it was discovered that he did not disclose all his assets. He had $19 million in debts, so not being able to ditch out of them in bankruptcy was probably pretty painful. (The IRS alone says he owes $400,000 to them, but since he hasn’t filed a tax return since 2008, who knows how much higher the real number could be.) Read More

05 Nov

PricewaterhouseCoopers a Defendant in Two Lawsuits Over Audits

In the last week Big Four auditing firm PricewaterhouseCoopers has been sued over its performance of audits of companies with massive frauds. First, PwC was named as a defendant in a suit filed by the Federal Deposit Insurance Corporation as the receiver for Colonial Bank.

Colonial Bank went under thanks to a fraud by Taylor Bean & Whittaker Mortgage Corp., its largest mortgage banking customer. Executives at Taylor Bean & Whitaker cooked up a scheme whereby they sold $400 million in worthless mortgages to Colonial Bank. The mortgages were worthless because they either did not exist, or had already been sold to other investors. Read More

03 Nov

McKinney Bankruptcy Case Settled: What’s Next?

Jennifer McKinney (aka MckMama) and Israel McKinney appear to have settled all claims in their bankruptcy filing in which trustee Gene Doeling alleged fraud, saying:

The Debtors have concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtors’ financial condition or business transactions might be ascertained. The debtors failed to keep adequate books and records from which their financial transactions could be ascertained. The co-debtor was receiving cash payments from photography clients that were not disclosed and for which she has been unable to provide an accounting. Read More