tag:blogger.com,1999:blog-44359013788222745032024-03-12T20:04:00.713-07:00Steve Lee & AssociatesSteve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-4435901378822274503.post-19831024222876711762010-01-04T12:56:00.000-08:002010-01-04T12:58:51.557-08:00Christmas Terror in the Skies - What Really Went Wrong?System Analysis by Fraud Detective and Security Expert Steve Lee Managing Partner of Steve Lee & Associates<br />
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Terrorist suspect Umar Farouk Abdulmutallab became the perfect Grinch who stole Christmas when he attempted to ignite explosives aboard Northwest Airlines Flight 253 en route from Amsterdam to Detroit. This near tragic incident has sparked a great deal of debate amongst our leaders and others about why it occurred, who is to blame and what should be done to prevent its repetition, even prompting President Obama to weigh in on the matter particularly after his Homeland Security Chief’s comment to the effect that the system worked. <br />
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The reactions and responses of our leaders and others to this event have for the most part been “knee jerk” and politically motivated rather than reflective of a genuine concern for the flying public and aviation professionals. No blankets on our laps? No visits to the bathroom during the last hour of the flight? Come on. If we are really concerned about explosive underwear, why not just require us to change into hospital gowns before each flight, or place our underwear into the same bin as our shoes at the security checkpoint, or just fly “commando”? That seems at least literally appropriate. If we really think the Christmas scenario is likely to be repeated, such passive procedures certainly will not prove to be effective. Check point screening procedures are designed to catch non-terrorist travelers attempting to bring more than 3 ounces of hair product on board an airplane. There are so many examples of individuals successfully bringing pistols and edged weapons through security and onto airplanes, how can anyone really be shocked that explosive material was brought aboard Flight 253? The passengers of Flight 253 are just fortunate that the perpetrator knew almost as little about the explosive and how to detonate it as did the airport security personnel in Amsterdam. <br />
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By and large, the security agencies of the United States have done an excellent job for the last eight years of detecting and interdicting threats long before they get to TSA and international security check points. However, the security check point is not the place where “the rubber meets the road” in counter-terrorism. If it were, we would all be in serious trouble. While TSA and international security standards have improved over the last eight years, protocols and security philosophy do not include behavioral evaluation, situational awareness, or threat recognition consistent with effective counter-terrorism training. To be fair, expecting TSA and international security screening personnel to have legitimate counter-terrorism experience is like expecting your coffee shop barista to be an “iron chef” or your typical security guard to know how to run a hostage rescue team. Generally, terrorist detection and intervention takes place long before a suspect sets foot into an airport. <br />
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While the immediacy of our leaders’ reactions are certainly warranted, in my opinion the focus of this reaction is misdirected. In simple terms, the actions or inactions of TSA and its international counterparts at airport security check points around the world are not responsible for this breakdown. I am also unconvinced that the fault can be laid at the feet of individual intelligence or law enforcement professionals. Rather, we should be focused on our leadership and examining the role that politician’s policies and practices in the areas of intelligence and inter-agency communication played in allowing this potentially fatal incident to occur. <br />
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What is most troubling to me about this event is the apparent breakdown in communications that took place after the suspect’s father attempted to warn authorities about his son’s “radicalization”, even though it now appears that the suspect was being tracked by some components of United States intelligence. It seems to me that there are two possible reasons why the father’s warnings were largely unheeded. First, the father may not have been considered credible, thus causing the reported threat not to be taken seriously at intake. Second, if it is true that the father spoke directly to intelligence personnel, then someone in the professional’s reporting chain failed to pass on this information to analysts or agencies where good use of the disclosures could have been made. Such intra-agency or inter-agency communication problems would be reminiscent of those with which we were faced before the World Trade Center attack on 9/11 - despite the advent of Homeland Security. If that is indeed what happened, it is simply terrifying. With effective communication technologies and protocols in place, as is generally the case these days, it is unlikely that a hardware or system failure caused any breakdown in communications. So what did?<br />
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Poor communication suggests a failure at a policy and leadership level. We all know that our national attention has been focused elsewhere – the financial crisis, the national healthcare debate and so on. If, at the national leadership level, we demonstrate by example that counter-terrorism is no longer a top priority, that we want to be more permeable and accessible to foreign interests, and that we are deeply concerned about the profiling of potential terrorist threats, then government agencies, law enforcement, security personnel and others will tend to follow that leadership, either explicitly or implicitly. Miscommunications such as the one characterized above will be more prone to occur. Well, our allies and friends throughout the world tend to follow our lead in security matters, whether or not they want to admit it. Thus, if we appear to de-prioritize our counter-terrorism efforts, if we appear to adopt a more permeable and accessible posture towards foreign interests and if we appear overly concerned about the manner in which we identify potential terrorist threats, then our international constituents will follow suit. <br />
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If you travel frequently by air, like I do, I am sure you can sense (if your “radar” is deployed) that passenger safety and security is no longer the most important concern of airlines and airport security personnel. When, for example, is the last time you sensed that a United States Air Marshall was on your flight? You may well ask: “What does this have to do with a terrorist slipping through security with explosives in Amsterdam?” It has everything to do with it. Without the re-prioritization of counter-terrorism and continued emphasis on security – even if that emphasis manifests itself from time-to-time as politically incorrect – I am deeply concerned that we are inviting another terrorist to strap on the explosive device du jour and board an airline bound for one of our great American cities.Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com1tag:blogger.com,1999:blog-4435901378822274503.post-76747119310921455932009-12-15T13:02:00.000-08:002009-12-15T13:07:24.969-08:002009 IS THE YEAR OF THE FRAUDSTERThe Psychological Profile of a White-Collar Criminal<br />
By Financial Detective Steve Lee <br />
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Los Angeles, California, December 15th, 2009—I’ve been asked to comment frequently on the news this year about a lot of fraudulent business activities in 2009. You’ve seen the headlines every single day, the most well-known among them Bernie Madoff’s Ponzi scheme, continuing with the secret UBS Swiss bank accounts of U.S. tax evaders, and most recently with the Galleon Group’s insider trading debacle. <br />
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While fraud certainly persists during periods of economic growth, it conflagrates in economic downturns. Tanking financial market values, depressed real estate, smaller paychecks, reductions in employee headcount, erosion of internal controls, desperation for unrealistic returns, stockholder pressure on corporate officers, scope limitations on audit functions, as well as diminished morale, are the factors that fan the flames of fraud in a down market.<br />
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Inside the mind of a white-collar fraudster<br />
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What does the archetypal white-collar fraudster look like? Much has been written about fraudster demographics. As a group, fraudsters whether executives or employees are dominated by middle-aged white males, the most notorious among them profiled in magazine cover stories. But, what are they thinking when they commit these crimes? Based on my experience in the field, executive white-collar criminals share the following key attributes: <br />
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• Calculating and Justifying. Fraudsters typically calculate potential gains and losses before they decide to commit fraud. They know they are far less likely to go to jail for a $50 million swindle than an armed robber who heists $500 from a bank teller. This knowledge emboldens them. The fraudster justifies his actions with a simple credo: the end justifies the means. In fact, for these individuals, anything can be justified. And that’s where they become dangerous.<br />
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• Entitlement. This is a corollary to justification. Many times fraudsters defend their acts by pointing to what they believe they are entitled to. They will frequently explain their behaviors with statements like: “I would have received that money anyway” and “I’ve made a lot of money for this company and this is no more than fair compensation.” It is also typically apparent in their lifestyles. Privately, they almost invariably indulge in various forms of excess that can be astonishing; it may be the 35,000 square foot homes, multiple corporate jets, jewel encrusted Breguet or Chopard watches and/or Bugatti, Ferrari and Lamborghini exotic cars.<br />
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• Unrestrained by Ethics. Modern systems of ethics center on behavior that either is consistent with moral principles or creates what ethicists refer to as “the greater good”. While fraudsters frequently talk about ethics and engage in moralizing, their actions are almost always inconsistent with either the greater good or an acceptable set of moral rules. They frequently talk a good game around business ethics, honesty and integrity. Their public actions stand up to a cursory review. Their business activities are often suspicious on a day-to-day basis. They usually spin a cocoon of financial opacity around these activities. It is part of the permission they give themselves to act outside moral principals and the greater good. News making examples include Jeffrey Skilling at Enron, Bernie Ebbers at WorldCom, Bernard Madoff and the allegations surrounding Raj Rajaratnam and his Galleon Fund operations. <br />
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• Intuitive Behaviorists. The executive fraudster’s ongoing shenanigans rely on a keen understanding of human behavior. They use bluster, force of personality and charm to deflect skepticism and to prevent insiders from turning on them. They also use incentives, fear of reprisals and a sense of being trapped as a co-conspirator to keep insiders in line. Fraudsters count on the laziness of their victims. They gamble that a suspicious client, employee, board member or colleague is averse to “rocking the boat.” Frauds do not usually survive illumination. Victim and co-worker passivity enables executive fraud. <br />
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• Loyalty & Trust. Executive fraudsters inspire loyalty and trust not only among their employees, but also among their clients and business colleagues. As cynical as this may sound, loyalty and trust can be the pavers on the road to fraud. For example, an employer might not question a trusted employee walking out of the warehouse with a box because they assume he is conducting the firm’s business. Similarly, investors may have assumed that Madoff offered no sophisticated web-based account access because he did things the “old fashioned” way or because his methods were so proprietary that such information could give away the Madoff “competitive advantage”. We now know that the real reason was because the securities were not really there, just like the trusted employee might be walking away with the firm’s inventory to his pick-up truck. The executive fraudster bets – usually correctly –that his prey will think, “Whatever you say, you’re the boss/expert/smartest-guy-in-the-room.” <br />
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• Smart. There is a popular notion that criminals are stupid. Whereas this may be the case in the realm of violent crime, narcotics, and burglary, it is not true of executive-level fraudsters. In fact, they are among the cleverest people we encounter.<br />
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• Overconfidence. This is often where fraudsters get caught. Despite their smarts, high-level fraudsters are superstitious learners. Fraud detectives know that fraudsters sometimes observe a single data point and extrapolate it as though it were a rule. For example, if they get away with one fraudulent move, they become addicted and plan their next move with a falsely bloated sense of security. Among those whose frauds are eventually uncovered, there tends to be a belief that “if they haven’t caught me up to now, they won’t catch me in the future.” It’s just not so. <br />
Frauds tend to expand as they age. The velocity of the fraud and the volume of funds required to support it generally grows geometrically or exponentially while the available resources to support the fraud usually grow linearly. The overconfident fraudster may indulge in believing that what he has concealed now can be remedied or rendered opaque in the future. He contends that when a more ideal environment arises, he can resolve the financial discrepancies created by his fraud. He also tends to underestimate the doggedness of lawyers, auditors, bankers, regulators and others who may investigate the transactions that the fraudster has buried.Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-3685307855440443592009-10-22T16:07:00.001-07:002009-10-22T16:07:59.405-07:00The Ins & Outs of Cyber Theft Prevention - <a href="http://tinyurl.com/ygvavs3">http://tinyurl.com/ygvavs3</a>Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-53112865184853782232009-10-22T15:59:00.000-07:002009-10-22T16:04:03.504-07:00The Ins & Outs of Cyber Theft PreventionBy Steve Lee, Managing Partner of Steve Lee & Associates<br />
www.stevelee.com<br />
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October is National Cyber Security Awareness Month and a recently issued IBM X-Force 2009 Mid-Year Trend and Risk Report describes the current Internet climate as "an unprecedented state of Web insecurity as Web client, server and content threats converge to create an untenable risk landscape." However, despite these findings, the Internet will remain a vital channel for most businesses. So, how can you help create a safer and more secure online environment for your business and its customers?<br />
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With the expertise of Stan Stahl, CEO of Citadel Information Security (www.citadel-information.com), Steve Lee & Associates has worked with businesses to help mitigate, investigate and prosecute cyber crime.<br />
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Selected trends in online theft: These days, online banking hacks are the cornerstone of cyber theft committed against small and medium-sized businesses. Cybercriminals target business’ bank accounts and have focused their efforts on pilfering money from company demand-deposit accounts. McAfee, a leading security-software company estimates that in 2008, companies around the world lost more than $1 trillion to cybercrime.<br />
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Email phishing scams have become highly targeted as well. The attacks are delivered against users by name and can appear deceptively familiar and credible because they may include portions of the user’s password.<br />
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Trojans are delivered to unsuspecting small, middle-sized and large organizations through email purportedly from social or business networking sites and even from the IRS. One click and the hackers can access company bank accounts and use money mules to quickly siphon significant amounts of money out of the company’s account.<br />
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It’s important to remember that theses cyber crooks, also known as ‘black hats’, have the technological upper hand. Malware development has accelerated far beyond anti-virus and patch development. By the time ameliorative patches are available to detect or pre-empt the malware, hackers have deployed Trojans, viruses, worms, rootkits and spyware that may be several generations beyond the latest, published fix. (NOTE: for more information on malware development, see Brian Krebs’ The Washington Post column “Security Fix” at http://voices.washingtonpost.com/securityfix/)<br />
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Think your business’ bank account is protected by “second-factor authentication?” Well, think again. While second-factor authentication is touted by banks as a truly secure solution, it is not. Unfortunately, the awful truth is that no widely utilized online banking solution can guarantee 100% security. Multi-factor authentication is only slightly more robust than single-factor (i.e., user name and password) authentication. Even so, there are ways to help keep your money as safe as possible. Consider the following steps:<br />
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To maintain a safer computer infrastructure, your company’s management must consistently address cyber theft by implementing and continuously improving controls and processes:<br />
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1. Use a dedicated PC for online banking that is not used for any other transactions. If this sounds like a nuisance, just consider the inconvenience of losing hundreds of thousands or millions of dollars and then having to bring suit against your bank in an effort to recover your money. Remember, the bank will maintain that they are utilizing reasonable security practices. And by currently standards: they may be right. The onus will be on your business to prove your case.<br />
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2. Make a plan for breach disclosure. Most states, in addition to the District of Columbia , have laws governing "breach disclosure." You may be required to notify consumers if you have reason to believe that there has been a compromise of private consumer information. Insurance industry reports suggest that "breach notification costs" exceed $200 for every person that has to be notified.<br />
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3. Explore obtaining breach notification insurance as well as cyber insurance.<br />
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4. Establish usage rules like administrative privileges, subnet access, download permissions and acceptable applications. Invest in monitoring systems and enforce the rules.<br />
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Once a company protocol is mandated, these procedures must be communicated to employees. Employees need regular, albeit brief, training to help them recognize the red flags of cyber crime. In addition, regular upkeep and modernization of your security infrastructure is critical to preventing cyber theft:<br />
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1. Stay current with patches. That means Flash, Adobe, Java and other programs on your company’s computers in addition to Windows patches.<br />
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2. Invest in intrusion detection and intrusion prevention solutions. Don’t be penny wise and dollar foolish; a managed service may be your best bet. Yes, they cost more than off-the shelf anti-virus programs. You can be certain that you will never get more value out of software or a service than what you paid! Think about that the next time you decide to use freeware (also known as “unsupportedware”.) <br />
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3. Review your banking transactions frequently.<br />
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4. All social networking sites must be isolated from the corporate computing environment. They are for your employee’s and your home machine or a dedicated machine at your office that is off your corporate network.<br />
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Be mindful of Stan Stahl’s cyber security dictum: “Trust no one.”Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-24805758298804749802009-10-22T09:21:00.001-07:002009-10-22T09:21:43.299-07:00Roman Polanski: Celebrity Criminal and Justice Evader No More - <a href="http://tinyurl.com/yjeyx4h">http://tinyurl.com/yjeyx4h</a>Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-58495332560019891952009-10-22T09:14:00.000-07:002009-10-22T09:14:35.921-07:00Roman Polanski: Celebrity Criminal and Justice Evader No More<!--StartFragment--> <br />
<div align="center" class="MsoNormal" style="text-align: center;">By Steve Lee, Managing Director, Steve Lee & Associates <br />
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</div><div class="MsoNormal"><b>October 22, 2009</b><span style="font-weight: normal;">…The clash among Los Angeles County authorities, French political and cultural figures, and celebrities over the arrest and extradition of Roman Polanski threatens to eclipse justice in this infamous matter.<span style="mso-spacerun: yes;"> </span>This cross-border ruckus reminds us that the American criminal justice system has a long memory and a longer arm – even when it comes to “players” on the world stage.<o:p></o:p></span><br />
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</div><div class="MsoNormal">Yes, international authorities have devoted tremendous resources over decades to Polanksi’s case.<span style="mso-spacerun: yes;"> </span>That’s in part because he is a public figure. There’s no question that individuals of lesser stature evade the law, and these matters don’t prompt petitions or make news. Given Polanski’s visibility in the global entertainment and cultural community and the notoriety of his crime, officials would be hard pressed to diminish their efforts.<span style="mso-spacerun: yes;"> </span>All the more so after Polanski essentially thumbed his nose at the Los Angeles Country District Attorney’s office and the Superior Court. It appears that Polanski was offered a “sweetheart” deal and declined to consider it.<o:p></o:p><br />
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</div><div class="MsoNormal">Yet Polanski’s celebrity also served to bolster his ability to evade law enforcement. The facts and circumstances around the original court proceedings in the late 1970s indicate there was a good chance that Polanski would have spent a minimal amount of time – if any – in jail.<span style="mso-spacerun: yes;"> </span>If he did, he likely would have served time at a minimum security facility and received the kind of gentle treatment often reserved for celebrities and white collar criminals.<span style="mso-spacerun: yes;"> </span><o:p></o:p><br />
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</div><div class="MsoNormal">Mr. Polanski has led a privileged life.<span style="mso-spacerun: yes;"> </span>There is no doubt that he is a talented man and has made measurable contributions to his chosen art form.<span style="mso-spacerun: yes;"> </span>He is well loved and revered by many in the film industry and some have been vocal in his defense.<span style="mso-spacerun: yes;"> </span><o:p></o:p><br />
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</div><div class="MsoNormal">Polanski’s victim is now an adult and has indicated that she would prefer the case be concluded.<span style="mso-spacerun: yes;"> </span>According to reports in Time Magazine, she has indicated that she does not wish to testify against Mr. Polanski.<span style="mso-spacerun: yes;"> </span><o:p></o:p><br />
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</div><div class="MsoNormal">Despite all these factors in Mr. Polanski’s favor, the facts are what they are.<span style="mso-spacerun: yes;"> </span>Polanski was booked on charges of rape, suspicion of sodomy, child molestation, and furnishing dangerous drugs to a minor.<span style="mso-spacerun: yes;"> </span>He was indicted on drug and rape charges.<span style="mso-spacerun: yes;"> </span>He entered a guilty plea to having unlawful sex with a minor and then he fled the jurisdiction.<span style="mso-spacerun: yes;"> </span><o:p></o:p><br />
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</div><div class="MsoNormal">What is at play here is the Fugitive Disentitlement Doctrine, which asserts that a court will not determine the merits of a claim made by a fugitive because any potential enforcement against the fugitive is impractical.<span style="mso-spacerun: yes;"> </span>Polanski wants the statutory rape charge dropped, but he refuses to return to deal with American justice.<span style="mso-spacerun: yes;"> </span>Presumably his concern is that the Court in 2009 may not find that his claims of judicial misconduct in the 1970s are well founded.<span style="mso-spacerun: yes;"> </span>The risk for Polanski is that if the Court found his claims without merit, he would be treated as a self-admittedly guilty sex offender in custody.<span style="mso-spacerun: yes;"> </span><o:p></o:p><br />
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</div><div class="MsoNormal">Today, tougher scrutiny of standards of celebrity justice coupled with a fervent distaste for and intolerance of child abuse might make prosecutors less willing to cut the kind of deal that was available to Polanski in the 1970s.<span style="mso-spacerun: yes;"> </span>Perhaps it is that change in the criminal justice climate that makes Mr. Polanski and his attorneys wary of a return to California.<span style="mso-spacerun: yes;"> </span>Attitudes change, but the reality of the acts that were performed does not.<span style="mso-spacerun: yes;"> </span>If they were criminal then, and they are criminal now, then justice needs to prevail.<span style="mso-spacerun: yes;"> </span><o:p></o:p><br />
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</div><div class="MsoNormal">We must be mindful that it is the individual that goes on trial for his or her acts, not the artist for his or her art.<span style="mso-spacerun: yes;"> </span><o:p></o:p><br />
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<!--EndFragment-->Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-10224230355276678662009-09-15T13:46:00.000-07:002009-10-01T19:28:21.131-07:00Physical Theft In The Workplace<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbEk7UxkN3onOc5PjwKvl2HhlSns0YkoQJ1zgfrqh1z_nAMpjkxOr1c1pl4rdKOy6Tydtdx49kcJZdLy7ycdVFWi8rSNHWivbJdiFVDBgdFI5X_JT_1EiM_aCt8jYS-WocXMcyuELjOlU/s1600-h/sla.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5381809262778147090" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbEk7UxkN3onOc5PjwKvl2HhlSns0YkoQJ1zgfrqh1z_nAMpjkxOr1c1pl4rdKOy6Tydtdx49kcJZdLy7ycdVFWi8rSNHWivbJdiFVDBgdFI5X_JT_1EiM_aCt8jYS-WocXMcyuELjOlU/s320/sla.jpg" style="cursor: pointer; float: left; height: 46px; margin: 0pt 10px 10px 0pt; width: 320px;" /></a><br />
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<div style="font-family: arial; text-align: center;"><span style="font-size: 85%;">Physical Theft In The Workplace<br />
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</div><div style="font-family: arial; text-align: center;"><span style="font-size: 85%;">By Steve Lee, Managing Director<br />
www.stevelee.com<br />
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September 15, 2009...What are the components of physical theft effecting enterprises? We're talking about larceny, embezzlement and misapplication. Black's Law Dictionary defines "larceny" as the "felonious stealing, taking and carrying...away </span><span id="SPELLING_ERROR_0" style="font-family: arial; font-size: 85%;">another's</span><span style="font-family: arial; font-size: 85%;"> personal property with intent to convert it or deprive the owner thereof." When an employee or another person unlawfully converts or removes one's property for his own benefit, the crime is embezzlement. When it's done for the benefit of someone other than the wrongdoer, it is misapplication. In all cases, it's theft.<br />
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While cash theft schemes occur three times more often than non-cash (inventory and other assets) theft schemes there is still plenty to talk about with these non-cash theft schemes.<a name='more'></a><br />
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</span><span style="font-family: arial; font-size: 85%; font-weight: bold;">So what are the big targets for physical theft?</span><span style="font-family: arial; font-size: 85%;"><br />
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That depends upon the industry in question.<br />
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</o:p>If a company is in the </span><span id="SPELLING_ERROR_1" style="font-family: arial; font-size: 85%;">healthcare</span><span style="font-family: arial; font-size: 85%;"> space, there is a raging market for pharmaceuticals, medical equipment and related paraphernalia (not to mention scheduled drugs).</span><span style="font-family: arial; font-size: 85%;"> </span><span style="font-family: arial; font-size: 85%;">According to the Association of Certified Fraud Examiners, hospital admission kits are high on the list of items subject to employee theft.<br />
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<div class="MsoNormal" face="arial" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">The good news is that most non-cash larceny schemes are not very complicated. Hourly workers like warehouse personnel with access to inventory or supplies typically perpetrate these crimes.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">More often than not, employees walk off with company assets in plain view of their coworkers.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Here comes the trust issue.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Most coworkers believe that their coworkers (who may have become friends or acquaintances) are acting in good faith. When they see their acquaintance walking an asset out of the work place, they assume he has good cause and authorization to do so.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">We tend to find less controls in private companies than in public companies and it is perhaps for this reason that personal trust becomes a greater problem in private firms.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">As a side note, it’s an interesting commentary on our times, our culture and our economy that I can string together the words “personal trust becomes a greater problem” without embarrassment.</span><br />
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</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;"><o:p> </o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;"><b>What do these non-cash theft schemes look like? For what vulnerabilities must you heighten your awareness? <o:p></o:p></b></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">We all know that theft occurs right out of the warehouse. An employee who steals the company’s warehouse merchandise is stealing an asset the company needs for its business.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">These assets are meant to be available for a particular purpose like satisfying customer needs.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">And of course, in their absence, the company loses revenue.</span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">Then there is larceny of inventory.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Asset misappropriations are not always perpetrated by employees acting alone.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Corrupt employees may work in concert with outside accomplices to steal inventory.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Certainly, the fake sale is one method that is accomplice dependent, and it happens tens of thousands of times per day!</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The fake sale is simple and easy to accomplish.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The outside accomplice "buys" merchandise from the employee.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The employee does not “ring up” the sale. </span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">However, there are more complex schemes than just walking out the door with merchandise or failing to enter a sale into a register.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;"><o:p><br />
</o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">How about personal purchases with company funds?</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">In this tried-and-true classic, the fraudster purchases personal items with the company's money.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Company accounts are used to buy items for the wrongdoer, for their side business and their family members. Here our crook buys an item and submits the bill to his employer as if it represented a purchase on behalf of the company.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">His objective is to have the company pay the invoice.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">We call this a fraudulent billing scheme rather than a proper theft of inventory.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The company is still deprived of inventory or physical assets, but the central point of this scheme is not the taking of existing inventory, but the purchase of new inventory that the company will never receive.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">From the company’s perspective, this asset is not central to its business as it is when employees make off with warehouse merchandise so the damages amount to the money lost in purchasing the item that struck the wrong-doer’s fancy.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">What does this kind of crime look like?</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The company may have an employee that has control over the purchasing function at a company.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">He can, on his own authority, purchase thousands of dollars worth of power tools or equipment for use in his home or in the handy man business he runs on weekends.</span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">But there are worse purchasing and receiving schemes.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Crooked employees manipulate the purchasing and receiving functions of a company to enable and cover-up the theft of inventory and other assets.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Here is how it often works.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">An employee is responsible for receiving goods on behalf of the victim company.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">He could be a warehouse manager or a receiving clerk or a “delivery” man.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">He falsifies the records of incoming shipments. Suppose that 100 smart phones are received.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The dishonest employee notes that 90 were received.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">By marking the shipment short, he enables the theft of ten smart phones.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The ten phones never make it into inventory.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;"><o:p><br />
</o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">If they do make it into inventory and our employee simply takes them home, then we have inventory shrinkage.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Inventory shrinkage is the unaccounted for reduction in the company’s inventory that is the product of theft.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Some crooks will try to cover up inventory shrinkage.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Empty boxes, full bottles replaced by empty bottles, blister packs filled with sand or with obsolete equipment rather than the equipment that is supposed to be in the package are all favored techniques.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">There is a famous case from a generation ago of a company in the salad oil business.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The salad oil was kept in huge vats.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The vats were filled with water except for a long metal tube that was fitted to the top testing port.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">That tube was filled with salad oil.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">When auditors inserted testing tubes into the salad oil vats, they appeared to be full.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">This was not an early and unsuccessful attempt at diet salad dressing but rather a clever theft of the company’s product.</span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">In one of our fraud cases, the owners of a company perpetrated a massive inventory fraud.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">One element of the fraud included buying and selling the same computer processing units (</span><span id="SPELLING_ERROR_2" style="font-size: 85%;">CPUs</span><span style="font-size: 85%;">) together with their heat sink fans over and over again.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The company would sell these blister-packed twinned units to a related party who would sell them to another related party and so on until they were purchased back by the same company that originally sold them!</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The extraordinary thing was that from the beginning the owners of the company had removed the </span><span id="SPELLING_ERROR_3" style="font-size: 85%;">CPUs</span><span style="font-size: 85%;"> from the blister pack, resealed the packaging and simply shipped them with nothing but the fan.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Of course, the fan was 99% of the weight and volume of materials in the blister pack.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Even upon casual inspection, auditors did not notice the missing </span><span id="SPELLING_ERROR_4" style="font-size: 85%;">CPUs</span><span style="font-size: 85%;">.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">But the </span><span id="SPELLING_ERROR_5" style="font-size: 85%;">CPUs</span><span style="font-size: 85%;"> were 99% of the value in the package.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">That fraud went on for years until we surfaced it.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">To top it off, the company sold the </span><span id="SPELLING_ERROR_6" style="font-size: 85%;">CPUs</span><span style="font-size: 85%;"> to an outfit in <st1:place st="on"><st1:country-region st="on">China</st1:country-region></st1:place> that was making illegal clones.<o:p><br />
</o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">Back to shrinkage and how to conceal it.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">A straightforward method is to change the perpetual inventory record so that it will match the physical inventory count. We call this a forced reconciliation.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The bad guys do nothing more than change the numbers in the perpetual inventory to match the actual inventory count.</span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">In fact, we frequently see wrongdoer employees writing off inventory and other assets in order to remove them from the books after the theft.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The more aggressive fraudster writes off the inventory before it’s stolen.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Who, after all, will miss the inventory after it has been written down to zero?</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">This fraudulent technique greatly reduces shrinkage, so it is widely employed.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Let’s go back to our earlier example of selling merchandise without recording a sale.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">This increases the inventory shrinkage on the company's books because the actual inventory is reduced without a concomitant reduction in the perpetual inventory record.</span><br />
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</span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;"><o:p> </o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;"><b>How do you <u>detect</u> the various species of physical theft? <o:p></o:p></b><o:p><br />
</o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">One method is analytical review.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Inventory fraud can be detected through trend analysis.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">The Association of Certified Fraud Examiners points out that when the cost of goods sold increases by a disproportionate amount relative to sales, and no changes occur in the purchase prices, quantities purchased or quality of products purchased, the cause of the disproportionate increase in cost of goods sold might be the depletion of the ending inventory by theft. </span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">Chances are that the numbers will not pass the smell test.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Something will seem wrong.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">It’s generally an experienced forensic investigator who is going to do the detection.</span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;"><br />
</span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;"><o:p> </o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;"><b>How do you <u>prevent</u> the various species of physical theft?<o:p></o:p></b><o:p><br />
</o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">This is about the company’s control environment and its training, awareness, policies and technologies.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">What do we mean by controls environment?</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">We’re talking about policies and practices, independent observation of inventory, segregation of duties, substantive </span><span id="SPELLING_ERROR_7" style="font-size: 85%;">pre</span><span style="font-size: 85%;">-employment screening, verification of shipments and receiving logs, obtaining sufficient third party evidential material regarding deliveries, two-person control, radio frequency tags and monitoring on inventory, surveillance and security, enforcement of security and area restrictions, limitations on the distribution of keys, key cards and door lock combinations, enforcement of vacation policies, rotation of responsibilities, internal audit and so on.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Also, consider doing what trustees do when they take over businesses.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">They change locks.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">It’s often a good place to start if you don’t hand out keys like candy.</span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">It’s 2009.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">If an owner or manager of a business is experiencing high levels of employee theft, it’s because he </span><span id="SPELLING_ERROR_8" style="font-size: 85%;">hasn</span><span style="font-size: 85%;">’t put the right people and controls in place.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">And that means he has decided – even if only passively – that the cost of prevention exceeds the likely losses.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">But that’s an incorrect assumption.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">According to the Association of Certified Fraud Examiners in their most recent Report to the Nation, the median damage for private companies suffering from non-cash misappropriate schemes is in the neighborhood of a quarter of a million dollars.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">A great deal of prevention can be bought for a fraction of that amount.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;"><o:p><br />
</o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;">Asset based lenders – those who advance funds against receivables and inventories – have an old saying when they go into a credit that </span><span id="SPELLING_ERROR_9" style="font-size: 85%;">doesn</span><span style="font-size: 85%;">’t quite pass the initial sniff test:</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">“Keep your hands on your wallet and your eyes on the back office.”</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">It’s good advice for business owners too.</span><br />
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</div><div class="MsoNormal" style="font-family: arial; text-align: justify;"><span style="font-size: 85%;"><o:p> </o:p></span><br />
</div><div class="MsoNormal" style="font-family: arial;"><span style="font-size: 85%;"><b>About Steve Lee & Associates<o:p><br />
</o:p></b></span><br />
</div><div class="MsoNormal" style="font-family: arial;"><span style="font-size: 85%;">Steve Lee & Associates (</span><span id="SPELLING_ERROR_10" style="font-size: 85%;">SL</span><span style="font-size: 85%;">&A) is among the foremost companies involved in worldwide high-stakes litigation and forensic accounting work. Much like an economic swat team, this cadre of highly skilled professionals solve complex commercial matters in areas such as corporate and fraud investigations, loan workouts, insolvency and reorganization, electronic discovery, computer security, competitive intelligence, class action defense, transaction advisory services and theft of intellectual property. Headquartered in <st1:city st="on">Los Angeles</st1:city>, with offices in <st1:state st="on">New York</st1:state>, <st1:city st="on">Chicago</st1:city> and <st1:city st="on"><st1:place st="on">London</st1:place></st1:city>, </span><span id="SPELLING_ERROR_11" style="font-size: 85%;">SL</span><span style="font-size: 85%;">&A has operated in more than 50 countries across the globe.</span><span style="font-size: 85%;"> </span><span style="font-size: 85%;">Additional information about Steve Lee & Associates can be found at <a href="http://www.stevelee.com/">www.stevelee.com</a>.</span><br />
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</div>Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-22819062568842953222009-08-21T17:09:00.000-07:002009-08-21T18:09:39.122-07:00Who is most likely to be the whistle-blower in a corporation??<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCJFUzXFtzRufzdUYE1wXBIeZSAJelVYua2YwgDeVOUxFS2IWCUJQERsZufobxbzGP2aV7VUQTYfadRaFZ4P8GcMZQmEzlmv9M09ljPk8qiDwyO8A51RzQKS3TTAxwtkVIgGXmUR-Usmw/s1600-h/sla.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 320px; height: 46px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCJFUzXFtzRufzdUYE1wXBIeZSAJelVYua2YwgDeVOUxFS2IWCUJQERsZufobxbzGP2aV7VUQTYfadRaFZ4P8GcMZQmEzlmv9M09ljPk8qiDwyO8A51RzQKS3TTAxwtkVIgGXmUR-Usmw/s320/sla.jpg" alt="" id="BLOGGER_PHOTO_ID_5372573975982411442" border="0" /></a><br /><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:punctuationkerning/> <w:validateagainstschemas/> <w:saveifxmlinvalid>false</w:SaveIfXMLInvalid> <w:ignoremixedcontent>false</w:IgnoreMixedContent> <w:alwaysshowplaceholdertext>false</w:AlwaysShowPlaceholderText> <w:compatibility> <w:breakwrappedtables/> <w:snaptogridincell/> <w:wraptextwithpunct/> <w:useasianbreakrules/> <w:dontgrowautofit/> </w:Compatibility> <w:browserlevel>MicrosoftInternetExplorer4</w:BrowserLevel> </w:WordDocument> </xml><![endif]--><!--[if gte mso 9]><xml> <w:latentstyles deflockedstate="false" latentstylecount="156"> </w:LatentStyles> </xml><![endif]--><style> <!-- /* Font Definitions */ @font-face {font-family:Verdana; panose-1:2 11 6 4 3 5 4 4 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:536871559 0 0 0 415 0;} @font-face {font-family:Times; panose-1:2 2 6 3 5 4 5 2 3 4; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:536902279 -2147483648 8 0 511 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-parent:""; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:"Times New Roman"; mso-fareast-font-family:"Times New Roman";} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.25in 1.0in 1.25in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} --> </style><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} </style> <![endif]--><span style="font-weight: bold;"><span style="font-family:times new roman;"><br /></span></span><br /><br /><div style="text-align: center;"><span style="font-weight: bold;font-family:times new roman;" >Who is most likely to be the whistle-blower in a corporation??</span><br /><br /><div style="text-align: left;"><span style="font-family:times new roman;">August 21, 2009...There's no question that whistleblowers, employees who bring concealed misconduct to the attention of superiors, work in the financials departments at a company but aren't typically the CFO. It is often controllers, assistant controllers, assistant treasurers, and senior bookkeepers who "blow the whistle" because of their understanding of the links between the company's financials and the processes and transactions that go into financial statements. These employees raise concerns about how numbers, figures, and calculations that don't quite make sense, may develop into a larger problem, or are flat out wrong.</span><br /><br /><span style="font-family:times new roman;">This was the case at Enron, where former vice president Sherron Watkins warned that the company "had a hole in the ship and was going to sink" after scrutinizing its assets against accounting standards. Consequently, Enron declared bankruptcy in December 2001, rendering thousands unemployed and resulting in millions of dollars in losses for investors.</span><br /><br /><span style="font-family:times new roman;">Once a whistleblower voices a financial, legal, or ethical violation, immediate action must be taken by investigating, preserving evidence, establishing audit trails to prove or disprove fraud or other misconduct, determining damages, installing procedures and controls to mitigate further misconduct, and preventing retaliation.</span><br /><br /><span style="font-family:times new roman;">Steve Lee, Managing Partner at Steve Lee & Associates can be contacted at: stevelee@stevelee.com.</span><br /></div></div><p class="MsoNormal"></p>Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-22143587496659558312009-08-20T17:37:00.001-07:002009-08-20T17:37:13.041-07:00Latest in forensic accounting—a financial detective’s perspective on UBS: <a href="http://bit.ly/RuA29">http://bit.ly/RuA29</a>Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-14566847456565222972009-08-19T13:11:00.001-07:002009-08-19T13:11:56.178-07:00Check out our new blog on UBS: <a href="http://bit.ly/RuA29">http://bit.ly/RuA29</a>Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-66011036548105846592009-08-19T12:48:00.000-07:002009-10-01T19:29:43.441-07:00U.S., SWISS AGREEMENT ON SECRET UBS BANK ACCOUNTS REPRESENTS THE TIP OF A VERY LARGE ICEBERG<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiN1_rYrfXh9gRo0A3bLVDQYBML7ZpgvIgUcFyBePLMogQIo8t33f9mJH7FgCWg9b4pXc2Au8eYXm7SKGxwT0eQCUz4vJxFlyoQ7v-Vtxk4-7kXaJ8TkqVoVxcIw2jWB1-7UgyuGobRK08/s1600-h/SLA.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5371765029951394306" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiN1_rYrfXh9gRo0A3bLVDQYBML7ZpgvIgUcFyBePLMogQIo8t33f9mJH7FgCWg9b4pXc2Au8eYXm7SKGxwT0eQCUz4vJxFlyoQ7v-Vtxk4-7kXaJ8TkqVoVxcIw2jWB1-7UgyuGobRK08/s320/SLA.jpg" style="cursor: pointer; float: left; height: 46px; margin: 0pt 10px 10px 0pt; width: 320px;" /></a><br />
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<div style="font-family: Arial,Helvetica,sans-serif; text-align: center;"><span style="font-size: small; font-weight: bold;">U.S., SWISS AGREEMENT ON SECRET UBS BANK ACCOUNTS</span><span style="font-size: small;"><br />
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</span><span style="font-size: small; font-weight: bold;">REPRESENTS THE TIP OF A VERY LARGE ICEBERG</span><span style="font-size: small;"><br />
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</div><div class="MsoNormal"><span style="font-size: small;"><span style="line-height: 115%;">August 19<sup>th</sup>, 2009….UBS has at long last succumbed to pressure from the Swiss government, agreeing to provide the IRS with the names of certain would-be taxpayers suspected of sheltering funds in those top secret Swiss bank accounts we’ve all heard so much about. At first blush, this seems like a big deal. After all, those tight-lipped, look-the-other-way Swiss banking types that we’ve grown so fond of over the years weren’t supposed to just cave like that, right? Well, the forensics investigation team at Steve Lee & Associates (www.stevelee.com) doesn’t think this is such a big deal after all.</span></span><br />
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</div><div class="MsoNormal"><span style="font-size: small;"><span style="line-height: 115%;">The mainly unstated implications of the UBS case seems to be that the IRS (with a little help from their diplomatic and law enforcement colleagues in the US government) has busted wide open the doors of one of the world’s most secure tax havens. Their victory awards them depositor records on a platter: they finally have the goods on some of the world’s worst felons – the terrorists, the mobsters, the Madoffs. Or not, says Steve Lee & Associates.</span></span><br />
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</div><div class="MsoNormal"><span style="font-size: small;"><span style="line-height: 115%;">Managing Partner Steve Lee sees the IRS’s victory as pyrrhic. “We think it is excellent news that the Treasury will obtain recoveries from exposed tax evaders. If these individuals owe taxes to Uncle Sam, that obligation should be satisfied.” But Lee warns that the IRS has very limited influence when dealing with small private banks that do not operate or possess traceable assets or deposits in the <st1:country-region st="on"><st1:place st="on">United States</st1:place></st1:country-region>. “<st1:country-region st="on"><st1:place st="on">Switzerland</st1:place></st1:country-region> attracts significant wealth associated with monies legally earned, but where the depositors want to hide ongoing investment income. We see that hot wealth associated with white-collar crime, racketeering, narcotics and weapons trafficking, and illegal gaming is being hidden from the <st1:country-region st="on"><st1:place st="on">US</st1:place></st1:country-region> government in more exotic domiciles. In some of these countries, the stakes are higher and the risks are greater, and bureaucrats and bankers associated with secret accounts are likely to be more concerned about a client’s wrath than prosecution or pressure from the IRS or <st1:country-region st="on"><st1:place st="on">US</st1:place></st1:country-region> law enforcement.”</span></span><br />
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</div><div class="MsoNormal"><span style="font-size: small;"><span style="line-height: 115%;">So where are these domiciles? Through its investigations, the forensic economics swat team at Steve Lee & Associates – knowledgeable of the individuals and entities that obtain funds through criminal enterprises -- has identified (in descending order) the most frequent spots where white-collar criminals have stashed their ill-gotten booty (perhaps if the list focused exclusively on tax, it would have to be restructured -- and Switzerland would rank more highly):*</span></span><br />
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<li class="MsoNormal" style="line-height: normal;"><st1:country-region st="on"><st1:place st="on">Belize</st1:place></st1:country-region> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:country-region st="on"><st1:place st="on">Panama</st1:place></st1:country-region> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:place st="on">Cayman Islands</st1:place> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:city st="on"><st1:place st="on">Dubai</st1:place></st1:city> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:place st="on">British Virgin Islands</st1:place> (BVI) <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;">Grand Duchy of <st1:country-region st="on"><st1:place st="on">Luxembourg</st1:place></st1:country-region> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:country-region st="on"><st1:place st="on">Monaco</st1:place></st1:country-region> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;">Lichtenstein <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:place st="on">Hong Kong</st1:place> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:country-region st="on"><st1:place st="on">Taiwan</st1:place></st1:country-region> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:country-region st="on"><st1:place st="on">Switzerland</st1:place></st1:country-region> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;">US <st1:place st="on">Virgin Islands</st1:place> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:country-region st="on"><st1:place st="on">Austria</st1:place></st1:country-region> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;">Nevis (<st1:place st="on">Caribbean</st1:place>) <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;"><st1:place st="on"><st1:placetype st="on">Republic</st1:placetype> of <st1:placename st="on">Andorra</st1:placename></st1:place> <o:p></o:p></li>
<li class="MsoNormal" style="line-height: normal;">Campione d’Italia<o:p></o:p></li>
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</div><div class="MsoNormal" style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><span style="line-height: 115%;">How did the top three countries “earn” their positions? Lee explains, “In Belize, a vastly ineffective extradition treaty with the <st1:country-region st="on"><st1:place st="on">US</st1:place></st1:country-region> has enabled many criminals to purchase economic citizenships with impunity by domiciling sufficient assets. <st1:country-region st="on"><st1:place st="on">Panama</st1:place></st1:country-region> has been a haven for white-collar criminals since the fall of Noriega. In the <st1:place st="on">Cayman Islands</st1:place> it has been possible to charter a bank or insurance company to deposit or shelter significant assets. These entities have no reciprocal operations or known assets in the <st1:country-region st="on"><st1:place st="on">United States</st1:place></st1:country-region>, so the IRS has less leverage over them than it does with a public bank like UBS.”<br />
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</div><div class="MsoNormal" style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><span style="line-height: 115%;">But Lee is all too familiar with these operations from his firm’s past global rendezvous: “It’s a tough crowd to pursue. They don’t play nice in the sand box and they don’t like it when you separate them from the money they obtained illegally. That doesn’t stop us. <st1:country-region st="on"><st1:place st="on">Switzerland</st1:place></st1:country-region> – and UBS in particular – was the low hanging fruit. And in the end, the IRS got less than four thousand five hundred names out of the fifty-two thousand they sought. It’s going to get a lot tougher when the IRS goes after the big money that is sequestered in markets like <st1:city st="on">Dubai</st1:city>, Central America and the <st1:place st="on">Caribbean</st1:place>.”</span></span><br />
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</div><div class="MsoNormal" style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><span style="line-height: 115%;">What’s more, Lee notes that “criminals of particular ethnicities appear to favor specific havens just as their forebears favored particular immigration ports-of-entry. The tendency to hide money where friends and extended family hid theirs is very helpful to us in international asset searching and recovery outside the <st1:country-region st="on"><st1:place st="on">USA</st1:place></st1:country-region>.”</span></span><br />
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</div><div class="MsoNormal" style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><span style="line-height: 115%;">The heated match between UBS and the IRS has taken the limelight, and the impetus to quickly and efficiently tackle suspicious hotbeds of white-collar crime and expose familial fraudulent networks is here to stay. Financial detectives Steve Lee & Associates unlock these vaults.<br />
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</div><div class="MsoNormal" style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><span style="line-height: 115%;">* This list was devised based on the large number of investigations done by SL&A involving capital flight out of the <st1:country-region st="on"><st1:place st="on">United States</st1:place></st1:country-region>.<o:p></o:p></span></span><br />
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</div><div class="MsoNormal" style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><span style="line-height: 115%;">Steve Lee, Managing Partner at Steve Lee & Associates can be contacted at:<o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><span style="line-height: 115%;">stevelee@stevelee.com.</span></span><br />
</div><span style="font-family: times new roman; font-size: 85%;"></span>Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0tag:blogger.com,1999:blog-4435901378822274503.post-25544015089325328002009-08-19T08:27:00.001-07:002009-08-19T08:27:45.997-07:00Steve Lee & Associates on national radio show - <a href="http://ping.fm/NgteK">http://ping.fm/NgteK</a>Steve Lee & Associateshttp://www.blogger.com/profile/05769002818069499076noreply@blogger.com0