Trust is inherent in any good business. We continuously place trust in our employees and in those with whom we do business. But that trust which is so necessary to the operation of a business is also the impetus for thieves to profit.
It is unfortunate that fraud occurs when and where you least expect it. Blood may be thicker than water, but that doesn’t protect a company from theft by family members. In fact, it may be just that trust between family members that is exploited by a dishonest sibling, uncle or cousin.
Some fraud experts suspect that fraud occurs more often in family businesses than other businesses, and that the increased fraud risk is due to the trust factor. Family members put more trust in one another and therefore grant one another more access and opportunities for fraud. The controls in family businesses may be lax, particularly as they relate to the oversight of management’s activities. Continue reading
More than ever, competent and dynamic expert witnesses are critical to winning legal cases. Even if a case doesn’t go to trial, a credible expert can be the key to settling the case for your client.
I believe that an expert witness has the opportunity to make or break a case. We all know that there are few chances to fix a bad opinion when you go to court. There is one chance to express the correct opinion and support it fully. A faulty opinion, or one with little reliable support, can doom a case.
Some attorneys have their preferred experts, while others get referrals from colleagues. Each attorney works with an expert witness in the way that she or he is comfortable. However, it never hurts to hear about it from the other side. This is my perspective on best utilizing your expert witness to her or his full value. Continue reading
If Roca Labs (seller of weight loss goop it claims is just like gastric bypass surgery) hasn’t brought enough shame to itself (remember the fake endorsement, the other fake endorsement, the child porn doctor who tells us the products are wonderful, the bogus DMCA takedown notices, its suit against a witness against Roca, threats to sue just about anyone who wrote about the company’s tactics, and on and on….), today additional shame has been brought its way thanks to Marc Randazza.
Roca Labs sued Randazza, counsel for PissedConsumer.com and Opinion Corp. There are currently multiple suits pending between Roca Labs and Opinion Corp, basically all because Roca Labs doesn’t want Opinion Corp to provide a forum for unhappy customers to tell the public about Roca’s horrible product. Continue reading
Fraud is big business. Companies are at the greatest risk of fraud from their employees, since the employees have easy access to information and assets. Some experts estimate that companies lose 5% of their revenues to internal fraud. At a company with annual sales of $100 million, that means that $5 million is walking out the door each year.
Executives tell themselves that their company isn’t the norm. They do better than average. They certainly haven’t been a victim of internal fraud to the tune of 5% of revenues. The sad truth is that they don’t know exactly how much has been stolen from their companies because they aren’t aware of all the fraudulent activities committed. Five percent is an average level of fraud for a company, and it would be wise for executives to take this number seriously. Continue reading
Freedom of speech reigns in the United States. Unless you are criticizing a person or company with the funds to sue you into infinity. Then you could find yourself on the receiving end of an expensive lawsuit that has no aim other than to shut you up. (Case study: Medifast Inc.’s $270 million lawsuit against me and others; I have won and Medifast is now trying to get out of paying the $300k+ of legal fees they are required to pay.)
Attorney Eric Turkewitz writes about his experience with SLAPP suits in New York. (SLAPP = Strategic Lawsuit Against Public Participation) Although the law protects people who write truthful things and/or state their opinions, the legal process of getting a case dismissed is onerous without anti-SLAPP laws. (Even with anti-SLAPP laws, it can still be expensive. Medifast sued in California, where there is good anti-SLAPP legislation, but it still took over $300k in attorneys fees — not counting the hundreds of thousands of dollars the other defendants spent on their attorneys — and over four years of litigation to get the suit against me dismissed.) Continue reading
When a company discovers an internal fraud, it’s not uncommon for owners and management to look for a party to blame. After all, someone should have known that a fraud was in-progress, right? Often, the blame is cast in the direction of the auditors.
The auditors are an easy target. Not only do they usually have professional liability insurance policies to fall back on, the auditors initially seem like the logical culprit.
Management often believes that the auditors worked very closely with the financial information; therefore, they should have discovered the fraud. Continue reading
When fraud happens within an organization’s accounting system, there is often a paper (or digital) trail left behind. It’s unavoidable, as there is a record of something related to the fraud, whether it is a legitimate invoice that was later adjusted, an account balance that was changed, or a fake employee who was added to the payroll system.
Frauds involving bribery and corruption are different. They happen almost completely outside the accounting system, so they often don’t leave a paper trail. Management instead must rely on tips or other vague clues to the existence of such a fraud scheme.
Bribery and corruption typically arise out of relationships between people, so in order to detect them, management must often be aware of the personal relationships between employees and outside parties. That is clearly a difficult task, and often nearly impossible. Continue reading
A class action lawsuit filed in California highlights issues that a number of people (including consumers, attorneys, journalists, and forensic accountants) have been discussing. I will let the complaint speak for itself. The highlights include:
Defendants advertise and market the Formula that it advertises as follows; “Roca Labs® (Florida, USA) invented the Gastric Bypass Alternative®, strongest non-. surgical weight loss in the world for the obese. The Formula procedure creates an immediate gastric bypass effect, leaving only 20% stomach space available for eating, practically forcing the user to eat only half and lose weight from day 1.” [www.rocalabs.com, hereinafter “the Website”]
Both statements are false. A gastric bypass is an operation that divides the stomach into multiple pouches and rearranges the small intestine connections to the stomach. Roca Labs’ Formula does not divide the stomach into parts nor does it rearrange the small intestine.
Multi-level marketing companies are quick to tout the success of their “million dollar earners.” Sounds impressive, doesn’t it? Who doesn’t want to make a million dollars?
Except that phrase “million dollar earner” hides the truth:
- What they don’t clearly mention is that this is cumulative earnings over a number of years, typically between 5 and 20 years.
- They also fail to mention that this is gross income, prior to any business expenses. The business expenses in multi-level marketing can get very high, and will include product purchases (in order to stay active and/or meet requirements for certain commission levels), travel, office expenses, training costs, business insurance, supplies, prizes for customers and downlines, venue rental for events, food for events, etc. The expenses can easily equal 40% to 60% of gross income.
Financial statement fraud includes intentional, material misrepresentations. Tracy Coenen explains the concept of financial statement fraud to a group.