Huge fines are a tax on illegal behavior

Several weeks ago I listened to a continuing education class presented by Sam Antar, current felon and formerly CFO of Crazy Eddie.

In the session, he made two comments that caught my ear. First, the fines we read about as a result of various financial scandals are just a tax on illegal behavior. Second, those fiascos are, he said, a cancer destroying capitalism.

After the session, I had opportunity to interview him by phone and follow-up on both of those ideas.

Fines are a tax on illegal behavior

He indicated that essentially no one has been implicated in any of the disasters we’ve read about, which I have discussed extensively on my blog.

He said corporations don’t commit crimes. People commit crimes.

And the people who committed crimes aren’t going to jail.

Is the cost of reducing fraud risk greater than the loss from a fraud incident?

I recently had the opportunity to visit with Sam Antar, convicted felon and former CFO of Crazy Eddie. This is cross-posted from my other blog, Nonprofit Update.

During our interview, Mr. Antar suggested a reason why businesses don’t put enough effort into fraud prevention and detection. He said the cost of deterring fraud may be more expensive than the consequences of fraud. Before I refine the concept, look at some costs he mentioned:

  • In the corporate world, particularly companies that have grown for a while, there needs to be a lot of systems put in place to deter and mitigate fraud risk.
  • There needs to be an audit committee and they need to have resources available to them. Translate that to they have authority to hire legal and accounting experts. They need training personally. This is expensive.
  • The audit committee, consisting of skilled and knowledgeable people, must have a direct line of contact to the Board of Directors. That is expensive in terms of time.
  • The Board of Directors has to have a substantial amount of financial skills. That is expensive in terms of time and dollars for training and dollars for their access to expert resources.
  • At some point in the growth curve, there needs to be a robust, skilled internal audit department. That could get quite expensive, if you look at it only in terms of cash outflows.

I would add to that the time involved to implement quality controls, policies, and procedures. Those will take a lot of time for the finance & accounting team. In turn, those procedures will take time for operational staff to follow. All of that translates into more staff.

That can get costly fast.

What is the cost of a fraud incident

Nonprofits cannot *prevent* fraud but they can reduce the risk

Sam Antar is a convict and former CPA. He was the CFO of Crazy Eddie, which by his description was an intentionally fraudulent business.

I recently had opportunity to interview him by phone. Will have more of our conversation in future posts.

What I’m going to do in these discussions is combine his comments and ideas with my thoughts. Cross-posted from my other blog, Nonprofit Update.

Advice for charities

I asked him what advice he would have for small charities to prevent fraud.

Wow, was that a mistake. I should not have used the word “prevent.”

You can’t prevent fraud. If someone is intending to steal or is completely determined to cook the books, they will find a way.

Tragedy of Fraud series now available in print as well as e-book formats

tragedy-cover   tragedy-cover


Both books in my Tragedy of Fraud series are now available in print format from Amazon.

The newest book:


Tragedy of Fraud – Insider Trading Edition describes – Scott London’s long fall from Big 4 audit partner to prison inmate.

Click the link for your reading preference:

First book in the series:


Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned – Consequences of fraud spread far. There is a long list of well-earned wages from fraud that will be paid in full.

Available in your preferred format:

Another view of the devastation caused by a fraudster

Looking closely at a specific fraud case shows the depth of the damage caused by fraud. That also lets us see the horrible impact a fraud has on the fraudster and his or her family.

Take a look at the story of Amy Wilson, who stole $350,000 from her employer. She served four years in prison. She is working to restore her life and has made a lot of progress.

What could you learn from the video?

Listen as she tells of the devastation she caused her dear husband and beloved children.

Listen as she tells of the betrayal she caused her oh so nice employer.

Listen for clues on how you could take steps that might prevent this kind of devastation from shredding your ministry.




If you want to learn more of her story, you could visit her website: …

The world’s oldest profession? Fraudster.

I listened to a CPE class by Sam Antar last week (Crazy Eddie CFO and ex-CPA Sam Antar Shows You How He Cooked the Books). Great class, in case you are looking for 2 hours of CPE. (Cross posted from my other blog, Nonprofit Update.)

He suggested that unlike what has been said for a long time, prostitution is not the world’s oldest profession.

Instead, he suggested that committing fraud is the world’s oldest profession.

How can that be?

Go back to the garden of Eden. The serpent deceived Eve through a knowing misrepresentation of the truth in order to deceive her and take something from her. His intent was to harm her.

Definition of fraud

Irony: Charity’s anti-fraud manager pleads guilty to fraud

BBC reports on 3/6 that Oxfam ex-fraud chief admits defrauding charity.

Oxfam, a development charity in England, has revenue of £385.5M (~$645M) in 2012.

The charity’s head of the counter-fraud department pled guilty to embezzling about £62.6K (~US$105K) and will be sentenced May 16.

(Cross-posted from my other blog, Nonprofit Update, since this is useful info for CPAs.)

His scheme?

Upland bribery case – where are they now? Three have served their time. Ex-mayor has six months to go.

Time for my semi-annual update on the location of defendants in the Upland bribery case.  Since my last update in July, a third schemer has been released. The former mayor still is in federal prison in Taft, California. That is a privately operated facility in Kern County.

Why am I still interested? Following the details of a specific incident helps demonstrate the tragedy of fraud. It’s also an education on the legal system.

eBook ‘Tragedy of Fraud’ now available in multiple formats

Fraud has tragic effects on innocent people who didn’t commit the fraud. The person who did the deed will pay a severe price far beyond what the judge imposes. Just like a stone thrown into a pond causes ripples all across the water, so a fraud ripples out to cause all sorts of harm.


Only 99 cents.

Available in Epub for iPad, iBooks, Nook, and Sony Reader.

Also in mobi for Kindle, PDF for desktop reading, and 5 other formats.

Newest versions can be found here.

Has been available at Amazon since February.

3 bank confirmation frauds

Previously mentioned that AU-C 505.07 requires auditors to look at the address used on confirmations.

Here are three illustrations of how things can go sour when sending bank confirmations: PFGBest, Parmalat, and a small company in North Carolina:

PFGBest – Peregrin Financial Group

The organization’s CEO was sentenced to 50 years in prison and ordered to pay restitution of $215.5 million.

Upland bribery case – where are they now? Two in jail and two have served their time.

Since my last update in December, one of the defendants in the Upland bribery case has reported for his confinement. Two have completed their term and been released. The former mayor is still in jail.

Why am I still interested? To me, following the details of a specific incident helps illustrate the tragedy of fraud. This also provides me an education on the legal system. That is useful since I’m a CPA.

Fraudster tells her story

I’ve previously discussed the journey through fraud, jail, and rebuilding taken by Mrs. Amy Wilson. You can see my posts here.

She is providing speaking engagements to make money to repay her victim.  She has a new website set up at Forged Redemption, LLC.

If you are interested in studying one specific fraud incident to help yourself learn about fraud, check out her site. Likewise if you are looking for a speaker.

I like the graphic at the bottom of this page – it has three pictures of her at different points in time with a description of each stage: …

All the Enron accounting was approved by the attorneys and the auditors and the board. Everything was perfectly legit. Until indictments were issued.

In a speech that should give all auditors pause, Andrew Fastow, former CFO of Enron, tells us that all the off-balance sheet transactions were reviewed and approved in advance by everybody.

Enron was one of the biggest in the host of business frauds after the turn of the century.

Half of Enron’s assets were off-balance sheet. According to the article, Former Enron CFO Andrew Fastow Confronts the Fraud Examiners, Mr. Fastow says those deals were intended to deceive:

Fastow admitted that his role was engaging in structured finance transactions that intentionally created a false appearance for Enron. 

The goal was to create misleading financial statements.

Did he violate the accounting rules?


Did he break specific laws?


The transactions were reviewed and approved, yet still fraudulent

Live example of a fraud fiasco

“Going to meet your Maker with the fresh scent of theft on your hands is not a good way to go…”

is how Charles Hall starts his story of a long ago fraud – Stealing While Dying.

We’ve all seen the situation where the bookkeeper does the main bookkeeping, receives the bank statements, reconciles the accounts, and is an authorized check signer.

In this situation, the most-honest-and-nicest-person-you’ll-ever-meet bookkeeper starting stealing lots of money when she became gravely ill.

Check out the full story. …