Another chapter in the Tragedy of Fraud

Prison.  Bankruptcy.  Publicity. Civil litigation.

Such are the wages of fraud.

It is such a tragedy.  Such a waste.

The mayor of a neighboring city provides the next example of the devastation from fraud.

I’ve discussed this case in my other blog, Attestation Update, over the last year from the perspective of an auditor. See my update for developments this week:  Guilty plea in corruption trial mentioned a year ago.

Here is my short version of the government’s accusation, based on reports in the local paper, mostly this article from the Daily Bulletin.

My guest post at re:The Auditors on accounting for the Olympus fraud

Francine McKenna asked me to combine my short comments on the Olympus fraud into a guest post on her blog.

I’m quite happy to announce my revised, expanded, and edited discussion is available. You can read the full thing at How Do You Hide A Multibillion Dollar Loss? Accounting For The Olympus Fraud

Many thanks to Francine for the wonderful opportunity to speak to a big audience.

If you suspect fraud in your ministry, get help early

If you come across some things that make you think there are some shenanigans going on, your first reaction will be to look at it some more. 

While you will obviously want to look at something so you can understand it, don’t get too far into an investigation.  If you think you’re looking at actual fraud, you need help.  Someone trained in investigations.

Scam watch – you don’t have to pay someone a bunch of money to file your SOI-100

Previously discussed a scam where someone is sending letters saying businesses need to pay $370 to file the renewal of a fictitious business name license.  Those are also called a doing-business-as name.

You also don’t have to pay anyone to file a Statement of Information (SOI-100) with the California Secretary of State.  That is the form that nonprofit organizations need to file every two years.  I previously mentioned that form in this post.

Scam watch – you don’t have to pay someone $370 to help renew your fictitious business name

If you want to conduct your ministry or business using anything other than your legal name, you have to get a fictitious business name.  This is also called a DBA, or “doing business as” name.

Let’s say you are on staff at Southside Community Church and are starting a major summer program as an outreach to the community.  This would be a big, ongoing project. If you’re going to be collecting money and trying to reach out beyond your local congregation, you just might decide to run the program under the name Southside Summer Swim.  If that is the case, you need to file for a fictitious business name with the county clerk’s office.

Scam watch – the IRS will not send a fax asking for your bank account info

William Vaughan Company CPAs, reports one of their clients got a fax that seemed to be from the IRS asking for bank account information.  See their post and a copy of the fax at: Recent IRS Scam Requests Bank Account Information.

How can you tell this is a scam?  That is not how the IRS does things.  Very simply, it fails the smell test.

Action plan to prevent fraud in local church

Previously discussed Weeds in the Garden, a superb book on fraud prevention for the local church.  The author, Verne Hargrave, has written a superb five-page summary in the Spring 2011 NACBA Ledger.

Main points in the Ten Ingredients of Effective Fraud Prevention are:

Tragedy of Fraud – part 5 – becoming fodder for blog posts

One of the ripple effects when a fraud incident hits the papers is that you become fodder for snide comments in the blogosphere.  I suppose the same thing would apply to any incident that hits the newspapers.

How could an auditor pick up any red flags to this corruption case?

I’m writing a series of posts on my other blog about a corruption indictment of officials in the city of Upland.  The focus of that series of posts is a case study for CPAs based on a live, developing situation.  Since the audience will be CPAs, I will not cross-post those discussions to this blog.  If you’re interested, the posts start here and continue here and here.

Crooks cleaning out bank accounts of small businesses

Another article describing how the bad guys are using ‘phishing’ emails to plant key-stroke loggers on unsuspecting small business computers and thus gaining bank account log ins.  Eventually crooks clean out a lot of money before getting detected or the account is drained.  Frequently, the banks can walk away from any liability since the log-in data appeared to be legit and the problem originated on the customers computer.  Wall Street Journal article here.

Preventive techniques suggested in article:

Posts on Tragedy of Fraud combined into a page

The series of posts on the Tragedy of Fraud have been combined into a separate page, found at the top of this blog.  You can read them in chronological order on the page above.

Tragedy of Fraud – part 4 – possible civil litigation

Previous post discussed the sentencing in a fraud case I have been following.  Jail for 270 days, $25,000 restitution, and $3,915 of fines and fees.  The ripple effects of the fraud have not ended.  The next chapter might be in the civil law area.

The tragedy of fraud – part 3 – the sentencing

On December 20, 2010, the judge pronounced sentence in a case I’ve been following.  Why go into detail?  To continue the discussion of the massive devastation of fraud.

The Tragedy of Fraud – part 2

Previously discussed the tragedy of fraud.  The ripple effects of the massive Madoff fraud have been spreading.  The ripples include a lost life this past week. 

Organizations can work to break down the fraud triangle

Having discussed the fraud triangle, you may wonder if there is anything you can do in your organization to stop the three sides of the fraud triangle from coming together and igniting into a disaster.  Well, you can not absolutely prevent fraud.  However, you can work to minimize the risk on each side of the triangle and as a result greatly reduce the danger of fraud.  Some of the things you can do as an organization are discussed here, here, and here.