Tracy Coenen

COVID-19 Coronavirus Stimulus Check Scams

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Coronavirus stimulus check scams have already started. This is shameful, but not entirely unexpected.

U.S. taxpayers will be receiving payments of up to $1,200 per adult and $500 per child, with reductions for special circumstances. To receive a payment, you must have a social security number. Nonresident aliens, people without a social security number, and adult dependents (ex. your college student who is claimed as a dependent on your tax return) are not eligible.

To receive the full $1,200 you must have income less than $75,000 per year (single) or $150,000 (married). Those with income of $75,000 to $98,000 (single) or $150,000 to $198,000 (married) will receive a reduced amount. Those receiving social security retirement or disability payments WILL get a stimulus check, as well as veterans and those who are unemployed

The $500 per child is only available for a child under the age of 17 who is claimed as a dependent on your income tax return.

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Fraud During the Coronavirus (COVID-19) Crisis

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There are so many things to be worried about with the COVID-19 pandemic. First and foremost is the health of our family and friends. But let’s not kid ourselves: The health of our economy is important too. People are already out of work, and many more may be out of work in the weeks to come. There are so many uncertainties.

Since I do fraud investigations for a living, fraud is something I’m thinking about a lot. And the fraud risks during this time of uncertainty and economic distress are great!

There are a few reasons for this:

  1. Many companies have reduced the size of their workforce. The fewer people working, the more difficult things become. There may be increased workloads, which is stressful. There is also often reduced supervision. This creates greater opportunities for fraud to happen, and likely impacts whether or not it will be detected timely.
  2. Working remotely is a great option if it is possible in your company, but it also creates opportunities for fraud. This is again related to reduced supervision of employees.
  3. Employees are facing greater financial pressures. This could lead otherwise honest employees to turn to fraud. They may tell themselves they’re just “borrowing” the money. They may justify a theft because of a dire need.

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Myths About Fraud

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I wrote an article on these five myths about fraud nearly fourteen years ago. And really, nothing has changed. I’ve updated some of the facts and figures, but the concepts remain the same. These are some of the most common myths I see, and these traps are the reasons companies continue to become victims of expensive internal frauds.

1. Our company does not have an internal fraud problem.

While companies would like to believe they have good employees and adequate controls to prevent fraud, the fact of the matter is that half of all companies will be significantly affected by fraud. One survey estimates the average internal fraud will cost a company $150,000.

Companies cannot afford to ignore the risk of fraud and the likelihood that fraud is occurring internally. It is too expensive, particularly when one considers the fact that there are many indirect costs of fraud, including investigation and legal costs, employee attrition, and decreased employee morale.

Actively fighting fraud means implementing policies and procedures that prevent and detect fraud. Anti-fraud professionals who are experienced with the common methods of fraud can be invaluable to this process. Whether a company gets there with employees or outside consultants, it is important to secure company information and assets to prevent internal fraud.

2. Most people are honest and won’t commit fraud.

This is a dangerous approach to take to the business of fraud. It is true that most people are generally honest. But to rely on this instead of putting controls in place to prevent fraud is a big mistake.

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Shark Tank’s Barbara Corcoran $400k Fraud Victim

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Barbara Corcoran lost $400,000 to a fraud scheme. Or did she?

The headlines were that the real estate mogul had nearly $400,000 stolen from her with an email phishing scam. It makes for good click-bait, but there was so much more to the story.

What really happened was that Barbara’s bookkeeper paid an invoice that she thought had been approved by Barbara’s assistant. The invoice appeared to be from a renovation company in German, and seemed legitimate because of all the real estate projects Barbara is involved in.

But… the email from the other employee was a fake. The email address was off by one letter, and the bookkeeper didn’t notice it. She wired $388,700 from a German bank to an account that was owned by the Chinese scammer. The bookkeeper then emailed Barbara’s assistant to let her know that the invoice was paid, and the scam was revealed. The assistant knew nothing of the transaction and saw that the original email was a fake.

Read moreShark Tank’s Barbara Corcoran $400k Fraud Victim

Kevin Trudeau Has Learned Nothing

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Does anyone remember Kevin Trudeau? He’s been in prison for the last six years, so you may have forgotten about him.

Kevin Trudeau used to be called the “infomercial king” because he did a bunch of wildly successful infomercials selling “natural cures.” Between the natural cures and the weight loss cures he peddled, he made millions off unsuspecting consumers.

But Kevin Trudeau was a special kind of criminal. He was a repeat offender who didn’t learn anything from his many legal troubles..

He did time in the early1990s for credit card fraud. The FTC went after Trudeau in 1998 for false and misleading information in the infomercials, and he had to pay a $500,000 fine. Then in 2003 they went after him for violating the order in the 1998 case when he made claims that Coral Calcium Supreme cured cancer. In 2004, he had to pay a $2 million fine related to this violation.

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Using Facebook in Financial Investigations

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I did a divorce investigation a few years ago that I like to call the Instagram Investigation. The husband was accused of marital waste (dissipation), as he was spending lots of money on his new girlfriend while his divorce was pending. The wife needed to quantify how much he was spending on the girlfriend, but it wasn’t clear who was spending money just by looking at the credit card statements. Until you looked at the girlfriend’s Instagram account and saw all the pictures from her shopping trips. It was a matter of comparing 150+ dated photos (also tagged with locations) to credit card charges to determine what was spent on the girlfriend.

Can we use Facebook to assist with financial investigations? Sometimes. I find that Facebook is most useful when researching relationships between people and tracking the activities of a party. It hasn’t proven to be particularly useful in terms of financial analysis, except when an occasional vacation or automobile purchase is documented on Facebook.

Even if the information I find may be limited, I still often check Facebook to see if there is anything I can use. I have found that Instagram accounts are very often public, so they don’t require permission from the user to see what he or she is posting. On the other hand, most people seem to have privacy safeguards in place on their Facebook accounts. That means you’re not going to see much of their activity unless you are FB friends with them.

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Don’t Cash Out Your 401(k) in Divorce

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It is common for divorcing spouses to cash out retirement funds at divorce time. And it seems to make sense at the time. There are expensive lawyers and all sorts of expenses to establish a new residence. Support payments may be delayed or non-existent. A retirement fund seems like great solution. It’s a pile of money that you weren’t going to use for a long time, and you have financial needs now.

But it should be the absolute last resort, because it’s so costly in both the short term and long term.

Retirement accounts like 401(k)s and IRAs create a tax deduction now (when money is contributed to it), and then taxes are paid when the funds are withdrawn at retirement time. The government wants us to keep the money in those accounts until we retire, so there are disincentives to withdraw the money early. If you take an early distribution from a retirement account, you’re going to pay income taxes on the money you withdraw, plus a 10% federal penalty for early withdrawal, plus any penalties your state may impose. I tell people to count on losing about 50% of the money they withdraw to taxes and penalties.

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Divorce Fraud Red Flags

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The vast majority of family law cases are settled without trials. However, a client should not enter into a voluntary settlement if there are significant concerns about the truth of the financial disclosures and indications that assets or income may be hidden. The first step in determining whether a forensic accountant is needed to evaluate the finances of the parties is the identification of “red flags” of fraud. A red flag is simply a warning sign or an unusual item or circumstance.

Attorneys often use their instinct to determine when a forensic accountant is needed in a family law case. If something does not feel right, it probably should be investigated. A client is often suspicious of the spouse even before they are separated. The spouse may even be known to manipulate the money.

Beyond using intuition to determine if something is wrong, there are plenty of warning signs that indicate the finances should be evaluated carefully. These red flags by themselves do not mean that money has disappeared or the finances are being manipulated. But they are signs that an investigation is warranted. Because divorce is so adversarial, it is likely that one or both of the spouses will conceal or manipulate financial facts.

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Divorce Lifestyle Analysis Data Entry

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A question often comes up relative to the lifestyle analysis in divorce cases: Isn’t is just data entry that anyone could do? Why do I need a forensic accounting expert? As I explain below, the lifestyle analysis is NOT just a data entry exercise. A level of quality control is necessary in order to ensure … Read more Divorce Lifestyle Analysis Data Entry