Blog Joomla! - the dynamic portal engine and content management system http://lindquistforensics.com Tue, 11 Dec 2018 16:50:34 +0000 en-gb BOB LINDQUIST FORENSIC INVESTIGATIVE ACCOUNTING LESSONS LEARNED #7 http://lindquistforensics.com/index.php/blog/item/12-bob-lindquist-forensic-investigative-accounting-lessons-learned-.html#7&Itemid=58 http://lindquistforensics.com/index.php/blog/item/12-bob-lindquist-forensic-investigative-accounting-lessons-learned-.html#7&Itemid=58

Forensic Investigative Accountant Mindset concludes that the merger of motive, opportunity and personal financial need as one mindset trumps any standard of deterrence, no matter its foundation.

Bob Lindquist Comment on Governor McDonnells Trial in State of Virginia

Washington Post: "McDonnells found guilty of corruption"

The headline, stunning in its statement and so very sad for the family reminded me of when I arrived home from Piarco, Trinidad landing at Dulles International airport several years ago after having been there for a few weeks conducting a political corruption investigation involving bribery of a public official by a foreign vendor.  On arrival at the airport I obtained the latest Post and the headline read:

            "$90,000 found in congressman's freezer"

Somewhat agitated, I wondered how this could happen in the United States with its strong legal system and with the principle of deterrence well established.  I understand why political corruption flourishes in foreign cultures but in the United States…what was this person thinking?  I was so disappointed and wondered what it takes to deter such human behavior. 

Then I thought about my Client's situation. Here I am conducting a political corruption investigation on behalf of a foreign government who wish to create a deterrent based upon one case, so future politicians will at least pause before accepting a bribe.  I asked myself what is the point for my Client to continue given that notwithstanding the success within the United States, the system is still unable to deter politicians from such human behavior.  Then we fast forward to 2014 and the McDonnells' trial: stunning and so very sad! 

I can only conclude that the merger of motive, opportunity and personal financial need as one mindset trumps any standard of deterrence, no matter its foundation.]]>
bob@lindquistforensics.com (Bob Lindquist) LESSONS LEARNED Fri, 06 Feb 2015 19:48:42 +0000
BOB LINDQUIST AND FORENSIC LESSONS LEARNED #6 http://lindquistforensics.com/index.php/blog/item/11-bob-lindquist-and-forensic-lessons-learned-.html#6&Itemid=58 http://lindquistforensics.com/index.php/blog/item/11-bob-lindquist-and-forensic-lessons-learned-.html#6&Itemid=58

Forensic Investigative Accountant Mindset Includes

“…Training the mind to see both the doughnut and the hole”

“…Often, the fraud auditor does not know what he is looking for or even why, other than something looks suspicious or out of place.  So to be overly organized when doing fraud audit work may be a handicap.  You need a lot of freedom and space to let your imagination run wild.  You need to poke holes into everything including your own pet theories and biases. Do not accept anything anyone says as gospel truth.  Do not assume that any document is what it purports to be.  When conflicts between statements of witnesses occur, do not take sides or prejudge their veracity.  Keep an open mind.  The proof of fraud is rarely when and what you thought when you first began the audit.  Preconceptions are dangerous.  They invariably lead you down the wrong path…”

MINDSET OBJECTIVE

To seek relevant information whether or not supportive of your client’s position obtained from persons and documents within the financial world and to report findings in an independent and objective manner.

MINDSET REQUIREMENTS

To have a knowledge of fraud characteristics with its many varieties and respective red flags

To understand somewhat the legal process

To understand that the forensic standard of proof is governed by the Court of law

To understand the need for independence and objectivity and the concept of ‘benefit of doubt’

To understand where your expertise ends, particularly in specialty industries

To be aware of your enemy in the form of bias and prejudice

To be naturally curious and intuitive and to maintain healthy skepticism of information received from persons and documents until third party verification

To understand you are re-creating history by accumulating puzzle pieces of information in random sequence

To understand prior to commencing the investigation how to prepare the initial plan of inquiry and related fraud theory

To maintain a free floating mind in order to identify all possible interpretations of events and explanations

To have the ability to move from a study of minute detail to conduct a big picture interpretation of new findings  

To identify investigative priorities from developing findings in order to pursue the most efficient means to either support or refute a concern or allegation

To document the timing of events and the inferences to be drawn there from, especially in circumstantial matters as to persons’ possible knowledge

To understand the interview process, to know how to identify chemistry in a group setting including those in control and eventually potential rollovers in a live investigation

To be able to establish your creditability as in investigator during a live investigation

To understand that the passing of time can be an effective investigative technique in a live investigation

To know how to identify persons in a developing investigation who might be culpable so you, your client and they are protected
To understand the concept of a pattern of conduct and personal and/or business conduct that is not in the normal course as possible indicators of the hidden reality of fraud

To give no priority to issues of materiality and reputation and to be very cautious with the use of a sampling approach as an investigative technique

To understand how to work in foreign cultures, if applicable

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webmaster@doubledome.com (Administrator) LESSONS LEARNED Mon, 09 Jun 2014 21:22:24 +0000
BOB LINDQUIST AND FORENSIC LESSONS LEARNED #5 http://lindquistforensics.com/index.php/blog/item/10-bob-lindquist-and-forensic-lessons-learned.html http://lindquistforensics.com/index.php/blog/item/10-bob-lindquist-and-forensic-lessons-learned.html

Where you have the same parties conducting business over a period of time, we encourage forensic accountants to focus their initial investigation on the ‘before’ transaction(s) and not the ‘now’ transaction that is usually largest.  At the start of any management misconduct, the intentions behind any transaction are easier to ascertain, and witnesses are more co-operative since one or more are usually no longer part of the original management/employee team.  In summary the pattern of conduct to establish knowledge, relationships and intent is usually more visible.  

The following extracts come from two case examples that are presented in more detail at

                             lindquistforensics.com

‘Selected Cases’          ‘1980s’            ‘Greymac Mortgage, Seaway Mortgage and Crown Trust’
‘Selected Cases’          ‘2010s’            ‘UDECOTT’ vs. John Calder Hart et al’

“$500 Million Sale Creates $230 Million Profit”
Bill Player and others had purchased 10,931 apartment units in Toronto for $270 million and flipped them for $500 million to Saudi Arabian investors in the Grand Cayman that created an instant profit of $230 million.  But, two months later the profits were gone and the Ontario government had called for a Public Commission of Inquiry.  Its focus: the Cayman transaction.

Later the Attorney General retained Lindquist asking that I take advantage of the work already done.  However my approach was different. No matter how large a case: the fraud still had to start at some time and place.  In the early days of Player’s property flips, the nominees were not Saudis and the transactions were not in the Grand Cayman.  To the contrary, the initial property transactions were normal, taking place in small town Ontario with $50 drunks acting as nominees. 

With this approach, the pattern of conduct was established; the subsequent property flip transactions revealed a consistent pattern that was the same as their last deal, the $500 million sale to the Saudi Arabian investors in the Grand Cayman.

“Lindquist Goes After Hart”
In March 2010 the UFF Public Commission of Inquiry issued its report into the construction sector and in regard to the case involving the Brian Lara stadium and the tender submitted by Hafeez Karamath Limited their focus was on the ‘now’ transaction of 2006.  However, given that the issues involved parties with a history, Lindquist focused on the ‘before’ transactions in 2003 and 2005. 

In May 2003 the UDECOTT Evaluation Team had failed Hafeez Karamath Limited for a number of reasons set out fully in its report including ‘such financial statements as provided showed a deficient working capital…the related company may in any event, have been gravely insolvent’.

Then in March, 2005 the UDECOTT Evaluation Team found that Hafeez Karamath Limited for construction projects in excess of $100 million was lacking in the financial, construction management and/or management capability.

The benefit of the historical findings is summarized in Paragraph 9 of the Claim that states:

‘Prior to the award of the contract to Hafeez Karamath Limited the First and/or Second and/or Third and/or Fourth Defendant were involved in and obtained information from the tenders for the Customs and Excise Campus Plaza (2003) and the Ministry of Legal Affairs Tower (2005) which would have led a director and officer acting prudently to recommend the rejection of Hafeez Karamath Limited’s tender for the Brian Lara Construction Packages 2, 3 and 5 to 8.]]>
bob@lindquistforensics.com (Bob Lindquist) LESSONS LEARNED Mon, 22 Jul 2013 20:50:55 +0000
BOB LINDQUIST AND FORENSIC LESSONS LEARNED #4 http://lindquistforensics.com/index.php/blog/item/9-bob-lindquist-and-forensic-lessons-learned.html http://lindquistforensics.com/index.php/blog/item/9-bob-lindquist-and-forensic-lessons-learned.html

In Lessons Learned #1 we stated ‘Objectivity is the key word from beginning to end’.  We should have added that this includes your conduct during the entire legal process as it progresses over the years.

The following case example is presented in more detail at

                             lindquistforensics.com

‘Selected Cases’          ‘2000s’            ‘Government of Antigua vs. Lester Bird et al’

May 2004                    Attorney General retained Lindquist
March 2006                 Attorney General filed a civil claim
February 2009             Attorney General announces recovery of US$12M from Rappaport

Now nine years later, the following article dated May 14, 2013 is written by Martina Johnson:

ASOT MICHAEL WITNESS STATEMENT LEAKED: ATTORNEY ANGRY

ST JOHN’S, Antigua – Attorney John Fuller said the publication of Asot Michael’s witness
statement in the IHI debt settlement probe could jeopardise the future of the investigation.  He condemned the report on Caribarena’s online news portal, calling it “the most outrageous abuse of information” particularly since it could have a negative effect on potential witnesses in other cases, who may now decide not to come forward out of fear their statements could be leaked.

There have been numerous instances in which prosecutors had to edit witness statements for national security reasons and also to prevent prejudicial statements against an accused being made before a jury.  Fuller said, regardless the means of obtaining the document, the entity ought to have exercised caution given the potential ramifications.

The lawyer added he believes the publication is a part of a “personal vendetta” against opposition Antigua Labour Party MP Michael, who is one of the individuals being investigated in the IHI matter.  The MP has several civil lawsuits pending against the news site in which he accuses its operators of libel and defamation of his character through several articles. He is seeking aggravated and exemplary damages.

While the police communications office has declined to comment, Commissioner Vere Browne said he must first apprise himself of the contents of the latest publication before making a statement.  Meantime, head of the Criminal Investigation Department Superintendent Nuffield Burnette also declined to comment yesterday but had earlier said, the file would be reconstituted and police would continue the investigation.

 

Apart from MP Michael, former prime minister Lester Bird, Bellwood Services SA, Patrick A Michael Co Ltd and Debt Settlement Administrators LLC of Florida are all targets of the IHI probe.  The investigation, which was the subject of a forensic investigation by Robert Lindquist, relates to the repayment of the US$33 million loan from IHI Japan to fund the construction of a desalination plant and power plant.

Several civil matters were filed and later withdrawn, while a Commission of Inquiry was scrapped following legal challenges. In 2011, the investigators said they shifted focus to building a criminal case into the alleged misappropriation of about US$14 million.  The late Swiss investor Bruce Rappaport and his IHI debt settlement company are no longer under investigation since Rappaport repaid US$12 million to the government.

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bob@lindquistforensics.com (Bob Lindquist) LESSONS LEARNED Mon, 22 Jul 2013 20:50:14 +0000
BOB LINDQUIST FORENSIC LESSONS LEARNED #3 http://lindquistforensics.com/index.php/blog/item/8-bob-lindquist-forensic-lessons-learned.html http://lindquistforensics.com/index.php/blog/item/8-bob-lindquist-forensic-lessons-learned.html

For young professionals: Work hard because you never know who might take an interest in your career.

The case is presented in more detail at

                             lindquistforensics.com

‘Selected Cases’          ‘1970s’            ‘The Collapse of Atlantic Acceptance Corporation’

Lindquist starts his 41st year and recalls his move into Forensic Accounting

It was January 1972, and the audit season was in play at Touche Ross Bailey & Smart (now Deloitte Touche) in Toronto when the audit partner called me into his office.  He was not pleased with me.  I had just won the 1971 Rally Championship in a Datsun (now Nissan) and his statement to me was to decide whether I wanted to drive rally cars or be a professional auditor. This meeting followed several evenings and weekends working on one of his audits. I vividly remember this meeting, as if it was yesterday, I kept my cool. 

It was a wonderful opportunity because earlier Brian McLaughin who was in charge of the insolvency group had told me that if the day arrived when an audit partner didn’t like me, to come see him.   I did, in the first week of February 1972 and at the time I had no idea that forensic accounting would become my career.

Brian had previously been retained to assist Commission Counsel for the Honorable S.H.S Hughes with the public inquiry into the collapse of a major finance company.  My first assignment was to proofread the draft report entitled ‘Report of The Royal Commission Appointed to Inquire into the Failure of Atlantic Acceptance Corporation Limited’. 

By way of background, in June 1965 ‘Atlantic’, a major Canadian finance company with Powell Morgan as President failed to meet a $5 million matured secured note and three days later it was placed into receivership.  Its collapse shook Canada’s financial community and a $20 stock became .65 cents. 

I found the findings to be most fascinating.  Subjects in the report like “The Five Wheels Transaction and its Reversal” made references to names such as Commodore Business Machines, Allen Manus a Toronto stock promoter, Jack Tramiel and the Grand Lucayan Beach Hotel in the Bahamas.  In one day, one amount of $750,000 was processed through six transactions called “A Financial Merry-Go-Round.”  The Report stated the collapse represented a loss of some $70 million and labeled Morgan as inventive, ingenious, incompetent, corrupt and a swindler.  This sure beat auditing!!

The intrigue captured my interest and my passion; I had been rescued from the audit world and the rest is history, thankfully still unfolding over 40 years later. 

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bob@lindquistforensics.com (Bob Lindquist) LESSONS LEARNED Mon, 22 Jul 2013 20:49:38 +0000
BOB LINDQUIST FORENSIC LESSONS LEARNED #2 http://lindquistforensics.com/index.php/blog/item/7-bob-lindquist-forensic-lessons-learned.html http://lindquistforensics.com/index.php/blog/item/7-bob-lindquist-forensic-lessons-learned.html

Forensic and investigative accountants must study human conduct.  In an honest environment, behavior is for the most part predictable, but in a questionable business environment subject of a live investigation, the forensic accountant must be most focused on the nuances of conduct, whether business or personal that is not in the normal course.  The nuances tend to reflect sensitivity to a subject that must be investigated as a solid lead.

The following extracts come from a case example is presented in more detail at

                             lindquistforensics.com

‘Selected Cases’          ‘1990s’            ‘IBM, Poughkeepsie, New York’

Roger was Too Busy to Chat!
Hi-tech products have a relatively short shelf life and this requires procedures to properly dismantle parts that are used, discontinued or deemed to be surplus.  However, the risk is that the dismantled parts could be diverted for sale on grey markets.

A department in this Hi-tech company had selected various vendors through the bid process to contract the necessary services.  All the agreements required the vendors to share their sale proceeds from recycled parts and to not sell parts scheduled for scrap.  However, field investigators had confirmed the movement of the company’s scrap in the grey market and our mandate was to determine if any person or group of persons within this department was involved. 

There was also one other factor.  General Counsel advised that their Internal Audit group had concluded their review of this department just two weeks earlier with all findings satisfactory…and he wanted them to work with us.  That was fine and to his credit, the Director of Internal Audit was most positive and very helpful and especially anxious to learn, if their findings were incorrect, how they went wrong.

At the start of the investigation, the General Counsel met with department management and staff to introduce us and to advise of our joint investigation with the Director of Internal Audit.  He sought their cooperation and as expected the employees expressed many concerns with such questions as ‘Does management believe someone in this department has engaged in any misconduct or criminal activity?’ and ‘Assuming I cooperate, will I be guaranteed employment?’

 

 

 

It was time to start work and after the introduction it made most sense for the Director and me to meet with the head of the department, Roger. After the usual preliminaries, the interview started, but within a few minutes Roger focused the conversation onto the stress from his sick wife, and then he had to excuse himself to attend a meeting.  Now think about this, if Roger had been honest he would have given us all the time we required.  After all, these allegations were not new; they had been ‘dogging’ his department for some time.  We could have provided Roger with instant relief. 

In the normal course, that is, an honest environment, Roger would have fully engaged us until we had had enough for the day.  But point is, Roger’s conduct was not in the normal course of business.  Our suspicions were only intensified, now we just had to establish the trail of evidence.  That story is for another day.

The Director of Internal Audit also discovered the answer to his question: a lack of professional skepticism, a skill often difficult to practice when working as an employee within any organization.]]>
bob@lindquistforensics.com (Bob Lindquist) LESSONS LEARNED Mon, 22 Jul 2013 20:48:58 +0000
BOB LINDQUIST FORENSIC LESSONS LEARNED #1 http://lindquistforensics.com/index.php/blog/item/6-bob-lindquist-forensic-lessons-learned.html http://lindquistforensics.com/index.php/blog/item/6-bob-lindquist-forensic-lessons-learned.html

Forensic and investigative accountants must write a report with the assumption it will appear on the front page of a major newspaper.  Strict adherence to and reliance upon phraseology such as ‘attorney work product’ or ‘privileged’ or ‘confidential information’ is most insufficient.  At the same time we counsel them to be aware of their greatest enemy: personal bias. Objectivity is the key word from beginning to end.  Otherwise when one’s findings are leaked into the public forum, it could prove most uncomfortable.

The press article refers to a case that is presented in some detail at

                                     lindquistforensics.com

‘Selected Cases’          ‘2000s’            ‘Central Bank of Trinidad vs. CL Financial et al

CLICO CORBEAUX
By Asha Javeed asha.javeed@trindadexpress.com  
Story Created: Nov 10, 2012 at 10:04 PM  

“Lindquist investigation reveals”

While insurance firm CLICO was caught up in a liquidity crisis in 2008, a top official at CL Financial (CLF) allegedly defrauded the insurance giant of prime assets for personal benefit. 
The individual was aided by another executive from a Barbados-registered company.  And even after the Government intervened and bailed out CLICO, another deal was made which cost CLICO millions. 

These were some of the details unravelled in the forensic work done by forensic accountant Bob Lindquist commissioned by the Central Bank following the collapse of CLICO in January 2009. 
The individuals and the multiple million-dollar transactions which they orchestrated are now the subject of a police probe which was launched last week.  They are among three top officials from the CL Financial Group who the Sunday Express understands form the police investigations. 

The criminal investigation against former CLICO officials and several corporate entities aligned to the collapsed insurance company was announced last week by Director of Public Prosecutions (DPP) Roger Gaspard. 

While Lindquist's forensic work exists, no official report was prepared from it and his work is not admissible evidence in a court of law. However, the Sunday Express learnt that Lindquist's work, apart from having information to pursue civil proceedings, also has enough information to substantiate a criminal probe. 

 

The Sunday Express has obtained a copy of Lindquist's work, which centres around three specific transactions as at June 30, 2010. The work is primarily a chronology of events which were knitted together from documents and e-mails from CL Financial and CLICO. The Sunday Express understands that the Central Bank had commissioned Lindquist's work into the affairs of CLICO and the documents are subject to professional privilege and public immunity. 

Witness statements from several individuals — former corporate secretary Gita Sakal, former Group Financial Head Michael Carballo, former CLICO chief executive Karen Gardier and Methanol Holdings chief executive Rampersad Motilal — are cross-referenced throughout the Lindquist document, which posits a timeline of events leading up to the CLICO collapse and the transactions undertaken. 

While the statements of both Motilal and Sakal bear "public immunity" in Lindquist's work, both individuals have appeared before Colman's Commission to address some of the issues. The financial statements and declarations of dividends are also used as exhibits. 

At one point, Lindquist illustrates the complex corporate structure of CLF with a line graph. 
Lindquist's work focuses on four transactions, conducted from November 2008 to February 2009, which builds a case of fraud. 

The transactions show how one top CLF official, aware of the financial constraints faced by CLICO, fraudulently obtained assets from the company and was ably abetted.  It shows a contrived effort on the part of individuals, aided by their attorneys, in the setting up of Swiss companies in November 2008, before the bailout by the Government, to loot CLICO's assets. 

In one instance, US$2,800,000 from a CLICO subsidiary was paid to a Swiss company and not CLICO itself. That payment was used to acquire 337,800 shares from another CLICO subsidiary company without disclosure by CLICO and CLF.   When a CLF executive questioned the transaction, the individual was told by a lawyer to "treat this with all of the required sensitivity". 

In another instance, an official claimed ownership of a subsidiary, with an estimated value of US$100 million, which was only held in his company's beneficial interest "for tax efficiency" so subsequent dividends were paid to his Cayman registered-company. 

In that instance, it resulted in a heated e-mail exchange between two CLF officials at the time — one argued that the shares were owned by CLF while the other insisted they belonged to him. 
The e-mail trail of that incident, which was reproduced by Lindquist, incriminates the CLF official and surmised it as "theft".  Both officials exited the company before the issue of ownership was resolved. 

Lindquist's work also detailed the circumstances leading up to the undervalued sale of a prime CLICO energy asset in February 2009, which was described as being done "with indecent haste" and with no proper reason and in breach of the Memorandum of Understanding signed with the Government of Trinidad and Tobago. 

Lindquist's documents were used by the Central Bank in June 2011 to initiate a civil case against two former CLF executives.  The Central Bank's civil case centers on the mismanagement of CLICO, and misapplication and misappropriation of its income and assets to the detriment of its policyholders and mutual fund investors.]]>
bob@lindquistforensics.com (Bob Lindquist) LESSONS LEARNED Mon, 22 Jul 2013 20:47:20 +0000