SEC Alleges Multi-million Dollar Fraud in Virginia

Lawrence R. Beebe, CPA, Principal

While Bernard Madoff dominates the financial news with his conviction for cheating investors out of billions of dollars by operating a Ponzi scheme, the SEC continues to investigate lesser known advisors who may have mirrored Madoff on a smaller scale.  The SEC recently filed charges against John M. Donnelly of Charlottsville, Virginia, accusing him of running a Ponzi scheme that defrauded as many as 31 investors out of $11 million.  The SEC alleges that Donnelly […]

March 16, 2009 Accounting, Audit, Forensic Accounting Read more...

Former SEC Chief Accountant Credits Auditors

John Merchant, CPA, CFE

CFO.com reports that Lynn Turner, former chief accountant of the Securities and Exchange Commission, credited financial statement auditors for contributing to the general decline in major financial statement frauds since the collapse of Enron and WorldCom.  Turner noted that auditors have stood behind fair value and tried to “get the numbers right”.  At the same time he criticized the Financial Accounting Standards Board for doing an abysmal job in standards setting, particularly with regard to rules […]

March 16, 2009 Accounting, Audit, Forensic Accounting Read more...

FINRA Provides Online Anti-Fraud Tools

John Merchant, CPA

The Financial Industry Regulatory Authority (FINRA), the largest independent regulator for securities firms doing business in the United States, is providing two new online tools for investors.  The Scam Meter helps investors determine whether a potential investment may be too good to be true.  The Risk Meter helps investors determine whether they share behavioral traits with people who have been found susceptible to fraud.  FINRA has also issued an alert called Avoiding Investment Schemes to provide information […]

March 2, 2009 Accounting, Forensic Accounting Read more...

Why are Certain Frauds Called Ponzi Schemes?

John Merchant, CPA, CFE

As you read about unscrupulous people defrauding investors through pyramid schemes, have you ever wondered why they are called Ponzi schemes?  The answer is that over 80 years ago a man named Charles Ponzi created a multi-million dollar pyramid scheme that became so famous that it has forever linked his name to this type of fraud.  CNN has created an interesting article (follow the link below) that gives readers a look into the life of the man […]

February 16, 2009 Accounting, Audit, Forensic Accounting Read more...

FBI Warns of Jury Service Fraud Scheme

John Merchant, CPA, CFE

The Federal Bureau of Investigation warns that criminals are conducting a unique telephone scam by posing as employees of the U.S. court system.  They contact individuals by telephone and inform them that they have been selected for jury duty in a U.S. court.  They then ask the person to verify their name and social security number and later proceed to ask for credit card information.  If skeptical individuals decline to provide information, the caller threatens them […]

February 16, 2009 Accounting, Forensic Accounting Read more...

Common Characteristics of Ponzi Fraud Schemes

John Merchant, CPA, CFE

According to Reuters, as investors continue to consider the magnitude and effects of Bernard Madoff’s alleged Ponzi scheme, the SEC reports that the number of such schemes is not on the rise, but their magnitude is.  The SEC also reports that successful Ponzi schemes have certain factors in common.  The creator of the scheme is generally very charismatic, their investments tend to appear very successful, although specific information about them is hard to obtain, and the […]

February 9, 2009 Accounting, Forensic Accounting Read more...

1996 Fraud Ruling Overruled in the 11TH Circuit

John Merchant, CPA, CFE

A 1996 court ruling stated that in order for prosecutors to achieve conviction of a defendant accused of mail fraud, they must show that a reasonably cautious person would have been deceived by the defendant’s scheme.  The court in the 1996 ruling stated that the ruling was consistent with the mail fraud statute that was enacted in 1872. Prosecutors complained that this ruling had the unintended effect of making it nearly impossible to prosecute for a […]

February 9, 2009 Accounting, Forensic Accounting Read more...

Bond Beebe Principal Receives Master of Science in Forensic Studies

Natalie Burchfiel

BETHESDA, Maryland (February 6, 2009) – Bond Beebe, a certified public accounting and advisory firm with offices in Bethesda, Maryland and Alexandria, Virginia, announced today that John A. Merchant, a Principal with the firm, has recently received his Master of Science degree in Forensic Studies from Stevenson University. Individuals with a Forensic Studies degree are able to help corporations, government agencies, and other organizations with fraud prevention and fraud investigation. They can also assist businesses with merger and […]

February 6, 2009 Accounting, Forensic Accounting Read more...

Management Fund Sues Auditors for Negligence for Not Discovering Fraud

John Merchant, CPA, CFE

Maxam Capital Management LLC, an investment fund, has filed suit against its auditors, McGladrey& Pullen, LLP and Goldstein GolubKesssler LLP for professional negligence.  Maxam apparently invested all of its assets with Bernard Madoff and alleges that its auditors were negligent in accepting documents created by Madoff rather than seeking independent confirmation of holdings and trades when performing the audit of Maxam’s financial statements.

February 4, 2009 Accounting, Audit, Forensic Accounting Read more...

Florida Fund Manager Faces Multiple Fraud Charges

John Merchant, CPA,  CFE

In a case similar to that of Bernard Madoff, Reuters reports that Arthur Nadel, a Florida hedge fund manager has been arrested and will be transported to New York to face charges of both securities fraud and wire fraud.  Investigators allege that Nadel who disappeared on January 14th, but later surrendered to the FBI, holds only about $1 million of a reported $300 million.   At age 76, Nadel potentially faces 40 years in prison and millions […]

February 4, 2009 Accounting, Audit, Forensic Accounting Read more...