Advanced Accounting: Non-For-Profit: Emergency International Internet Relief Code of Ethics Descriptor Handbook and Notes Bayo Cary

April 12, 2015

Assignment 7: Fraud Prevention: Analyze Ethical Questions Related to Fraud

Miss Bayo Elizabeth Cary, A.A., B.A., M.L.I.S.

Home/Cell: 001-352-262-9733 Toll Free US: 1-888-571-0119 Fax: 1-352-433-1875

Email: bayo.cary@yahoo.com

Company: Non-For-Profit Organization: Emergency International Internet Relief

Brief Summary of Organization:

       

      The purpose of, the non-for-profit organization: Emergency International Internet Relief, is to establish, a non-for-profit organization, that actually assists, with emergency situations, both: within the United States, and abroad. There are a number of non-for-profit organizations, which exist within the U.S., and abroad, and while these organizations, provide a plethora of information, about emergency situations around the world-International Crisis Press, they do not do anything to assist-with resolving the crisis situations. I, personally, have contacted several non-for-profit organizations, that have stellar reputations, and which receive copious amounts of contributions, from donors-because of their tax deductible status, organizations, such as: Amnesty International, Human Rights Watch, etc., and although these organizations are well funded, and provide media coverage of International crisis, there is no evidence-whatsoever, that they do anything at all, to resolve International emergency situations.

        

       The non-for-profit organization: Emergency International Internet Relief, is being incorporated in the state of Florida, U.S.A. . The non-for-profit organization: Emergency International Internet Relief, is being developed to assist individuals, and organizations, in the following areas: food, housing, employment, education, medicine, information, legal, travel and relocation services, and, in other areas, which are not previously listed. The reason why: Emergency International Internet Relief was established, is because, when I needed assistance, and tried contacting: non-for-profit organizations, private businesses, and government agencies, in the U.S., for assistance, with all the above listed areas of concern-in emergency situations, no one anywhere, was willing to help me.

     

       I call the: Emergency International Internet Relief, the bottom line. My plan, is to assist individuals, who are in extremely difficult situations, and who are dealing with impossible odds-like the ones I face in the U.S., and, who desperately need and require, emergency assistance, and, for many pertinent reasons, cannot obtain assistance, in any of the above listed emergency service areas. The situation, in the U.S., is grave right now, due to anti-American political policies, which are being supported, and reinforced, by Obama, and the Obama administration. Many Americans, like myself, have suffered a great deal, under the Obama administration, and have run out of avenues of recourse. I intend to provide support and services, to others in need.

Code of Ethical Conduct:

        

       As a code of ethics guide, I will provide the answers, to four basic questions, which deal with: morals, ethics, ethical standards, and how to follow-through, with the reporting of suspected fraud, in the work place. The following questions represent an examination of: “the standards of ethics, or lack thereof, in cases of corporate fraud.” The following questions are considered, and answered below:

1. How does fraud affect the victimized company, the stockholders, and the economy as a whole?
2. What ethical violations come into play?
3. What if you knew of the fraud beforehand?
4. What should your reaction be?

Answers to Questions Posted Above:

1)      How does fraud affect the victimized company, the stockholders, and the economy as a whole?

              

           When a company is established, the company has a goal, to make profits/revenues, and to increase earnings over time, so the company, can compete in a market economy. In the U.S., there are a number of small businesses, and then, there are a much smaller number, of very large corporations, which are traded on Wall Street, as public companies. The larger a company, the more employees. When a company employs, a larger number of employees, then the company, is responsible for the financial well-being, of a larger number of people. When a company employs a larger number of employees, the company is also at a higher risk, for hiring an employee, who may turn out to be, a fraudster.

             

             There are certain procedures that a company is supposed to take, to protect against hiring an unreliable work force, which might decide to commit an act of fraud, in the work place. Employers, are supposed to perform a thorough background check, and, a company is supposed to check references, to make certain the new hire is: trust worthy, reliable, and capable of performing the work-for which the individual is being considered. In addition, many work places in the U.S., also require a drug screening urine test, and a competency skills exam-prior to completing the hiring process. It is extremely important, that all new hires, are: honest, competent to complete the work they are hired for, and drug and alcohol free-because, if a company hires an incompetent worker, then, the company is liable, for any and all: law suits, property damage, broken safety rules, etc., that the new hire commits, after they have begun work.

                 

             As previously stated, the larger the company, and the more employees, the higher the risk, that the company may accidentally hire an employee, who erroneously decides, to commit an act of fraud. When an act of fraud occurs in the work place, the entire company suffers. Often times, when an act of fraud is committed in a company, other employees are reluctant to report, the suspected fraud. The fraudulent act, in any given company, could go unreported, for extensive periods of time. Many employees, do not want to be: stigmatized, ostracized, or Blacklisted, as a whistleblower.

         

      What is a whistleblower? According to Wikimedia Commons (n.d.), the following, is the definition, of a whistleblower:

Although there are whistleblower protections in place in the U.S. right now, the reality of the situation is, that it is extremely difficult to find an honest lawyer these days, who would be willing to take on, a whistleblower’s case. Often times, if an employee, in a U.S. company, reports a suspected fraud to management, the whistleblower, is: stigmatized, ostracized, and Blacklisted, from further employment, in the U.S. . Whistleblowers, in the U.S., have rights, which are supposed to be protected, by the U.S. government.

           According to Bill Conroy (2009), the following, are supposed to be prevented, by rights and protections, which are supposed to be supported for whistleblowers, by the U.S. government:

Companies, in the U.S., are supposed to provide avenues for employees to report suspected acts of fraud, in the work place anonymously. However, a company does not always have in place, the proper programs, that: educate employees, about the importance of reporting suspected fraud, or, the correct support systems, for assisting whistleblowers, who decide to risk it all, and, report a suspected fraud in the work place. Recent reports state, that the majority of information, which is provided about suspected fraud in the work place, is most often provided by employee tips. Therefore, it is detrimental to a company, when employees are reluctant to report, suspected fraud, in the workplace. Fraud happens, in companies of all sizes, with different products, services, and budgets. When fraud in the work place goes unreported, the entire company suffers.

      

           According to O.S.H.A., whistleblowers in the U.S., have U.S. government, protected rights- OSHA Fact Sheet (2013): 

It is important that the correct example is set by management, and by those at the top. Employees model, the behaviors, and actions, that are considered acceptable, by top management. If a company is led, by dishonest management-this includes, the: C.E.O., and C.F.O., then the employees, will be much less honest, and will be vulnerable to engaging in acts of fraud. It is extremely difficult to report an act of fraud, when management is involved, or, when the fraud is a collusion, wherein, many employees and/or management participate. Studies show, that the way a company is instructed to function, and influenced by the: C.E.O., and C.F.O., affects the company’s performance, more than many people realize. Honesty, and accuracy, and reliability, from the top down, is a must, to prevent fraud, in the work place.

       

        When a new employee is hired by a company, in addition to a thorough background check, a check of references, and a check for drug, and/or alcohol abuse, the company is supposed to provide the new employee, with fraud prevention training. The fraud prevention training, is supposed to prepare a new hire, for the: laws, rules, and regulations-pertaining to fraud in the work place, according to the company’s guidelines. The company is also supposed to run an on-going campaign, in order to reinforce fraud prevention practices, and policies. Many companies require new hires, and retained employees, to sign an annual honesty and anti-fraud agreement, which provides a restatement of the company’s fraud prevention practices, and policies. It is important to train new hires, in fraud prevention, however-that is not enough. New hires, and retained employees, must be reminded of their obligations to the company, to support the company’s anti-fraud practices, and policies.

           

       When a suspected fraud is detected in a work place, it is usually reported to management-except in the case when it is suspected, that the fraud has been committed, by the management. Management is obligated, to protect the integrity of the company, by following-up, after reports of suspected fraud in the work place. When management does not follow through, with an investigation, of a suspected fraud, the entire company suffers. When fraud in the work place goes unpunished, then, the incidence of fraud in the work place-often times, increases. In order to send a strong message to employees, that fraud will not be tolerated, in the work place, management, is obligated to prosecute, if enough evidence is collected, to convict.

        

           The first way, that fraud can be detected in the work place, is by employee tips of suspected fraud. The second way that fraud can be detected in the work place, is through an audit. An audit of a company’s financial accounting books, is required by U.S. law. An auditor, will come to a business and look through the financial statements, and review the footnotes to the financial statements-which further explain the movement of money, and other financial transactions, that the company participates in. If the auditor, finds any suspicious, anomalous financial accounting entries, to the company’s financial statements, then the auditor, is supposed to recommend to management, that they hire an investigator, to look further into the companies, financial accounting, and financial statements. An auditor is qualified, to do the initial review, of a company’s financial accounting, and financial statements, however, for more detailed information, about a suspected fraud in the work place, and for the collection of evidence, for prosecution in court, a trained specialist, and an expert-an investigator, must be called in.

             

           It is the responsibility of management, at a company, to make certain, that an employee, or management, who has committed fraud at a company, is prosecuted, for their wrong-doing. The investigator, who follows-up, after the auditor, to collect evidence, to prosecute, the offender in court, is supposed to assist the prosecutor with the case, and, is supposed to take the stand in court, as an expert witness, in the case-against the offender. By prosecuting, individuals who commit fraud at a company, a clear message is sent to both: employees and management at the company, that acts of fraud, will not be tolerated by the company. In addition, when a perpetrator is prosecuted, for committing an act of fraud at a business, then that individual has been prevented-to a great extent, from being hired somewhere else, where they would most likely be inclined, to repeat the fraudulent activities.

             

         When an act of fraud occurs at a company, as previously stated, the entire company is negatively impacted. An act of fraud at a company damages the integrity of a company. When a company can no longer be trusted, then, the company will lose business, and go bankrupt, or fold under. Americans will not continue to do business, with a company, that engages in fraudulent activities, and, which cannot be trusted. There are three types of fraudulent activities, which affect companies:

1)      Accounting Fraud;

2)      Consumer Fraud;

3)      And Organizational Fraud.

Accounting Fraud:

           Accounting fraud occurs, when a company alters financial, and accounting records, to place the company in a better light. Often time, a company works hard to meet short term goals. The short term goals of a company, usually revolve around meeting revenue goals, for the year. It is important, for a company to remain viable, in a market economy, for the company to meet revenue goals, of earnings in clear excess of costs and other expenditures. Sometimes, when a company is not doing very well, the accounting department will: “cook the books.” The accounting department will begin earnings management, and move money from accounts, when the money is being held in abeyance, for: emergencies, unexpected costs, or for warranty coverage, etc., into other cash, and earnings accounts, to improve the overall picture, of the company’s financial accounting, and financial statements.

          Earnings management can be used by a company, to move money from accounts and funds, to rebalance the books, and, it can be used, to add additional anomalous entries into the financial accounting, and financial statement records. For instance, a one time sale of property, that may or may not be real, can be added at the very end of an accounting period, to give the revenues account, a boost-up. In addition, sometimes, the periods in which an expected sale, or payment is due, is recorded during the wrong pay period, to paint a rosier picture, of the company, and a company’s overall financial viability. According to Mathew Argersinger (2011), the following are “Red Flag” signals, that accounting fraud, at a company, may be occurring:

1. Smooth and predictable EPS: But companies that consistently meet or exceed Wall Street's consensus earnings estimates are often gaming their company's earnings to do so. Be especially wary of managers who publicly tout their earnings-guidance track record. (para. 9)

2. Boosting income or lowering expenses using one-time events: Companies will periodically experience one-time or non-recurring changes to their business: perhaps the sale of a factory, a large gain on an investment, a charge to restructure the business, or a large write-off of obsolete inventory. (para. 10)

Your job is to figure out when management is making appropriate adjustments to the income statement, and when it's inappropriately shifting line-items around to simply paint a prettier picture of the business. (para. 11)

3. Inappropriately capitalizing normal operating expenses: In essence, a company treats normal operating expenses as an asset, shifting them to the balance sheet to be amortized (depreciated) over many years, instead of in the current quarter. (para. 15)

4. Unusual changes in reserve accounts: Manufacturers are required to record an expense and a liability reserve on the balance sheet for expected future warranty costs at the time the product is sold. Similarly, most companies set aside reserves to cover a portion of their accounts receivable -- the amount their customers owe them -- that they don't think they'll collect. And banks, when they have to, set aside certain amounts to cover expected loan defaults. (para. 19)

Accounting fraud, is detrimental to a company. When a company is dishonest, with their financial accounting, and financial statements, the cost to investors, can be in the billions. When people begin committing fraud at a company, they usually start off small. Then, if the fraud goes undetected, or unreported, the fraudster begins to steal more. Studies show that many people who commit fraud at a company, are not new hires, they are people who have been with the company for years, and they are people who have worked their way up into positions of relative power and independence-where they are trusted. Studies show that people commit fraud for a number of reasons, including: they hate their boss, they feel under-appreciated, they think they are under-paid, they are greedy, they think that they are over worked, etc. .

      According to Cressey, the primary reasons for individuals engaging in fraud, is reflected in the: Fraud Triangle. The following graphic depiction of a fraud triangle is an illustration from the Controller and Auditor General: New Zealand 2011:

The fraud triangle is illustrated with three components: 1) Incentive and pressure, 2) Opportunity, and 3) Attitude and Rationalization. Incentives and pressures, that are the impetus for an individual committing a fraudulent act, in the work place, are almost always financially motivated. An individual will sometimes, decide erroneously, to steal a small amount of money, in order to: pay off over-due bills, or to pay for an extra expense, which is beyond their means, or to purchase something extravagant-which they could never normally afford, such as, a: new home, a foreign car, a boat, etc.. 

         The key, according to Cressey, to the: incentive or perceived pressure, is that the individual who decides to commit fraud, justifies doing so, impart, because the individual, identifies the: incentive/perceived pressure, as an un-shareable problem. In many cases, had the individual decided to share the problem with someone, chances are, that help for the problem, may have been available. Some companies provide support programs, for employees with: financial management, stress, and mental health issues, because the company’s want to detour the impetus for acts of fraud, among employees.

           Opportunity, is defined by Cressey, as the ability to commit an act of fraud, in a work place. As previously stated, employees who commit fraud, have usually worked their way up, and into positions of trust, and independence within a company, so, there are not many barriers, to prevent them from committing fraud. Departments in a company, such as the accounting department, have to be more careful, than other departments, because of the easy access those employees, have to the financial accounting records, and statements. 

         A company is supposed to take pro-active steps, to prevent fraud in the work place, by having instituted a strong plan of internal controls. Internal controls include: software to monitor financial transactions, and to limit access to some financial records, for some employees, and dividing jobs within the accounting department, so that no one person, has too much control, or power over: checks, books, or financial statements, security cameras, security badges, and rules forbidding the sharing of passwords, etc.. 

          However, because no system of internal control, is fail proof, employees must keep an eye out, for what are referred to, as: “Red Flags.” Red flags are indicators, that an employee may be engaged in an act of fraud, in the work place. Some common red flags, are the following: living beyond one’s means-an extravagant and expensive life style, never missing a day of work, irritability or un-provoked anger, from stress and guilt associated with committing fraud, etc. . Red flag indicators, can be utilized by employees, to submit a tip to management, of a suspected act of fraud, in the work place.

       According to Cressey, rationalization, is the thought process, which individuals who commit fraud utilize, to justify, their: amoral and unethical act. People who commit fraud rationalize stealing from a company, by thinking some of the following thoughts: 

1.      I will never be caught;

2.       I am not really stealing from a person-it is a business that can afford the loss, so no one is really hurt;

3.      The money is owed to me;

4.      I work hard, and I am not paid enough;

5.      It is just a loan, and I will pay the money back eventually, etc..

The thought processes, that criminals use, to rationalize, committing an act of fraud, are not logical or honest. Rationalization-is the exact antithesis. The thought process, which individuals who steal, utilize to justify, their: amoral and unethical acts, are not rational at all.

Consumer Fraud:

            Consumer fraud, is fraud committed against consumers. Consumer fraud is committed, when consumers are promised certain good or services, in exchange for: personal information, money, etc., and then, the good and services, are not provided, or, are provided in an amount, or in a low quality-that was not agreed upon, and/or, the personal information is stolen, for use, in other acts of fraud, against the consumer, such as: identity theft. Consumer fraud is becoming more and more common in the U.S.. If someone commits fraud against you, in the U.S. right now, there is very little that can be done.    

         The following is a list, of the Top Ten Frauds as Reported by the FTC Consumer Fraud Survey, and the Estimated Number of Victims (n.d.):

Consumer fraud has existed since Biblical times. Throughout the centuries, various groups of people and businesses, have highlighted, the importance of protecting, consumers against fraud. In modern times, consumer fraud protection, is supposed to be managed in the U.S., by the U.S. government. However, the U.S. government, is not really active, in preventing consumer fraud. There are websites available, which are posted, and updated by the U.S. government, which provide information, on U.S.: laws, rules, and regulations, relating to consumer fraud, and consumer protections, however, most of the: laws, rules, and regulations listed, are not enforceable, in the U.S. right now, because of the Obama administration.

         The Internet has offered many new opportunities, to many people. The Internet has increased employment opportunities. The Internet has increased the amount of information, which is available to various people worldwide. The Internet, has made it easy to: complete applications for employment, for study at universities, for filing government documents, etc.. Unfortunately, as the Internet has grown, so has consumer fraud. Many connections on the Internet, are not safe enough, and therefore, people and organizations, other than the intended, sometimes have access, to information, which is shared, and conveyed, by the Internet-which includes email communications. People who commit consumer fraud, pray upon individuals, who utilize the Internet.

         According to the USA.gov: Stopping Fraud (n.d.) website, the following are ways, Americans can work, to protect themselves against fraud:

Look For Warning Signs: Look for these warning signs to avoid fraud:

• Someone you don't know asks you to send money or money orders to claim a prize, lottery, credit card, loan, or other valuable offer.
• Someone you don't know offers you the chance to receive a credit card, loan, prize, lottery, or other valuable item, but asks you for personal data to claim it.
• An unknown caller claiming to be a lawyer or in law enforcement offers to help you get your money back (for a fee).
• The deal is only good "for today" or a short period of time.
• The seller offers "free gifts" in return for a minimum effort or a fee.
• A "repair person" suddenly finds a dangerous defect in your car or home.
• You are given little or no time to read a contract.
• A sale item is suddenly unavailable but a "much better item" is available for slightly more money.
• Someone is trying to scare you into making a purchase.
• The solicitation looks like a government document and suggests contest winnings or unclaimed assets are yours for a small fee. (The government doesn't solicit money from citizens.)
• You are asked for your bank account or credit card number. (para. 1)

Quick Tips For Avoiding Fraud: There are many varieties of consumer fraud, but the most common ones are variations of fake check scams, credit repair, free trip offers, and sweepstakes. Here are some tips to help you avoid being a victim:

• Don't give out personal information. Be suspicious of anyone you don’t know who asks for your Social Security number, birthdate, credit card number, bank account number, password, or other personal data.
• Don't be intimidated. Be suspicious of calls or e-mails that want you to provide or verify personal information immediately. Tell them you're not interested and hang up or don't reply to the e-mail.
• Monitor your accounts. Review bank and credit card statements carefully. Report unauthorized transactions to your financial institution immediately.
• Use a shredder. Tear or shred credit offers you receive in the mail, bank statements, insurance forms and other papers with personal information. (para. 2)

If you think that you have been the victim of consumer fraud, there are U.S. government agencies, which can be contacted, to report the acts of fraud. There, are however, no guarantees, that the U.S. government, will resolve any of the issues, related to your report of fraud. While living homeless, police in Seattle, WA false arrested me in 2013, and stole my social security card, and all of my other picture I.D.’s. The Seattle, WA police, then, refused to return my personal identifications to me, in court. Then, my personal identification information, which was stolen from me, was utilized to: cancel and reorder my U.S. benefits card, to an address, where I did not live, and to an owner, that was not me. Reports state that once a social security card and number, have been stolen, that they then remain on the Black Market, for: sale, re-sale, identity theft, and other abuses-indefinitely.

         I reported my stolen social security card to the: F.T.C., and to Social Security. Neither government entity ever followed-up with me, after I filed my complaints. When I went to the social security office, in Denver, CO, I explained to the representative there, what happened to my identifying personal documents, in Seattle, WA, and I told the representative, about how my U.S. benefit card, had been stolen, with my stolen social security card and picture I.D.’s. The representative, at the social security office, in Denver, CO, understood what I was telling him, however, he discouraged me from applying for a new social security number-even though, the confidentiality and security of my social security card and number, and my picture I.D.’s, had already, clearly been violated. 

           The following, is a list of contact information, available on the USA.gov: Report Consumer Frauds & Safety Hazards (n.d.) website, for reporting consumer fraud, and safety hazard issues, in the U.S.:

If you suspect a law has been violated, contact your state or local consumer protection agency. This agency may take action or refer you to another state organization that has the authority where you live. A local law enforcement officer could also be able to provide advice and assistance. (para. 1)

Violations of federal laws should be reported to the federal agency responsible for enforcement. While federal agencies are rarely able to act on behalf of individual consumers, complaints are used to document patterns of abuse, allowing the agency to take action against a company. (para. 2)

You can find the appropriate federal agency to contact with your complaint by using this online directory. (para. 3)

People who have no intention of delivering what is sold, who misrepresent items, send counterfeit goods or otherwise try to trick you out of your money are committing fraud. If you suspect fraud, there are some additional steps to take:

·         Contact the Federal Trade Commission.

·         Scams that used the mail or interstate delivery service should also be reported to the U.S. Postal Inspection Service. It is illegal to use the mail to misrepresent or steal money. (para. 4)

If you suspect you have a product that poses a safety hazard, report the problem to the appropriate federal agency:

·         Automobiles- National Highway Traffic Safety Administration

·         Drugs, medical devices- Food and Drug Administration

·         Food- U.S. Department of Agriculture, Food and Drug Administration

·         Seafood- Food and Drug Administration, U.S. Department of Commerce

·         Toys, baby and play equipment, household products- U.S. Consumer Product Safety Commission (para. 6)

Organizational Fraud:   

       Organizational fraud, is fraud that is committed at an organization, and along with an organization. Organizational fraud, is often times committed by a number of employees, in collusion, or, it is committed by employees, along with assistance from management. According to Mohit Goel (2009), organizational fraud, can also be committed by someone from outside of the organization, also referred to, as a third-party.  

         When fraud is committed at a company, and the company begins to suffer financial set-backs, because of fraudulent acts, the company must make a decision, about how to handle the situation. Fraud in the work place, is soo incredibly damaging to a company, that, the only logical recourse-in an attempt to preserve the company, is to prosecute the offender. Individuals, who engage in fraud-a white collar crime, can be tried in court, both civilly and criminally. The difference, between a civil prosecution, and a criminal prosecution, is the preponderance of evidence, which is required to indict the offender. Some companies, depending on the degree of damage committed to the company, by the fraudster, may choose to file, both: civil, and criminal charges.

            Most times, when a company is found guilty, of committing acts of fraud, their stock values on Wall Street, respond almost immediately-with a precipitous drop. In America, we base our: laws, rules, and regulations, on the King James Bible. According to the faith and practice of Christianity, and the King James Bible, it is wrong to steal, and, committing a fraudulent act, is stealing. Americans, do not react favorably, to a company that steals. Americans, therefore, withdraw their financial support, from companies, which are found guilty of hiring inept individuals, who commit fraud, against the company. When a company on Wall Street, discovers that fraud has occurred, the perpetrators of the fraud, within the company, are supposed to be prosecuted, to the fullest extent of the law. Most companies, on Wall Street, that are found guilty of committing fraud, go under-they are never ever able to recover, from the negative image that develops, after their company is found guilty of stealing-investors, and shareholders, place the money elsewhere.

         When a number of larger companies, engage in fraud, the effects can be detrimental, to an economy. In 2001-2002, a number of U.S. companies, trading on Wall Street, including: Enron and Worldcom, engaged in massive collusive fraud schemes. The frauds that were committed, occurred in companies, that were enormous, therefore, those companies, were providing a great deal of stability, to the U.S. economy-until their frauds were discovered. The impact, of the Enron and Worldcom frauds on Wall Street, were soo wide-spread, that the entire U.S. economy was effected negatively. The U.S. Congress was alarmed, by how wide-spread the effects of the: Enron and Worldcom frauds were, so they passed, the Sarbanes-Oxley Act of 2002. The Sarbanes Oxley Act of 2002, increased the checks and balances, and the requirements of the Securities Exchange Commission (S.E.C.) for Wall Street companies, and the veracity with which, they had to utilize, when filing their financial accounting and financial statements. The Sarbanes-Oxley Act of 2002, increased the quantitative financial data reporting requirements, for Wall Street companies, in the U.S. .

2)      What ethical violations come into play?

                 Anytime someone chooses to lie, about any given situation-regardless of the reason-strictly speaking, an ethical violation has occurred. Some people, who are from other cultures, and other countries, and who are not Christians-therefore, they do not follow the Bible-think that it is fine to lie. Americans, are still mostly Christians, and, American: laws, rules, and regulations, are based on the Christian values, espoused in the King James Bible. Americans, of an average intelligence level, and above, know, that it is wrong to: lie, cheat, steal, etc. .

               A number of immigrants, from many countries around the world, who do not follow the Christian religion, were invited to the U.S. by Obama, and the Obama administration. Many of the new immigrants to the U.S., are from cultures, where it is fine to lie. People who immigrate to the U.S., at the urging, and with the support of Obama, and the Obama administration, find employment very quickly. It is extremely difficult for me, and for many other Americans, to live in a country, where, for instance, police are being hired to work in the U.S.-who sometimes do not speak fluent English, and who, at other times, do not know, or do not care to follow U.S. law. Obama, and the Obama administration, has hired immigrants to the U.S., to many positions across the board in the U.S.-the problem is not limited to too many U.S. police, not being American.

            Americans of average intelligence and above, know the difference between right and wrong. When a person, cannot tell the difference, between right and wrong, the person is likely to commit, a number of ethical violations. When I was homeless, in Boulder, CO, in 2013-2014, I decided to apply for law school, because I am overqualified to attend law school in the U.S. .I went to the Wolf Law School, at the Boulder, CO University of Colorado campus, and I was on campus for a while, while I aggregated my law school application materials. I was astonished to find out, from talking to some of the students, who were enrolled at the Wolf Law School, that some of the law students, had failed the ethics portion of the American Bar Exam, over 4 times, and, they were still allowed to remain enrolled in classes, in law school, at Wolf School of Law. Clearly, the students, who failed the ethics portion of the Bar Exam 4 times, could not tell the difference, between right, and wrong, however, they had money for tuition, and therefore, were allowed to remain, studying at the law school, although, they were not qualified at all, to practice law in the U.S. .

           Obama and the Obama administration, has encouraged immigrants to come to the U.S., from non-Christian countries, from all over the world. There are soo many Muslims and Israelis on the University of Florida campus-in Gainesville, FL, where I live, that many American students, have stopped attending classes on campus. Many American students, like me, are tired of being threatened and harassed, by immigrants, who Obama has invited to America. Many American students, are, therefore, like me, choosing to attend university classes online. The Muslim and Israeli students are aggressive, and bully, and make the classroom environment uncomfortable, and, the campus as well. In 2008, while finishing up my undergraduate degree, on campus, at the University of Florida, a bleach blond student-what looked to be a female, with the last name of: Mahomed, ran into me, while I was riding my bike, with her S.U.V..

         At the University of Florida, most of the students who enroll in the business programs, are Muslim students. One day, when I was homeless in Gainesville, FL, in 2011, I was sitting on campus, by the school of business, and I was un-nerved, by how many of the business students in suits, looked ethnically Middle Eastern. Those business students, were not the first generation of Muslim students, who were entering the U.S. work force, with business degrees, from a major U.S. university, and, who loath Christianity, and Christian rules about: not stealing, always telling the truth, etc. . Inviting immigrants to the U.S., from non-Christian countries, has not been good for U.S. businesses, or for the U.S. economy. Many of the immigrants, that were invited to the U.S., by Obama, and the Obama administration, do not know right, from wrong, and try to teach other people, that anything goes-and that is a serious violation, of U.S. ethical standards.

3)      What if you knew of the fraud beforehand?

                If you know of a potential fraud, you are obligated, as a company employee, to tell the truth, and to report the fraud. Unfortunately, there can be negative consequences, to a whistleblower, for sounding the alarm, on a potential act of fraud. According to Gary Wheeler (2012), there are certain whistleblower disclosures, which are protected by the U.S. government:

              

                  4) What should your reaction be?

      If you report, an employee suspected of committing, an act of fraud, to your employer, and your employer reacts negatively towards you, according to Gary Wheeler (2012), there are legal steps, which you are supposed to be able to take, in the U.S., to combat the situation:

Example: Case Study Questions

1. The fraud triangle consists of perceived pressure, perceived opportunity, and rationalization.

How do you think John Rigas rationalized his dishonest use of company assets?

            I think that some people, like John Rigas, are risk takers-they like to bet. John Rigas, was set on growing an empire-not just a small up-start company. John Rigas was greedy, in addition to being a better. To add to John Rigas greed, and his like to play the odds, and bet, John Rigas, was also very dishonest. I think that John Rigas reasoned, that he would break even eventually. I think that John Rigas, was betting, that he would somehow break even, if he continued to speculate and invest.

2. What are other ways people rationalize fraudulent behavior?

           Fraudulent behavior, is rationalized in a number of ways. Sometimes people say:

1.      The money was owed to me, because I work soo hard;

2.      I am only borrowing the money, I will pay it back;

3.       I am taking money from a company, and not an individual, so no one is getting hurt;

4.      I am smart enough to steal the money, and therefore, it is mine to keep;

5.       I hate the owner of the business, it was dumb of the man to hire, or to trust me, etc.;

3. How would owning and operating a family business create temptations and opportunities to commit fraud?

           When owning and operating, a family business, one might rationalize, that the entire company, and all of the assets, are available for use, because, the business is family owned, and not a separate, more formal business ownership relationship.

4. Based on the facts of the case, do you think this case has led to civil litigation, criminal prosecution, or both? Explain your answer.

             I think the case might have led to both civil, and criminal prosecution. The S.E.C., racked up a long list, of confirmed, and verifiable criminal violations-which they had evidence to support. It is in the best interest, of the general public, to prosecute white collar crime, to the fullest extent of the law. I think that the S.E.C. does what they can, to protect American investors, and American consumers-in general, and, therefore, the S.E.C.-with all the evidence that they were successfully able to collect, would want to make an example, of John Rigas, and his family, by following-through, with both: civil and criminal prosecution, of charges.

5. Suppose you were an expert witness in this case. What would be some of the facts to which you would pay special attention?

          If I were an expert witness in the John Rigas case, I would pay attention, to the following case details:

1        John Rigas has a history of over leveraging himself. John Rigas began his business, on an over-drawn bank account.

2        John Rigas and his family, were operating in the negative, for a long period of time, and against better judgement, continued to borrow, to over invest, and, began to: “cook the book,” to hide the fraudulent financial accounting.

3        John Rigas and his family, racked up, a huge sum of debt, that was stolen money, that had been obtained through acts of fraudulence-the large sum, is quite significant.

The information contained herein, provides explanations, of terminology related to: the ethical issues, of fraud prevention, in the workplace. For clarification, of terminology, graphic illustrations, and examples have been provided, to further explicate, the importance of preventing fraud in the work place, honest reporting of suspected fraud in the work place, and following-through, with the prosecution, of established fraud, that has been identified, as having occurred-with evidence for submission in court.

Works Cited

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Actions and Remedies. (2012). [Graph illustration the Slideshare February 4, 2012]. Actions and

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Albrecht, Chad O., Albrecht, Conan C., Albrecht, W. Steve,& Zimbelman, Mark F. (2012).

              Fraud Examination: Fourth Edition. Ohio: South-Western.

Argersinger, Mathew. (Jul 19, 2011). 4 Signs A Company is Fudging Its Quarterly Earnings

Reports. Retrieved from http://www.dailyfinance.com/2011/07/19/4-signs-a-company-is-fudging-its-quarterly-earnings-results/

Callahan, David. (n.d.). Accounting Fraud. In Cheating Culture. Retrieved from

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from Speech Online Web site: http://www.sec.gov/News/Speech/Detail/Speech/1370539845772#.VSlzypMfOYM

Consumer Fraud. (n.d.). In Business Dictionary online. Retrieved from

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Zealand 2011]. Fraud Triangle from the Controller and Auditor General Website of the Government of New Zealand. Retrieved from http://www.oag.govt.nz/2011/public-sector-fraud/fraud-awareness-survey/my-environment/gfx/fraud-triangle.gif/view

Goel, Mohit. (Aug. 02, 2009). Organizational Fraud. In StudyMode. Retrieved from

http://www.studymode.com/essays/Organizational-Fraud-222202.html

OSHA Fact Sheet Image. (2013). [Graphic illustration Hospitality Risk Solutions August 7,

2013]. OSHA Fact Sheet Image Whistleblower Complaint from Hospitality Risk Solutions. Retrieved from http://hospitalityrisksolutions.com/2013/08/07/hospitality-industry-legal-risks-kansas-hotel-group-pays-fired-worker-22000-in-back-pay-and-damages-filed-whistleblower-complaint-after-raising-workplace-safety-issues/

Protected Disclosures-Whistleblower Law Image. (2012). [Graphic illustration the Slideshare

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Top Ten Frauds as Reported by the FTC Consumer Fraud Survey, and the Estimated Number of Victims

Image. (n.d.). [Graphic illustration Online Debt Smart n.d.]. Online Debt Smart Top Ten Frauds as Reported by the FTC Consumer Fraud Survey, and the Estimated Number of Victims by: Rebecca Lindsey. Retrieved from http://www.debtsmart.com/pages/article_credit_fraud_051214637.html

Unknown Author. (Feb 02, 2015). Banking Frauds. In USA.gov Consumer Complaints and

Protection.Retrieved http://www.usa.gov/topics/consumer/scams-fraud/bank.shtml

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yourself against consumer frauds and scams. Retrieved from http://www.usa.gov/topics/consumer/scams-fraud.shtml

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Protection. Retrieved from http://www.usa.gov/topics/consumer/scams-fraud/education.shtml

Unknown Author. (Feb. 02 2015). Email Fraud. In USA.gov Consumer Complaints and

Protection. Retrieved from http://www.usa.gov/topics/consumer/scams-fraud/types/email-scams.shtml

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Protection. Retrieved from http://www.usa.gov/topics/consumer/scams-fraud/types/check-fraud.shtml

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Protections. Retrieved from http://www.usa.gov/topics/consumer/scams-fraud/insurance.shtml

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 from http://www.usa.gov/Citizen/Topics/Internet-Fraud.shtml

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Unknown Author. (Feb. 02 2015). Mail Fraud and Scams. In USA.gov Consumer Complaints and

Protection. Retrieved from http://www.usa.gov/topics/consumer/scams-fraud/types/mail-fraud.shtml

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 and Protection. Retrieved from http://www.usa.gov/topics/consumer/scams-fraud/types/index.shtml

Whistleblower Definition Image. (2014). [Graphic illustration The Thinking Moms’ Revolution

 August 22, 2014]. Whistleblower Definition: The Thinking Moms’ Revolution. Retrieved from http://thinkingmomsrevolution.com/whistleblower-blows-lid-malfeasance-fraud-cdc-tuskegee-revisited/

Whistleblower’s Cross. (2009). [Graphic illustration the narcosphere January 30, 2009].

Whistleblower’s Cross in the narcosphere by: Bill Conroy. Retrieved from http://narcosphere.narconews.com/notebook/bill-conroy/2009/01/whistleblower-rights-legislation-signals-changing-guard

Whistleblowing Image. (n.d.). [Graphic illustration Wikimedia Commons n.d.]. Whistleblowing

Image from Wikimedia Commons. Retrieved from http://commons.wikimedia.org/wiki/File:Whistleblowing.pdf

Who is Covered Image. (2012). [Graphic illustration Slideshare February 4, 2012]. Who is

Covered: Whistleblower Law by: Gary Wheeler. Retrieved from http://www.slideshare.net/TheVirtualHRDirector/whistleblower-law 

April 11, 2015

Assignment 7: Direct Quote Fraud Prevention: Analyze Ethical Questions Related to Fraud

You will now examine the standards of ethics, or lack thereof, in cases of corporate fraud. Consider the following questions:

• How does fraud affect the victimized company, the stockholders, and the economy as a whole?
• What ethical violations come into play?
• What if you knew of the fraud beforehand?
• What should your reaction be?

Review the Extensive Case #1 in Chapter 18 of your textbook. Answer the questions at the end of the case study related to ethics, the fraud triangle, and the legal ramifications incurred. After answering these questions and the ones posed above, create an original “Code Of Ethical Conduct” Handbook as though it is to be a general guide distributed to all accounting and financial personnel in a firm in which you are the CEO of. There is flexibility in the structure but follow APA standards for formatting. You may include visual aids such as charts and graphics to help create an engaging and informative resource for your employees.

Be sure to detail the various types of fraud your organization may encounter. You may want to begin your handout with a brief summary of your organization and the industry in which it operates. (You may use your own organization or one of your choosing).

Questions

1. The fraud triangle consists of perceived pressure, perceived opportunity, and rationalization. How do you think John Rigas rationalized his dishonest use of company assets?

2. What are other ways people rationalize fraudulent behavior?

3. How would owning and operating a family business create temptations and opportunities to commit fraud?

4. Based on the facts of the case, do you think this case has led to civil litigation, criminal prosecution, or both? Explain your answer.

5. Suppose you were an expert witness in this case. What would be some of the facts to which you would pay special attention?

Business Dictionary: What Is Accounting Fraud?

Accounting Fraud: accounting fraud

Definition Add to Flashcards Save to Favorites See Examples

The intentional misrepresentation or alteration of accounting records regarding sales, revenues, expenses and other factors for a profit motive such as inflating company stock values, obtaining more favorable financing or avoiding debt obligations. Employees who commit accounting fraud at the request of their employers are subject to personal criminal prosecution.

Read more: http://www.businessdictionary.com/definition/accounting-fraud.html#ixzz3X2At57x9

Business Dictionary: Consumer Fraud

Consumer Fraud: The defrauding of a consumer of various products and services which do not perform as advertised, or overcharging and levying hidden charges through deceptive business practices. (para. 1)

Read more: http://www.businessdictionary.com/definition/consumer-fraud.html#ixzz3X2CBDB7t

Organizational Fraud

For many organizations, “getting it right” or “getting it wrong” is a matter of survival. This study talks about the issues like, ‘organisational fraud’, ‘ethics’ & ‘empowerment’ in an organisation and their relation to standards of good behaviour in order to explore various ways in which occurrences of ever increasing frauds can be checked. Organisational Fraud can be perpetrated by those outside an organization (“third parties”), by employees, or through the collusion of employees and third parties. Numerous surveys in recent years have reported that the majority of fraudsters are employees, with more than half of these being from management grades. (para. 1)

Cheating Culture: Accounting Fraud

A key recommendation of reformers back in the early 2000s, after the Enron and WorldCom frauds, was that public companies should have to rotate their auditors every few years, so that overly cozy ties didn't undermine the independence of auditors. (para. 1)

That never happened. Congress decided the issue needed to be "studied" further, and the matter soon disappeared. (Although Sarbanes-Oxley does require that specific partners rotate off a company's account every seven years.) But now, in the wake of the financial crisis, some powerful regulators are asking whether it's time to revisit the issue of auditor independence and mandate rotation of firms. (para. 2)

Auditor Independence Revisited

The study is entitled “Fraudulent Financial Reporting: 1998-2007," and -- for some of us, anyway -- it makes for fascinating reading. The study looked at nearly 350 cases of accounting fraud. Among its findings:

·         Financial fraud affects companies of all sizes, with the median company having assets and revenues just under $100 million.

·         The median fraud was $12.1 million. More than 30 of the fraud cases each involved misstatements/misappropriations of $500 million or more.

·         The SEC named the CEO and/or CFO for involvement in 89 percent of the fraud cases. 

·         Initial news in the press of an alleged fraud resulted in an average 16.7 percent abnormal stock price decline for the fraud company in the two days surrounding the announcement.

·         News of an SEC or Department of Justice investigation resulted in an average 7.3 percent abnormal stock price decline.

·         Companies engaged in fraud often experienced bankruptcy, delisting from a stock exchange, or material asset sales at rates much higher than those experienced by no-fraud firms. (para. 7)

Resolution of Fraud?

But what happened to the executives accused of accounting fraud? Well, here's the finding that really caught my attention: "Within two years of the completion of the SEC investigation, about 20 percent of CEOs/CFOs had been indicted. Over 60 percent of those indicted were convicted." (para. 9).

Will The Accounting Industry Ever Be Reformed

The history of accounting is filled with sorry stories of accountants helping to cover up frauds by corporations and banks. Long before Arthur Andersen famously collapsed in 2002 after being indicted on federal charges related to the Enron scandal, the accounting industry faced big ethical problems. (para. 12)

Historical Information: History of Fraud

A major report released by a key subcommittee chaired by Senator Lee Metcalf in 1976 stated:

Doubts as to the accuracy and reliability of information reported by corporations have resulted from continual revelations of corporate misconduct which was not found or not reported by independent auditors. Congress and the public have little assurance that corporate financial statements accurately portray the results of business activities because of flexible, alternative accounting standards. Public confidence in independent auditors, which is essential to the success of the federal securities, has been seriously eroded. (para. 13)

No new legislation was enacted at that time and major accounting firms went on to be deeply implicated in the Savings and Loan scandals of the 1980s. "Accountants didn't cause the S&L crisis," said Senator Ron Wyden in 1992. "But they could have saved taxpayers a lot of money if they did their jobs properly and set off enough warning alarms for regulators." (para. 14)

More hearings were held, but not much was done. Then came the frauds and earnings scandals at Enron, WorldCom, and many other companies. The combination of Arthur Andersen's collapse and the passage of Sarbanes-Oxley changed the calculus and put the accounting industry on notice that regulators would take a tougher approach. (para. 15)

Yet here we are just a few years later with the revelation that Ernst & Young may have covered up massive financial misreporting by Lehman Brothers. That misreporting helped ensure Lehman's rapid collapse and the financial crisis that followed. (para. 16)

Accountants are in a famously tough spot: They were as supposed to serve as watchdogs of the financial system and ensure that companies are being honest about their finances. But they are also being paid to serve those same companies. The new regulations put in place after Enron were supposed to make it easier for accountants to do the right thing. Clearly those laws aren't tough enough. (para. 26)

Financial Reporting and Accounting Fraud

September 19, 2013

It is great to be here today.  I am excited to speak about a topic that is near and dear to me – financial reporting and accounting fraud, and the SEC’s efforts to combat it.  I recently read a New York Times article with a headline about the SEC bringing sexy back and referencing our efforts to combat accounting fraud – I had a hearty chuckle over that.  I couldn’t stop laughing about both the idea that the SEC was sexy and that the sexiness was due to a focus on accounting fraud.  But I guess it is all about context – you definitely take that kind of press whenever you can get it.  Better for the press to be talking about us as sexy than lots of other things. (para. 2)

And then I tried one of the first pre-Enron accounting fraud cases against a CEO – Mickey Weissman, the former CEO of American Banknote.  It was a great trial, as it involved a timing issue in the recognition of revenue – essentially it turned on a 2-week period at the end of one year and beginning of the next, and revenue being shifted back to the prior year, which helped make the financials for that year look better in connection with a planned IPO.  Getting a jury to understand the importance of that sort of timing issue was difficult, and opposing counsel, the former US Attorney in the SDNY was a challenge, but we were successful – Mr. Weissman was convicted.  To tell you the truth, sometimes I wish I were back trying those kinds of cases because I am a trial lawyer at heart and I find accounting fraud cases so interesting – although calling the work sexy might still be a stretch. (para. 4)

Accounting Fraud

In the wake of the financial crisis, the SEC was very focused on financial crisis cases – cases involving CDOs, RMBS, Ponzi schemes, and other transactions that resulted in massive losses to investors.  Consequently, we devoted fewer resources to accounting fraud.  During this period, we have had fewer accounting fraud investigations.  So for example, in FY2012, we opened 124 financial fraud/issuer disclosure investigations compared to 304 in FY2006 and 228 in FY2007.  As for accounting fraud cases, we saw a reduction here as well:  we filed 79 financial fraud/issuer disclosure actions in FY2012 compared to 219 in FY2007. (para. 5)

 Although I should also note that the number of large companies (market capitalization over $75 million) restating their financials actually jumped from 153 in 2009 to 245 last year. (para. 6)

Some have suggested that these reductions resulted from Sarbanes-Oxley and the improvement in financial reporting caused by related reforms.  Sarbanes was indeed very significant - the enhancements in auditing, the creation of the PCAOB, the implementation of certification requirements of financial statements, the establishment of testing and certification of internal controls over financial reporting, the enhancements to corporate governance and audit committees - all were very significant changes.  And there is no question we are in a better place today than we were pre-Sarbanes.   The transparency with which companies report their financial results has definitely improved.  Indeed, I would venture to say that the focus on accounting issues has increased significantly in the last 10 years. (para. 7)

But I have my doubts about whether we have experienced such a drop in actual fraud in financial reporting as may be indicated by the numbers of investigations and cases we have filed.  It may be that we do not have the same large-scale accounting frauds like Enron and Worldcom.  But I find it hard to believe that we have so radically reduced the instances of accounting fraud simply due to reforms such as governance changes and certifications and other Sarbanes-Oxley innovations.  The incentives are still there to manipulate financial statements, and the methods for doing so are still available.  We have additional controls, but controls are not always effective at finding fraud. (para. 8)

Renewed Focus:

The importance of pursuing financial fraud cannot be overstated. Comprehensive, accurate and reliable financial reporting is the bedrock upon which our markets are based because false financial information saps investor confidence and erodes the integrity of the markets.  For our capital markets to thrive, investors must be able to receive an unvarnished assessment of a company's financial condition.  Financial reports must provide transparency for investors, and must not obscure the truth, even if that truth is inconvenient.  The last decade is full of painful reminders of how important reliable information is to investors, to markets and to regulators. And so, in a post-crisis world, the SEC must renew its focus on financial reporting and accounting so that investors and regulators receive the accurate information that sustains our markets. (para. 9)

There are a lot of promising methods out there for determining the companies on which we should be focused.  We have new ways of crunching data that allow us to isolate potential red flags and trends; other regulators are uncovering potential issues; whistleblowers are bringing us invaluable information (18.2 percent of FY 2012 whistleblower reports related to corporate financial and disclosures); and we have significant sources of information throughout the agency.  But we thought we needed a group of people to focus on harnessing all of these resources. (para. 11)

FRAud Task Force:

The task force has about 12 staffers, both lawyers and accountants.  Its objective is to improve our ability to detect and prevent financial statement and other accounting fraud.  It will be devoted to developing state-of-the-art methodologies that better uncover accounting fraud and incubating cases that will then be handled by other groups within the Enforcement Division. (para. 13)

To fulfill its mandate and find promising investigations, the task force is launching various initiatives.  These may include closely monitoring high-risk companies to identify potential misconduct, analyzing performance trends by industry, reviewing class action and other filings related to alleged fraudulent financial reporting, tapping into academic work on accounting and auditing fraud, and conducting street sweeps in particular industries and accounting areas. (para. 14)

The task force also will utilize recently developed technologies such as our Accounting Quality Model and related tools, which uses data analytics to assess the degree to which a company’s financial statement appears anomalous.  With this tool, we can better compare performance across industries and detect outliers that suggest possible fraud. (para. 15)

While we expect that the task force will develop additional methodologies for uncovering fraud, and will generate additional cases, it is also important to note that we recently brought several significant financial reporting cases and have plenty more in the pipeline. (para. 23)

Ultimately, the task force demonstrates our renewed commitment to prosecute those who betray the trust of the public markets.  But bringing actions after the fact is no substitute for full and honest disclosure at the outset.  Enforcement actions are little comfort for investors who lost their savings after relying on misrepresentations and half-truths.  Shareholders should be able to rely on accurate accounting, effective auditing, and transparent financial reporting.   And we believe that our renewed focus on accounting and financial reporting fraud will result in better compliance within the industry by sending a clear, strong message that deters both current and future wrongdoers. (para. 25)

Finally, let me be clear that we will use all the tools in our arsenal, including disgorgement, monetary penalties and 102(e) bars against accountants.  Sarbanes Section 304 also provides us with the ability to claw back bonus money received or the proceeds of stock sales that occurred during a period when the company's financial statements were misstated.  And in appropriate cases we will exercise this authority. (para. 26)

Admissions Policy

As many of you know, our settlement approach, much like numerous other federal regulators, had been to settle essentially all of our cases on a no-admit-no-deny basis.  The SEC has been incredibly successful in achieving great settlements with this policy and it will still be an important approach that applies in most cases.  This settlement approach has allowed us to achieve quick results and provide prompt relief to investors, while also allowing us to conserve resources and eliminate litigation risk.  This interest in obtaining quick relief, conserving resources, and avoiding litigation risk will typically trump the need for admissions in order to better achieve the goals of our enforcement program.  (para. 28)

But there also is a group of cases where a public airing of unambiguous facts – whether through admissions or a trial – serve such an important public interest that we will demand admissions, and if the defendant is not prepared to admit the conduct, litigate the case at trial.  I analogize it to a guilty plea in a criminal case – there is a certain amount of accountability that comes from a defendant admitting to unambiguous, uncontested facts.  It is in many respects a cathartic moment.  And there can be no denying the facts under those circumstances. (para. 30)

Conclusion:

To wrap this all up, our markets depend not only on strong regulators but on confident investors – investors who have the information necessary to compare performance, evaluate risk, and make rational decisions.  Although effective enforcement can increase the confidence that investors bring to the markets, ultimately we will only succeed if investors believe the numbers reported on the bottom line.  So it is imperative that we amplify our efforts to root out financial fraud and ensure that investors receive accurate, transparent, and complete financial information. (para. 34)

4 Signs A Company is Fudging Its Quarterly Earnings Reports

Jul 19 2011

For many companies, meeting or beating quarterly earnings estimates matters more than anything else. Add stock options to the mix, or big cash bonuses tied to short-term earnings or stock price targets, and executives' temptation to focus exclusively on quarterly results becomes irresistible. In the worst cases, this tunnel vision can drive companies to creative accounting, or even fraud. (para. 1)

Why Earnings Are So Easy To Manipulate

Bad companies always ultimately lose the expectations game. Accounting trickery can only cloud a company's struggling operations for so long. Astute investors can look behind the numbers and spot the red flags that clue us in when a company's earnings results aren't worth the paper they're printed on. (para. 5)

Earnings are at the very bottom of the income statement (hence the term "bottom line"). They're the end result after all expenses -- raw material costs, salaries, marketing expenses, research and development, interest, and taxes -- are taken out of revenue. Unfortunately, that also makes earnings the figure most susceptible to manipulation. (para. 6)

Shift some expenses around, draw down some reserves, play with your tax rate a bit, and presto! That quarterly earnings per share (EPS) result suddenly goes from a miss to a beat. Hey, what's a penny or two between friends, if it leads to that fat year-end bonus and a higher stock price? (para. 7)

4 Signs of Earnings Funny Business

Howard Schilit, founder and CEO of the Financial Shenanigans Detection Group, has written extensively on the subject of earnings shenanigans. Here are a few of the major earnings red flags he discusses in his book, Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports. According to Schilit, these signs may indicate that a company is trying to pull a fast one: (para. 8)

1. Smooth and predictable EPS: But companies that consistently meet or exceed Wall Street's consensus earnings estimates are often gaming their company's earnings to do so. Be especially wary of managers who publicly tout their earnings-guidance track record. (para. 9)
2. Boosting income or lowering expenses using one-time events: Companies will periodically experience one-time or non-recurring changes to their business: perhaps the sale of a factory, a large gain on an investment, a charge to restructure the business, or a large write-off of obsolete inventory. (para. 10)
Your job is to figure out when management is making appropriate adjustments to the income statement, and when it's inappropriately shifting line-items around to simply paint a prettier picture of the business. (para. 11)
3. Inappropriately capitalizing normal operating expenses: In essence, a company treats normal operating expenses as an asset, shifting them to the balance sheet to be amortized (depreciated) over many years, instead of in the current quarter. (para. 15)
4. Unusual changes in reserve accounts: Manufacturers are required to record an expense and a liability reserve on the balance sheet for expected future warranty costs at the time the product is sold. Similarly, most companies set aside reserves to cover a portion of their accounts receivable -- the amount their customers owe them -- that they don't think they'll collect. And banks, when they have to, set aside certain amounts to cover expected loan defaults. (para. 19)

But management can exercise considerable discretion about how much money to mark for future liabilities. Reserve too little, and profit margins get a nice short-term boost, at the risk of higher expenses -- not to mention lower profits -- down the road. (para. 20)

USA.gov: Consumer Fraud

Consumer Fraud: Bank Fraud

Phishing Scams: “Phishing” is the use of fraudulent e-mail designed to steal identities as well as vital personal information such as credit card numbers, bank account PINs, and passwords. Phishing e-mails often ask you to verify this type of information. (para. 1)

SMishing Scams: Scammers also go “SMishing,” or phishing using text messages, by asking you to verify or confirm sensitive information. Legitimate companies never ask for your password or account number via e-mail. (para. 2)

Protect yourself:

• Call the company directly to determine if the email is trustworthy
• Forward the email to the Federal Trade Commission at spam@uce.gov.
• Do not reveal personal or financial information in emails
• Contact the company directly. Do not use contact information provided on a web site connected to the request; instead, use contact information from account statements that you already have.
• Don’t reply to the email, even if it threatens to disable your account. (para. 2)

Cash Top Up Scams:

Cash top-up cards can be a convenient way to transfer money to other accounts. They are not designed to be used directly with retailers or online merchants; rather they are used to reload money on accounts that you control, such as your debit card.
Unfortunately, scammers know the ease and convenience of using these cards. They persuade you to share your top-up card number directly with them instead of using a wire or escrow service. (para. 3)

To protect yourself from these scams:

• Guard your top-up card like it is cash.
• Be wary of advertisements where you are asked to pay with a cash top-up card.
• Don’t share your top-up card number with someone you don’t know, even if a merchant asks you to e-mail it to them.
• Never use these cards to pay taxes or fees on lottery or sweepstakes winnings. It’s likely that you haven’t won anything. (para. 3)

Protect Your PIN:

Shoulder surfers and skimming: Beware of “shoulder surfers.” Be suspicious of anyone lurking around an ATM or watching over your shoulder while you use your card. Some thieves even put a device over the card slot of an ATM to read the magnetic strip and record your PIN; this is known as “skimming”. (para. 4)

USA.gov: Credit-Protect Your Credit

Beware: Offers To Skip A Payment

If your credit company invites you to skip a monthly payment without a penalty, it is not doing you a favor. You will still owe finance charges on your unpaid balance. And interest could be adding up on any purchases you make after the due date you skipped. (para. 1)

Beware: Teaser Rates

Some cards are advertised with very low introductory interest rates called teasers. The rate is good for a short period of time. If you know you can pay what you owe while the low rate is in effect, it could be a good deal. But if the teaser time runs out and you still owe money, you could end up paying a higher rate than you might have without the special introductory rate. Just one late payment could also cancel the teaser rate. (para. 2)

Beware: Credit Insurance

When you take out a loan for a big purchase, a salesperson may try to sell you credit insurance. Your credit card company may also encourage you to purchase credit insurance. The coverage may be promoted as a way for you to protect yourself if your property is damaged or lost. Other credit insurance offers promises to make loan payments if you are laid off, become disabled or die. It is almost always better to buy regular property, life or disability insurance instead of credit insurance. (para. 3)

Be Alert: ‘Credit Repair’ Scams

• A credit repair company must give you a copy of the "Consumer Credit File Rights under State and Federal Law" before you sign a contract.
• The company cannot perform any services until you have signed a written contract and completed a three day waiting period, during which time you can cancel the contract without paying any fees.
• The company cannot charge you until it has completed the promised services, according to the Credit Repair Organizations Act.
• It is illegal to erase timely and accurate negative information contained in your credit history.
• Suggestions that you create a new credit history (also called file segregation) by requesting an Employer Identification Number from the IRS are also illegal.
• You can work to solve your own credit challenges, by requesting a free copy of your credit report, and by working with creditors to dispute incorrect information. (para. 4)

CARD Act Protections For Consumers

Fees

• Cannot change rates or fees without sending you a notice 45 days in advance in most cases.
• Must give you the option of rejecting a fee increase, but be aware that the credit card company may close your account if you reject the fee increase and may require a higher monthly payment.
• Cannot charge you a late payment fee of more than $25, regardless of how much you owe- unless one of your last six payments was late or the credit card company can justify a higher fee based on the cost of late payments.
• Cannot charge a late payment fee that is greater than your minimum payment.
• Cannot charge you an inactivity fee for not using your card.
• Cannot charge you more than one fee for a single late payment or any other violation of your cardholder agreement.
• Cannot charge you over-the-limit transaction fees unless you opt in, stating that you want to allow transactions that take you over your credit card limit. If the credit card company allows the transaction without your opt-in, it cannot charge you a fee.
• Can impose only one fee per billing cycle for transactions that take you over your credit limit if you opt in to over-the-limit transactions. You can revoke your opt-in at any time. (para. 5)

Payments:

Payments

• Has to tell you how long it will take to pay off your balance if you make only minimum payments.
• Must mail or deliver your credit card bill at least 21 days before your payment is due.
• Must apply any payments above the minimum required amount to the balance with the highest interest rate, if you have more than one rate. (para. 6)

Interest Rates

• Cannot increase your rate for the first 12 months after you open an account unless you have a variable interest rate or an introductory rate; you are more than 60 days late paying your bill; or you are in a workout agreement and don't make payments as arranged.
• Cannot charge higher rates for purchases made before you receive notice of a new rate.
• Cannot use the double-cycle billing method when calculating interest; interest can only be charged on balances within the current billing cycle.
• Cannot increase your Annual Percentage Rate (APR) without explaining why it is doing so. If your credit card company increases your APR, it generally must re-evaluate that rate increase every six months. Under some circumstances, it may have to reduce your rate after the evaluation. (para. 7)

Education Scams

Diploma Mills: If you're ever tempted by an e-mail or ad claiming you can "earn a degree based on life experience," don't fall for it. Any company that offers degrees for a flat fee and requires little course work is a diploma mill. If your school is not recognized as an accredited institution by the Secretary of Education, you may not be able to receive financial aid and employers won't recognize it. You can check on a school's accreditation by contacting the Department of Education or search the Council for Higher Education Accreditation's database. (para. 1)

Beware: Scholarship and Financial Aid Scams: Scholarships and financial aid do not require upfront fees. While there are legitimate companies who will help guide you through the financial aid and college application process for a fee, disreputable companies may ask you for money up-front and provide nothing in return. Red flags to watch out for include the following:

• A "money-back guarantee" to secure a scholarship. Don't believe it. Unscrupulous companies attach conditions that make it impossible to get the refund.
• "Secret scholarships." If a company claims to have inside knowledge of scholarship money, they're lying. Information on scholarships is available freely to the public. Ask you librarian or school counselor.
• Telling students they've been selected as "finalists" for awards. If they ask for an up-front fee, head for the nearest exit.
• Asking for a student's checking account to "confirm eligibility." If they want bank account information or your credit card number to confirm or reserve a scholarship, it's a scam.
• Quoting a relatively small "monthly" or "weekly" fee. Then asking for authorization to debit your checking account for an unspecified length of time. Ongoing fees are a sure sign of a scam.
• Unsolicited offers. Whether it's an e-mail, phone call, or it arrived in your mailbox, if you didn't request the information, ignore the offer. (para. 2)

USA.gov: Beware of Insurance Fraud

To avoid insurance fraud:

• When shopping for insurance on the Internet, check that the website is secure. Look for the lock icon, a URL that begins "https:" and never provide personal information if you don't trust the site.
• Be wary of people selling insurance door-to-door and over the telephone.
• Be suspicious if, after an accident, a stranger contacts you to offer "quick cash" or recommends a particular attorney or health care provider. Report the incident to your police department.
• Don't give your insurance identification numbers to companies you don't know.
• Carry a disposable camera in your glove compartment. If you are in an accident, take pictures of the damage and the people involved. Ask for names, telephone numbers, and driver's license information for all those involved. Getting contact information for any witnesses is also a good idea. (para. 1)

If you suspect fraud, call the National Insurance Crime Bureau's hotline at 1-800-835-6422. For more information, check out the Coalition Against Insurance Fraud (para. 2)

USA.gov: Internet Fraud

Reporting Internet Fraud:

• Child Pornography on the Internet
• Complaints about Foreign Companies
• Consumer Complaint Form
• Further Ways to Report Internet Fraud from Cybercrime.gov
• Identity Theft
• Internet Crime Complaint Center
• Internet Investment Fraud (para. 1)

Learning about Internet Fraud:

·  Avoiding Internet Investment Fraud

·  Cyber Crime Information

·  FBI Warning about False FBI E-mails

·  Identity Theft: Trends and Issues

·  Identity Theft Information

·  International Financial Scams

·  Internet Protection Information for Consumers and Businesses

·  Phishing Scams

·  Spyware

·  Statistical Data and Reports on Internet Fraud (para. 2)

USA.gov: Investment Fraud

Know the Signs: Deceptive pitches for investments often misrepresent or leave out facts in order to promote fantastic profits with little risk. No investment is risk-free and a high rate of return means greater risk. Before investing, get written information such as a prospectus or annual report. Beware if a salesperson:

• Encourages you to borrow money or cash in retirement funds to invest;
• Pressures you to invest immediately;
• Promises quick profits;
• Says that the disclosure documents required by Federal law are just a formality;
• Tells you to write false information on your account form;
• Sends material with typos or misspellings or not printed on letterhead;
• Does not send your money promptly;
• Offers to share inside information; or
• Uses words like "guarantee","high return","limited offer", or "as safe as a CD".
• Uses the phrase, "this investment is IRA-approved."
• Claims that "off-shore investments are tax-free and confidential." (para. 1)

Affinity Fraud

Affinity frauds are investment scams that target specific groups, such as the elderly, religious or ethnic communities. The investment promoters involved in these scams often are (or pretend to be) members of the group. (para. 2)

Affinity fraud usually involves either a fake investment or an investment where the scammer lies about the investment’s risk of loss, earnings or historical performance. Many affinity frauds are Ponzi or pyramid schemes. (para. 3)

Take these steps to avoid being a victim of affinity fraud:

• Research the investment promoter’s professional background (even if you know him or her), as well as the investment itself. Use independent information, not just brochures provided by the promoter.
• Check to see if this person is licensed and verify with the Securities and Exchange Commission and your state’s securities regulator.
• Don’t make an investment based solely on the recommendation of a member of an organization or group to which you belong.
• Beware of promises of spectacular profits or “guaranteed” returns, with little risk.
• Be skeptical if the details of the investment opportunity are not in writing.
• Don’t be pressured or rushed into buying an investment. (para. 4)

Contact the SEC or your state’s securities administrator if you have questions about investments or to file a complaint about investment fraud. (para. 5)

USA.gov: Phone Scams

Slamming and Cramming: 

Slamming: "Slamming" occurs when a phone company illegally switches your phone service without your permission. If you notice a different company name on your bill or see phone charges that are higher than normal, take action:

• Contact the company that slammed you and ask to be switched back to your original company. Tell the company you are exercising your right to refuse to pay any charges.
• Report the problem to your original company and ask to be enrolled in your previous calling plan. If you're unable to resolve your complaint, contact the FCC. (para. 1)

Cramming: "Cramming" occurs when companies add charges to your telephone bill without your permission. These charges may be for services such as voice mail, ringtones, or club memberships. You may not notice these monthly charges because they are relatively small, $5 to $30, and look like your regular phone charges. (para. 2)

Steps to take to avoid slammer and crammers:

• Block changes to your phone service. Ask your telephone service provider if they offer a blocking service, which usually requires the company to notify you before making any changes to your service.
• Read the fine print on contest entry forms and coupons. You could be agreeing to switch your phone service or buy optional services.
• Watch out for impostors. Companies could falsely claim to be your regular phone company and offer some type of discount plan or change in billing. They might also say they are taking a survey or pretend to be a government agency.
• Beware of "negative option notices". You can be switched or signed up for optional services unless you say "NO" to telemarketers.
• Examine your telephone bill carefully, including pages that show the details, and look for suspicious charges. (para. 3)

Your phone service cannot be shut off for refusal to pay for unauthorized services. For help, contact your local or state consumer protection agency, state public utilities commission, or the FCC. (para. 4)

Caller ID Spoofing: Scammers have adopted the practice of caller ID spoofing to obtain personal information from consumers. In this fraud, someone calls you using a false name and phone number for the Caller ID screen. During the call, the scammer describes an urgent scenario, such as the cancellation of an account. The caller may say you can avoid the cancellation if you provide your bank account or credit card number to pay the company. If you give the sensitive information, he can use it to steal your identity, or use your bank accounts. (para. 4)

Report caller ID spoofers to the Federal Communications Commission online or 1-888-225-5322. (para. 5)

USA.gov: Report Consumer Frauds & Safety Hazards

If you suspect a law has been violated, contact your state or local consumer protection agency. This agency may take action or refer you to another state organization that has the authority where you live. A local law enforcement officer could also be able to provide advice and assistance. (para. 1)

Violations of federal laws should be reported to the federal agency responsible for enforcement. While federal agencies are rarely able to act on behalf of individual consumers, complaints are used to document patterns of abuse, allowing the agency to take action against a company. (para. 2)

You can find the appropriate federal agency to contact with your complaint by using this online directory. (para. 3)

People who have no intention of delivering what is sold, who misrepresent items, send counterfeit goods or otherwise try to trick you out of your money are committing fraud. If you suspect fraud, there are some additional steps to take:

• Contact the Federal Trade Commission.
• Scams that used the mail or interstate delivery service should also be reported to the U.S. Postal Inspection Service. It is illegal to use the mail to misrepresent or steal money. (para. 4)

If you suspect you have a product that poses a safety hazard, report the problem to the appropriate federal agency:

• Automobiles- National Highway Traffic Safety Administration
• Drugs, medical devices- Food and Drug Administration
• Food- U.S. Department of Agriculture, Food and Drug Administration
• Seafood- Food and Drug Administration, U.S. Department of Commerce
• Toys, baby and play equipment, household products- U.S. Consumer Product Safety Commission (para. 6)

USA.gov: Stopping Fraud:

Identify and Stop Consumer Fraud:

Look For Warning Signs: Look for these warning signs to avoid fraud:

• Someone you don't know asks you to send money or money orders to claim a prize, lottery, credit card, loan, or other valuable offer.
• Someone you don't know offers you the chance to receive a credit card, loan, prize, lottery, or other valuable item, but asks you for personal data to claim it.
• An unknown caller claiming to be a lawyer or in law enforcement offers to help you get your money back (for a fee).
• The deal is only good "for today" or a short period of time.
• The seller offers "free gifts" in return for a minimum effort or a fee.
• A "repair person" suddenly finds a dangerous defect in your car or home.
• You are given little or no time to read a contract.
• A sale item is suddenly unavailable but a "much better item" is available for slightly more money.
• Someone is trying to scare you into making a purchase.
• The solicitation looks like a government document and suggests contest winnings or unclaimed assets are yours for a small fee. (The government doesn't solicit money from citizens.)
• You are asked for your bank account or credit card number. (para. 1)

Quick Tips For Avoiding Fraud: There are many varieties of consumer fraud, but the most common ones are variations of fake check scams, credit repair, free trip offers, and sweepstakes. Here are some tips to help you avoid being a victim:

• Don't give out personal information. Be suspicious of anyone you don’t know who asks for your Social Security number, birthdate, credit card number, bank account number, password, or other personal data.
• Don't be intimidated. Be suspicious of calls or e-mails that want you to provide or verify personal information immediately. Tell them you're not interested and hang up or don't reply to the e-mail.
• Monitor your accounts. Review bank and credit card statements carefully. Report unauthorized transactions to your financial institution immediately.
• Use a shredder. Tear or shred credit offers you receive in the mail, bank statements, insurance forms and other papers with personal information. (para. 2)

Fraud Alert: Be on the lookout for these common scams:

• Fake Check Scams You discover the check is worthless after you've deposited it and wired money back to the crook.
• Sweetheart Swindles Criminals befriend you in online chat rooms or dating sites, then request money as a favor or for accident or travel expenses.
• Auctions Beware of fraudulent sellers and bogus merchandise.
• Lotteries Don't fall for foreign lotteries; they're illegal to play and may be a scam.
• Advance Fee Loans and Credit It's illegal for telemarketers to charge a fee in advance for help getting a loan. (para. 3)

Consumer Action Handbook

Get helpful tips on preventing identity theft, understanding credit, filing a consumer complaint, and more. (para. 4)

USA.gov: Types of Scams and Fraud:

·  E-Mail Scams

·  Fake Check Scams

·  Mail Fraud

·  Phishing

·  Smishing and Vishing

·         Telephone Scams

USA.gov: Email Scams

• BBB Warns of an Email Phishing Scam
  The Better Business Bureau is warning consumers about a new email scam designed to steal your money. Be on the lookout for an email claiming to be from someone you know who is stuck in another country. They are asking you to give them a loan to pay for their hotel bills and airfare home and request that you respond via email. (para. 1)
• Beware of Osama Bin Laden Email Phishing Schemes
  The death of Osama bin Laden has garnered attention and interest around the world. Unfortunately, major news events like this one often bring a wave of phishing scams designed to collect your personal or financial information without your knowledge. Phishing scammers use email or malicious websites to solicit information by posing as a trustworthy source. For example, a scam may send an email that looks like it's from a reputable news organization with links to photos or video when, in fact, it takes you to a malicious website or downloads harmful viruses onto your computer. (para. 2)
• Don't Open Bogus Email that Claims to Come From the FTC
  A bogus email is circulating that says it is from the Federal Trade Commission, referencing a 'complaint' filed with the FTC against the email's recipient. The email includes links and an attachment that download a virus. As with any suspicious email, the FTC warns recipients not to click on links within the email and not to open any attachments. (para. 3)
• E-mail Claiming to Be From the FDIC
  The Federal Deposit Insurance Corporation (FDIC) has received numerous reports of a fraudulent e-mail that has the appearance of being sent from the FDIC. The subject line of the e- mail states: 'check your Bank Deposit Insurance Coverage.' The e-mail tells recipients that, 'You have received this message because you are a holder of a FDIC-insured bank account. Recently FDIC has officially named the bank you have opened your account with as a failed bank, thus, taking control of its assets.' (para. 4)
• E-mails Containing Threats and Extortion
  The Internet Crime Complaint Center has recently received information concerning spam e-mails from 1wayout@myway.com threatening to assassinate the recipient unless the recipient pays several thousand dollars to the sender of the email. The subject claims to have been following the victim for some time and was supposedly hired to kill the victim by a friend of the victim. The subject threatens to carry out the assassination if the victim goes to the police and requests the victim to respond quickly and provide their telephone number. (para. 5)
• FTC Warns Consumers About Bogus E-Mail That Claims to Be From Agency
  Consumers, including corporate and banking executives, appear to be targets of a bogus e-mail supposedly sent by the Federal Trade Commission but actually sent by third parties hoping to install spyware on computers. The bogus e-mail poses as an acknowledgment of a complaint filed by the recipient, and includes an attachment. Consumers who open the attachment to this e-mail unleash malicious spyware onto their computer. (para. 6)
• Gmail Phishing Attack
  US-CERT is aware of public reports of a phishing attack that specifically targets US government and military officials' Gmail accounts. The attack arrives via an email sent from a spoofed address of an individual or agency known to the targeted user. The email contains a "view download" link that leads to a fake Gmail login page. The login information is then sent to an attacker. (para. 7)
• Mass Marketing Fraud
  A few decades ago, mass marketing fraud - the kind that exploits mass communication techniques like bulk mail or telemarketing - was relatively low-tech and mostly a regional crime problem targeting victims nearby. These days, it's a different story. Thanks to the Internet, criminals and crime groups can also target victims halfway around the world, blasting out spam e-mails by the millions and setting up phony but realistic websites to lure people in. (para. 8)
• Sham Site Is a Scam: There Is No "National Do Not E-mail Registry"
  Have you submitted your e-mail address to a "National Do Not E-mail Registry" that promises to reduce the amount of spam (unsolicited e-mail) you receive? If so, you are the victim of a scam, according to the Federal Trade Commission (FTC). The web site at "unsub.us" mimics the language, look, and navigation of the Web site for the National Do Not Call Registry, a legitimate free service of the federal government. The "unsub.us" site is not run or authorized by the FTC and is concerned that the "unsub.us" site could be part of a high-tech scam that uses a deceptive Web site to trick consumers into disclosing their e-mail address or other sensitive personal information. (para. 9)
• Spammers Continue to Abuse the Names of Top Government Executives by Misusing the Name of the United States Attorney General
  As with previous spam attacks, which have included the names of high- ranking FBI executives and names of various government agencies, a new version misuses the name of the United States Attorney General, Eric Holder. The current spam alleges that the Department of Homeland Security and the Federal Bureau of Investigation were informed the e-mail recipient is allegedly involved in money laundering and terrorist-related activities. To avoid legal prosecution, the recipient must obtain a certificate from the Economic Financial Crimes Commission (EFCC) Chairman at a cost of $370. (para. 10)

USA.gov: Fake Check Scams

·  Don't Fall For Fake Check Scams
The National Consumers League is alerting the public to the growing problem of fake check scams. Based on complaints reported to NCL's National Fraud Information Center/Internet Fraud Watch database since last December, when the fake check category was added, these scams are now the sixth most common Internet fraud. Consumers who reported fake check scams to NCL's fraud programs between January 1 and June 30, 2004 lost an average of $5,000. In many cases, the contact is initiated by email. (para. 1)

·  FTC Advice on Giving the Bounce to Counterfeit Check Scams
A new scam is swindling consumers: counterfeit checks that seem legitimate to both bank employees and consumers, but that leave unsuspecting consumers footing the bill. The Federal Trade Commission is issuing a new brochure, Giving the Bounce to Counterfeit Check Scams, which explains common angles used in these scams, the responsibilities of banks and consumers when it comes to counterfeit checks, and advice on how to avoid these increasingly common traps. (para. 2)

USA.gov: Mail Fraud

Phony Letter from Publishers Clearing House Lands in Mailboxes Across the Country
Better Business Bureau is warning the public to beware of letters supposedly from Publishers Clearing House which claim that they have won a grand prize drawing of $1 million. Despite how official the letters might look, the recipient is the target of a widespread scam that is seeing a sudden resurgence across the country. (para. 1)

USA.gov: Smishing and Vishing:

Smishing and Vishing : And Other Cyber Scams to Watch Out For This Holiday
Smishing - a combination of SMS texting and phishing and Vishing - voice and phishing are two of the scams the FBI's Internet Crime Complaint Center is warning consumers about as we head into the holiday shopping season. These scams are also a reminder that cyber crimes aren't just for computers anymore. Read on for tips to protect yourself From cyber scams. (para. 1)

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