Firm was retained by Counsel for the accused Merrill to assess the government’s allegation of a ponzi scheme where it reported”total losses by the victims of about $3,045,000,000″ located around the world.

We must determine if the characteristics associated with an alleged Ponzi scheme are evident in the nature of the revenue and expense recorded by the company. To assemble the full financial picture, a list of missing financial records from the government’s case along with a list of various computer-based analyses that became their basis for the allegations were requested.

The requests were necessary in order to address such findings by the DOJ as “total losses by the victims of about $3,045,000,000″…”multiple User Accounts for the sole purpose of leveraging their fictitious profits”…”multiple User Accounts on their own behalf could generate credits by essentially recruiting themselves”…”net winners”…”net losers” and the”$5,000,000,000 trailing liability.”

The DOJ case against Merrill had concluded “Unsurprisingly, because promoters had to pay to join, but did not have to sell a product, TelexFree had to compensate its promoters with the revenue generated from buy-in fees (the $339 or $1425) paid by newer promoters. That is, it was a Ponzi scheme.”.

The SEC Complaint had concluded “Based on the information available to date…Through the sale of those one-year contracts, TelexFree promised to pay more than $1.1 billion to the promoters who placed the required internet ads – a task which was extremely easy to accomplish. In other words, the receipts from selling the packages covered barely 1% ofTelexFree’s obligations to pay promoters who placed ads…”

The result is evident in the attached PDF.

View Former President of Telexfree Sentenced for Billion Dollar Pyramid Scheme

The post United States v. James Merrill and Carlos Wanzeler appeared first on Lindquist Forensics.

Permanent Secrecy

Counsel for the plaintiff in Chicago retained me with my involvement subject to a protective order. It had been agreed between Counsel for the plaintiff and the defendant that a forensic accountant, acting on behalf of the plaintiff would be granted access to the financial records of a company related to the defendant. The task was to determine if there was merit to the allegations through the examination of business transactions over a four year period and to report thereon.

Upon completion and as instructed, I submitted my report to counsel for the defendant and at the same time advised the Court of the delivered report. Thereafter I disappeared and was paid but do not ask me the outcome.

The post Confidential Case, Chicago appeared first on Lindquist Forensics.

A ‘yen’ for Asian Antiques

Counsel in one of the largest income tax cases in the U.S. involving a privately held international company was required to refute allegations including money laundering and customs violations made by the U.S. government. The investigation focused upon the company’s business activities in Asia.

The husband and wife who owned the company were indicted in federal court for conspiracy, tax evasion and smuggling, where it was alleged that they had underreported their 1987-1990 income by more than $125 million.

It is essential that the forensic accountant in his financial fact-gathering role identify all relevant information that is good and bad for Counsel’s client in order to avoid a potential bad surprise. In a case such as this one, it is necessary to assess the role of the external bankers and auditors, especially when any business experiences extraordinary growth, whether from a garage location or Main Street U.S.A. The company’s external auditor was asked to create a schedule to present the source and use of funds amongst the related companies located in the U.S. and overseas. This accounting schedule gave the appearance of one pool of money and became one basis for the government to seize assets in the U.S.

However, upon re-examination, it was found that the money generated from business sales in the U.S. had no direct relationship to the assets seized in the U.S. The direct linkage suggested by the pooled accounting statement in fact did not exist.

When retained by defense counsel, it is most important to identify all possible weaknesses, no matter how small in the plaintiff’s case, especially when it is the U.S. government.

Read “Sunrider aims to put tax scandal behind it”

Read “USA v. Tei Fu Chen”

The post Sunrider International, Los Angeles, CA appeared first on Lindquist Forensics.

It’s my tunnel!

Who owns the Canadian half of the tunnel?

The US Company was formed in 1929 to construct the tunnel with agreement that the Canadian half would revert to Windsor in 60 years. But in 1989, the US Company would not respond.

I was retained by Counsel Harvey Strosberg in Windsor.

For the case, the paper trail was significant. Until 1980, when Windsor gave its notice of intent to take over its half, one note to the financial statements disclosed the existence of their right. However, after notice, the US Company changed auditors and the note to the financial statement was dropped. The US company’s depreciation expense policy going back to the 1930’s was also consistent with the existence of this right. However, in the year of the change in auditors, the original fixed-asset ledger disclosed a “white-out” of information to reflect a change away from the original depreciation policy.

Much can be learned about a person’s mind when the paper trail talks. In 1990 ownership of the Canadian half of the tunnel reverted to the City Council of Windsor.

Read Detroit-Windor Tunnel

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