Scherzer Blog

Consider the source…of the funds

A holding company’s claim that it “had the funds and network to take the action necessary to complete business deals” was put to the test in an SI background investigation. Searches of civil records located a lawsuit filed in 2008 in which the holding company sued the United States of America, the Drug Enforcement Agency, and Internal Revenue Service for return of approximately $24.5 million seized from bank accounts in Florida. The government’s response to the holding company’s claim disclosed that there was an ongoing criminal investigation in Arizona involving drug trafficking and related international money laundering enterprises. The seizure of the funds resulted from evidence gathered during the investigation.

In addition to the foregoing, the government stated that it was still investigating whether there were any victims of fraud because the investigation made it apparent that many of the entities associated with the seized accounts had no legitimate business activity, are shell companies, and have failed to comply with reporting requirements in Florida regarding their purported operational activities. The government specifically noted that the holding company’s Web site appears to promote an investment scheme with unrealistically large interest returns which typically is consistent with a fraudulent investment operation and, in fact, agents have received statements from individuals reporting that they have invested in a program that promised incredibly high rates of return. The government’s investigation led it to conclude that the holding company failed to establish it is an entity of substance and not composed of a series of shell companies simply moving money around in a money laundering exercise to conceal the ownership, source, and control over the funds.

|Fraud|

One of the largest employment tax-fraud cases in IRS history

Our investigation, which included manual civil and criminal record searches and searches of media sources, revealed that the subject company and four of its subsidiaries are under federal indictment for conspiracy and wire fraud as part of a multimillion dollar tax fraud scheme orchestrated by the companies’ founder. This individual recently was sentenced to over 20 years in prison and ordered to pay restitution of $180 million to the Internal Revenue Service after pleading guilty to five felonies including failure to collect and pay payroll taxes and obstructing a federal investigation. It is reportedly one of the largest employment tax-fraud cases in IRS history. Before the sentencing, the individual attempted to justify his actions by claiming insanity.

The subject company and its subsidiaries also were defendants in dozens of lawsuits for fraud and breach of contract with damage claims totaling over $220 million, in addition to filing for Chapter 11 bankruptcy. Several motions had been filed to dismiss the bankruptcy proceedings, one of which was made by the company’s former accountants who were sued for professional negligence. In court papers, the accountants asked that the case be dismissed or converted to a Chapter 7 because “the only reason the debtor filed the petition was in an effort to help (the founder’s) criminal case.” The motion to dismiss also argued that the company has no chance to successfully reorganize because it is a “sham company used only for illegal activities,” has no remaining employees and no income.

|Bankruptcy, Fraud, Taxes|

New SHRM Reports Highlight Trends in Employee Benefits, Job Satisfaction, and Job Hunting in 2009

NEW ORLEANS, June 29 /PRNewswire-USNewswire/ — The Society for Human Resource Management (SHRM) yesterday released new data that details employees’ thoughts on job risk in the current economy, overall job satisfaction, and recent trends in employee benefits.

http://news.prnewswire.com/ViewContent.aspx?ACCT=109&STORY=/www/story/06-29-2009/0005051865&EDATE=

|Employment Decisions|

Your Risk Management Partner … Because Integrity Matters

The past few months have witnessed appalling stories of con artists who bilked billions of dollars out of people, business, and charitable foundations. These white collar thieves were not just in banking and on Wall Street; they were in health care, retail, oil and refining, military supplies and other fields. In short, the effects of these cons have been felt on every street in America and beyond.

Do these stories indicate that business crime has increased in recent years, or are we simply more effective in catching the perpetrators? Perhaps it is a combination of both, but these cases point to the importance of internal controls through due diligence and risk management.

Scherzer International (SI) has a proven reputation for accuracy, expertise, quality and speed in risk management. As part of a Risk Management Program we provide background reports with search strategies designed for each client’s risk level. Our highly trained research analysts review and summarize public records for both individuals and companies and deliver a comprehensive, easy-to-read report targeted on the client’s purpose of investigation.

SI’s trusted reputation was proven once again recently in two highly publicized cases involving fraud, money laundering and drug related crimes. Years before news broke on the cases; SI identified these individuals as a potential risk for two of our clients. Based on our reports, our clients (one a financial services firm and one an accounting firm) made the informed decision not to engage in business with these individuals. In one case, the subject of our investigation was arrested and convicted of drug related crimes, money laundering and involvement in organized crime. In the other case, the federal government charged the subject with illegal financial dealings, investments that could not be traced and altering financial records.

It is difficult to quantify just how much SI’s background report saved these companies in what could have been very costly and damaging decisions. What we can say is that our clients feel confident that we are an integral part of their Risk Management Program.

Your Risk Management Partner … Because Integrity Matters

|Partnership|

Members of the Financial Community

Members of the Financial Community
FM: Larry Scherzer, President, Scherzer International
RE: Background Investigations in the Current Economic Environment

Ladies and Gentlemen,

As a part of its Risk Management Program, one of our financial services clients asked us to conduct a Prospective Client Background Investigation. This is a well-accepted best practice for protecting the firm’s reputation and minimizing legal liabilities.

SI’s investigation in 2006 revealed that the subject company and its principal were involved in dubious business practices. As you may have guessed, based on this initial discovery, our client declined the engagement.

Recent headlines have now verified, years after our investigation, that the prospective client had, in fact, been running what can best be described as a long-standing Ponzi scheme.

This experience demonstrates the benefits of obtaining background investigations that provide comprehensively researched and analyzed information as a key element in your Risk Management Program.

Please visit www.scherzer.com or telephone 800-SC-FACTS to find out more about managing business risk for pennies on the dollar… because we never take integrity for granted

Sincerely,

Larry S. Scherzer

|Risk Management|