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The Duh Factor: This One is Filed Under How Stupid Can You Be
This article was taken from the FTB’s Criminal Corner – I think this is right up there with one of my favorites.
“On November 19, 2009, a Sunland interior designer was sentenced after pleading guilty to one felony count of state income tax fraud and one felony count of insurance fraud.
According to court documents, Ronald E. Hunt, 56, continued working as an interior designer from 2003 to 2006, including an appearance on an HGTV home improvement show during the time he claimed to be disabled. An employee with the private insurance company paying Hunt’s disability saw the show and alerted the California Department of Insurance (CDI). An investigation confirmed Hunt intentionally and knowingly concealed his secondary employment from his disability insurance company by falsifying written statements and deceiving a company field representative. During the time Hunt claimed to be disabled, he collected more than $400,500 in income as an interior designer while also collecting $147,600 in disability benefits. Hunt also failed to report this income on his state income tax returns for these same years.
Hunt was ordered to pay $151,700 restitution to the private insurance company and $31,000 to us, representing the unpaid tax, penalties, interest, and the cost of the investigation. He was sentenced to 200 hours of community service and 60 months of probation.
Judge David M. Horwitz handed down the sentence on Tuesday, November 17, in Department 50 of the Clara Shortridge Foltz Criminal Justice Center. Los Angeles County Deputy District Attorney David Berton prosecuted the case. This was a joint investigation between the CDI and us.”
Is it really necessary to say Duh here? I mean really.
Sam Antar “It takes one to know one” and He Knows Patrick Byrne
By Stacie Clifford Kitts, CPA
I’ve watched with interest the online clash between CEO Patrick M. Byrne of Overstock.com and a handful of bloggers and journalists. The basic issue appears to be a consensus, among this group that Mr. Byrne is (allegedly) a crook [and maybe a little unstable] who is also (allegedly) cooking the books of the company he is charged with running.
Sam Antar who has the best bio snippet I have read to date….
I am a convicted felon, former CPA, and former CFO of Crazy Eddie. There is a saying, “It takes one to know one.” I teach law enforcement, professionals, and students about white collar crime and how to catch corporate miscreants….
In my blog, I expose white collar crooks just for the fun of it…
….really really R-E-A-L-L-Y dislikes Mr. Byrne. Based on Mr. Antar’s “it takes one to know one” philosophy, Sam insists that he knows Patrick pretty well.
Mr. Antar has made this determination based on his analysis of the publically available financial information of Ovestock.com. You can read Mr. Antar’s many comments about Mr. Byrne at his acclaimed blog White Collar Fraud.
Mr. Antar’s rehash of his part in the Crazy Edie fraud scandal at his website http://www.whitecollarfraud.com is also a good read. There is no doubt that this recount should be mandatory reading for all new staff accountants.
As for my take….
I’ve always believed based on my experiences working in both public accounting and industry, that the financial statement audit process [limited to large publically traded companies]was for the most part a silly practice that boiled down to ongoing compromises made by auditors to sustain the fine line walked to keep clients. Although the audit practice has tightened up -some – over the years i.e. the PCAOB, I think we are still looking at an overriding drive for accounting firm profit over good sense.
Evidence you ask.
In my opinion, the fact that Overstock.com was able to find an audit firm amidst all the (alleged) controversy is evidence enough. It’s too bad that the audit firm’s work papers aren’t public information, because I would looove to get my hands on the Client Acceptance Form that KPMG put together to prove their acceptance of this client. If only to see how they have addressed these allegations. [I hope they have really good practice insurance.]
Anyway…What’s a Client Acceptance Form you ask?
A Client Acceptance Form is a checklist that an auditor uses to decide whether they should accept a company as a client. This document incorporates questions about whether the firm believes that they have the proper knowledge, training, and staff to handle the engagement. However, it also wants to know things about the target client too. For instance, there are questions about the integrity of the company’s management, the chances that there is fraud in the financial statements, and questions regarding whether there is evidence that management may be motivated to commit fraud.
There appears to be plenty of evidence that the management integrity of Overstock.com is at least in question [if of course you believe the many journalists and bloggers who have commented on Overstock’s current woes]. This alone should have precluded an audit firm from accepting the engagement (in my opinion). Obviously, this acceptance is profit motivated, but KPMG – people – come on -what – are – you – thinking.
If you would like to read, more about the controversy check out this recent post by Sam
Post Script: I saw fraud unfold up close and in person at a public company I worked for in the 90’s. I was not part of the fraud scandal. However, watching what happened after it was discovered makes for an interesting story. Stay tuned for more on that truly fascinating tale.
Stacie's Tax Stuff 