Category Archives: Travel Tales

Something’s Not Right

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When I was just heading into my teenage years, something was not right. Not with me, but with my mother. It was unsettling for me and then miserable. It was difficult enough to be heading into my teenage years but my mother was not helping by being off.

First of all, she began to act out of character. She would come home from work and ask for a glass of water with lots of ice in it. You may not see anything wrong with that, on the face of it, but it was plenty odd because my mother never drank glasses of water with lots of ice in them. And now she wanted a glass every night. To make things even more stressful for us, each glass was closely examined and if it was not perfect – not enough ice, water somehow looked cloudy, the glass was not perfectly polished – one of us kids would have to get a new glass and make sure that it was perfect this time.

Then there was the language. My mom started using new slang. For all I know now, she may have started hanging out with a new lunch buddy and picked up some phrases from this new friend. But, along with the water, this new language mom was freaking me out. It was truly odd. But the breaking point came, for me, one Saturday morning. I was following my mother around the house and she watered and spoke to her many, many plants. This was totally in character so that gave me some comfort and was likely the reason why I was hanging about with her that morning. Then I noticed that her dress didn’t quite fit. It was tight on my mom and that was, once again, out of character for her. What was going on?

That thought was still with me as I spent time alone that afternoon. What was going on? Well, after an afternoon of pondering, I had narrowed it down to two options. Either my mother was having an affair or she had been abducted by aliens and they had left an imposter alien in her place. My two options seemed to be the only options that made sense to me at the time – I had friends at school whose parents were going through divorce. Something about our conversations made me think that divorcing parents did not act like themselves. But, if it wasn’t divorce, it could only be aliens. I blame Star Trek for getting me to believe that my mother could be abducted and a poor replica, that wasn’t quite the same size and betrayed itself with its weird speech patterns and love of ice, be left in her place. Both options were devastating for me; either way I was losing my mother and that filled me with despair. I even cried a little that afternoon.

Fortunately for my state of mind, just that week, as though she knew what was going on with me, my mother broke the news. She was pregnant (some may say I was sort of right about the alien in her body). What a relief!

It turns out that, despite all the clues that I noticed, I came to a completely wrong conclusion about what was causing the changes in my mother. Fortunately all my wrong conclusions led to was an afternoon of sadness and tears. In the work place, the consequences of taking data, red flags and other clues to incorrect conclusions can be far more costly. A classic example is that of Rita Crundwell, who defrauded the city of Dixon of over $53 million. The people who worked with her saw that she had a growing stable of quarter horses and was often traveling far and wide with these horses. They assumed that the horses paid for themselves and more and this was how she could afford to keep them. People in the horse world, who knew that horses cost more than they made, thought that she had some kind of trust fund that paid for her extravagant lifestyle. When Rita would not let anyone do her work, or even collect her mail, they thought she was being a great treasurer who diligently controlled her city’s budget. No one saw all the clues and thought she was embezzling money.

If someone was paying attention to the clues and knew how to analyze all the red flags that Rita Crundwell left in her wake, her fraud would never have lasted for the two decades that it did. If, for instance, the city had taken on the services of a forensic CPA to analyze, design and implement control systems and to help them with fraud prevention and deterrence, they may not have lost over $53 million to Crundwell.

This is an excellent reminder of how important it is to have a CPA, with experience and qualifications in financial forensics, to analyze and assess your business’s operations and finances to see what clues are there and what those clues really mean. You may notice that things are amiss, but how willing are you to accept how expensive coming to the wrong conclusion can be for you?

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Communications Addendum

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I was just in the Dominican Republic on a birthday/honeymoon/Thanksgiving trip. They say that people don’t do it well, but I think that we are doing a great job of multitasking vacations. However, I digress, as I am wont to do.

My husband lives for surfing. He checks the weather, daily, to see how it will affect the waves. He goes surfing, in the dead of winter, in New York City and, if that isn’t dedication, I don’t know what is. I get frostbite just thinking about it. When we travel, we often look to go to places where he can surf and, while he is surfing, I either go for a run or I take a surfing lesson.

During our multitasking vacation, I took a lesson. The lesson started out on the beach, with a session on technique. That went very well; it is very easy to surf on an immobile board that sits on sand. After this session, we were then each sent out with a board and an instructor. In addition to the challenge of keeping water out of my nose and mouth and, of course, trying to ride the waves, while standing on my board, I had to figure out how to communicate with Francisco, my instructor. My Spanish does not even qualify as rudimentary and, even though Francisco’s English was decent, I managed to do odd things on the board that he struggled to explain. Instead of giving up on me, he called on his co-instructors to bring together what English each knew. And they came up with a complete critique of my surfing technique, or lack thereof. My ego could have done with less resourcefulness, but my drive to succeed on the board appreciated it. The collaboration of these men was able to cover a lot of issues and, in no time, I was standing on my board and feeling rather accomplished.

Francisco, reinforced, for me, the power of collaboration, effective communication and, without a doubt, of having someone find you the perfect wave to ride. Gracias!

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Desperate Needs, Gouging Measures…

IMG_2231When I lived and worked in Zimbabwe, my parents and I lived in different cities, about an eight-hour drive apart. My father, however, was in town at least once a month for meetings and, when he came to town, we would meet for and evening of dinner and catching up. On one such evening, we were sitting in his hotel suite, eating dinner and watching the news. There was a piece on about an Ebola outbreak in the Democratic Republic of Congo. At the time, people were speculating that people living in the area where the outbreak had occurred had come across dead animals in the forests and had eaten them. Handling the dead animals (which had been killed by the Ebola virus) had infected them with the virus. I looked over at my father and said, “Why would they eat a random dead animal they came across in the woods? I mean, wouldn’t they ask themselves what had killed this animal and wouldn’t they be scared of being killed by the same thing?”

My father looked at me and said, “My dear, you can’t judge them. You don’t know what you would do if you were starving? Who knows what you would eat.”

Since, at that moment I was working my way through a three-course dinner, it didn’t seem like the appropriate moment to argue with my father, but I was pretty sure that no kind of hunger would lead me to eat dodgy food. I do know now that I was judging because I am fortunate enough to have many food options.

It turns out that investigators now think that fruit bats, not mysteriously dead animals are to blame for the spread of Ebola, but I thought about this conversation with my father when I read a piece in the New York Times about usury charges being brought against several payday loan companies, their owner and two of his associates. Usury is one of those not often heard words that is at home in the bible or a Shakespeare play, but it basically is illegally lending money at very high interest rates. I first heard analysis of payday loans on the NPR podcast, Planet Money, who, in 2010, discussed payday lenders. The concept of a payday loan is that people take out a small loan that is that is then paid back using the borrower’s next pay check. These loans, however, charge much higher interest rates than banks or credit cards do. The Planet Money episode referred to rates of over 500%. A more recent Planet Money piece spoke of a loan being offered at an annual interest rate of over1,300%. Many people debate payday loans and the people who take them out. Some argue that people who take out these loans are people who are irresponsible with their money and the payday loan rates are so high because the borrowers are risky. Others will talk about how payday lenders target people with low incomes and get them into a cycle where they end up spending years paying high fees and never being able to repay their initial balances.

In the state of New York, all this debate is moot because payday loans are illegal. When announcing the indictments, on 12 August, the Manhattan District Attorney, Cyril Vance, encouraged victims of payday lending schemes to call the Major Economic Crimes hotline. This is important to know, whether you received the loan at a storefront or online, the practice is illegal in New York, seventeen other states and District of Columbia. This is because, when people feel they have few options, people with few scruples like to take advantage of the situation. These are the types of people who offer to lend you $750 for a week, at a cost of $225. To make this point clearer, if you borrowed that $750 for a year and paid this interest on the loan every week, you would pay a total of $11,700 in interest. That is a lot of money to pay for $750 and I think that most people would agree that charging that kind of interest qualifies as usury.

Even if payday loans are legal where you live, the lenders still have to comply with rules that govern their industry. If you believe that you or someone you know is being taken advantage of, with regard to a payday loan, you can either call your local district attorney’s offices or get in touch with the Consumer Financial Protection Bureau (CFPB), which is the federal agency whose mission is to protect consumers of financial products. It is important to know that there are protections in the system and there may be more options than you think, when it comes to finding ways to pay debts or make ends meet and not every option involves interest rates that would make your calculator give you the side-eye. Knowledge is power and sometimes knowledge can also save you money and keep you from having your rights violated.

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A Better Mousetrap

IMG_2078Growing up, Saturday was the day that my mother ran errands and, because she tended to attack several items on her to-do list in one car trip, she tended to drag us along with her. At times errands involved going to the grocery shopping and this invariably meant my mother paid the bill by check. Now, writing out a check takes long enough but my mother never rushed the process, and I mean never. She would write out the check amount in numbers and words, pausing to direct the packer not to mix food types in the same bag. She would sign the check slowly, and beautifully and then, just when you thought she was done, she would balance her checkbook. It did not matter how long the line behind her was, she would take her time and complete her process. It did not matter how much grumbling was going on, she would ignore everyone, as she made sure that her numbers were correct.

Last week, I returned from an amazing trip to Zimbabwe, where I was the maid of honor at my sister’s wedding. I love traveling to Zimbabwe for countless reasons; one of these is seeing the changes to the financial systems that I see every time I go back. My last trip to Zimbabwe was a little over a year ago and I wrote about the process I went through in order to get a prepaid phone line. During this trip, I only had to deal with two people and I did not have to travel from one desk to another in order to get things done. I still had to hand over identification but this time, I could hand over the original and the phone company made a copy for me. The system was more computerized and I only needed to deal with one agent but I left with sufficient paperwork for my transaction. The SIM card for my phone line and airtime both had pre-printed serial numbers and I also received one receipt for my transaction, where I bought a line and airtime.

Just about everywhere I went, I was struck by the technological advancements since my last trip. More and more transactions are becoming completely computerized and the changes give me the opportunity to observe whether the advancements have weakened control systems and whether the designs of the new systems took control systems into account. One place where we saw significant changes was with the highway toll system. Last year, most of the toll stations were merely agents standing at a point in the road, with armed guards to make sure that no one tried to fly through the stations without paying. This year, there were built up with automatic booms that let drivers through, after they had paid. These stations had cameras installed in various places and these cameras transmitted images to a central office, as one of the controls to ensure that all vehicles passing through the stations were charged. Just as had happened the year before, every time we drove through a toll station, we received a receipt for our payment. The additional controls, such as the automatic boom and the cameras, added layers of controls without adding time to the process of going through the tollgates.

The challenge, when it comes to the technological advancements, is to ensure that those using them do not pave their cowpaths. This is a concept very well explained by Tom Hood. There is a big risk of using new technologies to do the same things in the same way; instead of using these technologies reimagine processes. It is very easy to dress up the same old processes in a fancy new exterior and convince yourself that you have created a new process. I shall keep taking notes during my future trips, as technological advancements continue to see whether people are paving cowpaths or creating superhighways.

Thankfully for those standing in line behind her, my mother no longer writes checks when she goes shopping. She has found new ways to keep track of her finances that ensure that her numbers are correct but that take less time than writing a check and balancing her checkbook used to. I even had a paper trail for the exhilarating lion walk that I went on at Antelope Park, a lion conservancy just outside Gweru, in Zimbabwe. I had a receipt for my payment and I also signed an indemnity form to prove that I went willingly, just in case the lions got grumpy, smelt my fear or just wanted to play with me with their massive paws!

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Step Away From The Dice

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I just spent a lovely weekend in Atlantic City, celebrating a friend’s birthday. During this time I ran past several casinos, I walked through a casino but, happily, I did not spend any time at all gambling at the casino. I say happily because I am a terrible gambler. The mere thought of gambling fills me with anxiety because I have no idea what I’m doing out there. The only thing I do know is that the odds are stacked against me, more so because I don’t know what I am doing. I never learned how to play poker, beyond yelling “big money, big money” I don’t know the rules of roulette and even when sitting in front of a one-armed bandit, I am pretty sure that I am not quite doing it correctly.  The one thing I do know, when I am in a casino, is who to NOT consult for help. The pit manager. Because the allegiance of pit managers is to the casino so I know that helping me win money is not a priority for them. In fact, in order for the pit managers to keep working, we the gamblers need to lose more than we win.

This brought to mind an article I read about Philip Ramatlhware who walked into a Philadelphia Citibank branch to open a regular bank account where he could deposit the proceeds from a settlement with Greyhound. He had been injured in a bus accident and received $225,000 and wanted to keep his money safe. All he wanted was a savings account but he was referred to a broker who assured Mr. Ramatlhware, a man with limited English skills and without a college education, that his money was going into “guaranteed” funds. Instead, in less than six months, he lost $40,000. This is not an isolated case. Digging into the archives of the Financial Industry Regulatory Authority (FINRA), which is an independent regulator of security firms doing business with the public, you can find several cases where individuals walked into commercial banks, seeking a safe, FDIC insured place to put their savings and ended up losing money through risky investments that they could not understand. That they could not understand the risky investments was not only because these investments were complex ones but also because the brokers they met with misrepresented the risks involved and was not clear about where the money was going. It is, to a certain extent, understandable that these customers were easily misled – they believed they were going to a commercial bank and not an investment bank.

Back in 1933, the Banking Act of 1933 was enacted and it included four provisions that are what is generally meant when people speak of  the Glass-Steagall Act. The provisions served to, in essence, separate commercial banking and investment banking. They kept commercial banks from dealing in securities for their customers. The funds that customers deposited into commercial banks, as I mentioned before, were insured by the FDIC and were not to be used for speculation. They were to be considered safe by the banks’ customers. Conversely, risk-taking investment banks were not to take in deposits. So, you may be wondering how, with Glass-Steagall in effect, Mr. Ramtlhware and walked into a commercial bank and ended up investing with an investment bank broker. This is because Glass-Steagall was repealed in 1999, leaving banks able to deal in both commercial and investment banking at the same time. This means that investments that are complicated and very risky and should be reserved for so-called sophisticated investors are being marketed and sold to people who think they are dealing with the relatively safe offerings of a commercial bank, do not fully comprehend what they are getting into and who generally cannot afford to lose the money they end up investing in risky offerings.

As long as the wall between commercial and investment banks continues to be virtually non-existent, potential customers walking into commercial banks are going to have to start asking more questions at the bank:

  • Is my deposit insured by the FDIC?
  • Are you a broker?
  • If I am just depositing money into a risk-free guaranteed account, why does it come with all of this complicated paperwork?

Should you find that you have been taken for a ride by your bank, know that you have resources you can turn to in order to have your case heard. FINRA offers advice to investors that probably will not turn you into a sophisticated investor but may go a long to helping you recognize some of the strategies an unscrupulous broker may employ. Also you can take your case to FINRA or, in the case of fraud, the Department of Justice. Though you may believe that you are walking into a commercial bank and dealing with a customer service representative who wants to help you, you should be careful in the banks for sometimes you may come across a pit manager who is trying to make as much money as possible for the investment bank casino.

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Money Trails

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I mentioned, last week, that I traveled to Zimbabwe and Mozambique. After my experiences during this, and our previous trip, in 2010, I am now pretty convinced that the government system and most companies were created by old school accountants and that very little has changed since then. It is a great reminder of how important having a good financial control system is. In our mostly virtual and paperless modern transactions, people tend to think less about how a transaction can be traced. Not so long ago, when business was more manual, it was easier to see the path a transaction took from inception to completion. One could refer to a stack of papers to see who gave their okay to a process. The separation of duties was also much clearer as documents tended to be manually moved from one place to another, or employees had physical custody over paperwork. These days, as these systems and documents have disappeared into the computer and cloud, it has become more challenging for those running corporations and institutions to think through a process and determine adequate controls and paper trails, virtual though they may be.

However, in Zimbabwe, often transactions are quite manual and, even when they are not, they are quite involved and can involve a lot of paperwork. I mentioned getting my prepaid phone line – let me tell you the process:

  1. I first had to provide a copy of my identification and fill out an application form for a SIM card. This means that it would be pretty impossible to have one of those crime show episodes where the trail for a criminal goes cold because everything was done using prepaid phones and so no one knows who the line was purchased by.
  2. I took this form to the cashier who gave me a receipt for the one dollar I had to pay in order to buy the phone line.
  3. I then took my receipt to a customer service representative, who was sitting in the booth next to the cashier’s. The representative gave us a SIM card and activated the phone line for us. We then needed air time.
  4. With proof of our activated phone line, we then went back to the cashier and paid for air time.
  5. We left the phone store with a phone line, air time and a bunch of receipts.

Our experience was similar at the border, when traveling from Mozambique to Zimbabwe – we gave payment to one person, were issued a receipt and then and received our visa from another person. As frustrating as it was to walk back and forth in order to get through the process, it was fascinating for me to see the clear separation of duties and the generation of a paper trail.

Most fun was when we received our gifts after our wedding. The afternoon after the wedding, my aunt and cousin came by with an envelope of money and the personalized gift receipt book you see above. It turns out that, during the reception, a team of wonderful volunteers, sat at a desk and received gifts from wedding guests. They then placed a piece of carbon paper (who knew that still existed) between two pages of the receipt book. After filling out the details of the receipt, they tore out and gave the original to the guest (as proof that the volunteers had received the funds) and the carbon copy remained in the prenumbered guest receipt book. Yes, numbered receipts for wedding gifts – who knew?

It is fantastic that many processes have become automated and that transactions are now completely more quickly and, hopefully, more efficiently than years ago. It is important, however, to make sure that controls and safeguards are not sacrificed in the name of efficiency. The separation of duties may feel tedious but having more than one person involved in a process means that, if one person is flouting the system and perhaps even misappropriating assets, there is at least one other person to blow the whistle on what is going on. Having an audit trail (paper or virtual) can seem overly meticulous until one needs to determine whether a transaction is valid. Creating, monitoring and maintaining a strong financial system is a much better proposition than trying to recover assets and rebuild a business after a fraud has occurred.

Also, you could get a lovely, personalized gift receipt book as part of the deal.

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