Letter From The President

By James D. Ratley, CFE

If the economic indicators are to be believed, it would appear we're headed for a slowdown. I'll have to admit that most of those indicators are over my head, and I usually rely on Brian Williams, the evening anchor of NBC News, to summarize and explain the economists' theories. 

Williams recently reported that the sales of recreational trailers were down 27 percent, and that for the last 30 years a recession has followed when the United States has experienced a drop in RV sales that large. With facts like that, I don't see how anyone could argue that bad times are ahead. 

As fraud examiners, it's important we realize that economic conditions can, and will, have a direct effect on the business community throughout the world. During the last economic slowdown, we saw such notable frauds as Enron, WorldCom, Parmalat, and HealthSouth, which resulted in major losses for shareholders and employees. 

When we enter a major slowdown, we read about investors losing millions to large Ponzi-type schemes that collapse due to lack of funds to nurture them. The media then usually focus on the corrupt business executives' excessive lifestyles and greed. Without fail, we're always amazed at the huge number of red flags that were ignored and the lack of internal controls that allowed the schemes to flourish. 

While only a few companies suffer frauds so massive they become household names, the ACFE's "Report to the Nation on Occupational Fraud and Abuse" demonstrates that fraud affects us all, not just large public corporations. For every company that encounters fraudulent activities large enough to attract evening-news airtime, there are hundreds facing the same problems with similar devastation to shareholders, owners, and employees.

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