Wednesday, October 24, 2007

Is New York State Using a "Trust, Don't Verify" Approach Regarding Convicted Felon CPAs?

New York State Catches Up to Convicted Felon and Licensed CPA after 15 Years

Fifteen years after pleading guilty to one of the largest securities frauds of its time, the New York State Education Department - Office of Professional Discipline has finally caught up with a convicted felon who admits to committing his crimes with a "cold, dark, and heartless soul." That convicted felon is me!

After pleading guilty to three felonies in late 1992, the American Institute of Certified Public Accountants (AICPA) and the New York State Society of CPA's (NYSSCPA) booted me from their respective professional organizations. They informed me that they were referring my case to the New York State Education Department - Office of Professional Discipline, to have my license revoked. I knew that NY State automatically revoked CPA licenses for convicted felons. Since I believed that I was losing my license anyway, I simply let my registration to practice public accounting expire to put the situation behind me. In any case, I thought that my failure to re-register my license would result in it being revoked.

After I let my registration expire, I had no contact with NY State. I believed that NY State knew about my criminal record or at least that my license had expired upon my failure to re-register it. I assumed that I was no longer a CPA. I have since referred to myself as a former CPA in my fraud presentations. My web site refers to me as a former CPA, too.

A few years later, NY State published an on-line database of licensed CPAs. I found out that I was still a licensed CPA but not registered to practice public accounting! Since my registration to practice public accounting expired, I was considered an "inactive" but licensed CPA. In other states, if you fail to register your license, you lose it. However, I later found out that in New York a failure to register your license puts you on inactive status and does not revoke your license.

It turns out that the AICPA and/or the NYSSCPA either did not refer my criminal record to the New York State Education Department or if they did make a referral, New York State failed to act on the matter. Whether or not the AICPA or the NYSSCPA made a referral, it appears that NY State had no record of my criminal conviction. NY State never revoked my license.

Now that I found out that I was still a licensed but "inactive" CPA, I had openly disclosed my situation to most people in the profession that I had contact with and in most of my
fraud presentations during the last several years to thousands of people. I invited people in the audience to rat me out to NY State. I wanted to see how long it would take for NY State to finally get around to actually revoking my license.

On Monday, October 22, 2007, I received an email from Lewis Antine at the NYS Education Department -- Office of Professional Discipline, asking me to contact him concerning my CPA license.

I immediately called Mr. Antine from the NY State Education Department anticipating the subject matter of the call. I asked him, "What took them so long to get to me?"

A person attending one of my fraud presentations had informed his office that I told an audience the fact that NY State had never disciplined me nor revoked my CPA license, despite the fact that I have a criminal record and that the AICPA and NYSSCPA booted me. He seemed to be quite embarrassed about the episode and the fact that NY State was the last to know that I was still a licensed but "inactive" CPA despite my criminal record.

Mr. Antine acknowledged the fact that I never publicly held myself out as a CPA by always calling myself a "former CPA" in public, such as during my fraud presentations, and on my web site. As a convicted felon, I never used my CPA credentials in private industry or anywhere else. I was publicly open about the fact that I did not face any disciplinary action to revoke my license. Mr. Antine was thankful to me for my public candor about the matter.

The problem of criminal CPAs and a solution

I hope that NY State has not adopted a "trust, don't verify" approach honor system regarding disclosure of criminal records for CPAs. There is a big hole in the system for screening out CPAs with criminal records. After meeting certain educational requirements, passing the CPA exam, and meeting experience requirements a qualified person can apply for a CPA license and register to practice public accounting. When a person applies for a CPA license, registers to practice public accounting, renews his registration to practice, or re-activates it after letting his registration lapse, he is required to disclose any criminal record.

The NY State Education Department should have access to criminal record information and conduct periodic checks for criminal records with the FBI. If anyone is naïve enough to believe that many criminals would disclose their criminal records, they are fooling themselves, since such a disclosure would red flag their licenses for revocation. A person convicted of a felony after obtaining a CPA license can simply let their registration to practice lapse and still be a licensed but inactive CPA, so long as NY State fails to institute a disciplinary proceeding to revoke his license. While such a criminal cannot practice public accounting, he can still call himself a CPA in working in private industry (something that I did not do).

I asked Mr. Antine if there was anything NY State needed from me. He asked me for copies of my criminal record, since NY State could not easily obtain any copies. I guess as a convicted felon, the least I could do is to help NY State prove that I am actually a criminal, so that they can discipline me and finally revoke my license.

As Herb Greenberg would say, "The beat goes on" and as Jeff Matthews would say, "I am not making this up."

Written by:

Sam E. Antar (former Crazy Eddie CFO & convicted felon)

Additional blog information:

White Collar Fraud Blog Index

Selected White Collar Fraud Blog Posts:

10/16/07: A Warning to Wall Street Analysts from a Convicted Felon

06/02/07: Advice about Trust from a Convicted Felon

12/25/06: The Art of Spinning: How to Identify White Collar Criminals or at Least Unethical and Deceitful People Who You Should Avoid

12/19/06: Managing Earnings: Playing the Numbers Game

12/10/06: Hiding Your Dirty Laundry in the Footnotes: Anatomy of the Crazy Eddie Accounts Payable Fraud

1 comment:

NJ Citizen said...

I filed a complaint against a New Jersey licensed CPA, one with the New Jersey board of accountancy and the other with the AICPA. This CPA/Director has committed fraud, and was also assisting others in committing fraud. I sent my letter and supporting documents (backed up by professional reports by a forensic accountant) to the board and the AICPA, I was contacted by the Board, I spoke with a Deputy Attorney General, she never asked any questions regarding the information I sent, but seemed more inclined to discourage me from filing my complaint.  The AICPA advised me that it’s in the State’s hands and they will wait on the State’s decision.   
Considering what this CPA has done, it somewhat baffling to me that this person continues to hold a license and is still a member of the AICPA, also continues to work for a well respected Accounting firm in the Sate of New Jersey.  It is unclear to me why the Board has not taken any action, knowing that there is so much proof and then never following up with an investigation that would further prove what I had sent them.

The board says “As a unit of the Division of Consumer Affairs, the New Jersey State Board of Accountancy (Board) takes its responsibilities seriously” Those words are meaningless, both of these organizations are a joke.