27 Dec

Finding the Best Expert Witness

More 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.

Finding the Right Expert
The most critical part of working with an expert witness is finding the right one. Naturally, the selection of an expert involves the evaluation of education and credentials. The examination of an expert’s credentials is a particularly critical process. Read More

21 Dec

Surviving an Income Tax Audit

Income tax audits are intimidating whether you are being audited personally or as a business owner. There is a right way and a wrong way to handle an audit by a state or federal taxing authority. It is easy to dig a hole for yourself, but awfully hard to get out of that hole.

Whether you attempt to handle an audit on your own, or opt to involve a professional who is experienced in these matters, there are some things you should know as you embark on your journey. I don’t ever suggest that a taxpayer submit to an audit alone. It is very helpful to have an experienced professional along for the ride. Not only can the accountant or attorney help you complete records requests, she or he can also act as a buffer between the taxpayer and the IRS.

The process of an audit is often one big negotiation. It is a give and take between both sides. Ultimately, both sides want the case closed, and the faster we can get to that point, the better. (Preferably with the least amount of pain for everyone involved.) Read More

18 Dec

Things I’ve Learned About Fraud

After more than 20 years conducting fraud investigations, I have learned a lot about fraudsters, their methods, and the companies they work for.

Hotlines cut fraud losses in half.
Anonymous reporting mechanisms like fraud hotlines decrease the cost of internal fraud. Employees are excellent watchdogs, and are more likely to report wrongdoing if they have a confidential way to report the information they possess. Research shows that companies with hotlines discover fraud schemes sooner and therefore lose less to internal fraud.

Sarbanes-Oxley mandated anonymous reporting mechanisms like hotlines for public companies. Private companies should do the same, since the hotlines have been proven to be effective. However, companies should not get a false sense of security from a hotline. There are many other fraud-prevention measures that companies should also implement.

Employees are very receptive to anti-fraud training.
As I’ve mentioned, employees are typically very good watchdogs. They don’t like to see someone else on the take while they are putting in honest work. If they know what to look for, employees are likely to report misdeeds to management. Read More

13 Dec

Large Data Sets in Financial Investigations

Complex financial investigations involve large sets of data, numerous accounts, multiple players, and lightning fast movements of money. Being able to accurately document these movements of money is the key to the financial portion of a case, whether it involves embezzlement, bribery, misconduct in office, money laundering, or divorce.

Forensic accountants can quickly become overwhelmed by the sheer volume of data that needs to be analyzed. Even with all of the modern technological tools available, many of the tasks in financial investigations are still done manually. Why? The format of accounting statements and reports varies so much that there is no single solution that can help capture that data. Instead, fraud investigators turn to manual data entry much of the time. Read More

10 Dec

Why is a Lifestyle Analysis So Important in a Divorce?

In the early stages of divorce, clients are required to complete financial affidavits, financial declarations, or other similarly titled disclosures.  The importance of an accurate disclosure of assets, liabilities, and income is obvious. Yet many clients are unable to accurately prepare this financial information.

Particularly in high net worth divorces, it may be difficult for the husband or wife to report these financial details because of a large volume of data and/or an inability to compute the numbers. The financial declaration will be a primary piece of information used to divide assets, calculate alimony, and calculate child support. Errors can therefore be very costly.

A lifestyle analysis completed by a forensic accountant can solve this problem, and can add other value to the divorce process. The lifestyle analysis is typically done to demonstrate the spending (or the lifestyle) of the family prior to the separation. Read More

04 Dec

Standard of Living in Divorce Cases

In a typical divorce with one or both of the spouses having traditional jobs and earning middle to upper class wages, the calculation of alimony and child support are pretty easy. States have charts or standard percentages that are applied to the income to figure out how much one spouse should pay the other each month.

With high income households, it is not necessarily so easy. This is especially true for ultra high net worth clients. In those cases, the courts will look to the standard of living during the marriage. A forensic accountant will evaluate the cost of the lifestyle of the parties during the marriage (and also the lifestyle of the children) and that analysis will be used by the court in calculating support payments.

For the purpose of calculating alimony, courts consider a variety of factors, and the standard of living established during the marriage is included in those factors. It is important to not only consider the standard of living during the marriage, but also whether the parties are able to maintain a reasonably comparable standard of living following the divorce. In many cases, the same standard of living cannot be maintained because there is not enough income to maintain two households of comparable quality to the marital household. Read More

03 Dec

Good MLMs and Bad MLMs

pyramid-selling-scamDefenders of multi-level marketing (MLM) will tell you that some companies “do it” right, while some companies “do it” wrong.

The fact that a multi-level marketing company like Mary Kay Cosmetics has been around for more than 55 years does not define whether it is a fraud or scam. Remember Enron (in business more than 15 years prior to the fraud being discovered) and Bernie Madoff (whose investment firm was in business for more than 40 years before his Ponzi scheme was revealed)? Length of time in operation has nothing to do with whether something is a scam or a fraud. Being traded on the New York Stock Exchange is not an indicator of legitimacy either. Read More