Skillz, who has been in prison since 2006, had his 24-year sentence reduced today by 10 years by virtue of a "court-ordered reduction and a separate agreement with prosecutors." This has been an ongoing battle ever since JS appealed his sentence and it was vacated in 2009 because "a sentencing guideline was improperly applied." Persistence pays off! [AP, Earlier, Earlier]
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(UPDATE) Fooling Auditors Is So Easy, a Caveman Could Do It
- Caleb Newquist
- January 21, 2010
In the spirit of O.J. Simpson, Tracy Coenen explains today, that if Sue Sachdeva stole $31 million and spent most of it on some high-end threads and then sold the crap she didn’t want, it would’ve been a snap.
We’re not talking Enron type stuff here, just making off with cash:
All it takes are three steps to make this fraud nearly undetectable in a company in which the other members of the executive team aren’t paying attention. (And don’t worry, dear readers, that I may be giving away any secrets to committing fraud and covering it up. Any serious fraudster already knows these three things.)
1. Keep the fraud off the balance sheet.
2. Keep all transactions below the scope of testing by the auditors.
3. Don’t commit fraud during the last month of the fiscal year and the first month of the following fiscal year.
Can it really be this simple?
Here’s the quick and dirty:
Point 1 – Tracy notes that 80% of audit procedures focus on the balance sheet so if Suze was slamming all the bogus transactions amongst 4 or 5 income statement expense lines, no one would get wise to it.
Point 2 – If she did it, Suze probably knew what GT’s scope was (it’s supposed to be super-secret). She could plan the amount of her transactions to fall under this scope every time.
Point 3 – Auditors probably spent most of their time looking at bank statements for the last month of the fiscal year and the first month of the subsequent fiscal year. The rest of them don’t get much attention.
So there you have it. Throw in the incestuous management team, auditors that may be trying to get on each other and you’ve got a slam dunk.
UPDATE 7:38 pm: We got to wondering if Tracy’s statement “Any serious fraudster already knows these three things” were true, so we asked one. Crazy Eddie CFO, Sam Antar indulged us:
[Tracy] is correct. The fraudster always has the initiative because they are judgment oriented in their approach to crime, while auditors are process oriented in their approach to audits. In other words, fraudsters know how to think out of the box to solve problems and achieve their goals, while auditors rely too much on process and procedure to accomplish their missions. In the criminal’s world, judgment is more powerful than process.
We’ll leave it there (that’s right CNN).
Koss Corp.: Commit the fraud and cover it up [Fraud Files Blog]
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KPMG Survey: India is a Hotbed for Fraud Due to Competition, Diminishing Ethical Values
- Caleb Newquist
- April 6, 2010
In this morning’s Roundup, we told you about the ICAI belly-aching about the Big 4 circumventing the rules in India to the point of extreme annoyance but technically not breaking said rules.
Strangely enough, BusinessWeek has a story today that cites a KPMG report that found that fraud is on the rise in India due not to shifty international accounting cooperatives but rather to, among other things, the pressure of increased competition in the last two years.
As you might expect, fraud due to financial reporting is the biggest problem. The report cited, “weak rules and the inability of authorities to enforce regulation.” Other things mentioned as opportunities for chicanery:
• “Volatile economic conditions”
• “Increasing business and technological complexities”
So does that mean opportunities for fraud are ubiquitous? Do the respondents really believe that India is the only place where this is happening?
And the attitude/lack of self-control part of your triangle:
• “Diminishing ethical values”
• “Failure on part of managers to act against deviations from established policies and processes”
Diminishing ethical values? Deviating from established policies? Again, the respondents can’t think this is unique to India so shall we just assume that it’s more widespread there?
Some other contributing factors cited were “executives vying for higher pay, weak internal controls and increasing competition…for market share.” But wait! KPMG’s survey said that there were “’encouraging signs’ that mechanisms for detection of fraud through internal audits had improved.” That’s nice despite the fact that sounds similar to something that Overstock management said in their earnings call yesterday.
If you have “weak rules” accompanied by spineless bureaucrats that won’t even enforce those rules, of course you’re going to have some problems. ICAI seemingly wants to blame everything on the Big 4 probably because that’s the going trend these days. We’re not saying you can’t throw some blame towards PwC for missing the phantom $1 billion at Satyam but if your financial reporting regulatory infrastructure is akin to the something out of Deadwood, circa 19th Century, then maybe you should be more consider making some fundamental changes.
Fraud Rises in India as Competition Increases, KPMG Study Says [Bloomberg BusinessWeek]
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Ex-Madoff Accountant Got an Early Start on ‘Clearing His Good Name’
- Caleb Newquist
- September 26, 2013
When you're known as "the guy Bernie told us could help with our tax returns," […]