Throughout the week over at Securities Docket I highlight the most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation. Here is a digest of my picks for the week ending February 10.

via Web Watch: Best of the Week Ending February 10 – Compliance Week.

Join a webcast with an experienced panel of anti-corruption compliance practitioners that will cover the key trends shaping anti-corruption enforcement and provide practical views on how companies can update their anti-corruption compliance programs to meet the many challenges facing business today.  In particular, the webcast will

1. summarize global anti-corruption enforcement trends in the United States, the United Kingdom, Germany and other key countries;
2. recap the latest FCPA trials and their implications;
3. address today’s best practices for establishing and refreshing an effective anti-corruption compliance program; and
4. look at the importance of risk-based third-party due diligence.

The panel’s collective knowledge, gained from advising clients daily on the legal and business challenges posed in this area, will benefit directors, senior executives, in-house counsel, and compliance personnel alike.

Presenters:

• F. Joseph Warin serves as chair of the Litigation Department for Gibson Dunn’s Washington, D.C. office and as co-chair of the firm’s White Collar Defense and Investigations group.  A recognized expert in the FCPA and U.K. Bribery Act, Mr. Warin has served or is serving as FCPA compliance monitor (or counsel to the first non-U.S. FCPA compliance monitor) for three companies.
• Benno Schwarz is a member of Gibson Dunn’s White Collar Defense and Investigations and International Corporate Transactions groups.  Based in Gibson Dunn’s Munich office, Mr. Schwarz is an expert in global anti-corruption compliance having conducted corruption-related internal investigations throughout the EU, Russia, and China.
• Michael Diamant is a partner in Gibson Dunn’s Washington, D.C. office and practices in its White Collar Defense and Investigations group.  Mr. Diamant is an expert on the FCPA, the UK Bribery Act, and corporate compliance issues.
• Joseph Spinelli is a Managing Director in Navigant’s Global Investigations and Compliance segment and is a leading authority on white-collar crime matters with more than 30 years of forensic investigations experience, including as a special agent in the FBI and a principle in a Big Four accounting firm.

To attend this free webcast scheduled for Wednesday, February 29, at 12 pm Eastern, please sign up below.

In this webcast, two of the leading commentators in the FCPA area–Professor Mike Koehler and Howard Sklar-present sharply conflicting opinions on this key issue. Drawing upon his just-released paper on the topic (“Revisiting a Foreign Corrupt Practices Act Compliance Defense”), Professor Koehler will argue in favor of Congress creating an FCPA compliance defense. He will explain why the unique aspects and challenges of complying with the FCPA in the global marketplace warrant a specific FCPA compliance defense and how the DOJ already recognizes a de facto FCPA compliance defense, albeit in opaque, inconsistent and unpredictable ways.

On the other side of the issue, however, Howard Sklar contends that there are two overriding reasons why Congress should not include a compliance defense to violations of the FCPA. Sklar contends that corporations will not see any incremental benefit from making effective compliance a defense, and, moreover, that taking discretion out of the hands of the prosecutors will create unintended and adverse consequences that will more than offset any slight benefit corporations see. In short, he will explain how the end result of any FCPA compliance defense would be a weakening, not a strengthening, of corporate compliance programs.

Please join panelists Mike Koehler, Assistant Professor of Business Law at Butler University; and Howard Sklar, Senior Counsel, Recommind, as they address these issues and your questions in this free webcast. To attend this webcast scheduled for Tuesday, February 21, at 1 pm Eastern, please sign up below.

Cases involving allegations of security fraud, money laundering, misappropriation of assets, income tax fraud, and Foreign Corrupt Practices Act (FCPA) violations require investigators to follow a money trail. However, sometimes it is difficult to know where to start, or where to continue when you’ve come to an apparent dead end.

Third Party Records

Regardless of the type of case for which there is a need to trace the flow of funds, the most reliable source of information is third party records. The records of an alleged fraudster are always suspect. How are we to know if the accounting records have been manipulated?

In contrast, records from a disinterested third party are much more likely to be authentic and to tell the truth about the money. The most common and reliable sources of third party records are banks, brokerage houses, and credit card companies. Except in rare cases in which a secret relationship facilitates the manipulation of these records, they will tell us exactly where money came from and where it went.

Do you know where to start getting these records? It may be simple in the case of a bona fide business with one or two sets of books. Even if the accounting records are manipulated or altered in some way, the records will likely point to financial institutions that hold at least some of the company’s money. The first place to start is the accounts disclosed by the target of the investigation or the accounts documented in the target’s records.

If we’re tracking down a fraudster with no disclosed or confirmed accounts, we will have to be creative. It’s not practical to subpoena every bank in existence, so some precision is required in our investigation. We must look to parties other than the target for information on accounts and activities of the scammer.

For example, an investor in a Ponzi scheme may have canceled checks relating to his investment, and the information on the back of the checks can go a long way in telling us what banks the target was using. Gather together the documentation of multiple victims of the Ponzi scheme, and suddenly several financial institutions used by the fraudster may be revealed. We can then get those records and dig through them to find evidence of other accounts used.

Detailed Analysis

A skilled fraudster is going to tangle a very intricate web of accounts, transactions, people, and entities. Money is intentionally bounced from bank to bank, account to account, and entity to entity in varying amounts with seemingly random timing. These things make it difficult to trace the flow of money and to tie funds to any particular act or scheme.

A capable investigator is going to be able to unravel the mess and make sense of the money movements. This isn’t easy, especially when the number of involved bank or brokerage accounts climbs. Cataloging individual transactions is simple. The more institutions, accounts, and entities involved, the greater the complexity of the analysis.

The difficulty is in ensuring that all accounts and all time periods have been analyzed, and all transactions between these accounts are properly documented. It is easy to get so caught up in the details of individual transactions, that the investigator could lose sight of the big picture. This could result in a failure to analyze all transactions, a missed link between accounts, an overlooked payment to an outside party that be a smoking gun, or a failure to have a complete and accurate tracing of money through the web of accounts.

Don’t think of this as simply a data entry exercise. It is much more than that, and it is a critical part of prosecuting or defending a fraud case. It’s easy for just about anyone to look at one bank statement or check copy and tell me where the money went. It is another thing entirely to look at 100 bank accounts over a period of three or five years and get a complete picture of the flow of funds over time.

Dead End?

What happens when you seem to have come to a dead end in the money trail? There is usually no such thing as a dead end unless you’ve come to a piece of real estate, a boat, an airplane, or a sizable bank account that can be seized (or at least tied up in the legal system for the foreseeable future). Whether a case is civil or criminal, part of the endgame will be recovering the proceeds of the fraud. In many cases, it is the most critical thing, especially for the victims.

If frequent small transactions are all you are seeing, and there is no apparent pot of gold, you just haven’t found the right information yet. Somewhere within all this evidence is a clue to a piece of real estate that was purchased with illicit funds. A payment to a municipality, a utility company, a real estate attorney, or a construction company may hint to the existence of real estate. A payment for a registration fee, to a fuel company, or to an insurance company might lead us to the existence of a luxury yacht.

Again, the key will be to dig deep into the details of the financial transactions without losing sight of the big picture. As questions are raised regarding certain transactions, the investigation still must continue through the remaining transactions. Although one lead may look promising, it should not be the reason to stop going down other roads that may lead to the discovery of other valuable information.

Pulling It All Together

Equally as important as wading through a financial labyrinth skillfully is presenting the findings in a way in which non-accountants can understand it. Attorneys, judges, and juries may need to understand the flow of money in the scheme, so telling a story about the money is critical.

The best way to communicate results to people with varying levels of accounting and financial sophistication is with three approaches: words, numbers, and pictures. The financial investigator should start with an explanation of the work completed and the findings and conclusions. Then set forth summary tables of the most important numbers that are discussed, followed by charts and graphs that further demonstrate the findings. This gives the user an opportunity to see a picture of what has been explained about the disposition of funds or relationships between entities.

When these three approaches are combined, it is much easier for a reader to understand the conclusions that have been drawn after an exhaustive financial analysis. After all, a complex analysis and conclusion that is helpful to your case is not worth anything if the important people can’t understand the opinions and how they were reached.

Tracy L. Coenen, CPA, CFF is a forensic accountant and fraud investigator with Sequence Inc. in Milwaukee and Chicago. She has conducted hundreds of high-stakes investigations involving financial statement fraud, securities fraud, investment fraud, bankruptcy and receivership, and criminal defense. Tracy is the author of Expert Fraud Investigation: A Step-by-Step Guide and Essentials of Corporate Fraud, and has been qualified as an expert witness in both state and federal courts. She can be reached at tracy@sequenceinc.com or 414.727.2361.

The materials from the webcast can be downloaded here.

This week’s most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation.

via Web Watch: Best of the Week Ending January 27 – Compliance Week.

This week, the SEC quietly rolled out its first iPhone app. The app is very basic, but for an agency that has often lagged behind in the social media world, it is a step in the right direction.

via SEC Rolls Out First iPhone App – Compliance Week.

The materials from the webcast can be downloaded here.

Hedge funds are in prosecutors’ crosshairs for insider trading as never before. An upcoming webcast will discuss ways that hedge funds can protect themselves going forward, both from a compliance/legal perspective and a technology perspective.

via How Hedge Funds Can Use Compliance, Technology to Stay Out of Insider Trading Crosshairs – Compliance Week.

Throughout the week over at Securities Docket I highlight the most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation. Here is a digest of my picks for the week ending January 20.

via Web Watch: Best of the Week Ending January 20 – Compliance Week.