Businessman sentenced form stealing thousands from partner

Boy this case sure sounds familiar. Glad for the outcome here in Colorado unlike the DA unwilling to take the other case in Wyoming. Businessman sentenced from stealing thousands from partner

Update - Police Union Manager Gets 4 Years in Prison for Embezzlment

Cindy Ann Su'a, 47 Office Manager for the Police Union in Anaheim, was sentenced to four years in state prison for embezzling from the  Police Association. Read the full story here.

Massive $20 Million Embezzlement Alleged In Chicago

Read the story at FraudTalk

and Chicgobusiness.com

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Davenport Woman Arrested in Court following Fraud Charges

BARTOW, FL -- A 40-year-old Davenport woman is accused of posing as a wealthy widow and trying to pass more than $100,000 in worthless checks to buy everything from new vehicles to a limousine ride, according to a State Attorney's Office investigation..

Read full story here  

Story provided by: Investigator Stephen R. Menge, MBA, CFE

Three good reasons why your small business needs an internal control program!

Multi State Background checks! Or this could happen to you.

A 34 year old bookkeeper from Bradenton accused of embezzling $17,000 from her current employer.  Doesn't sound like much?  Well, this lovely bookkeeper was already on probation for embezzling more than $400,000 from her previous employer!  Really!  Time to do more thorough background checks!!!    Read full story here: Bradenton Herald.

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The City of Dixon gets a $40 million settlement from the accountants

The City of Dixon gets a $40 million settlement from the accountants who missed the most outrageous fraud scheme to last almost 30 years in the City of Dixon with the notorious Rita Crundwell and her $57 million dollar embezzlement scheme.

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Rita Crundwell Fraud Scheme

Small Business Fraud Prevention Tool reported in Fox News

My new internal control desktop application called Vitalics was written about in Fox News Small Business and Business News Daily!  I am very proud! 

Affinity Scams Are On The Rise!

What exactly is an affinity scheme?  Affinity schemes are investment scams that prey upon members of identifiable groups. The group leaders are in a very high regard with the kinship or members. Whether that kinship comes from religious groups (churches have a high affinity fraud problem), ethnic groups, elderly groups, minority groups and professional groups. The group leader has built a special trust relationship with the person(s) who refers them.

The victims in an affinity fraud scheme are referred into the group by a very trusting person.  Whether that person is a relative, a close friend, a co-worker or even the group leader.  These group are very tight nit in structure and don't let new members in lightly.  If they do, the new member must be someone known.  Affinity schemes are frequently referred to as  

• Ponzi Schemes
• Pyramid Schemes
• Real Estate Investment Schemes

A Ponzi Scheme - A fraudulent investment operations that pays it’s returns to its investors from their own money paid by subsequent investors. Ponzi Schemes offer a high return on investments often in a short period of time

Pyramid schemes promises participants payment for services for enrolling other people into the scheme.  It generally does not involve real products.

A Real Estate Investment Schemes creates a “Partnership" and brings in multiple investors.  These schemes promise a high ROI as well as promises ownership on the properties.  Real Estate Investment Schemes last a long time and are more drawn out where the return isn't always promised in a short period of time. 

Affinity frauds are very difficult on the victim and unfortunately the bonds the victim has with the members can blind them into believing everything the fraudster is telling them.  They don't think that one of their own would ever steal from them.  The perpetrator generally incorporate elements of charity and gift giving or giving back to the community which makes their fraud scheme even more difficult to believe because they are held in such high regard in the community.  If a victim of an affinity fraud scheme feels that something is wrong and attempts to speak with other members or even the leader, the group will claim that reporting the allegations of fraud will prohibit any possible return on their investment so they won't do it.  The members have also been known to retaliate against the victim as well.

The perpetrator being well respected in the community is very good at their disguise.  They are pathological liars and are able to adjust their behavior to appear more credible.  They are able to adept and understand the mindset of those they defraud appearing sympathetic however they have no compassion or empathy for the financial destruction that they cause.  They only time the fraudster has any regret or empathy is if they get caught. 

Some warning signs of an affinity fraud scheme:

• Won’t provide financial or investment reports
• Tax return not filed or late
• Investor makes payment to individual
• Company research lacks records
• Real Estate title not held by partnership but by fraudster
• Promises a high return on investment
• Must act now urgency
• Deal of a lifetime opportunity
• Promises quick return on investment

If you know someone who may have invested their hard earned money into a questionable investment, remember the hardest part is to get them to accept that they have possibly been a victim of a fraud scheme. If you are the investor take the time to go through your paperwork and start researching your investment.  Never leave it to chance.  The magnitude of affinity fraud schemes on the rise is alarming and the frausters don't care who they hurt along the way.

Take the quick test to see how you rank or if you know someone who has invested money into a private group investment to see if you should be concerned.  If you fail this test, I would gather all of your paperwork in relation with your investment and bring it to un-related party to review. 

Julie A. Aydlott, CFE
970-776-8395

Business Fraud Prevention, LLC

Beware of Disaster Fraud Schemes

In light of the recent flood disaster to hit Colorado, I thought it would be a priority to write this month’s newsletter on the unfortunate fraud schemes that are already happening due to the disaster. Fraudsters do not have compassion or empathy with any of their victims. Their sole purpose is to get your money no matter how they do it and they don't care who they hurt along the way.  For the fraud victims it is a very personal violation and often times very hard to get through.
When a disaster hits, fraudsters come out in full force in many different ways. Depending on the disaster itself it lays a path on what kind of opportunities the fraudster will have to gain access to your money. Because this flood has destroyed thousands of homes throughout the front range and mountain areas of Colorado, construction fraud is going to be on the top of the list to watch out for. Whether you were a victim of the flood or you have a family member or friend that was directly affected, it is important that you - or they - are able to think clearly when entering into a contract to repair the damages.
In the construction industry, it is common to get a deposit to start work. This secures your scheduled start date as well as allows the contractor to begin paying for expenses relating to your job. The amount of the deposit is crucial for red flag warnings. Contractors will generally request a deposit of 1/3 of the total contract price to start a job.  Other states vary based upon state imposed regulation so make sure you check with your state.  If you have been contacted by a contractor that is requesting a substantial deposit to begin work, don't pay them anything, don't sign anything and run for the door.  If you feel that your contractor is legitimate, get a third party to review the terms of the contract and help you research the company in full before you hire them.
Some tips for hiring a contractor:

• Get at least three estimates
• Get referrals and actually call on them
• Check their license with the city or state
• Check the Secretary of State for their registered business
• Ask for a copy of their insurance (make sure they are insured)
• Insurance should be a bond as well as liability
• Don’t sign a contract if you are pressured into it
• Don’t pay a deposit of more than 1/3
• Don’t pay them in cash
• If they accept credit cards ask to pay the deposit in the form of a credit card. If they don’t follow through on the work you can get a charge back from the credit card company.
• Find out who their sub-contractors are on your job. Get their names, phone number, mailing address and make sure they have the proper license and insurance as well.
• Any payment you make to the contractor as progress payment on the job MAKE SURE the sub-contractors are paid and you get lien releases from the subs and the general contracor for progress payments. If you paid your contractor $50,000 for a job and he didn’t pay his sub-contractors they could file a lien on your house even though you paid the general contractor in full. If your contractor has a problem with this, pay his/her sub-contractor directly or hire a different contractor! Lien releases need to be all inclusive on anyone including the main contractor who worked on your job.
• Get a written contract. Make sure it includes the complete detail of the repair or construction work to be performed, the estimated start date, the estimated completion date as well as the total contract price.

Construction and repair fraud isn’t the only one to watch out for. Scammers are burning up the phone lines as well as the pavement looking for donations to their non-existent charities. Make sure you do your homework when donating to any charities.

• Don’t donate to a charity you have never heard of
• Research the charity before you donate
• Call your local police department to ask them if they have had any complaints from an un-known charity
• If you receive a phone solicitation DO NOT give your checking account information, credit card number, social security number or any payment over the phone!
• Scammers lie, that is what they are good at.  They pretend they are the Red Cross even the Police Department or Fire Department.  Don't fall for it and if you are unsure, hang up the phone and call the actual company they are claiming to be so you can find out if they are actually trying to get donations
• Door to door scammers not only can try to scam you out of money by having you donate to bogus charities, they also have been known to "scope" out your house for valuables and return at another time to rob you.  Don't ever let a door to door solicitor in your house!

You can contact the Better Business Bureau’s Wise Giving Alliance at www.give.org to look up a reputable charity.

You can also contact the Disaster Fraud Hotline at 866-720-5721 to get more information or file a fraud complaint.  
Be on the alert while we all are recovering from these devastating floods.  Anyone can become a victim of fraud and the last person that needs that additional stress are those who just lost everything in a flood.

Julie A. Aydlott, CFE
970-776-8395

Business Fraud Prevention, LLC

Bookkeeping Shortcuts that lead to Internal Control Weaknesses

I have been seeing more and more shortcuts with bookkeeping entry into the accounting system over the past few years.  Not only from internal bookkeepers but also from professional bookkeepers as well.  Is entering in the employers or client data that much of a hassle to bookkeepers that it causes laziness,  or is it just to get the job done quicker?  As a business owner, you need to ask yourself (or your clients) some very important questions about how your bookkeeping data is entered into your accounting software.

• Do you know how much money you pay to all of your vendors?

• Could you print out a detailed listing showing the total amount paid to each vendor?

• Would that total amount include a lump sum or could you see how much you spent on a specific cost?

• Can your software print out all of the contact information for your vendors?

• Does your bookkeeper enter more journal entries to record financial transactions rather than tracking the actual transaction by payee name?

• Does your bookkeeper reconcile your business credit cards?

• Are your credit card receipts accounted for?

• Are your vendor hard files a mess and you can’t find anything?

An enormous internal control weakness in the accounts payable function is not tracking vendors in the accounting software.  This happens so often when the business uses credit cards to pay for all of the business and personal expenses so that they can accumulate mileage or points from the credit card company.  When the bookkeeper has to enter in hundreds of charges per month, they don’t seem to want to break it down and enter the charge in as a credit card transaction by recording it to the proper vendor.  They tend to enter the transaction into the bookkeeping system from the point of payment and group it straight to an expense account without tracking who the expense was for.  Realistically, this type of entry only shows that XYZ Company paid $5,000 to American Express, yet $4,500 was to Builders Supply for materials on a job site.  This type of entry system does not allow you to see how much of that actual payment made to American Express was paid to Builder Supply.  Yes it may show that your supply expenses was $4,500, but it is lacking the "to who and what for" information that causes the weakness. Not only is this system an internal control weakness in your purchasing and accounts payable function, it also prevents the business owner from being able to realistically review their overall costs which would help in their bottom line. 

When payments are entered without tracing who the vendor is, this creates several problems.

• Potential loss on profits

• Tracking vendors that require 1099’s

• Tracking billing schemes or purchases with a shell company

• Overpayment on purchases

• Not confirming receipt of materials or merchandise.

The solution is to require your bookkeeper to enter all vendor purchases properly so that you can track your total costs per vendor.  Yes, this will take more time especially if you use a credit card to purchase everything, but if your bookkeeper is efficient then it shouldn’t be that big of a change in their productivity. 

Make sure your bookkeeper;

• Enters vendor purchases to a vendor account.

• Enters credit card charges properly

• Reconciles your credit card accounts

• Can print a vendor purchase detail listing at any giving time

• Provides you with a reconciliation approval form to confirm and verify payees

• Uses purchase orders for supplies and materials to compare what was actually billed or charged to your credit card as well as what you received.

Most small business computer software is integrated with the credit card companies to import the data directly into the computer system.  If you have the ability to use this function, do.  It will save time for your bookkeeper from entering in all of those meal expense receipts………. 

Don’t allow shortcuts or laziness to be an identifying factor in your bookkeeping system, it is doing you more harm than good.

Julie A. Aydlott, CFE Business Fraud Prevention, LLC