24 Feb

Family Lies: Fraud in Family Business

Trust is inherent in any good business. We continuously place trust in our employees and in those with whom we do business. But that trust which is so necessary to the operation of a business is also the impetus for thieves to profit.

It is unfortunate that fraud occurs when and where you least expect it. Blood may be thicker than water, but that doesn’t protect a company from theft by family members. In fact, it may be just that trust between family members that is exploited by a dishonest sibling, uncle or cousin.

Some fraud experts suspect that fraud occurs more often in family businesses than other businesses, and that the increased fraud risk is due to the trust factor. Family members put more trust in one another and therefore grant one another more access and opportunities for fraud. The controls in family businesses may be lax, particularly as they relate to the oversight of management’s activities. Read More

18 Feb

Making the Most of an Expert Witness

gavel-moneyMore than ever, competent and dynamic expert witnesses are critical to winning legal cases. Even if a case doesn’t go to trial, a credible expert can be the key to settling the case for your client.

I believe that an expert witness has the opportunity to make or break a case. We all know that there are few chances to fix a bad opinion when you go to court. There is one chance to express the correct opinion and support it fully. A faulty opinion, or one with little reliable support, can doom a case.

Some attorneys have their preferred experts, while others get referrals from colleagues. Each attorney works with an expert witness in the way that she or he is comfortable. However, it never hurts to hear about it from the other side. This is my perspective on best utilizing your expert witness to her or his full value. Read More

10 Feb

The Fight Against Fraud: Arm Yourself With Prevention

Fraud is big business. Companies are at the greatest risk of fraud from their employees, since the employees have easy access to information and assets. Some experts estimate that companies lose 5% of their revenues to internal fraud. At a company with annual sales of $100 million, that means that $5 million is walking out the door each year.

Executives tell themselves that their company isn’t the norm. They do better than average. They certainly haven’t been a victim of internal fraud to the tune of 5% of revenues. The sad truth is that they don’t know exactly how much has been stolen from their companies because they aren’t aware of all the fraudulent activities committed. Five percent is an average level of fraud for a company, and it would be wise for executives to take this number seriously. Read More

08 Feb

The Case for Anti-SLAPP Legislation

SLAPPFreedom of speech reigns in the United States. Unless you are criticizing a person or company with the funds to sue you into infinity. Then you could find yourself on the receiving end of an expensive lawsuit that has no aim other than to shut you up. (Case study: Medifast Inc.’s $270 million lawsuit against me and others; I have won and Medifast is now trying to get out of paying the $300k+ of legal fees they are required to pay.)

Attorney Eric Turkewitz writes about his experience with SLAPP suits in New York. (SLAPP = Strategic Lawsuit Against Public Participation) Although the law protects people who write truthful things and/or state their opinions, the legal process of getting a case dismissed is onerous without anti-SLAPP laws. (Even with anti-SLAPP laws, it can still be expensive. Medifast sued in California, where there is good anti-SLAPP legislation, but it still took over $300k in attorneys fees — not counting the hundreds of thousands of dollars the other defendants spent on their attorneys — and over four years of litigation to get the suit against me dismissed.) Read More

05 Feb

The Fraud Blame Game: Accusing the Auditors

magnifyprintWhen a company discovers an internal fraud, it’s not uncommon for owners and management to look for a party to blame. After all, someone should have known that a fraud was in-progress, right? Often, the blame is cast in the direction of the auditors.

The auditors are an easy target. Not only do they usually have professional liability insurance policies to fall back on, the auditors initially seem like the logical culprit.

Management often believes that the auditors worked very closely with the financial information; therefore, they should have discovered the fraud. Read More