David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting and marital dissolution services in Philadelphia and the Delaware Valley.
On TV, especially in police procedurals, fraud investigators are able to access banking records, credit card information and tax returns within minutes of identifying the perpetrator. In addition, they are able to easily identify fraudulent activity by briefly viewing these records.
Unfortunately, this is seldom the case in the real world. Nevertheless, some of my fraud investigation clients seem surprised that I can’t easily and quickly obtain banking records, credit card information, tax returns, and other personal financial information. Others don’t understand why I can’t just look at a transaction and immediately determine if it is fraudulent or not. This blog discusses why this is the case. My focus will be on civil litigation and criminal defense.
In civil litigation, the forensic accountant must depend on the counsel with whom he or she is working to subpoena business and personal records. The other side can dispute the need to provide these records and can insist that the Court decide which records must be provided (and under what circumstances). Additionally, the other side can delay up to the Court’s time limit and can provide records in a haphazard, incomplete, or burdensome way which can require significant time and resources to analyze them. Banks and credit card companies can also insist on payments for copies of statements, cancelled checks and deposit slips. Companies can demand payments for copying costs. All-in-all, it can be quite burdensome to obtain these records.
Once the forensic accountant has obtained and analyzed the records, the forensic accountant must depend on the client to identify which transactions are improper and unauthorized (we are not permitted to say fraudulent – that is a legal finding which is up to the Court or a jury). It is not necessarily the case that every check written to the employee or employee’s family members and/or every personal charge on company credit cards by the employee is improper and unauthorized.
For example, in a recent case, I found a check for a significant amount which the perpetrator had written to herself, and which appeared to have been improperly recorded as a distribution to the owner. However, upon reviewing the check with the client, I learned that the client had authorized the payment as a short-term personal loan from the owner to the employee. The employee had directly repaid the owner.
In another case, I found payments made by the company directly to the perpetrator’s divorce attorney (the employee was a non-owner). Upon reviewing this with the owner, I learned that the owner had approved these payments due to the employee’s long and loyal service to the company (which, of course, turned out to be not so loyal). In this case, the owner was also at risk for recording legal costs which were not valid costs of the business.
In a third case (involving improper and unauthorized credit card charges), the owner had allowed the perpetrator to pay for one personal family dinner per month using the company’s credit card, and to have the expense recorded as a company business expense (again, an additional business risk for the owner).
Having to review specific transactions can sometimes be overwhelming for a client, but the forensic accountant needs this additional level of verification to prevent the risk that the forensic accountant has identified one or more valid transactions as improper and unauthorized.
For criminal defense litigation, I interviewed Philadelphia federal criminal defense and white-collar crime attorney NiaLena Caravasos (https://nialena.com/). Ms. Caravasos advised me that for criminal litigation, the government is generally required to share with the defense all of the relevant documentation and other information it has received.
However, there may be additional information which the defense needs but which the government has not obtained. For example, the defense may desire to see the defendant’s Outlook work calendar, even though the government did not obtain this information. As a result, the criminal defense attorney will seek to obtain it from the defendant’s employer. In this case, the process is similar to that of civil litigation. The criminal defense attorney requests the Court to issue a subpoena for the desired information. This then affords the third party the opportunity to dispute the subpoena with potentially the same results as described above for civil litigation.
Again, once the forensic accountant has obtained and analyzed the records, the forensic accountant must depend on the client to review each transaction and indicate a potential defense for some or all of the transactions. In such cases, the forensic accountant might need to perform additional work in order to support the client’s defense (for example, locating an e-mail authorizing the client to make a personal charge on the company’s credit card, or additional analysis of the company’s credit card transactions to show that it was a regular practice of the owner to allow employees to make personal charges on the company’s credit card account).
So, the next time you see a forensic accountant on television easily identify fraud and catch the perpetrator by the end of the hour, remember that this is so only through the magic of television. In the real world, forensic investigations take a lot of time and effort on both the part of the forensic accountant and the client.
If you would like to speak with such a forensic accounting expert in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.
About David Anderson & Associates
David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson is a forensic accounting expert in Philadelphia with more than 30 years of experience in financial and operational leadership positions. He is a Certified Public Accountant, a Certified Fraud Examiner, and a Certified Valuation Analyst.
