Common Misconceptions about Fraud in the Family Business

Posting by Jacqueline Thompson
No family-owned business likes to think that their trusted employees would steal from the business –certainly not their family members. Unfortunately, family businesses aren’t exempt from fraud, and assuming that your company is safe from embezzlement, malfeasance, or any other fraudulent act can put your business at grave risk.

In my years of accounting work, here are the most common misconceptions I’ve encountered regarding family business fraud:

Fraud Doesn’t Happen in Family Businesses. Any business is vulnerable to […]

Missing Pensioners

Larry Beebe, CPA

One of the Department of Labor’s “hot buttons” lately has been making certain that defined benefit pension plans do everything they can to reach retired participants who are required to start taking distributions.

Lois Gleason, at the International Foundation of Employee Benefit Plans, has written an excellent blog on how to send the proposal notices to that retired participant.

DOL Investigating Plans that Fail to Locate Terminated Vested Participants

Larry Beebe, CPA

The Department of Labor (DOL) recently announced a new initiative to investigate the adequacy of Defined Benefit Plans procedures to locate and pay out benefits to terminated vested participants. DOL believed that many Plans do not have adequate systems to identify and pay terminated vested participants when they reach either the Plan’s normal retirement age or the IRS required minimum distribution age of 70 ½.

The failure to take action to identify, locate and pay terminated vested participants […]

Supreme Court Win For Self-Insured Health Plans

Larry Beebe, CPA

On March 4, the Supreme Court ruled self-insured health plans do not have to comply with a Vermont law that required them to submit to the state “information relative to health care costs, prices, quality, utilization, or resources required.” The third party administration of a self-insured health plan was issued a subpoena by Vermont to gain this information and threatened severe penalties for non-compliance. The plan refused to provide the information and argued the reporting requirements were […]


Michael Raiken, CPA

According to the IRS, tax scammers are getting more aggressive this tax season with evolving tax schemes. This time, they are calling unsuspecting people claiming that they have the person’s 2015 tax return and wish to verify a few details in order to process the return. The scammers are attempting to get personal information such as Social Security Numbers or personal financial information, such as bank numbers and credit cards.

This scheme is a continuation of past schemes […]

Larry’s Laws of Larceny- Law 20: Fraud in a Health Plan is More Common Than you Think

Larry Beebe, CPA

Health care spending in the United States is massive. In 2014, health care spending in this country was estimated at $2.7 trillion or approximately 17% of Gross National Product. Fraud is estimates to consume $272 billion, which would be 10% of health care providers. Health care fraud is committed by service providers, insurance companies, and my patients.

I teach at the New Trustees Institute of the International Foundation. I ask the trustees, by a show of hands, how […]

Larry’s Laws of Larceny- Law 19: Beware of the Long Term Trusted Employee who Doesn’t Take Vacations

Larry Beebe, CPA

As stated earlier, excellent internal control systems help prevent fraud. One essential internal control concept is separation of duties, no one in the organization should have custody of assets and also be responsible for the accounting for those assets. This concept is likely to be violated when the organization has a long term trusted employee. The rationale is that the person can be trusted because he or she has been there for a long period and therefore […]

Larry’s Laws of Larceny- Law 17: The Confusing Transaction is Often the Fraudulent Transaction

Larry Beebe, CPA

Accounting transactions can be very complex. For example, the use of derivatives in an investment can tremendously increase the risk in what appears to be a conservative asset purchase. Generally accepted accounting principles often allow transaction to be recorded in an entity’s accounting records in many different ways. Some of these ways are conservative, and some employ very liberal accounting. Unfortunately, these transactions can be manipulated in a fraudulent manner to make an entity appear healthier than […]

Larry’s Laws of Larceny- Law 16: The Smart Crook Makes the Abnormal Look Normal

Larry Beebe, CPA

The smart crook can work wonders with a high quality photocopier. Checks, deeds, and other documents can be created that appear to be genuine, but are as phony as a $3 bill.

Barry Mikow started a carpet cleaning business, ZZZZ Best, while in high school. He soon branched into the “insurance restoration business” to restore buildings damaged by natural disasters. The “insurance restoration business” didn’t exist. He and a partner forged all of the documents to create the […]

Larry’s Laws of Larceny- Law 15: You can Drive a Mack Truck Through an Internal Control Hole

Larry Beebe, CPA

An organization must have excellent internal control systems to insure that its accounting records and financial statements are complete and accurate. An employee benefit plan has many internal control systems including cash receipts, cash disbursements, benefit payments, payroll and participant data. A person working at the plan who wants to steal only has to find a small flaw in the internal control system to steal. In no time, that small flaw in the internal control system becomes […]