Should forensic accountants and expert witnesses provide services to criminal defendants? Tracy Coenen discusses the work that can be done on the criminal defense side, and a few issues that the accountant should consider before accepting such a case.
Tim Grittani, a student in the Timothy Sykes Millionaire Trading Challenge, hit the $1 million profit mark a few weeks ago.
Grittani graduated with a finance degree from Marquette University, my alma mater (and the university at which I am now teaching Fraud Examination to graduate students), and started trading penny stocks with $1,500. In less than three years, Grittani turned his $1,500 into more than $1 million.
See Sykes and Grittani appearing on Fox & Friends today:
Extortionist Crystal Cox got a favorable ruling yesterday in her appeal of a $2.5 million judgment against her by Obsidian Finance. The appeals court’s ruling can be found here, and the bottom line is that the case has been kicked back for a new trial.
This does not mean, however, that what Crystal Cox does is acceptable. It just means that she gets a new shot at arguing her case in front of a jury. What does she do that is objectionable?
In this case involving Kevin Padrick and Obsidian Finance, Padrick was appointed as the trustee for the Summit Accommodators bankruptcy. It was then that Cox began her defamation of Padrick and Obsidian. When asked to remove the false materials from her websites, Cox told Padrick and Obsidian that if they paid her $2,500 per month, she would provide them with reputation management services. Normal people recognize that as extortion. In the ruling published yesterday, the court said:
This article was originally printed in the ABA Section of Family Law eNewsletter, December 2013.
Spousal support and child support are most heavily influenced by the earnings of the parties. Historical earnings will play a big part in these calculations, so it is important to properly analyze them.
Income can easily be determined in cases in which the party or parties only receive traditional wages. The rate of pay is constant, and it is easy to confirm historical earnings. The forensic accountant must be careful to account for things like raises, overtime earnings, or periods during which a party does not work. However, as a general rule, past earnings can be easily analyzed and future earnings are fairly predictable.
Tracy Coenen discusses the early stages of a financial investigation related to a divorce. When evaluating the finances of a business, Tracy explains what to look at first and how those items are analyzed.
How can income be calculated in a divorce case when a spouse refuses to produce documentation or is suspected of concealing sources of income? One way is through the Net Worth Method of Proof, which is used to analyze income and assets when detailed documentation is not available, either because the opposing spouse is obstructing efforts to get data and documents, or because data and documents are legitimately not available.
This method of determining income is used by the federal government in criminal income tax cases. Because it is accepted in federal criminal cases, family courts often will accept this as a reliable method for calculating income.
A detailed analysis of expenditures is performed using any documentation available. Each expenditure for the period under review is captured from bank, brokerage, and credit card statements, and each item is categorized so that totals can be accumulated for the period under analysis.
It has been almost four years since the massive fraud committed by Sujata Sachdeva against her employer, Koss Corp., was uncovered. A year after the discovery, Koss sued Park Bank for failing to find the fraud. The company says that Park Bank should have known that a fraud was occurring when Koss employees with proper authority withdrew funds from the Koss bank account and had Park Bank make out cashier’s checks with the funds. Koss says that Park Bank should have realized that the endorsements on the cashiers checks did not match the payees. (For example, a cashier’s check made out to N.M. was endorsed by Nieman Marcus.)
If you know anything about fraud, you know how absurd these claims are. It is the company’s responsibility to prevent and detect fraud. This is not the first time that the company made silly claims against parties it was suing in order avoid taking responsibility for Michael Koss’s own mismanagement of the company. Mind you, the company was sanctioned for its own part in the fraud, including lack of oversight, inadequate accounting controls, failure to reconcile accounts, and failure of Michael Koss to review figures before certifying the financial statements.
There are four widely recognized methods of calculating income in family law cases. These four methods have been developed for use by the Internal Revenue Service in calculating unreported income in tax cases, and are the primary ways a lifestyle analysis can be completed.
Specific Items Method
One of the most straightforward ways to complete a lifestyle analysis is through an analysis of specific items of income. This method is possible when there are substantial documents detailing cash inflows, and is considered a “direct method” of verifying income.
Income-related information is gathered from bank and brokerage statements, tax-related documents, and business records. Inflows are identified and summed, theoretically verifying the income disclosed in the family law case. This method is easy to understand and present, which makes it an attractive option for evaluating claimed income. The court will easily be able to understand how income was calculated.
There is an awesome provision in Obamacare (thoroughly inappropriately named the Affordable Care Act) that will allow anyone who receives a subsidy to scam the system.
Here’s how it works: Pay your subsidized premium for one month, then stop paying. Under the law, you must continue to be covered for three additional months, referred to as the grace period. That’s buy one, get three free!
I’m sure the intent behind this was good. If someone unexpectedly loses a job and can’t pay the health insurance premiums, the family is still covered. However, it’s obvious that this provision will be abused extensively. There is no way to differentiate between those who legitimately cannot pay, and those who choose not to pay.
Tracy Coenen talks about what it is like to testify at trial as an expert witness.