Month: April 2015

Defending Tax Fraud Cases – Expert Financial Analysis Required

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Written by Tracy L. Coenen, CPA, CFF

White collar government investigations almost always have one thing in common: They rely heavily on an analysis of financial information. This often includes going through banking documents with a fine tooth comb, and can also involve scrutinizing accounting records.

While the task of accumulating this data and examining it seems basic, there is much work involved, and expertise in financial and accounting crimes is necessary to fully understand the issues and the potential criminal or civil charges that the government brings against the company or individual. To properly defend such a case, it is necessary to have a financial investigator involved to help filter the data and the issues the government will raise.

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Nevada Anti-SLAPP Law Threatened

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In 2013, Nevada enacted an anti-SLAPP law… something all states should have, but only 28 do (and those laws vary in quality). SLAPP stands for “strategic lawsuit against public participation.” It’s basically the type of lawsuit that is filed in order to get people to shut up.

I am no stranger to such suits. I was sued in this fashion by Medifast Inc. (aka Take Shape for Life) in 2010, and it took over five years for me to be dismissed, have the dismissal affirmed, and have the court order Medifast to pay my attorneys’ fees. The whole point of the Medifast lawsuit was to make me stop saying unflattering things about the company. And to scare anyone else who might dare to say bad things about the company…. the cost of litigation is tremendous, and companies like Medifast use the threat of litigation to shut up their critics.

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Medifast is Ordered to Pay Fees…. Five Years After Filing a SLAPP Suit

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It’s taken more than five years and hundreds of thousands of dollars to dispose of the frivolous and unethical lawsuit Medifast Inc. (aka Take Shape For Life) and their dishonest attorneys filed against Tracy Coenen and Sequence Inc.

You will recall that I won my anti-SLAPP motion to dismiss, and Medifast appealed, ensuring that the suit would drag on for years. In June 2014, the appeals court affirmed my dismissal and told Medifast to suck it. But of course, Medifast STILL wanted to fight… this time about the attorneys’ fees they were legally obligated to reimburse.

Yesterday the court ordered Medifast to pay nearly $200,000 and never darken my door again:

In accordance with those orders and decisions, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that:

(1) This action is dismissed as to defendants TRACY COENEN and SEQUENCE, INC., and judgment is hereby entered in their favor;
(2) Plaintiffs BRADLEY MACDONALD and MEDIFAST, INC. shall take nothing by way of their First Amended Complaint against defendants TRACY COENEN and SEQUENCE, Inc.; and
(3) Judgment is entered in favor of defendants TRACY COENEN and SEQUENCE, INC., and against plaintiffs BRADLEY MACDONALD and MEDIFAST, INC., jointly and severally, in the amounts of $190,520.50 for attorney’s fees, $7,502.00 for nontaxable costs related to the proceedings in the District Court, and $855.00 for costs in the Ninth Circuit (for a total of $198,877.50).

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that plaintiffs, jointly and severally, shall be obligated to pay defendants TRACY COENEN and SEQUENCE, INC. the aforesaid sums, each with interest accruing at the legal rate from the date of entry of judgment until paid in full.

IT IS SO ORDERED.
DATED: April 20, 2015

Read moreMedifast is Ordered to Pay Fees…. Five Years After Filing a SLAPP Suit

Recovering From a Fraud Loss

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Frauds committed by employees can have devastating effects on businesses. The company’s finances suffer, employee morale may drop, and the company’s reputation could be affected by negative publicity.

Following the investigation of an internal fraud, owners and managers of companies need to rethink how they do business. It is the perfect time to carefully analyze the operations and create procedures and an environment in which ethical behavior thrives.

A fraud by a trusted employee is often devastating to management, both financially and emotionally. A company can be thrust into turmoil because of a significant theft, and it’s important to approach the situation methodically in order to mend the damage and prevent future occurrences. Companies can recover from an internal fraud by focusing on three key areas, in addition to completing a thorough investigation of the fraud.

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Expense Report Abuse: Much Ado About Nothing?

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The dreaded expense reports. Employees hate preparing them. Companies hate reviewing them. They seem to be painful for everyone involved, yet companies can’t get away from them all together.

You’re asking yourself why this might be an important topic. Expense report losses are really a minor expense for most companies, aren’t they? Yes, they are.

However, the problem with them is what they stand for in other areas of the company.

Cheating on expense reports is one of the most common thefts perpetrated by employees. While the amounts lost to expense report abuse may be small, condoning this unethical behavior can lead to bigger problems.

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When Employees Steal: Five Reasons Your Business Could Be Vulnerable to Fraud

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The last thing you want to discover is that one of your employees is stealing from your small business. Not only is it a total violation of your trust, but internal fraud also has the potential to put you out of business.

According to the Association of Certified Fraud Examiners, businesses lose an average of 5% of revenues each year to fraud. Could your company survive if an employee stole 5% of your revenues?

Read moreWhen Employees Steal: Five Reasons Your Business Could Be Vulnerable to Fraud

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.

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