Month: March 2010

Why Solos and Small Firms Shouldn’t “Partner” With Larger CPA Firms on Projects

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A couple of weeks ago I had an email exchange that exemplified why solo practitioners like myself should not “partner” with larger firms on projects. There is no “partnering” about it. The bottom line is their bottom line, and their bottom line is enhanced by two key moves:

  1. Profiting from your work
  2. Stealing your intellectual property so they don’t have to “partner” with you next time

Here’s the first email I got from the consulting firm:

Read moreWhy Solos and Small Firms Shouldn’t “Partner” With Larger CPA Firms on Projects

World of Forensic Accounting Unveils How Companies Are Cheated Out of Millions

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Millions of dollars are missing from a Milwaukee company, and an employee is charged with stealing a staggering sum of money. How deep the fraud goes is something investigators are still deciphering. FOX6 gives you a look at how they do it, and how they think one employee made off with millions.

In this interview with Milwaukee’s Fox affiliate, WITI 6, Tracy Coenen talks with news anchor Brad Hicks about how the Koss fraud may have been perpetrated, and how the company apparently made it so easy for former VP of Finance Sue Sachdeva.

Read moreWorld of Forensic Accounting Unveils How Companies Are Cheated Out of Millions

Koss Auditor Faces Lawsuit, Questions

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Cary Spivak – Milwaukee Journal Sentinel

As investigators, attorneys and accountants sift through the aftermath of the $31 million alleged embezzlement at Koss Corp., a question lingers:

Where was Grant Thornton, the national auditing firm that collected more than $625,000 from 2004 through 2009 to audit the books of the small Milwaukee headphone manufacturer?

Read moreKoss Auditor Faces Lawsuit, Questions

Small Filers Struggle With Internal Controls Over Fraud

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Compliance Week – Melissa Klein Aguilar

A large school of thought has developed to support the argument that non-accelerated filers should be exempt from compliance with Section 404(b) of Sarbanes-Oxley, which requires external auditors to review and attest to the strength of a company’s internal controls.

But as much as non-accelerated filers denounce the burden of Section 404(b) compliance, they’re still confronted with one stubborn counter-argument: fraud happens.

Read moreSmall Filers Struggle With Internal Controls Over Fraud

Lennar Corp: Being Right Feels So Good

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On January 7, 2009, Barry Minkow and the Fraud Discovery Institute issued an initial report on Lennar Corporation (NYSE:LEN), citing 10 Red Flags of Fraud.  Lennar immediately came forward and called FDI and its investigators liars, saying in one press release:

Today convicted felon Barry Minkow, acting as an agent for a disgruntled litigant, Nicolas Marsch III, posted false and inflammatory accusations concerning Lennar.

Read moreLennar Corp: Being Right Feels So Good

The Heart of the Milwaukee Public Schools Problem: Employee Costs

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Every year we hear how Milwaukee Public Schools (MPS) has a budget problem. We’re told they simply don’t have enough money to operate the school system. That is an outright lie.

Every year they increase spending. Here is a breakdown of the budget and enrollment by year:

The 07-08 budget was $1.19 billion. The 08-09 budget was $1.24 billion. The 09-10 budget was $1.34 billion.

And it’s worse if you look at spending per student. In 06-07, they spent  $12,976 per student. In 07-08 they spent $13,758 per student. In 08-09 they spent $14,520 per student. In 09-10, they spent $16,385 per student.

Read moreThe Heart of the Milwaukee Public Schools Problem: Employee Costs

Medifast Lawsuit Update

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UPDATE: On February 17, 2010, Medifast Inc. filed suit in US District Court, Southern District of California, alleging defamation, violation of California Corporations Code, and unfair business practices. On March 29, 2011, Judge Janis Sammartino dismissed all of Medifast’s claims against me in her ruling on my anti-SLAPP motion.

A few weeks ago, Medifast Inc. (NYSE:MED) sued Barry Minkow, his Fraud Discovery Institute, me, my corporation, William Lobdell (a journalist working with Barry), Robert FitzPatrick (an expert witness on mutli-level marketing and pyramid schemes), and an anonymous message board poster (good luck with that).

Medifast sued us for daring to say that their Take Shape For Life multi-level marketing division is a typical recruiting scheme and looks like a pyramid scheme. FitzPatrick has done years of research on MLMs, in large part using the numbers publicly released by companies to demonstrate how the vast majority of participants lose money. He wrote two formal reports on Medifast and their numbers – – he basically showed that the company’s financial gains in the last year or two have come almost solely from their multi-level marketing division. (The first report is here, and the second report is here.)

Read moreMedifast Lawsuit Update

More Fallout From Koss Fraud, But Michael Koss Stays on Strattec Board

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The latest news related to the $31 million fraud committed by Koss Corp.’s ex-VP of Finance Sue Sachdeva is activity at Strattec. Laughably, Michael Koss was the chairman of Strattec’s audit committee since 2003. In January, he was removed as head of that committee, but still remains on the board and on the audit committee. It’s interesting that Strattec didn’t announce the developments related to Michael Koss anywhere, and we’re only finding about it now because Journal Sentinel reporter Cary Spivak started asking questions.

So Koss was removed as audit committee chairman but remains on the board and on the audit committee. I think it’s time for the Strattec board members to ask themselves a serious question: If Michael Koss didn’t care enough about his own company to pay attention to the financial statements, what makes you think he’ll pay attention at Strattec?

I’ve been more than happy to publicly state that Michael Koss and the rest of the executives were asleep at the wheel while Sachdeva was stealing at least $31 million from them in a fraud scheme that lasted over five years.  And amazingly, the executives don’t seem to have plans to change much in wake of the fraud, as they stated in their most recent 10-Q (bold added by me):

Although numerous actions were taken beginning in late December 2009 following the discovery of the unauthorized transactions, including changes relating to the Company’s banking procedures and certain other internal policies and procedures, as well as the other actions described in the Explanatory Note, the Company implemented no formal changes in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Read moreMore Fallout From Koss Fraud, But Michael Koss Stays on Strattec Board

This is Why Welfare Sucks

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There are many different types of welfare. There are straight-up handouts to those who haven’t earned them. There are programs to bridge a gap and help a family in dire need. There are things like unemployment, which people somewhat earn while they work, and collect after they lose a job. There are tax “credits” which are a fancy way of disguising welfare payments. Most are bad. Some are even worse.

And this story on WalletPop.com about a man on unemployment emphasizes why it is so important to reduce all welfare to the absolute minimum, helping only those who are worst off and in an emergency situation.

Read moreThis is Why Welfare Sucks

Marquette University Alumni National Awards

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College of Business Administration and Graduate School of Management
Entrepreneurial Award
Tracy L. Coenen, Arts ’93, Grad ’96

Tracy Coenen may not know where the bodies are buried, but she knows how to follow the numbers. When it comes to forensic accounting, she wrote the book on the subject. In fact, she wrote three: Expert Fraud Investigation: A Step-by-Step Guide, Essentials of Corporate Fraud, and The CPA’s Handbook of Fraud and Commercial Crime Prevention.

Read moreMarquette University Alumni National Awards