Category Archives: Where We Are

Who Is The Accountant?

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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!

 

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Checking Up

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Several years ago, I was working on an assignment that had me flying out to Boca Raton, Florida, every Monday and returning to New York City on Friday night. It was great because it was a brutal winter in New York City and pleasantly warm in Boca Raton. It was terrible because it was close to impossible to get anything done over the weekend. One week, I had to admit that there I needed to get one of my teeth looked at. It had been causing me some pain and I knew I had to sort it out before it started hurting a lot. My challenge was to find a dentist who took patients on weekend days and who I could get to easily. I found one online and went in to see him on a Saturday morning. He determined that I needed a filling fixed and he got to work. What I remember about that day is how incredibly painful it was and how unsympathetically the dentist kept ordering me to “be strong”. I was traumatized – so much so that I did not go anywhere near a dentist’s office for years after that. I knew I should, but the memory of the pain and a dentist who was in need of a heart kept me away. Other aspects of my body were very well taken of; I went to my annual physical and that was always a pleasure, compared to my dental disaster. I brushed my teeth but, other than that, they were pretty much on their own.

One nights, I fell asleep while sucking on a throat sweet and, the next morning, I woke up feeling as though my teeth were about to fall out of my head. I was in a panic; I was too young to be toothless. I was desperate and looked up dentists located close to my office. Thankfully, I was able to find a dentist, a few blocks away, who was able to fit me in that very day. As he examined me, a poem from my childhood, “Oh, I Wish I’d Looked After Me Teeth” ran through my head. Fortunately, this time around, I get to keep my teeth. My dentist was a great guy who doesn’t believe in causing pain and suffering and NEVER says to me, “be strong”. I did, however, have to go through a series of appointments to repair the damage that had accumulated over the years that I had avoided the dentist, dentist I could have avoided. I have not missed an appointment since, although I get nervous when the machine turns on, even just to polish my teeth.

Like my teeth, a business needs regular checkups to maintain its financial health. Yes, a lot of companies review their financials on a monthly or quarterly basis, but how many are assessing their control systems and taking steps to update and analyze how they prevent and detect fraud? The fact that the median length of a fraud is 18 months before it is detected and that many frauds can last many years as in the cases of Bernie Madoff and Rita Crundwell, to name a few high profile cases, implies that these steps are not taken often and rigorously enough. No one really thinks that it will happen to them and some people think that their finance department, accountant or auditor will keep them safe from fraud. This is because they do not fully understand the roles and duties of their auditors and accountants. Other people don’t want to spend the money on fraud prevention and detection. However, when you start thinking that Rita Crundwell stole over $54 million and a quick search of the internet brings up many other recent cases of embezzlement of millions of dollars that have been discovered. There are many more that either have not been recorded or are of lesser amounts.

Think about this:

  • Fraud goes on for an average of 18 months but many go on for much longer.
  • Usually fraudsters start out stealing a little money but as times goes on and they are not caught, the amounts stolen grow and grow and grow
  • The knowledge that a company has allowed theft to go on under its nose for years can negatively affect its reputation, leading people to believe that it may not be a safe and ethical place to do business

These are just a few things to think about when it comes to detecting and preventing fraud in your company. It only makes sense to get a qualified Forensic Accountant, Certified in Financial Forensics to assess and evaluate your companies systems in order to beef up your fraud prevention programs and also, perhaps to detect possible fraud? Now, I learnt a very painful lesson before I started to take care of my teeth. Do you want to learn a hard, and possibly expensive, lesson before you take proper care of your business?

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All For Love

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“Valentine’s Day; red roses
It’s said that some have died for love.
In North Clark Street, Chicago
They died for money…”

It was with those words, uttered by Laurence Olivier, on a Paul Hardcastle song about greed, that Al Capone first fascinated me. It started with that tale of the St. Valentine’s Day Massacre – “It’s a good day to die,” the gangster laughed in a scene in the video – and it continued as I learned more about his legacy as a famous gangster. I mean, as perennially single as I have been most of my life, I have been known to don black clothing and disdain on February 14th, but to shoot a bunch of people on that day? That just seemed a little much. You couldn’t wait until the 15th? What kind of person does that? I found out that others were similarly outraged by Capone’s actions and expended a lot of time and energy trying to bring him down.

A few weeks ago, I was reminded of Al Capone when I spoke with Meredith Engel of The New York Daily News. She was reporting on the financial issues faced by those in the marijuana business. Marijuana is legal in some states, such as Colorado and Washington, but is still illegal on a federal level. This dichotomy may lead to confusion on what income is taxable on a state level, where pot is legal, and on a federal level, where it is illegal.

What does this have to do with Al Capone? Well, despite being blamed for the St. Valentine’s Day Massacre, among other murders, and in spite of being investigated for racketeering and his bootlegging business, the authorities struggled to get Capone convicted on his gang-related crimes. However, there was a government agency that he had not seriously considered; the IRS. You see, it does not matter where your income comes from, be it from legal or illegal sources, you have to pay taxes on it.

It doesn’t matter whether you are selling pot or stealing from your boss, if you don’t pay taxes on that money coming into you, you cold find yourself in trouble with the IRS, ranging from interest and fines to imprisonment. Federal agents couldn’t find enough evidence to pin murder on Al Capone, but they were able to use forensic accounting methods to put together enough evidence to indict Capone on tax evasion charges. He was sentenced to 11 years in prison, was fined $50,000, was charged $7,692 in court costs and $215,000 plus interested in back taxes.

Preparing a tax return can get rather complicated. Figuring what deductions, exemptions and credits you are eligible for can be a like navigating a maze. However, the most simple part of the tax return is the income that you start with. If you don’t want to get into trouble with the IRS – REPORT ALL OF IT, regardless of how you came about it.

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Ripped From My Headlines?

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“Aren’t you excited that they’re making a show about you?” This is how my friend, Tabeel, greeted me this morning.

A show about me and I haven’t been telling you all about it? Well, let me tell you, I’m as surprised as you are, but very delighted about the news. It’s about time. I watch way more than my share of crime shows. I have watched so much vintage Law & Order that I can pretty much tell when we are going to move from the Order to the Law and I can see a twist coming a mile away. When I see a new crime show being advertised on TV, I am pretty much always willing to give it a chance. I am held back from watching more crime-related shows because there are only 24 hours in day and I waste a lot of that time sleeping, working and interacting with the real world. For all the great and wonderful things that the shows do for me, I have a recurring gripe.

Every once in a while, on these shows, the investigators will have to solve a money-related issue and they’ll call in the forensic accountant. The guy, and it’s always a guy, who shows up always looks like he has not seen the light of day in years and appears to have forgotten how to interact with other human beings. His clothes and hair are out of style and the other investigators only put up with him because he talks, geekily, about where the money that they are trying to find went. The forensic accountant is that one guy on the show that no one wants to be. I mean, the coroners are more exciting than the forensic accountant and they deal with corpses!

But all of that is about to change. It is as though someone with access to a television network has been listening in on my conversations and hearing me yelling at the television. Tabeel shared with me that Shonda Rhimes is adding a new show to her resume, “The Catch”, and this show is a show about a forensic accountant. Not a show where a forensic accountant is released from the dungeon every once in a while, to look at numbers. The main character is a forensic accountant and the forensic accountant is a woman! Finally, someone found the right ear to whisper in – the stereotype is not reality. There is so much more to a forensic accountant than we have seen so far on television. At last, someone has decided to make a show about me!

I mean it totally has to be a show about me, right? A female, forensic accountant who is likely to be kick-ass and have many clever and insightful things to say. That’s totally how I roll. I look forward to this show, in between the dramatic twists and cliffhangers, highlighting some of the processes and nuances of what forensic accounting is about.It may begin a movement until finally Law & Order FAU (Forensic Accounting Unit) is launched. The forensic accountant is busting out of the basement and she’s taking no prisoners! Well, there probably be a lot of prisoners but you get what I’m saying. Look out for it, set your DVRs and dive into the world of the crime-fighting CPA!

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The Sheriff in Town!

When I first went to university, I was unsure what I wanted to major in. I had been considering chemistry, because I fancied that I might be the person to come up with a cure for AIDS. At the idealistic age of 18, I was so sure that I could use the colorful magic of gas chromatography to come up with a solution that many experienced scientists with doctoral degrees had been unable to discover. I signed up for a chemistry class and, I decided to take an elective in economics. I was hooked after my first class and ended up majoring in economics. I was fascinated by various theories and the push and pull between fiscal and monetary policies. I did come away from my class knowing one thing – I wanted to work for the Federal Reserve System, home of US monetary policy. To me, to be part of an organization that was focused on what to do in order to best positively influence the economy of the entire nation was awesome! Federal Reserve Banks issue the money that we use; how cool is that? I remember going to a campus career fair and spending most of my time there chatting with a representative from the Fed. Following that conversation, getting a job at the Fed was my dream. One big obstacle stood in my way; at the time, I was not a US citizen. I was devastated but I still dreamt that one day I would either be a citizen or the Fed would change its policies, whichever came first. At the time, as an economist in training, my dream was to be an analyst.

As time has gone by (I am a citizen now) and I have gone on to add becoming a CPA and then getting Certified in Financial Forensics to my skill set, my interest in the Fed and what it does has grown. After graduating, with my degree in economics and mathematics, I went on to work at a bank, where I was an analyst. I was very excited about the opportunity to apply the theory I had learnt in college. I had not bargained on how people are not very good at following the rules, be they the rules of logic or the rule of law. I mean, how many times have you said, “Who would do that,” or “Why did they act that way? It doesn’t make sense”? Yep, we humans use our free will in the nuttiest ways. Just last week, I read a crazy story about a Georgia woman filing a tax return for a $94 million dollar refund. Every aspect of the story is insane, from her 100 dependents to thinking that she could pick up her refund check at a local Kroger grocery store, and yet she is neither the first or last person to attempt this kind of thing. So, after the monetary policy folks have come up with their ideas about how best to influence the economy, there need to be the people who make sure that people are not breaking the rules and people who create control systems and audit them to minimize the risk of people breaking the rules. This is where forensic accountants come into play at the Fed.

Forensic Accountants, both those Certified in Financial Forensics and those who are Certified Fraud Examiners, can be found in the audit and enforcement areas of the Federal Reserve System. The saying is that love makes the world go around, but we are all aware that money is a big motivator for who many people behave. I have written about the fraud triangle and how people in positions of trust and authority will break the law in pursuit of illicit gain. With this in mind, it is vital to assess and improve control systems to make sure that, starting at the top financial institution, there is little opportunity for those who feel the pressure to commit financial crime. If the top bank cannot keep money safe, what hope is there for the rest of them? The Fed has bank examiners whose goal is to ensure that banks comply with laws such as those governing anti-money laundering and doing business with nations and people that the US government has imposed sanctions upon. The Fed plays an important role as an independent third party that will objectively assess operations at the banks that they supervise to make sure that they are not, for example, helping criminal rings hide their ill-gotten gains.

There are twelve banks in the Federal Reserve System and each bill of paper money that you have incorporates, in its serial number, the letter assigned to bank that issued that bill. Pull out a banknote, be it a dollar or a $100 bill, it will have the letter of the particular Federal Reserve Bank that issued it, be it Boston, San Francisco or any of the ones in between. In the case of the dollar bill, the name of the issuing bank is also noted on the bill. It goes almost without saying that the institution that issues the money that we use should have top notch controls. Each Federal Reserve Bank, therefore, has audit departments that are constantly reviewing it and making sure that the banks are complying with the rules. The auditors also work to improve systems. Every day, people are spending a lot of time and energy trying to figure out how to game the system and so those at the Fed should spend at least as much time and energy working to keep the banks safe and compliant.

Though my focus has changed, my excitement when it comes to the Fed is unabated. Not only are they working on monetary policy, they are also working to make sure that the rules are not being broken and that the opportunity to defraud, steal or abet crime is diminished. Take a look at the money in your wallet and think about what goes into making it worth what it is worth.

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Hear Ye, Hear Ye! It’s The Future!

 

Toward the end of June, I went into the New York State Society of CPAs offices (very lovely offices, I must say) to be part of a roundtable discussion on the future of the accounting profession. The discussion was distilled into a piece in August’s CPA Journal. Personal interest aside, it is a great read with a diversity of opinions on various issues regarding the CPA profession and the value of the designation. Along with me were three other professionals, all with different career paths within the designation of CPA. Somya Munjal is the founder of CPA for the People, which is a CPA services, business consulting and social venture firm. She is also the founder of Youthful Savings, whose mission is “empowering the next generation with financial education and entrepreneurship training”. Michael Durant is working on his master’s degree in taxation, while pursuing his CPA designation. That’s right, a master’s in taxation; that should begin to convey just how complicated taxation can be. Michael is also the cochairman of the advisory board for the Bronx School of Law and Finance, a school that he is an alumnus of. Jordan Frey is a senior account in EisnerAmper’s private business services group. As you can see on the company’s website, the group provides a wide range of services to businesses of all types and sizes. And then there is me – figuring financial forensics. So, in a room of four CPAs, you have a tax man, a social venture, financial education and entrepreneurship training guru, a private business services expert and a forensic accountant. Walking into the room, I was encouraged to find that I was in a room with people who validate my claims about the variety of professional paths that a CPA can take. It’s always a good feeling when your claims are validated.

We had a very interesting discussion about the different directions in which our CPA designation was taking us and, for all the differences in career we had, we had some real similarities. We were drawn by the high standards and ethics that are integral to being a CPA. I have written about how a CPA is considered to be a trusted professional, a characteristic that is an asset in someone you are dealing with when it comes to financial matters. I am happy to find that I am not alone. It is one thing for me to stand on my soap box and wax lyrical about the virtues of the CPA; it is completely something else, in a very good way, to be in a room with others who feel as passionately as I do about what we do.

I am sharing our conversations with you and, if you feel as though reading The CPA Journal diminishes your street cred, you can throw in a little Wu Tang Clan as your backing track, as you read a little bit about the future…

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It’s In The Mail

ImageIn one of my previous lives, I worked for a company that, among its various business ventures, owned a mailboxes service. I would pop in occasionally to see how this and other nearby businesses were doing and, on one such visit, I found myself in the middle of an adventure. In the morning, shortly after the store opened, a man walked in and flashed his very impressive-looking badge. He explained that a woman was going to come in later in the day to pick up a package and that he needed to be present when this happened. Unsure what was going on, yet thoroughly impressed by the badge, the store’s staff agreed to let the man set himself up behind the counter, in wait for the woman. In no time, the man had settled himself in a chair, opened up a newspaper and blended into the scenery. A short while later, the store’s phone rang and one of the store’s employees answered a call for the woman they were waiting for. She asked if her package had arrived. Upon hearing that it had, she requested that someone bring it out to her car, as she was waiting outside the store. The employee explained that it was the store’s policy that all customers come in to pick up and sign for their own packages. After a short back and forth, he hung up the phone and a few minutes later a small woman in massive sunglasses walked in. The agent paid her no notice and appeared, instead, to be engrossed in a phone conversation with a friend. The woman signed for her package and turned to leave with it. As she did so, the agent whispered urgently into his phone and, suddenly, the mailboxes store turned into a scene straight out of the movies. Men in dark glasses, holding guns, burst in through the door, our agent behind the counter surged forward and, in no time, the woman was under arrest and her box was in their custody. Before he left, the agent explained that this woman was one of a group of people shipping some drug along the lines of PCP. Suffice to say, we were all pretty speechless and the most amazing thing of all? These guys worked for the US Postal Service. Yes, those folks who will let “Neither snow nor rain nor heat…” keep them from delivering your mail will not let crime hang out in their system either.

The United States Postal Inspection Service, founded by Benjamin Franklin, is the primary law enforcement arm of the US Postal Service and one of the oldest federal law enforcement agencies in the United States. Their goal is to protect against those who  “attack our nation’s postal system and misuse it to defraud, endanger, or otherwise threaten the American public.” You would be amazed how many criminals use the postal service as a conduit for perpetuating their crimes (using services such as UPS and FedEx for crimes that cross state lines is also covered by these laws). When Charles Ponzi was arrested for taking people’s money in a giant fraud that came to be known by his last name, the Ponzi Scheme, he was arrested by the US Postal Inspection Service because he had used the mail system to write to his investors, encouraging them to reinvest their funds.  He was charged with and went to jail for mail fraud.

If a person sends you mail in order to ensnare you in some kind of scam, to make an illegal delivery or to otherwise commit a crime, that is mail fraud. Conversely, if someone has scammed you and you end up sending that person money or some other item of value, that too is also considered mail fraud and that person can be prosecuted for it. Since a lot of mail fraud involves financial schemes, the work of financial forensics experts is quite important in the crime fighting work of the US Postal Inspection Service. If, for example, a person were running a pyramid scheme that involves people mailing in funds to invest in the scheme, a forensic accountant would be needed to track and follow the money trail and build a case against the criminal carrying out the scheme. Also, say you received a solicitation to send money to a fake charity and you sent payment in the mail. A forensic CPA’s skills would go a long way in exposing and putting a stop to the bad deeds of the fake charity.

The US Postal Service provides a very important service. It is well known that stealing mail is a federal crime but few realize just how far the US Postal Service and its law enforcement agents go to maintain the integrity of the postal service. Much trust is placed in those blue boxes and this is because of the work of these agents.

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Things Fall Apart

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Divorce. Just about nobody wants to deal with that. However, just about everybody knows that, in order to best navigate what can be a rather complicated process, if they are getting divorced, they should get a lawyer. How many think – I should probably get an accountant too? That’s right – an accountant. During a marriage, couples will acquire property, share incomes and perhaps even have children. Should they split, it is almost never a simple matter of just walking away. There may be a home (or homes) to consider, issues of child and spousal support and other financial assets that will be taken by one or the other spouse. These many financial aspects to divorce  can be very challenging to resolve, and this is where the services of a forensic accountant can be well utilized.

The services can be as straightforward as preparing a spouse’s statement of net worth.  The forensic CPA’s understanding of and experience with financial statements and tax return documents will help make this process more efficient, and less likely to contain errors, than trying to prepare the statement yourself. Trying to correct net worth numbers after a divorce is finalized is a huge headache that most would probably want to do without. The need for the specialized skills and qualifications of a forensic CPA  come into play when a divorce involves more substantial and complicated assets. During a marriage couples may accumulate property, own and operate businesses, or incur debts. Forensic accountants will investigate the locations, value and character of the assets and income of the divorcing couple and present this financial information and testimony in court.

The location of assets and income is simple enough concept. Sometimes a divorcing spouse who wishes to minimize alimony or child support payments may try to hide their true income. Especially when the spouse is self-employed or has various sources of income, a forensic accountant may need to use various methods to trace and recalculate hidden income. In addition to tracing hidden income, a forensic account will assess the current value of property and other non-cash assets. What also comes into play in a divorce proceeding is the character of the property and debts. Where a divorcing couple resides decides to a large extent whether property will be viewed as community, equitable or separate. A state’s marital, financial and tax laws determine how the marital estate will be divided, how spousal and child support will be calculated and it is, therefore, very important that a divorcing party engages experienced divorce attorneys and forensic accountants who are experienced in family law.

For instance, when a couple has been married for many years, trying to determine the character of an asset can be a challenge. A forensic accountant may be needed to trace that asset back many years, and possibly through various investments, to figure out the source of the original funds used to purchase the assets. Sometimes separate property has been mixed with community property (which is completely understandable as most believe their marriage will be permanent). In these cases, it is important to have a professional who can use acceptable methods to identify the different types of property to a level that is acceptable in a court of law. Things can get really complicated. For example:

  • What if one spouse comes to the marriage with separate property which carries debt. During the marriage payments on this property. Are those payments made with separate or community funds? Will that change the character of the property as a whole, or in part or not at all?
  • What about if one spouse comes to the marriage with a business that she or he works in during the marriage. At the time of the divorce, can the other spouse claim a part of the increase in value of the business? How could their contribution be assessed if at all?

Using presiding laws and their expertise, forensic accountants work to provide the evidence and calculations that the judge will use to come to conclusions about the apportionment of assets and income.

Another way in which the skills of a forensic accountant are used are during the discovery phase. This is the part of the divorce process where the lawyers gather information, documents and other evidence that they will then use to resolve the case. Discovery involves requesting and collecting documents, asking questions of various parties that must be answered, under oath, in either written form or in the presence of a court stenographer, issuing subpoenas, and asking the opposing party to admit that items on a list of statements are true. Credentialed forensic accountants are very important during discovery as they can help the attorneys draft documents, analyze and assess whether or not documents received are reliable and useful. They can help the lawyers put together the lists of the documents that they should request from the opposing parties.

The stress of dealing with a divorce can be better managed by engaging the services of a qualified professional who has an understanding of

  • tax issues,
  • financial statements,
  • tracing financial transactions,
  • analyzing the value and character of assets and liabilities, and
  • understanding the machinations of the local legal system.

Together with your lawyer, should you have to go through a divorce, a certified and experienced forensic accountant can help make the process less of a drama.

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All Over This One

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In the United States, bribery of a public official is illegal. Public officials, on a state, local or national level, tend to hold a lot of power. It would not be right to allow those among us with deep pockets to use the contents of said pockets to get unfair benefits, such as no-bid contracts, tax breaks and “get out of jail free” passes. In 1977, the Foreign Corrupt Practices Act (FCPA) made it illegal for U.S. persons, companies and their subsidiaries to bribe foreign government officials. The FCPA was further amended in 1998 to apply to foreign people and companies whose payments pass through the United States. The FCPA also applies if a foreign party authorizes a bribe via an email that is stored on a server in the United States. It is a far-reaching law with two main provisions – an anti-bribery provision that is generally enforced by the U.S. Department of Justice (DOJ) and accounting and record-keeping provision that is generally enforced by the Securities and Exchange Commission (SEC).

A huge incentive to not violate the FCPA is the severity of the punishment. The criminal and civil fines for violating the FCPA apply to companies and individuals alike. Companies can be fined up to a maximum of twice the benefits sought by the bribe. For individuals, fines can be up to $5 million and 20 years in jail. Fines and jail time can apply for either the corrupt payment or violation of the books and records provision. In addition to the fines, companies may also receive sanctions such as the loss of export licenses and disqualification from U.S. government contracting. For example, in 2008, Siemens was fined more than $1.3 billion by the DOJ, the SEC and German regulators and, more recently, Walmart is under investigation for bribery of officials in Mexico, China and elsewhere.

To avoid the fines and jail time, individuals and firms must comply with both provisions of the FCPA. The first, bribery, seems straightforward but I shall go over it so we are clear.

  1. Do not make payments to public officials in order to get special favors. An officer at state-owned entity is also considered a public official. It is safest, and ethical, to not pay bribes to anyone. However, be mindful of the fact that bribes of public officials will get you into the most trouble.
  2. If you invite public officials on a trip to show off your business or to a conference, do not throw in extras, such as a trip to Disneyland for their family. Keep it all above-board and about business.
  3. “Gifts” such as watches that costs thousands of dollars or a suitcase of cash are taboo.
  4. Payments related to the political campaigns of foreign governments are also not allowed.

The accounting provisions are where the forensic accountant is very active, working for both the companies and for the DOJ and SEC. Corporations covered by the FCPA are required to make and maintain books and records that accurately and fairly reflect their transactions and to devise and keep a sufficient system of internal controls. This is so that government agencies inspecting the books and records of the corporation will be able to easily see that the corporation is in compliance with the anti-bribery laws. The controls are so that the employees of the corporation do have the opportunity to commit fraud or bribery. When companies and individuals are paying bribes to public officials, it is highly likely that they will try to hide these transactions in their ledgers so they are not immediately identifiable as illegal transactions.

Companies with international operations will often have a department that review the books and internal control systems to ensure that they are complying with FCPA provisions. From time to time, the company may call in a forensic accountant to perform an internal investigation. This may happen either because the company suspects that untoward behavior has occurred or as a periodic review of their books and systems.

The DOJ and SEC will also employ the services of forensic accountants when they investigate companies and individuals that they suspect of violating the FCPA. When cases like this happen, there will be forensic accountants working for both the government agencies and the entity being investigated. In addition to discovering whether or not bribery has occurred, the company and the government agencies seek to determine the extent of the violations and determine the value of the gains realized and, therefore, the fines and other penalties to be levied by the government and avoided by the corporation. These investigations can be very extensive and span several continents, depending on the size and reach of the corporation. Financial forensic experts are instrumental and very involved in these investigations, tracing payments and working diligently to find what the corporation has tried to hide both on and off its books.

Often, an element of a FCPA settlement is the appointment of a multi-year monitor. This happens after the investigation and is an area where forensic accountants can use their expertise to examine the company’s control environment and record-keeping and assess the progress the company has made toward compliance with the law.

In recent years, the DOJ and the SEC have become very aggressive about enforcing the FCPA. In addition to this, other nations have enacted their own anti-bribery laws; the U.K. Bribery Act of 2010 has been in force since July 2011 and criminalizes bribe payments to private individuals as well as government officials. Also, there is more and more international cooperation in the investigation and enforcement of this law. Through it all, the work and expertise of financial forensic experts are extensive and vital. A lot of big firm lawyers think of the FCPA when they think of forensic accountants. It is indeed one of the many places you will find the financial forensic expert.

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When Disaster Strikes…

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I had no idea how uneventful my life was until I came home to find a tornado had passed through my apartment. I had been on the subway when it happened, then I walked up my block in auto-pilot, taking in absolutely none of the world around me. I opened my apartment door and found all my window screens lying on the ground, everything that had been on the windowsills was now scattered around on the floor and water everywhere. I was convinced that we had been robbed and was livid at the inconsiderate thieves who had felt it necessary to leave a watery mess behind. Now I had to go to the grocery store to get paper towels and other cleaning materials. It was only once I walked outside again that I noticed all the damage on my block. A tornado. In Brooklyn. Who knew?

A couple of months later, I was at work when it seemed as though the words on my computer screen shifted. First, I thought I was about to pass out then, because I work on the 28th floor where I get motion sickness on a windy day, I walked to the window to see just how windy it was. Nothing. I decided that perhaps I needed a little fresh air and walked out of my office to find others were looking confused; perhaps there was construction going on upstairs. We all decided to go outside for little fresh air. We were surprised to find crowds of people standing about on the street. it turned out that the movement had been caused by an earthquake. Since then, New York City and its environs have seen damage from two hurricanes, Irene and Sandy.

Because these natural disasters have been hitting us at home, I have been thinking and reading more about insurance issues, both at an individual and business level. A lot of individuals and businesses have been trying to sort through their various insurance coverage issues – what they can claim, where they should go to resolve their issues and whom they should be dealing with. It can get very complicated and having the right people helping them navigate it all can make a huge and positive difference to a claimant’s experience.

The first step with insurance coverage is getting a policy that provides adequate coverage. It is important to know and understand what is covered, whether one is a business or an individual. It is highly advisable for a business owner, regardless of the size of that business, to engage the services of a knowledgeable lawyer to review the insurance contract so that the business owner is aware, before anything happens, what they can or cannot claim. Individuals should also know and understand their insurance policies. It may also be a good idea to have a professional review an individual’s insurance policy, to ensure that the individual knows exactly what is in the contract.

Generally, forensic accountants are engaged in connection with business insurance claims, not individual claims. Financial forensic professionals, often certified in financial forensics, are useful in many ways, when dealing with business insurance claims. Forensic accountants who have experience with the claims process will tend to be a time saver as they will know what, where and how documents should be filed. For business interruption claims, forensic accountants will identify the financial documents required to prove losses, analyze these documents to calculate the losses, and summarize their findings in a format preferred by the policies. Experienced forensic accountants know how the insurer wants documents to be submitted – the format, order and even the segregation by claim type. This goes a long way toward a successful and timely processing of a claim. It will also be helpful to have forensic accountants who are familiar with federal, state and local laws. Depending on the extent and type of devastating event, the insured parties may be claiming federal aid – through FEMA (the Federal Emergency Management Agency) or the National Flood Insurance Program – in addition to the claims that they are filing with their insurance companies.

Though forensic accountants do not generally deal with individual claims, there are several steps individuals can take to simplify the claim process:

  • As mentioned before, understand the insurance policy, including what types of natural disasters are covered by the policy. Individuals should consider whether or not they require extra coverage beyond the standard policy.
  • When getting an insurance policy, make comprehensive lists of valuables. After the event, make lists of losses and, using resources such as stores and the internet, estimate the cost of replacing lost and damaged items.
  • Report your claim promptly.
  • Organize paperwork in a binder that is sectioned by the various types of claims.
  • Keep a log of all claim activities, including dates and parties dealt with, and save copies of everything that is filed.
  • Don’t sign off on any legal documents without fully understanding them first and consulting with a lawyer, if need be.
  • Seek out and speak with people who either have gone or are going through the insurance claim process. Share your experiences and tips. Generally, educated and united policyholders tend to have faster and fairer settlements.
  • If you decide to hire a professional to assist you with your claim, be sure to check their qualifications and references. Sadly, there are people to seek to take advantage of those who have been struck by tragedy and to exploit the vulnerable.

Dealing with a disaster that leads to property damage and business interruption is very stressful. Preparing for the possibility of these events, including getting adequate insurance, keeping good records and consulting with qualified professionals can go a long way toward making recovering from the disaster more manageable.

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