Who Is The Accountant?


I have been excited about watching “The Accountant” for over a year, when I first heard about this movie – a film about a forensic accountant! I lived in fear of the project being canceled by film bigwigs, who would decide that no one wanted to see a movie about an accountant. Accountants are almost never depicted, on screen, as anyone worth one’s time. You can’t love or hate them, they are too boring to think about. But here was a movie and the filmmaker was so confident about it that he called it “The Accountant.”  I would tell people how excited I was about the film and they would almost always express surprise that anyone would want to make a film about a CPA, let alone watch one. I don’t blame them because just about every time I have seen a CPA being portrayed on film or television, I don’t want to be him (and it is almost always a him). He is a guy with zero social skills that people put up with because he is some kind of numbers-whisperer; a guy who can find secrets in the numbers that the true heroes are too busy being interesting to find. So, on Sunday, I dragged my husband, who is a true saint, to the movie theaters to watch “The Accountant.”

From the previews, you will see that Ben Affleck, the Accountant, seriously lacks social skills and does not appear to have any friends. He is, as a forensic accountant, a super numbers-whisperer who gobbles up financial statements for breakfast, lunch and dinner.  However, he is also the hero and is an incredibly interesting guy who can do all the running, jumping and full mystery solving that heroes can! They also threw in the story of Crazy Eddie and his “Panama pump”. I may have been the only person in the movie theater who exclaimed in excitement when that came up, but the story of Crazy Eddie is one of many years of various fraud schemes, ranging from money laundering and tax evasion, to financial statement fraud.  I had a great time watching this movie and, I even forgave the woman who yelled out a spoiler reveal before it happened.

It seems that many had been convinced to try out a film about a forensic accountant. “The Accountant” won the box office this weekend, by a massive margin that you don’t have to be an accountant to understand. This gives me hope for the future of CPAs on the screen (big or small). I can see it now – characters who are at least as interesting as lawyers and doctors. We may even be portrayed as people who can tell funny jokes, who can be engaging and who can even have friends: I am excited about films that break long-standing stereotypes. Maybe I am getting ahead of myself, but I will say something that is a first, with respect to how I feel about a CPA of any kind on TV or on film. I watched this movie and I came out wanting to be a forensic accountant!


Tagged , , , ,

Massive Betrayal of Trust


Photo by Mamnaimie Piotr

On September 8, the Consumer Financial Protection Bureau (CFPB) put out a press release that it was fining Wells Fargo Bank $100 million for secretly opening deposit and credit card accounts, without customer approval. In addition to the CFPB fine, Wells Fargo was fined $35 million by the Office of the Comptroller of the Currency, $50 million by the City and Country of Los Angeles and will have to pay approximately $5 million in restitution to customers. This fraudulent behavior occurred on a massive scale and, based on the CFPB’s investigation, resulted in:

  • Employees opening 1,534,280 unauthorized deposit accounts;
  • Employees submitting applications for 565,443 credit-card accounts, without the knowledge or consent of the people in whose names the applications were made;
  • Employees creating fake email addresses in order to enroll consumers in online-banking services;
  • Employees requesting debit cards for customers, without the customers’ knowledge or consent, and creating PINs to activate these cards.

All of the above has happened only since January 1, 2011. That is about five years in which these shenanigans were going on. During this time, Wells Fargo fired about 5,300 employees but it does not appear that the bank did a lot more than that to change the culture and systems in order to keep these practices from recurring, or that it took any steps to do right by the customers who were affected. To boot, the executive who oversaw the unit where this all happened left without having to pay back any of the almost $125 million that she earned with the bank. To understand why employees engaged in these dishonest practices, it is important to understand how they benefitted.

Wells Fargo is valued at over $250 billion, making it the most valuable bank in United States, by this yardstick. Wells Fargo was also considered to be the king of cross-selling. Cross-selling is a practice where banks sell more than one service to a customer. For instance, say you open a checking account with Wells Fargo. If the person that you open your account with convinces you to then open a savings account, a credit card account and a mortgage, all of that is cross-selling. At Wells Fargo, employees were paid and received bonuses based on the number of different services they were able to sell to customers. At times, employees would have to work unpaid overtime hours in order to reach these goals and would be threatened with losing their jobs if they did not do enough cross-selling. These employees were told to do “whatever it takes” in order to meet sales goals and this turned out to include engaging in the fraudulent behaviors I noted above.

With the pressure to perform in order to increase earnings, through bonuses, or merely keep a job, the retail employees, at least 5,300 of them, found many opportunities to game the system. Controls at Wells Fargo, when it came to ensuring accounts were valid and authorized by customers, appears to have been very lax. For instance:

  • Employees were able to sign up customers for banking services and would use fake email addresses that used wellsfargo.com as the domain name, such as 1234@wellsfargo.com or none@wellsfargo.com. Doesn’t that seem rather brazen? It also seems like a security shortfall on the part of the bank, that the application process wouldn’t flag an email that doesn’t exist in your own system.
  • When employees opened fake deposit accounts, they would fund these accounts by transferring a customers money from an authorized account to the fake account. Sometimes, as a result of the transfer, the authorized account would incur insufficient balance and overdraft fees. Also, the fake accounts would also incur fees and Wells Fargo would withdraw money from the authorized accounts in order to pay these fees.
  • In a similar manner, credit card accounts opened, without the approval or knowledge of customers, would incur annual and other fees. At times, these customers would find that they were in collections and their credit scores had been affected by accounts that they did not even know they had.
  • Some customers actually received credit cards for accounts that they had not authorized. When these customers contacted Wells Fargo to complain about these cards, they were told to simply destroy the cards. Destroying a credit card does not close the credit card account, nor does the shredding of a card do anything as far as the shredding that your credit profile may have taken.
  • In order to meet quarterly goals, employees would hold back applications for account openings. The manual applications, that included sensitive personal information, would be stockpiled in an unsecured manner and the accounts would only be opened in the next sales goal period, in a practice referred to as sandbagging.
  • Wells Fargo also misled customers by telling them that they could not get one service without getting a bundle of other included services. That would be like opening a checking account and being told that you cannot do so unless you open a savings account and get a credit card with the bank.

With how widespread these practices were, it seems that employees were sharing knowledge about how to best bulk up their cross-selling numbers, without actually cross-selling. Also, when customers complained about fees, it is unclear how much of a follow-up there was to discover if what had happened was a mistake or not. Then, when Wells Fargo discovered this behavior and fired an employee, the bank did not take any steps to let the impacted customers know that their information had been used to open accounts in their name and, if applicable, charge them fees. The bank did not go back and refund customers the fees they had been charged, unless the customer raised a stink about them. When I was discussing this case with my husband and explaining how customers were negatively affected, he had a tale of his own. He has a credit card (not Wells Fargo) and the company changed his credit card information, without letting him know. When he sent payment on his account, they accepted the payment, without telling him that the account was closed, and then charged him interest and fees on the balance that had been moved to a new account. He, not the credit card company, had to figure out what had happened and he, not the credit card company had to calculate the monies that needed to be refunded to him and make sure that the company was not just holding money on a nonexistent account but actually crediting it to his account.

As a result of this case, in addition to the fines that Wells Fargo has been ordered to pay, there are steps the bank has been ordered to take in order to improve the culture and strengthen the system so that this kind of behavior can be prevented, detected and corrected in the future. This includes:

  • Employee training to prevent “Improper Sales Practices” and improve integrity at the bank;
  • Creating monitoring processes and policies to effectively deal with customer complaints;
  • Creating systems to ensure that customer approval is received before accounts are opened on their behalf;
  • Revising the basis for how employees are paid and reviewing sales goals to ensure that they are not unrealistic and do not impose unreasonable pressure on employees.

Wells Fargo will continue to be monitored for five years, to make sure that they comply with the CFPB’s consent order.

On your part, with all your accounts, you can check to make sure that they accounts that you have are ones that you have authorized and that transactions made in your name are valid. Some steps that you can take are:

  • Review your credit report on a regular basis to make sure that all accounts listed are ones that you know about. Several financial institutions offer free credit reports to customers. If this is not an option for you, you can visit the Annual Credit Report website. On this website, you are entitled to credit report per year, from each of the three major credit reporting companies. A strategy to employ is to check a report with one agency every four months;
  • Check your bank statements regularly (at least monthly) for any transactions that are incorrect. Even if it is a small amount, look into a transaction. That small amount could be an indication of something bigger;
  • If you receive a card in the mail that you did not apply for it, follow-up on it and make sure that it is cancelled. Then check your credit report again.

On the Wells Fargo website, the Chairman and CEO states that “Everything we do is built on trust.” It seems that many employees have been playing lip service to that value and we know that, even with trust, it is important to verify. Take the time to check in on your finances. There may be mistakes that need fixing and there may also be pressured employees who are trying to get ahead or merely hold onto their jobs by engaging in dishonest practices.

Tagged , , , , , , , , , , , ,

Two Hours… And Counting


Oh man! I may need treatment to recover from working out my health care expenses. For several years now, my shoulder has hurt. I have had it looked at by a doctor and I went through physical therapy until I had used up all that I was allowed to use, and treatment didn’t really work. My shoulder still hurt a lot. I then got sidetracked by all kinds of other things going on in my life and so I pretty much lived with the pain (eased a bit by massage, ibuprofen and Salonpas). Finally, I decided that enough was enough and that life should not be lived in pain, so I went to see the doctor who helped me out when I fractured my knee. I love his guy. He is absolutely awesome. And it is a great and special thing when you establish and relationship where you are treated like an adult with a brain and all your questions are answered and things are good. You feel great, until you start to talk money. Then you feel all kinds of unwell again.

I am a person with health insurance and I believe it is pretty good insurance because it is pretty widely accepted and my co-payments are decent. I understand that choosing an out of network doctor is bound to be very pricey. However, several years ago, I had some pretty terrible experiences when I went with in-network doctors that were recommended to me by my insurance website and not by a fellow medical profession. Now, when I find someone who treats me with respect and seems to have a vested interest in my being healthy and fully recovered, I tend to stick with that person. I understand that this can come with a premium; I just wanted to know what this premium might be. So, there I was, discussing a treatment plan and then payment plans. The treatment plan ended up being the easier part of things to understand. Let me tell my tale…

Looking at a schedule of my health insurance benefits is like solving a complex math problem, where suddenly I need my calculator and a whole lot of patience. I have to factor in a deductible and then calculate the split between what insurance will then cover and what I have as an out-of-pocket expense. I sat down with the office manager at my doctor’s office and he went through the various costs of my treatment and then he pulled up the Fair Health Consumer website. The office manager then explained to me that, because my doctor was out of network, we should go over what the treatment could, potentially, cost me. He explained to me that even though my insurance would cover a percentage of my “eligible expenses”, what that meant could make a huge difference to my wallet. I found out, this week, that things can get very complicated and expensive.

First of all, the health insurance company will determine the reasonable and customary cost of a procedure. This is the average fee charged in a particular geographic area. Then, for out of network providers, regardless of what the provider charges, the health insurance company will cover costs based on the reasonable and customary cost. However, a health insurance plan may determine what they will cover, based on a published rate allowed by Medicare. This rate has nothing to do with the average cost of a procedure in the part of the country where your treatment occurs. This rate can be wildly different from the reasonable and customary rate and this can result in a big difference in how your wallet looks at the end of the day. For example, you could have a procedure that has a reasonable and customary cost of $10,000. If your health insurance covers 60% of this rate, your out-of-pocket expense will be $4,000 or 40% (I am, for the sake of simplicity, assuming that there is no deductible). Now, if your health insurance uses the Medicare based rate, they could reimburse you only about $300 (this is a comparison that I actually did on the Fair Health Consumer website, and not something that I made up, as extreme as the difference is). That means here, your out-of-pocket expense will be $9,700. That is a significant difference. So it is very important to have an idea of what you are going to pay beforehand, Otherwise the doctor’s bill may give you a heart attack, in addition to all your other issues. The health insurance companies say that they have switched to the Medicare rate in order to push out of network doctors to become in network doctors in order to get better reimbursement rates from them, but what I have read of how this rate came about does not appear to support that claim. However, it seems to me that the patients are the ones who are suffering, being that they are the ones who then get the gigantic bills from the provider that they have chosen to use. And this could be because they have looked at their explanation of benefits and calculated their out-of-pocket based a reasonable cost. Imagine that.

With this in mind, the office manager gave me a list of information, including the codes for the treatment and suggested that, beyond visiting my insurer’s website and reading their explanation of benefits, I actually call and have conversations about what exactly the explanations mean. So began my adventures in telephone conversations regarding my health insurance benefits. I made my first call, thinking I would be on the phone for a few minutes but I didn’t hang up until over an hour later and I was still clueless. The man I spoke to was very friendly and polite and he took my information but then as we got into what I should expect my out-of-pocket expense to be, things became very murky and confusing. It appeared that he could not access out of network information for what my cost would be and, he was not clear on what rate my out-of-pocket expenses would be based. After an hour of us hanging out on the phone, trying to figure things out, he found a form that I could submit in order to get a quote from the health insurer but he seemed to not know how to get it to me. So he said he would call me back or email me before the end of the day. He did neither.

The next morning I called again and, even though this particular insurance company representative seemed to have access to a little more information, she too was very vague and kept telling me that she could not tell me how much things might cost me or what would be reimbursed. That is a bit scary since I was calling to make sure that I would have as few surprises as possible. About an hour into a very frustrating and circular conversation, I mentioned that the day before, the representative had mentioned a form and a client advocate. She claimed she had never heard of such a thing but she put me on hold as she went to investigate. She came back on the line and said she had found this form but she could only either fax it to me or send it via snail mail (I could go into a whole rant about why, in 2016, people can’t email you something and, instead, you have to figure out how to get your hands on a fax machine).

So, now I am at a point where I have sent information in to the insurance company and I am now waiting (for 2-3 business days, per the form) for a response on the eligible expense for my treatment – the first step in calculating out-of-pocket expenses. I am hoping that my future does not hold more protracted conversations where things end up even more confusing than they were going in. I would feel dumb, but the health insurance representatives seemed to know about as much as I did about what my insurance policy does and does not cover. I hope that I can get to a point where I can make an informed decision about what to do next. And my lesson, almost, learnt that I am sharing here – don’t take the website blurb at face value; don’t take the information booklet at face value; don’t assume you know what is going on. Keep asking questions, even if you get so frustrated that you want to throw your phone across the room. If what you are being told about your insurance doesn’t make sense, ask to speak to someone else. I could tell you what I think about all of this, but I am going to stick with telling you to ask the questions until you get clarity (even if it is very expensive clarity). Insurance is a very murky space and those dark spots could turn out to be a lot of money coming out of your pocket.


Tagged , ,

A Matter of Trust


I fell in love with economics, in part, because it made so much sense. Just about everything could be boiled down into a supply and demand chart that even I, with my limited artistic skills, could draw, freehand. In a free market (the basis of all things good in this world) and in our economics 101 diagrams, the goal was to get everything, neatly, to equilibrium. It was glorious! In every situation, supply and demand, in a free market, would come to a price where both parties were happy and all goods and services to be sold were bought. In equilibrium, there were no shortages, there were no overages and the price was right. For instance, say guy made Twix bars and was selling them for five cents. He would likely find that a lot of people, including those who might ordinarily prefer Snickers, would be clamoring to stock up on Twix bars. Chances are that this guy would sell out of Twix bars in no time. People seeking these cheap, and now sold out, Twix bars might start placing ads on Craigslist, perhaps even offering ten cents for a Twix bar. Others might go to the Twix maker and offer him ten cents a bar to be put on a pre-sale list. Some people might see how well the Twix bar maker is doing and decide to start making Twix bars too. In the world of the perfect graphs, this cycle would go on, with the Twix makers raising their prices a little more and making more Twix bars, in response to the great demand for the chocolate bars. However, as the price goes up and gets closer to the price of a Snickers bar, some of the people who are not so crazy about the Twix will find that the higher price is not enough of a bargain for them, so they will no longer want to buy the Twix bar at this high price. The Twix makers might get too excited about the demand for the chocolate bars and decide to raise the price to two dollars. Even though a few Twix or nothing people might be willing to sacrifice all for a Twix, most people would tell the Twix makers that they are crazy and go looking for an alternative. The Twix makers would then find that the Twix bars are going old and stale in their storage facilities and they are not selling enough chocolate to even cover their costs. To resolve this, they will lower their prices and reduce production, until they get to the point where the price is such that sellers have enough unexpired Twix bars to sell to everyone who comes in looking for them, no extras, no shortages. That, according to the graphs, is how a free market works.

When a monopoly exists, it messes with the free market. In the case of a monopoly, there are no other options and people have no choice but to buy a product or service from one source. This would like living in a place where you can only buy electricity from one provider. For most people in that society, they will be forced to pay whatever the electricity provider charges for electricity. Try as they might, they will not have an alternative to electricity in order to charge their mobile phones and laptops. Twix bars won’t cut it. What economists have found is that, left to their own devices, monopolies will charge more for their products and services than people would be willing to pay in a free market where they could choose their supplier. Monopolies have pros and cons. Some pros of monopolies are:

  • Stable Prices that come about because there is no one coming in and out of the market to create bidding wars, where suppliers fight, with prices, to get customers. With only one supplier, there tends to be just one price that tends to remain the same for a while.
  • Economies of Scale. This basically means that, because the monopolist is making all the product for the entire market, he is making a lot of product at one time. As a result, the large scale will lead to lower costs per unit. If the monopolist chooses to pass the savings on to the customer the customers will be able to get goods and services at a lower price than they might have in an open market with many supplies making goods on a smaller scale.
  • Research and Development may benefit from monopolies. Since the monopolies are making all the money in the market, from sales, they can take these larger profits and have more money to put towards innovations and improvements of their goods and services.

On the flip side, the cons of monopolies are:

  • Higher Prices may be a result of monopolies. Because people have no other options, the monopolies can get away with charging whatever they feel like charging.
  • Price Discrimination can happen with monopolies as well. Because they can charge whatever they want, they can decide to charge some people one price and others another price and, because customers have no options, they are forced to accept the price quoted to them.
  • Inferior Goods and Services are a possibility with monopolies. Monopolies may look at the market and decide to cut corners and produce inferior quality goods and services because they know that customers can’t go anywhere else.

Generally, monopolies are not considered to be in the spirit of the free market. Competition, that would correct inefficiencies and unfairness in the markets, does not exist with monopolies and so there is a risk that consumers can be taken advantage of. As a result, regulators tend to take steps to review mergers of large companies in order to reduce the risk of monopolies (or something close to a monopoly). The action by the regulators is related to their enforcement of antitrust laws.

Currently, several health insurance companies are fighting with the US Department of Justice. Humana and Aetna are seeking to merge into one company as are Athena and Cigna. Currently there are five national health insurance providers; the merger will leave us with three providers. The health insurance companies are touting the pros of monopolies, claiming that the mergers will lead to lower prices to consumers and increased research and development. The justice department, on the other hand, argues that, with fewer national insurance companies, there will be less innovation and there will be the risk that customers will be charged higher rates.

As we enter the complications of humans, trust, regulations and court battles, we can keep in mind the memory of the neat graphs of the perfect markets. It may help us better understand the news articles, full-page ads and other coverage of this and other antitrust actions related to other mergers and acquisition deals in the news. If not, we can take comfort in our still affordable Twix bars.

Tagged , , , , , , , , , , ,

Cheating Mysteries


When I first started running long distance, my goal was to run the New York Marathon. After I completed the Chicago Marathon, things changed a little. Of course I still held my breath every year, hoping to make it into the New York Marathon. But I also had another distant dream – qualifying for the Boston Marathon. It was a distant dream because I would need to run a qualifying time in order to get into Boston and my pace at that time was nowhere near one that would get me into Boston. Over the last few years, my pace has improved and qualifying for Boston has become a more attainable dream. Over the years, I have also come to know more runners and have found that many of us aspire to qualify. I know I am always in awe of a person who has qualified for Boston – it is no mean feat.

With the line of work that I am in, I should not have been surprised, but I was, when I read a recent Runner’s World piece about people who cheat to get into the Boston Marathon. I wanted to run the New York Marathon because I was inspired by the runners who ran past my block, the runners who would touch all five boroughs that make up the city that I call home. I enjoy running races in cities and towns that I have never been to, as I find it a great way to visit and discover new places. When I think about Boston, I don’t necessarily think about running the race itself. The power of Boston, for me and for many that I speak with is in what it takes to qualify. That is the challenge. So, when I read about people who cheated by getting someone else to run a qualifying time in their place, or by cutting a course, I was baffled. Where is the joy in telling someone that you achieved something that you didn’t or that you had someone achieve on your behalf? When I speak with fellow runners, I tend to speak with like-minded people who are just as baffled as I am.

This article reminded me that just because one cannot understand the motivations of a cheater, it does not mean that the cheating will not happen. The fact that many of us cannot understand this motivation is exactly what those that cheat bank on. If no one can imagine how or why someone would fake qualifying for the Boston Marathon, the chances are high that a person will get away with faking in order to qualify for the Boston Marathon. This is something that we all should be mindful of, beyond the realms of the Boston Marathon. Way too often, a business owner or manager will forgo instituting checks and balances in their company, because that business owner can’t imagine that anyone that works for them could be the kind of person that would defraud them.

It is important to take steps to keep from being blindsided by your world view. Precisely because you can’t imagine how a person could behave in a fraudulent manner is why you should seek out the services of a forensic accountant, whose job it is to both imagine how a person could defraud you and how to prevent and detect such actions. We all hope that people will be honest, but it is a sad truth that for various reasons, people will cheat. In the context of the Boston Marathon, perhaps some people feel that they are so close to a qualifying time that a little cheat is not such a bad thing. Maybe some people hunger for praise, even if they have not earned it. Maybe some people just don’t think it is a big deal to cheat in order to get into Boston and see it as a victimless crime. In the context of a business, some people may face personal pressures that they feel push them to fraud. Some people may feel that they are not sufficiently appreciated by their employer and may, therefore, feel justified in taking from that employer. No one is immune from the pressures or motivations that lead to fraud, but what we can do is take steps to make it as difficult as possible to be defrauded.


Tagged , , , , , , , , , , ,

2016! Three Words! Boom!


Hey there 2016! In 2013, I officially put aside New Year’s Resolutions. This is because I was introduced to the concept of Three Words, by Tom Hood, who found this idea from Chris Brogan. I have found the three words to be a great way to give my year a point of consolidation and mindfulness. I have found the three words to be invaluable. I find myself bringing up these words in conversations and in my writing and I am sure I must sound like a broken record to some people. I am happy to be a broken record if this helps me live a life of greater focus and productivity. I am just about always trying to do too much and I have found these three words give me greater direction.

Last year, my three words were Receptive, Synergy and Service and I found these words coming up often during 2015. I faced several challenges during the year, I embarked on new ventures and my life took turns that I never imagined. During that time, my words from 2013 all the way through 2015 helped form my rallying cry.

As 2015 neared its end, I wondered what my words for 2016 would be. I took the time to look back and think about where I have been and then think forward to where I would like to go and what I want my compass to look like as I travel. Today, I have my words for 2016.

Learn: During my various adventures in 2015, I things thrown at me that I could either try to ignore or take lessons from. My brother got married and that brought a lot of my family together in one place. It is always amazing to me that, for as much as I think I know the stories of my family, when we come together there are new and incredibly interesting things that I learn. My husband and I also spent time together with his aunt where she regaled us with stories of her youth and his family history. As much as I think I know, I find that there are still more ways to expand my mind and that should I choose to, I can keep on learning. I hope to learn in formal settings, in informal setting and totally by surprise.

Fear: I am sure that at some point in my writing I have shared my irrational fear of rodents, a fear that is not very helpful for a person who lives in New York City. I remember once, years ago, I was living in an apartment an old building. The old buildings in New York are lovely to look at but come with holes, holes that mice like to climb through, especially when it gets cold. One evening, I was hanging out on the couch when suddenly a mouse scuttled across my floor. I was frozen on the couch, afraid to move lest the mouse and I collide. People tell me that the rodents are more afraid of me than I am of them; I beg to differ. I ended up calling my neighbor, from the couch and, luckily he came by and dealt with the mouse. Now, I am not about to dive into a close encounter with a rodent, but I am learning that the times that I have been able to get past my fears are the times that I have been able to have new adventures. I started my own business this year and I am learning to not let my fears about failure, about the unknown or about anything else hold me back. I am also having a great time exploring life and learning new things about myself and those around me.

Community: I say it all the time and it remains true – nothing happens without community. When I started my business I found support from friends, family and colleagues. I found support from strangers. Had I realized the power of community, I may have taken the leap earlier. An instrumental aspect of collaboration and synergy is community. As I continue on this incredible adventure, I want to be mindful of the great things that can be achieved by a community.

Just a moment to look back on my words from prior years:

2013 – Change, Discover and Motivate
2014 – Transform, Pursue and Collaborate
2015 – Receptive, Synergy and Service

And now: Learn, Fear and Community

I am unbelievably excited at the prospect of looking fear in the eye and saying, “bring it on.”. For it is through these experiences that I shall learn and it is with these moments that I shall be able to connect with my community and build that community. AND I have an extra day to do all of this this year. So, tell me, what are your words?

Tagged , , , , , , , , , , , , ,

On the Record


I first wrote about Scott London in April 2013, soon after he had been arrested on insider trading charges. He was sentenced to 14 months in prison and was released early, for good behavior, earlier this year. I was listening to my regular Planet Money podcast last week and, like an awesome Christmas gift, they were interviewing Scott London about what he did and why he did it.

London spoke about how, when he was an audit partner at KPMG, he started sharing non-public information on his clients with a golfing buddy. It is not as though London did not know that what he was doing was both unethical and illegal. He speaks about how much training KPMG gave to employees, training that he himself gave at times. Yet, when his friend’s business was struggling and his friend asked for just a little help, Scott London was able to rationalize what he did. In his mind, the money that Bryan Shaw, the friend, was making was small and this made what he was doing not so bad. This is something that happens often in fraud stories. Most frauds start small, either because the fraudster is testing the waters or because the fraudster initially intends to just take a little to cover their perceived need. It is generally because the initial idea of a fraud is small so it does not seem like a big deal and will not hurt anyone. it is a good reminder that when you are looking into or for fraud, you should not just look for large amounts. The fraudsters are going to do what they can to stay under the radar and many are going to be committing in ways that minimize, in their minds, what they are doing.

All in all, Shaw paid London about $70,000 in cash and gifts, while Shaw made $1.27 million from the insider trading. I was amused to hear London’s shock at how much money Shaw made trading on the information that he got from London. You see, when Shaw asked for the tips, he proposed that they share the money equally. It was funny that London was shocked to find out that the person who had partnered with him in an illegal pursuit had been less than honest with him. I suppose he had not heard that there is no honor among thieves. I am not sure if he was surprised because he realized how much more money he should have been paid or if he thinks he would have nipped the insider trading in the bud had he known just how much money was at stake (making the crime a bigger deal than he imagined).

During the podcast, the Planet Money folk discussed whether insider trading is a victimless crime. They struggled to find who is hurt by the trading. They came to their conclusions about who is hurt and you can also read various others opine. When I look at insider trading and think about who can be seen as victims, I have a long list. If you are competing in what you believe is a level playing field but where some parties know more than you do, it is just about a given that those parties are going to beat you every time. And, in this day and age where many retirement and savings plans involve trading on the stock market, why would you even bother if you knew that there were people making lots of money, primarily because they had inside information that you were not privy to?

There are so many layers in the Scott London story that could fill a book and, one such book, by James Ulvog, about Scott London’s fraud is well worth a read. Hearing from Scott London himself was a great gift and is a lesson in insider trading, tone at the top, how easily a fraud can begin and the consequences of taking the path that he took. Thank you Santa and Planet Money!

Tagged , , , , , ,

When To Fold ‘Em


We are a household of sports fans and this tends to be just about the only live television that we watch. Because we can’t fast forward through the commercials during live games, I have watched commercials about daily fantasy sports. A lot of commercials about daily fantasy sports (DFS). It doesn’t matter whether it is DraftKings or FanDuel, as they both seem just about the same. I have heard about how you can win millions, practically for free, and about how easy it all is. I know nothing about fantasy sports, and I have come away mostly irritated by how ubiquitous the advertising is than wanting to try out the daily fantasy sports scene. I also don’t trust them when they tell me that I could win money for nothing and, instead, I wonder how they could claim to give away so much money for nothing and still pay for the many, many ads that are everywhere we look.

Answers came to me at the beginning of October, when a DFS scandal hit the news. As the story went, a DraftKings employee released key information earlier than he should. This information, if known, would give someone a tactical edge when playing fantasy football. The same employee also won $350,000 betting at FanDuel. Even though this doesn’t look good, DraftKings says they are certain that, even with an extra $350,000 in his pocket, their employee did not act improperly – he merely made a mistake. As I read the story, I shook my head in disbelief. I was surprised by several things. First of all, I was surprised to discover that Daily Fantasy Sports betting is not considered to be gambling. Now, I know hardly anything about daily fantasy sports, so it may indeed be a game of skill and not luck. However, especially with terms like “betting” used when talking about it, it sure does look a lot like gambling. That said, interviews that I have seen and read show those who spend a lot of money on DFS referring to it as investing. Nevada recently shut down DraftKings and FanDuel, declaring that DFS is gambling and that the two companies need licences before they can operate in that state. So, in that regard, let’s go with more and more people are agreeing with me on the whole “is it gambling” question.

More surprising, though, was the employee betting. To have a company that runs the betting allow its employees to bet as well smacks of impropriety, regardless of whatever steps the companies claimed they took to keep things on the up and up. Both FanDuel and DraftKings would not let their employees bet with them but those same employees, armed with whatever insider information they might (or might not) have, were able to go to competitor sites and bet there. And bet they did and how surprised are we to find out that the top winners in daily fantasy sports tended to be employees of DraftKings and FanDuel (though never from their own employer, of course).

As I read articles and watched news pieces on what was going on in the Daily Fantasy Sports realm, I kept exclaiming, to anyone within earshot, “who thought this was okay? How could they think it was okay?”

I couldn’t believe that management at this company could look at the set up was acceptable. Maybe they did, or maybe they just thought they could get away with it but it has me wondering about what operation and control policies other entities have in place that either do not protect them and their assets, or even put them at greater risk. Just because you institute a rule, it does not mean that it is a good or useful rule. For instance, DraftKings employees, with all the inside information they potentially had access to, could not place a bet with their employer, DraftKings. However, they could log into FanDuel, their competitor and use their edge when placing bets there. And the policy was mirrored by FanDuel. Looking in from the outside, both companies appeared to be acting unethically, and just about always, perceptions are as powerful as reality. If it looks as though someone is having a $350,000 party with your money, the facts will matter very little to you.

It might feel very managerial to make rules in your organization, but if all they serve to do is fill operations manuals and make you feel good, they are achieving less than nothing. It is worse than not making rules at all because, at least when you don’t have regulations, you have no illusions about whether or not you are protected. On the other hand, creating a free for all entity may make you feel like the cool kid and may even have people clamoring to work for you. However, among those clamoring, it is almost guaranteed, will be those seeing ample opportunity to commit fraud and perhaps lay waste to your business. There are very important reasons why people like me preach setting up your business in ways that prevent and detect fraud and two of these reasons are protecting your assets and protecting your reputation.

Now, FanDuel and DraftKings are finding themselves on the defensive and being given the cold shoulder by entities who do not want to be tainted by the growing scandals. They are being investigated by state and federal authorities, and are now scrambling to clean up an image that would never have been sullied if they had formed their operating and control structures correctly and ethically, in practice and appearance, from the get go. Now they are tripping over themselves, doing things like creating self-regulatory bodies in order to regain the trust of the public. Judging from what I have read, that is not working very well – something that happens when a company has betrayed the public’s trust. Instead these companies are being put under the microscope and their reputation is taking a beating. They are on the defensive now and all of this could have very easily been avoided. If you are running a business, you should ensure that you consult with a qualified professional to avoid issues such as:

  • Conflict of interest in perception and reality;
  • Approaches that compromise your reputation; and
  • Procedures that may cross legal lines.

Spending time and resources doing things property in the first place is less costly, in dollars and reputation, than trying to clean things up after the damage is done. That kind of disaster can be very difficult to come back from. Is it something you are ready to bet on?

Tagged , , , , , , , , ,

The Best! The Worst!


Today is marathon Sunday in New York City and, for years now, I have lived less than a block from the marathon route. It is one of the most exciting days of the year for me and I love walking down to the end of my block to join the over one million spectators who line the 26.2-mile route to cheer on the runners. All too often, New Yorkers are thought of as people who just don’t care about others. Per the stereotype, it’s just keep out of our way, don’t look us in the eye and don’t do anything that will slow us down and we won’t have any problems. Marathon day is a day when I am reminded that the city is a city full of people who do things like come out to cheer and high-five strangers as those strangers test their bodies and spirits. I love it.

There are moments, such as the marathon, that bring out the best in people. Disasters, as sad as they may be, also bring out the best in people. People come out and give time, money and other resources to help those in need. Tragically, disasters also tend to bring out the worst in some people. Some among us see disasters as a great opportunity to take advantage of others, for personal gain. Some of the fraudsters are blatant in their unscrupulous ways because they are targeting the desperate among us. A current example is the migrant crisis in Europe, where refugees, seeking to escape dangers at home, will give up all their resources in the hopes of reaching a safer place. Instead, some hand over money to greedy criminals who then lead them into more danger and, sometimes, even death.

Other fraudsters are more slick in their strategies to profit from the suffering of others. In recent months, natural disasters such as fires and tropical storms, have left many in the United States needing assistance. Just in October, while communities in South Carolina were struggling to recover from flooding damage, warnings were being sent out because of an influx of fake charities. These counterfeit charities, preying on the generosity of those wishing to do something to help the displaced and impacted, were taking people’s money and doing nothing to help those in need. Just a couple of days ago in New York, a company agreed to pay a settlement of $700,000 for pretending to collect secondhand clothing to help charities. Instead, this company sold the clothing, paid almost nothing to the charities and made profits of over $10 million dollars, it is estimated.

Because, even in situations where we should be helping others, there are those who are looking to help themselves at the cost of those around them, it is important to be vigilant.

  • It was Halloween yesterday and parents were checking to make sure that the treats that their kids collected were safe for consumption. Yes, people may appear to be doing good things, but it is only smart to make sure that everything is above-board.
  • Even though it may seem like a drag, check up on who you are giving your money or time to.
  • The name may sound familiar, but make sure it really is who you think it is.
  • If you feel uncomfortable about something, it is okay to say no. There are many opportunities to give back to those in need and you will find the opportunity where you are sure that what you are doing is benefitting those who need it.
  • Don’t give your personal information to anyone.
  • If you believe that you have been scammed, contact your local authorities and report it.

Giving is a vital part of what makes us communities. Just make sure that you are giving to the right people and not the unscrupulous scammers around. You know, like that obnoxious person in the neighborhood who decides that they just have to cross the street as the runners are passing by. Don’t give that guy the time of day.

Tagged , , , , , , ,

While We Are Making Plans


Because I live in the Northeastern part of the United States, I have become one of those people who lives for the brief summer months. There are only a few brief months of warmth and sunshine (and, often, humidity) in which to have a fun life. There are outdoor shows, there is the beach, there are picnics and that’s just a small sliver of all that needs to be done before the cold and darkness return. In my case, I had also signed up for a half marathon, to be run in the middle of October. Summer was my chance to keep on running and build my endurance and distance. When I run, I run on streets and have to deal with cracks in the sidewalk, people getting in my way and traffic. I am always on the lookout to stay safe and not hurt myself. So, in addition to all the stretching and foam rolling (never enough) that I do in order to prevent injury, on top of all of the careful calibration of distance that I do so that I don’t hurt myself by doing too much too soon, I am also keeping a watchful eye on every step that I take in order to keep myself safe and sound during my run.

Well, on a bright and sunny Sunday morning, at the beginning of August, I stepped out of my apartment building and into the parking lot, armed with a whole lot of recycling to put out. The next thing I knew, I had tripped over something (turned out to be a concrete block) and I was stumbling. The recycling flew out of my hands and the first thought that I had was, “this better not mess with my running”. In an attempt to break my fall, I jammed my leg into the ground and a sharp pain shot up my leg. I crumpled, in my mind, elegantly to the ground. It turns out that for all my measures to protect my body, all it took was taking out the trash in order to fracture my knee. I ended up with my knee in a brace and using a cane (that I still have). Throw in a surgery that I had in September and it turns out that this summer was not the summer I had imagined at all. An acquaintance said to me that life is what happens while we are making plans.

Most people business owners, similarly, spend a lot of time and invest a lot into protecting their businesses from most expected challenges. Depending on the size and complexity of the business, this will range from control systems to detect and prevent fraud and waste, to various reports that business owners and management use to monitor how the business is doing. The question that stands though is, what are business owners and management doing to deal with the unexpected or the events that they hope will never happen? Does the business have a disaster recovery plan? Has the business taken steps to encourage tips that will help uncover weaknesses in control systems and catch fraud and waste? Does the business know what it will do when fraud and waste are uncovered? Yes we make plans and take precautions, but are we ready to deal with what happens when the unexpected happens? Are we ready for, you know, life?

Tagged , , , ,