Inheritance hijacking by attorney

By Greg Wright

MBA, CFE, CFP®, CLU, ChFC

Certified Fraud Examiner

Certified Financial Planner™

Stephen W. Schuyler mug shot

Sarah Wilding trusted her attorney to give the remainder of her estate to her church’s building fund.  Elder attorney, Stephen W. Schuyler had other uses for the money.  Only recently, it finally came to light that Schuyler had over-charged and diverted as much as $500,000 from some of the 130 estate cases he was administering.

East Lynn Christian Church is a small Anderson Indiana church.  Following Sarah Wilding’s death on April 20, 2012, Schuyler paid her final expenses and distributed funds and assets to her named beneficiaries.  That was the plan.  The remainder, $145,003, was to go to the church building fund toward paying off the 2005 sanctuary expansion. 

The church was aware that Sarah had made a final gift to them, and they sought payment from Schuyler.  He stalled and requested the court approve yet another payment for additional attorney fees.  Undeterred, the church pressed him to close the estate and pay them.  Schuyler’s check bounced.

Finally, the police and prosecutor investigated.  They ascertained that, in addition to Wilding, other estates had been looted.  They identified four other estates specifically, and 130 unsettled estates that were eventually assigned to other attorneys.

The East Lynn Christian Church filed a civil complaint against Schuyler and his girlfriend, Kem Golden, for conversion of $164,101 from the Wilding estate. In addition to the civil complaints,

Charges have been made that involve the estate of Frances Clem from 2010 to 2014 of $156,790. Other victims may include other churches, and the local Humane Society. 

Unsurprisingly, Schuyler’s law license was suspended indefinitely, and he is facing 13 felony counts. 

Since supervision may be lax or even non-existent, there are probably similar cases in other communities that have simply not been reported.  The deceased had counted on a trusted attorney to carry out their final requests and not to loot the estate.  But, the lawyer treated the estate assets like his personal piggy bank.

Inheritance hijacking is not that rare.  Thieves who target the elderly and the dead are cunning and patient.  The vulnerable elderly within us are perfect targets – 20 percent are victims.

Strongly consider not waive the requirements that executors be bonded, as many attorneys suggest.  Consider not giving your attorney authority to be your executor.

Oh Snap, 401K

By Greg Wright

MBA, CFE, CFP®, CLU, ChFC

Certified Fraud Examiner

Certified Financial Planner™

"401(K)s are a great way to save for retirement?"  Sometimes.  "Taxes deferred are taxes saved?"  Not always!

401(K) expenses may offset investment gains.

Employees are suing their employers because of high fees. 

Here’s a short list of employers being sued: Anthem, Cigna, Caterpillar, British Petroleum, Boeing, Wal-mart, New York Life.

The courts may be interested; but, the regulators appear to be less interested – especially in the smaller plans.  Smaller employers have even higher fees than the big boys.  Your boss’s BFF may pay his BMW lease because of your retirement account. 

Groucho tells the story when he went to Bloomingdales department store and stole a printing press.  He was caught on the way out, and the store manager threatened to have him arrested. Bloomingdale himself told the store manager, “All the kids in this neighborhood steal. Let him go.” So Groucho went home scot-free.  The same thing happens to small 401(K) plan sponsors.  Probably less fiduciary behavior; few are investigated and fined. 

The dirty little secret is that employees pay almost all the 401K expenses.  Many plans are designed so that the company pays very little except for a “standard” plan document.  Since it is a fill-in-the-blanks plan document in the salesman's laptop, there is little or no fee.  Here are some 401(K) costs.  How much are you and your fellow-employees paying for these expenses? 

·                Investment advisor fees for managing the fund’s portfolios

·                Marketing fees

·                Shareholder service fees

·                Custodial expenses

·                Legal expenses

·                Accounting expenses ·                Sub-accounting fees

·                Transfer agent expenses

·                Brokerage Commissions

·                Sales loads

·                Redemption fee

·                Exchange fee

·                Account fee

·                Purchase fee

·                Maintenance fee

·                Plan set-up

·                Portfolio management fees

·                Educational materials and services expenses

·                Record keeping services

·                Employee enrollment services

·                Customer service

·                Legal advice to employer

·                Compliance testing expenses & audits

·                Fees for additional features or services – e.g. investment seminars, investment advice, loan fee

This chart from Brightscope illustrates 401(K) costs by size of the plan.  If your expenses are above one or two percent, you are probably paying too much.  The 401(K) guy (increasingly a gal) that shows up to answer questions and give an “investment” training lecture must be paid.   Can we talk about 401(K) investment returns?  Please.   You did know that few plans do better than broad market indexes?  In a good year, maybe 25% beat the Dow – before plan expenses.  According to some sources, not one 401(K) asset manager has been better than the Dow or S&P 500 for four consecutive years.  One writer said that a monkey throwing darts at the newspaper stock page would do better than most. Even if the employer has some sort of match, after expenses, vesting and poor performance, your returns may be negative.  Does the employer match go the same place your money goes? Does your company plan suck?  High expenses, low returns, The rep shows up in a BMW, pals with the boss and lives large.  If your company 401(K) sucks, you may not want to sue your employer.  Yes, it could be career limiting.  Some are quietly going another direction.  Here is a partial list of 401(K) alternatives from a recent US News & World Report: Use a taxable investment account.  Automatic deposit to an annuity or bank savings account.  Consider the myRA.  Set up direct deposit for your tax refund.

Cheating the elderly

By Greg Wright

MBA, CFE, CFP®, CLU, ChFC

Certified Fraud Examiner

Certified Financial Planner™

About 20% of Seniors are victims of financial fraud, and yet only 5% of the victims report the abuse.  The reasons for the low reporting include humiliation, feeling ashamed and being afraid. 

According to Federal Trade Commission, the number of complaints by people age 60 and over more than doubled between 2010 and 2014.  In the face of these alarming statistics, regulators have suggested rules to help stem the epidemic. 

In 2008, new rules prohibited the use a senior-specific professional designation that indicates or implies that the insurance or stockbroker had special certification or training in advising or servicing seniors.  Excluded from the regulations were Certified Financial Planners and six other designations[i], in part, because of their training and professional organization oversight.

Unfortunately, this rule has not seen enforcement, and I am unaware that anyone in violation of the rule has seen his license suspended, revoked, or has been issued a “cease & desist” order.   I’ve asked both the Indiana insurance and securities regulators.

Along comes the latest attempt this past September.  This latest proposed Model Rule has been designed to help protect vulnerable adults by requiring supervisors of stockbrokers and investment advisors to report when they have a “reasonable belief that financial exploitation of an eligible adult (age 60 or older) has been attempted or has occurred.” 

Good luck.  Caveat emptor. 

---

[i] Certified Investment Management Analyst - CIMA

Accredited Retirement Plan Consultant - ARPC

Certified Medicaid Planner - CMP

Certified Retirement Counselor - CRC

Certified Retirement Financial Advisor - CRFA

Certified Senior Advisor – CSA

Veros Partners Redux

By Greg Wright

MBA, CFE, CFP®, CLU, ChFC

Certified Fraud Examiner

Certified Financial Planner™

It was reported here last week that Veros Partners’ accounting business was quietly sold behind closed doors to insiders by the Court Receiver, William E. Wendling, Jr.  The business was not offered for sale to other potential purchasers and a written valuation report was not provided to the Federal Judge assigned to this SEC Ponzi fraud case. 

The attorney representing the accused has denied that it was a “Ponzi scheme.”  The case is complicated and will probably not be heard in court for another year.  Veros had hundreds of dental practice clients in Indiana and Ohio.  Perhaps Veros Partners had a market value of over $3 million before SEC case was filed. 

It is difficult to familiarize yourself with this case and not see hints of parallels with another Midwestern accounting firm that was crippled by its association with fraud – Arthur Andersen.  

You may recall that in 2002, Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron. Since the Securities and Exchange Commission cannot accept audits from convicted felons, the firm surrender its CPA licenses that year — effectively putting it out of business.   Even though the conviction was later reversed by the Supreme Court, it was too late.  The impact of the scandal combined with findings of criminal conduct ultimately destroyed the firm. 

A detailed account was published in 2002 by Andersen’s home-town newspaper, the Chicago Tribune.

Several key employees at Veros Partners were previously employed by Arthur Anderson.  It does not appear that any of these individuals were involved in the Enron scandal or have any prior blemishes on their professional record.  SED lawsuit defendant Matthew Haas is an Arthur Andersen alumni, 

Other Arthur Anderson alumni include some of the founders of the Veros Partners successor firms -- Trueblaze, LLC and MW Banks Consulting.  According to their LinkedIn pages and Veros Partners biographies, Adam Decker and Mylene Egenolf were employed at Andersen. 

Trueblaze was created on May 27, 2015, by Adam Decker and includes former Veros employees Sarah Robinson and David Osowski.  

MW Banks Consulting, LLC was formed on June 5, 2015 and appears to be operated by former Veros employees Amber Banks, Mylene Egenolf, and Wendy Day York.  Both organizations appear to have offices on the South side of Indianapolis near Greenwood. 

According to court records, before its purchase of assets from Veros Partners, MW Banks had already started providing services to former Veros clients and had received payments for those client services.  Further, court records indicate that Banks, Egenolf, and York has signed non-compete agreements while Veros employees. 

The bookkeeping, tax and audit business may not be as lucrative as you might first think.

 

According to the Chicago Tribune, Arthur Andersen embarked on a path that valued hefty consulting fees ahead of “bluntly honest bookkeeping,” and promoted a “slicker breed” of accountants who could turn modestly profitable auditing assignments into consulting gold.  Thus, the article concludes, eroding Andersen's prior good name.

Veros Partners’ defendants have not been convicted of wrongdoing.  I am certain that we will hear more from the defendants as the court date rolls around.

Veros Partners, not unlike other CPA firms, had moved beyond providing clients with “incidental” advice on investments and become Registered Investment Advisors.  Some CPAs offer personal financial planning and earn commissions by selling stocks, mutual funds, annuities and private placement investments. 

In 1988, after more than 80 years, the American Institute of Certified Public Accountants reversed a longstanding position by allowing accountants to sell stock, mutual funds, annuities, insurance products, limited partnerships and loan brokerage services in competition with other financial services professionals. 

For many of us, CPA firms are supposed to be guardians of the public trust, functioning like the police of the financial world. They know the rules, define the right and wrong way to keep the books. If a CPA firm puts its name on a financial statement, it certifies to the public that the company is playing by the rules and that the numbers conform to a high standard.

When a CPA – any CPA -- following a review of your taxes, suggests that you invest in his “homemade” private placement or a mutual fund, you might pause and ask yourself.  Is he making a higher commission on the investment than he makes for doing my taxes?  Do I need to find a CPA to review the investment suggested by my CPA?

By the way, court-appointed Receiver, William E. Wendling, Jr. has received fees of $390,375.26.  More than the court was paid for the Veros Partners accounting business.  You may read his justification for its sale at the end of last weeks article.  

Please comment.  

Veros sold to insiders - UPDATE

By Greg Wright

MBA, CFE, CFP®, CLU, ChFC

Certified Fraud Examiner

Certified Financial Planner™

William Wendling, Jr.

The Veros Partners accounting business was quietly sold to Veros insiders by Receiver William E. Wendling, Jr. 

Was it sold at a fair price?  Did the price represent an open market value?  Were the terms in the best interest of its shareholders, investors and clients? 

According to court papers, the terms of the sale were based on a Valuation Report[i]  Mr. Wendling has provided the public with over a hundred documents and exhibits – except for a written valuation report. 

Why won’t he respond to requests for a copy of the written valuation report?

Maybe it is because Mr. Wendling never ordered a written appraisal.  According to emails from Judge Poindexter’s staff, a written appraisal was never sent to the court.  

You may recall that, in April 2015, the SEC announced charges against Veros Partners, its president and two associates for making “Ponzi scheme payments to investors.”[ii]  The courts issued an asset freeze order and appointed Wendling as the Receiver.  Fraud Stupid has previously written about Veros.

In July 2015, Veros asked the court to allow it to “enter into two asset sale transactions – one with Trueblaze, LLC and one with MW Banks Consulting.”[iii]

According to the Indiana Secretary of State’s office, Trueblaze was established by Adam Decker on May 27, 2015, and MW Banks was formed on June 5, 2015. Both organizations appears to be owned by Veros insiders.  Mr. Decker appears to remain employed by Veros; Amber Banks left Veros on August 15, 2015.

Here are the terms of the sale taken from court papers dated October 5, 2015:[iv]

Trueblaze Offer: $215,000 for: (a) rights to provide business planning and strategy consulting, accounting and finance, individual tax services, business tax planning and compliance, bookkeeping and bill pay services, and start-up planning services to certain Veros consulting clients, including all files and records of those clients; (b) the goodwill of Veros’ business consulting and accounting business, and Veros Dental’s proprietary systems, tools, and trademarks, URL, telephone number, and internal operational manuals, administrative tools, forms, processes and systems and the perpetual right to use each of them; (c) certain office equipment, furniture and fixtures, and computer hardware and software; (d) all rights of Veros under the restrictive covenant agreements entered into between Veros and Veros employees listed on a schedule; and (e) office supplies of Veros used in the business.

MW Banks Offer: $90,000 for: (a) Veros’ client relationships with certain consulting clients and prospective clients, and all documents and information related to those clients; (b) certain office equipment and office supplies; (c) a prepaid Indianapolis District Central Society golf outing sponsorship; and (d) Veros’ relationship and position in the dental South Side Study Club.

Perhaps potentially troubling to Veros clients may be a stipulation that the purchaser has the right to enforce the non-compete agreements between Veros and its former employees.  We are approaching year-end tax season and its complexity.  The enforcement of non-compete agreements could force hundreds of dentists to find new accountants unfamiliar with their business, dig out old tax files for their new CPAs, and change those sensitive professional relationships. 

However, you may recall that after the fall of Anderson in the aftermath of the Enron scandal, many of its accountants went on to continue working with the same clients but at different firms.  A former Andersen CPA, Robert Lowe Jr., was later quoted in the New York Times, “I have the same relationships I’ve had for 20-plus years.” Apparently Andersen’s accountants were not curtailed by non-compete agreements.

Shortly after the offers from Trueblaze and MW Banks were published on Wendling’s website and Pacer, on October 26, 2015, the sale was approved. 

Was Veros’ accounting business offered to other accounting firms?  There is no evidence in Receiver Wendling’s papers that Veros asset selling price represented an open market value.  Why not? 

Below is a screenshot clipping from Mr. Wendling’s interim report dated Oct. 30, 2015.

(screenshot)

[v]

Based on a “Google” search of the subject, accounting firms appear to have a ready market. “Great buyer demand….difficult industry to grow organically.”[vi] The Journal of Accountancy article, “How to value a CPA firm for sale.” [vii] may be an appropriate place to start.  Another might be the AICPA article on the valuation of Accounting Firms by Eddy Parker, ABV.[viii] 

Using rules of thumb in these and other published sources, and based on public knowledge of Veros, one might easily arrive at a much higher amount than was paid by Trueblaze and MW Banks. 

I’m not faulting the former Veros employees at Trueblaze and MW Banks for negotiating a good deal for themselves. I am asking Mr. Wendling to explain why a detailed valuation report apparently was never ordered and why Veros’ assets were not apparently offered for sale to others. 

---

[i] Veros Motion to Modify Preliminary injunction to Sell Assets, Page 6, Document 135; http://www.ckplaw.com/wp-content/uploads/2015/05/135_2015-10-05_Order_on_Veros_Motion_to_Modify_Preliminary_Injunction_Sell_Assets.pdf 

[i] U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 23246 / April 24, 2015

 https://www.sec.gov/litigation/litreleases/2015/lr23246.htm

[i] Veros Motion Doc 135, p. 3

[i] Veros Motion Doc 135, p. 3-4

[i] Receivers 2^nd Interim Report,  http://www.ckplaw.com/wp-content/uploads/2015/05/143_2015-10-30-Receivers_2nd_Interim_Report.pdf 

[i] AICPA article on accounting firm valuations, http://www.aicpa.org/InterestAreas/ForensicAndValuation/Membership/DownloadableDocuments/accounting-firmscpas.pdf

[i] http://www.journalofaccountancy.com/issues/2013/nov/20138232.html 

[i] http://www.aicpa.org/InterestAreas/ForensicAndValuation/Membership/DownloadableDocuments/accounting-firmscpas.pdf

UPDATE:

4:00 PM 11/25/2015 comments from William Wendling:

“I am happy to point out a few issues that may help you understand the transaction that you somehow believe is nefarious.  First, I am not the Receiver over the entire Veros operations. Specifically, I have some supervisory authority, but I do not have control over there ordinary bookkeeping and tax preparation business, which was the asset being sold.  However, when Veros wanted to modify the agreed order relating to a freeze of its assets the SEC object for the reasons stated on it filing with the court.  There was a hearing about the modification request before the Judge and after the parties argued their position as to who should get the money resulting from the sale of these assets the court wanted to know about the value.  There was a discussion about the value and the court turned to the Receiver and asked me to report back to her if the value offered was fair.  So I requested  Blue & Company to help me determine whether the price offered was reasonable.  Blue & Company reviewed numerous Veros financial documents and interviewed the prospective purchasers etc.  I participated in most of those discussions.  Keep in mind that at this time Veros was losing clients right and left.  They were loosing employees.  Yes some had non compete and confidentiality contracts, but under the circumstances there are good legal arguments that could negate those contracts.  

So when Blue came up with its analysis it showed that the sales price was most likely much higher than what those assets were worth.  So, as requested by the court I filed my response that the price was acceptable. Not because it was close to the low side, but because it was considerably more than the high side.  After I filed my response about the value I participated in two conference calls with the court and the parties wherein my findings were discussed.  The court and parties were satisfied my statement that the value was acceptable.

One other safe guard that the price was right stems from the fact that the bank perceives these assets as being covered by its lien on Veros assets.  So the bank is not interested seeing those assets sold on the cheap since it intends to get the money.  My guess is that the bank arrived at the same conclusion that I did.  The assets were being sold for more they were worth.

I am not sure why you perceive any of this as being nefarious or devious, but your entitled to your opinion.”

UPDATE:

7:16 PM 11/25/2015 clarification comments from William Wendling:

I would change my statement to the extent that the assets were being sold at the high side of their value. I did not mean to say that the were sold higher than the value, although some could argue that they were. Again, the amount paid was considerable as it relates to the condition of the assets at the time of sale.  Neither the party buying the asset nor the party receiving the value of the sale, the bank or the SEC, not Veros, took exception to my report to the court that the sale price was in the range of acceptability.

UPDATE:

8:27 PM 11/25/2015 -- COMMENTS FROM GREG WRIGHT

Based on the most recent information from Mr. Wendling, my suspicion has been confirmed that a written Valuation Report was never constructed and the Veros Partners asset sale price did not represent an "open market value." 

Governor Pence Suspends Resettlement of Syrian Refugees in Indiana

This morning I asked Gov. Pence if he was going to follow the lead of the governors of Michigan and Alabama and suspend the resettlement of Syrian Refugees.

In addition to the public safety risks, it costs Hoosier taxpayers two to three times more to educate  a refugee than an American-born child.  The Federal government does little to offset the costs of resettlement.

An email was just received from his re-election campaign that he was indeed going to suspend that program.

End of Western Civilization?

By Greg Wright

MBA, CFE, CFP®, CLU, ChFC

Certified Fraud Examiner

Certified Financial Planner™

Will the combination of Mideast political instability and the inability to control immigration doom us?  Will the decisions of Secretary Hillary Clinton, President Barack Obama, and President George Bush, lead to the destruction of Western culture? 

We have been there before.

The Roman Empire lost the strengths that had allowed it to exercise effective control of its borders and Illegal immigration led to its fall.  Yes, illegal immigration caused the fall of the Roman Empire. 

Germanic immigrants drove the Roman government into extinction and its citizens into the “Dark Ages.” Is it possible Muslim, Mexican, and other immigrants are likely to send the U.S. and Europe to a similar fate?  

Ask the citizens of Paris. 

Just before the fall of the Roman Empire, its most successful institution was the army, a disciplined, well trained, and formidable fighting force. However, the Roman Government was corrupt.

Sound familiar?

Over a fifty years period, all of the Roman Empire was gone. Why? It was destroyed by illegal immigrants, equal to only about 10% of the native population. The Germanic tribes were not that rare and unusual. They started crossing the Rhine by the tens of thousands and kept coming. They were fleeing political disruptions and starvation.  Rome could not absorb that flood of refugees that refused to be absorbed into its society.

Following that illegal immigration, came the “Dark Ages,” of roughly the period from the 6th to the 13th century.  This was a period of intellectual darkness.  Are we to repeat that history?

This pattern of lax border control is not unknown in history and was the cause or an earlier destruction of civilization and entrance into centuries of dark ages.

In about 1177 B.C., groups known by the name  "Sea Peoples" invaded the Eastern Mediterranean. 

As explained in the recent award-winning book by Eric Cline “1177 BC: The Year Civilization Collapsed,”  the civilized world of the Bronze Age came to an abrupt end. Counties fell “like dominoes over the course of just a few decades.”  “No more Minoans or Mycenaeans. No more Trojans, Hittites, or Babylonians.” Egypt managed to defeat the Sea Peoples but emerged from that war so weakened that it slid into decline. 

These thriving cultures, in the Eastern Mediterranean Sea, suddenly ceased to exist.  Gone were their writing systems, technology, and architecture.  Eric Cline tells the story of the end of civilization and the beginning of a dark age that lasted centuries.  Uncontrolled immigration also ended this civilization. 

Will Europe and the U.S. suffer a similar fate?  Will the proponents of “open borders” and massive immigration prevail?  We know where the Moslem world stands on this issue.  Where do you stand?  Do you support Western civilization?