Two New Films, One Old Scheme

AUTHOR'S POST

Mandy Moody
ACFE Social Media Specialist

Tuesday, the Huffington Post released the trailer for the new documentary, "Chasing Madoff," starring whistleblower and CFE, Harry Markopolos. Even though I wasn’t working for the ACFE when Bernie Madoff turned himself in and the Wall Street Journal (finally) exposed Harry’s decade-long investigation, many of my coworkers were. In fact, several ACFE staff members were present for the tail-end of Harry’s journey and have continued to “listen,” support and honor a fraud fighter who brought new meaning to the phrase “going above and beyond.”

“Chasing Madoff,” based on Harry’s book, No One Would Listen, details the discovery, the investigation, the initial SEC filing, a second SEC filing, one more SEC filing, a scathing Barron’s expose, and, finally, the conviction and sentencing of the biggest Ponzi scheme to date. You can look for it in select theaters Aug. 26.

Fellow Ponzi schemer Marc Dreier will have to share the limelight once again with Madoff. The documentary, “Unraveled,” was shown this month at the 2011 Los Angeles Film Festival. Director Marc Simon, a a former employee of Dreier’s who lost his job (yeah, I reread that, too), films the former attorney and philanthropist for 60 days. The arbitrary number was not chosen for cinematic reasons, but rather ordered by a court. Simon decided to film Drier during the 60-day house-arrest period he served while awaiting sentencing.

“Unraveled” focuses more on the fraudster; his motives, greed and scam. Harry’s movie is almost solely focused on the fraud fighters, the good guys, which attempted to take down Madoff and save a lot of heartache and money. Oh yeah, did I mention Harry is a CFE?

I’m anxious to see both films and will definitely report back later. Let me know any thoughts below.

What Can Baseball Teach You About a Background Check?

GUEST BLOGGER

Brian Willingham, CFE
President, Diligentia Group
Brewster, N.Y.

Bill James revolutionized the way that people look at baseball players. Sabermatricians, as his followers would later be known, felt that there was a direct correlation between a player’s past and future performance. Instead of relying on the subjective judgments of baseball scouts, James compiled objective statistics and analysis to measure a player’s performance, thus helping to predict future performance.

“Brady Ball”

A great example of Bill James’ method happened in 1996, when Baltimore Orioles slugger Brady Anderson hit 50 home runs in 687 plate appearances (equivalent to one home run for every 13.7 plate appearances), while in his previous three seasons, he hit a total of 41 home runs in 1,846 plate appearances (one home run for every 45 plate appearances).  

It’s clear that Anderson’s past performance did not correlate with his breakout 1996 season, and sure enough, he regressed back to one home run every 40 plate appearances for the remainder of his career.

Anderson was long suspected of using steroids for the 1996 season, but those reports have never been confirmed. Without analyzing historical statistics, it would be difficult to see the uniqueness of that 1996 season.

Making a connection

Collecting and analyzing information based on a baseball player’s past performance is similar to what a private investigator does when conducting a background check. Objective information is collected about a person’s past through open sources and public records to help clients make more accurate predictions about the future. Historical bankruptcies, financial difficulties, criminal acts, a litigious past, misrepresentations and regulatory sanctions are all indicators of potential problems down the road.  

Past performance issues in a background check

There were many “past performance” issues that should have been major red flags in Bernard Madoff’s Ponzi scheme, including a two-person accounting staff overseeing a $50 billion firm, a highly secretive investment strategy and investment gains that neither Wall Street professionals nor Harry Markopolos, the Madoff whistleblower, could recreate.  

Other examples of “past performance” as an indicator of the future can be found in my recent post about 11 convicted Ponzi schemers who had already served jail time for other frauds or in the ACFE’s recent post about Barry Minkow's recent criminal charges.

Final thought

Just like in baseball, there is no one piece of information or statistic in a background check that can help predict the future. In fact, there are multiple layers of information over a period of time that must be analyzed to fully understand someone’s past behavior.  

When trying to learn more about a person’s background, if you think that a few reference checks, Google searches, a referral from respected members of the community or a couple of face-to-face meetings are the most reliable predictor of future performance, you need to take a page from the great Bill James and evaluate past performance.

Thanks to Seth Godin’s “Bill James and you” for the brilliant idea. Brian Willingham is a New York private investigator and president of Diligentia Group.