In 2017 my Website was migrated to the clouds and reduced in size.
Hence some links below are broken.
One thing to try if a “www” link is broken is to substitute “faculty” for “www”
For example a broken link
http://faculty.trinity.edu/rjensen/Pictures.htm
can be changed to corrected link
http://faculty.trinity.edu/rjensen/Pictures.htm
However in some cases files had to be removed to reduce the size of my Website
Contact me at 
rjensen@trinity.edu if you really need to file that is missing

 

Accounting Scandal Updates and Other Fraud Between April 1 and June 30, 2015
Bob Jensen at
Trinity University

Bob Jensen's Main Fraud Document --- http://faculty.trinity.edu/rjensen/fraud.htm 

Bob Jensen's Enron Quiz (and answers) --- http://faculty.trinity.edu/rjensen/FraudEnronQuiz.htm

Bob Jensen's Enron Updates are at --- http://faculty.trinity.edu/rjensen/FraudEnron.htm#EnronUpdates 

Other Documents

Many of the scandals are documented at http://faculty.trinity.edu/rjensen/fraud.htm 

Resources to prevent and discover fraud from the Association of Fraud Examiners --- http://www.cfenet.com/resources/resources.asp 

Self-study training for a career in fraud examination --- http://marketplace.cfenet.com/products/products.asp 

Source for United Kingdom reporting on financial scandals and other news --- http://www.financialdirector.co.uk 

Updates on the leading books on the business and accounting scandals --- http://faculty.trinity.edu/rjensen/Fraud.htm#Quotations 

I love Infectious Greed by Frank Partnoy ---  http://faculty.trinity.edu/rjensen/Fraud.htm#Quotations 

Bob Jensen's American History of Fraud ---  http://faculty.trinity.edu/rjensen/415wp/AmericanHistoryOfFraud.htm

Future of Auditing --- http://faculty.trinity.edu/rjensen/FraudConclusion.htm#FutureOfAuditing 

"What’s Your Fraud IQ?  Think you know enough about corruption to spot it in any of its myriad forms? Then rev up your fraud detection radar and take this (deceptively) simple test." by Joseph T. Wells, Journal of Accountancy, July 2006 --- http://www.aicpa.org/pubs/jofa/jul2006/wells.htm

What Accountants Need to Know --- http://faculty.trinity.edu/rjensen/FraudReporting.htm#AccountantsNeedToKnow

Global Corruption (in legal systems) Report 2007 --- http://www.transparency.org/content/download/19093/263155

Tax Fraud Alerts from the IRS --- http://www.irs.gov/compliance/enforcement/article/0,,id=121259,00.html

White Collar Fraud Site --- http://www.whitecollarfraud.com/
Note the column of links on the left.

Bob Jensen's essay on the financial crisis bailout's aftermath and an alphabet soup of appendices can be found at
http://faculty.trinity.edu/rjensen/2008Bailout.htm

The Heroes of Financial Fraud, The Atlantic, April 2009 --- http://meganmcardle.theatlantic.com/archives/2009/04/the_heroes_of_financial_fraud.php

History of Fraud in America ---  http://faculty.trinity.edu/rjensen/415wp/AmericanHistoryOfFraud.htm

Rotten to the Core --- http://faculty.trinity.edu/rjensen/FraudRotten.htm

Fraud in General --- http://faculty.trinity.edu/rjensen/Fraud.htm

AICPA Fraud Resource Center --- Click Here
http://www.aicpa.org/INTERESTAREAS/FORENSICANDVALUATION/RESOURCES/FRAUDPREVENTIONDETECTIONRESPONSE/Pages/fraud-prevention-detection-response.aspx

"New Report Shows Changing Fraud Environment," by Curtis C. Verschoor, AccountingWeb, March 18, 2013 ---
http://www.accountingweb.com/article/new-report-shows-changing-fraud-environment/221374

Today’s FBI: Facts and Figures 2013-2014—which provides an in-depth look at the FBI and its operations—is now available ---
http://www.fbi.gov/stats-services/publications/todays-fbi-facts-figures/facts-and-figures-031413.pdf/view

Center for Audit Quality Releases 'Fighting Fraud' Video in April 2013 ---
http://www.accountingweb.com/article/center-audit-quality-releases-fighting-fraud-video/221506

Bob Jensen's Fraud Updates are at
http://faculty.trinity.edu/rjensen/FraudUpdates.htm

Academic Versus Political Reporting of Research:  Percentage Columns Versus Per Capita Columns ---
http://www.cs.trinity.edu/~rjensen/temp/TaxAirlineSeatCase.htm
by Bob Jensen, April 3, 2013

WRESTLING WITH REFORM: FINANCIAL SCANDALS AND THE LEGISLATION THEY INSPIRED ---
http://www.sechistorical.org/
Thank you Jim McKinney for the heads up.

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm

History of Fraud in America ---
http://faculty.trinity.edu/rjensen/FraudAmericanHistory.htm




That some bankers have ended up in prison is not a matter of scandal, but what is outrageous is the fact that all the others are free.
Honoré de Balzac

Bankers bet with their bank's capital, not their own. If the bet goes right, they get a huge bonus; if it misfires, that's the shareholders' problem.
Sebastian Mallaby. Council on Foreign Relations, as quoted by Avital Louria Hahn, "Missing:  How Poor Risk-Management Techniques Contributed to the Subprime Mess," CFO Magazine, March 2008, Page 53 --- http://www.cfo.com/article.cfm/10755469/c_10788146?f=magazine_featured
Now that the Fed is going to bail out these crooks with taxpayer funds makes it all the worse.

Wall Street Remains Congress to the Core
The boom in corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem. It is against the law to trade on inside information about an imminent merger, of course. But an analysis of the nation’s biggest mergers over the last 12 months indicates that the securities of 41 percent of the companies receiving buyout bids exhibited abnormal and suspicious trading in the days and weeks before those deals became public. For those who bought shares during these periods of unusual trading, quick gains of as much as 40 percent were possible.
Gretchen Morgenson, "Whispers of Mergers Set Off Suspicious Trading," The New York Times, August 27, 2006 ---
Click Here

"Why Are Some Sectors (Ahem, Finance) So Scandal-Plagued?" by Ben W. Heineman, Jr., Harvard Business Review Blog,  January 10, 2013 --- Click Here
http://blogs.hbr.org/cs/2013/01/scandals_plague_sectors_not_ju.html?referral=00563&cm_mmc=email-_-newsletter-_-daily_alert-_-alert_date&utm_source=newsletter_daily_alert&utm_medium=email&utm_campaign=alert_date

Jensen Comment
The Big Banks and Wall Street in general will not learn until people are sent to jail. Until then the fines are just company money.

From the CFO Journal's Morning Ledger on May 21, 2015

Banks to pay $5.6 billion in probes
http://www.wsj.com/articles/global-banks-to-pay-5-6-billion-in-penalties-in-fx-libor-probe-1432130400?mod=djemCFO_h
The five big banks will plead guilty to criminal charges to resolve a U.S. investigation into whether traders colluded to move foreign-currency rates for their own benefit. Four of the banks, Barclays PLCCitigroup Inc., J.P. Morgan Chase & Co. and Royal Bank of Scotland Group PLC, pleaded guilty on Wednesday to conspiring to manipulate prices in the $500 billion-a-day market for U.S. dollars and euros, authorities said. The fifth bank, UBS AG, received immunity in the antitrust case but pleaded guilty to manipulating the London interbank offered rate, or Libor. It will pay a fine for violating an earlier accord meant to resolve those allegations of misconduct.\

From the CFO Journal's Morning Ledger on May 21, 2015

Barclays fined for alleged manipulation of ISDAfix.
Barclays PLC
was fined $115 million by the Commodity Futures Trading Commission, which said in a statement that Barclays’s U.S. traders attempted to manipulate the U.S. dollar iteration of ISDAfix, or the International Swaps and Derivatives Association Fix, between 2007 and 2012. A group of other financial institutions including interdealer broker ICAP PLC have said they are under investigation for alleged manipulation of the ISDAfix rate.

Rotten to the Core ---
http://faculty.trinity.edu/rjensen/FraudRotten.htm


Secrets of the Saints ... er ... read that Sinners

“Our ambition is to become something of a model for financial management rather than a cause for occasional scandal,” Cardinal Pell explained. He announced that the Vatican would hand over management of its billions of euros to external banking specialists and be subject to regular reports by an auditor general.
New York Times --- http://www.nytimes.com/2014/07/15/opinion/the-pope-and-the-vatican-bank.html?_r=0

"Vatican suspends PwC audit of its accounts:  The Vatican has suspended PwC’s audit into its finances only a few months after appointing the firm," by Jessica Fino, Economia, April 22, 2016 ---
http://economia.icaew.com/news/april-2016/vatican-suspends-pwc-audit-of-its-accounts 

The Big Four firm was chosen in December to perform the Vatican’s first external audit in a bid to make its finances more transparent.

It followed a series of scandals, including the discovery of €1bn hidden off the Vatican’s books.

However, the secretariat of state of the Vatican sent letters to all departments last week announcing the suspension.

The National Catholic Register, which first reported the news, said, “There was a shock to the system in terms of how rigorous the audit would be; the international standards feel a bit intrusive.”

Cardinal George Pell, prefect of the Vatican secretariat for the economy, said in a statement on Thursday he was “a bit surprised” by the decision of the secretariat of state, but added he expects the audit to “resume shortly” after “discussions and clarification” of some issues.

The suspension of the audit suggests there is conflict between the Italian bureaucrats and the supporters of financial reform.

A person familiar with the issue told the Guardian those who opposed PwC’s audit were concerned that the Vatican could be exposing itself too much and whether they could trust the firm to keep the information confidential.

Cardinal Pell, who announced the discovery of hundreds of millions of euros "tucked away" in various accounts in December 2014, was appointed by Pope Francis to clean up the Vatican’s finances shortly after the Pontiff sacked the entire board of its financial watchdog.

A PwC spokesperson said the firm does not comment on client work.

The Vatican Bank Scandal Nobody is Talking About (especially not the accountants)  ---
http://americamagazine.org/content/all-things/vatican-bank-scandal-nobody-talking-about


Time Magazine:  Whole Foods Is Accused of Overcharging Customers Again
New York investigators say it's the "worst case" they've ever seen ---
http://time.com/money/3933703/whole-foods-overcharging-customers/?xid=newsletter-brief


"Here are the most-retracted scientists in the world, ranked," by Julia Belluz, Vox, June 25, 2015 ---
http://www.vox.com/2015/6/24/8834405/scientists-most-retractions

Bob Jensen's threads on cheating are at
http://faculty.trinity.edu/rjensen/Plagiarism.htm


The IRS scandal on Day 779 just got even worse ---
http://nypost.com/2015/07/07/the-irs-scandal-just-got-even-worse/

So the Obama IRS wasn’t just persecuting right-leaning nonprofits — it was out to prosecute them, too. And with the help of the Obama Department of Justice and FBI.

Via Freedom of Information Act lawsuits, the watchdog group Judicial Watch just got evidence of the plot. A “DOJ Recap” on an Oct. 8, 2010 meeting tells how officials from the three agencies discussed “several possible theories to bring criminal charges under FEC law” against groups “posing” as tax-exempt nonprofits.

As part of the project, the IRS handed the FBI 21 computer disks with 1.23 million pages of confidential IRS returns from 113,000 nonprofit 501(c)(4) groups — nearly every 501(c)(4). This, though federal law generally bans the IRS from sharing such data.

The evidence shows “that the Obama IRS scandal is also an Obama DOJ and FBI scandal,” noted Judicial Watch President Tom Fitton. “The FBI and Justice Department worked with Lois Lerner and the IRS to concoct some reason to put President Obama’s opponents in jail before his re-election. And this abuse resulted in the FBI’s illegally obtaining confidential taxpayer information.”

Coninued in article

Bob Jensen's Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm


Commodities trader (Noble Group) has faced criticism for accounting irregularities ---
http://www.wsj.com/articles/noble-group-launches-accounting-review-1436229173

SINGAPORE—Commodities trader Noble Group Ltd. will launch an independent review into its accounting, which has come under some scrutiny this year, the company said Tuesday.

The Hong Kong-based company will appoint four nonexecutive directors and accounting consultant PricewaterhouseCoopers LLC to conduct the review, it said in the statement.

Noble Group has faced heavy criticism this year from several research firms, including U.S. short seller Muddy Waters, which accused it of accounting irregularities. The company has denied any wrongdoing.

The review will focus on Noble’s so-called mark-to-market of fair value accounting, the company said. Mark-to-market calculations, which are used to value assets, can include an element of subjectivity when estimating future commodity prices and production, for example. Noble’s critics say this practice led the company to report stronger results than it should have in the past.

Coninued in article

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


Update
"Madoff Accountant Avoids Prison Term," by Matthew Goldstein, The New York Times, May 28, 2015 ---
http://www.nytimes.com/2015/05/29/business/dealbook/madoff-accountant-avoids-prison-term.html?emc=edit_tnt_20150528&nlid=27162368&tntemail0=y&_r=0
 

By his own admission, David G. Friehling was not much of an auditor for Bernard L. Madoff — pretty much rubber-stamping financial statements for the man who masterminded an enormous Ponzi scheme.

As a cooperating witness, however, Mr. Friehling won plaudits from federal prosecutors, and because of that he will not serve any time in prison for his role in the financial fraud, which lasted more than two decades.

A federal judge on Thursday sentenced Mr. Friehling, 55, to a year of home detention and another year of supervised release. Judge Laura Taylor Swain of Federal District Court in Manhattan noted that Mr. Friehling had cooperated extensively with federal prosecutors, including testifying for several days during a lengthy trial last year that resulted in the convictions of five former employees of Mr. Madoff’s securities firm. Continue reading the main story Related Coverage

Frank DiPascali Jr. in Manhattan Federal Court on Monday, December 2, 2013. Bernie Madoff’s Essential ManMAY 15, 2015 Frank DiPascali Jr. faced a prison term of up to 125 years. Frank DiPascali Jr., Madoff Aide Who Pleaded Guilty in Fraud, Dies at 58MAY 10, 2015

Mr. Friehling could have been sentenced to more than 100 years in prison for his part in the Ponzi scheme that authorities estimate caused investors to lose $17.5 billion in principal and tens of billions more in paper wealth.

To some degree, ignorance worked in Mr. Friehling’s favor when it came to sentencing.

Federal prosecutors, in arguing for a lenient sentence for Mr. Friehling, who also served as a personal accountant for Mr. Madoff and his sons, said he had been unaware of the full extent of Mr. Madoff’s long-running scheme. But that was only because Mr. Friehling had “abdicated” his responsibilities as the firm’s auditor and approved the financial statements Mr. Madoff gave him without asking any questions.

“His crime came down to his failure to do his job,” said Randall W. Jackson, an assistant federal prosecutor under Preet Bharara, the United States attorney for Manhattan.

Continued in article

Bob Jensen's threads on Ponzi frauds ---
http://faculty.trinity.edu/rjensen/FraudRotten.htm#Ponzi


Teaching Case
From The Wall Street Journal Weekly Accounting Review on June 19, 2015

IRS, Tax-Preparation Firms Join Forces to Combat Return Fraud
by: John D. McKinnn and Laura Saunders
Jun 12, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Tax Fraud, Tax Identity Theft

SUMMARY: The Internal Revenue Service is working with states and tax-preparation firms to find new ways to strengthen security of the tax-filing system, after criminals this year used increasingly sophisticated strategies to commit stolen-identity refund fraud. The steps are likely to include finding better ways to validate taxpayers' identities when they file returns. The new approach also will include more sharing of broad-based data about trends in suspected identity fraud.

CLASSROOM APPLICATION: This update is appropriate for an individual income tax class.

QUESTIONS: 
1. (Introductory) What is tax identity theft? What problems is it causing?

2. (Advanced) What is the IRS doing to address tax fraud? What is the agency asking of private companies? Why is the IRS enlisting the help of outside parties?

3. (Advanced) Are these steps sufficient to stop this type of fraud? Why or why not? What could the IRS do or do better to prevent tax fraud and losses due to tax identify theft or other issues?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

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"IRS, Tax-Preparation Firms Join Forces to Combat Return Fraud," by John D. McKinnn and Laura Saunders, The Wall Street Journal, June 12, 2015 --- |
http://www.wsj.com/articles/irs-tax-preparation-firms-join-forces-to-combat-return-fraud-1434050523?mod=djem_jiewr_AC_domainid

The Internal Revenue Service is working with states and tax-preparation firms to find new ways to strengthen security of the tax-filing system, after criminals this year used increasingly sophisticated strategies to commit stolen-identity refund fraud.

The steps are likely to include finding better ways to validate taxpayers’ identities when they file returns. The new approach also will include more sharing of broad-based data about trends in suspected identity fraud.

“We’re asking every company that helps taxpayers file returns to provide us information that will add layers of security and step up their pre-refund authentication,” IRS Commissioner John Koskinen said Thursday. “We’re also making clear that companies need to let the IRS know if they detect any suspicious activity or refund fraud patterns.”

The IRS said industry and government groups have identified several new types of data that can be shared at filing time to help authenticate a taxpayer’s identity and detect potential refund fraud. Those data include the Internet address and computer associated with the return, as well as other characteristics of the transaction.

Already this year, the IRS has stopped some 3 million fraudulent filings, up about 30% from last year, Mr. Koskinen said. States also report surges in suspicious filings. Utah had more than 37,000 this year, for instance, up from 1,200 last year.

The IRS lost more than $5.8 billion to identity-theft fraud in 2013, according to a study by the Government Accountability Office.

The attacks are growing in sophistication. In the highest-profile problem this year, criminals—possibly operating from Russia and other countries—used ID data stolen elsewhere to obtain about 100,000 taxpayers’ prior-year return data from an IRS online application, the agency announced recently. Those data in some cases helped crooks defeat existing security systems and file fraudulent return claims using the taxpayers’ identities.

Continued in article

 


Bitcoin --- http://en.wikipedia.org/wiki/Bit_Coin

Private Currency --- http://en.wikipedia.org/wiki/Private_currency

Virtual Currency --- http://en.wikipedia.org/wiki/Virtual_currency

Jensen Comment
This begs questions about bitcoin and related currency implications for both managerial and financial accounting.

"Why Bitcoin Could Be Much More Than a Currency:  Bitcoin doesn’t have to replace government-backed money to improve the way we do business online," by Mike Orcutt, MIT's Technology Review, May 8, 2015 --- Click Here
http://www.technologyreview.com/news/537246/why-bitcoin-could-be-much-more-than-a-currency/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20150508

Boosters of Bitcoin commonly call the digital currency the future of money. But even if it doesn’t turn out to be, a growing group of investors and entrepreneurs is convinced that the idea at the center of Bitcoin could revolutionize industries that rely on digital record keeping. It might replace conventional methods of keeping track of valuable information like contracts, intellectual-property rights, and even online voting results.

Bitcoin’s real promise, they say, is not the currency. It’s the underlying technology, in which thousands of computers in a distributed network use cryptographic techniques to create a permanent, public record of every single Bitcoin transaction that has ever occurred (see “What Bitcoin Is and Why It Matters”). Investors are betting that this record-keeping system, called the blockchain, will be valuable for many other things besides tracking payments.

It’s become common for enthusiasts to compare where Bitcoin is now to where the Internet was in the 1980s and early 1990s. Joel Monegro, a venture capitalist at Union Square Ventures, says the open-source technology that creates the blockchain can be fairly compared to the open-source protocol that is the basis for the Internet, called TCP/IP. Technically a pair of protocols, the Transmission Control Protocol and Internet Protocol, TCP/IP dictates the specific ways data is packaged and routed between computers in a network. For years after TCP/IP was invented, the technology was accessible only to people with a certain level of technical knowledge. Similarly, right now Bitcoin is too arcane for most people and challenging to use even for those who are familiar with it.

Continued in article

FASB:  No GAAP for Bitcoins ---
http://www.bna.com/no-gaap-bit-b17179880752/

December 17, 2013 reply from Tom Selling

From the BNA Bloomberg piece:

"There is no generally accepted accounting principles (GAAP) that specifically addresses financial reporting for bit coins, which means this would fall under other comprehensive basis of accounting (OCBOA), FASB members who weighed in said."

I don't know if I agree with that assessment — assuming that it is accurately reported. Bit coins are clearly not a currency (yet), since they are not universally (or near universally) accepted as a medium of exchange. Thus, it seems to me that the portion of the ASC dealing with barter credits (starting at ASC 845-10-30-17) covers bit coins. Basically, a sale in exchange for a barter credit can be counted as revenue if the entity has a practice of converting the barter credit into cash in the "near term."

Am I missing something? I realize that the sponsors (if that's the right word) aspire that bit coins should become a new currency, but right now, they seem to be the functional equivalent of some forms of barter credits.

Best,
Tom

Jensen Reply

Hi Tom,

You made a very good point since both bitcoins (and other virtual currencies) and barter credits are sometimes traded on exchanges that set values apart from the fair values of the items traded initially. In the exchange markets values can be complicated by speculators in the virtual currencies and the varying willingness of businesses to accept them.

The question is whether barter credits meet the definitions of virtual currencies. I'm not familiar enough with barter credits to know that they have the "block chain central bodies" doing the mathematical calculations that, among other things, prevent double spending ---
http://en.wikipedia.org/wiki/Bitcoin

Virtual currencies differ from private currencies, and I tend to view barer credits private currencies rather than virtual currencies ---
http://en.wikipedia.org/wiki/Private_currency
One key difference is that private currencies tend to trade in terms of specified commodities (such as gold) or regions (such as BerkShares in the Berkshire region of Massachusetts) whereas virtual currencies tend to take on a life of their own. apart from commodities or spending regions.

It seems like accounting for bitcoins may become less complicated than accounting for private currencies in that bitcoins and other virtual currencies are more like international legal tender than private currencies subject to possible thinner markets such as the market for BerkShares. Of course bitcoins are not yet legal tender per se.

Barter credit accounting is also complicated by other revenue recognition rules. For example, if barter credits apply to discount coupons then all the complications of revenue accounting for discount coupons enter the picture.

I don't think the IRS, the FASB, and the IASB have yet dealt with all the complications of private currencies or virtual currencies traded on exchanges and the liquidity risks and speculation risks inherent in such transaction valuations. One complication is that the markets may be very thin such as the BerkShares trading market restricted to vendors in the Berkshires region.

A Bit of History
"Accounting For Transactions Involving Barter Credits," by Joel Steinberg, The CPA Journal, July 1999 ---
http://www.nysscpa.org/cpajournal/1999/0799/departments/D56799.HTM

Commercial barter transactions have been increasing in recent years, and there are currently a number of commercial barter websites. A barter transaction can involve an exchange of goods or services for other goods or services, or barter credits. In a transaction involving barter credits, a company exchanges an asset such as inventory for barter credits. The transaction might be done directly with another entity that will provide goods or services, or it might be done through a barter broker or network. In a barter network, goods or services are exchanged for barter credits or "trade dollars" that can be used to purchase goods or services from either the barter broker or members of the network. The goods and services to be purchased may be specified in a barter contract or may be limited to items made available by members of the network. Credits for advertising are the most common items received in barter transactions. This is because advertisers can often run additional spots with little additional overhead and are therefore willing to exchange such services for nonmonetary consideration.

When a company enters into a barter transaction, two things need to be addressed from an accounting standpoint. First, the exchange transaction needs to be accounted for properly. Second, the recorded amount of unused barter credits has to be evaluated at each financial statement reporting date.

Recording the Exchange Transaction

Guidance on accounting for the exchange transaction is provided in FASB Emerging Issues Task Force (EITF) Issue No. 93-11, Accounting for Barter Transactions Involving Barter Credits. The task force reached a consensus that APB No. 29, Accounting for Nonmonetary Transactions, should be applied to an exchange of a nonmonetary asset for barter credits. The basic principle of APB No. 29 is that accounting for nonmonetary transactions should be based on the fair values of the assets or services involved. (This excludes situations where the exchange is not the culmination of an earning process, in which case the recorded amount of the asset surrendered should be used.) The transaction is generally measured based on the fair value of the asset surrendered. The fair value of the asset surrendered becomes the cost basis of the asset acquired. A gain or loss should be recognized based on the difference between the fair value of the asset surrendered and its carrying amount.

The fair value of the asset received in an exchange should be used to record the transaction only if it is more clearly evident than the fair value of the asset surrendered. In the case of barter credits, it should be presumed that the fair value of the asset exchanged is more clearly evident than the fair value of the barter credits received. Accordingly, the barter credits received should be recorded at the fair value of the asset exchanged. That presumption might be overcome if the barter credits can be converted into cash in the near term, or if independent quoted market prices exist for items to be received in exchange for the barter credits.

When determining the fair value of the asset surrendered, it should be presumed that the fair value of the asset does not exceed its carrying amount, unless there is persuasive evidence supporting a higher value. When determining the value of inventory or other assets exchanged in a barter transaction, skepticism should be used. The reality is that the company would prefer to sell the inventory for cash rather than barter credits. The fact that the company is bartering with inventory could indicate that the company's normal selling price may not be an accurate measure of fair value. This could also raise lower-of-cost-or-market valuation questions about any items remaining in inventory.

The EITF also concluded that if the fair value of the asset exchanged is less than its carrying amount, an impairment should be recognized prior to recording the exchange. For example, inventory exchanged in a barter transaction should be adjusted to the lower of cost or market prior to recording the barter transaction. In the case of long-lived assets, impairment should be measured and recognized in accordance with SFAS No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of.

Evaluating the Recorded Amount of Barter Credits

At each balance sheet date, the recorded amount of barter credits should be evaluated for impairment. An impairment loss should be recognized if the fair value of any remaining barter credits is less than the carrying amount, or if it is probable that the company will not use all of the remaining barter credits.

The first step in evaluating the realizability of barter credits is to evaluate the likelihood that the counterparty will perform. If the credits are directly with another entity that will provide the goods or services, that entity should be evaluated. This can be done by investigating the credit rating of that entity and obtaining references from other companies that have been involved in similar transactions with the entity. If the credits are with a barter broker or network, the credibility and history of the broker or network should be evaluated. This can be done by contacting the International Reciprocal Trade Association (www.irta.net) or similar organizations.

The next step is to evaluate, based on current and future operations, whether the company is expected to fully utilize the recorded amount of the credits. For example, if a company has available $100,000 of advertising credits, but typically spends only $5,000 on advertising each year, it might take 20 years to fully utilize the credits. Similarly, credits may allow the company to purchase whatever goods or services happen to be available from members of the network, and it may be uncertain whether the company will ever need any of them. Barter credits may also have a contractual expiration date, at which time they become worthless. Finally, some arrangements may require the payment of cash in addition to barter credits, in which case the ability of the company to use the credits may be limited. *

"SEC Charges Texas Man in Bitcoin-Related Ponzi Fraud:  Agency Warns Investors to Be Wary of Schemes Tied to Virtual Currencies," by Robin Sidel, The Wall Street Journal, July 23, 2013 ---
http://online.wsj.com/article/SB10001424127887324144304578624221093071466.html?mod=djemCFO_h 

Regulators on Tuesday charged a Texas man with running a Ponzi scheme promising big returns on the virtual currency bitcoin, and warned individual investors to be wary of similar frauds.

The move by the Securities and Exchange Commission is the latest action by regulators to rein in suspicious activity associated with virtual currencies.

"We are concerned that the rising use of virtual currencies in the global marketplace may entice fraudsters to lure investors into Ponzi and other schemes in which these currencies are used to facilitate fraudulent, or simply fabricated, investments or transactions," the SEC said in an investor alert.

In recent months federal and state agencies have started to clamp down on exchanges that trade bitcoin, the most popular virtual currency, by requiring them to follow the same guidelines as traditional money-transmission companies like Western Union Co. WU -0.40% and MoneyGram International Inc. MGI -1.25%

Bitcoin is a decentralized currency that can be created or "mined" by users. It also can be traded on a number of exchanges or swapped privately among users. Most of the currency is traded on a Tokyo-based exchange called Mt. Gox, where one bitcoin was valued Tuesday at roughly $95.

The SEC on Tuesday charged Trendon T. Shavers, 30 years old, with raising more than $4.5 million worth of bitcoin from investors who were "falsely" promised a weekly interest rate of 7%. Mr. Shavers, of McKinney, Texas, was the founder and operator of a website called Bitcoin Savings and Trust.

Continued in article

Bob Jensen's threads on Ponzi schemes ---
http://faculty.trinity.edu/rjensen/FraudRotten.htm#Ponzi

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm

 


From the CFO Journal's Morning Ledger on April 24, 2015

Justice Department sues Quicken Loans
http://www.wsj.com/articles/u-s-department-of-justice-sues-quicken-loans-1429816481?mod=djemCFO_h
The U.S. Justice Department is suing mortgage lender Quicken Loans Inc., alleging the company lied to the government when making loans backed by the Federal Housing Administration. The Justice Department said that between September 2007 and December 2011, Detroit-based Quicken originated hundreds of FHA-insured loans that shouldn’t have been eligible for federal backing.

Bob Jensen's Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm


From the CFO Journal's Morning Ledger on April 22, 2015

“Flash crash” charges filed
http://www.wsj.com/articles/u-k-man-arrested-on-charges-tied-to-may-2010-flash-crash-1429636758?mod=djemCFO_h
A trader who operated out of his West London home was arrested by British authorities on U.S. charges that he helped cause the Dow Jones Industrial Average to plummet 1,000 points on May 6, 2010, in what came to be known as the “flash crash.” Prosecutors and regulators charged Navinder Sarao with using a souped-up version of commercially available software to manipulate a stock-market index futures contract.

Jensen Comment
If one obscure trader than bring down the market the system is much to fragile.


From the CFO Journal's Morning Ledger on April 21, 2015

Bogus stamps, phony bonds backed failed Oklahoma insurance firm
http://www.wsj.com/articles/oklahoma-insurer-liquidated-by-regulators-1429542995?mod=djemCFO_h
 Insurance regulators are liquidating an Oklahoma insurer after capital injected by new owners, a New York financial firm, turned out to include bonds linked to an admitted counterfeiter and a supposed $40 million stamp collection that couldn’t be authenticated.

Bob Jensen's Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm


To cut credit-card fraud, issuers are embedding chips; merchants say they can’t get card readers fast enough.

"Chip-Card Rollout Has Banks, Retailers Scrambling," by Robin Sidel, The Wall Street Journal, April 21, 2015 ---
http://www.wsj.com/articles/chip-card-rollout-has-banks-retailers-scrambling-1429568104?mod=djemCFO_h

. . .

Some 575 million of the new cards—representing about three-quarters of U.S. credit cards and about 40% of debit cards—are expected to be in the wallets of American consumers by year-end, making it the biggest rollout of new cards in decades.

Chip cards, which have been used throughout Europe, Asia and Canada for years, are coming to the U.S. after delays from banks that issue cards and the merchants who accept them.

But challenges remain: Even though tens of millions of new cards have already been shipped to customers, only Wal-Mart Stores Inc. and a few other large retailers so far have upgraded their payment terminals to accept the new plastic. Target Corp. , which had a massive breach in late 2013, has upgraded its terminals and plans to start accepting chip cards in the late spring, according to a spokesman.

Continued in article


Mehmet Oz --- http://en.wikipedia.org/wiki/Mehmet_Oz

"The making of Dr. Oz:  How an award-winning doctor turned away from science and embraced fame," by Julia Belluz, Vox, April 16, 2015 ---
http://www.vox.com/2015/4/16/8412427/dr-oz-health-claims

"A group of doctors just asked Columbia to reconsider Dr. Oz's faculty appointment," by Julia Belluz, Vox, April 16, 2015 ---
http://www.vox.com/2015/4/16/8423867/dr-oz-letter-columbia

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


"The Lehman Brothers Bankruptcy D: The Role of Ernst & Young"
Authors

Rosalind Z. Wiggins Yale University - Yale Program on Financial Stability
Rosalind L. Bennett FDIC, Division of Insurance and Research
Andrew Metrick Yale School of Management ; National Bureau of Economic Research (NBER)

SSRN, October 1, 2015
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2588551

Abstract:
For many years prior to its demise, Lehman Brothers employed Ernst & Young (EY) as the firm’s independent auditors to review its financial statements and express an opinion as to whether they fairly represented the company’s financial position. EY was supposed to try to detect fraud, determine whether a matter should be publicly disclosed, and communicate certain issues to Lehman’s Board audit committee. After Lehman filed for bankruptcy, it was discovered that the firm had employed questionable accounting with regard to an unorthodox financing transaction, Repo 105, which it used to make its results appear better than they were. EY was aware of Lehman’s use of Repo 105, and its failure to disclose its use. EY also knew that Lehman included in its liquidity pool assets that were impaired. When questioned, EY insisted that it had done nothing wrong. However, Anton R. Valukas, the Lehman bankruptcy examiner, concluded that EY had not fulfilled its duties and that probable claims existed against EY for malpractice. In this case, participants will consider the role and effectiveness of independent auditors in ensuring complete and accurate financial statements and related public disclosure.

Number of Pages in PDF File: 22

Keywords: Systemic Risk, Financial Crises, Financial Regulation

 

From the CFO Journal's Morning Ledger on April 16, 2015

Ernst & Young settles with N.Y. AG.
http://www.wsj.com/articles/ernst-young-n-y-attorney-general-close-to-10-million-settlement-over-lehman-1429116634?mod=djemCFO_h
Ernst & Young LLP
agreed Wednesday to pay $10 million to settle allegations from the New York attorney general’s office that the Big Four accounting firm had turned a blind eye when its client Lehman Brothers Holdings Inc. misled investors before its 2008 collapse.

Jensen Comment
I think this is on top of an earlier $99 million settlement in the Lehman Brothers repo accounting scandal ---

"$99 Million Buys EY Ticket Out Of Private Lehman Litigation, Finally," by Francine McKenna, re:TheAuditors, October 21. 2013 ---
http://retheauditors.com/2013/10/21/99-million-buys-ey-ticket-out-of-private-lehman-litigation-finally/

Bob Jensen's threads on Ernst & Young ---
http://faculty.trinity.edu/rjensen/Fraud001.htm

 


Most Hack Successes at Some Point Require Insiders

Iowa Man Accused of Hacking Lottery to Win $14.3 Million Ticket ---
https://www.yahoo.com/tech/an-iowa-man-is-accused-of-hacking-the-lottery-to-116386493569.html

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


From the CPA Newsletter on April 13, 2015

Accounting-driven class-action suits increased in 2014
http://r.smartbrief.com/resp/gDqYBYbWhBCOcSATCidKtxCicNRBXl?format=standard
There was an increase in accounting-driven class-action suites stemming from regulatory enforcement actions last year, when 53 such cases were filed, according to a newly released PwC report. In comparison, there were 46 such cases filed in 2013. CFO.com (4/10)

Bob Jensen's Fraud Updates are at
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


"Victims of Financial Wrongdoing Need a More Muscular S.E.C.," The New York Times, April 4, 2015 ---
http://www.nytimes.com/2015/04/05/business/victims-of-financial-wrongdoing-need-a-more-muscular-sec.html

Given the many billions of dollars financial companies have paid in regulatory and legal settlements related to the mortgage crisis, how much money has actually found its way into the pockets of investors harmed by their actions?

Less than you may think. To start with, little of the cash generated in most of the Justice Department settlements went to investors. Much of this money went into Treasury coffers or to various states while troubled borrowers were promised loan modifications and other relief as part of the deals.

Wronged investors are entitled to receive money, however, from lawsuits filed by the Securities and Exchange Commission. While the S.E.C. cannot, by law, seek compensatory damages for losses incurred by investors, the agency does collect penalties and disgorgement of ill-gotten gains from both institutions and individuals.

Sometimes the S.E.C. puts the dollars it collects into a fund to be distributed to a class of victims the agency has identified; other times it forces defendants to repay those investors directly.

The S.E.C. says it tries, whenever possible, to extract money from wrongdoers on behalf of investors. And an analysis of financial crisis lawsuits cited most recently on the S.E.C.’s website shows that 23 of them generated nearly $2.6 billion for investors.

Among the larger S.E.C. recoveries was $285 million from a 2011 case against Citigroup over a $1 billion collateralized debt obligation and $250 million returned to investors after Goldman Sachs’s settlement of the Abacus C.D.O. case in 2010. Investors also received $275 million from a mortgage securities deal struck last year with Morgan Stanley.

Returning almost $2.6 billion to investors is not nothing. But the S.E.C.’s recoveries pale in comparison to the amounts generated by law firms that brought class actions on behalf of stockholders and debtholders.

In the 17 largest securities law class actions arising out of the financial crisis, investors have recovered almost $8.3 billion, net of legal fees and expenses, court records show. These recoveries included $1.1 billion in two class actions against Citigroup, $850 million received from the American International Group and $523 million from Lehman Brothers.

Among the 17 private lawsuits and the 23 S.E.C. cases, six overlap — meaning the same financial institutions were sued on the same facts by both the agency and private plaintiffs. On a direct comparison, the recoveries generated by class-action lawsuits far exceeded those collected by the S.E.C.

In those six cases, the S.E.C. recovered $400 million for investors while the private plaintiffs received almost $3.8 billion, net of legal fees and expenses.

Consider, for example, the lawsuits against Bank of America. Both the S.E.C. and investors claimed that Merrill Lynch executives had not disclosed losses and bonus payments at the firm before it was purchased by the bank. Private plaintiffs received almost $2.3 billion in their case; from the S.E.C.’s suit, investors received $150 million.Then there is the case against Angelo R. Mozilo and other top executives of Countrywide Financial. The private lawsuit generated $516.4 million for investors; the S.E.C.’s recovery for investors was just over $48 million.

Finally, private litigation against New Century Financial, a defunct mortgage lender, recovered $107.6 million, while the S.E.C.’s lawsuit recovered $1.5 million for investors.

“Private litigation prosecuted by sophisticated plaintiffs and their counsel — who are not restrained by the limited resources and bureaucracy of government agencies — has delivered far larger recoveries for victims than companion government actions,” said Gerald H. Silk, a partner at Bernstein Litowitz Berger & Grossmann, a securities class-action law firm.

To some degree, of course, this is because the S.E.C. cannot recover losses for investors. By law, the agency cannot seek a penalty that exceeds the financial gain a wrongdoer made, even if losses incurred by investors as a result of the improprieties are far greater. For instance, if investors lost $100 million in a Ponzi scheme in which the overseer pocketed $10 million, the S.E.C. can seek to recover only the $10 million in ill-gotten gains and another $10 million in penalties. And the S.E.C. has secured significant sums for investors in some matters where there was no class action. For example, in three big C.D.O. cases, the agency returned a combined $661 million to investors from Citigroup, Goldman Sachs and JPMorgan Chase.

When asked about the size of the recoveries the S.E.C. has generated for investors, Andrew J. Ceresney, the agency’s director of enforcement, said: “We have been vigorous in our efforts to hold individuals and companies accountable for abuses related to the financial crisis. One of our highest priorities in these cases is to return money to harmed investors, in addition to punishing and deterring misconduct.”

The S.E.C. can pursue powerful remedies that private plaintiffs cannot. For instance, the S.E.C. can bar people from serving as directors or officers of companies and suspend lawyers and accountants from practicing before the agency. In the financial crisis cases identified by the S.E.C., the agency said it had barred or suspended 40 people.

The agency can also force the people it sues to pay penalties out of their own pockets; this is much harder for private plaintiffs to do.

Still, the disparity in recoveries is telling. It shows, among other things, how crucial it is for investors to be able to bring private actions under the securities laws.

“The S.E.C. can’t do everything,” said Norman Poser, a professor emeritus at Brooklyn Law School and a former S.E.C. official. “The Supreme Court has said there is an implied private right of action under the securities laws for exactly that reason.”

While both plaintiffs and the agency have different roles to play, Congress should still consider expanding how much the S.E.C. can extract in penalties, perhaps making them commensurate with the losses investors incurred.

The S.E.C. has asked Congress for this authority, Mr. Ceresney said. But it has not been granted. “Allowing us to recover penalties equal to investor losses would assist us in fulfilling our investor protection mission,” he said.

Continued in article

Bob Jensen's threads on Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm  

 


Ex-IRS Ethics Office Lawyer Disbarred For … Ethics Violations ---
http://taxprof.typepad.com/taxprof_blog/2015/04/ex-irs-ethics-office-lawyer-disbarred-for-.html

Jensen Comment
Her punishment sounds serious until you examine the IRS track record for hiring back fired employees.

"Report: IRS hiring back problem employees," by Kevin G. Hall, McClatcheyDC, February 5, 2015 ---
http://www.mcclatchydc.com/2015/02/05/255697/report-irs-hiring-back-problem.html

More than one in 10 former employees rehired by the Internal Revenue Services had left the agency with performance and conduct issues, a special inspector general’s report concluded.

The report by the Treasury Inspector General for Tax Administration was actually released last Dec. 30 but its results were divulged Thursday by the new chairman of the Senate Finance Committee, Utah Republican Orrin Hatch.

The IG’s report found that of the 7,000-plus former IRS employees hired back between January 2010 and September 2013, 824 of them had prior employment disciplinary issues. Of those 824, the inspector general said 141 had a prior tax issue and five of them were determined to have willfully failed to file a tax return.

Continued in article

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


"U.S. 11 Former Atlanta Educators Convicted in Cheating Scandal," by Kate Brumback, Time Magazine, April 1, 2015 ---
http://time.com/3767734/atlanta-cheating-scandal/?xid=newsletter-brief

In one of the biggest cheating scandals of its kind in the U.S., 11 former Atlanta public school educators were convicted Wednesday of racketeering for their role in a scheme to inflate students’ scores on standardized exams. More 500 Unaccounted For After Dozens Shot at College in Kenya NBC NewsDiplomacy Until Dawn: Kerry, Zarif Burn Midnight Oil NBC NewsTornado Threat Looms in Hail-Lashed Midwest, Plains NBC NewsThese Are 20 Of The World's Best Photos Taken With Cell Phones Huffington PostRichard Paul Evans: How I Saved My Marriage Huffington Post

The defendants, including teachers, a principal and other administrators, were accused of falsifying test results to collect bonuses or keep their jobs in the 50,000-student Atlanta school system. A 12th defendant, a teacher, was acquitted of all charges by the jury. Popular Among Subscribers Star Track: Amy Schumer’s movie Trainwreck Amy Schumer: Class Clown of 2015 Subscribe Cuba Libre Bitter Pill: Why Medical Bills Are Killing Us

The racketeering charges carry up to 20 years in prison. Most of the defendants will be sentenced April 8.

“This is a huge story and absolutely the biggest development in American education law since forever,” said University of Georgia law professor Ron Carlson. “It has to send a message to educators here and broadly across the nation. Playing with student test scores is very, very dangerous business.”

A state investigation found that as far back as 2005, educators fed answers to students or erased and changed answers on tests after they were turned in. Evidence of cheating was found in 44 schools with nearly 180 educators involved, and teachers who tried to report it were threatened with retaliation.

Similar cheating scandals have erupted in Philadelphia, Washington, D.C., Nevada and other public school systems around the country in recent years, as officials link scores to school funding and staff bonuses and vow to close schools that perform poorly.

Thirty-five Atlanta educators in all were indicted in 2013 on charges including racketeering, making false statements and theft. Many pleaded guilty, and some testified at the trial.

Former Atlanta School Superintendent Beverly Hall was among those charged but never went to trial, arguing she was too sick. She died a month ago of breast cancer.

Hall insisted she was innocent. But educators said she was among higher-ups pressuring them to inflate students’ scores to show gains in achievement and meet federal benchmarks that would unlock extra funding.

Over objections from the defendants’ attorneys, Superior Court Judge Jerry Baxter ordered all but one of those convicted immediately jailed while they await sentencing. They were led out of court in handcuffs.

“They are convicted felons as far as I’m concerned,” Baxter said, later adding, “They have made their bed and they’re going to have to lie in it.”

The only one allowed to remain free on bail was teacher Shani Robinson, because she is expected to give birth soon.

Bob Rubin, the attorney for former elementary school principal Dana Evans, said he was shocked by the judge’s decision and called it “unnecessary and vindictive.”

Prosecutors said the 12 on trial were looking out for themselves rather than the children’s education. Defense attorneys accused prosecutors of overreaching in charging the educators under racketeering laws usually employed against organized crime.

"Cheating in Atlanta: A Teachable Moment When unions attack testing and ensure that bad teachers stay hired, it’s no wonder some of them broke the rules," by Jason L. Riley,  The Wall Street Journal, April 8, 2015 ---
http://www.wsj.com/articles/cheating-in-atlanta-a-teachable-moment-1428521500?tesla=y

. . .

The state decided to investigate cheating in the public schools after an analysis of test results by the Atlanta Journal-Constitution found suspiciously high gains in math and reading proficiency. “A miracle occurred at Atherton Elementary this summer, if its standardized math test scores are to be believed,” the paper reported in 2008. “Half of the DeKalb County school’s fifth-graders failed a yearly state test in the spring. When the 32 students took retests, not only did every one of them pass—26 scored at the highest level.”

The suspicion was warranted. A subsequent 400-page report issued by the state in 2011 found that 44 of 56 investigated schools had falsified results on state exams. The cheating was “widespread and organized” and conducted “with the tacit knowledge and even approval of high-level administrators.” According to investigators, Atlanta Public Schools Superintendent Beverly Hall and her aides allowed “cheating—at all levels—to go unchecked for years.” Teachers would gather at so-called “erasure” parties to correct answers on exams and inflate scores. Some 178 public-school employees, including 34 principals, were implicated. Thirty-five of them were eventually indicted by a grand jury, and 21 reached plea agreements. Hall maintained her innocence but died before she could stand trial.

The reaction to these shenanigans from defenders of the public-education status quo has been sad but not at all surprising. Yes, the teachers were wrong to falsify scores and set up students to fail by promoting them to the next grade unprepared. But if you are Randi Weingarten, who heads the powerful American Federation of Teachers (AFT), the real victims are your union members. For Ms. Weingarten, a strong opponent of the testing requirements included in the No Child Left Behind education law signed by President Bush, the Atlanta scandal “crystallizes the unintended consequences of our test-crazed policies.”

Lily Eskelsen García, who is president of the AFT’s sister union, the National Education Association (NEA), wrote in a Journal-Constitution op-ed at the start of the trial that “too often, and in too many places, we have turned the time-tested practice of teach, learn and test into a system of test, blame and punish.” She added: “We are using these tests to punish schools, teachers, students and school districts. This simply isn’t right. It is toxic.”

. . .

In 2011 an investigation by a local television station in Atlanta, WSB-TV, revealed that more than 700 teachers in Georgia had repeatedly failed at least one portion of a test they must pass before receiving a teaching certificate. Nearly 60 teachers failed the test at least 10 times, and “there were 297 teachers on the payrolls of metro Atlanta school systems in the past three years after having failed the state certification test five times or more.”

Would you want your child taught by someone who flunked the certification test five times, let alone 10? And would that instructor be more or less likely to resort to changing student test scores to hide his own incompetence?

The eagerness to blame No Child Left Behind’s accountability provisions for these cheating scandals is off-base. The law has its flaws, including an overly stringent method of judging a school’s performance, but those flaws aren’t fatal. The much bigger problem is the one exposed by WSB-TV. Long before Mr. Bush signed NCLB, public-school teaching was attracting the least-qualified students from universities. For decades, the test scores of people who enter teaching have trailed those of people entering other professions, and research by Stanford economist Eric Hanushek and others shows that the trend has worsened in recent years.

Moreover, brighter college students who do want to teach for a few years after graduation, via highly selective programs such as Teach for America, are scorned by the education establishment as insufficiently committed to the profession. Among other things, Atlanta’s cheating scandal is a byproduct of who goes into teaching.

"Schoolteacher Cheating," Walter E. Williams, Townhall, February 5, 2014 ---
http://townhall.com/columnists/walterewilliams/2014/02/05/schoolteacher-cheating-n1788915?utm_source=thdaily&utm_medium=email&utm_campaign=nl

Philadelphia's public school system has joined several other big-city school systems, such as those in Atlanta, Detroit and Washington, D.C., in widespread teacher-led cheating on standardized academic achievement tests. So far, the city has fired three school principals, and The Wall Street Journal reports, "Nearly 140 teachers and administrators in Philadelphia public schools have been implicated in one of the nation's largest cheating scandals." (1/23/14) (http://tinyurl.com/q5makm3). Investigators found that teachers got together after tests to erase the students' incorrect answers and replace them with correct answers. In some cases, they went as far as to give or show students answers during the test.

Jerry Jordan, president of the Philadelphia Federation of Teachers, identifies the problem as district officials focusing too heavily on test scores to judge teacher performance, and they've converted low-performing schools to charters run by independent groups that typically hire nonunion teachers. But William Hite, superintendent of the School District of Philadelphia, said cheating by adults harms students because schools use test scores to determine which students need remedial help, saying, "There is no circumstance, no matter how pressured the cooker, that adults should be cheating students."

While there's widespread teacher test cheating to conceal education failure, most notably among black children, it's just the tip of the iceberg. The National Assessment of Educational Progress, published by the U.S. Department of Education's National Center for Education Statistics and sometimes referred to as the Nation's Report Card, measures student performance in the fourth and eighth grades. In 2013, 46 percent of Philadelphia eighth-graders scored below basic, and 35 percent scored basic. Below basic is a score meaning that a student is unable to demonstrate even partial mastery of knowledge and skills fundamental for proficient work at his grade level. Basic indicates only partial mastery. It's a similar story in reading, with 42 percent below basic and 41 percent basic. With this kind of performance, no one should be surprised that of the state of Pennsylvania's 27 most poorly performing schools on the SAT, 25 are in Philadelphia.

Continued in article

Bob Jensen's threads on cheating ---
http://faculty.trinity.edu/rjensen/Plagiarism.htm

Jensen Commentary
It should be noted that the author (Walter Williams) of this article is an African American economics professor at George Mason University..He's also conservative, which is rare for an African American who grew up in an urban ghetto. This makes him an endangered species in academe.

The cheating Atlanta Superintendent leader died two months ago from breast cancer.
The cheating hurt thousands of students by denying them access to remedial education while the cheating teachers and administrators got bigger bonuses.
Hundreds of other cheating teachers blamed administrators and plea bargained to stay out of jail and keep their jobs

"Why Students Gripe About Grades," by Cathy Davidson, Inside Higher Ed, January 7, 2013 --- 
http://www.insidehighered.com/views/2013/01/07/essay-how-end-student-complaints-grades

The biggest scandal in education is nearly universal grade inflation ---
http://faculty.trinity.edu/rjensen/Assess.htm#RateMyProfessor

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


Noble Group --- http://en.wikipedia.org/wiki/Noble_Group

From the CFO Journal's Morning Ledger on April 10, 2015

Noble Group faces fresh attack on its accounting practices
https://mail.google.com/mail/u/1/#inbox/14ca2fd477bbb090
Commodities trader Noble Group Ltd.’s accounting practices came under attack from short seller Muddy Waters LLC, the third outfit this year to question its financial statements. Muddy Waters said Noble “seems to exist solely to borrow and burn cash,” and alleged its 2011 acquisition of PT Alhasanie was designed to reduce a quarterly loss reported that year.

"Noble Group Faces Fresh Attack From Muddy Waters," by Jake Maxwell Watts And Mia Lamar, The Wall Street Journal, April 9, 2015 ---
http://www.wsj.com/articles/noble-group-faces-fresh-attack-from-muddy-waters-1428552536?mod=djemCFO_h

SINGAPORE—U.S. short-seller Muddy Waters LLC has joined in the criticism being lobbed at Noble Group Ltd. , becoming the third outfit this year to publicly question the commodities trader’s management and financial statements.

In a 14-page report dated Wednesday and published on its website, Muddy Waters said Noble “seems to exist solely to borrow and burn cash,” and alleged its 2011 acquisition of Indonesian coal-mining service company PT Alhasanie was designed to reduce a quarterly loss reported that year, Noble’s first as a public company.

Noble has repeatedly denied any wrongdoing. In a statement Thursday, it said it “completely rejects the allegations” while noting that Muddy Waters had publicly stated that it has a short position in Noble’s shares. “The company is studying the report in detail,” it said.

Noble is the second Singapore-listed commodities trader that Muddy Waters has criticized. In 2012, it attacked Olam International Ltd. ’s accounting practices and investments, which left Muddy Waters facing off with Singapore state-investment firm Temasek Holding Pte. Ltd. Temasek eventually helped lead a buyout of Olam.

Muddy Waters had more success with a 2011 attack on Chinese forestry company Sino-Forest Corp., which was later delisted in Toronto and filed for bankruptcy. Prominent U.S. hedge-fund manager John Paulson has said his firm, Paulson & Co., suffered millions of dollars in losses from a stake in Sino-Forest.

Noble first came under attack in February when an anonymous outfit calling itself Iceberg Research claimed Noble’s balance sheet overvalued its commodities contracts and associate companies. Hong Kong-based GMT Research has also published critical reports on Noble, including one this week that questioned the company’s valuation of Mongolian mining assets.

“Muddy Waters’ entrance into the fray validates some genuine concerns that exist over Noble’s financial statements,” GMT founder Gillem Tulloch said Thursday. “We believe Noble’s financial statements are some of the most curious we’ve seen in Asia.”

Noble earlier rebutted some of Iceberg Research’s allegations. In March, it filed a lawsuit in Hong Kong against Iceberg and a former Noble employee it said it suspected was behind the reports.

Singapore-listed shares of Noble, which is headquartered in Hong Kong and trades in commodities such as oil and coal, fell as much as 9% in Thursday trading. They closed at 0.86 Singapore dollars (63 U.S. cents), down 5.5% for the day and more than 28% since the Iceberg report was published in mid-February.

In its report, Muddy Waters echoed Iceberg’s criticism of Noble’s acquisitions.

“When we scratched the surface of [the PT Alhasanie] transaction, we found numerous red flags and aggressive actions by Noble,” Muddy Waters founder Carson Block wrote. For instance, the report alleged, the commodities trader paid $300,000 for PT Alhasanie and immediately booked a gain of more than $46 million.

Continued in article

"Noble Group Says Auditor (Ernst & Young) Needs More Time to Review Accounts," by Yuriy Humber, Bloomberg News, February 26, 2015 ---
http://www.bloomberg.com/news/articles/2015-02-26/noble-group-says-auditor-needs-more-time-to-review-accounts

Full Annual Report for the Noble Group --- http://www.thisisnoble.com/ar2011/pdfs/2011/Noble Annual Report 2011.pdf

Bob Jensen's threads on fair value (mark-to-market) accounting ---
http://faculty.trinity.edu/rjensen/Theory02.htm#FairValue

Bob Jensen's threads on Ernst & Young (EY) ---
http://faculty.trinity.edu/rjensen/Fraud001.htm


 

 

 







  • Accounting and finance professors should use this video every semester in class!
    The best explanation ever of the sub-prime (meaning lending to borrowers with much less than prime credit ratings) mortgage greed and fraud.
    The best explanation ever about securitized financial instruments and worldwide banding frauds using such instruments.
    The best explanation ever about how greedy employees will cheat on their employers and their customers.

    "House Of Cards: The Mortgage Mess Steve Kroft Reports How The Mortgage Meltdown Is Shaking Markets Worldwide," Sixty Minutes Television on CBS, January 27, 2008 --- http://www.cbsnews.com/stories/2008/01/25/60minutes/main3752515.shtml
    For a few days the video may be available free.
    The transcript will probably be available for a longer period of time.

    Bob Jensen's "Rotten to the Core" threads are at http://faculty.trinity.edu/rjensen/FraudRotten.htm





    Other Links
    Main Document on the accounting, finance, and business scandals --- http://faculty.trinity.edu/rjensen/Fraud.htm 

    Bob Jensen's Enron Quiz --- http://faculty.trinity.edu/rjensen/FraudEnronQuiz.htm

    Bob Jensen's threads on professionalism and independence are at  file:///C:/Documents%20and%20Settings/dbowling/Local%20Settings/Temporary%20Internet%20Files/OLK36/FraudUpdates.htm#Professionalism 

    Bob Jensen's threads on pro forma frauds are at http://faculty.trinity.edu/rjensen//theory/00overview/theory01.htm#ProForma 

    Bob Jensen's threads on ethics and accounting education are at 
    http://faculty.trinity.edu/rjensen/FraudProposedReforms.htm#AccountingEducation

    The Saga of Auditor Professionalism and Independence ---
    http://faculty.trinity.edu/rjensen/fraud001.htm#Professionalism
     

    Incompetent and Corrupt Audits are Routine ---
    http://faculty.trinity.edu/rjensen/FraudConclusion.htm#IncompetentAudits

    Bob Jensen's threads on accounting theory are at http://faculty.trinity.edu/rjensen/theory.htm 

    Future of Auditing --- http://faculty.trinity.edu/rjensen/FraudConclusion.htm#FutureOfAuditing 

     

     


     

    The Consumer Fraud Portion of this Document Was Moved to http://faculty.trinity.edu/rjensen/FraudReporting.htm 

     

     

     

     

    Bob Jensen's home page is at http://faculty.trinity.edu/rjensen/