This week an article in the Wall Street Journal explored whether there might be some changes coming for Sarbanes Oxley. With President Trump talking about rolling back regulations, business groups that want Sarbanes Oxley softened may get their way.
Sarbanes Oxley requires management to assess the internal controls over financial reporting (those things which are supposed to help prevent errors and fraud). Section 404(b) requires the auditors to evaluate that assessment and provide an opinion on it.
Some say the rule is too costly for smaller companies, while those in support of it say that it has helped ensure financial reporting integrity. Companies with a market cap under $75 million have never had to comply with Section 404(b). Possibly legislation could raise that threshold to $250 million or even $500 million. Continue reading
No group of people, no matter how poor, are immune to the predatory practices of multi-level marketing (MLM) companies. These companies are nothing but glorified pyramid schemes, causing financial losses for more than 99% who get involved.
A Chinese MLM called Tiens has set up shop in Uganda, despite the fact that the average income is $2 per day (so few people can afford overpriced snake oil). Tiens is using false income claims and lies about medical cures to recruit distributors.
Filmmaker Priya Biring did a 25 minute film on this MLM, entitled “Uganda’s Health Pyramid,” and produced by Al Jazeera News.
Priya says the following in the article that accompanies the video: Continue reading
Experienced family lawyers are familiar with the common ways spouses attempt to commit financial fraud in divorce: hiding or undervaluing assets, overstating debts, concealing income, and inflating or fabricating expenses. All of these are done in an attempt to get more than the spouse’s fair share in the property division, and to influence the amount of support that will be paid or received.
Successfully advocating for your client involves more than just knowing that these things occur during the divorce process. You must also be able to identify the red flags that indicate the financial issue(s) must be investigated further. Some are easier to spot than others, but once you have identified two or three red flags, it is time to get a forensic accountant involved. The financial analyst’s experience with fraud and deception will be invaluable in evaluating the red flags and determining if there is something of substance to investigate further.
The most straightforward red flag is the discovery of undisclosed accounts. This could be direct evidence of a spouse attempting to conceal assets. However, the nature of the undisclosed account should be examined. Is it an old account that hasn’t been used in a long time? Is there little to no activity in the account? Is the balance in the account insignificant? In these situations, little weight should be given to the non-disclosure, since it is more likely an oversight. Continue reading
If you’re new to the world of forensic accounting (also called investigative accounting), this video will give you an idea of the types of cases a forensic accountant might work on. There is quite a variety in the work, but most of it has something to do with fraud or litigation.
This week we heard news of $20 million (hidden in a box spring) being seized by the federal agents in its ongoing investigation of TelexFree, a multi-level marketing company that the government says was a massive Ponzi scheme. You can read all about the TelexFree case on Patrick Pretty’s blog.
News reports about TeleFree refer to it as a Ponzi scheme (also called pyramid scheme). What isn’t mentioned anymore is the fact that it operated as a multi-level marketing company, just like Amway, Mary Kay, Herbalife, LuLaRoe, and hundreds of other companies you hear about on a daily basis. While it is NOW acnowledged that TelexFree was a Ponzi scheme, there was a time when it operated exactly as these other MLMs do.
The FBI says the following about TelexFree: Continue reading
Each state has its own guidelines for calculating spousal support. Generally, factors which may be considered in determining alimony include:.
- The length of the marriage
- The needs of the recipient
- The relative earnings of each party
- Career sacrifices made to benefit the family (i.e. one parent gave up a career to raise children or one spouse worked so the other could complete a college degree)
- The earning capacity of each party
- The ability to pay spousal support
- The lifestyle of the spouses during the marriage
- The age of the parties
- The property divided by the spouses
- The ability of the recipient to earn income in the future
As victims of occupational fraud reflect on crimes committed against their companies, they wonder if there were any signs that a fraud was occurring. They wonder how a trusted employee could steal from the company. Sadly, frauds are committed by people in positions of trust. What is it about those people that leads them to commit fraud?
Corporate thieves have many things in common with one another. There are many tell-tale characteristics about people and their lifestyles that signal the potential for fraud. These range from personal financial circumstances to attitudes on the job. A few of these traits alone do not indicate the potential for fraud, but the probability rises as we identify more of the characteristics.
Employees who steal from their employers often appear very dedicated. They work long hours and seem willing to take on extra responsibilities. For a normal person, these would be desired traits. An employee who helps accomplish more is seen as an asset to the company. For someone with the potential for fraud, however, these characteristics are worrisome.
In high net worth divorce cases, there are often large volumes of data. The lifestyle analysis will rely on a detailed examination of bank, credit card, and investment statements. High levels of spending mean a large amount of data. In this video, Tracy explains how to manage and accurately evaluate the data.
Multi-level marketing companies (MLMs) like to refer to themselves as “Direct Sales” companies, because this puts the focus on the sale of the product or service, and takes focus off the business of recruiting.
I’ve been researching MLMs for years, and I’ve found that companies use the product or services simply as bait and a cover. It is “bait” for recruiting because it looks legitimate to a potential recruit. (How many people would join MLMs if they were truthful and told you that what you really had to do was constantly recruit new people?)
It is a “cover,” since it is what makes the schemes legal under state and federal laws. Pyramid schemes (which are simply a transfer of money up a pyramid-like structure) are illegal. But if you use a legitimate product or service as your cover and your reason for transferring money up the pyramid, you can successfully claim that your company is not a pyramid scheme. Again, the product or service takes the focus off recruiting.
But the truth is that the people involved in multilevel marketing companies do little actual retailing of products or services to third-party customers (non-members of the scheme). The vast majority of the purchases of products and services are made by the members of the MLMs themselves, either to stock inventory (which they will probably never be able to sell) or for personal consumption. Continue reading