Frank DiPascali, Bernie Madoff’s CFO Number-Maker-Upper is going to be charged in connection with some money gone missing. DiPascali has agreed to skip the grand jury and get down to business, according to Bloomberg, indicating that he might flip. DiPascali seems to be taking a cue from another pseudo-bean counter who’s only plausible defense is stupidity.
U.S. to File Charges Against DiPascali, Ex-Madoff CFO [Bloomberg]
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Detecting and Preventing Sex Fraud Isn’t All That Different From Detecting and Preventing Financial Fraud
Welcome to the latest edition of Accumulated Deprecation, Greg Kyte's monthly column. Go here to read more of Greg's posts.
You're a CPA which basically makes you a sex god; a wrathful sex god, because when people think about having sex with you, they tend to say things like, "god damn it."
The Latest Homebuyer Tax Credit Scam: Now with HUD!
That the First-time Homebuyers Credit is riddled with fraud is old news. Like all refundable credits, where the government writes you a check if the credit exceeds the tax shown on your return, it’s a magnet for grifters. What’s new is cross-agency efforts enable First-Time Homebuyer Credit fraud, with video.
James O’Keefe, notorious for donning pimpwear and taping ACORN officials happily facilitating tax fraud and child prostitution, and then for getting arrested in Louisiana, took his act to Detroit and Chicago offices of the U.S. Department of Housing and Urban Development posing as a tax credit scammer. One conversation went like this:
The law says that the tax credit maxes out at $8,000 for an $80,000 home. On the tape, O’Keefe asked a staffer, “What if I bought a place for $50,000, but the seller and I agreed to write down $80,000 as the purchase price?”
“Flip it any way you want,” the staffer replied.
What if the place is worth much less — like only $6,000?
“Yup, you can do that.”
This version of the Homebuyer Credit scam can get around the checks the IRS has in place to prevent fraud. The primary IRS anti-fraud check for the homebuyer credit is a requirement that a copy of an HUD-1 form or settlement statement be attached to the 1040 claiming the credit. If the buyer and seller collude to dummy up a HUD-1 form, the “buyer” is reasonably likely to get the credit as long as there isn’t some other item on the return that flags it – such as an address that’s different from the one for the “home” on the settlement statement.
The scammers wouldn’t be out of the woods by any means. The IRS might well catch up with the scammers. But then again, they might not, or if they did, the money could be long gone. For someone living in in a Detroit neighborhood where houses sell for as little as $1,000, splitting $8,000 with a scammer might be one of the less-risky opportunities at hand.
Man with a ‘Passion’ for Charter Buses Managed to Dupe Moss Adams, Deloitte in Washington’s Largest Ponzi Scheme
Allegedly! Admittedly, we’re a little behind on this one but you know how it is. Anyway, your Ponzi scheme du jour comes by way of the great Northwest, where Frederick Darren Berg, who seems to have some sort of charter bus fetish, is being prosecuted for orchestrating the largest Ponzi scheme in Washington.
When he was at the University of Oregon in the 80s, Berg allegedly helped himself to his fraternity’s cash to fund a “charter bus venture” and then pleaded guilty to a check-kiting scheme with another bus company a few years later. After those nickel and dime failures, Fred was done messing and decided to really do this:
The 48-year-old founder and chief executive officer of Meridian Group is accused of defrauding hundreds of more than $100 million invested in his Seattle company’s mortgage funds between 2003 and 2010.
Prosecutors allege Berg spent tens of millions on a ritzy lifestyle, including a posh Mercer Island mansion, two yachts and two jets.
But investigators say Berg diverted a bigger chunk, estimated at $45 million, to create a luxury bus line that served tour groups and sports teams, including the Seahawks and the Oregon Ducks.
And we all know what happened to mortgage funds, don’t we? Okay, then. So your next question probably is, “how did the auditors miss this one?” Well!
Berg used some simple stratagems to mislead auditors at Moss Adams, a large Seattle-based firm, which produced audits for a trio of Meridian funds for three years.
The standard procedure is to send out confirmation letters to a random sample of mortgage borrowers and compare what they say they’ve paid with what the lender’s records say.
But Moss Adams didn’t notice most of the confirmations it sent out were going to post-office boxes and coming back with the same handwriting, said [bankruptcy trustee Mark] Calvert.
Berg had rented more than 20 P.O. boxes and had the mail forwarded to another address in Seattle. He was replying to the auditors’ queries himself, according to the indictment.
[Cringe] Oops. To be fair, auditors can’t be expected to be hand-writing experts…can they? Mr. Calvert seems to think so and told the Seattle Times that he plans on suing Moss Adams and Deloitte for their roles. Oh, right! How do they fit in? To wit:
Berg also hired Deloitte Financial Advisory Services to do a “valuation report” on funds V through VII, meant just for Meridian management. Meridian, however, used it to reassure investors, touting Deloitte’s conclusion “the sample mortgage pool appears to be of higher quality and better performance” than comparable loan portfolios.
But Calvert said Deloitte’s supposedly random sampling “was not completed as outlined” in its agreement with Meridian. He declined to be more specific.
Moss Adams and Deloitte would not comment on their work for Meridian.
Financial empire, luxurious lifestyle were built on a mirage [ST]