Skip to main content

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.

Note: Bold print and italics added by me.

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.

Respectfully,

Sam E. Antar

Disclosure:

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.

Comments

Popular Posts

Did a Clever SEC Bait Goldman Sachs into Compounding Its Legal Problems With the "Kiss of Death" Message?

Updated: At 3:48 AM ET 04/20/2010 on bottom

The Kiss of Death

In filing its lawsuit against Goldman Sachs (NYSE: GS) on a Friday, the Securities and Exchange Commission sent what I call the "kiss of death" message to the embattled company. In other words, the SEC wanted to stick it to Goldman Sachs and Fabrice Tourre, the Executive Director of Goldman Sachs International, who is also a defendant in the complaint. While the SEC as a practice does inform target companies and individuals of an impending enforcement action, it does not always tell them exactly when such an action will be filed.

Apparently, the SEC filed its lawsuit without giving Goldman Sachs the heads up that it was planning to file it that day. Business Insider observed that Goldman Sachs was clearly unprepared to respond to the complaint as news of the lawsuit dominated the headlines all day. Goldman issued a short denial around noon and issued an extensive denial late in the afternoon, after most people had …

Overstock.com CEO Patrick Byrne Sleeps With a Gun

In numerous blog posts in the past, and in widespread media coverage, evidence has accumulated for years that Overstock.com CEO (NASDAQ: OSTK) Patrick Byrne has shown signs of being mentally unbalanced and paranoid.

Byrne has blamed his company's financial woes on an unnamed "Sith Lord." He hired paid goons to stalk his real and imagined adversaries and to write lengthy conspiracy theories on the Internet. Byrne has close ties with Bo Gritz. The Anti-Defamation League lists Bo Gritz as a far-right extremist with “extensive connections to both white supremacists and anti-government groups and leaders.”

Patrick Byrne's infamous temper tantrums when he doesn’t get want he wants are well documented too. He made obscene and misogynistic comments to a female reporter. He suggested that she gave “blowjobs” to Goldman Sachs traders. He suggested that a male reporter “Sucks It Likes He’s Paying the Rent.” An independent research analyst was told that “You deserve to be whippe…

Nature's Sunshine Products, Willbros Group, Cal Dive International, and BSQUARE Violate S.E.C. Rules on Calculating EBITDA

Nature’s Sunshine Products (NASDAQ: NATR), Willbros Group (NYSE: WG), Cal Dive International (NYSE: DVR), and BSQUARE (NASDAQ: BSQR) have recently issued earnings reports which include a calculation of EBITDA (earnings before interest, taxes, depreciation, and amortization) that apparently does not comply with Securities and Exchange Commission interpretations for Regulation G governing such non-GAAP financial measures. In each case, their erroneous EBITDA calculations have enabled them to significantly distort their financial performance by erroneously reporting a positive EBITDA, when they should have reported a negative EBITDA in the latest quarter.

How EBITDA is supposed to be calculated under Regulation G

According to the S.E.C. Compliance & Disclosure Interpretations, EBITDA is defined under Regulation G as net income (not operating income) before net interest, taxes, depreciation, and amortization. See below:

Question 103.01Question: Exchange Act Release No. 47226 describes E…

InterOil, John Thomas Financial, and Clarion Finanz: Anatomy of a Stock Market Manipulation Scheme

In this blog post, I will provide evidence of what I believe is a stock market manipulation scheme involving InterOil (NYSE: IOC), John Thomas Financial, and Clarion Finanz AG. I believe that InterOil with the assistance of Clarion Finanz concealed John Thomas Financial’s involvement in helping it raise $95 million through a private placement of convertible debt securities.

Clarion Finanz acted as a buffer between InterOil and John Thomas Financial to help InterOil hide John Thomas Financial's role in raising funds. Afterwards, InterOil filed false and misleading reports with the Securities and Exchange Commission in an effort to conceal John Thomas Financial’s role in helping the company raise $95 million in convertible debt.

Carl Caserta, who in 1991 was barred by the Securities and Exchange Commission from “association with any broker, dealer, or investment advisor” played a role in helping InterOil use John Thomas Financial to obtain funds from investors. InterOil, John Thoma…

Class Action Complaint against Amedisys uses Sarbanes-Oxley Act Corporate Governance Provisions to Battle Alleged Corporate Malfeasance

Updated at bottom of article

Last week, Pomerantz Haudek Grossman & Gross LLP filed a class action lawsuit against Amedisys (NASDAQ: AMED) charging the company, its CEO William F. Borne and its CFO Dale E. Redman with securities fraud.  In the next few days, Bernstein Liebhard LLP and Finkelstein Thompson LLP filed similar class action lawsuits against the company. The lawsuits allege that Amedisys abused Medicare's reimbursement system for at-home therapy care based on a compelling analysis of company revenues in an April 27 Wall Street Journal article.

In addition, the lawsuits innovatively utilize a provision under Section 406 of the Sarbanes-Oxley Act 2002 which provides a back-door way for investors to force ethical corporate governance and sue public companies for malfeasance. That provision requires Senior Financial Officers, such as the CEO and CFO of public companies, to abide by a strict code of ethics which broadly defines corporate malfeasance and effectively makes…