Recognizing Signs of Fraud

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Would you recognize the clues that your client has been ripped off by one of its employees? Or would management conduct business as usual, blindly trusting their employees? Companies make the mistake of not actively searching for fraud. They tend to trust their employees and trust the procedures in place to safeguard company assets.

It may be good business to trust employees and empower them to make real contributions to the growth of the company. However, it is not wise to turn a blind eye to signs that a trusted employee may be stealing.

An unexpected increase in affluence may signal an employee with sticky fingers. Favorite toys of fraudsters include new Harley Davidson motorcycles, luxury vehicles, and high-end watches. Those things are easy to spot, although management doesn’t always think through the implications. Continue reading

Using Bank Statements in Divorce Cases

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Bank statements can be a very valuable tool in child support and divorce cases, particularly when one party has not been forthcoming about income and expenses. We can look at deposits to draw conclusions about income, and the level of expenditures may also give us clues about the level of income. Tracy talks about some of the ways she analyzes the bank statement data.

Don’t Get Swindled by Your Financial Advisor

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Yesterday I read a horrifying local story about Edward Matthes, a former financial advisor for Mutual of Omaha who stole at least $2.6 million from his clients. According to the Information in the federal case, Matthes carried on his fraud between 2013 and 2019. SIX YEARS!!!!

He swindled at least 23 clients. He’d convince them to bring investment accounts over to Mutual of Omaha. Funds were transferred from their old accounts to Matthes, who never invested the money for them. Instead, he put it in his own bank account and spent it.

Matthes got away with it because he created phony account statements that showed client balances and he had meetings with them about their “investments.”

So how could consumers have avoided being defrauded like this? Or at the very least catching the fraud early to a) have a better chance of getting their money back, and b) stop this loser from doing the same thing to others.

  1. Never send your funds to an individual investment advisor or insurance agent. Always send the funds directly to the company it is supposed to be invested with.
  2. Once your funds are invested, go online to the company you’re investing with and get a login that you can use to view your account. In this case, if clients had done this, they would have seen immediately that they had no accounts with Mutual of Omaha.
  3. Look carefully at any documents provided to you by the investment advisor. I bet there were some signs on these “account statements” that Matthes provided to his clients that could have tipped them off that they were phony.

Here are some tips that can help you avoid other investment scams such as Ponzi schemes. Be careful! There are plenty of shady people who are trying to take your life savings from you.

4 Key Pieces of an Effective Corporate Fraud Investigation

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Here’s a simple way to break down the idea of a corporate fraud investigation. If you’ve got a compliance department, this is way too basic for you. But if you’re at a smaller company that is new to the concept of fraud (either because you recently had a fraud or because you have decided that fraud prevention and detection are important)…. then this might help you see the basic things that you’ll need to put in place.

A corporate investigative policy is necessary because it is important to have guidelines in place for the start of an investigation. What should management do when fraud is suspected? How are fraud allegations to be evaluated? When and why does the company initiate a full-blown investigation?

Most managers and executive haven’t had to deal with allegations of serious fraud. They need some guidance so that evidence isn’t corrupted and so that the allegations are handled fairly. A well-designed policy will help avoid claims of selective treatment. It also brings uniformity to the process so that similar offenses are treated similarly.

The investigative team will carry out the full fraud investigation. Depending on the seriousness of the allegations and the level of examination required, the team could be as few as one or two people, or as many as dozens of people. The team might include: attorney, fraud examiner or forensic accountant, auditor, private investigator, computer consultant, and a management representative. For smaller companies, your fraud investigation team will likely be made up of outside consultants, rather than dedicated employees. Continue reading

Public Records in Financial Investigations

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The internet is an important source of information in financial investigations. It has become so important, that I wonder what I ever did without access to all of this information! Even though my work is focused on digging into the details of financial records – – and many of those are private and not available online – – I still acquire a lot of information helpful to my investigations on the internet.

In Chapter 5 of my book Expert Fraud Investigation: A Step-by-Step Guide, I discuss sources of information for fraud investigations. There are entire books devoted to the process of finding and using public records and public information to aid in investigations, so naturally a chapter of a book can only scratch the surface. However, in that chapter and in this article, I’m going to begin to show you how you can find valuable information. Continue reading

Becoming an Expert Witness

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Are you a CPA who wants to become an expert witness? Lawyers are always on the lookout for financial experts who can help them win cases. Virtually all civil suits involve issues about money, and a certified public accountant is one of the best resources for sorting out the financial details.

As a CPA, you don’t have to focus on litigation work to become an expert witness. As a professional doing income taxes, financial statement audits, benefit plan consulting, or other advisory work, you possess valuable expertise that could help expand your practice. The key is to set yourself up as an expert on a narrow range of issues and market yourself to the right potential clients. Continue reading

Criminal Defense Work: Financial Crimes

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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. Continue reading

Ponzi Scheme Red Flags

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Charles Ponzi

How do you know if you’re considering investing in a Ponzi scheme? The promoters will never come out and tell you they are running a pyramid scheme, so the investors have to be smart enough to recognize them on their own. The good news is it is easy to spot a Ponzi scheme.

Now I don’t mean that it’s easy to prove in a court of law that something is a Ponzi scheme. In a civil or criminal case, there are certain standards of proof that need to be met. But you’re not a court. You’re simply an investor. Whether you have $10,000 to invest or $10 million to invest, your money is probably pretty important to you.

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Preventing Corporate Fraud

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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

How-To Guide to Fraud Investigations Course (CPA Crossings)

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Coming up on Monday, October 19: How-To Guide to Fraud Investigations course at CPA Crossings.

This is a 2 hour online course, and is the third in a 4 part series on conducting #fraud investigations. This is your chance to learn some fraud investigation techniques that I use in many investigations, and it is inexpensive at only $89 for 2 CPE credits!

This session shows you how to investigate an asset misappropriation scheme. We walk through a detailed case study so you can see where to start at the beginning of a financial investigation, and you’ll learn procedures and techniques used to investigate fraud and trace funds. Continue reading