Milwaukee Alderwoman Chantia Lewis Charged With Fraud

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On Tuesday, Milwaukee Alderwoman Chantia Lewis was charged with 4 felonies and 1 misdemeanor related to misconduct in public office, embezzlement, fraud, and campaign finance violations. Her attorneys say this situation is just about “accounting errors.” The detailed criminal complaint includes compelling evidence, however.

The total Ms. Lewis is accused of stealing or misappropriating totals at least $21,666.70. Thomas Meverden, an investigator with the Milwaukee County District Attorney’s Office examined bank records and other documents that were subpoenaed from vendors such as Agape Love Bible College, New York New York Hotel and Casino, Southwest Airlines, and the City of Milwaukee.

The alleged fraud breaks down like this: Continue reading

Investigating Ponzi Schemes

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You’ve heard news stories involving Ponzi schemes. Investment scams and Ponzi schemes are all too common, even thought consumers are warned about them regularly. Investors are lured in with promises of high returns. People in or nearing retirement find these investments enticing, especially as their retirement funds in the stock market have taken many hits in the last few years.

As I wrote in my book Expert Fraud Investigation: A Step-by-Step Guide, investors are becoming victims of these scams despite the proliferation of information available about phony investment schemes and the dire warnings given regularly by news reporters.  Perpetrators of investment schemes dream up stories explaining their unusually high rates of return on money, and get high net worth people to invest with them. Often these people are investing their entire savings with scammers.

These high investment returns typically amount to guarantees in excess of 10% per year. Often they are to the point of ridiculous, offering a 30% or 40% annual return. As a fraud investigator, it is clear to me that these offerings are bogus, because any investment that legitimately generated such returns would not be much of a secret to the rest of the world. But consumers, who are often eager to protect and grow their nest eggs, are all-too-willing to believe that this investment is the answer to their money problems. Continue reading

Tracing Digital Assets in Divorce (Cryptocurrency)

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Everyone is asking about cryptocurrency and NFTs (Non-Fungible Tokens) in divorce. More and more people are investing in and using cryptocurrency, and it could be an important asset that needs to be accounted for during the divorce. In some cases, one spouse has made or lost a lot of money trading crypto, and that has implications too.

So what do you do if you haven’t a clue about this crypto stuff?

First, you make sure you’re working with a forensic accountant or other financial expert who knows what they are talking about. Cryptocurrency can be hard to track down and an added problem is the volatility (crypto can gain or lose a ton of value throughout a day).

Second, you can learn the basics of crypto and NFTs so that you at least know what you’re talking about. Cryptocurrency is quite simply a digital currency in which transactions are verified and records are maintained by a decentralized system. In other words, no one person or entity (like a government) controls cryptocurrency. There are all sorts of different flavors of cryptocurrency, but some of the most recognizable names include bitcoin, ethereum, litecoin, and dogecoin. Continue reading

Think Like a Thief

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Fraud is committed by real people. They have real families and real jobs. They often are just like you and me. But what makes thieves different from a lot of us is their ability to lie and steal. Most of us would never seriously consider taking something that does not belong to us, especially not significant sums of money.

But thieves are different. Those who commit fraud have taken that which is not theirs. They have cheated others. They have covered up their lies. What makes it okay in their minds to commit fraud? What is it about their moral code that allows them to steal? How do they justify their actions?

The answer is found in the fraud triangle, an old concept in criminology that still has wide acceptance in the fraud examination field. In order for fraud to occur, three things must be present, and each represents one side of the triangle. The three pieces of every fraud puzzle are opportunity, motivation, and rationalization. These are key to explaining why a fraud occurs. Continue reading

Two Great Internet Resources for Background Investigations

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My investigations are rooted in financial documents, as I am most often trying to trace money and figure out where it went. (Thus, my unofficial tagline of: “I find money!”)

But incorporated into the financial investigations is often background investigative work. To be clear: I don’t do deep-dive background investigations. For something like that you’d go someone like Marcy Phelps or Philip Segal. If the point is just getting a better understanding of the people and entities involved, however, I do some of the legwork to find that.

I’m often looking for names of family members, friends, roommates, business associates. I want to find addresses of homes lived in and other properties owned. I might be looking for addresses that were used by business entities. Sometimes I’m looking for pictures of people or places they lived.

Here’s how I would use obituaries and Facebook in my financial investigations:

Obituaries can tell you about…. Continue reading

The Seven Year Billionaire Divorce

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Divorces can go on for years. It’s emotionally taxing, and of course, the longer a divorce goes on, the more expensive it gets. Can you imagine a divorce that goes on for seven years?

Scott Hassan and Allison Huynh were married for 13 years when he sent her a text in 2014 saying the marriage was over. They’re still fighting because they’ve got billions of dollars of assets to divide.

Of course, there are some interesting details:

  • Every settlement conference, Scott reduced his settlement offer
  • He started a website in her name to publish embarrassing things related to a wrongful termination lawsuit she filed against her employer in 2000
  • Scott wanted Allison to sign a post-nup in 2005 and she said no thank you
  • A romantic trip to Fiji in fall 2014 seemed to signal good things ahead, but he asked for a divorce a couple of months later.

Continue reading

EY Charges Related to Auditor Independence

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An interesting story popped up last week about charges the Securities and Exchange Commission (SEC) brought against Ernst & Young (EY) and current and former partners. The current partner is James Herring, and the former partners are James Young and Curt Fochtmann. Separate charges were also brought against the chief accounting officer for the potential client, William Stiehl. All parties involved have agreed to settle the charges for a total of more than $10 million.

The SEC says the partners were submitting a proposal for audit services for Sealed Air, a public company in Charlotte, NC. During the request for proposal (RFP) process, the partners got confidential information from the audit committee, as well as information about other proposers. What the chief accounting officer (Stiehl) did amounted to “auditor selection process improprieties.”

Why would these big firm partners participate in the fraud of bid-rigging? EY is a huge firm, and surely one audit client wouldn’t make or break them. That’s true, but to the partners involved, it’s a much bigger deal. Partners in auditing firms live or die by the business they bring in, and the competition for new audit clients can be tough. Continue reading

Kelly Clarkson Child Support and Alimony

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A couple of weeks ago, singer Kelly Clarkson was ordered to pay her soon-to-be ex-husband Brandon Blackstock $150,000 per month of spousal support (alimony) and $45,601 in child support. Some people are criticizing this award and referring to it as “manimony.”

This order of the court is temporary, but will total over $2.3 million per year if it continues for the long term. Clarkson and Blackstock have two children together, ages 5 and 7.  Blackstock initially requested $436,000 per month of support, so the temporary award is less than half that amount.

Why has Kelly been ordered to pay so much?

The biggest reason is probably Clarkson’s income. Court documents show that she makes $1.9 million per month. Blackstock doesn’t seem to make a whole lot of money. The courts look at the relative income of the parties, and want to make sure that the non-monied spouse is able to continue to live a lifestyle equivalent to that of the marriage. (That’s why a lifestyle analysis is often done in high net worth cases.) We look at the “marital standard of living” and do calculations to determine how much the spouses need after the divorce to continue this standard of living. Continue reading

Preventing Fraud in a Law Practice

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One of the last places you’d expect to find fraud is in a law practice. Like accounting, the practice of law is a profession in which ethics are of utmost importance. Accountants and lawyers are often too trusting of their fellow professionals, and therefore leave themselves open to the risks of fraud.

The issue of fraud isn’t limited to a law practice of a particular size. Larger firms experience fraud because there are so many people generating so many documents, that it’s easy for a fraud to get lost in the shuffle. Small firms become victims of fraud primarily because management puts too much trust in one or two employees and fails to properly supervise them.

What would a theft of $100,000 or $500,000 or $1 million mean for your practice? Could your law office sustain such a fraud? The average workplace fraud goes on for 18 months before it is discovered. Could that be happening in your law firm? Continue reading

Tracy on the Where Accountants Go Podcast

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Yesterday I appeared on Mark Goldman’s “Where Accountants Go” podcast. Mark owns MGR Accounting Recruiters, a company that matches employers with job seekers in the accounting and finance arena.

We spent 30 minutes talking about my work as a forensic accountant, with a focus on how I got into the specialty and how I developed my forensic accounting practice. Mark and I talked about things like: Continue reading