Property Tax Claims Based on Assessor Corruption Rejected
The New York State Supreme Courr Appelet Division on October 24, 2006 dismissed assessor corruption for lack of standing, Systematic underassessment of properties belonging to bribe-paying owners resulted in the over-assessmen of all remaining properties.However the taxpayers failed to show that the corruption caused them special damage different in kind and degree from the communiy in general, In addition, the taxpayers did no have claims regarding a violaton of their rights to due process and equal protection.
Nation's Largerst Criminal Tax Case EverNation's Largerst Criminal Tax Case Ever
Wayne Evans, a telecommunications entrapreneur, pleaded guilty on September 8, 2006 to tax evasiona and fraud. He evaded 200 milliaon in federal and local taxes using offshore corporations and bank accounts to hide income from tax collectors.
COURT bARS sOUTHERN CAIFORNIA MAN FROM TAX RETURN PREPERATION
The U.S. Department of Justice through a press release dated July 19, 2006 announced that the Justice Department has permanetly bared Charles T. Kizer of Riverdale, California from acting as a federal tax preparer. The government suit aggelleged that Kizer and two others prepared over 8000 returns undeestating thieir customers tax liablilities by an average of $16,000 per return. Since 2001 the Justice Department has obtained injuctions against over more that 190 return preparers and tax fraud preparers.
ACFE REport to the Nation-2006
5 Percent of U.S Domestic Product is lost to fraud; the estimate of annual losses is $652 Million dollars. Three main catagories account for the losses; Asset misapprpriation. Corrruption and Fraudulant financel statements. Main causes of detection in decending order are: Tips, by accident, Internal Audit, Internal Controls, External Audit, and Police Notification. Joe Wells, founder of the Association referred to th dichotomy of fraud and trust. "Trust is and essential element of business-and an essential element of fraud. Absent trust, it is impossible to conduct business."
Indictments of Trial Lawyeers
Bllomberg.com reported on May 22, 2006 that the law firm of Milberg & Schulman and two of its senior partners were indicted by a federal grand jury for paying illegal kickbacks while winning more than $45 Billion for its clients.Bllomberg points out that Judge Janis Jack in Corpus Chiste Texas , studied the explosion of a silcosis claims before her court and uncovered a highly entraqpreneurial plaintiff generating machine that boggled imagination.Commenting she observed "it is apparent that truth and justice had very little to do with these diagnoses manufactured for money."
GET YOUR FRAUD GUARD UP
On May 5, 2006, Invvestors Business Daily advised " the biggest mistake companies make is to think that it cannot happen to them." "A typical company loses 6 % of annual revenues to fraud according to the Association fo Certified Fraud Examiners. To llimit fraud the article advised to create a perception of detection, set up anomynous reporting hot lines, and to be aware of risk factors. "Everybody who got defrauded know their employees" according to association general counsel John Warren."They wouldn't do anything like that."
Tax Cheating has Gone Up
On February 15, 2006, The New York Times reported that two separate studies found that Amereican taxpayers had significantly underpaid their taxes.The Comnmerce Department concluded that that more than one trillion dollars in income was not reported on 2003 returns.The Internal Revenue Service concluded that taxes in the amount of $345 billion were unpaid as a result of unreported income and improper deductions The I.R.S. pointed to small businesses, investors, and farmers
No Derivitaive Action under Sarbanes Oxley Act
After the Enron debacle Congress with the purpose of getting both corporate Amereica and the accounting profession to heal, passed Sarbanes Oxley. tHE Act contains provisions for Investigations and diciplinary by auditors, corporate respsibility for financial rep[ores and much more.
A recent case however drew the line for shareholder derivitive actions. Tthe Third Circuit United States District Court opined on September 27, 2005 found that "Congress did not intend to create an implied cause of action in Section 304of Sarbanes Oxley." The shareholder suit wasdismissed without pedjudice.
The Web sute of the New York State Society Of CPAs reported on May 31, 2005 "Ex-School Official Pleads Not Guilty."
John Jackson, the former Minneola N.Y. schoold business official who was released without bail, got a new lawn sprinkler system, a new brick patio and a new driveway form district vendors by submitting false or inflated invoices to the district to cover the work on his home. He is also accused of ordering groundskeepers to use school money to buy landscapping and shrubs for his home and then having that staff build him the fish pond and perform chores such as staining the patio furniture, cleaning his garage and even hanging holiday light displays; His court date is June 7, 2005. We will keep you advised.
Anatomy of a Scandel-The Rosylyn Union Free School District
The Office of the New York State Controller has concluded an audit of the School District, The report concludes that more than $11 million of District funds had been used for personal expenses naming three individuals. "The apparent misappropriation of government funds is shocking." Both the School Board and the ourside CPA auditors were chastised for "failure to take their resposibilities seriously." The report is being referred to th Nassau County District Attorney for criminal prosicution "where appropriate.
Three Concurrrent New York City Trials
WorldCom, Tyco, and HealthSouth spotlight accounting scandal and greed. At WorldCom, accountants were told to create $700 million dollars of non-existant assets per Quarter in 2001 as well as covering up $800 million in expenses.The Tyco Board of Directors Did not approve milllions of dollars in loan forgiveness to former top executives. Accountants at HealhSouth were told to inflate earnings to meet Wall Street expectations. In mid February 2005 the trials are concurrent In three court rooms in New York City.
The Insurance Hall of Shame
The Coalition Against Insurance Fraud inducted eight of the most egregious actors for exceptionally large, brazen, or plain stupin cons for the past year. The purpose is to call attention to the $80-billion annual insurance scams.
Isabell Parker milked insurures for $500,000 with fake falls in 50 states. Don McAuliffe torched his own house while vacationing in the Virgin Islands. Beatrice Kaufman exploited the 9-11 tradgedy by with false claims that the events had damaged her luxurious $5-million dollar penthouse. (renovations were already on the way.) Rev. Gerald Rayborn burned down his own church in an attemt to collect $800,000, Emile Moreau left his partner to die in an attempt to burn apartment in Jamaica NY.( the partner survived to testify against Moreau. Lyn Tuner killed her policeman-husband with by slhis food in an attemot to collect on his life-insurance policy. A Buufalo NY dentist Tejbir Oberoi yanked perfectly healthy molors, performed unneeded root canals and botched surgeries to hike insurance billings.John Hyde sold fake health insurance policies to thousands of small businesses around the United States. Tradgedy followipping antifreeze into ed "insured trauma patients.
Price Waterhouse White Paper
This international accounting firm has selected "Economic Crime: "Beyond the Financial Growth" as one of their best articles of 2004.
Highlites of the paper are as follows. "The nature of the Crime_ Companies that fall victim to economic crime often suffer damage that is far more severe than direct financial loss. The blackening of and invaluable rreputatin and a carefullyu bulilt brand image, as well. as the undermining of emplyee morale, cna be crippling. Economic crime or fraud is sometimes -and mistakenly-seen as a "victomless' crime especially in larger companies.
Low-profile , long time eployees who quietly go about their business rarely making demands or creating fiction-are usually the ones most likely to steal from the conpany.Only 32% of fraud was actually discovered-and then only by accident.
People in an organization pick up quickly on how the CEO and other senior executives deal with individuals and situration that man not conform to the ehical code.
Coincidence and luck play a greater role in exposing fraud thad do conventional rold in exposing fraud than do conventional risk management systems.
Once a company has been the victim of major economic crime, it quickly becomes the focus of lawyers, regulators, and activists of every stripe and variety.
Fraud _Phantom_Crashes
California Insurance Commissioner John Garamendi announced arrests (November 2004) in a large "paper collision" insurance fraud ring. The scam involvedd luxury and new veh8icles which were insured multiple times with various insurance companies. Vehicles were damaged intentionally and photographed so that claims could be repeatedly submitted for accidents that never occurred. Body shops were used to facilitate the scheme and used repeatedly. A 1999 Lexus, with the same damage. was used in 28 claims over a 20 month period.Approximately $2 million was paid out by insurance companies for accidents that never occured.
Fraud at Small Business Levels
The PORTLAND BUSINESS JOURNAL, in an article written by Tom Sulewski, points out that "Small businesses aren't immune to crime."
Most likely methods include:
Skimming money from unreported sales or collections
Billings from fraudulant bendors
Issuing fictious refunds
Warning Signs
Intergrity stems from the top; Check www.etix.org
Epilogue to All is Not Well in Paridise
Audits, audits, & more audits. Locking the door after the horse is stolen? NYS comptroller Alan Hevesi has annouced in-depth audits of four other school districts and adminsitrative review of another 15. Parents thoughout New
All is Not Well In Paridise
Rosylin, Long Island, a wealthy suburb of New York City has a school district where 98% of students enter college. Per pupil cost has been $20, 385.00, the hightest on Long Island. School budgets were always approved by voters who placed a high value on education and high SAT Scores. The volunteer school board plaiced trust in internal auditors, external auditors, district treadurers, and audit committes to see that the large budget was spent for quality education.
Several weeks ago, Pamela FC Gluckin, a senior adminsitrator was charged with stealing over $1 million from the school funds. Ms. Gluckin allegedly used the funds to finance four homes, luxury automobiles, lmousine services and gourmet restaurants.. Currently under review are $8 Million of bills . There are indicia of corruption and collusion. Ms Gluckin was able to by-pass the all existing fiscal controls. For more as to these Capers, check the NEW YORK TIMES of June 27, 2004.
Do You Have a Job for and Ex-Con?
Who is there better to teach your emplyees than the person who "has been there, done that?" The media is continuous with it's coverage of high level white collar crime.
Now persons such as Barry Minkow, ZZZZ Best Carpet Cleaning scam, Daniel Bubalo a former CEO at Omni International Trading, Walt Pavlo. a former senior manager at MCI Communications are on the lecture curcuit. Their presentations deal with the temptations and pressures, procedures used to commit frauds, and the quintessentials of the matter- stopping fraud at your company before it starts. The price of the lecture fee represents the ounce of prevention.
Gambling & Embezzlement
A bookkeeper, employed by a residential homebuilder, in Middleport, New York, has pleaded guilty to second-degree grand larceny for the theft of over $700,000. The funds were embezzled from the closely held corporation to support her gambling at the Niagara Falls, Ont. casino. The perpetrator, while preparing company checks to vendor payees was able to convert these checks to her own use. The funds supported her gambling habit at Casino Niagara from November 1997 to June 2002. Apparently she was oblivious of the signs in Casino Niagara with the message “
While the company’s insurer repaid the losses to the homebuilder for the bonded employee, the saga illustrates the need for tight internal control systems. It is axiomatic that a person other than the preparer should receive the company’s bank statements together with the cancelled checks each month. After inspection of the returned checks, that person should prepare the bank reconciliation and compare the reconciled amounts with the company’s general ledger.
Data processing has opened the door to embezzlements since often managers and owners are intimidated by the computers.
A system of internal controls must be maintained at all times.
The Fox in the Chicken Coop
Toni Freitas, an employee of the Bank of Hawaii faces up to 55 years in prison after pleading guilty to bank fraud, acces-device fraud and identification –theft fraud according to the Pacific Business News. She gained access to a questioner that prospective clients fill out and apply for credit cards for to which she charged $14,628 and used the identity of “physically and mentally infirm clients in a retirement residence to embezzle $71,000 from them over a more that two-year period. These egregious events occurred despite the fact that Freitas was put through an extensive background check before she was hired. The financial institution now admits, “We have to learn from any incident to improve our security system.” A very old principle is applicable to the client,” trust but verify.”
Misconduct Investigations
Since 1999, the Federal Trade Commission prohibited employers from the use of outside investigators in cases of suspected employee misconduct unless the employee was first notified. The employee under these circumstances had ample opportunity to tamper with evidence and threaten witnesses. At the conclusion of the investigation, a complete copy of the investigation results had to be provided to the employee including names and comments of witnesses.
In December 2003, the President signed into law a bill reauthorizing The Fair Credit Reporting Act removing workplace misconduct investigations from the notice and disclosure requirements of the Act. The change in the law leads the way to enhanced and improved security performance by businesses.