It’s easy to assume that upper-level executives in companies with fraud scandals were always bad people. By assuming that they were inherently bad people, we don’t have to confront the issues related to trusting people who seemed trustworthy. We don’t have to explore the idea that people can turn bad or choose a bad path or give in to greed.
Yet the fact remains that many executives who committed fraud were at one time considered rising stars with good values. If it was recognized that their ethics were a little lower than preferred, some were still promoted because those in charge believed the results were more important than the methods.
Many may look at executives like Kenneth Lay and Jeffrey Skilling of Enron infamy, and believe that they were bad people long before Enron. The role of the villain is sometimes easy to fill when you have someone like Tyco’s Dennis Kozlowski, who was busy buying unusually lavish items with company funds. Certain people just make good villains in our minds.Continue reading
The 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.Continue reading
Both civil and criminal cases often involve an element of proving or disproving income of an individual or business. It is not unusual for a divorce case to include allegations of hidden income or assets. In contract disputes alleging the loss of sales or profits, an accurate determination of income is critical.
In criminal cases, the issues surrounding the income of an individual or business have even higher stakes. These cases are quite often tax-related matters, but cases involving white collar crimes and drug trafficking usually include questions about income too.Continue reading
Many of the cases I work currently focus on the tracing of funds through multiple bank, brokerage, and credit card accounts. I am typically working with tens of thousands of transactions at a time, so the sheer volume of the data could be overwhelming.
I have put together a proprietary software system that enables me to capture manage, and analyze the data. The system eliminates the need for staff assistance (and the dangers that go along with having multiple people touch the database and possibly corrupt the data). How does the system work? Read on.
Getting the Data
The process of discovery can be long and agonizing for everyone. There is often a push and pull between the parties in the discovery process, as opposing counsel rarely wants to voluntarily give up damaging financial data. It often takes several rounds of requests to get the information we seek.Continue reading
Executives have the means to commit and cover up the largest frauds. They have access to the information and computer systems, they have power over all employees and they have access to the money. The finance function is riddled with fraud risks and the company’s executives are in the best position to take advantage of those risks.
Because of the risk of losing large sums of money to fraud by executives, companies must ensure owners and boards of directors are actively involved in creating and maintaining an environment that is not conducive to fraud. This involves active oversight of daily operations, continuous monitoring of potential red flags of fraud and swift action when fraud is discovered.Continue reading
Sam Antar is a legend in the fraud industry. He was the CFO of Crazy Eddie, an electronics retailer which pulled off (for a time!) a massive fraud in the 1980’s. He was interviewed by CNNMoney while attending the New Jersey securities fraud summit as a keynote speaker.
Antar said during the interview:
“We are in the golden era of white-collar crime. My biggest regret is I should’ve been a criminal today rather than 20 years ago.”