Fraud Investigation for Small Firms

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The growth in forensic accounting and fraud investigation specialties has led accounting firms of all sizes to expand their practices to these areas. Experts agree that this practice area will continue to grow for the foreseeable future.

Is it as easy as it sounds to add forensic accounting to your firm’s competencies? Traditional audit staff may have excellent foundational knowledge that could be applied to fraud investigations, but offering consistent and reliable services to clients in the area of forensic accounting will take some work.

Here are areas your firm — especially if it’s small — should focus.

Service focus

It is a simple decision to start providing accounting services. The next step is deciding which specific services to provide. Many types of engagements can fall under the forensic accounting umbrella, so it is important to develop a focus. Continue reading

Recognizing the Red Flags of Fraud

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People who steal from their employers often exhibit telltale characteristics that could tip off management that they’re likely to commit fraud. These characteristics include attitudes on the job, daily work habits, and personal lifestyle issues. A few of these traits alone do not indicate fraud, but the potential for fraud to occur rises with more of the characteristics in an employee.

Often when a victim of occupational fraud reflects on the work history and personal life of the perpetrator, a light bulb comes on. The perpetrator exhibited many of these characteristics, but those things were overlooked in the normal course of business. Awareness of these characteristics can help reduce internal fraud. Continue reading

RHOC Noella Bergener Owes Her Attorneys Lots of Money

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Rule #1 of divorce and child custody cases: It’s expensive to fight over these things in court.

Noella Bergener, one of the cast members of Real Housewives of Orange County (RHOC), has found out the hard way. But she made it even worse on herself by assuming that her ex was paying her legal fees, and then ignoring her attorneys’ requests to get paid.

Bergener now owes over $400k for a paternity suit over her daughter that was filed in 2014. The case dragged on for 4 years before being settled. She owed her law firm Fried and Goldsman $293k. They tried over and over to collect, but apparently she ignored them because she thought her husband James Bergener was going to pay the bill as part of their divorce settlement.

Interest of $116k and other fees of $5k were added to what she owed to bring the total over $400k. And she apparently blew off the lawsuit for the fees, which resulted in the default judgment.

Don’t be like Noella. Don’t ignore your attorney when he or she is requesting that you pay your bill. And don’t assume someone else is paying your bill and fail to show up for your court hearing about it.

Red Flags of Fraud in a Specific Industry

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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

Why Women Are Often at a Disadvantage in Divorce

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divorce financial analysisIn many divorces, women are at a significant disadvantage, especially when it comes to money. In many marriages, the husband has been the main breadwinner. He often controls the purse strings, and often knows much more about where money has been spent and what assets are owned.

In contrast, the wife has often had lower earnings, and has had little to no control over the money. She may have been free to spend money as she saw fit, but she did not see the bills, pay the bills, or maintain control over bank and brokerage accounts. At divorce time, she has no idea where the money is, where is may have (improperly) gone, and may have no access to it. Continue reading

Grab the Documents

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Miles Mason, a Memphis divorce attorney, has a great article on his blog called Grab the Documents: What Spouses Need to Copy for Divorce Lawyers. Divorcing spouses always wonder what documents they need to take, and the list provided by Miles is a great roadmap. Read the article for details and descriptions on each item, but below is the basic list.

Documents are going to include both paper and digital records. If you have access to any bank, credit card, or investment accounts online, it’s advisable to go into the accounts and download all available statements and supporting documentation. Do it right away in case you lose access to that account later. Continue reading

Hidden Income in a Cash Business

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I love working on divorce cases where one spouse is trying to hide money.

When a business owner has a cash business and is getting divorced, sometimes the income coincidentally (or not so coincidentally!) drops dramatically.

What can we do to investigate that? It’s hard. The business owner knows that cash leaves no paper trail and is difficult to prove.

But all is not lost. There are techniques we can use to find indirect proof of the amount of cash a business should be generating (even if the owner isn’t reporting all of it). Continue reading

Teen Mom Lawsuit: Anti-SLAPP Motions and Legal Fees

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Last week, my friend and colleague Marc Randazza scored a big win for Briana DeJesus in the lawsuit filed against her by Kailyn Lowry. The case against Briana was dismissed after successfully arguing an anti-SLAPP motion.

I have my own experience with anti-SLAPP motions, after having been sued for $270 million by Medifast, a scammy MLM that peddled diet products under the brand Take Shape for Life (now called Optavia). I won my anti-SLAPP motion to dismiss, and then Medifast had to pay nearly $200,000 in legal fees to me.

Kail sued Briana for defamation in June 2021 after Briana said that Kail’s ex-boyfriend Chris said Kail physically assaulted them. Briana’s win was really simple: She told the truth. Chris did, in fact, tell her that Kail assaulted him.  And there was no evidence that Briana knew that the statement was false. Continue reading

How Many People Are Being Audited by the IRS?

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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.)

Using a Financial Expert in a Family Law Case

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Family law cases involving complex financial issues often require the assistance of a financial expert for the following issues:

  • Preparing a financial disclosure, including creating a marital balance sheet
  • Comparing balance sheets from period-to-period to evaluate changes in assets and liabilities
  • Analyzing financial disclosures or affidavits prepared by the spouses
  • Calculating the historical income of the spouses
  • Determining income (or the ability to pay) in order to calculate support
  • Determining the standard of living (or the need for support)
  • Valuing business entities or other assets (such as real estate, pensions, and the like)
  • Identifying assets and determining whether they are non-marital (separate) or subject to division (marital or community)
  • Tracing and finding funds or other assets
  • Analyzing claims of dissipation, wasteful spending, or fraudulent conveyance
  • Evaluating the income tax impact of various scenarios
  • Assessing the work of an opposing financial expert
  • Other litigation assistance, such as assistance with drafting discovery demands and interrogatories or preparing for the depositions of individuals with financial information

Continue reading