Owner of Money Store in Maryland Convicted of Fraud

John Merchant, CPA, CFE

The Federal Bureau of Investigation reports that Joy Jackson of Greenbelt, Maryland has been sentenced to more than 12 years in prison and ordered to make restitution for nearly $17 million in losses created by a fraudulent scheme that she ran through her company, Metropolitan Money Store of Lanham, Maryland.  According to the FBI report, Jackson took advantage of the current economic downturn to prey on desperate homeowners who had significant amounts of equity in their […]

Where is Fraud Likely? – Part 1: Almost Anywhere

Lawrence R. Beebe, CPA

Where is fraud likely to occur in an entity?  The answer is that fraud can occur anywhere in an organization.  All it takes is someone to determine how the internal controls in the organizations can be circumvented and how to undertake the fraudulent conduct (usually the theft of assets).

For internal control to function properly there needs to be separation of the responsibility for custodianship of the assets and the record keeping for those assets.  Many small […]

Madoff’s Auditor Pleads Guilty on Multiple Charges

John Merchant, CPA, CFE

David Friehling, CPA has pled guilty to various charges stemming from his service as independent auditor for Bernard Madoff’s investment firm.  Friehling, who served as the Madoff firm’s auditor for nearly 18 years, issued audit reports indicating that he had performed his work in accordance with generally accepted auditing standards. He now admits that he did not conduct appropriate audits. He acknowledges that the primary flaw in his procedures was that he accepted assertions by Madoff […]

Supreme Court to Consider Honest Services Convictions

John Merchant, CPA, CFE

A federal fraud statute known as the “honest services” statute, enacted in 1988, establishes that it is a crime for officers of a corporation to cause losses for shareholders by depriving them of their right to honest services by those officers.  Defense attorneys have argued that prosecutors have obtained convictions under this statute because it is too vague and, therefore, easy to charge and hard to defend.

Earlier this year, the former CEO of Enron, Jeffrey Skilling, […]

Judge Jed Rakoff – Protector of the People?

John Merchant, CPA, CFE

In August 2009, the SEC sued Bank of America, claiming that Bank management had lied to its shareholders in order to complete a $50 billion acquisition of Merrill Lynch, an investment company that was nearly bankrupt, while secretly paying several billion dollars in bonuses to Merrill Lynch executives.  In short, the Commission contended that the shareholders of Bank of America were the victims of fraud. The SEC action appeared to be an effort to enforce the […]

OFF WITH THEIR HEADS! Does White Collar Crime Warrant Execution?

Lawrence R. Beebe, CPA, Principal

Even though Al Capone was known to have perpetrated many heinous, violent crimes, in addition to what we today would consider white collar crimes, he was finally nabbed by a forensic accountant , and sent to prison (for years, but not for the rest of his life).  But in some parts of the world, those in power who bilk others out of their money may be incarcerated for life, or even executed.

Think Twice Before Any […]

Financial Law and Order: Why we need Forensic Accounting witnesses

Michael D. Rockefeller, CPA, Principal

It’s hard to picture the dramatic closing court scene of Law & Order being centered around an accountant, but as their stories are ripped from the headlines, this is more likely to appear in an episode a la Bernie Madoff’sPonzi scheme or the like. The specialty area of forensic accounting has opened up the scope of accounting, and features more intriguing services and characteristics beyond accounting and auditing; requiring skills and tools utilizing quantitative methods, […]

Common Misconceptions about the Prevention of Occupational Fraud – Part 2

John Merchant,  CPA

As we discussed in Part 1 of this series of articles, when management of an organization relies solely on an annual audit of its financial statements by an independent CPA firm as its protection against occupational fraud, the organization is probably not nearly as well protected as management believes.  While an annual audit is a good idea, it must be supplemented by other fraud prevention policies and procedures.  One of the best steps management can take is […]