Fraud Economy: How Current Economic Trends Lead to More Corporate Scams

This is what happens when cash is harder to find — say, after a sustained decline in the stock market or an enormous increase in the cost of borrowing money. First, there is what Bank of America called “corporate misery” as forward-looking numbers come in lower than projected. (That’s already happening.) Then that misery finds a company run by executives who think that by committing acts of fraud, they can obfuscate their dire financial situation.

The risk of running into companies that have moved from funk to fraud gets higher the longer financial conditions remain tight, Howard Scheck, a former chief accountant of the Securities and Exchange Commission’s Division of Enforcement, told me. Now he’s a partner at the advisory firm StoneTurn, where he leads accounting investigations for corporate clients facing allegations of fraud from regulators — like the people at his old job — or shareholders.

“I think we’re going to be very busy this year,” he said.

Source: Fraud Economy: How Current Economic Trends Lead to More Corporate Scams