Who’s Cheating America: Let’s Go Fly A Kite!

Image Credit: Charles Schulz via John Harris

Check kiting! Maybe the most colorfully named of all the great frauds. And something you could almost see someone falling into inadvertently. Let’s say you don’t have enough to pay a certain bill in one checking account, but hey, you have more than one account. And a few credit cards. All their due dates are different! So you have some money coming in here, flowing out there, this one can cover that one, and then that one can cover this one, this bill’s not due until the tenth, the paycheck’s the fifteenth, when does the bank cash this thing anyway? Wait, what? This is illegal? I thought it was called running a household.

Well, yes, it is illegal. Paying with money you don’t have (yet) is illegal. And it’s often the sign of a gambler, or a small-business owner, or Homer Simpson.

It’s certainly not the handiwork of an audited Nasdaq-traded company. Except when it is!In this case, the auditor missed the fraud and declared that the books were in order. They’re being sued by a creditor who claims they relied on those reports when making a loan to the company:

Milfam and its principal Lloyd I. Miller claim they relied on Holtz’s audit reports, which showed the company’s books were in order, when they loaned at least $3 million to Synergy in 2010. Had those audit reports shown the truth — the company whose revenues CEO Mair Faibish was inflating by passing bad checks to Canadian companies and receiving bad checks in return — Miller said he never would have invested in the company.

Okay, there was something going on here, but why blame the auditors? Auditors can’t catch every little thing! Sometimes they’re victims too. And if this guy Faibish was writing out some bad checks – well, how are the auditors supposed to know?

A New York judge on Friday shot down Holtz Rubenstein Reminick LLP’s bid to quash a creditor’s lawsuit that claims the auditor should have caught bankrupt food products company Synergy Brands Inc.’s $1 billion check-kiting scheme that led to the arrest of its CEO, ruling the creditor has standing to bring the action.

A billion dollars? They missed a billion dollars in check kiting? What were they auditing? The cheese steaks in the cafeteria?

Argh. Not sure who’s worse – the cheats or the lazy accountants who enable them. Wake up, America! Take a closer look at your books! You’re being cheated!

Previous entries in our Who’s Cheating America? series:

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2 thoughts on “Who’s Cheating America: Let’s Go Fly A Kite!

  1. It takes two to tango! Stony Brook University’s foundation and other related organizations are using these “LAZY” Accountants and they make for very good bedfellows

    Like

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