The Fraud Files: From Chaos to Clarity in Financial Investigations

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Wisconsin Law Journal

Written by Tracy L. Coenen, CPA, CFF

Financial investigations have one common problem: Large volumes of data and documentation that need to be examined.

Cases such as corporate embezzlement, securities fraud, Ponzi schemes and white-collar crime often have lots of financial documentation that needs to be analyzed by a forensic accountant.

Many of these types of cases involve moving money around rapidly between multiple bank and brokerage accounts to disguise the true sources and uses of funds. The long trail of financial documentation needs to be examined by a forensic accountant and the data must be pieced together to form a winning strategy. Continue reading

Methods of Searching For Unreported Income

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Written by Tracy L. Coenen, CPA, CFF

Wisconsin Law Journal

Lifestyle Analysis
For the employee who is receiving cash in lieu of a real paycheck or who is otherwise concealing wages and earnings, it can be very difficult to prove the case. Cash doesn’t leave much of a trail, and a company that is willingly participating in a fraud like this isn’t likely to offer up proof of the fraud either. Continue reading

Searching For Unreported Income

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Written by Tracy L. Coenen, CPA, CFF

Wisconsin Law Journal

The million dollar question in many litigation disputes, be it family law, a shareholder divorce, or other corporate wrangling, often centers around unreported income. Are there sales that aren’t being recorded on the books? Is the individual receiving cash for work done? Is revenue hidden to shield it from being considered by the court?

It would be lovely to be able to wave a magic wand and have all the “hidden” income magically appear. Unfortunately, that’s just not going to happen in this lifetime. The search for unreported revenue and earnings is a difficult one. Continue reading

Herbalife is Not Like Vemma, Unless It Is

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In light of the recent shutdown of multi-level marketing company Vemma (following allegations that it is a pyramid scheme),there has been much discussion of Herbalife. Is it a more legitimate MLM, or is it a pyramid scheme like Vemma and others that have been shut down before it (BurnLounge, Fortune Hi Tech Marketing, etc.)???

“Analyst” Tim Ramey, longtime Herbalife cheerleader, contends that Herbalife is not like Vemma:

Our opinion has always been that Vemma was likely an illegal structure – it has that endless chain feature where “Affiliates” are incentivized to buy a high-priced starter kit with minimal real value, only to turn around and very quickly find two, three or four others to do the same so that they can reap a quick profit and recoup their initial “investment,” said Ramey.

This is a familiar argument. MLMs left standing after one is shut down claim that THEIR company doesn’t pay for recruiting. And technically it appears that they don’t. Except they do. They may not have a “high priced starter kit” or may not pay a “commission” on the starter kit. Instead, they encourage distributors to buy a bunch of products up front and commission is paid on those. Since those products could theoretically be sold, I suppose that’s not paying for recruiting so much it is paying for getting the recruit to buy some overpriced, hard-to-sell products. MLM attorneys will tell you that you have to make it look like you’re not paying for recruiting or the kit. Continue reading

MLMs as Pyramid Schemes (Vemma Shut Down)

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vemma logoMulti-level marketing companies – – MLMs for short – – go to great lengths to distance themselves from pyramid schemes. The Direct Selling Association (a lobbying group funded by multi-level marketing companies that helps ensure our government continues to allow MLMs to operate) says that legitimate MLMs have legitimate products or services for sale and base compensation primarily on the sales of projects. In contrast, they say that pyramid schemes focus on recruiting and base compensation on recruiting.

In reality, multi-level marketing companies have products that are simply a “front” for the real business, which is recruiting. They talk about all the riches distributors can earn, knowing that almost everyone who participates will lose money. (And when those losses inevitably occur, the companies say it is the fault of the distributors who must not have worked hard enough.)

And yesterday, the FTC took steps toward shutting down one MLM, Vemma, saying: Continue reading

Lifestyle Analysis in Criminal Cases: Proving Income Without Full Documentation

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Both civil and criminal cases often involve an element of proving or disproving income of an individual or business. It is not unusual for a divorce case to include allegations of hidden income or assets. In contract disputes alleging the loss of sales or profits, an accurate determination of income is critical.

In criminal cases, the issues surrounding the income of an individual or business have even higher stakes. These cases are quite often tax-related matters, but cases involving white collar crimes and drug trafficking usually include questions about income too. Continue reading

Rigging a Contest, Jennifer McKinney Style

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jennifer-mckinney-xyngularRemember our favorite serial scammer, MckMama?  Well, the infamous Jennifer McKinney is back and is scamming the sheeple again. (Who am I kidding? She never STOPPED scamming businesses and consumers.)

We’ve talked here at length about Jennifer and Israel McKinney’s unsuccessful attempt at defrauding the bankruptcy court. Of course the McKinneys have scammed many creditors over the years, losing FOUR houses along the way. We have also talked about Xyngular, the multilevel marketing company that MckMama shills for.

And it just so happens that the latest scam involves Xyngular.

On July 30 she announced the giveaway of a “free weekend vacation for two to anywhere in the continental United States.) People could get their names entered multiple times in the drawing… which was supposed to be “randomly” drawn. However, Jennifer McKinney appears to have chosen her winner ahead of time as you will see below. Continue reading

Signs That a Company Has Been Ripped Off

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Written by Tracy L. Coenen, CPA, CFF

Wisconsin Law Journal

How would you know if your company was being looted by a dishonest employee? Most companies miss all of the warning signs that could help stop a fraud early.

The Association of Certified Fraud Examiners reports that the average fraud scheme within a company lasts 18 months. That’s one year-and-a-half that one or more employees are stealing from the company without being caught. In that period of time, the average internal fraud causes losses of $159,000. Imagine how much damage could be done to your company in that amount of time. Continue reading