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Fraud Detection and Deterrence

STOP!
Would you know if your employees were
stealing from you right now? If you're
reading this, you're not watching them.

Business owners are usually swamped with handling the day-to-day chores of operating their business. They rely on the person in charge of the accounting, who may be called the bookkeeper, controller, business manager, etc., to keep the records, collect the accounts receivable from customers and pay the bills.

In some cases, elaborate systems may be set up to protect the "hard assets" from employee theft (although this area is widely neglected). But there is little thought given to the "right hand" person who is handling the business funds.

San Jose Mercury News, Monday, November 11, 1996, Page 1A: "Gilbert and Cheryl Chavez lived the Life of the rich and famous."

"They owned a $900,000 home in Saratoga. They had two Lear jets and a dozen expensive cars and boats. And they apparently thought little of chartering a plane to take friends and family to Hawaii, where they owned a nine bedroom house on the beach."

"But it was hard to fathom how a couple such as the Chavezes could afford such grand style on the earnings of a former pipe fitter who quit his job and a bookkeeper paid less than $45,000 a year".

"Now authorities are charging that Cheryl Chavez stole as much as $18 million over an eight year period from her boss, Carl Berg, a wealthy builder, high-tech capitalist and former owner of the San Jose Earthquakes soccer franchise."

Fraud affects all of us. In the United States alone, fraudulent activities and white-collar crime cost the economy over $400 billion each year, according to the Association of Certified Fraud Examiners.

At one time, businesses hired CPA firms to perform financial statement audits. Although these audits are not designed to detect fraud, they were a deterrent, because at least now someone was looking! CPA-prepared financial statements do not involve independent confirmation procedures as audited financial statements do. The CPA may be hired only to prepare the business income tax returns, or the income tax returns may be prepared internally using computerized tax preparation software. The point is; no one is carefully reviewing the accounting procedures of the business, including whether an internal control system is in place and functioning to protect the assets of the business.

Significant experience conducting financial investigations and providing expert testimony has enabled us to assist fraud investigators, insurance claim representatives, government officials and others with the financial aspects of fraud and embezzlement cases.

Our experience in this area includes:

  • performing business and property valuations
  • providing financial analyses for insurance claims involving business interruption, lost profits and damages
  • designing damage models and forensic audit programs
  • locating hidden assets
  • providing testimony and consultation for legal proceedings


The president of our firm, Bill Michaelson, CPA, possesses the following additional credentials relating to fraud investigations:

  • Certified Fraud Examiner (CFE), which is a specialist in the detection and deterrence of a wide variety of fraudulent conduct--from discovering employees or executives who misappropriate company assets to assisting investors who are defrauded in the course of commercial transactions. A CFE is responsible for resolving allegations of fraud, obtaining evidence, taking statements and writing reports, testifying to findings and assisting in the prevention and detection of fraud.

  • Member of the Academy of Experts (MAE), which was established in the United Kingdom. The Academy is a professional society and qualifying body that provides a source of experienced expert witnesses for the European Community and elsewhere internationally. Bill's qualifications as an expert are not limited to domestic cases, but extend to the international arena as well.

  • Speaker on forensic accounting and fraud-related topics for national and local forums. For example, Bill was the only CPA invited to speak at the national Division of Insurance Fraud / Special Investigative Units Conference for the past two years. He also has served as a speaker at the 1996 American Institute of CPAs National Advanced Litigation Services Conference, a conference for CPAs who want to stay informed about the most up-to-date happenings in litigation services, including state-of-the-art fraud detection and deterrence techniques.

  • Author of articles on forensic accounting, fraud detection and related topics. Send us an e-mail message with your name and address if you would like to receive copies of specific articles.

    "Advocacy and the Different Roles of Experts" Florida CPA Today, February/March 1996.

    "In Search of Hidden Assets" The Practical Accountant, February 1995.

    "Proposed Tax Changes" Daily Business Review, April 1996

    "Divorce: A Game of Hide and Seek" Journal of Accountancy, March 1996.

    "Two Different Roles: Consulting Experts vs. Testifying Experts" and related testimony tips "Six Tips for the Testifying Expert" On Point, Winter 1996.

    "Commercial Damage Theory" Florida CPA Today, May 1997.

    "How CPAs Can Help in the Discovery Process" On Point, Spring 1997.

    "Effective Financial Exhibits" On Point, Winter 1997.

Additional information relating to Bill Michaelson's credentials in forensic accounting and fraud detection is included in his Curriculum Vitae.

Speaker
To schedule Bill Michaelson as a consulting group speaker, please e-mail your request or call Trish Murray for more information at (561) 683-6800.

Update!
Cheryl Chavez, the former office manager for Silicon Valley builder and investor Carl Berg, pleaded no contest in March, 1998 to charges of embezzling $17.6 million. Her husband, Gilbert claims he is innocent and continues to travel at his leisure.


Links to Fraud and Investigation Web Sites:

Go to Legal-Related Links.

Go to Helpful Accounting and Financial Web Site Links.