How to Detect Behavioral Red Flags of Fraud

Standard

According to the Association of Certified Fraud Examiners, the overwhelming majority of frauds against organizations are committed by insiders.Yet, it would be a mistake to assume that most employees who steal are experienced criminals.

In fact, many, if not most, employees who defraud their employers are fundamentally honest.They just get themselves into difficult predicaments or have personalities that are more prone to breaking the law if given the opportunity.

There are hundreds of kinds of personal problems and personality traits that can cause a normally honest employee to “cross the line.” While the existence of one or two or even just a few such indicators doesn’t necessarily mean that a person is stealing, understanding the common behavioral red flags of internal fraud can be extremely helpful in protecting the organization from a variety of frauds.

IN A JAM
Among the most common personal problems that can present red flags of fraud are substance abuse, gambling habits or other addictions. Continue reading

Perfect Audit Review: Terrible Product, Doesn’t Perform as Promised

Standard

perfectaudit-ocrolusA few months ago, I was asked to beta test PerfectAudit software by Ocrolus.The software has used other names such as AuditGenius (auditgenius.com now forwards to perfectaudit.com) and Medicaid Genius. Promotional emails are being sent from the domain perfectauditpreview.com, which forwards to perfectaudit.com. The company is currently marketing to service providers in the divorce arena, and they say that firms such as Met Life, RGL, and Duff & Phelps are using the site for divorce cases.

The website bills Perfect Audit as a “game changer” for those who depend on data from bank statements and credit card statements. It’s a great concept! PerfectAudit will use OCR technology to pull the data off the statements, put the data into a searchable database, and you have access to data that is guaranteed to be 100% accurate.

But the product is terrible and doesn’t even come close to doing what they say it does. Here is what they say it does: Continue reading

Support for Dr. John McAdams of Marquette University

Standard

I am a proud graduate of Marquette University (both undergraduate and graduate), and currently serve as an adjunct instructor in the accounting program. I love my alma mater deeply, but I cannot stand by and watch the treatment of Dr. John McAdams over the last year without saying something.

More than a year ago, Dr. McAdams criticized Cheryl Abbate, who was the instructor for a Theory of Ethics class at Marquette. A firestorm ensued, and Abbate claimed that the criticism by Dr. McAdams was bullying. She allegedly got hateful emails… not from Dr. McAdams, but from third parties he appears to have had no direct involvement with.

Dr. McAdams was then suspended, a move I believed was retaliatory and inappropriate. Although he was suspended with pay, all of his classes were canceled and he was instructed that he was not to be on campus at any time. Continue reading

Take Steps to Prevent Fraud in Your Law Practice

Standard

One of the last places you’d expect to find fraud is in a law practice. Like accounting, the practice of law is a profession in which ethics are of utmost importance. Accountants and lawyers are often too trusting of their fellow professionals, and therefore leave themselves open to the risks of fraud.

The issue of fraud isn’t limited to a law practice of a particular size. Larger firms experience fraud because there are so many people generating so many documents, that it’s easy for a fraud to get lost in the shuffle. Small firms become victims of fraud primarily because management puts too much trust in one or two employees and fails to properly supervise them.

According to the Association of Certified Fraud Examiners, the average workplace fraud costs $175,000. What would a theft of that size mean for your practice? Could your law office sustain such a fraud? The average workplace fraud goes on for two years before it is discovered. Could that be happening in your law firm? Continue reading

The Future of Financial Investigations

Standard

What is at the heart of almost every securities case, whether the case is pursued by the government or a private party? It is a trail of money. The difficulty in prosecuting or defending a securities case is the fact that there is voluminous financial data that must be culled, analyzed, and presented in a way that proves the case.

For the last three decades, securities and financial fraud cases have been evaluated by forensic accountants using manual processes. The financial investigators compared accounting data with source documents, ultimately trying to prove the source and use of funds.

This is complicated, especially in large cases (which are the ones the government most often cares about), because there can be a multitude of involved people, entities, bank accounts, and brokerage accounts.  The process of understanding and organizing the flow of funds is complex, and it can take months or even years before plaintiffs or defendants know exactly what happened to the money.

Cutting-Edge Forensic Accounting

The world of forensic accounting is moving in a new direction, however. Fraud investigators are slowly beginning to use technology to analyze large volumes of financial data much faster, more efficiently, and more accurately than they have been able to do using traditional investigative techniques. The shift has been moving at a snail’s pace, however, but this provides significant opportunities for parties to litigation who are willing to embrace change and harness the power of cutting-edge technology. Continue reading

What Every Attorney Needs to Know About Fraud

Standard

Most attorneys don’t think about the issue of fraud in companies until a client (or their law firm) is hit by employee theft. It’s simply not one of those issues that is taken too seriously unless huge risks are identified or a crime has already been committed. Until then, fraud is just another “issue” that probably isn’t as pressing as other legal and operation matters.

Once a sizable fraud is committed and detected, everyone is in fire drill mode to get to the bottom of the issue. Everyone wants to find out who stole the money, how it was done, and how in the world someone could get away with this at “our” company! While this reactive attitude is very common, it’s not the best for the long-term health of a company.

Maybe the issue of fraud in companies is ignored because it’s not something that attorneys see everyday. Maybe it’s because issues like profitability and closing new deals are so much more important to the viability of a business. Yet fraud cannot be overlooked, as companies put their livelihood at risk when they do not take steps to deter and detect fraud. Continue reading

Big Frauds Start Small

Standard

Take a look at the frauds in the news, and most of them are huge. Huge frauds make huge news.

As investors and the general public demand more transparency from companies and executives, the issue of fraud is being talked about more than ever. Everywhere we turn, the word fraud is rearing its ugly head.

While fraud is a good thing if you make a living as a fraud investigator, it’s not so good for business and profits. The impact goes beyond dollars and cents, as fraud can negatively affect employee morale, employee work ethic, investor confidence, and customer loyalty.

The sad truth is that almost all frauds started small. They had to start somewhere before they grew to those headline-grabbing proportions. Think about Enron, everyone’s favorite example when discussing corporate fraud. Continue reading

ESPN on AdvoCare

Standard

Yesterday ESPN published an article about AdvoCare, Drew Brees Has A Dream He’d Like To Sell You. AdvoCare is a typical multi-level marketing (MLM) company. It focuses on selling a “business opportunity” and uses nutritional products to make it appear as thought they’re not promoting a pyramid scheme. Unfortunately, more than 99% of participants in MLM lose money, making it a “business opportunity” that is even worse than gambling at a casino.

Mina Kimes did an outstanding job of digging into AdvoCare’s empty promises to distributors. It’s a long article, so I’m going to pull out some of the most interesting excerpts for you. Here is one of the most important things to remember: ESPN has nothing to gain from misleading you. They don’t care one way or another if AdvoCare or any other MLM is a legitimate opportunity.  AdvoCare, on the other hand, lives or dies by the public perception… they are fully invested in consumers believing that they push a good and beneficial opportunity.

On selling hope:

AdvoCare, which has used athlete endorsers and event sponsorships to cultivate deep ties to the sports world, portrays itself as a company that “offers the average American the chance to make an above-average income,” but, in truth, only a tiny percentage of salespeople ever make significant money.

Slight correction: Only a tiny percentage of MLM salespeople ever make any profits. Continue reading

ESPN Outside the Lines on AdvoCare

Standard

advocareUPDATE: The television segment has been pushed back, but the article is out today.

ESPN has been investigating AdvoCare, a multi-level marketing company that sells a “business opportunity” using nutritional products as their hook. Today, ESPN’s investigative news show Outside the Lines is running a segment in AdvoCare, airing at 1:30pm Eastern time. The broadcast will be replayed on Sunday, March 20th at 9:30am Eastern time.

The broadcast must be good, because Advocare launched into damage control mode a few days ago. The company has posted a video that purports to be an excerpt from the interview, but it is clearly a self-promotional piece. They also are promoting the hashtag #AdvoStrong. on Twitter.

In conjunction with this broadcast, ESPN the Magazine is publishing an article about AdvoCare by Mina Kimes.

Please check out both the segment and the article, as they both help shine a light on the negative effects of multi-level marketing.

As Easy As 1-2-3: Working With Financial Expert Witnesses

Standard

A competent expert witness is vital to cases involving economic damages and other financial calculations. However, the expert must be much more than just a mathematician, market analyst, economic guru or forensic accountant. The job of the expert is far from over once the facts are analyzed and the calculations are completed.

Traditional accounting and finance skills are not enough when it comes to litigation. A financial expert witness must qualify as an expert in court and must convey the findings to non-accountants on paper and on the witness stand.

Probably one of the most important yet difficult parts of being a financial expert is relaying the findings without using accounting lingo. Accountants often forget that not everyone speaks their language. They are not used to explaining their findings to people outside the finance environment. Creating a meaningful understanding for readers and listeners can be an art form unto itself, and the best financial expert witnesses do it easily. Continue reading