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Technical stuff for CPAs providing attestation services

Archive for the ‘Fraud’ Category

Brief survey of costs from Volkswagen’s diesel fiasco.

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Image courtesy of Adobe Stock.

Haven’t talked about the massive Volkswagen diesel fraud much on this blog. Just don’t have enough time to cover every business fiasco. Time for a brief recap of the financial cost of the cheating mess.

Here is a fast tour from the guilty plea in 2017 to the latest estimate of total costs in 2019.

3/10/17 – Wall Street Journal – Volkswagen Pleads Guilty to Criminal Charges in Emissions-Cheating Scandal.  Good recap of the VW confession:

Key tidbits:

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Written by Jim Ulvog

December 27, 2019, 7:00 am at 7:00 am

Posted in Fraud, Other stuff

Alleged arson illustrates the fraud triangle

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Analyze fraud in terms of opportunity, motivation, and rationalization. Image courtesy of Adobe Stock.

A current trial alleging arson and insurance fraud provides CPAs an educational read on the fraud triangle.

Consider these articles if you want more background or to see my sources:

A fellow woke to fire in his home, packed a few belongings, called 911, tossed a couple suitcases out the window he broke with his cane, then climbed out the window to save his life.

That’s what he told fire officials and his insurance company.

The fully involved fire, which from a photo looks to have destroyed the home, caused around $400,000 of damages.

Technology can rat you out

His pacemaker told a different story.

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Written by Jim Ulvog

March 21, 2017, 8:57 am at 8:57 am

Posted in Audits, Fraud

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In case you hadn’t hear, those telephone calls claiming to be from the IRS demanding you immediately pay back taxes are a scam.

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Wouldn't it be nice if the phone id actually was that accurate for every call? Image courtesy of Adobe Stock.

Wouldn’t it be nice if the caller ID was actually that accurate for every call? Image courtesy of Adobe Stock.

(Cross-posted from my other blog, Nonprofit Update, so you may refer your clients to an article that provides depth on how to avoid becoming victim of recent scams.)

The most frequent scam in 2016 was the phone calls saying “This is the IRS and if you don’t pay your past due taxes this instant we will send someone to your house to arrest you right now.”

There are many things wrong with those calls.

As a starter, your first contact with the IRS will never be by phone. You will instead get a letter explaining what the IRS thinks you messed up.

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Written by Jim Ulvog

January 9, 2017, 10:38 am at 10:38 am

Posted in Fraud, Other stuff

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Update on Panama Papers – 11/22

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Either there hasn’t been much going in the money laundering news or I’ve not paid enough attention. On the other hand, governmental investigations are run behind the scenes. Perhaps the regulators are working out of sight.

Here are a few articles I’ve noticed in the last few months.

7/28 – U.S. Prosecutors Probe ‘Panama Papers’ Law Firm’s Employees – Leaks say Department of Justice has opened an investigation of various staff in the D.C. office of Mossack Fonseca.

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Written by Jim Ulvog

November 22, 2016, 7:00 am at 7:00 am

Posted in Fraud, Other stuff

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Guess we might want to reallocate blame for that $5 billion trading loss at Societe Generale

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Sometimes it's complicated. Photo courtesy of Adobe Stock.

Sometimes it’s complicated. Photo courtesy of Adobe Stock.

One thing I’ve learned while being in leadership at my church is that a conflict that appears simple to outsiders is usually far more complicated and messy and ugly than it appears, with blame for a conflict sometimes belonging to the party that appears innocent.

I’m slowly catching on that maybe that idea sometimes applies to massive financial fiascos. (Yeah, yeah, I know. I usually catch on really slow.)

Who is at fault?

Back in January 2008 a trader, Jérôme Kerviel, engaged in €50B of unauthorized trades for Société Générale and hid his trades. That’s fifty billion euros. He admits to making fake entries to hide his admittedly unauthorized trades.

Unwinding the trades cost the bank €4.9B.

I recall at the time that the story line was he was a rogue, a scoundrel, etc., doing all this by himself, etc., single handedly pulling off a huge scam, etc, cleverly wending his way between those tight internal controls, etc.

Criminal sentence

Previously, Mr. Kerviel was tried and convicted on criminal charges. His initial sentence was five years, which was reduced to two years (I think it was 2 but maybe was 3).

He served five months in prison, according to the following article.

Wrongful termination

Well, multiple parts of the French judicial system are saying that allocating the blame is a bit more complicated.

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Written by Jim Ulvog

October 4, 2016, 8:00 am at 8:00 am

Posted in Fraud, Other stuff

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Yet another banking fiasco – Opening two million fake accounts to meet sales targets

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Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.

Wells Fargo Concord stagecoach. Notice the only suspension for running over rough roads is those leather straps under the passenger compartment. Those didn’t smooth out the rocks and bumps very much. April 2012 photo by James Ulvog.

Deep sigh. Another banking fiasco hit the papers yesterday. The Wall Street Journal reported Wells Fargo to Pay $185 Million Fine Over Account Openings.

The bank will pay a mere $185M to settle claims brought by OCC, CFPB (Consumer Finance Protection Bureau, the new creation of the Dodd-Frank legislation), and LA city attorney.

This scheme involved customer-facing employees opening fake bank accounts in the name of existing customers without the customer’s permission. Another variation is opening a fake account in the name of a nonexistent customer. Article says sometimes money would be transferred from a customer’s account into the new, fake account with occasional NSF fees because there wasn’t enough money in the legitimate account to cover legitimate checks.

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Written by Jim Ulvog

September 9, 2016, 8:30 am at 8:30 am

Posted in Accounting, Fraud

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Litigation cases that could possibly take down a Big 4 firm

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

If a judgment at trial were big enough, it could mean the end of a large firm. Writing on August 13th at Market Watch, Francine McKenna explains PwC faces 3 major trials that threaten its business.

That threaten its business phrase in the headline actually means could take down the entire firm.

There are three major cases, each with a serious enough impact, that an adverse ruling in any one could take out the firm. One is in court now, another expected next February, with the final one in court within a year.

Work with me as I try to process through the cases. Here is the thumbnail version.

Two lawsuits over one client

Taylor Bean & Whitaker Mortgage Corp allegedly generated massive amounts of fraudulent loans, a large portion of which were sold to Colonial Bancgroup.  Both companies failed during the financial crisis.

PwC audited Colonial Bank and allegedly did not discover the bad loans that their client, Colonial Bank, bought from PwC’s non-client Taylor Bean.

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Written by Jim Ulvog

August 15, 2016, 7:14 am at 7:14 am

A few convictions of traders. Several walk.

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Photo courtesy of Adobe Stock

Photo courtesy of Adobe Stock

An ongoing challenge for law enforcement in pursuing charges against bankers is actually getting convictions at trial. Even manipulating Libor is a tough sell to juries.

For those who wanted to see bunches of bankers in prison stripes, keep in mind there is that hurdle of persuading a jury a crime was committed. It may be difficult, but is possible to do.

7/4 – Bloomberg – Guilty Ex-Barclays Trio Ends Another Libor Chapter for London Read the rest of this entry »

Written by Jim Ulvog

July 7, 2016, 7:31 am at 7:31 am

Posted in Fraud, Other stuff

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Update on Panama Papers – 6/27

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Here are a few recent articles on the Panama Papers leak. Doesn’t seem to be a lot of new developments since my last post three weeks ago.

6/5 – New York Times – Panama Papers Show How Rich United States Clients Hid Millions Abroad – The NYT has finally gained access to the Panama Papers.

In their research they have only found 2,400 Americans who ran money through companies set up by Mossack Fonseca, none of them high-profile, and apparently none of them from the political world.

Article tells the tale visible from correspondence for a few people who had already built a private fortune and then decided to park money overseas.

The basic asset protection shell structure includes two entities: a for-profit into which money is moved from the US, and a Panamanian based foundation which receives a contribution from the first shell, thus protecting the money from litigation, taxation, or disclosure.

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Written by Jim Ulvog

June 27, 2016, 7:30 am at 7:30 am

Posted in Fraud, Other stuff

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Cheating on your Fitbit? After you stop laughing, think about this from the fraud perspective.

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One option to get superb results on your exercise tracker. Photo courtesy of Adobe Stock.

One option to create superb results on your exercise tracker. Photo courtesy of Adobe Stock.

Sometimes you just have to laugh.

On June 9, The Wall Street Journal asked Want to Cheat Your Fitbit? Try a Puppy or a Power Drill.

Those informal office challenges to get people to exercise often involve using a Fitbit device to track how far participants walk or run.

Apparently a few folks have decided to take some shortcuts.

One fellow attached his tracker to the blade of an electric saw. After leaving it run overnight he had recorded 57,000 steps the next morning.

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Written by Jim Ulvog

June 15, 2016, 8:07 am at 8:07 am

Societe Generale and their trading fiasco is back in the news. Oh, firing someone who lost $5 billion in unauthorized trades is a wrongful termination.

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

I can now add the French judicial system to the reeeeeally long list of things I just do not understand:

6/7 – Wall Street Journal – Court Finds Kerviel, Whose Bets Lost Bank Billions, Was Fired Unfairly – A French court awarded a fired banker US$511,000 for what we would call wrongful termination in the US.

Why was he fired? He merely cost the bank €4.9B back in 2008 after they unwound his unauthorized trades. That is only $5,530,000,000 at today’s exchange rate.

First, some background. You can check out the WSJ article on 10/6/10 for more details: Rogue French Trader Sentenced to 3 Years.

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Written by Jim Ulvog

June 10, 2016, 8:29 am at 8:29 am

Posted in Accounting, Fraud, Pondering

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More reactions to Panama Papers leak

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Here are a few more recent articles on the offshore banking industry that were of interest to me:

  • Proposed U.S. rules that won’t do much
  • Law firm at center of the leaks is closing some remote offices

5/10 – Salon – The Obama administration’s Panama Papers misfire: Why new rules to curtail global tax avoidance could actually make things worse – This article follows up on my previous comments that the proposals from the feds to counter offshore banking will do very little to stop the practices.

Article says the details of the proposals accomplish very little and could actually make things worse.

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Written by Jim Ulvog

June 3, 2016, 6:27 am at 6:27 am

Posted in Fraud, Other stuff

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Update on Panama Papers – 6/1

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Seems there was a lull in the interesting articles on Panama Papers. Here are few articles catching my eye to get caught up.

  • How to prepare for a media firestorm
  • Searchable database released
  • A mere 35 Americans are visible in the Panama Papers database

5/9 – Nelson Granados at Forbes – Are You Law-Abiding and in the Panama Papers Database? How to Handle a Public Relations Crisis – Article is written on how a company who is legally and ethically using offshore accounts can prepare for the negative media attention when their name is revealed.

As a general concept these ideas apply to every business and charity. Getting ready in advance of a media firestorm will improve your chances of surviving the onslaught.

Short version: Read the rest of this entry »

Written by Jim Ulvog

June 1, 2016, 6:30 am at 6:30 am

Posted in Fraud, Other stuff

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Update on Panama Papers – 5/9

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

The story is getting more confusing:

  • new revelation of an old technique to launder money,
  • US government actions to reduce laundering that look to me like they are just eyewash, and
  • small investors in a local real estate project appear to be investors working through the Panamanian system.

5/5 – Star-Telegram – Panama law firm used charities’ names as cloaks for clients – One of the schemes used in hiding money through offshore companies is setting up a foundation under Panamanian law. A private foundation can be set up which requires three directors, two of which must be publicly disclosed. Intended beneficiaries must be identified but could be changed before any funds disbursed.

The way this works is the two named individuals work for the law firm while the third undisclosed person is the person hiding money. The undisclosed person calls the shots with the two staff people from the law firm following instructions. The beneficiaries can be changed at any time.

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Written by Jim Ulvog

May 9, 2016, 6:19 am at 6:19 am

Posted in Fraud, Other stuff

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Update on Panama Papers: searchable data base, no more bearer stocks, reasons to park money offshore

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Panama will be shutting down the bearer share concept for documenting ownership of a company. ICIJ plans to release a huge database on shell companies. Also some reasons I would have an offshore company or maybe five if I was a billionaire or high official in a corrupt country.

If I was super rich, I’d park some money offshore

4/19 – Daily Beast – Obama in Saudi Arabia: What Do These Oil Sheiks Have to Hide? – Short answer: their contingency escape plans.

Article wonders why the rulers in an absolute monarchy would want to park money in anonymous offshore accounts. Article suggests there isn’t any need to do so since absolute rulers not only own the country but decide by themselves what is legal and illegal.

The reason can be found by looking around after the Arab Spring. It seems like in just a flash the governments of Tunisia, Libya, and Egypt collapsed. Even the current prime minister of Pakistan was ousted (he has since regained power) and had to flee for his life.

The longer answer for hiding money in offshore accounts is it that when things can change overnight, you need to have someplace to run and some money to work with. An escape plan.

And then there are the super rich people who made their money legitimately.

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Written by Jim Ulvog

April 27, 2016, 7:57 am at 7:57 am

Posted in Audits, Fraud, Other stuff, Pondering

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