Catching Up: A Few Links

Another reminder that tax incentives and poor oversight are a great recipe for fraud (via WSJ):

...Des Moines, population 200,000, is dealing with a nasty hangover. A lavish tax-incentive program that brought Hollywood to its doorstep has come to a halt amid allegations of faulty oversight, poor record-keeping and potentially criminal abuse.

Charges were brought against 41 individuals allegedly involved in a widespread mortgage fraud scheme (via NYT):

“The fraud schemes alleged in the cases unsealed today reflect a veritable smorgasbord of scams,” Mr. Bharara said during a news conference in Lower Manhattan. “Whether the economy was going up or the economy was going down, these alleged fraudsters were working feverishly to game the system.” 

Other Madoff Aides Said to Be Tied to Fraud:

The trustee, Irving H. Picard, citing his own findings, asserted that 245 of the almost 5,000 active Madoff accounts were directly managed by other Madoff staff members, not by Mr. DiPascali.

Like Mr. DiPascali, these employees created records of fictional trades that maximized the reported profit in the accounts, the trustee’s filing asserted. Indeed, it claimed those accounts showed bogus profits in excess of the fictional gains recorded in the DiPascali accounts, which ranged from 10 to 17 percent.

According to the filing, the accounts included those set up for Stanley Chais, a Los Angeles investment manager whose clients lost millions in the fraud, and Jeffry Picower, a professional investor who withdrew billions from his Madoff accounts.

The special accounts also included ones set up by members of the Madoff family and employees at the firm, according to the document.

And finally, PCAOB Announces Ambitious Agenda; May Be Time to 'Dial Up' on Fraud, Silvers Says (HT FASRI):

In response to questions, Silvers said, "We should not expect that every audit is a forensic audit... that's absolutely not what I'm saying." However, he added, "I think we need to move the dial a little bit so auditors have some greater obligation than is currently embodied in the current fraud standard, to have an obligation to act when there is reasonable suspicion of fraud."

"This was subject to some extensive discussion in the Treasury committee (Treasury's Advisory Committee on the Auditing Profession or ACAP]," said Silvers, adding, "some people, [e.g.] Lynn [Turner], may feel my approach is not tough enough, some people felt we should move to some absolute liability standard [i.e.] if you don't find fraud, it's the auditors fault; but it's also not my view that looking for fraud is not related to the audit, that doesn't parse with the public's [perception] of the audit profession."