Fraud

Nonprofits cannot *prevent* fraud but they can reduce the risk

Sam Antar is a convict and former CPA. He was the CFO of Crazy Eddie, which by his description was an intentionally fraudulent business.

I recently had opportunity to interview him by phone. Will have more of our conversation in future posts.

What I’m going to do in these discussions is combine his comments and ideas with my thoughts.

Advice for charities

I asked him what advice he would have for small charities to prevent fraud.

Wow, was that a mistake. I should not have used the word “prevent.”

You can’t prevent fraud. If someone is intending to steal or is completely determined to cook the books, they will find a way.

(more…)

Jim Ulvog

Tragedy of Fraud series now available in print as well as e-book formats

tragedy-cover   tragedy-cover

 

Both books in my Tragedy of Fraud series are now available in print format from Amazon.

The newest book:

tragedy-cover

Tragedy of Fraud – Insider Trading Edition describes – Scott London’s long fall from Big 4 audit partner to prison inmate.

Click the link for your reading preference:

First book in the series:

tragedy-cover

Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned – Consequences of fraud spread far. There is a long list of well-earned wages from fraud that will be paid in full.

Available in your preferred format:

Jim Ulvog

The world’s oldest profession? Fraudster.

Last week I listened to a continuing education class by Sam Antar (Crazy Eddie CFO and ex-CPA Sam Antar Shows You How He Cooked the Books).

He suggested that unlike what has been said for a long time, prostitution is not the world’s oldest profession.

Instead, he suggested that committing fraud is the world’s oldest profession.

How can that be?

Go back to the garden of Eden. The serpent deceived Eve through a knowing misrepresentation of the truth in order to deceive her and take something from her. His intent was to harm her.

Definition of fraud

(more…)

Jim Ulvog

Beware an aggressive scam from callers claiming to be IRS agents demanding immediate payment

Scammers are amazingly creative. One of the new schemes is to spoof a phone number from the DC area as the caller claims to be from the IRS. The caller says you have back taxes due and must be paid right now or else you will be going to jail. This can be settled today for a fraction of the due amount if you just provide a credit card number to pay the smaller amount to take care of this today.

This is just another identity theft scam designed to steal your money.

William P. Barrett tells of a friend who received such a call. Mr. Barrett returned the call on behalf of the friend and tells of the conversation:  IRS scammer makes threatening call to Seattle.

(more…)

Jim Ulvog

Primer on fraud in local governments

If you work in a local government, are in leadership there, or provide audits in that sector, you really ought to check out Charles Hall’s book, The Little Book of Local Government Fraud Prevention.

I bought & read a copy a while back and really, really want to write a review of the book, but haven’t been able to pull together my thoughts.  (Sorry Charles!) It is a good read.

(cross-posted from my other blog, Attestation Update.)

Until I pull together my thoughts, just know that I believe you would benefit from reading the book.

(more…)

Jim Ulvog

Arriving soon at an e-retailer near you: Tragedy of Fraud, Insider Trading Edition – The fall from Big 4 audit partner to prison inmate.

Debut appearance of the cover, hot off the digital press:

 

tragedy-cover

 

My newest book is in the last stages of editing. Hope to move into conversion to e-book format soon. Will be released in the next couple of weeks.

As you may know, I’ve been following the story of Scott London closely on my other blog, Attestation Update. Mr. London was the partner at international accounting firm KPMG in charge of the audit practice for the southwest region of the U.S.

He was caught passing inside information to his golf buddy. When confronted, he quickly confessed and plead guilty. He received a fourteen month jail sentence and is now a prison inmate at the Taft Correctional Institution.

You can now read of his journey from the lofty world of senior leadership to prison inmate in this book. The dozens of blog posts covering the story have been combined in chronological order instead of being spread all over the blog in reverse chronology. The posts have been edited slightly and the sequence changed a bit.

Available soon

The story of Mr. London’s fall will soon be available on your phone, e-reader, tablet, or other reading platform of choice. Will be available at the Amazon, Barnes & Noble, and iTunes stores.

Print copy will be available at Amazon soon after the electronic version is published.

 

Jim Ulvog

1 fact and 2 stories explaining why you should set up a fraud hotline in your charity

What would you think is the most likely way that a fraud is detected?

Internal audit?

No.

External audit?

No.

One fact

Forty-two percent of frauds are discovered by a tip.

Internal audits are the means to catch 14% of frauds. External audits catch a mere 3% of frauds.

Frauds are ten times more likely to be discovered by a tip than by an external audit.

That single fact, 42% of frauds discovered by tips, is a strong argument to set up an anonymous fraud tip hotline.

That data is provided by The Association of Certified Fraud Examiners in their 2014 Report to the Nations on Occupational Fraud and Abuse based on their survey of over 1,400 frauds reported to the organization.

First story

(more…)

Jim Ulvog

A different view of what fraud might look like from the inside

For a light-hearted look at what might be going through the mind of a person stealing from your ministry, check out how to Steal Like A Boss, from Charles Hall’s blog, CPA-Scribo.

Mr. Hall illustrates how a fraudster can get from “this is stealing” to “this is a loan”, or even better, to “this is the pay raise I’ve been deserving for quite some time now.”

(more…)

Jim Ulvog

Irony: Charity’s anti-fraud manager pleads guilty to fraud

BBC reports on 3/6 that Oxfam ex-fraud chief admits defrauding charity.

Oxfam, a development charity in England, has revenue of £385.5M (~$645M) in 2012.

The charity’s head of the counter-fraud department pled guilty to embezzling about £62.6K (~US$105K) and will be sentenced May 16.

His scheme?

(more…)

Jim Ulvog

2 more case studies in tragedy of fraud

For a couple of years I’ve been looking at a few specific fraud incidents as case studies of fraud in general. It has been fascinating to dive deep into an embezzlement at a nearby megachurch and a corruption case in a nearby city. I’ve blogged about those extensively and even turned my blog posts into an e-book, Tragedy of Fraud.

Two more case studies have surfaced — one I’ll just mention and the other I’ll see what I can find for several more posts.

“Googlable”

Here’s a consequence of fraud I’d not pondered before:  

Explaining to your young children that mommy is a felon before they have the opportunity to start searching the internet. Better to explain your record before they read about it.

That’s what one woman had to do with her young twin boys, as described by Dr. Michael Shaub in his blog post Redemption. Please read the short post to hear her story of going to federal prison for a creative accounting deal that didn’t give her anything.

Barry Minkow

Mr. Minkow is the other case study I’ll start focusing on.

My post is titled: Fraudster turned fraudbuster turned pastor turns fraudster again: Pleads guilty to stealing from his church

Dr. Shaub has a post also:  Barry and Me.

He has a longer description of Mr. Minkow. It’s

… a rags to riches to orange jumpsuit to crime fighter to clerical collar to fraudulent short-seller to multimillion dollar church embezzlement story.

The professor has followed Mr. Minkow for many years, read several (most?) of his books, and even used his books in class.

Apparently the felon-again had a movie about his life in production. I’m guessing, along with the professor, it won’t be released anytime soon.

Read the full post as a further intro to the amazing life of a no-longer-alleged triple felon.

Jim Ulvog

Fraudster turned fraudbuster turned pastor turns fraudster again: Pleads guilty to stealing from his church

Barry Minkow, pastor of San Diego Community Bible Church (SDCBC) pled guilty to embezzling $3 million from his church. The U.S. Attorney for Southern District of California announced the plea agreement on 1-22-14. You can see the press release here.

Pr. Minkow first went to prison as the mastermind of the ZZZZ Best fraud which collapsed back in 1987. He served under 8 years of a 25 year sentence.

After release he worked at a church in the LA area then became pastor at SDCBC. He started a for-profit company that researched and publicized frauds.

In 2011, he pled guilty to insider trading for reportedly shorting a stock before denouncing the company for alleged irregularities. He drew a five-year sentence for that felony.

That brings us to this week. In the press release announcing a plea agreement, the US AG says (more…)

Jim Ulvog

All the fraudulent accounting at Enron was fully reviewed & approved and seemed perfectly fine until the indictments were issued.

I have a post at my other blog, Attestation Update, describing a speech by the former CFO of Enron that says all of the bad transactions that sent him to jail were approved by the attorneys, approved by the auditors, and approved by the board.

Yet Enron is the poster child for corporate fraud.  A bunch of people went to jail for transactions that were fully reviewed and approved.

My post is All the Enron accounting was approved by the attorneys and the auditors and the board. Everything was perfectly legit. Until indictments were issued.

Here is the question that should unsettle all of us:

(more…)

Jim Ulvog

Live example of a fraud fiasco

(Cross-post from my other blog, Attestation Update, with minor changes.)

“Going to meet your Maker with the fresh scent of theft on your hands is not a good way to go…”

is how Charles Hall starts his story of a long ago fraud – Stealing While Dying.

You have heard of the situation where the bookkeeper does the main bookkeeping, receives the bank statements, reconciles the accounts, and is an authorized check signer. Perhaps you recognize that from someplace you’ve worked.

In this situation, the most-honest-and-nicest-person-you’ll-ever-meet bookkeeper starting stealing lots of money when she became gravely ill.

(more…)

Jim Ulvog

Price cut on my newest e-book, “Tragedy of Fraud”

Price reduced to only $0.99, now available here.

“Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned” describes the tragic consequences from fraud.

There are ripple effects that spread out to harm innocent bystanders. The perpetrator draws a wide range of well-deserved wages that will be paid in full.

The book looks at two fraud incidents to learn what happens after a fraud is discovered. One took place in a local megachurch and the other in the mayor’s office of a small city.

This book is a compilation of blogs posts that have been previously published at Nonprofit Update and Attestation Update. The posts have been edited slightly and reorganized for easier reading.

Major sections of the book:

  • Tragedy of Fraud – The Ripple Effects from the Embezzlement Fraud in a Local Church.
  • Wages of Fraud – Consequences from the Corruption Fraud in a Mayor’s Office.
  • Why is it Difficult to Find Fraud? – The lack of documentation inside an organization makes it even more difficult to identify a fraud scheme.
  • The Fraud Triangle – A discussion of the three sides of a fraud triangle. That’s the idea that three components need to be present for a fraud to take place – opportunity, motivation, and rationalization. Great danger is in play when all three factors are present.

The other book I have available at Amazon is Once Upon Internal Control.

Jim Ulvog