Should forensic accountants and expert witnesses provide services to criminal defendants? Tracy Coenen discusses the work that can be done on the criminal defense side, and a few issues that the accountant should consider before accepting such a case.
In 2008, former Detroit Mayor Kwame Kilpatrick was charged in state court with 8 felonies related to perjury, misconduct in office, and obstruction of justice. In On September 2008,he pleaded guilty to two felonies for obstruction of justice and was sentenced to four months in the Wayne County Jail and ordered to pay $1 million of restitution to the city of Detroit.
The fun didn’t stop there. Kilpatrick has been accused of hiding money that could be used to pay $855,000 restitution owed to the city of Detroit, stemming from the conviction. Despite claiming poverty and an inability to pay the restitution he owes, money has been magically appearing! Money was transferred to his wife, and Kwame himself received $4,000 from a mystery source. None of these funds were disclosed to the state by Kilpatrick, despite being required to do so under the conditions of his probation. It is suspected that Kilpatrick has money hidden, and that is the source of the funds.
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, diversion of assets, or Foreign Corrupt Practices Act violations.
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.
The most interesting cases I work are criminal cases for defendants accused of financial crimes such as money laundering, tax fraud, bribery and corruption, embezzlement, and investment fraud. I do my best work as a forensic accountant and fraud investigator in cases in which a trail of money must be followed through a complex web of people, entities, and bank accounts.
Peers and colleagues often question my desire to do criminal defense work. CPAs often see themselves as financial watchdogs, especially when they are providing traditional accounting or auditing services. The see themselves on the “right side” of the law, and can’t get their heads around the idea of a CPA helping a criminal.
Cases of financial fraud often focus on the core issue of where the money went. Successfully carrying out a fraud scheme involves not only taking the money, but covering up the fraud and hiding the money trail. Recent headlines have consumers wondering how someone like John Corzine of MF Global could have no idea where hundreds of millions of dollars went. But skilled financial investigators know there is always a trail, and while the money may or may not be recovered, it can be located.
The financial portion of a lawsuit is often high-stakes. This is especially true in cases of divorce, breach of contract, securities fraud, tax fraud, money laundering, and white collar criminal defense. Whether the other side is an individual, a company, or the government, you need an accurate analysis of the numbers for the benefit of your client.
Below is a recent (short) video I put together to demonstrate my forensic accounting process. We talk about the types of cases that we do best, as well as show some of the unique parts of our process and the advantages for clients.
From my Thought Leadership series at Securities Docket:
Nearly every lawsuit has a financial component to it. In many cases, the issues surrounding the numbers have high stakes. Cases involving securities fraud, money laundering, tax fraud, investment fraud, and Ponzi schemes rely on an accurate tabulation and evaluation of the numbers. To take the numbers as provided by the other side at face value, however, would be a huge mistake.
In fact, there is almost always a story behind the numbers. A case may very well be won or lost based on the ability to find out the story, which is often hidden from view. How, then, can a party best get to the truth?
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.
Milwaukee area jewelery Harry C. Glinberg has been charged with money laundering, and has been accused of significantly underreporting his income to the IRS. He was arrested last week and is currently free on a signature bond.
Glinberg is accused of selling expensive jewelry to drug dealers for cash. The jewelry store is known for selling watches costing thousands of dollars, including diamond encrusted watches that retail for $30,000.