Carnival of Personal Finance #185: Cheesehead Edition

Welcome to the last Carnival of Personal Finance for 2008, The Cheesehead Edition.  I’m located in Milwaukee, Wisconsin, and I send greetings from fellow Cheeseheads. We’ve had an interesting winter so far, with record-level snowfalls in December, followed by record high temperatures on Saturday, and now back to freezing temperatures. Hopefully this week’s Carnival of Personal Finance can warm some hearts…

If you have an interest in fraud and scams, this blog is the place to be. I regularly rip on those perpetrating fraud against unsuspecting consumers. I recommend subscribing to my feed… And if you like shorter takes on things, you can follow me on Twitter.

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A Thief Among Us: Lessons From Bielinski Brothers

Written by Tracy L. Coenen, CPA, CFF

Wisconsin Law Journal

During the summer of 2004, a major shakeup was occurring at the Milwaukee-area home building firm of Bielinski Brothers, Inc. Their chief financial officer, Robert Brownell, was fired along with several trusted employees, amid allegations that a complex fraud scheme had been ongoing for years.

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Property tax sticker shock

The Milwaukee Journal Sentinel writes today about the sticker shock property owners are having when they open their property tax bills. The taxes have gone up in general, but property owners are frosted because their assessments no longer match the real market value of their houses. The reality is that property values are generally down, … Read more Property tax sticker shock

What Has Sarbanes-Oxley Done For You Lately?

With all the talk about fraud in the last several years, you would think that companies are doing whatever they can to prevent fraud by employees, right? Think again. The number of companies that have radically increased their fraud prevention policies and procedures has not increased significantly since 2001 and 2002, the years in which fraud came to the forefront.

What about Sarbanes-Oxley? If you’re like many accountants, executives, and attorneys, you’re sick of hearing the words Sarbanes-Oxley. It goes by other names such as Sarbox and SOX, and these terms are equally worn out. Sarbanes-Oxley was the legislation that was to restore faith in the integrity of corporations and executives.

There are several schools of thought about what Sarbanes-Oxley has really done for investors and other users of financial statements. Sarbanes-Oxley supporters cite numerous improvements in companies since the legislation was enacted. Some professionals believe that any improvement in corporate governance is a good thing, and justifies the existence of the legislation.

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Wondering Why Frauds at Public Companies Aren’t Being Pursued by the Feds?

Consumers are often left wondering why the Securities and Exchange Commission doesn’t heavily pursue allegations of fraud against public companies like (NASDAQ:OSTK), Usana Health Sciences (NASDAQ:USNA), Herbalife (NYSE:HLF), and the like. I’ve always said the answer is simple: There are not enough resources devoted to investigating and prosecuting fraud in public companies. Executives are free to use phony accounting measures and other false information to hype the company with little fear of action by the SEC.

Read moreWondering Why Frauds at Public Companies Aren’t Being Pursued by the Feds?

How to make social media a total waste of time

I admit it: I’m not a lover of all things social media. I am participating in the Facebook and Twitter discussions a bit begrudgingly. It’s not that I don’t think these tools work to grow businesses and create interesting discourse. They do.

It’s just that as a solo, I have only so much time available to me, and I’m interested in being involved with the things that offer the most bang for the buck. Don’t get me wrong: I’m not trying to “sell” to my followers and friends, or looking at them as a means to an end. But at the end of the day, I have to make a living and I’m trying to use my time as efficiently as possible.

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$65 Million Fraud Via a Shell Company Scheme

The IRS is accusing Ausaf Umar Siddiqui, vice president of Fry’s Electronics Inc., of embezzling more than $65 million from the company via a shell company scheme. They say he used the money to pay gambling debts in Las Vegas

A textbook shell company scheme would go like this: Set up a company that sources goods from a legitimate supplier, then mark up those goods and sell them to Fry’s. The shell company acts as a middleman,  keeps the markup, but adds absolutely no value to the transaction.

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Red Flags Apparent in Alleged Ponzi Scheme

Recent news of the alleged $50 billion Ponzi scheme perpetrated by investment advisor Bernard L. Madoff has done nothing to ease the fears of investors who have been annihilated by the stock market over the last couple of months.How does an investment opportunity go from being a legitimate investment vehicle to a pyramid scheme? In this case, it is alleged that Madoff invested the money of clients, but lost it and didn’t want to admit it. Instead of alerting investors to the losses, he used the money of new investors to pay “returns” to the original investors.

This is a classic Ponzi scheme, in which money is collected and spent or lost, and new marks must be recruited to “invest” new cash into the scheme. The pyramid grows, and requires continuously larger “investments” of new money in order to pay existing participants their phony returns. So long as the operator can continue to recruit marks and keep new money flowing in, the pyramid stays afloat.

How does a scheme like this grow to an estimated $50 billion in losses? It’s hard to imagine, but it is alleged that this operation was conducted in secret. Employees say the investment advisory business was run on a secured floor that was separate from the offices of the company’s core business of market making.

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For Students and Job Seekers: Becoming a Fraud Investigator

I routinely get emails from students, job seekers, or the gainfully employed who want to make a career change… all asking me for advice on getting into the field of forensic accounting and fraud investigation.

Here are my top three tips for getting into this field:

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Big Three bankruptcy impact distorted

Last week at the 2008 Inforum Outlook Conference, a presentation was given about the impact of potential bankruptcy filings of the Big Three automakers, GM, Ford, and Chrysler. The media has cited figures ranging from 2 million to 3 million jobs lost.

A study of such bankruptcy filings found that the figure of 3 million jobs is grossly inflated. The logic is simple: 3 million jobs would only be lost if all  supply and manufacturing related to Big Three autos was halted completely, and that’s not going to happen.

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