Archive for January, 2006
Tue 31 January 06 · Filed under Fraud Detection & Prevention
Carl Icahn, a major shareholder in Time Warner Inc. has been speaking out against the company’s expenses. He says that the overhead and the perks are outrageous. Corporate overhead includes airplanes used by senior management for business and personal travel. Icahn also points out that Time Warner’s corporate headquarters, at $1.7 billion, is the most expensive office building ever built in New York.
Time Warner executives say that their overhead spending is not out of line when compared to other companies of a similar size.
Mon 30 January 06 · Filed under Entertainment
The publisher of “A Million Little Pieces” by James Frey has apologized to its readers. Nan A. Talese/Doubleday published the hardcover version, while Anchor Books published the paperback edition. Both publishers are apologizing to readers for the controversy.
The book, a purported nonfiction work, includes many exaggerated truths and outright lies. The publishers have now decided to include author and publisher notes to all future editions shipped to stores. The notes will also be published online.
As you might imagine, this controversy has helped to increase sales of the book.
Sat 28 January 06 · Filed under Fraud Detection & Prevention
It has taken four years, but Ken Lay and Jeffrey Skilling of Enron fame are finally going in front of a jury. The question remains whether or not the two heads of the company were a part of inflating earnings while the company was billions of dollars in debt.
Wed 25 January 06 · Filed under Auditing & Regulations, Entertainment
Richard Hatch, the winner of the first season of ‘Survivor’ was convicted of evading taxes on his winnings, as well as money earned as a radio show host and earnings from a rental property. He faces prison time of up to 13 years and a fine of up to $600,000.
Hatch’s defense was based upon his contention that he was a bad bookkeeper, and that he thought the producers of ‘Survivor’ were supposed to pay the taxes on his winnings.
He was acquitted on seven charges of bank fraud, mail fraud, and wire fraud. Hatch was taken into custody because the judge felt he was a flight risk. Sentencing is scheduled for late April.
Wed 25 January 06 · Filed under Uncategorized
Georgia Thompson, a purchasing division supervisor in the Wisconsin Department of Administration has been charged in federal court with 2 felonies. The charges include misapplication of funds and participating in a scheme to defraud the State.
The charges stem from the awarding of a $750,000 contract to provide travel services to the State. Thompson was on the team that reviewed bids from travel agencies, and the team awarded the contract to Adelman Travel.
Thompson was the coordinator of a process that limited the number of travel agencies doing business with the State. She allegedly manipulated the contract process to create job security for herself and create a political advantage for her supervisors.
In 2004, bids were solicited for 6 travel contracts. The largest one included 40% of the State’s travel business. Thompson and her team evaluated bids and utilized a scoring system. After written bids were examined, Thompson is accused of manipulating the next step of the process by inflating her scores for Adelman Travel and convincing other committee members to do the same.
Other team members agreed that the contract should go to Omega World Travel because of a higher score than Adelman. Thompson convinced the team to allow Adelman and Omega to present their “best and final” numbers, even though Omega won. A final round of bids was solicited from the two firms, and Adelman was awarded the contract.
The maximum possible penalty if convicted, is 20 years in prison.
Tue 24 January 06 · Filed under Fraud Detection & Prevention
The audit committee of the Milwaukee County Board is considering hiring an outside forensic accounitng firm to perform a forensic audit on the finances of the Milwaukee Public Museum. This project would cost between $50,000 and $100,000. The project is being proposed by Supervisor James White.
The board of MPM was told by county auditors that investigators found no evidence of fraud or misappropriation of funds. The museum board once considered a forensic audit, but instead allowed county auditors to examine the books.
The county examination revealed deception and incompetence by former museum officials. The financial mismanagement drained the endowment fund and put the livelihood of the museum at risk.
Tags: forensic accounitng, forensic audit, Milwaukee Public Museum
Mon 23 January 06 · Filed under Fraud News Stories
Ameriquest Mortgage Co. has offered $325 million to settle accusations of predatory lending in 49 states. Consumers in Wisconsin will receive over $2.7 million of the total. The company was accused of using high-pressure tactics and deception to sell mortgages to homeowners interested in refinancing.
Ameriquest is the nation’s largest sub-prime lender, offering loans to consumers with poor credit. Those mortgages are usually at higher interest rates.
Ameriquest has denied all allegations, but is agreeing to new standards that are meant to prevent the alleged unfair and deceptive practices. The new standards include not paying incentives to employees who secure mortgages with prepayment penalties or other fees.
The settlement must still be approved by the state courts.
Mon 23 January 06 · Filed under Uncategorized
Four men pleaded guilty last week Friday to misdemeanor charges of property damage for their participation in the Election Day 2004 tire-slashing. The defendants were all workers for the Kerry-Edwards campaign, and the 40 tires they slashed were on 25 vans rented by the Republican party to transport inner-city voters to the polls.
The guilty men include:
- Lavelle Mohammed, 26
- Lewis G. Caldwell, 29
- Sowande Omokunde, 26, son of U.S. Rep. Gwen Moore (D-Wis.)
- Michael Pratt, 33, son of former acting Milwaukee Mayor, Marvin Pratt
The four men must collectively pay approximately $5,300 in restitution prior to their sentencing on April 26. In exchange, the District Attorney will recommend they only get probation. The charges carry a maximum possible penalty of nine months in jail and a $10,000 fine.
The guilty pleas came while the jury deliberated in their trial on felony charges. The defendants claimed that the Democratic party set up the defendants to take the rap for the crime.
No estimate has been made of the number of inner-city voters who were disenfranchised because they were unable to get to the polls.
Sat 21 January 06 · Filed under Entertainment
The first winner of my all-time favorite television show, Survivor, is on trial for alleged tax evasion. Richard Hatch is accused of not reporting to the IRS his earnings from Survivor, as well as not paying taxes on other income.
In a strange twist, Hatch’s attorney has stated that the Survivor producers made a deal with Hatch to pay the taxes on his winnings if he didn’t spill the beans about contestants whose friends were sneaking food to them on the island. It is not clear whether or not Hatch will testify about the alleged deal.
Fri 20 January 06 · Filed under Writing & Blogging
The latest issue of On Balance is out, and it is dedicated to the topic of fraud and forensic accounting. On Balance is the magazine published by the Wisconsin Institute of Certified Public Accountants, published every other month, and edited by Amy Gaeth.
I contributed several items to the issue:
1. The cover story “CPA Sleuths: Bringing the Truth to Light” includes my comments about experienced forensic accountants.
2. The story “Office Piracy” is the true story of one of my clients. They were defrauded by their CFO, and their family business ended up filing bankruptcy. They made lemonade out of lemons, however, but you’ll have to read the story to find out how.
3. The article “An Ounce of Prevention” was written by me. It summarizes my proprietary methodology for creating an effective fraud prevention program, including education, investigation, and proactive prevention.
Tags: fraud, forensic accounting, fraud prevention
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