College of Business Administration and Graduate School of Management
Entrepreneurial Award
Tracy L. Coenen, Arts ‘93, Grad ‘96

Tracy Coenen may not know where the bodies are buried, but she knows how to follow the numbers. When it comes to forensic accounting, she wrote the book on the subject. In fact, she wrote three: Expert Fraud Investigation: A Step-by-Step Guide, Essentials of Corporate Fraud, and The CPA’s Handbook of Fraud and Commercial Crime Prevention.

A CPA who’s also certified in financial forensics and as a fraud examiner, Tracy clearly knows her business: catching bad guys. She has investigated hundreds of frauds, from embezzlement and financial statement fraud to investment fraud and insurance fraud. She has served as an expert witness in cases involving damage calculations, commercial contract disputes, shareholders’ disputes and criminal defense. She even blogs about money scams professionally. (Read the whole article here.)

Dow Jones Newswire reports:

Minkow has blown the lid on about two dozen Ponzis over the years, including the charges the SEC filed against Gross last week.

It has got to be demoralizing knowing your Ponzi gig is up because an even bigger Ponzi artist just ratted you out.

An attorney for Gross declined comment, saying he was just beginning to review the case.

The SEC also charged Gross’ associate, Gregory W. Laser, 46, of San Diego, Calif. Laser didn’t return a phone call and an email.

The SEC alleges that Gross and Laser, and their Bridon Entertainment, took more than $18 million by promising guaranteed returns as high as 40 percent on the sale of advertising to large corporations, including FedEx Corp., Wal-Mart Stores Inc., Best Buy Co., Costco Wholesale Corp., Albertson’s and Jewel Osco.

“The contracts provided to investors were fake, and Gross did not have relationships with the well-known companies he claimed were his clients,” the SEC said in a press release.

It was allegedly just a pretext to suck up other people’s money like one of Minkow’s old carpet-cleaning machines.

“Gross did not buy or resell advertising, and investors’ purported returns were not generated by the sale of advertising, but instead came from money raised from subsequent investors, in classic Ponzi fashion,” the SEC said.

Minkow said he learned of the alleged scheme from a member of his church who was thinking of investing $50,000. Minkow said that when he reviewed the offering memorandum and a slide show presentation, it smacked of Ponzi on its face.

Gross and Laser claimed they needed investors’ money to buy advertising space that they would then sell to large companies. But anyone doing this could typically get credit from the media outlets selling the ads and wouldn’t need investors.

“The offering memorandum, itself, was probable cause to suspect a financial crime in progress,” Minkow said.

So he called the FBI, put on a wire, and had lunch with Gross.

“The guy drove up from the Valley and I was afraid he was going to recognize me,” Minkow said. “Because in the San Fernando Valley, that’s where I did my crime. .. He said, “You look familiar.” .. I said, “Yeah, just tell me about those returns.” And we just sort of moved on.”

Minkow said he came to the meeting with an assistant posing as his wife. Gross asked how many kids they had.

“I said four and she said three, at the same time,” Minkow said. “Then I made some joke about how she doesn’t like to acknowledge our oldest.”

A man intent on closing a deal doesn’t always notice such inconsistencies. And Minkow had been referred by people Gross trusted–a tactic masters like Bernie Madoff deploy universally.

“We all do the same thing,” Minkow said. “This guy was saying I couldn’t talk to anyone at FedEx or Home Depot, and the reason was because it would jeopardize his relationship. .. This is what I used to say.”

When auditors wanted to check if ZZZZ Best did the work it claimed, Minkow told them they couldn’t go to the job sites. It was a liability, he’d explain. They might slip and fall.

This usually worked, and when it didn’t Minkow took the auditors to empty office buildings that he had staged as work sites.

“What deja vu is this?” Minkow said he thought as he listened to Gross’ pitch. “It’s just a variation on a theme.”

Not to take anything away from this caped crusader, but as alleged Ponzis go, $18 million barely makes a news brief in a local newspaper anymore.

But Minkow said he aims to stop Ponzis while they are young: “Madoff didn’t start off at $50 billion, and $20 million becomes $200 million very quickly.”

Today’s article about a fire at the house of a women accused of defrauding Wisconsin’s child care system brought this to mind. Latasha Jackson has gotten rich off of providing daycare services in the city of Milwaukee. But not just any daycare services. The ones paid for by the Wisconsin Shares program, essentially a welfare program that pays the daycare costs for low income families.

Jackson was suspected of defrauding the system by billing the state for children she was not actually caring for, but she remained in the Wisconsin Shares program for years anyway. When the Journal Sentinal made clear their intentions to publish a story about Jackson’s alleged fraud, the state finally cut her off and she turned herself into the authorities.

The fraud is pretty simple to commit under Wisconsin’s rules. A woman who is employed in a low paying job is eligible for child care for her children. If the woman is employed at a daycare, she can have paid childcare at that daycare facility for her children, sort of double-dipping. The daycare owner can defraud the system by falsely claiming that the woman is working at her daycare and falsely saying that her children are enrolled there. The state pays the daycare costs for the children, and the daycare owner will give a part of the proceeds to the mother who isn’t really working for her. (Sometimes the mothers do work at the daycare, but much less than is reported to the state, and the children actually attend the daycare far less than reported.)

In August 2009 alone, the newspaper reported that Jackson had been paid $90,000 through the Wisconsin Shares program. She has collected more than $3 million from the state since 1999. The total Jackson was paid from the state was over $830,000 in just 2006 alone.

The state was warned repeatedly that Jackson was committing fraud, with multiple reports of her billing the state for children who didn’t really attend the daycare. Inspectors also caught her numerous times not keeping proper attendance records.

Jackson’s Menomonee Falls house has been on the market for a while with an asking price of $1.5 million. And early this morning the fire department got a call about a big fire at the house. No one was in the house at the time. The damage to the home is currently estimated at $800,000, and the cause of the fire is under investigation.

UPDATE: Evidence of arson has been found.

But in this day and age, the U.S. Postal Service is no longer needed, and I suggest that we get rid of this drain on tax dollars.

Many people think it’s a foregone conclusion that the U.S. Postal Service is needed, wanted, and necessary. I strongly disagree. You don’t want to spend $8 to send a lettter via FedEx or UPS? You wouldn’t have to. If the USPS goes away, I guarantee that a private carrier like FedEx or UPS would create a new service for cheap letter delivery. Why? Because they’re so good at what they do and they could make money doing so.

And how many letters do you mail anyway? With the proliferation of online bill pay and electronic statements, my use of USPS has gone down dramatically. I run a business and my personal life, and I mail less than 10 pieces of mail each month. I could mail even less if I tried harder. We simply don’t need the post office like we used to!

The biggest advantage to getting rid of the Post Office would obviously be the savings of tax dollars. Postal employees are overpaid and given too many benefits. That’s why the Post Office keeps losing money.  And their service is not that great. If I’m sending a package, I’ll pick, FedEx or UPS any time.  But notice all the advertisements that are trying to get you to buy more services from the USPS? Ever try to ship something at the Post Office and get tired of all the add-ons they want you to buy? They simply don’t run a lean or competitive business, and the taxpayers are being punished because of it.

And of course, the Post Office isn’t interested in cost-cutting measures like reducing the current six-days-a-week delivery schedule. I think it would be fantastic if they delivered to businesses Monday, Wednesday, and Fridays, and residences Tuesdays, Thursdays, and Saturdays. They can cut their staffing costs dramatically by doing so, and consumers really aren’t going to suffer if they have to wait one extra day to get their mail.

To add insult to injury, the US Postal Service is apparently happy to waste taxpayer money whenever they can. And this might just rise to the level of fraud, although no one wants to say that word, and they instead call the spending “imprudent.”  The inspector general for the USPS reports that in a five-month period, $800k was spent improperly on unapproved, non-business meals, alcohol, and events by Postal Service employees.  Yet the agency is crying because they lost $3.8 billion in the most recent fiscal year. Duh!

A sampling of some of the wasteful spending noted in the report:

• There was “no business justification” for $355,451 of food provided at a September 2008 national sales educational conference; it included a $96-per-person dinner and a $500 “bartender charge.”

• An installation celebration for one postmaster — the report didn’t say where — included “unallowable food purchases” totaling more than $17,000. The menu included “crab cakes, beef Wellington, shrimp and scallops” even though Postal Service guidelines allow for only “light snacks” at such events.

• There was “no business necessity or justification” provided for $77,757 in breakfast meals for events between September 2008 and February 2009.

This story follows a nice little tidbit that was exposed earlier this year by CNN: The postal service bought an employee’s home for $1.2 million so the employee could relocate. Who knew that our government agencies were into buying and selling residences?

When are taxpayers going to take a stand against government agencies wasting their money??? Wouldn’t your money be much better spent on your own family’s needs? Why pay so much in taxes, only to have inefficient service, excessive pay and benefits, and wasteful spending?

From their recent press release:

The Company previously announced that it had identified an issue relating to its recording of certain revenue in a non-core business, Promotions.com, that the Company acquired in August 2007. Since that announcement, the Company has been conducting a thorough review of accounting matters related to the business unit and the Company currently is assessing the impact of such matters on the periods since the acquisition. The Company has not yet determined whether it will be required to restate any prior period results. The Company currently does not believe that this matter is likely to result in any significant percentage revision to the aggregate revenue or expenses previously reported by the Company since the acquisition (although the Company cannot give any assurances with respect to this matter as its review is not yet complete), but may result in material revisions, upward or downward, to the net income reported by the Company during any one or more of the periods since the acquisition. This matter does not affect the Company’s previously reported cash, cash equivalents, restricted cash or marketable securities. The Company is endeavoring to complete its review of this matter expeditiously, but cannot presently give assurances as to when the review will be completed.

When the review is completed, the Company will announce a new date and time for its second-and third-quarter 2009 earnings release and investor conference call in a subsequent press release.

Even more troubling is that this bookkeeping mess follows some other disturbing developments at TheStreet.com, which include board members and executives jumping ship at record pace.

The guys over at WallStreetCheatSheet took a couple of well-deserved shots at Cramer… noting that if one follows Cramer’s own advice, they’ll sell the stock. Cramer was none too happy with their blog posting, but who can really blame them for simply pointing out the obvious?

And now more news reports are coming out about how phony the stimulus “success” numbers are…

The Southwest Georgia Community Action Council reported that they saved 935 jobs, but they’ve only got 508 employees

The Administration for Children and Families at Health and Human Services claimed it saved 14,506 jobs, except that’s not true. 9,300 of those jobs weren’t “saved.” Rather, those employees got raises and additional benefits.

Even worse is the idiotic explanation why those 9,300 jobs can be considered “saved.” In the words of another blogger:

HHS spokesman Luis Rosero defended the practice of counting raises as jobs saved, explaining that “If I give you a raise, it is going to save a portion of your job.”

Now I have spent the last three hours reading that statement over and over again to try to figure out what that could possibly mean — I even translated it into Latin, which was difficult because it required a subjunctive. But let’s try to parse it a little bit: What is a “portion of a job” and how does a “raise” help to “save” that “portion”. This is one of those inexplicable statements that completely stumps me.

Then there’s the North Chicago school district. They say they saved the jobs of  473 teachers with the $4.7 million tehy got. The problem is that the district only has 290 teachers. And in the same news story, other Illinois school jobs “saved” are outed as complete fiction:

In the official report, Wilmette Public Schools District 39 was credited with 166 jobs saved by stimulus aid. Superintendent Raymond Lechner said the number should be zero.

At Dolton-Riverdale School District 148, stimulus funds were said to have saved the equivalent of 382 full-time teaching jobs — 142 more than the district actually has.

A similar discrepancy was found in data for Kankakee School District 111, where the stimulus report logged the equivalent of 665 full-time jobs saved. “That’s impossible,” a top Kankakee school official said, adding that the entire payroll — full and part time — is 600 workers.

Of course there are also reports of jobs that were saved in other districts that weren’t reported at all, which would mean that the numbers are underreported for them.

The bottom line is that no one is able to give accurate figures on the jobs “saved” with stimulus funds. Which is another reason why our government should not be taking money away from hard working taxpayers and pretending to use it to “save jobs.” They can’t do so efficiently, and they can’t even report their activities accurately. Government, please get out of our lives.

Look at the stimulus numbers in general. In Wisconsin, for example, federal stimulus money was reported to have “saved” 8,284 jobs. That sounds impressive, until you find out that 75% of those jobs were government jobs. (And no, I don’t belive the government report that the jobs saved were “essential.” That’s a smokescreen, plain and simple. There are plenty of tax dollars to fund “essential” services, and the reason governments are “broke” is because they’re using tons of tax money to fund non-essential things that they should not be doing!)

What’s my beef with saving government jobs? We should not be trying to “save” government jobs! Those jobs should only exist to provide the most basic and necessary functions of government. We should want smaller government, not larger. Our government is wasting our money to “save” jobs which are wasteful.

Our federal government is reporting that the stimulus saved 650,000 jobs, yet there is clear evidence that their numbers are phony.

And here’s a specific example of why the government should not engage in stimulus activities to influence the market. They screw it all up and cost taxpayers tons of money.

Take the Cash For Clunkers program. Car buyers got $4,500 from the government to purchase new cars. Essentially, you and I (those who didn’t buy new cars in the program) helped buy our neighbors new cars. (And quite frankly, I’m not interested in kicking in any money to help you buy a new car!)

What did this program add to our economy? NOTHING! Most who had the need and ability to buy new cars would have done so anyway. They may have postponed those purchases a little, but they would have made the purchases without government intervention.

Edmunds.com is reporting that of the 690,000 cars that were purchased under Cash For Clunkers, 565,000 of the buyers would have purchased a car anyway. So what did we accomplish? We got 125,000 people who wouldn’t have bought new cars to do so. (And I’ll suggest that many of those couldn’t afford to do so, and had no business making those purchases anyway!)

So our government spent $3 billion to spur the purchase of 125,000 cars. That’s a cost of $24,000 per car. Our government wasted $3 billion of our money in order to cause the sale of extra cars (above then normal demand) at a cost of $24,000 per sale. No one in their right mind can possibly suggest that this was a worthwhile way to spend tax dollars.

And our government doesn’t want you hearing about this obscene waste of taxpayer money. They’re going to do everything in their power to shut up those who would expose the frauds being perpetrated on the taxpayers. So now the United States Retribution Czar is maligning Edmunds.com for daring to clue in the taxpayers.

The bottom line is that our government should not be propping up certain companies and industries with our tax dollars. (Yes, I‘ve been against all bailout and stimulus-type activities from the very beginning of the financial meltdown!)  It’s a waste of money which belongs to the hard working taxpayers who earned that money (and who have almost no say-so in the creation and administration of these programs).

Our government has never been efficient and effective in administering anything. And they should stay out of our economy and let the free market work for itself.

When Scott Walker became the County Executive, he made a promise to not add more to the taxpayer burden. He’s kept that promise, and “essential services” have not suffered. Even non-essential services haven’t suffered.

There has been lots of crying as Walker forced the Parks Department to reign in spending to do their part in balancing the budget. Those in favor of massive spending on Milwaukee County parks believed that the system was being destroyed by Walker, and they shouted loudly about our poor, poor parks.

But the blatant lies by those who want more and more legal theft of taxpayer dollars were exposed when the Milwaukee County parks won the National Gold Medal for Excellence by the American Academy for Park and Recreation Administration and the National Recreation and Park Association.  Seems the prudent spending hasn’t impacted the parks negatively.

And now we turn our attention once again to the wage and benefit situation for county employees. They have long been the recipients of high wages and astronomical benefits.

The private sector currently has an average benefit cost of 41.3% of total wages. Wages and salaries average $19.39 per hour, while the benefits cost an average of $8.02 per hour. That’s a total wage and benefit cost of $27.42 per hour in the private sector.  So benefits of $8.02 per hour, compared to wages of $19.39 per hour, equals a benefit cost of 41.3% of wages.

I’ll suggest to you that this ratio is a result of whatever the market deems appropriate. That is, employers are likely in this range if they want to be competitive, while at the same time the costs are still manageable.

To heck with reasonable costs, however. Milwaukee County has long been out of line with that average. The county’s current budget has benefits which cost 74.35% of wages.

Now of course, some will say that’s because government workers are underpaid. I disagree. By and large, we see that pay for government jobs is often rather generous, so this higher percentage is not because of some depressed wage rates.

And the next budget looks to be even worse for Milwaukee County. According to this calculation, 2010 benefits for county employees will be a whopping 93.31% of wages.

But who cares??? This Milwaukee County Board now wants to add to the costs and already enormous $80 million budget deficit by handing out more benefits. The latest proposal suggests providing health insurance benefits for domestic partners of any sex. They’re pretending that the cost would “only” be $3.9 million if an estimated 3% of employees took the option. And we all know how these cost estimates go. They’re almost always wrong, and the reality almost always goes against the taxpayers.

Those in favor of this proposal cite “fairness” as a reason to provide these benefits to domestic partners.

I have an idea to make the issue of health insurance “fair” in the workplace. All employers offering health insurance, both private and public, should provide insurance for the employee. The employee then has the option of paying for insurance for their family or domestic partners. That way, every employee is getting the exact same benefit (single coverage), and they’re free to purchase anything additional that they desire (family coverage).

I’ve long felt that those providing health insurance to employees do so in an unfair manner. Employees who are married and/or have children receive far more compensation than single employees via the health insurance benefit. Family coverage is inherently more costly than single coverage. Why should some employees get a much larger benefit than those who choose to remain single and childless?

I’m all in favor of being fair. Let’s fairly offer insurance to the employees, and then allow them the ability to purchase any additional coverage they want. We save Milwaukee County tons of money, and we are 100% fair to all employees, no matter who they live with or marry, no matter what the sex or the legality of their relationship. Problem solved.

Then things gradually started spiraling out of control as politicians wanted more and more control of our lives. We have gotten to a point where our politicians are legally stealing from citizens via taxes. Why on earth should the government be permitted to take away a large chunk of my hard earned money?

There really is no justification for it. Oh sure, it’s popular in some circles to say that the “rich” should give up some of their money for the benefit of the “poor.” But is that really right? Is it really fair to take away from some and give to others? As a society, we don’t condone me breaking into someone’s bank account and taking out a bunch of the money.  That’s stealing. The money is not mine, and I have no right to it, no matter what I think of the person who owns the money and how they came to own it.

Yet we allow our government to do essentially that. They are deciding who to steal money from. And it’s not for the betterment of society as a whole. When has our government ever done something right? They haven’t. They’re essentially a case study in waste, fraud, and abuse of taxpayer money.

And now that economic times are more difficult, our government is getting even more bold, taking even more money away from citizens. Tax collections are down, and instead of trimming spending accordingly, the answer has been to make taxpayers pay more. Where exactly are the taxpayers supposed to get this extra money? Who cares! The law says they have to pay their taxes, and pay they must.

The latest act of theft is a sales tax on digital downloads. This goes into effect tomorrow in Wisconsin, making a total of 11 states that are taxing downloads of music, books, and other digital items.

Sales tax started out primarily as a tax on tangible goods, with some exceptions. The idea was to charge a tax on a finished good purchased by a user of that good. Sales tax is charged by states, and certain goods have been exempted from sales tax. For example, groceries are generally not subject to sales tax.

As time went on, some service began to be subject to sales tax. The list of taxable goods and services has continued to grow over the years as governments have wanted to take more and more money away from citizens.  There is no doubt that government spending has been out of control for a long time. It’s just that when economic times were good, it didn’t seem like such a big deal. Now that money is tight for everyone, the waste and abuse of tax dollars is much easier to see.

I love how Wisconsin defines taxable digital downloads in such a way as to almost justify this new tax:

Digital goods include versions of products that have historically been produced and transferred as articles of tangible personal property, and that are now produced and transferred electronically as digital files. In many cases, a digital good is also available for transfer as an article of tangible personal property. However, it is not necessary for a digital good to have a tangible counterpart to be considered a digital good.

Example: Recorded music has been produced and sold in the form of vinyl LPs, cassette tapes, and CDs. More recently, recorded music has been produced and sold as a digitally-encoded file which is transferred electronically to the purchaser. Recorded music transferred electronically is a digital good.

Notice that they throw in the part about these newly taxable items being previously available as “tangible personal property.” Who cares what they were? That taxable item is not the same thing as the digital download, and so the tax on digital downloads is a new tax. (And no, I don’t buy the argument that sellers of physical goods like movies on DVD are at some sort of “disadvantage” because those items have been subject to sales tax. Taxes are not supposed to be a great equalizer. Our government is not supposed to be in the business of creating equal playing fields. This new sales tax is not “necessary” to make the world of commerce fair. Any retailer who feels at a disadvantage by selling tangible goods subject to sales tax can change their business model at any time!)

Sales tax is now going to be charged on downloaded or streamed music, movies, games, books, clipart, newspapers, and television shows.

And of course, our government makes it easy to prove that their tax laws are completely arbitrary. Traditional newspapers are exempt from sales tax in Wisconsin. Digital downloads of newspapers, however, are now subject to sales tax in Wisconsin. Makes lots of sense, doesn’t it?