How pervasive is corporate fraud?
link.springer.com
link.springer.com
How naive... No One would listen... [1]
> No One Would Listen is the thrilling story of how the Harry Markopolos, a little-known number cruncher from a Boston equity derivatives firm, and his investigative team uncovered Bernie Madoff's scam years before it made headlines, and how they desperately tried to warn the government, the industry, and the financial press.
[1] https://www.goodreads.com/book/show/7740121-no-one-would-lis...
Good piece on Netflix about her and the short position she took
When Hindenburg published this gem: https://hindenburgresearch.com/nikola/
I literally started screaming with joy like a lunatic at my phone in the middle of the street.
Turns out... even an obvious obvious obvious fraud can keep going like wile coyote for prolonged periods of time. Do not friggin recommend.
I also have been trading the Turkish lira for over a year. Also do not recommend as they flat out cheat and gaslight on.. frankly historical scales.. as well as get foreign currency under the table from fellow despots.
If you're wondering what the hell would possess me: at some point they started making schemes like "citizens it is your patriotic duty to sell us your gold jewelry so we may smelt it, we will give you a great price promise" -- the list of shenanigans got so long and comical and the central bank balance sheets so iffy I couldn't help myself. It is very true that western media under reports this, they might mention the out of control inflation but don't explain how the country is run by clueless mobsters.
Being correct directionally is not nearly enough. Be very careful. This Adani thing mostly bounced back already, unless you're willing to be very patient as it unfurls over literal years you very easily could lose money despite being right.
I think there's a famous saying about that: "the market can stay irrational longer than you can stay solvent."
You're not betting just on whether they did a mistake, you're betting on when will they realize it.
This is the correct take. The world is nowadays largely owned and operated by various criminal organisations that rake in more cash in a month than entire nations do in a year. Thank you, prohibition.
Here is a random CNBC clip, look at these absolute lunatics: https://www.youtube.com/watch?v=NYBj83HttG4
I remember being unable to sleep wondering if the audience at his events were all hired actors. But then they couldn't be as that is a conspiracy involving too many people. Looking online he had actual fans and true believers and they were basically illiterate people gambling he is the next Elon, absolutely nothing would phase them.
The journalists interviewing him clearly had no idea about the difference between a gas powered and a hydrogen vehicle. And neither did he as he would steer the conversation into folksy directions whenever anything remotely technical came up.
I did a lot of soul searching and accepted that this is the stupidest time line and the emperor really is naked. And this time I caught his tiny wiener flapping in the wind in time. It was just beyond obvious.
And the market cap kept rising and rising!
I thought it was so obvious and then called out publicly and exposed.
It doesn’t matter. I think that as long as the right people in the media are greased it doesn't enter the mass consciousness.
If you look at the mass media, you will see that the actors on the news will show emotions around certain subjects, they will make a grind or a disgusted face while talking about a problem at a company or a political movement. That is what change people mind when repeated many times.
This video (from a shadow banned account) show how the media talk with one voice. https://youtu.be/ZggCipbiHwE
That was that Sinclair media thing. The fact that they have independent teams serving many smaller markets gave it away. If (say) CNN were to do the same thing, they could probably reach an even bigger audience with one guy reading the script, which can't be exposed with a supercut.
Just a totally bland exec call, standard for that station. But also keep in mind it is essentially an advertising segment. They pretend not to be, but the way you get yourself on the show is a quid-pro-quo: some producer will need someone to say something interesting to fill up CNBC's day, and this is something, so the guy gets put on in exchange for an easy interview. I know people who've been on the show, and people who presented on the channel. This is why you get a lot of recurring guests like Mr Jones from Jones Asset Management coming on over and over, the little guys need to promote themselves.
Yes it almost makes your eyes glaze over. By design. But you see ,unlike an actual exec at an actual real company at this point in time he is burning cash and literally has nothing to sell and nothing to show.
If you listen carefully to his explanation of when he plans to actually show something and sell things -- you will note that it is... complete... gibberish..
> But also keep in mind it is essentially an advertising segment.
Absolutely. And what is he advertising at this point in time? :)
Imagine he was talking about a super sonic long distance electric VTOL plane instead of hydrogen trucks.
"We have no debt and plenty of money in the bank and these things are going to roll off the factory line next year just as soon as we figure out the PR with our customers as the timelines are tricky. Meanwhile we can't show you anything. Please buy my stock."
Consider, is it employee theft if they take a notepad home? I'd wager not. Now, if they empty out the supply closet? Almost certainly yes.
Basically a secure dropbox where they can share important information about the company aka layoffs plans and unpopular ways to make money without worrying about some tech activist in the company leaking that information.
how does it work then?
if you share, then they can always take a picture/screenshoot/record their screen
Rules for thee, but not for me.
They get the most basic function of auditing wrong. Auditors are taught from the beginning that they do not look for fraud. You should not expect auditors to detect fraud. My wife is in finance and I have a dozen Big 4 auditors as friends. This is one of the basic things hammered into every auditor from day one. Auditors do not look for fraud.
If they happen to find fraud they need to report it. But they don’t go into an audit looking for fraud.
Second, using restatements as a measure of fraud is stupid. restatements can happen for a bunch of reasons, the least of which are fraud. Very often people make mistakes and thats why every company has a tolerance of error called materiality. Sometimes errors aren’t detected for many quarters and would cause a restatement.
As well the auditing rules leave room for interpretation. There is always dynamic tension between the accounting team of a company vs the auditors. The fact that a company and auditors gets things wrong and then for this to be classified as “fraud” is stupid. It’s most often times not fraud. Sometimes the audit partner changes and their opinion is vastly different from the previous partner which causes a lot of regurgitation of the financials and likely a reevaluation of the contract. But the audit partner doesn’t want to lose her job or go to jail so I think for the most part having strict laws and tough punishments is very motivating for auditors.
That said, I worked for a company that got shut down for true fraud. The cfo and ceo lied about sales in order to make their numbers. They both went to jail but this is the most basic fraud and they went to jail for a long time.
To be fair, the authors defined fraud very loosely.
"As we explain in Section 2, we use the term “fraud” loosely, since what we measure is some form of misconduct or alleged fraud."
Auditors are expected only to certify that a company's accounts are a "true and accurate" representation of the company's financial position. Corporate fraud is fantastically expensive to investigate and prosecute; fraud trials sometimes last years, and some fail simply because jurors died of old age.
If you don't prosecute crimes, then you are encouraging them; I imagine the incidence of fraud is much greater than the authors estimate.
Auditing is not actually checking the money exists or the transactions were real or the products paid for were really delivered etc.
If I say Acme Inc received 2$ in revenue and spent 1$ in costs, it's cash on hand should go up 1$. If I get that right, I pass that bit of the audit. Whether acme actually got paid or not or even exists is not the auditors problem: just 2-1=1.
https://www.businessinsider.com/companies-may-give-fake-mana...
Edit: See comment below about "salaried." Thanks.
It is perfectly possible to be a salaried employee, and to be eligible for overtime.
My interpretation: Companies just hate doing that, because it means trusting the employees to accurately report when they work overtime who are not regularly reporting their hours.
But we were told in no uncertain terms that we were not counting our hours. I'm sure the legal department had approved all of the verbiage and procedures.
I never personally measured my work in hours, and a lot of workers simply reported hours that precisely matched their project allocations, or copy-pasted from one week to the next. My present job doesn't have any of that.
So the meaning of saying that it is not counting hours is as clear as mud.
It also extends to more than one industry. Not just, say, corporate litigation.
Now I am salaried, and am not allowed to put in overtime on my own initiative, but I am eligible for it if requested. The next salary grade up, union rules allow unpaid overtime.
> In our experiment, the sample of firms under enhanced scrutiny is the set of Arthur Andersen (AA) clients after the AA demise following the Enron scandal.
Their initial data sets (2) indicate that detected fraud is in the realm of 2-5%, and they then hypothesis from Enron clients that the actual fraud rate is astronomically high, by abusing a statistical model.
They are using an outlier to form statistical representations on the whole.