Group Project pt 2

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Colorado Technical University *

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CJUS380

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Accounting

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Feb 20, 2024

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Group Project Unit 4 Part 2 Karen Vega ,Skyla Witt April Lopez, Steven Joslin Shamonique Thompson Colorado technical University White Collar and Financial Crimes Suan Wind December 10, 2023

By Skyla Witt NET WORTH analysis IS THE ASSETS MINUS YOUR LIABILITIES. IT IS WHAT IS LEFT OVER AFTER YOU PAY ALL OF YOUR LIABILITIES. NET WORTH IS A BETTER MEASURE OF SOMEONE'S FINANCIAL STABILITY THAN INCOME ALONE https://playsmoneysmart.fdic.gov Is the value of all your assets minus the total of all your liabilities put another way it is what you own minus what you owe if you owe more than you own you have a negative net worth. www.forbes.com Net worth analysis is crucial for understanding on's financial standing and progress, regularly assessing net worth helps identify areas of improvement, track progress towards financial goals, and make informed decisions. www.financestrategists.com Requirements for using indirect methods of proof

A couple of definitions for indirect method of proof comes along as evidence which only tends to establish the issue by proof of various facts sustaining by their consistency the hypothesis claimed ( www.lawinsider.com ). Another one that has come up is an argument for a proposition that shows its negation to be capable with a previously accepted or established premise. ( www.dictionary.com ). Another way to look at it is that it is a roundabout way of proving that a theory is true ( https://study.com ). one of the requirements of using indirect methods of proof is when you are filing your taxes. Here are some rules that u must go by when using this method, assuming the conjecture is not true, and then running into a contradiction proving that the conjecture must be true ( https://study.com ) so with those rules being in place you can say that they are requirements for this kind of method. However, just like in other incidents, there are expectations to the rules. For example, in money laundering cases, a conviction can be reached because no requirements exist to provide proof of the time, place and perpetrator that did the fence. Instead, they use an approach called the step-by- step plan. ( https://www.amlc.eu/analysis/of/case/law/on/the/indirect/method/of/proof ). The the amount of indirect proof needed for a criminal case is much higher than the amount needed in a civil law case. For example, in a criminal case if a person were testifying that they saw someone go into an aid store and then come running out holding a gun would not be enough evidence for a conviction. Whereas if the person said they saw the person going into the store heard screams, then ran out with the gun and then they went into the store and were told that it had just been robbed there would be more evidence for a conviction. And a civil case where an accident might happen for example, the indirect proof

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would be with engaging the skid marks and then testing the theory of how fast the cars were going to arrive at the conclusion of who was at fault in the accident and that indirect evidence would be sufficient (www.mylawquestions.com/what- is-indirect-evidence.htm). By April Lopez Net worth Method Net worth is calculated by subtracting all liabilities from assets. What is an asset? An asset is anything owned that has mandatory value, while liabilities are obligated to deplete resources like loans, accounts payable and mortgages. Understanding Net Worth A net worth is a statement or balance sheet that is designed to provide a picture of the financial soundness of your business or income at any specific point in time. Net worth statements are often prepared at the beginning or end of the accounting period; this is not always true since it can be done at any time. The networth statement is a record of assets in a company's business or an individual. This can keep track of their value and liabilities or financial claims. Assets-Liabilities=Net worth Indirect method of proof

There are 2 methods of indirect proof. 1. Proof of the Contrapositive 2. Proof by Contradiction. They are closely related, they even interchangeable in some circustances. Proof by contradiction is more powerful. What unties Proof of the contrapositive and Proof of Contradiction they both start assuming the denial of the conclusion. References: www.extension.iastate.edu www.invetopedia.com Whitman college 2.6 indirect proof www.whitman.edu

By Keran Vega The Bank Deposit Method is used to prove circumstantial evidence of fraud. This evidence shows the amounts deposited in individual accounts would or would not match his income. All deposits are added to calculate gross deposits. That determines income for the single year. Once deposits are determined, expenses are deducted from the gross deposits. (Brown PC, 2023). The Internal Revenue Service uses this method to establish proof that someone is understating taxable income. The Supreme Court ruled in Gleckman v. United States, 80 F 2d 394 (8th Cir. 1935) that the bank deposit method is an acceptable method of proving income. In our scenario, it will be used to prove that Mr. Jones is embezzling funds from the store or laundering money from another source. In 2007, Mr. Jones had net deposits totaling $51,000. His expenses were $50,000 for a car and $42,000 in rent totaling $92,000. He spent $41,000 more than he

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had deposits for but has a bank balance of $8,000. The amounts do not match his income for 2007. In 2008, Mr. Jones deposited $160,000 and withdrew $150,000. His income at the grocery store was $70,000 net profit. His yearly expenditures totaled $113,500. Subtracting expenses from the store profit shows he spent $43,500 more than his income. But he still has an $18,000 balance for 2008. In 2009, Mr. Jones deposited $170,000 and then withdrew $165,000. His total expenses totaled $133,500. Net profit from the store is $80,000. Subtracting expenses from the profit shows Mr. Jones spent $53,500.00 more than his income. His bank account is showing a balance of $23,000 in December. Analysis: There are indications that either money laundering or embezzlement is occurring at the store. The figures do not add up. In 2008, Mr. Jones bought a pool paying cash of $20,000 down and taking out an INTEREST-FREE loan of $10,000. Yet, we are showing a loan that should be interest-free at 14000.00. How can that be? By 2009, he had paid $12,000.00, leaving a balance of $2000.00. Net profit for Mr. Jones’s Grocery store for 3 years shows $150,000. His expenses total $288,000, leaving $138,000.00 in funds that no deposits account for. Incomes do not match deposits. Resource:

Brown PC. (2023) Bank Deposits Method of Proving Income. Browntax.com https://www.browntax.com/tax-law-library/methods-of-proof/bank-deposits- method-of-proving-income/ IRS. (2004, Nov. 5). Bank Deposits Method of Proving Income. 9.5.9.7. https://www.irs.gov/irm/part9/irm_09-005-009 By Shamonique Thompson The indirect method of proof looks at a person's income versus their lifestyle. In other words, if someone's life expenses exceed their known income the question raised is, how are they affording it? One of the largest embezzlement cases was that of United States V. Bernard L. Madoff. Bernard Madoff ran a multi-billion-dollar scam that defrauded investors all around the world for decades, since 1992. Madoff was arrested in December of 2008. Madoff investors were receiving constant and steady annual returns through intricately forged account statements and other documentation. These documents were made for investors to believe that their money had been used for an actual investment when in reality the money they invested was going straight to Madoff's personal bank account There were no actual investments and no real returns. Madoff pulled this off by paying the initial investors' "returns" with funds given to him by a secure flow of new investors. The gig was up once the global economy began to decline in 2008. A lot of Madoff's investors were requesting cash in their investment due to this economy decline but Madoff did not have the money needed to cover their requests. The

cash out requests totaled around 7 billion dollars (about $22 per person in the US) and all Madoff could come up with was a few hundred million dollars. On top of that new investor money was hard to come by due to the decline so he eventually ran out of options. Madoff was later arrested in 2009 and was sentenced to serve 150 years in prison. The United States government ultimately offered to pay out over 700 million dollars to Madoff investors that had been victims of his scheme. This amount was nothing compared to the billions of dollars investors had been scammed out of, but it is said that some of Madoff's earlier investors managed to recover their full investment. The case of Nick Kikalos and Helen Kikalos (Plaintiffs) v. United States of America (Defendant) During the year 1988 and 1989 the plaintiffs owned three liquor stores in Indiana. Nearly all the purchases made in the store were made via cash payments. In addition, the plaintiffs paid their payroll and other purchases such as beer and other goods with cash. Nick Kikalos oversaw the books of all three of the stores, meaning he was responsible for paying taxes as well. When it came time to collect the data from each store, he did so, however, he discarded all proof of income once it was collected. This left them with no proof of income for the years in question. The IRS began to investigate the plaintiffs’ tax returns for the years 1988 and 1989 and discovered the books and tax records did not corelate. Since the plaintiff did not keep proper data of their income, the IRS was forced to use an indirect

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method, which in this case was the percentage markup method to estimate the plaintiff’s income for the years in question. The plaintiffs paid the assessment done by the IRS in full and now are suing for a refund. Unfortunately for the Plaintiffs a judge by the name of James T. Moody did not rule in their favor. Moody found that the plaintiffs had not kept adequate record of their books to determine the accurate income earned. However, even though the defendant was negligent in not keeping proper documentation of their books they would still be allowed to establish their income by any indirect method of their choice, otherwise the government could be defrauded with impunity. "Other indirect methods tend only to show that the Plaintiffs' income could have been estimated in different ways with different results. It does not tend to prove or disprove that the assessment resulting from the method the government chose is wrong and wrong by some amount."(United States District Court, N.D. Indiana, Hammond Division, 2003) Since the court says that any proof of the Kikaloses income under other indirect methods are irrelevant, the defendant’s motion to sue for a refund was granted. · Information on whistleblower rules or the effectiveness of the use of whistleblower processes for identifying potential frauds. Whistleblowing was introduced in the 1970's initially. It was widely recognized by a variety of disciplines and has gained worldwide acceptance among the manufacturing industry. A whistleblower is someone who reports waste, fraud, abuse, corruption, or other dangers to public health and safety. Most of the time

a whistleblower works at the organization where the corruption is happening. This is so the individual can relay information regarding any wrongdoing that may not have been known. There are a lot of whistleblower laws in place in the United States. These laws are at the federal, state and local levels. They range from the False Claims Act to the Clean Air Act, Even the Antarctic conservation Act. Each of these acts have their own special meanings and procedures. It is vital that whistleblower rules and procedures are followed. Individuals that follow the whistleblower rules can help protect against retaliation and can sometimes get financial rewards for helping prosecute wrongdoers. Based on the recent study done by the ACFE, whistleblowers were accountable for exposing 40% of fraudulent situations. The ACFE's report determined that 21% of workers are likely to blow the whistle and 14% of customers are likely to blow the whistle. 14% are unidentified individuals, 8% are suppliers, 5% are outsiders, 3% are rivals, and only 2% are owners of the organization. References Kikalos v. United States, 313 F. Supp. 2d 876 (N.D. Ind. 2003) :: Justia (N.d) Madoff a 21st Century Ponzi Scheme NASAA https://www.nasaa.org/4303/madoff-a-21st-century-ponzi-scheme/ (N.d) Who is Bernie Madoff Corporate Finance Institute https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital- markets/bernie-madoff/

What is a Whistleblower - National Whistleblower Center (whistleblowers.org) Examining Whistleblowing Intention: The Influence of Rationalization on Wrongdoing and Threat of Retaliation - PMC (nih.gov) By Steven Joslin Whistleblowing is the act of reporting wrongdoing committed by a public or private company/organization. Depending on the sector or company, there are different processes but all are protected by the Office of the Inspector General and the Department of Justice. These protections disallow retaliation against the whistleblower from management while allowing disclosure of evidence that may

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prove potential wrongdoing. The following are three examples of government sectors and the processes for disclosing whistleblower information. FBI Defined Wrongdoings: Flagrant Mismanagement Flagrant Use of Funds Authority Abuse Lawbreaking or Misconduct in Rules/Regulation Specific and Substantial Endangerment of Public Safety or Health FBI Authorized Audiences for Reporting: Office of Special Counseling Head of Management Immediate Supervisor, Head of Management or Anyone In-between Inspector General Office of Personal Responsibility from DOJ or FBI Inspection Division of the FBI Any Employee Assigned by Those Listed Above DOJ Defined Wrongdoings: Flagrant Mismanagement

Flagrant Use of Funds Authority Abuse Lawbreaking or Misconduct in Rules/Regulation Specific and Substantial Endangerment of Public Safety or Health DOJ Authorized Audiences: Usually allowed to disclose information to anyone so long as the information disclosed was not classified or lawfully prohibited for public release. If information is classified then only the Office of the Inspector General, Office of Special Counseling, or an Agency Official may the information be disclosed to. Grantees and Contractors Wrongdoings: Flagrant Mismanagement of Grant or Federal Contract Flagrant Waste of Funds Authority Abuse Lawbreaking or Misconduct in Rules/Regulation Specific and Substantial Endangerment of Public Safety or Health Grantees and Contractors Authorized Audiences: Member of Congress Inspector General

Accountability Office DOJ or Law Enforcement Grand Jury or Courts Management Official Federal Employee(s) Overseeing the Grant or Contract All three sectors can report to the Office of the Inspector General and a hotline has been established for this very reason. It is important to note that for retaliation complaints, the Office of Special Counseling has first jurisdiction over most federal employees except for those employed by the FBI. The Office of Special Counseling have special authorities that offer protection for whistleblowers and will correct retaliatory actions on the whistleblower's behalf. Those employed by the FBI must submit their retaliation complaints to the Office of the Inspector General or to the Department of Justice Office of Professional Responsibility. These two offices are strictly in charge of reviewing retaliation complaints and conducting investigations for FBI employees. The Securities and Exchange Commission has an office specifically for whistleblowers called the Office of the Whistleblower. Congress has authorized the Commission to award individuals with high-quality information monetarily. Usually in the amount of 10-30% of the money collected. This has to create sanctions of over $1,000,000 to qualify which the Commission has awarded over $1,000,000,000 to this day for individuals who have stepped forward with information of wrongdoing. This action helps preserve the United States economy

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of capital markets and minimizes harm to investors while holding those accountable for their unlawful actions. In August 4 t , 2023, the Security and Exchange Commission awarded seven whistleblowers an amount over $104 million which is the fourth largest award in the program. Their information prompted an investigation with evidence of supporting documents and interviews that led to criminal charges. References: SEC.gov | SEC awards more than $104 million to seven whistleblowers . (2023, August 4). https://www.sec.gov/news/press-release/2023-147 SEC.gov | Office of the Whistleblower . (2017, April 4). https://www.sec.gov/whistleblower Whistleblower rights and protections . (n.d.). https://oig.justice.gov/hotline/whistleblower-protection