Criminals Help Fight Future Fraud

Sam Antar is notoriously known for one of the largest securities frauds of his generation. As a former CPA of Crazy Eddie, Inc., Sam had begun his fraudulent activity almost from the start of the company’s establishment. The “Darth Vader of Capitalism”, as he was referred to by US Attorney Michael Chertoff, skimmed money from the company’s revenue, falsified profit margins, and laundered money. This securities fraud cost investors hundreds of millions of dollars, cost many people their life savings, many people lost their jobs and careers, cost creditors hundreds of millions of dollars, and others' suffering that cannot be measured. When Sam Antar was cooking the books for his company, he used a number of convoluted accounting tricks to deceive auditors. But some tactics were simple. He had noticed that most of the Big Four accounting firms had employed auditors who were fresh out of college. He had asked himself, “What do kids in their 20s think about all the time? Sex.” In response, Antar would place “cute hot female” employees alongside his youthful male workers in order to create a distraction in the workplace, allowing for greater ease of deceitful activities. “In effect, I was a fraudster, matchmaker and pimp,” said Antar. After avoiding jail time due to employment with the United States government, Antar now counsels government agencies and businesses on the avoidance of accounting fraud.

Between Enron, WorldCom, AIG, and now Bernie Madoff it has become increasingly clear that the United States and even countries around the world need to take a long look at the problem of accounting fraud. While there are no international statistics charting white-collar crime arrests, the number of people being trained to detect accounting shenanigans has exploded since the financial crisis of Bernie Madoff. The Association of Certified Fraud Examiners located in the United States, which trains accountants in fraud examination, has 47,000 members worldwide and has added 10,000 new members last year alone. "There's always an uptick in fraud activity when the economy goes down," said Kim Frisinger, a former FBI accounting fraud investigator. "It's like the ocean going out and you can see everything that was hidden under water."

It is said that although there may be millions of ways to commit fraud, there are always three familiar elements involved in any example of fraud: incentive, opportunity, and rationalization. Greed may be the most apparent incentive; however, it is not the only one. Gambling or bank debts, infidelity, and drug addictions are also common symptoms that lead to fraudulent activity in an organization. The other factor, opportunity, arises from the employee or employees thinking that there is a slightly low probability of being caught. Rationalization, being the final element, is the thought process an employee goes through before acting on his scheme. This involves the conscience of the employee, which can be greatly affected when factors such as economic downturn, possible promotions, or company downsizing are put into place.

Going back to the topic of Sam Antar, there is great value in someone that is in a position to catch fraudulent acts that can think like, or in this case has been, a criminal. "You have to take morality out of the equation to understand the criminal mind ... I'd still be doing it today if I didn't get caught," said Antar. Sam adds that his only objective in achieving an accounting degree was the gain enough knowledge to find ways to undermine the law. Along the way however, employees like Sam may pick up some things that you may not have necessarily learned in school. Like diverting auditors with attractive staff, accounting fraud can be all about distraction, Antar said. "It's like David Copperfield, it's an illusion ... I want you to look over here so you don't see what I'm doing over there."

Mark Morze, who served jail time for a billion dollar stock fraud in the 1990’s, is now teaching accountants about fraud as well. He states that in terms of financial recording, perfection is frequently an indication of fraudulence. Morze remarks, “You're doing everything in reverse, so of course it's going to add up.” Every financial statement I put together was accurate, but it wasn’t truthful,” adds Morze. Perhaps one of the best ways to identify financial statement fraud is to exclusively examine the footnotes of the company over time. There may be slight variations over time and that is where the fraud would be frequently hidden. As more and more firms are falling victim to fraudulent activity, it is increasingly popular to find people like Antar and Morze who can use their personal experience to better identify the types of factors involved in accounting fraud.

Article Source:http://www.articlesbase.com/accounting-articles/criminals-help-fight-future-fraud-1352865.html

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