Is It a CAM or a SCAM?

Only a Proper Lease Investigator Knows for Sure


By Herbert "Hal" Rosenthal, CFE, CPA, CVA, CFF

  

hal-rosenthal-50x50.jpg   Case in Point   

 The fraud examination field has a particularly valuable tool – a predicate, also known as a hypothetical or a hunch. A tenant in a commercial property hired me to verify costs associated with the lease agreement it had made with the landlord years earlier. I had a hunch that certain public records weren’t valid. I did something a bit out of the ordinary, but it paid off handsomely for both the tenant and me.

The deal was that the landlord would construct a 300,000- square-foot office building that the tenant company would rent for 25 years and then buy after making a final payment. Also, the tenant would reimburse the landlord up to $500,000 for any future land development costs the landlord would be required to make over and above the cost of the building itself.

In the public record, I saw that the land development’s descriptions and drawings – about such items as sewers, drainage, waterlines, major electrical conduits and meters, etc. – didn’t match what I’d observed during the site inspection, except for a unique stone entrance wall and portal. Because the documents depicted a completed project, I thought they might be for a different site, perhaps owned by the same landlord. Based on the property records’ format, I was thinking it would be located nearby, and it would also have an identical entrance wall and portal.

A landlord could present a tenant with a copy of such a drawing, but that tenant normally wouldn’t perform a field inspection including the testing of measurements contained in the drawing. In this instance, the tenant would see that unique entrance wall and portal and be fooled into believing that was the site on which his building was constructed.

I couldn’t physically search for the separate building site because of the densely overgrown brush in the area and no obvious roads. So I hired a helicopter and pilot at an adjacent airport (not exactly a generally accepted auditing procedure) and discovered from the air a separate and completed commercial development, which had an identical stone entrance wall and portal. I took some photos.

 
 

 

  

 

 

 

 

 

 

 

 

 


For full access to story, members may sign in here.

Not a member? Click here to Join Now. Or Click here to sign up for a FREE TRIAL.