30 Jan

Lifestyle Analysis: Existence of Unusual, Non-Recurring Expenses

 When doing a lifestyle analysis for a divorce or child support case and evaluating historical spending, we sometimes run into unusual expenses that may be considered one-time (or non-recurring). What do we do with these?

Expenses that are not expected to recur should be excluded from the marital lifestyle.  The rationale is simple: If an item will not recur, either due to the end of the marriage or some other relevant factor, it is not part of the lifestyle that must be funded post-divorce.

Examples of items that should be excluded from the marital lifestyle could include: Read More

28 Jan

Why Multi-Level Marketing Companies are Pyramid Schemes

I often hear: “Pyramid schemes are illegal! If XYZ Company was a pyramid scheme, the government would shut them down!”

Yes, pyramid schemes are illegal. No, our government generally doesn’t shut down pyramid schemes masquerading as multi-level marketing.

MLM is a type of pyramid scheme that our government allows to operated. Is it ignorance? Or is it deliberate? I don’t know, but it seems that educating consumers is the best way to fight against pyramid schemes which try to hide the nature of their activity by calling themselves “multilevel marketing” or “network marketing” or “home based businesses.”

Watch this video to learn more.

22 Jan

Investigating Investment Frauds and Schemes

Despite the proliferation of information available about phony investment schemes and the dire warnings given regularly by news reporters, consumers continue to become victims of these scams on a regular basis. The perpetrators of investment schemes dream up stories explaining their unusually high rates of return on money, and people with money to invest with them.

These high investment returns typically amount to guarantees in excess of 10% per year. Often they are to the point of ridiculous, offering a 30% or 40% annual return. As a fraud investigator, it is clear to me that these offerings are bogus, because any investment that legitimately generated such returns would not be much of a secret to the rest of the world. But consumers, who are often eager to protect and grow their nest eggs, are all-too-willing to believe that such an investment is the answer to their money problems. Read More

18 Jan

Dividing MacKenzie Bezos’s Fortune

We keep hearing about the divorce of Jeff and MacKenzie Bezos and how “his” fortune of $135 to $140 billion related to Amazon will be divided.

People are speculating that there is no pre-nuptial or post-nuptial agreement. Amazon was started after the couple was married, so the assets may be owned jointly and subject to a 50/50 split.

As we often see in cases in which the husband is the “moneyed” spouse (the one with the business involvement and the one whose name is on the paychecks), people talk about how much he will have to “give” his wife in the divorce. But where community property is involved, the spouses own the property jointly. Neither is “giving” property to the other. Instead, the property is divided. Read More

16 Jan

Manual Cash Disbursements and Fraud

Companies typically have a standard way of initiating cash disbursements like payments to vendors or employees. Often this involves entering an invoice into the accounting system, ensuring proper approval for payments, and then generating the electronic transfer or check. Sometimes invoices are entered at scheduled intervals and payments are issued on certain days of the week.

Any disbursement that falls outside of these procedures could be considered a manual disbursement. That is, it is initiated manually and issued under special circumstances.

Probably the most common type of manual disbursement occurs in a company that has an accounts payable process through which all vendor payments should flow. Suppose a vendor drops off materials and needs to be paid immediately for that delivery, and there is not a chance to get the vendor payment through the regular accounts payable process. A check will be cut directly to the vendor, and the accounting system is updated later. This is a classic example of a manual disbursement. Read More

14 Jan

Documents Needed to Investigate Business Interests in a Divorce

When a spouse owns a business, it can create some of the most complicated financial issues in a divorce. It is extremely important to dive into the financial records of the business in order to value it and to determine where the money is REALLY going. Tracy Coenen and Miles Mason discuss what documents a forensic accountant needs to evaluate the business.

11 Jan

Why Do a Business Lifestyle Analysis?

I often talk about doing a lifestyle analysis in divorce, where I go through the personal spending of the parties in detail and make calculations surrounding the spending. But what about doing the same type of lifestyle analysis for a business? Why would we want to do that?

Closely held businesses present special challenges in the family law setting. Typically, only one spouse is actively involved in the business. Therefore, not only does the spouse control the family’s finances, he or she also controls all of the records of the business. When a spouse is attempting to quantify the income from the business or the value of the business, the spouse who works actively in the business can purposely (and often very effectively) obstruct attempts to get accurate and complete data. Read More

08 Jan

How to Perform Analytical Review

When investigating fraud, I often find it useful to perform analytical review on the financial statements of a company. Even when management is certain that they know where the fraud occurred within the accounting system, analytical review can help identify unsual things about the numbers that may warrant further investigation.

Ratio analysis and analytical review procedures are very familiar techniques for financial statement auditors. While analytical procedures may seem elementary, they can be very important in giving clues to areas of the financial statements that may contain fraud.

Analytical review involves comparing changes in numbers between accounting periods (horizontal analysis) and the relationships between certain financial statement line items (vertical analysis). The numbers for a business typically have certain predictable patterns, and when the financial results fall outside those parameters, it may be cause for concern.

Typical sets of data to be compared during analytical review can include: Read More