Quantifying Risks
The objective of this paper is to analyze the procedures used in detecting and investigating complex criminal fraud. Specifically I will be reviewing the case of FirstPlus Financial Group Inc and the Lucchese organized crime family.
FirstPlus Take Over
The FirstPlus indictment, filed in November 2011, accuses 13 people of seizing power at a FirstPlus Financial Group Inc. (FPFG) which eventually filed for bankruptcy. Among those indicted were two men with alleged ties to the Italian Mafia; Nicodemo Scarfo, a member of the Lucchese crime family, and Salvatore Pelullo, an associate of the Lucchese and Philadelphia LCN families. (Voreacos and Pearson, 2011) The indictment asserts that a group led by Scarfo and Pelullo extorted FPFG board members by threatening to sue unless the individuals convinced the other board members to surrender control of FPFG. The board member cooperated according to the indictment, giving control of the company to the Scarfo-Pelullo group, which installed a new board and management team which they completely controlled. (Department of Jusice, 2011) The indictment details some of the methods utilized by Scarfo and Pelullo to keep their criminal enterprise activity concealed, such as amassing a stock of guns and ammunition, as well as threatening to sell the children of one of the new board members into prostitution if the board member ever went to the authorities. Scarfo and Pelullo also utilized the assistance of five attorneys and one CPA. The CPA is specifically accused of being hired on retainer by Pelullo to serve as FPFG’s internal accountant. According to the Department of Justice, Howard Drossner, CPA, repeatedly submitted false information, or omitted material information, in required SEC filings. As a result, FPFG’s shareholders and the investing public had no idea that FPFG was being controlled by members and associates of organized crime. (2011) Investigation Methods and Internal Controls
With this type of criminal activity
FirstPlus Take Over
The FirstPlus indictment, filed in November 2011, accuses 13 people of seizing power at a FirstPlus Financial Group Inc. (FPFG) which eventually filed for bankruptcy. Among those indicted were two men with alleged ties to the Italian Mafia; Nicodemo Scarfo, a member of the Lucchese crime family, and Salvatore Pelullo, an associate of the Lucchese and Philadelphia LCN families. (Voreacos and Pearson, 2011) The indictment asserts that a group led by Scarfo and Pelullo extorted FPFG board members by threatening to sue unless the individuals convinced the other board members to surrender control of FPFG. The board member cooperated according to the indictment, giving control of the company to the Scarfo-Pelullo group, which installed a new board and management team which they completely controlled. (Department of Jusice, 2011) The indictment details some of the methods utilized by Scarfo and Pelullo to keep their criminal enterprise activity concealed, such as amassing a stock of guns and ammunition, as well as threatening to sell the children of one of the new board members into prostitution if the board member ever went to the authorities. Scarfo and Pelullo also utilized the assistance of five attorneys and one CPA. The CPA is specifically accused of being hired on retainer by Pelullo to serve as FPFG’s internal accountant. According to the Department of Justice, Howard Drossner, CPA, repeatedly submitted false information, or omitted material information, in required SEC filings. As a result, FPFG’s shareholders and the investing public had no idea that FPFG was being controlled by members and associates of organized crime. (2011) Investigation Methods and Internal Controls
With this type of criminal activity
References: Kranacher, M.-J., Riley, R. A. Jr., & Wells, J. T. (2011). Forensic accounting and fraud examination. Hoboken, NJ: John Wiley & Sons Department of Justice. (2011, November). Lucchese organized crime family member and associates among 13 arrested, charged for racketeering and other offenses, including illegal takeover of publicly traded company [Press release]. Retrieved from http://www.justice.gov/opa/pr/2011/November/11-crm-1433.html Federal bureau of investigation. (2011, December). In Mafia family fraud. Retrieved June 9, 2013, from http://www.fbi.gov/news/stories/2011/december/mafia_121211/mafia_121211 Voreacos, D., & Pearson, S. (2011, November). FirstPlus financial hit by mom takeover, prosecutors say. Business week. Retrieved June 9, 2013, from http://www.businessweek.com/news/2011-11-01/firstplus-financial-hit-by-mob-takeover-prosecutors-say.html