Saturday, June 13, 2009

Memo to President Barack Obama from a Convicted Felon: Be Prepared For an Unprecedented Onslaught of White Collar Crime

To President Barack Obama:

Within a couple of years, you can expect a massive crime wave on an unprecedented scale resulting from spending trillions of extra taxpayer dollars to stimulate the economy and bail out the financial sector in a relatively brief period of time. Not enough attention is being paid to effective internal controls to prevent such crimes. The FBI and other law enforcement agencies do not have enough resources to effectively investigate and prosecute such crimes.

The Republicans will run against you on a simple platform, “The Democrats are responsible for white collar crime, corruption, and waste on an unprecedented scale.” The Republicans will say that you should have cut taxes and simplified the tax system to stimulate the economy and reduce the incentive for criminals to commit fraud.

According to the Wall Street Journal:

The Federal Bureau of Investigation is braced for a potential crime wave involving fraud and corruption related to bank bailout money and the economic stimulus package, FBI director Robert Mueller warned Tuesday.
"These funds are inherently vulnerable to bribery, fraud, conflicts of interest and collusion. There is an old adage, that where there is money to be made, fraud is not far behind, like bees to honey," Mueller told an afternoon gathering of business executives.

According to MarketWatch:

Swindlers, con men, and thieves could siphon off as much as $50 billion of the government's planned stimulus package as the money begins flooding the economy in coming months, according to David Williams, who runs Deloitte Financial Services Advisory and counsels clients on fraud prevention.
"The rule of thumb typically is that of the about $500 billion worth of money that's going to run through the procurement process, somewhere between 5% and 10% of that usually finds its way into potential problems," Williams said. "That's sort of the benchmark that I use."
Companies will face increased pressure to try to stem the tide, and need to be prepared to safeguard data as well as the cash, according to Williams.

David Williams' estimate is too conservative. You can expect hundreds of billions in fraud and waste. Williams based his estimate just on the stimulus package and it does not include the extra trillions of taxpayer dollars to bail out Wall Street, banks, and the rest of the financial sector. According to FBI Director Mueller:

Given the trillions and trillions of dollars involved in the government's current moves to stem the economic crisis, "from the purchase of troubled assets to improvements in infrastructure, health care, energy and education -- even a small percentage of fraud would result in substantial taxpayer losses. [Emphasis added.]

The private sector and government do not have an adequate internal control structure to prevent white collar crime. We cannot rely on legislation mandating effective internal controls and accountability. We require experienced, competent, and well trained CPAs, internal auditors, external auditors, and compliance personnel to insure adequate compliance, transparency, and accountability to prevent white collar crime.

Current college curriculums do not offer enough training in internal controls, forensic accounting, auditing, and criminology for future CPAs, internal and external auditors, and compliance personnel entering the work force. Instead they are forced into battle with well prepared criminals, while slowly training on the job and taking courses in their spare time. We require more up to date education about how criminals execute their crimes, counter measures to prevent such crimes, and an effective streamlined means of disseminating such information to existing professionals in the field.
According to a recent New York Times article:

The F.B.I. is planning to double the number of agents working financial crimes by reassigning several hundred agents amid a mood of national alarm. But some people inside and out of the Justice Department wonder where the agents will come from and whether they will be enough.

Simply reassigning agents and hiring new agents fresh out of school will not solve the main problem of effectively investigating and prosecuting white collar crime. White collar crime investigations are increasingly complex cases that require enormous specialized resources and take long periods of time to successfully prosecute them. It takes years of specialized training for investigators to obtain the necessary skills to competently investigate such complicated crimes.

The FBI and other law enforcement agencies also need to recruit experienced specialized talent from the private sector. The government must offer employment incentives to bring back veteran investigators who left the FBI and other law enforcement agencies to seek better opportunities in the private sector. In addition, we require incentives for other seasoned anti-fraud professionals to leave the private sector for government employment.


Sam E. Antar


I am a convicted felon and former CPA. As the criminal CFO of Crazy Eddie, I helped mastermind one of the largest securities frauds uncovered during the 1980s. During the last ten years I have taught law enforcement, professionals, and students about white collar crime, free of charge.

On August 5, 2009, I am scheduled to deliver a speech at the United States Securities and Exchange Commission Joint Conference on Fraud Detection in Washington, DC. The Joint Conference on Fraud Detection is a cooperative effort sponsored collectively by the CBOE, NASAA, FINRA and SEC.

On September 30, 2009, I am scheduled to make a fraud presentation at the United States Department of Justice Affirmative Civil Enforcement for Investigators and Auditors Conference in Columbia, South Carolina.

I am a registered Democrat. However, I vote for candidates of each party depending on who I believe is the best candidate. In New York, convicted felons can vote. However, we cannot get jury duty, which I am happy with.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.