...I think that article, without seeming indelicate, is a puff piece.
Actually, I would call it holiday filler.
If I am not mistaken, the Parmalat fraud occurred over a fifteen year period, which means that that the auditors have fifteen years of mistakes to answer for. You would think that someone might have made a phone call or two directly to the banks during that period.
I also read somewhere that the confirmations were faxed to the "bank." Who faxed them? The client? Giving up control of the confirmations to a client is just about the most egregious error an auditor can make.
...Sarbanes Oxley, which tries to shift the blame to the CEO who now has to certify that the audit is correct.
I would suggest that the intent is not to shift the blame to the CEOs but rather to include them as a responsible parties. While I am disinclined to make that case that they are being unfairly targeted, my experience with CEOs is that most of them are clueless about the numbers.
BTW, Barry Minkow is now on the side of the angels. <gg>
careerjournal.com
Insights Reap Redemption For a White-Collar Criminal
By Jeff D. Opdyke
From The Wall Street Journal Online
SAN DIEGO -- Barry Minkow once again is wrapped up in corporate fraud. This time, he is one of the good guys.
As a 10th grader, Mr. Minkow launched a neighborhood carpet-cleaning business in Reseda, Calif., that grew into a $300 million public company and Wall Street's infamy: ZZZZ Best Co. That business was a fraud. Mr. Minkow conned his way through lenders, lawyers, auditors and investment bankers for five years, falsifying some 22,000 documents along the way. After the company disintegrated in 1987, he was sentenced to a 25-year prison term, of which he served more than seven years, one of the longest terms served by a white-collar criminal.
Today, the 37-year-old Mr. Minkow is again deep into the world of fraud. A number of government agencies -- including the Federal Bureau of Investigation, the San Diego U.S. Attorney's office, the Los Angeles Better Business Bureau and even the Securities and Exchange Commission, which originally prosecuted his crimes -- couldn't be happier. Instead of swindling investors, Mr. Minkow is helping regulators, investigators and prosecutors unravel and understand the sorts of fraud he once orchestrated.
To some, Mr. Minkow is far from a white knight. Some investors are still out millions from the ZZZZ Best fraud. And some critics say the cases in which he has assisted regulators are small and that he couldn't be very helpful in working through more sophisticated financial skullduggery.
Still, his newfound role as a corporate crime fighter illustrates Mr. Minkow's efforts to resurrect his name and offers a lesson for a Wall Street reeling from a bumper crop of white-collar sins. Even as executives from ImClone Systems, Adelphia Communications, Enron and Rite-Aid face prison sentences for a variety of transgressions, Mr. Minkow's story shows that even notorious white-collar criminals can find redemption.
On a more practical level, investigators and prosecutors say Mr. Minkow offers welcome assistance at a time when agencies are stretched thin in efforts to police fraud. While the San Diego-based Fraud Discovery Institute, which Mr. Minkow helped found, might not have uncovered Enron or other high-profile scandals, his experience with ZZZZ Best "gives him unique insight about the tricks of the trade," says James Asperger, the former federal prosecutor in Los Angeles who brought charges against Mr. Minkow and once compared him to Billy the Kid. Though it took Mr. Asperger years to lose his skepticism, he now says: "Barry appears to be one of those people who truly turned their life around."
There are other reformed skeptics. Dickran Tevrizian, the U.S. District Judge for the Central District of California who originally sentenced Mr. Minkow to 25 years and once told the smooth-talking young criminal that "you don't have a conscience," cut short the former felon's probation last fall. In doing so, the judge noted Mr. Minkow's continuing work helping investigators detect fraud: "We have [a] problem facing our country now with corporate dishonesty," the judge told Mr. Minkow, according to court documents filed in a California federal court. "Go in and investigate some of these frauds ... and bring others to justice."
That is exactly what Mr. Minkow is trying do -- though it isn't easy. Tim France, a U.S. postal inspector in San Diego, says that while Mr. Minkow has provided "great stuff on what looks and smells like it's a pyramid scheme, my problem is that Barry has baggage and you have to disclose who he is" to superiors before pursuing any investigation. Other ghosts haunt him as well: The court ordered him to pay $26 million to investors and lenders, but Judge Tevrizian dismissed that order in 2002. Shareholders lawsuits returned about 90 cents on the dollar to stockholders.
Mr. Minkow still owes Union Bank of California, the biggest victim of ZZZZ Best, $19 million, which includes interest. As a pastor for a church in suburban San Diego, Mr. Minkow knows he will never fully repay that debt. But he says he remits as much as 30% of what he makes every month to the bank -- his annual salary is $68,500 -- and turns over the lion's share of each check received for speaking engagements. Because of those efforts, Union Bank lifted temporarily a lien on Mr. Minkow's modest stucco home in San Diego's Imperial Beach section so that he and his wife could adopt twin boys born in Guatemala earlier this year.
Mr. Minkow's efforts at rooting out potential fraud are highlighted in court papers the SEC filed earlier this year in a Washington federal court in a continuing case with Edward R. Showalter, a California businessman. The SEC in 1998 accused Mr. Showalter in a civil case of devising two fraudulent schemes to raise money for a now-defunct Florida restaurant company. The SEC in 2001 won a roughly $900,000 default judgment in this case against Mr. Showalter.
In court filings, the SEC specifically notes that Mr. Minkow provided new evidence -- including voice-mails from Mr. Showalter and a packet of information for a new business he is pitching to investors to import cement from the Ukraine. The evidence stirred the agency's concern, particularly Mr. Showalter's plans to raise millions through Bond Capital Management, a Beverly Hills investment firm. That, the SEC told the court, "causes us a lot of concern, and we don't want to be in a position where this is a fraudulent enterprise being used to pay our judgment."
In an interview, Mr. Showalter says Mr. Minkow's information "is extremely incorrect." He declined further comment, saying he had to talk to his lawyer first. Neither Mr. Showalter nor his lawyer returned subsequent calls.
Mr. Minkow stumbled onto Mr. Showalter's cement venture while seeking to invest trust money for his 72-year-old mother. While scanning the classifieds this spring, he noticed a manufacturing company seeking investors with a minimum of $50,000. He called, and a few weeks later was eating breakfast as Mr. Showalter detailed plans for Goldstar Cement. As the meeting ended, Mr. Minkow says, "Showalter told me, 'You cannot check up on anything in this [packet], but here are the names of three people you can call.' "
Mr. Minkow says he pursued his own form of due diligence. He ran a title search on the real estate Mr. Showalter promised to pledge as collateral for Mr. Minkow's mother's investment. It had loans against it in excess of the property's value. He checked cement-industry trade publications and discovered that Goldstar's sales expectations would represent an unreasonably large share of the industry, Mr. Minkow asserts. He called the references Mr. Showalter provided and found the company's plan to import cement had been continually delayed.
Mr. Minkow called the SEC's enforcement division in Washington, D.C., which prosecuted him 15 years ago, and said, "This is Barry Minkow." The agency, he says, "was a bit taken aback in hearing from me." Nevertheless, the SEC asked him to send the evidence he had gathered. Within weeks, the SEC cited those documents in federal court. |
