Refer back to the beginning of this chapter to the

Refer back to the beginning of this chapter to the excerpt from a Los Angeles Times article about Reed Slatkin’s fraud. The article insinuates that the FBI and IRS’s raiding of Slatkin’s office marked the beginning of the government’s investigation of Slatkin’s financial activities. In fact, Slatkin was under investigation for at least four years prior to the raid, and nearly a year and half previous to it , the SEC had already conducted a series of depositions featuring, among others, Reed Slatkin as a witness. Transcripts of two of these fraudsare available online: Open depo…jcm.!Jtm (Depo 1) and http://slatkinfraudcom/depo..Jeb.lltm (Depo 2). All page numbers refer to Depo I except as individually noted.

1. Page 1. Where was this deposition conducted?

2. Page 1. Name the three individuals representing the SEC.

3. Based on the chapter’s explanation of depositions, do you think these three are lawyers or SEC investigators(fraud examiners)?

4. Page 1-11. Using the explanation of discovery in the chapter, what is meant by “The abovee ntitled matter came on for hearing at I 0:12 a.m ., pursuant to notice”? (italics added) (A lso, see page 6·23 to page 7-7.)

5. Page 2. Another vital aspect of deposition is subpoena ducestecum, a written order that commands an individual or organization to produce case-related documents, which will often be used as evidence in the deposition or trial and are usually called exhibits. What two exhibits are presented in this deposition?

6. Depo 2, Page 2. Compare the number of exhibits used in Depo I to the number used in Depo 2. By the nature of the exhibits listed for Depo 2, why do you think the SEC employed so many more exhibits in the second part of the deposition than the first?

7. Pages 7-9 to 10-13. Quickly read over this discussion. Using the explanation of subpoenas in the chapter, why are the examiners so particular in their questions regarding the subpoenaed documents?

8 . Page 3. According to Mr. Dunbar, what is the purpose of this deposition, or “investigation”?

9. Depo 1, Pages 52-16 to 55-14; Depo 2, Pages 214-3 to 215-4. Quickly read over these discussions. Refer ring also to the chapter, describe briefly the role of Mr. Boltz, Mr. Slatkin’s attorney.

10. Pages 134 -14 to 137-17. Quickly read over this discussion . Keeping in mind that Mr. Slatkin handled investments for hundreds of “friends” but was not a registered investment advisor, and paying particular attention to Mr. Boltz’s “promptings” in this section, for what reason does Mr. Boltz apparently believe his client is under investigation?

11. Page 142-2 to 144-25. Throughout the deposition, both Mr. Slatkin and his interrogators reference NAA Financial, a Sviss institution housing most of Slatkin’s “friends’ money.” On a scale of 1-10, how confident is Mr. Boltz concerning NAA Financial? 

a . When asked how he can be certain that NAA Financial is “good for the money,” how does he respond?

b . Is Mr. Boltz’s method of verification legitimate?

c. Has he personally made contact?

d . Who is Mitchell Axiall?

On a beautiful spring morning in 2015, Stephen Lowber, chief

On a beautiful spring morning in 2015, Stephen Lowber, chief financial officer of Cutter and Buck, Inc., slowly arose from his bed, walked across the bedroom floor, and gazed out the window. It was a surprisingly clear, sunny day in Seattle, Washington.

Despite the beauty of the day, the expression on Mr. Lowber’s face was not positive. Cutter and Buck, a company that designs and markets upscale sportswear and outerwear, had enjoyed financial success. It recently announced revenue of $54.6 million for the fourth quarter and $152.5 million for the entire fiscal year. Cutter and Buck also announced it was rated as the hottest golf apparel brand from 2010 to 2014 by Gold World Business Magazine, a leading golf trade publication. Despite the success and positive publicity of his company, Lowber was haunted because he knew the company had engaged in fraud.

Cutter and Buck, Inc., had been encountering declining sales as it approached the end of its fiscal year. In the final days of the fiscal year, the company negotiated deals with three distributors under which Cutter and Buck would ship them a total of $5.7 million in products. The distributors were assured they had no obligation to pay for any of the goods until customers located by Cutter and Buck paid the distributors.

Sometime later, Lowber learned that these three distributors were operating as Cutter and Buck’s warehouses. Rather than restate and correct the company’s financial statements, Lowber concealed the transactions from Cutter and Buck’s independent auditors and board of directors by arranging for distributors to return $3.8 million in unsold inventory.

The returns were accounted for as a reduction in sales during the following year. Additionally, Lowber instructed personnel to override the recorded business lines instead of the business line under which those sales were originally recorded to hide the magnitude of the returns.

As a result of these fraudulent transactions, Cutter and Buck’s management overstated true fourth quarter and annual revenue of fiscal year 2015 by 12 percent and 4 percent, respectively.

1. What were the main types of financial statement fraud committed at Cutter and Buck? Do these types of fraud occur often?

2. What should have been the appropriate accounting treatments?

3. The three parts of the fraud triangle are pressure, opportunity, and rationalization. List some of the pressures that may have Jed to this fraud.

In this chapter, we have discussed the GrammLeach-Biiley Act, which

In this chapter, we have discussed the GrammLeach-Biiley Act, which gives credit unions, savings and loans, banks, insurance agencies, mortgage companies, and other financial institutions the right to sell customer information to marketing companies, affiliates, and others. Some individuals believe that doing this is ethical since customer s have the right to opt out of having their information sold and because by law these organizations have the right to make additional income through selling customers’ information. On the other hand, some individuals believe that these organizations do not educate customers and unfairly keep them ignorant to the use of their information.

Split the class into small groups. Have the groups discuss the following:

a. Is the Gramm-Leach-Bliley Act ethical? Why or why not?

b. Do organizations have a responsibility to educate customers about the Gramm-Leach-Biiley Act? Why or why not?

c. Just because something is legal, is it ethical? Why or why not?

Recently, Experience published the findings of an online survey about

Recently, Experience published the findings of an online survey about identity theft. Findings from the survey are found online at http://www.experian.com/blogs/ask-experian/survey-findings-are-consumers-makingit-easier-for-identity-thieves/?pc=prt_exp_O&cc=prt_0817 itpsurvey. Review the findings of this survey and identify four to six highlights identified by the survey-especially focusing on insights that a significant number of individuals may not understand. Then prepare a short report that describes each of these insights and explain what you and others can do to help eliminate the risks identified in the survey. Prepare the report as if you planned to share it with your friends or family members in an effort to help prevent identity theft.

In November 2017, Wehav Funds, a profitable engineering firm, signed

In November 2017, Wehav Funds, a profitable engineering firm, signed a Joan guarantee as a third party for No Certainty Company, a newly formed organization focused on pharmaceutical research and development. Because Wehav Funds was a reputed and successful company, the Joan was processed and approved by National Bank at the end of November 2017.

Due to the nature of the pharmaceutical industry, No Certainty projects are considered inherently risky. The company is currently awaiting FDA approval of a miracle drug that, according to marketing research, has the potential to generate millions of dollars of revenue per year. If the drug is not approved, No Certainty will not have the financial resources to continue business.

The Joan guarantee by Wehav Funds will come into effect, and Wehav Funds will have to front the full amount of the Joan. The end of the fiscal year is approaching, and as the auditor, you must decide how Wehav Funds should account for this Joan guarantee in its financial statements.

1. Under what circumstances must a contingent liability be recorded on the balance sheet?

2. When must it be disclosed in the notes?

3. What is the appropriate accounting treatment for the No Certainty transaction with Wehav Funds?

4. Would your “fraud radar” go off if the company ref used to record this item in the financial statements?

Look up the U.S. Trustee Program’s 2012 AnnualReport at http://www.justice.gov/ust/eo/public_affairs

Look up the U.S. Trustee Program’s 2012 AnnualReport at .

1. How is a trustee defined?

2. What are the functions of the trustee program?

3. The program routinely hires bankruptcy analysts of what two certifications?

4. What initiative did the program latmch in 2001? For what purpose?

5. What specific actions can the program take under this initiative?

6. According to the report, with what other crimes is bankruptcy fraud often connected?

7. The trustee program refers criminal cases to the district attorney’s office. The report separates these referrals into six categories. List the categories and provide a one-sentence description of each type of scheme.

8. List the ten duties of a U.S. Trustee.

Identify a local company that conducts e-commerce, preferably one with

Identify a local company that conducts e-commerce, preferably one with whom you have previously done business or are otherwise familiar. Research the company and become knowledgeable in its basic operations and services. Contact the company and inform it of your interest as a student, in learning more about its business. Inquire as to how the company guarantees the security of its site and consumers’ personal information. Ask the company whether it has a formal code of conduct and, if so, whether it is available to be examined.

In essay format, describe your conversation with the company’s representative, explain the security measures the company uses, and comment on the company’s code of conduct. Conclude your essay by stating whether and why you would be comfortable engaging in online transactions with this company. 

Conduct a random survey of at least 30 people. From

Conduct a random survey of at least 30 people. From the survey responses, draw several conclusions about attitudes of consumers toward e-commerce. Write a brief essay summarizing your conclusions.

Attach to it any spreadsheets or charts used in your analysis. The survey should include, but not necessarily be limited to, the following questions:

1. How often do you purchase products or services over the Internet?

a. Never.

b. Two or three times a year.

c. At least once a month.

d . Several times a month.

2 . If “never,» why?

3 . Name two or three companies from whom you purchase products online.

4. What steps do you take to check the security of the sites and the legitimacy of the companies from whom you make purchases online?

5. How often do you pay your bills over the Internet?

a. Never.

b. Two or three times a year.

c. At least once a month.

d. Several times a month.

6 . If “never,” why?

7 . Name two or three companies with whom you make online payments?

8 . What steps do you take to check the security of the sites and the legitimacy of the companies with whom you pay bills online?

9. How often do you view and/or manipulate banking and credit card information over the Internet? 

a. Never.

b. Two or three times a year.

c. At least once a month.

d. Several times a month.

10. If “never,» why?

11 . What is the name of your bank or credit ca rd provider that provides your financial information online?

12. What steps do you take to check the security of the sites and the legitimacy of the companies with which you access online financial information?

13. How often do you double-check your bank and credit card statements for accuracy?

a. Never.

b. Sometimes.

c. Every month.

14. How comfortable are you submitting your Social Security number over the Internet?

a. Extremely uncomfortable.

b. Uncomfortable.

c. Neutral.

d. Comfortable.

e . Extremely comfortable.

15. How comfortable are you submitting your credit card number over the Internet?

a. Extremely uncomfortable.

b. Uncomfortable.

c. Neutral.

d. Comfortable.

e. Extremely comfortable.

16. How regularly do you run spyware removal programs on your personal computers?

a. Never.

b. Once a year.

c. Several limes a year.

d. At least monthly.
17. Your age?

Together with other students from your class, identify a small,

Together with other students from your class, identify a small, local company that does e-business and whose owner or manager is willing to talk with you about its operations. With your professor’s approval, meet with the company manager and explain to him or her that you are studying fraud examination and would like to discuss the company’s vulnerability to fraud Follow the following steps to proactive fraud examination:

1 . Endeavor to understand the business or operation of the organization.

2. Identify what frauds can occur in the operation.

3 . Determine the symptoms that the most likely frauds would generate.

4. Propose several queries that might identify those symptoms.

5. Propose methods to follow up on any revelations of those symptoms.

The interview with the owner or manager should only last 30 to 40 minutes and should cover Steps 1, 2, and 3.  After the interview, brainstorm Steps 4 and 5 as a group. Write a 500 word essay that includes your responses to each step. Before the interview, offer to submit a copy of the completed essay to the owner or manager.

Assuming you are an agent with the Federal Bureau of

Assuming you are an agent with the Federal Bureau of Investigation, do the following:

I. Plan and coordinate an investigation in a manner that would not arouse suspicion fro m Cummings and Baptiste.

2. Create a vulnerability chart to coordinate the various elements of the possible fraud.

3. Assuming your investigation used surveillance and/or covert investigation techniques, what types of surveillance and/or covert operations would you use? How would technology play a role in this part of the investigation?

4. Finally, how would analysis of physical evidence help in this investigation? What types of physical evidence would be especially helpful?

By the time the New York identity theft fraud case was solved, over 30,000 people had suffered a total combined loss of over $2.7 million. This money had been stolen by a ring of New York residents who had accessed the victims’ credit information and exploited that information to steal the victims’ identity. 

The fraud began when Linus Baptiste approached Philip Cummings about a plan to steal and sell people’s personal information. Philip Cummings had begun to work at Teledata Communications, Inc., a third-party credit-reporting agency that facilitates the retrieval of credit history data. Teledata had outstanding contracts with over 25,000 companies, allowing these companies to check on the creditworthiness of potential customers, thus creating a direct line past the three main credit bureaus. As a customer service representative, Cummings had obtained access to many confidential access codes. These access codes were used by the clients of Teledata to gain approval on credit requests. With access to these codes, Cummings had the opportunity to commit fraud.

In early 2013, Cummings and Baptiste began to steal credit reports. The two fraudsters sold this information to a group of Nigerian nationalists. The Nigerian nationalists would pay up to $60 for one person’s information. After some time, the Nigerian nationalists began to provide the two fraudsters with names and Social Security numbers to help facilitate the process even further.

To convert the information into money, the Nigerian nationalists would use the information to gain access to the victim’s bank accounts and other financial information. The group of Nigerian nationalists would then take the following steps:

  • Deplete the bank accounts of the victims through wire transfers.
  • Change the addresses of the accounts so the current information was not sent to the victim.
  • Order new checks to be written off of the victim’s bank accounts.
  • Order new A TM cards so the money could be taken out in cash.
  • Order new credit cards under the victim ‘s name.
  • Establish new lines of credit under the victim’s name.

By using these techniques, the fraud ring was able to steal over $2.7 million from consumers. This money was stolen over a period of about three years. The most intriguing aspect of the fraud was that Cummings quit working at Teledata half way through the fraud period, but was able to continue to steal the information for an additional two years. Cummings claimed that most of the access codes he had stolen while working at Teledata remained unchanged for the full two yea r s after he left the company.

After three years, Cummings began to get greedy, and his greed led to the detection of fraud Perceiving that he needed to make more money, Cummings stole around 15,000 credit reports from Teledata by using the access codes of Ford Motor Company. Then for the next four months. Cummings again stole a large number of names. This time, Cummings used the access codes of Washington Mutual Bank to steal 6,000 c redit reports. Finally, three months later, Cummings made what would be his last big credit report theft. Using the access codes of Central Texas Energy Supply, Cummings was able to steal 4,500 credit reports.

After the theft using Ford’s access codes, Equifax, one of the three large credit bureaus in the United States, began to see the request spikes in Ford’s account. After the next two large batches of requests, Equifax decided to investigate further. Equifax found that almost all of the credit report requests came from one phone number and that the requests were done in large batches of about 100. The location of the phone numbe r was found, and a search by federal authorities turn ed up a computer and other equipment that were used in the fraud.

Cummings was prosecuted, sent to prison, and had to pay large fines. The victims faced the dreadful task of restoring their credit, a process that, in some cases, took a long time to complete.