Wisconsin Case Highlights the Limits of Perception

If you do more than set forth to confirm legitimacy, you’ll believe that you’ve done so, even as your money goes up in smoke.

“But I saw their tax returns!” At least one of the victims of the scam described below must have said this when he or she discovered that the investment was a fraud. But creating phony documents is as easy as a few mouse clicks; something any middle high schooler could do. According to the CFTCs release: (more…)

SEC Gets a Judgment Against One of the Top Wealth Advisers in America

Vigilance in the price of enjoying the retirement for which you have worked and saved.

To set up a recent development in an SEC enforcement case, we begin with an excerpt from The Vigilant Investor: (more…)

Friendly Neighborhood Insurance Agent Pleads Guilty to Running a Ponzi Scheme

As Glenn Frey wrote in Smuggler’s Blues, the lure of easy money has a “very strong appeal.” Often, we are just too close to see the red flags that would stand out to an objective observer.

We like to think that we can see a scam coming a mile away.  Too often, though, we find that it was standing right next to us as we scanned the horizon for it.  According to an article by John Diedrich of the Milwaukee Journal Sentinal: (more…)

SEC Charges Alleged Corporate Pick-Pocket

uxury living on a salary that would not seem to support it is the most reliable indicator of embezzlement. Unless corporations occasionally look for it, they are at risk for the kind of loss that Koss suffered.

If you can’t trust your vice president of finance with money, who can you trust?  Koss Corporation, a Milwaukee-based manufacturer of headphones, is finding out the hard way that constant vigilance is smarter than blind trust.  The SEC has charged Koss’s former vice president of finance, Sujata Sachdevacan, and another accounting employee, Julie Mulvaney, with embezzling more than $30 million from Koss and covering up the theft with false accounting entries.  The SEC’s press release about the case reads, in part:

Since at least 2004, Sachdeva - the former Principal Accounting Officer, Secretary and Vice-President of Finance at Koss - stole over $30 million from Koss. Sachdeva used the embezzled funds to finance an extravagant lifestyle, including lavish spending sprees at department stores, designer boutiques, jewelry stores, and other high-end retailers. Sachdeva and Mulvaney - Koss’s senior accountant - concealed and facilitated the theft from Koss by preparing materially false accounting records. Mulvaney, working in concert with Sachdeva, prepared false journal entries to disguise Sachdeva’s misappropriation of funds. Sachdeva and Mulvaney attempted to hide the embezzlement on Koss’s balance sheet and income statement by overstating assets, expenses, and cost of sales, and by understating liabilities and sales. Based on the fraudulent records prepared by Sachdeva and Mulvaney, Koss prepared materially false financial statements and filed materially false current, quarterly, and annual reports with the Commission. After discovering the embezzlement, Koss amended and restated its financial statements for fiscal years 2008 and 2009 and the first three quarters of fiscal year 2010.

Notice the extravagant spending. Luxury living on a salary that would not seem to support it is the most reliable indicator of embezzlement. Unless corporations occasionally look for it, they are at risk for the kind of loss that Koss suffered.

Extravagant spending is also an indicator of an investment adviser who is spending clients’ money. Count on it: if your investment adviser spends like a trust fund baby on a weekend shopping bender, he is spending your money, not his. Do not chalk up ostentatious wealth to an adviser’s competence at managing money. You want your adviser to understand the value of a dollar better than the guy who blows hundreds of thousands of dollars on luxury cars and a collection of designer watches.

Follow the Money - Hedge Fund Managers

The U.S. Securities and Exchange Commission (SEC) has charged Wisconsin-based Wealth Management LLC, and its principals, James Putman and Simone Fevola, with securities fraud in connection with investment pools that the defendants operated.  Among the SEC’s allegations is that the defendants inflated the supposed returns for the funds in order to maximize the compensation to the hedge [...]

The U.S. Securities and Exchange Commission (SEC) has charged Wisconsin-based Wealth Management LLC, and its principals, James Putman and Simone Fevola, with securities fraud in connection with investment pools that the defendants operated.  Among the SEC’s allegations is that the defendants inflated the supposed returns for the funds in order to maximize the compensation to the hedge fund managers. (more…)

 
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