Archive for February, 2008
Wed 27 February 08 · Filed under Pyramid Schemes & MLM
I was recently interviewed for a Brazilian blog dedicated to exposing multi-level marketing companies and pyramid schemes for the scams that they are. Here are their questions and my responses:
1. How did you became involved with MLMs? What attracted your attention, personal experience or otherwise? At the time I got involved in Mary Kay Cosmetics, I was simply looking for an opportunity that I controlled. I didn’t look at it as a potential career for me, but as a part-time job for which I controlled the hours and the activities. I was also attracted by the supposed ability to earn a lot of money for my efforts. Little did I know that was a complete lie.
2. If some companies are real financial pyramids, why there is no intense action to prevent and correct them in the USA? Quite simply, the U.S. government has decided not to enforce the laws on the books. I think it is partly for political reasons, and it is partly because the companies running the pyramids are quite clever about it. Companies like Amway, Mary Kay, Usana, Herbalife, and the like have very cleverly masked their pyramid schemes with what appears to be a legitimate retail product. They ask the government to focus on the product, while in reality, the representatives of the companies are focusing on recruiting new members to the pyramid. Read the rest of this entry »
Tue 26 February 08 · Filed under Fraud Detection & Prevention
Question: why would companies overstate inventory
Answer: There are a couple of reasons why a company might overstate inventory. They both relate to reducing expenses and therefore increasing the company’s profit.
If inventory is overstated, it means that cost of goods sold is understated. This could be a case of not writing down inventory that has lost value, or of simply not expensing out items of inventory that have already been sold.
Inventory can also be overstated by dumping business expenses into inventory. What better place to hide expenses that you don’t want to properly recognize in the current year.
And it’s pretty easy to manipulate inventory figures. There are a ton of individual transactions throughout the year, and the auditors can’t possibly test many of them. And inventory counting procedures at year end are easily circumvented to cover fraud. This is a financial statement line item with a very high risk of fraud.
No matter the motivation or the mechanics of how it’s carried out, overstated inventory quite simply causes a company’s profits to be overstated as well.
Mon 25 February 08 · Filed under Fraud News Stories
The Democrats swear that “universal health care” will be fabulous for all. No one really knows “who” is going to pay for it, but if enough voters think it’s going to be “someone else,” that’s good enough for them.
But socialist health care systems don’t work, and all we have to do is look to the north and to the east to see examples. Here’s a fantastic example from Britain, by way of WenchyPoo’s blog…
There’s a little practice in Britain called “patient stacking.” Treatment at the hospitals is so slow, that a guideline was issued which said patients couldn’t be held in a hospital waiting room for the emergency department for more than four hours. Read the rest of this entry »
Mon 25 February 08 · Filed under Fraud News Stories
This slide show explains it nicely. Please don’t look at it if foul language offends you.
Mon 25 February 08 · Filed under Fraud Detection & Prevention
If there’s one silver lining to this case, it’s that the defendants are apparently admitting that they cheated Social Security. But now the bigger problem is that they’re saying it’s the government’s fault.
Last month 83 people were charged with participating in a $663,000 fraud that spanned 15 years. The defendants are accused of falsely telling the Social Security Administration that their benefit checks were lost. They would receive a replacement check, and cash both the replacement and the original (which was never really lost).
But in true American style, the defendants say it’s not their fault. It’s actually the government’s fault that they stole money with this scheme. How could it be the government’s fault? The defense says that when the government found that both checks were cashed, they asked the defendants to repay it. *gasp* Really? Read the rest of this entry »
Sun 24 February 08 · Filed under Fraud News Stories
Ever met anyone who thought he didn’t have to pay income taxes? Maybe he tried to argue taxes are unconstitutional and there are legitimate ways to avoid paying them.Don’t believe it. Wesley Snipes believed it, and found himself in quite a bit of legal trouble. He’s been acquitted of the most serious criminal charges, but that doesn’t mean he won’t have to pay his taxes. The IRS still intends to go after him for income taxes on tens of millions of dollars, and the interest and penalties associated with those taxes won’t be cheap.
This week brings news that Nicholas Cage is joining the ranks of famous tax cheats. The IRS alleges he used his business, Saturn Productions, to write off $3.3 million in personal expenses (all those jet trips and limos) and says he owes $814,000 in taxes and penalties. Cage argues the expenses are all security needs. Read the rest of this entry »
Sun 24 February 08 · Filed under Fraud Detection & Prevention
I recently did an interview with Sam Steele (that’s him at the right), the face of The US3 Report. He interviewed me on Corporate Fraud & Embezzlement, and of course, gave me a chance to promote my new book Essentials of Corporate Fraud.
The US3 Report calls itself: “The Ultimate Safety & Security Resource for the Business Executive.” Subscription to this resource is by invitation only, and is purposely capped at a small number, to ensure that subscribers are the recipients of exclusive information.
Much of the information in the monthly reports revolves around personal security and protection for the high-profile and/or high net worth individual. It’s clear that these types of people are bigger targets for criminals, both those committing physical crimes and those stealing identities and other personal information. Read the rest of this entry »
Fri 22 February 08 · Filed under Entertainment
I started off my day recording a podcast with Phil Davis from Authors on the Net. The site is geared toward helping authors promote their books. The site was really built with self-publishers in mind, because most of them have no idea where to begin to market their books. But those of us with publishers can still benefit from the site as we work on promotional efforts.
Then I spent some time cleaning up a few minor client issues and answering emails.
Off I went to lunch at Mo’s Irish Pub. I was in the mood for Fish ‘n Chips, and theirs is fantastic. As I was crossing the street, I saw a television camera and the back of crew cut. I knew immediately that it was John McGivern. I’ve never actually seen him in person before, and had no reason to believe he’d be standing on a street corner with a camera man. So how did I know that was the back of his head? I dunno. Read the rest of this entry »
Thu 21 February 08 · Filed under Fraud News Stories
No one can even name one accomplishment of his or anything that remotely qualifies Obama to be President: Read the rest of this entry »
Thu 21 February 08 · Filed under Auditing & Regulations
Sam Antar made this nice find in regard to materiality, one of many issues at Overstock.com (NASDAQ:OSTK). You see… materiality is an issue because, in addition to “unusual” material items at Overstock, we’ve seen several immaterial “unusual” items as well.
Users of financial statements have a tendency to overlook “immaterial” items, because by definition, they are quite small and likely don’t make much of a difference when you look at the financial statements as a whole
But don’t be fooled. Items deemed small and “immaterial” can in fact be very important to the financial statements. So says the SEC in Staff Accounting Bulleting 99: Read the rest of this entry »
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