18 Jun

Finding Skimming Schemes

Schemes that involve the skimming of money are very difficult to detect, investigate, and ultimately prove. These types of schemes are carried out before money is recorded in a company’s accounting system. Because of this “off-books” nature of the crime, little to no trail is created for investigators to follow.

Skimming happens at the point of entry of money into a business. The gatekeeper who receives those funds is the most likely person to steal the money. Typical jobs that might involve access to funds in this way include bank teller, waitress, store cashier, salesperson, or medical billing clerk. Hundreds of jobs could afford someone an opportunity to skim funds from a company, but these common examples illustrate the ease of theft but the difficulty of investigation.

Imagine a case involving a waiter or waitress who takes an order from a customer, which includes an appetizer, a meal selection, and a beverage. The customer receives all the food and pays for all the food, but the server has not entered the appetizer into the cash register, and instead pockets that part of the customer’s payment. This is a simple example of how easily a skimming scheme can be carried out. Read More

14 Jun

Why Does Bankruptcy Matter During the Hiring Process?

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It’s difficult to know who is going to commit fraud at a company. In 89% of internal fraud cases (fraud committed by employees of a company), the perpetrator was never previously charged or convicted of a fraud-related offense. So there is very little direct evidence that someone is more likely to commit fraud when they come to work for you.

That is why we look for red flags… signs that someone may be more likely to engage in fraud. We call these personal red flags of fraud, and there are literally hundreds of them that could indicate a greater propensity toward fraud. While companies have to be careful in the hiring process to not discriminate against protected classes, they most certainly can consider legal troubles (particularly of a financial nature) when hiring someone who is going to have access and/or control over budgets and money.

This topic came to my attention as the City of Milwaukee encounters an interesting turn in their quest to hire a new Health Commissioner. One of two finalists for the position, Jeanette Kowalik, has had some significant financial troubles that were reported yesterday in the local newspaper. Ms. Koawalik filed for Chapter 7 bankruptcy in both 2003 and 2014. Chapter 7 bankruptcy allows the filer to clear unsecured debts, but not debts secured with collateral (like a home) or student loans. She also lost a home to foreclosure in 2014. Read More

12 Jun

The Fraud Investigation Report

Reporting the findings of a fraud investigation will require varying levels of detail and precision, depending on the specifics of the engagement. Yet it is fairly easy to develop a standard reporting process that can be followed by staff.

One option in some cases is providing an oral report to the client and counsel. This is not the most common way to report on the findings of a fraud investigation. However, it is appropriate in certain cases, such as ones in which legal counsel does not yet want a discoverable report in the file.

The results of a fraud investigation are usually detailed in a written report. When writing a report, the fraud investigator must remember who will be reading the report. It is important to consider that even though today the report may only be for a company’s internal purposes, somewhere down the road the report may be used by law enforcement or in court proceedings. So it is important to know the current audience for an investigation report, but it is also imperative to consider who might need the report in the future. Read More

11 Jun

What Does This Forensic Accountant Do?

I spend lots of time telling people what I do in my role as a forensic accountant. Put simply, I do fraud investigations (often for the victim, but sometimes the accused hires me), divorce financial analysis, and damages calculations for insurance and litigation matters.

But sometimes I find it’s fun (and necessary!) to talk about what I do NOT do. Here are a few things I don’t do: Read More

07 Jun

Terrence Howard and the Case of the Missing Spousal Support

Empire star Terrence Howard illustrates why it’s so important to pay up when the court orders you to pay spousal support. His divorce from Michelle Ghent has been interesting for years. Back in 2012, Howard signed a spousal support agreement, but later he said that he only signed it because Ghent was blackmailing him. A judge believed him and threw out the agreement.

Ghent appealed, and last year she won that appeal. The agreement was reinstated, so spousal support was back on.

And apparently Terrence Howard is awfully far behind in his payments to Ghent. Their agreement called for support of $5,800 per month plus additional amounts (up to $4 million per year!) depending on his earnings. Ghent is going to court to ask for $909,418 in back support. She says he hasn’t paid what he owes since she won the appeal, and that he’s hiding his income from the Empire series. She says he’s made $9.7 million from the show over the last 5 years. Read More

06 Jun

Industry Red Flags of Fraud

Have you ever thought about the fact that a particular industry in which a company operates creates risk factors for fraud? We call these industry red flags, and Tracy discusses some of the more common ones in this video, including:

  • Performance substantially out of line with competitors (either much better or much worse than others in the industry)
  • A highly competitive industry
  • Poor reputation within the industry
  • Market saturation
  • Declining margins
  • Industry declining in general
  • Industry affected by rapidly changing technology

04 Jun

Budgets for Living Expenses in Divorce

It can be difficult to come up with a budget for your future living expenses when getting divorced. Most people don’t know how much they have been spending on various things like clothing, groceries, and dining out. It can also be difficult because we need to consider the spouse’s reasonable needs in the future. Things can become even more complicated if the earnings of the parties aren’t sufficient to support two households at the same level they had during the marriage.

Nonetheless, budgets or projections of future spending should be prepared, and a financial expert should take steps to verify the figures and determine if they are reasonable.

What historical period should be evaluated when creating the budget? It is typical to evaluate one to five years of data, but there is no hard and fast rule for the time period that should be analyzed. Contrary to the position advanced in some divorces, future needs are not necessarily based only on expenditures in the last year of marriage. What if spending had been increasing by 10% per year for each of the last five years of the marriage? A case could be made that future needs should reflect a similar increase. Read More

30 May

What Is a Tax Audit?

In this video, Tracy Coenen briefly defines and audit and how many people are being audited by the IRS. (Hint: A very low number of people are being audited, and people with higher incomes are much more likely to be audited. Watch the video to find out the numbers.)

23 May

Typical Red Flags of Ponzi Schemes

Last week the FBI posted an article on its site, A Pyramid of Lies, that told the story of the Gentry Ponzi scheme in rural Tennessee. Ponzi schemes are pretty easy to spot if you know the red flags. Even if you don’t know FOR SURE that an investment “opportunity” is a Ponzi scheme, if you see enough of the red flags, you should be smart enough to walk away. Better to be safe than sorry. Invest your money in something that isn’t showing these signs.

Jeffery Gentry stole more than $10 million with his investment scam. Let’s run through the red flags that popped up in the article: Read More

21 May

Companies at Greater Risk of Fraud

What kinds of companies are more prone to fraud?

In my business, we talk a lot about the red flags of fraud. There are two different types of red flags: the kind that suggest that a fraud is currently in progress, and the kind that puts a company at greater risk of fraud.

In this video, I talk about a few of the characteristics of companies that seem to put companies in greater danger of becoming a victim of fraud by employees. Some of these red flags include:

  • Executives act autonomously
  • Authority is not delegated
  • Distrustful management
  • Management driven by the pursuit of power