Financial Forensics
Case Example 1: Fictitious Vendor
Industry: TransportationServices Rendered: Fraud Investigation
Overview: A large trucking company discovered that one of its employees was selling computers to the trucking company at inflated prices through his bogus computer supply company. We documented from third-party vendors the purchase of computers by the bogus company and the sale of these computers at inflated prices to the trucking company over three years. We traced nearly $4 million in misappropriated cash to the employee’s investment accounts. The trucking company recovered most of the money.
Case Example 2: Financial Statement Manipulation
Industry: Government ContractingServices Rendered: Fraud Investigation
Overview: Officers and key management were suspected of manipulating contracting revenue for a company with $500 million in annual sales. We imaged computer hard drives and converted and indexed the electronic data files. We then developed key word searches to narrow down 250,000 documents to just 47,000 to be manually reviewed. After reviewing e-mails and documents we interviewed key employees and company officers and reported our findings to the audit committee. We also provided the company’s independent auditors with information to evaluate the sufficiency of our procedures.
Case Example 3: Partnership Dispute
Industry: Real EstateServices Rendered: Record Reconstruction, Financial Analysis, Expert Witness
Overview: Members of a family-owned real estate development company disputed whether payments to the owners had been made as agreed. We reconstructed 10 years of accounting records (for 10 entities involving 20,000 transactions from nearly 50 bank accounts and 100 credit cards). We provided expert testimony in court.
Case Example 4: Ponzi Scheme
Industry: InvestmentsServices Rendered: Fraud Investigation, Record Reconstruction, Litigation Support, Accountant to Trustee
Overview: We investigated a $13 million diamond investment ponzi scheme. We reconstructed records involving transactions and investments by over 3,000 individuals, and assisted the bankruptcy trustee in developing claims against management and insiders.
Case Example 5: Kiting Scheme and Lending Limit Violations
Industry: Financial InstitutionsServices Rendered: Forensic Analysis and Fraud Investigation
Overview: A bank’s branch manager and a customer were accused of check kiting. We investigated the matter. We documented an $800,000 check-kiting scheme, analyzed loans to insiders, identified legal lending limit violations, and determined that certain board members and the branch manager were involved. We then assisted counsel in developing claims against the bank’s bonding company.
Case Example 6: Employee Theft
Industry: Medical EquipmentServices Rendered: Fraud Investigation
Overview: The president of a medical equipment enterprise suspected that the chairman of the board was defrauding the company. We uncovered falsified travel and expense reports totaling nearly $100,000. We presented this evidence to the chairman and obtained a confession. He agreed to make restitution payments
Case Example 7: Fictitious Vendor
Industry: Medical ResearchServices Rendered: Fraud Investigation
Overview: We investigated a false vendor scheme by an employee of a large non-profit research company. We imaged computer hard drives and developed key word searches. We discovered that the employee had set up a bogus company and was receiving payments for fake invoices.
Case Example 8: Damage Analysis - Construction Accident
Industry: ConstructionServices Rendered: Forensic Damage Analysis
Overview: A crane at a high-rise construction site fell and damaged a nearby building. We analyzed the leasing operations of the damaged building. We determined the loss of rental income from tenants who had to vacate the building during repairs.
Case Example 9: Fraudulent Lending Schemes
Industry: Automobile FinanceServices Rendered: Fraud Investigation, Forensic Analysis, Accountant to Trustee
Overview: Three related automobile finance companies and two dealerships were involved in several lending schemes. We analyzed the financing activities and discovered illegal lending practices. We then helped the bankruptcy trustee of the entities develop claims against those involved.
Case Example 10: Arson - Fraud Investigation and Damages
Industry: RestaurantServices Rendered: Fraud Investigation, Forensic Damage Analysis, Expert Witness
Overview: A family-owned restaurant was destroyed by arson. The fire also destroyed the company’s records. We reconstructed the business records for an insurance company to assess the financial condition of the business and the owners, and to determine lost profits resulting from the fire. We obtained records from banks, vendors, the Internal Revenue Service, state and local taxing authorities, and other sources to reconstruct the records. We determined that the company had little positive cash flow and, along with its owners, was behind on tax and other payments.
Case Example 11: Lease Payment Manipulation
Industry: Equipment LeasingServices Rendered: Forensic Analysis
Overview: An equipment leasing company was suspected of manipulating payment delinquencies and other actions in violation of its agreement with a bank. The bank had purchased lease income streams from the leasing company. Violation of the agreement would require the leasing company to repurchase the lease income streams from the bank. We analyzed records of the leasing company and documented issues indicating it likely had violated the agreement. We reported our findings to the bank and its legal counsel.
Case Example 12: Securities Fraud and Mismanagement
Industry: Financial InstitutionsServices Rendered: Fraud Investigation, Forensic Analysis, Accountant to Trustee
Overview: A large bank holding company was one of the largest junk bond customers of Drexel Burnham Lambert, Inc.
The holding company and its subsidiary savings and loan entity failed and the subsidiary was taken over by regulators. We investigated allegations of securities fraud and mismanagement by senior officials of the bank holding company. The trustee was able to successfully settle many claims to the benefit of creditors of the bank holding company.
Case Example 13: Mismanagement and Auditor Malpractice
Industry: InsuranceServices Rendered: Forensic Analysis and Review of Auditor Working Papers
Overview: The assets of a Kentucky insurance company had been placed into receivership after allegations of mismanagement. We reviewed loan files and other transactions. Our findings helped support legal claims against senior management and a malpractice claim against the company’s independent auditors.
Case Example 14: Record Reconstruction and Fraud Investigation
Industry: Real EstateServices Rendered: Fraud Investigation, Record Reconstruction, Accountant to Trustee
Overview: We helped a Chapter 11 bankruptcy trustee investigate a corporation that was a general partner in about 50 real estate-based limited partnerships. We reconstructed the accounting records of the entities and found that invested funds had been diverted and manipulated by the corporation’s senior management. We documented claims to support legal actions to recover assets for the bankruptcy estate and investigated senior management. The CEO was convicted of illegal activities.
Case Example 15: Escrow Fund Diversion
Industry: Real EstateServices Rendered: Cash Transaction Tracing and Record Reconstruction
Overview: A title company was accused of diverting escrow funds from real estate transactions. We traced over $1 million in diverted funds to support claims against management and insiders of the company.
Case Example 16: Improper Payments to Venders
Industry: ConstructionServices Rendered: Forensic Analysis
Overview: The owner of a building project who lived outside the country gave his architect authority to hire subcontractors and approve construction payments. The building owner suspected the architect of making improper payments. We analyzed construction cost reports, supporting invoices, and other documents for duplicate or unsupported payments and other irregularities. We reported our findings to the building owner and his attorney.
Case Example 17: Railroad Reconstruction Cost Dispute
Industry: TransportationServices Rendered: Forensic Construction Cost Analysis
Overview: Two railroad companies were litigating the shared $40 million reconstruction cost of a railroad track damaged in a landslide. Our forensic analysis helped determine which costs should be shared.