Chasing the Money – Financial Failure or Fraud?
According to the IRS, Bankruptcy Fraud continues to be an area of investigation and prosecution for both the IRS and the DOJ. Bankruptcy fraud tends to be complicated and can be difficult to identify and to unravel. Your focus is the law, your legal strategy and your case. You might not have the time, experience or expertise to work through the lack of financial transparency in a company's financial statements or to determine the veracity of the integrity of the company's management and operations teams.
Financial decline happens over time, and over time, fraud schemes tend to become more creative, more complex, and more difficult to detect and understand. Additionally, as the business declines, management's attention turns to managing multiple crises, record keeping becomes less important and adequate staffing in the organization, particularly in the finance and accounting areas declines. As a result, not only are the financial records unnecessarily complex in order to attempt to conceal fraud, but they are may also be muddled with errors and incompetence. This is where adding a forensic accountant to your legal team may be essential.
As you formulate your legal strategy, consider whether adding a forensic accountant to your team will help you in identifying if your matter includes acts of fraud, misappropriation of company assets, and/or fraudulent financial reporting.
Why a Forensic Accountant?
A forensic accountant:
• Works with attorneys and is familiar with legal concepts and procedures
• Understands how to identify fraud in bankruptcy
• Understands how to consider the concepts of substance and form
• Is trained to think beyond just the numbers, to question why and establish the what, where, how, and when
• Analyzes and interprets complex financial issues
• Is used to working with incomplete, disorganized, and error-filled records
• Summarizes and presents complex issues in an easy-to-understand manner that is supported by evidence
• Prepares expert reports on factual findings as presented by the evidence
• Is curious and creative
• Exercises sound professional judgment
How Can a Forensic Accountant Help You?
In bankruptcy matters, a forensic accountant can assist your legal team by:
• Reviewing the financial books and records for unusual transactions that might warrant further attention
• Preforming business valuations
• Preparing an analysis of pre- and post-petition financial statements
• Identifying the transfer of assets pre- and post- petition
• Identifying and quantifying fraudulent transfers of assets (a form of "bleed-out)
• Identifying and locating diverted funds
• Identifying the concealment and /or misappropriation of assets
• Identifying transactions with straw buyers / fictitious bidders
• Identifying the transfer of property to related parties (shareholders, insiders, relatives) shortly before filing
• Identifying inflated compensation and / or cash withdrawals made by directors or other related parties (shareholders, insiders, relatives) – another form of "bleedout"
• Identifying transactions with non-debtor subsidiaries, parent companies, or affiliated entities owned by the same related parties or entities
• Analyzing business operations and performance
• Identifying breakout schemes
• Performing financial analyses in determining the feasibility of reorganization
• Identifying potentially questionable financial accounting reporting methods and accounting methodologies
• Identifying inconsistencies in financial statements, tax returns, and debtor's schedule and statements of financial affairs
• Identifying and unraveling Ponzi schemes and other schemes (e.g., other businesses started near the time of the bankruptcy)
• Providing analyzes to support court motions by both parties
• Providing an expert witness report
• Providing expert witness testimony
• Preparing easy-to-understand visual exhibits for trial
The BERO Group has an experienced team of forensic accountants who can assist you with bankruptcy matters in looking for bankruptcy fraud and performing business valuations. With more than 25 years of experience working with attorneys on complex litigation issues, we are as confident on the witness stand as we are in our analysis.