THE KESSLER REPORT Continued
A Publication of Michael G. Kessler and Associates, Ltd.
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Behind the Numbers®
Edition
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Volume 1
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Number 2
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BOOK 'EM!
Forensic Accounting in History and Literature
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Was The Great Gatsby "done in" by
Forensic Accounting? So it seems.
The title character of F. Scott
Fitzgerald's classic tale of the Roaring 20's had it all: wealth,
status and the love of a beautiful woman. But Daisy Buchanan had a
jealous husband who would rather ruin Gatsby than give up his
wife. Employing what essentially amounts to a forensic investigation,
the husband explores Gatsby's background and business, exposing him as
a poor nobody who had grown rich bootlegging and gambling. The news
drives the fast-living Gatsby to his sudden and tragic downfall.
Although the term "Forensic Accountant"
is relatively new, history and literature are filled with people of
various titles investigating fraud and performing other tasks now
associated with the Forensic Accounting discipline. In fact, the work
of a Forensic Accountant often reads like a dime-store detective
novel, spiced with colorful villains, financial intrigue, deception
and pursuit.
The main difference between fiction and
reality is that instead of using mask and gun, today's villains use
mouse and keyboard. Instead of hiding behind a lamppost in a trench
coat and fedora, today's Forensic Accountants are more likely to be
hiding behind their own computers, searching for clues amid mountains
of data.
Perhaps the most celebrated case of an
accountant nailing a famous criminal was the case of Al Capone. For
all of Capone's colorful history of violent crime, the FBI could never
gather enough evidence to convict him until FBI agent Eliot Ness had
an idea.
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He gathered special agents of the IRS to track the flow of cash from
Capone's illicit activities. When the mobster failed to pay taxes on
those earnings, the IRS nailed him for tax evasion. Capone went to
jail and was never a factor again. IRS recruitment posters boast till
this day: "Only an accountant could catch Al Capone."
Forensic Accountants were a busy lot in
the 1980s, when greed rose to unprecedented levels on Wall Street and
the stock market soared. Billions of dollars were made on insider
trading, as some traders used any method at their disposal to gain an
unfair advantage over others. These methods were ultimately uncovered
by skilled Forensic Accountants. Based on information from a
criminal-turned-state's-witness, special agents of the SEC audited
trading records to verify unusual stock purchases were taking place
prior to important company announcements. Seeking the identity of the
owner behind those trades, they followed a trail of insider trading
activities directly to arbitrageur Ivan Boesky. Boesky plead guilty
and was fined $50 million, agreed to return another $50 million in
illegally obtained gains, and went to prison. Boesky cooperated with
the authorities, supplying them with evidence which lead to the arrest
and conviction of an even bigger fish--junk bond king Michael
Milkin. Milkin paid $1 billion in fines, went to prison and the
scandal ultimately lead to the collapse of his firm, Drexel
Burnham.
Even the news of the day puts Forensic
Accounting into the public spotlight.
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After O.J. Simpson was found liable in the civil trial of murdering
his ex-wife and her friend, the jury had to decide how much to award
in punitive damages. The prosecution called in a Forensic Accountant
to refute defense claims that Simpson was broke and could not afford
further damages. Testimony was given that he had examined Simpson's
finances and Simpson had drastically understated his assets, hiding
millions away in investments and pension funds. The jury must have
believed the accountant--they ultimately awarded the plaintiffs a
total of $33.5 million.
Forensic Accounting is turning up more
frequently in the world of fiction, too. The financial intrigue of
fraud and the investigative process of Forensic Accounting are a
natural fit with mystery or suspense novels. Add exotic locations,
colorful characters and a murder or two, and you have all the elements
of a classic thriller. Not only are these books entertaining, but they
are educational in helping the layperson understand the Forensic
Accounting process.
Non-accountants often use Forensic
Accounting techniques to help solve crimes in novels. In John
Grisham's bestseller The Firm, (Island) Mitch McDeere is a young
attorney hired by a law firm that turns out to be corrupt.
McDeere probes the firm's finances and, by copying files, scouring
billing records and interviewing witnesses, uncovers a plot where
clients are double-billed for their work and the excess cash is
smuggled out of the country. He turns this information over to the FBI
and the firm is ruined.
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In his best-selling novel Disclosure,
(Knopf, 1993), Michael Crichton tells the story of Tom Sanders, a
computer executive who is accused by his female boss of sexual
harassment. In an effort to clear his name, Sanders conducts a most
unusual Forensic Accounting investigation into his company's records,
reviewing high-tech electronic, video and virtual reality
files. During his search, he discovers a scheme to undermine the
company.
There is also a selection of books
featuring Forensic Accountants as the heroes of their own stories, as
well. Lenny Cramer, perhaps the most prominent of this fictional
group, is the star of a series of novels written by I.W. Collett and
various co-authors. In one of these novels, Cramer tracks forged
receipts to uncover a plot to steal Burmese religious
treasures. Another features Cramer, while conducting an audit at
Coca-Cola, uncovering a scheme to steal the company's secret
formula. In yet another, Cramer uses his Forensic Accounting skills to
solve a series of murders in the New York art world.
As long as there are criminals trying to
steal money and investigators pursuing them, Forensic Accountants or
people utilizing Forensic Accounting skills will continue to be heroes
in history and literature. So "curl up with a Forensic Accountant"
tonight and you'll have an evening that won't just be by the
numbers.
K
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F Y I
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 Michael G. Kessler
was interviewed for an article on the increasing demand for Forensic
Accountants. The article appeared in the May 6th edition of the Los
Angeles Daily News.
Mr. Kessler was
recently invited to the National Law Enforcement Center where he
delivered a speech on Forensic Accounting and Investigation to the
Environmental Protection Agency.
Susan M. Peterson was
recently awarded the CII designation by the Council of International
Investigators. She was also appointed to the research committee for
the Certified Fraud Examiners.
Mr. Kessler was
appointed by the Nassau County District Attorney as a consultant on
major white-collar crime
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cases. He was also elected a fellow for the American College
for Forensic Examiners and appointed to INTA's anti-counterfeiting and enforcement
committee.
Michael Kessler and
Susan Peterson were recently appointed to the Board of Directors of
the International Coalition Against Diversion (ICAD). Mr. Kessler gave
a speech on product diversion to the Council of International
Investigators in Orlando.
Kessler & Associates
has opened an office in Los Angeles, California.
Kessler & Associates
is pleased to announce the additions of Richard Sauerwald, Chris
Papachristos, Karen Wienclaw, Lori Parker, and Karen Kirsch to its
staff. Mr. Sauerwald was previously employed as a Staff Accountant at
American Tissue
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Corporation. Mr. Papachristos was president of PAPA Technologies,
a firm which specialized in forensic computer applications. Ms. Wienclaw,
a paralegal, was previously with the law office of Jacoby & Jacoby.
Ms Parker, also a paralegal, was most recently employed by the Lake Grove
Village Justice Court. Ms. Kirsch joins the company as an administrative
manager previously with Lehman Brothers.
Kessler & Associates
manned a booth at the International Trademark Association's trade show
in San Antonio, Texas, where we shared investigative solutions for the
protection of corporate trademarks.
Michael Kessler was
quoted in Business Week magazine on an article discussing screening
your vendors before signing a contract.
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Publisher: Kessler & Associates, Ltd. Editorial Director: A. Reshen
Editor: B. Quintana
Design Studio: Pink Coyote Design, Inc. Designer: J. Ponzan
Copywriter: R. Dreger
The Kessler Report (V1,N2) copyright ©1997 by Kessler & Associates,
Ltd. is published bi-monthly. Send correspondence to: Kessler & Associates,
Ltd., Park Avenue Atrium, 237 Park Avenue, 21st Floor, New York, NY 10017.
The Kessler Report (V1, N2) is a registered trademark of Kessler & Associates, Ltd. Printed in the USA. No portion
of this newsletter may be reprinted without crediting The Kessler Report,
a publication of Michael G. Kessler and Associates, Ltd.
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Copyright © Michael G. Kessler & Associates, Ltd. 1997. All rights reserved.
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