Yesterday, I used some of the wisdom from current CIA
Director General David Petraeus to suggest how senior management might move
forward with a compliance program. Today I will use a very different individual
to help inform your third party due diligence, Charles Ponzi.
My colleague Tracy Coenen writes an invaluable blog
entitled The Fraud Files
Blog. She consistently writes about detecting fraud in all its forms.
In a recent post,entitled "Ponzi
Scheme and Investment Fraud Red Flags", Tracy identified many Red Flags
which might come up if you performed some due diligence on a Ponzi scheme or
persons promoting it. In her blog post, she listed "some red flags about the
"investment" you're considering that might indicate it is a Ponzi scheme" and
they are as follows:
One of the things that struck me in reading Tracy's list
of Ponzi scheme Red Flags is how closely they mirror those which may appear in
a Foreign Corrupt Practices Act (FCPA) or UK Bribery Act due diligence
investigation. Additionally the Red Flags would seem to organize themselves
into four general areas:
In due diligence training, I always tell people to listen
to their guts, or if the hair on the back of their neck stands up, pay
attention. Not listening to your internal warning system can lead your company
down a path that it may well not desire to travel. Red Flags are so called for
a reason and if they are raised they must be sufficiently clear. Tracy Coenen's
list of Red Flags for Ponzi schemes is one which any corporate compliance
officer should take to heart.
Coenen, CPA, CFF has also written a useful book for
helping companies and individuals detect fraud and Ponzi schemes and investment
frauds entitled, "Expert Fraud
Investigation: A Step-by-Step Guide." She can be reached via
email at email@example.com.
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
This publication contains general information
only and is based on the experiences and research of the author. The author is
not, by means of this publication, rendering business, legal advice, or other
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© Thomas R. Fox, 2012
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