Smart Hiring Of Financial Staff For Family Employers

A former chief financial officer for the financial services organization Bankrate faces numerous charges for allegedly participating in an accounting and securities fraud scheme.

The indictment charges the former CFO with lying to accountants and falsifying records, committing wire and securities fraud, and conspiracy.

According to the charges, between 2011 and 2014, the former CFO and his co-conspirators artificially inflated the organization's earnings by manipulating its financial statements. They also allegedly lied to auditors, shareholders, and the investing public to hide their "cushion" accounting. Their alleged wrongdoing includes leaving unsupported expense accruals on the books to later artificially meet earnings goals and fraudulently listing some expenses as "deal costs" to artificially inflate earnings metrics.

The U.S. Postal Inspection Service investigated the case. According to the inspector in charge, the organization "has an extensive history of investigating complex financial fraud schemes in order to protect investors as well as the integrity of the financial marketplace from fraudulent activities by trusted insiders who abuse their positions." "Former Chief Financial Officer at Publicly Traded Company Charged with Accounting and Securities Fraud Scheme," www.justice.gov (Dec. 20, 2017).


Commentary and Checklist

To protect your finances, family employers must perform due diligence before hiring staff members who will manage or influence finances.  When selecting a financial advisor, always go with a fee-based (not commission-based) certified financial planner (CFP) who is a fiduciary.

Check to see if the financial planner has ever been investigated or indicted for financial wrongdoing, and if his or her credentials are sufficient and up-to-date. Request client references and ask them about any signs that their money may have been mismanaged.

Family employers must be careful when investing to protect themselves from investment fraud. Here are some tips from the U.S. Securities and Exchange Commission (SEC):
 

  • Perform your own independent research before investing. Check out the organization's financial statements on the SEC website or contact your state securities regulator.
  • Never use unsolicited emails, message board postings, or the organization's own news releases as the sole motivator for investing.
  • Even if you know the person with whom you will be investing socially, take time to learn about their professional background. Make sure they are licensed to sell securities in your state, and check the SEC's online database to see if they are under investigation for wrongdoing.
  • Be wary of any unsolicited offers.
  • Remember, if it sounds too good to be true, it probably is. Guaranteeing returns is impossible, so do not trust anyone who claims extremely high returns are a sure thing.
  • Just because an organization has a nice-looking website does not mean that it is legitimate. It is easy to create a fake site.
  • Resist pressure to invest quickly, and be wary of anyone who says a "once-in-a-lifetime" offer will be gone tomorrow. Truly good investment opportunities will wait for you to perform your research.
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