Archive for August, 2007
Fri 31 August 07 · Filed under Fraud News Stories
Yes, I spent one hour and eleven minutes on the phone with Bank of America tonight. *sigh*
It was long, but it was mostly good. I didn’t have to talk to anyone in India, so that was the best part of all.
Here’s the deal. I got a new credit card and for the life of me I couldn’t pay it online like I do with my other Bank of America cards. I exchanged a bunch of emails with customer service, but they couldn’t help. So my payment due date was approaching and I sent in a paper check just to be safe.
Today was the payment due date, and of course the check didn’t arrive. (Big hugs to the U.S. Postal Service!)
And what is the penalty for late payment? A fee and the loss of the promotional rate. Yikes!
So by the time I was transferred to my fourth person, Mr. Fenton, I was not terribly jolly. I kept telling myself, “At least he’s not in India. At least he’s not in India.” Do you realize how crazy it would be for “Bank of America” to have customer service in India???
So he fixed the online payment problem, but I still had the problem of now having a “late” payment because the online payment system wouldn’t let a payment post today. Well we tried to talk to person number five, but the wait was oppressive, so Mr. Fenton told me how we will fix the problem and all will be well.
We’ll find out Tuesday if it works out as promised. Why am I telling this story? Because Mr. Fenton was fab. That’s all.
Fri 31 August 07 · Filed under Fraud News Stories
A growing problem for companies is the presence of corporate moles - - employees who are stealing information and giving or selling it to outsiders (especially competitors).
Anti-fraud software maker Actimize conducted a survey on this issue, and included 40 large financial services firms in the U.S. and United Kingdom. About 50% of the companies surveyed said they believe they have had a corporate mole recruited and trained by outsiders to commit fraud. 85% of respondents said their company has been affected by employee fraud in general, and 65% think it is going to be a bigger problem in the future.
The 50% of companies that reported a data theft within the last 12 months have had losses averaging $875,000 per incident. The largest incident created $6 million in losses.
Thu 30 August 07 · Filed under Fraud News Stories
This is taken from the White-Collar Crime Fighter newsletter. You can subscribe to the full newsletter here, as well as access other fraud-fighting resources.
Steve Albrecht on: The Six Signs of Internal Fraud
As executives, managers, internal auditors or rank and file employees, when it comes to internal fraud we may suspect it… suffer the consequences of it…or anticipate it. But we never see it.
However, we can see the signs of fraud. There are six of them in all organizations. By understanding them and looking for them, we significantly improve our chances of detecting and reporting fraud…
- Accounting anomalies—representing such countless red flags as inventory shortages, unrecorded transactions, unusual levels of returns, etc.
- Internal control weaknesses. These equate to opportunities for insiders to commit fraud. If you identify a weakness, chances are that someone will exploit it if they haven’t already.
- Analytical symptoms. When a business function occurs at the wrong time, or is conducted by the wrong person or a similar operational anomaly occurs, chances are it is a sign of fraud.
- Lifestyle symptoms. Employees living beyond their means is the most common. Smart internal fraudsters would steal and save. But most steal and spend. When you notice signs of extravagant lifestyle, you’re most likely looking at a sign of fraud.
- Behavioral symptoms. People who stop looking you in the eye… sweat more than usual… come in earlier than usual and/or stay late should be monitored as potential fraudsters.
- Tips and complaints. When employees report actual or suspected incidents of fraud among their co-workers or bosses, you’ve got good reason to start following up with a search for hard evidence.
White-Collar Crime Fighter source:
Steven Albrecht, PhD, CPA, CFE, Associate Dean, Marriott School of Management, Brigham Young University, and the first President of the Association of Certified Fraud Examiners. He is one of the foremost thought leaders in fraud detection, prevention, deterrence and investigation. He can be reached at steve_albrecht@byu.edu.
Thu 30 August 07 · Filed under Fraud News Stories
Yes, you read that correctly. Home Depot fired (former) employee Dustin Chester, who worked at a store in Murfreesboro, TN, after he apprehended a thief.
Last week, Dustin saw a man with a crowbar by a soda machine in front of the Home Depot store. He says the thief started running, and Dustin took off after him. He caught him and restrained him until the police came.
Unfortunately, Dustin was a department manager, and Home Depot’s policy prohibits managers and most employees from going after thieves. He was informed afterward by the district manager that he was supposed to let thieves go. Only loss prevention employees are allowed to go after thieves for safety reasons, says the company.
Since Dustin didn’t follow the company’s policy, he was fired. He says that he was just looking out for the other employees. He was worried about what the man might do with the crowbar and he didn’t want the customers or other employees to be in danger.
Thu 30 August 07 · Filed under Auditing & Regulations
Yesterday, a judge ruled that the IRS was not entitled to see workpapers that were deemed work product. This is a very important ruling in tax matters.
“Work product” is used in legal cases to protect papers that you don’t want the other side to see. Essentially, the attorney in a case doesn’t have to show the other side his notes and his work. Why? Because doing so would give the other side an unfair advantage if they get to see his research and though process.
And so the decision went in this tax case.
The IRS and Justice Department wanted the tax accrual workpapers of Textron Inc. They wanted to see how the company came up with its accrual. The judge said no, because those workpapers contain a legal analysis of transactions that the IRS might challenge. The judge said that allowing the IRS to see that information would amount to an unfair advantage, just as taxpayers would have an unfair advantage if they were able to see the IRS’s behind-the-scenes work on tax issues.
Wed 29 August 07 · Filed under Scam Busting
Those who have been involved in high-profile fraud investigations and general scam-busting are used to getting threats. The wackos typically like to threaten jobs, reputations, and families, and the levels to which they will stoop seem to have no lower limits. No lie or distortion is beneath those who want to silence the critics.
Last night, the threats went to another level. Barry Minkow’s life was threatened on Yahoo by someone who posted a pretend article from USA Today with a headline “Barry Minkow, Dead at the Age of 41.” The threat was complete with social security numbers, a drivers license number, the names of his wife and children, and a date and location in the future. The threat went on to note Barry’s investigation of Usana Health Sciences, the catalyst for this threat.
How sick does someone have to be to post something like that? I know that Barry is used to making people mad. After all, he’s uncovered over $1 billion in fraud and turned his findings over to the federal authorities. I suppose there are bound to be some fraud perpetrators who get a little upset when the gravy train is gone.
Rest assured, the truth will not be silenced.
Wed 29 August 07 · Filed under Pyramid Schemes & MLM, Scam Busting
This is from TerminatedRamp on the Yahoo message board for Usana. He raises an excellent issue. The IRS already has a generally dim view on multi-level marketing because the odds of turning a profit are less than 1:100 (1%). In order for business deductions on a tax return to be legitimate, the “business” activity must be done with the intent of making a profit and with a likelihood of profit. Doesn’t sound like a Usana distributorship meets these guidelines if you listen to Usana CFO Gil Fuller.
Gil Fuller repeatedly called the majority of USANA distributors “Volunteer Army”. This implies that these distributors never joined the business opportunity with the intent to profit. Even the Wall Street Journal reported the following: “The company has previously said that most of its distributors join to secure a discount on vitamins, not to earn money.”
This is devastating for the hundreds of thousands of USANA distributors who aren’t making a profit and are deducting their losses with USANA. According to Gil Fuller, they have no intention to make a profit and only wanted vitamin discounts. Now hundreds of thousands of distributors may be subject to an audit to see if these distributors ever intended to make any money. Sadly enough, they will most likely get away with what they did unless the IRS steps into this battle.
Gil Fuller can’t have it both ways. Either the distributors joined with the intent to make a profit in a business and therefore legitimately deduct their loses, or they are just a “volunteer army” who are illegally deducting their USANA losses. If Gil Fuller lied about this notion that USANA distributors are a “Volunteer Army” and all actually joined to make money in a business opportunity, then USANA must admit that the loss rate amongst USANA distributors is infact close to 95% of the currently enrolled distributors. That is, out of about 500,000 USANA distributors, close to 475,000 USANA distributors are not turning a profit. We already know that 66% have not earned a single penny in commissions.
These losses are dramatic and real. And the money these profitless distributors pay into USANA are used to enrich the top 3% of the distributors in the pyramid scheme, which consists of a lot of the original & current management’s family members as well as those who got in very early on. If it was only about the product to these failing distributors, then they would ONLY be preferred customers. Once they join the BUSINESS Opportunity, their motive is Profit. If it isn’t, then they can’t deduct their losses, and if they are, they are breaking the law.
Gil Fuller really screwed the distributors if you ask me. The “Volunteer Army” that is…
Wed 29 August 07 · Filed under Fraud News Stories
Robert FitzPatrick at Pyramid Scheme Alert reported in his recent newsletter on the class action suit that has been brought against Amway (Quixtar) by high-ranking distributors:
The lawsuit states:
* Quixtar’s (Amway and Quixtar are both part of the same company) products are so overpriced they cannot be profitably retailed.
* Only 3.4% of product sales are made to customers outside of the Quixtar distribution network.
* The sole way to make money is for a (distributor) to continually recruit new distributors who are also willing to buy and self-consume, or give away, the Quixtar products.
* Quixtar a classic recruitment pyramid scheme.
The distributors say they want to “extricate themselves from continued forced participation in Quixtar’s illegal pyramid scheme and pursue legitimate business opportunities instead.” They say Amway not only induces people to participate in an illegal scam but also locks them into the scheme with non-compete contracts that prevent them from contacting their downlines to work with them in other businesses.
In short, Amway/Quixtar, they say, is not a “direct selling” business at all. It is an “illegal pyramid scheme.”
Who is calling Amway “illegal”? A bunch of malcontent “losers” or “anti-MLM zealots”? Far from it. These are Amway’s most successful participants (If it is possible to call making money in a pyramid scheme being “successful”) These are long term distributors. No quitters here. Eight of the plaintiffs are among the largest Quixtar distributors, many of whom have had close relationships and private conversations with Quixtar/Amway founders and executive management for more than 30 years. These are the ultimate “insiders” and they are saying in plain English that Amway is a global fraud.
Amway is the oldest, largest and most politically connected MLM - the company that effectively created “multi-level marketing”. This lawsuit, brought by its “top guns”, is only one a series of blows in the last few years years and indicate a downward spiral and possibly a coming collapse. Amway has victimized tens of millions of people and now its very top leaders say they too are victims.
Are these lazy losers who didn’t work hard enough? No. They were high-ranking distributors so they probably did their fair share of work. Although it does seem curious that they profited year after year off the backs of those at the bottom of the pyramid and are just now complaining.
Tue 28 August 07 · Filed under Fraud News Stories
Studies have shown that fraud awareness training is one of the keys to preventing and detecting fraud at corporations. If employees know what fraud looks like, they can help avoid it and they can report suspicious behavior. And corporate executives agree that fraud awareness training is key (see below graphic; click on it to view full size).
Most current ethics and compliance training programs have failed. FraudAware specializes in fraud awareness training, and comes highly recommended.
Tue 28 August 07 · Filed under Pyramid Schemes & MLM
Can an analyst covering Usana Health Sciences really provide an independent analysis of the company if he is a distributor? Tim Ramey covers Usana for DA Davidson. Isn’t it kind of weird to cover the company and to be a distributor? And at the very least, wouldn’t this be an important disclosure to make before recommending a “buy” on Usana stock?
From the insider on the Yahoo message board:
tim ramey signed up as an associate in may of 2005. he listed the address of 5651 zena road north west (nw) salem oregon 97304.
his phone number is 503 36X-1X85. he will claim that he made no money at usana as associate. that is the point, right? no one does. why worry when you can make commissions repurchasing one hundred thirty thousand shares when the stock went below 30 and d a davidson received commissions repurchasing about five million in shares. ramey knows where to make money and that is not as a usana associate.
the reporter who contacted you from the new york times was my contact. i am the one who handed your ‘associate’ the dvd at convention. the hypocrisy here is mind-boggling. when dr wentz was in the paper for selling shares in february our analysts screamed that it was less than one percent of the float and no big deal. then after the crash into the high twenties, we decided myron should start repurchasing as no one else was. he repurchased less than one percent of the float yet we publicized it like a big occasion. how is one sell less than one percent not a big deal and a buy less than one percent a huge deal? it is the standard operating procedures for us.
i will post this message shortly.
Here’s a list of companies Tim covers. I wonder if he has any undisclosed relationships with others?
American Italian Pasta Company AITP
Brown-Forman Inc. B BF-B
Constellation Brands Inc. STZ
Del Monte Foods Co. DLM
Flowers Foods Inc. FLO
Hormel Foods Corporation HRL
Kellogg Company K
Kraft Foods Inc. KFT
Martek Biosciences Corp.* MATK
Nu Skin Enterprises Inc. NUS
Omega Protein Corp. OME
Sara Lee Corp. SLE
Smithfield Foods Inc. SFD
Tyson Foods, Inc. TSN
USANA Health Sciences Inc.* USNA
The issue has been raised of the possibility that Tim is only on the “distributor list” so that he can receive distributor newsletters and such. I reject that as a defense for not disclosing this distributor relationship. If there was nothing improper and nothing to hide, I believe it would have been disclosed.
Next entries »
