R. Kelly Shows Us the Importance of Tracing Funds

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I’ve become really good at tracing funds through multiple bank accounts with tens of thousands of transactions. The goal is to find where the money went, and if we’re lucky find evidence of hidden accounts. I usually find a hidden account when someone is sloppy: a transfer to a bank that we didn’t know about, no matter how large or small the amount.

R. Kelly is currently sitting in jail after being charged in 2019 with 13 counts of racketeering, forced labor, and sexual exploitation of children in federal court in Chicago. He was denied bail because he was deemed a flight risk. R. Kelly’s attorneys claimed he was broke, though.

And now the Feds say they’ve found a bank account R. Kelly controls, and the account received at least $1.2 million last year.

How did they find this secret account?

Apparently R. Kelly was on a recorded line from jail when he told people to contact a person who was supposed to open an account to receive money indirectly from him. In other words, someone opened an account in their name to hold onto R. Kelly’s money for him. Continue reading

Using AI in Accounting? The ScaleFactor Scam

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Artificial Intelligence (AI) is everywhere. And companies that fine new or better ways to use AI create advantages for themselves, largely because it may give them the ability to scale things a reduced cost, and also because it may attract new clients who want this technology advantage.

In accounting, AI is most typically used to automate bookkeeping functions: recognizing payees and automatically categorizing transactions, matching transactions (ex. matching a purchase order to an  invoice), automatically producing certain financial reports, basic financial analysis. (AI isn’t yet good at complex financial analysis, but the ability to interpret data will continue to develop.)

Overall AI decreases the need for manual tasks such as inputting data and routine analysis of financial statements. That frees up accountants to do more specialized tasks. Think of it as automating the administrative tasks so the accountants can do the creative tasks.

I also use AI in my forensic accounting practice, although you might not recognize it as that. When I use software to perform data analytics (which has been around for a long time), I’m using AI. The data analytics are often centered around analyzing large sets of data to identify anomalies or patterns that are concerning. But we can also use AI to help link sets of data (think of matching transfers between accounts or matching bank transactions to underlying accounting system data). Continue reading

How to Perform Analytical Review

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When investigating fraud, I often find it useful to perform analytical review on the financial statements of a company. Even when management is certain that they know where the fraud occurred within the accounting system, analytical review can help identify unsual things about the numbers that may warrant further investigation.

Ratio analysis and analytical review procedures are very familiar techniques for financial statement auditors. While analytical procedures may seem elementary, they can be very important in giving clues to areas of the financial statements that may contain fraud.

Analytical review involves comparing changes in numbers between accounting periods (horizontal analysis) and the relationships between certain financial statement line items (vertical analysis). The numbers for a business typically have certain predictable patterns, and when the financial results fall outside those parameters, it may be cause for concern.

Typical sets of data to be compared during analytical review can include: Continue reading

Shaklee Average Income Disclosure

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Shaklee is best known for its vitamins, but now sells health shakes, diet pills, and beauty products.

If you have any income disclosure statements to add to the above, please send them to the email address on my Contact page.

Are Your Employees Committing Fraud?

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Fraud is big business. Companies are most at risk of fraud from their employees, since they have access to information and assets. On average, companies lose 5% to 6% of their revenues to internal fraud. This means that a company with sales of $50 million is likely losing $2.5 million to $3 million each year to employees with sticky fingers. In this age of amazing shrinking profit margins, 5% or 6% could mean the difference between being in the red or in the black.

You might be thinking that your company has never had that much stolen in one year. Correction: You don’t know if you’ve had that much stolen by employees. Companies can’t quantify exactly how much has been stolen from them, because they simply are not aware of all the frauds committed.

The average is 6 percent, and it’s based upon a consideration of the known and unknown frauds in companies. Don’t get caught in the trap of thinking that your company is much better than average. As managers of companies, you may like to believe that you’re doing better. But some companies are doing better, and some are doing worse. Assume that your company is losing 6 percent, and try to improve on that.

The Schemes
Fraud committed by employees comes in all shapes and sizes, but generally falls into three categories. Asset misappropriations are the ones we hear about most often. These include theft of inventory, theft of money and theft of anything employees can get their hands on. Continue reading

West Allis School District Will Steal Your Money… Twice

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Years ago, I wrote regularly about Milwaukee Public Schools and their penchant for wasting taxpayer money. The district portrays itself as poor, with an annual budget of more than $1 billion and spending that exceeds $14,00 per child with horrible outcomes.  (In case you’re wondering, “rich” districts in Wisconsin spend much less per child, and have dramatically better outcomes.)

The West Allis-West Milwaukee School District is the focus of this article. The district has been overspending for years, and is now holding a referendum. The dishonesty surrounding the whole issue is astounding. But I can break it down easily for you: For years the district has been stealing from taxpayers by spending money foolishly. Now they are crying that they are broke, and they want to steal from taxpayers again. The message is “approve our referendum or else.”

Dan O’Donnell breaks it down nicely in this article. I’ll give you the highlights: Continue reading

DoTerra Opportunity and Earnings Disclosure Summary

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doTERRA sells essential oils through “wellness advocates.” The company was warned by the FDA in 2014 that its representatives were making medical claims that were prohibited by law.

Here is an analysis of the DoTERRA figures.

If you have any income disclosure statements to add to the above, please send them to the email address on my Contact page.

Support for Dr. John McAdams of Marquette University

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I am a proud graduate of Marquette University (both undergraduate and graduate), and currently serve as an adjunct instructor in the accounting program. I love my alma mater deeply, but I cannot stand by and watch the treatment of Dr. John McAdams over the last year without saying something.

More than a year ago, Dr. McAdams criticized Cheryl Abbate, who was the instructor for a Theory of Ethics class at Marquette. A firestorm ensued, and Abbate claimed that the criticism by Dr. McAdams was bullying. She allegedly got hateful emails… not from Dr. McAdams, but from third parties he appears to have had no direct involvement with.

Dr. McAdams was then suspended, a move I believed was retaliatory and inappropriate. Although he was suspended with pay, all of his classes were canceled and he was instructed that he was not to be on campus at any time. Continue reading

Rigging a Contest, Jennifer McKinney Style

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jennifer-mckinney-xyngularRemember our favorite serial scammer, MckMama?  Well, the infamous Jennifer McKinney is back and is scamming the sheeple again. (Who am I kidding? She never STOPPED scamming businesses and consumers.)

We’ve talked here at length about Jennifer and Israel McKinney’s unsuccessful attempt at defrauding the bankruptcy court. Of course the McKinneys have scammed many creditors over the years, losing FOUR houses along the way. We have also talked about Xyngular, the multilevel marketing company that MckMama shills for.

And it just so happens that the latest scam involves Xyngular.

On July 30 she announced the giveaway of a “free weekend vacation for two to anywhere in the continental United States.) People could get their names entered multiple times in the drawing… which was supposed to be “randomly” drawn. However, Jennifer McKinney appears to have chosen her winner ahead of time as you will see below. Continue reading