Judgment but no money to pay

This was a particularly detailed accounting investigation where Counsel was looking to establish evidence of fraud by the contractor who was attempting to avoid a $3 million judgment in a fraudulent conveyance action. Marriott terminated the contractor and filed a lawsuit and soon thereafter the typical reaction occurred: The contractor began to funnel new business to an otherwise dormant sister corporation. These projects had contract values of some $81 million and their transfer ultimately lead to the contractor’s insolvent position.

By analyzing the timing of the relevant transactions and comparing those to business in the normal course, it was determined that the only possible reason for the transfer of assets was to avoid the judgment, a financial analysis designed to prove a negative.

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The Collapse of Two Travel Agencies

So you want high profile? Get a court appointment! A government ministry made me a court appointed inspector to examine the business of a travel agency under its legislation and to determine if it was meeting its financial obligations. It becomes an interesting human challenge to extract information from employees whose future is unsure due to your presence. It soon becomes clear that a successful investigator must have strong people skills and a quiet yet firm and respectful presence.

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The accountant took the money!

This fraud case involved the planned bankruptcy of Brittany Antiques, which was in the furniture business.

These cases are difficult, as one needs to prove that failure was not due to an inexperienced businessman but rather a guilty mind. The concept of “mens rea” is well suited to financial evidence through the effective documentation of patterns of business conduct, which are inconsistent with the normal course of business. It allows prosecution to assert that at a certain point in time, the accused knew or ought to have known that his course of conduct was fraudulent. This approach was the critical reason for the precedent established in the Scheel case, since it was the accounting schedules, which clearly presented the basis for counsel to argue for “mens rea” after a certain point in time.

An interesting deception occurred in March 1975 when Rosen advertised for an accountant. A real person by the name of John Geslak called and sent his resume. That was the last he heard about a job. However, in all cash transactions, it was John Geslak’s name that received the money.

Then in May 1975, Rosen wrote to his suppliers saying “Our accountant, John Geslak, has absconded with all deposits placing our firm in a terrible position.”

Rosen filed for bankruptcy, but when the police interviewed the real Geslak, he of course knew nothing. It was later determined that a man named Bill Brady from Boston had been forging Geslak’s name and had taken all the cash.

Trial proceeded without him, I gave the expert evidence and both accused received 4-year jail terms. Three years later, Bill Brady was found on a beach near Boston, enjoying the sun. He returned voluntarily and received one year. For me, this was another good lesson is using accounting information to address the issue of “mens rea”.

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