26 Jan

Identifying Red Flags of Investment Fraud

There is no shortage of allegations of investment fraud since the stock market tanked in 2008.  Are there more investment scams occurring, or have market conditions just led to the discovery of more of these schemes? I’ll guess the latter, although no one really knows for sure.

The beauty of fraud is that so much of it goes undetected. Those involved in financial fraud actively conceal their schemes and their involvement, so it’s impossible for fraud investigators to know exactly how much fraud is happening. For example, perpetrators go so far as to pay others to participate in the scheme and cover up phony financials and non-existent promissory notes. This kind of concealment leads to more investors putting money in a scheme, and ultimately creates ever larger financial losses.

In the end, however, it doesn’t necessarily matter if we can put our finger on exactly how many of these investment schemes are out there. What really matters is being able to identify the hallmarks of such schemes so that investors can avoid them like the plague. Read More

20 Jan

Does Voluntary Disclosure of White Collar Crimes Really Help?

Wisconsin Law JournalThe Federal government wields a big stick when it comes to business-related crimes. Violations of the Foreign Corrupt Practices Act (FCPA), fraud in the delivery of health care services or in the receipt of federal money for those services, and other whitecollar crimes can open up companies and their executives to harsh penalties under the United States Sentencing Guidelines.

Companies and executives can get reduced sentences if certain mitigating factors have been identified. One of those mitigating factors is having an effective compliance and ethics function within the company that attempts to prevent fraud and proactively identify criminal activities.

An additional way that companies have sought to mitigate their sentences is through confessing their violations of law to federal prosecutors. Read More

15 Jan

MLM is Not a Business (It’s a Pyramid Scheme)

I’ve written many times about how multi-level marketing (MLM) is not a business. Don’t believe me? Others have said the same thing. Today Lazy Man and Money lays out the reasons why MLM is not a business. You’ll have to read the details at his site, but the reasons include:

  1. Businesses obey the Commandment of Control
  2. Business 101 Excludes MLM
  3. Businesses obey the Commandment of Entry
  4. MLM Doesn’t Obey the Laws of Supply and Demand
  5. More than 99% of people LOSE money
  6. MLM is Not like Any Other Small Business
  7. It Doesn’t Matter How Hard You Work

The bottom line that any job is better than MLM. In MLM, you’re almost guaranteed to lose money. With a job, even one paying only minimum wage, you’re still making money.

11 Jan

Independence Vital in Fraud Investigations

Wisconsin Law JournalI would like to think that most companies are committed to doing business honestly. They try to do the right thing, and when a problem is found, they try to correct it quickly.

Even when a scandal is looming, I hope most companies would want to find the truth as fast as possible and take appropriate action.

Even when a company is committed to fixing problems, however, management does not always do it the right way. This is particularly true when it comes to investigating suspicions of wrongdoing. There are many times when such an investigation must be done by an independent party in order for the company to be in the best possible position following the conclusion of the investigation. Read More

05 Jan

From Chaos to Clarity in Financial Investigations

The financial part of a case can become overwhelming very quickly. Particularly in cases involving white collar crime, securities fraud, Ponzi schemes, or other fraud recoveries, the trail of financial documentation is often very long. A forensic accountant needs to examine the financial documents and piece together the evidence in a way that attorneys, judges, and juries can understand.

When there are mountains of data, the investigator needs a way to quickly examine the data, assemble it in a format that is usable, find connections between transactions, and quantify results. Traditional forensic accounting techniques are no longer effective in these types of investigations. The volume of data can quickly overwhelm the investigator, and this affects the quality of the results. Read More