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Austin Business Owners Should Take Steps to Prevent Business Fraud

September 27, 2011/in Uncategorized /by John McDuff

On behalf of John McDuff, Attorney at Law posted in Business Transactions

While sophisticated financial scams involving amorphous cyber-attack groups have stolen the headlines for the past decade, Austin small business owners should be aware that the most likely source of business fraud and losses is actually employees. A recent article from Smart Business citing the Association of Certified Fraud Examiners reports that four out of five internal fraud cases occur in small businesses.

Employee fraud and theft is one of the fastest growing crimes in the U.S., according to the FBI. In fact, the U.S. Chamber of Commerce estimates that 75 percent of all employees steal at least one time, and half of those will steal again. Moreover, in the United States 20 percent of every dollar earned is lost to employee fraud and theft, according to estimates by the American Society of Employees.

Business Owners Must Look For Signs of Fraud in Employees

In a press release from the Association of Certified Fraud Examiners, the ACFE profiled the persons most likely to commit fraud in a small business. Even if a small business owner does not suspect fraud, he or she should be on the lookout for these signs:

  • Employees who are most likely to commit fraud include accountants, sales persons, managers, customer service representatives, employees in operations or buyers
  • Employees who commit fraud are more likely to be in their thirties or early forties
  • Employees who commit fraud might have an unusually lavish lifestyle or difficulties meeting financial obligations
  • Employees who commit fraud generally do not have previous fraud convictions or financial crimes charges

Steps to Prevent Fraud: Oversight, Control of Bank Accounts, Random Audits

Smart Business advises Texas small business owners to take proactive steps to prevent fraud. Small business owners should complete criminal background checks on potential employees as a condition of a job offer. Even though most fraud is committed by people without criminal records, this step is still helpful to prevent hiring a repeat fraudster.

The business owner should not turn over complete control of the books to one employee and should have internal checks and balances in place so that coworkers can easily report suspicious activity, too. Finally, business owners should hire a financial auditor or CPA to conduct random, unscheduled audits at least once a quarter.

Austin Broker Indicted for Fraud Through Ponzi Scheme

February 28, 2011/in Uncategorized /by John McDuff

On behalf of John McDuff, Attorney at Law

Prominent Austin businessman and broker Kurt Barton appears in court today to begin addressing accusations of fraud. Barton was indicted on 33 counts of fraud, including money laundering, wire fraud and securities fraud. The case will proceed in Austin’s Federal District Court, where Barton is expected to plead not-guilty to the allegations.

The charges are based upon accusations by the U.S. Attorney’s Office that Barton raised $50 million dollars through fraudulent means. The indictment indicates that Barton used his connections through the Church of Jesus Christ of Latter-day Saints to find many of his investors. Details also claim that Barton used famous athletes such as Ty Detmer and Chris Weinke to convince people to invest in his endeavors concerning Triton Financial and related businesses.

Some of Barton’s investors began feeling duped several years ago when they initiated fraud litigationagainst him. They alleged that the former Triton CEO made misrepresentations concerning the use of funds that investors had entrusted to him. Federal authorities took note of the distressed investors and launched their own investigation, resulting in the pending criminal charges.

Since Barton is pleading not-guilty, his innocence will likely be determined by complex courtroom battles. This litigation will cover all the specific counts against the broker, with his intent being of paramount importance. The accusations don’t concern whether Barton made investments that proved to be poor decisions in hindsight. His guilt or innocence rests largely upon whether he knowingly misled investors through false statements or deliberate withholding of information.

This unfolding case provides an example of how fraud litigation can have a snowball effect. It can start with several unhappy investors initiating a civil lawsuit, and end up in a federal courtroom where the accused faces imprisonment and loss of assets. It underscores the importance of taking civil fraud litigation seriously.

Sources: Austin American-Statesman, “Former Triton chief indicted on charges of money laundering and fraud,” 2/15/2011; KXAN.com, “Former CEO heads to federal court,” 2/28/2011

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