5/26 Buffalo Means Business w/ Freed Maxick CPA'S

Buffalo Means Business
Saturday, May 26th

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

Thank you for tuning in to buffalo means business on news radio 930 WB Deanna I'm Randy bush over the program highlights local businesses and services in the region and if there's a local business or service you'd like to hear from. Send me an email at Randy dot bush over @entercom.com. With me apparent directors from free Max XE PA's timid Poland and Joseph a quick note gentlemen thanks for coming and that your hands are among the areas that you guys work within fraud investigations forensic accounting how does that work exactly fraud investigation what sort of thing is that you actually do. So typically we called in when there's been a potential bells meant with an A organization the way collar crime and determine the amount of money that was stolen. And how exactly do you go through that process that does someone come to you and say hey I think we have a problem order. Do you actually do all of the work to find that there is a problem in and go kind of backtrack it. Usually called from the owner of the business or their attorney and a feel that they've uncovered some impropriety within your organization. In the wanna see commanding and determine if you know what is the extent of the crime. I guess I should go back and also establish that you guys have more than just the office here in buffalo you guys are pretty widespread. Yes we have personally through our employees we were headquartered down in buffalo and liberty building we've been there since 1958. We're celebrating sixty years in business. Which is a great accomplishment. We're very proud of and we elsewhere have an office in Batavia Rochester. And Syracuse. Joseph we haven't heard from you yet so explain what it is that you do for free match XPX of a director ball in the audit and accounting but I also. Working our business valuation litigation support groups so. Of what that means is Tim and I typically the infants. Working with attorneys are in situations where others shareholder disputes issues between shareholders. Where they can't necessarily come to an agreement on the value of the company were brought in to can help with that process so. Of valuations needed because. What they're trying to do is settle that financial transaction with infected shareholder and they can't they can't come to an agreement on what the the actual value value of that ownership in the company is worth. Right Tim the typical fronts in areas that you've seen or worked. So mostly cases they're really not that complicated typically you've got a bookkeeper controller who is. Very involved in the business there's a lack of segregation of duties and you know typically we see is. Cash payments. Out to that individual or. Payments to fictitious vendors or. You know stealing cash before it gets recorded in the on the books or records so. I'm also might not very complicated but it's all but it's determining you know when did the crimes are. Over the tucked the schemes because typically there may be multiple schemes that are involved not just you know paying. Their personal corporate credit card with personal funds corporate funds so it's multiple. Different types listeners east Woolsey. And just a reset how exactly are these fraud some odd frauds yes it probably not the proper word but you know I mean are they discovered uncovered. Typically it's it's by accident you know over 50% is either the bookkeeper controller is on vacation. Or out sick and an accounting question comes up and the owner or that some of the other employees start to. Look for the answer all the suddenly uncover some. Something it looks not right and that's typically when we get involved in or you may get a call from a vendor. Or from a charge card company visa RMX says say. We're noticing that this individual's. Monthly credit cards being paid by corporate funds GI's aware of that so. Many times it's just by a hot tip or just you know by accident. Talking to a timid Poland and joked Leno both directors for free Max exe PA's. And Joseph want to turn to you for the business valuation part of things so what type of scenarios do you typically see business valuations used or when it comes to litigation. Sure I'd say the most common Rand is when there's issues between shareholders and we'll see. Either there's a shareholder buyout or dissenting shareholder that's not happy with the situation wants out and they can come to an agreement on price so. What the valuation does it determines our pricing can be used to have to kind of settle that transaction for the affected shareholder. And it's its interest in what is the process once the situation is identified you brought it into the situation. So when when the parties can't agree what they'll do is on the parties can be either. Existing shareholders with the company could be your Fisher holder dies there's a dispute with that shareholders a stage. Where they can't come to an agreement on price or the process typically is with the parties. Double player and independent appraiser to do evaluation. And whistles of valuations are Don if they still can't come to an agreement on a light Agile and core. Reevaluate her and opening an expert witness to defend their report in front edge surgeries. The process itself can get pretty complicated and that we're looking at. Historical several years of historical or projected financial information. Trying to analyze historical trends in the company wide what is the operations look like over the last few years what is it projected to court over the next few years. Other anomalies included meaning other things and maybe one offs that affect the value of the company there. Things that are comparable to the market or other companies in that industry that the company valuing is involved and and it's looking bad is owners compensation excesses are there. Family members included on the payroll or other non operating expenses are there one time it's that light helper or. Hurt the value of that company that we're trying to normalized earnings stream Kamal the fair market. And insisting it on that you mean business valuation isn't so much an exact science. So you get five Delhi waiters in a room all come up with five different valuations but. There's you know over the years there's much more empirical data there's much more. Transactional data out there that you can pull from to support evaluation of him of the business. As gonna ask you guys about that because that seems like that would be one of the hardest things to do is to figure out you know based on. First of all what product or service that they did the businesses offering and that's gonna maybe change depending on market value of that particular product right. Rated sickly and end in today's environment I mean the multiples that are being paid for businesses is extraordinary you know but we have to look at. You know most. Empirical data look at rates of return a marketplace in. What would be willing buyer and a willing seller. Pay for that business then you're looking at ultimately be careful. From the operations you know how good is the careful in how consistent will that be to pay Barack. You know the return on the dollars are being invested in the business and. And that's why you want a normalize is too because a lot of times there can be things have happened in the past that. Aren't necessarily every reflective of what's happening in the future that can impact the overall value for the company. And Joseph guys you and Tim just talked about that it's a pretty involved amount of information there what can business owners put in place to prevent the need for all of. It's up it it can be pretty extensive as well as expensive. For the business owners so. What one of the recommendations as soon it to have a solid buy sell agreement in place. You know I think a lot of times business owners are necessarily focused on that aspect there rightfully so we're obviously focused on the day to day operations of running their business. And if especially if things are going well and they're not really worried about what's gonna happen if things are console. And saw solid buy sell agreement we'll helping in kind of laying out the process that the company or use of trying these shareholders situations arise such as. You know the adopted a shareholder word the disability of a shareholder words can't worker she can't work anymore. Or just a case of a shareholder and along wants to be an owner in the company. It'll not only help with the process but it'll it'll lay out how the value of that company's going to be determined to be. A specific formula that the company uses or can be just a reference to using an independent appraiser such as tonight. It helps not only because a lot of times in reality what we've seen as you wanna buy sell agreement is in place. It it's not reviewed or updated all that often hasn't looked at since it was created so the value. A formula that's been used. Is an updated her current with the operations of the company you have disputes between journalists can agree on the value. So if it's updated periodically. Whether it's our leader whether it's every couple years. Everybody's more in line with that value in the methodologies. That are being used in just felt we use issues in the future. And Tim if we could to shift back to the fraud investigations portion and how do you perform an investigation one of the key elements to that. The key elements is when you suspect something is happening in improprieties. To secure. Documentation secure. Bank record six year. Information systems the computer. Records for the potential perpetrators. Because there has to be some former reconnaissance you may. Pick up on a tip that the other some impropriety going out CNET to spend nights and weekends. Pulling records together and so what you wanted usually build your case before the proper trader knows it something's going on in so. When you eventually. Address the prepared trader with the evidence do you have. It's a lot stronger case than if the perpetrators thinks that's your starting to investigate something in any start destroying records. And you know nature. Case alive harder to try and develop against that particular individual. And I would imagine that would make that even more difficult to resolve than BS the fear are in fact having records destroyed and then trying to figure out a way to either. Get those back electronically or by some other method. Yeah absolutely does you banks typically after five or seven years destroy. Bank records so committed to cool bells in the last you know four to five years we've been a ball with some nickel back is lawn is 25 years so. It soared in order to approve the amount of money that was taking you have to have access to all records as far back as in individuals that are working for the company. And even though would the two of you Tim and Joseph. Kind of work different ends of things I would imagine there are a number of times where both of your case is kind of come together right when you've got some fraud. Involved along with the the business valuation because. Those two would be intertwined perhaps. Yeah if you start looking at. And the valuations side where. There may be money going out the backdoor. For. Potentially. A third parties that may be the all nerve. Is also involved in NC you've got money being siphoned out. Fifth third party vendor and that was a way for an individual take additional money out of the business and there's no really services being performed so. I've seen Joseph situation you would. Possibly recover that and then. Treat that as an ad there or normalization adjustment because the profits of the company were artificially deflated because this person. Was actually siphoning money off through another company. And either you know is there such a thing is knowing how prevalent this is now as compared to years past as this re seeing about the same amount of the fraud and that sort of thing orders that are lasts. With the advent. Of the casinos. And the build up a casinos because people don't steal money. To hoard it and stick it underneath the mattress there's usually a need whether steal money in gambling is the number one reason out there. I've worked on a number cases with a disc attorney's office. I served probably twenty years ago an average of felt the man was twentieth 30000 dollars now it's 200 to 300000 dollars so. There is a need out there are casinos are probably the biggest reason. Lifestyle changes people like to keep up with the joneses and you've got somebody making 60000 dollars a year but. Tries around expanse of Paris goes on lavish vacations. Puts her kids through you know expensive college is so. I always tell everybody lauded the clues are very visual you can sir see. One plus one doesn't add up to two you know their lifestyle act exceeds what they are they're getting paid so. That makes it done is for interesting. Investigations. And Joseph anything them follow up on that yet I think you know and Tim can elaborate more than Bernard initially too as you must start to uncover the fraud. In the dollar start to add up. It's never initially what they think you know the last of me one number in ones in all the fraud work is done it it could be a significant amount more. That actually ends up being in Basel cell. I think if they start to understand that there's a situation and a lot of times it doesn't come to light when they don't want it to come to light and and think they can handle it on their own and the amount of the losses actually. The significantly amount more once regions that are doing the work. And and unfortunately general is a restitution they're very seldom you'll get any kind of restitution so. A gentleman learned a lot and know that I just crashed the surfer Exxon now both topics of thank you for reminding us what she did so far. Thank victory any that was our directors Tim Poland and joke we know with free Mac succeed BA's this is buffalo means business on news radio 930 WB yen.