Please, help me with creating a discussion post about the topic that I have attached and responding to the 4 classmates discussion posts in the file attached as well. Thank you
This assignment requires one main post and 4 classmate responses. Do a main post for the below topic. (about 120-140 words) Classmates posts to respond to: (about 80-90 words each) · Module 2 Discussion In reference to the textbook, Shell companies are "fictitious entities created for the sole purpose of committing fraud" (Wells, 2014). In essence, these companies are legally formed to conceal the true identity of a business through required documentations but are not physical in form. These corporations are commonly known to hide money in bank accounts that are setup in the new companies name with the fraudster being the signer. One example of a Shell company is Axact, a Pakistan IT firm. The CEO, Shaoib Shakih issued fake degrees and academic certificates from 350 fabricated virtual colleges that included names such as Brooklyn Park University and Nixon University. Unfortunately, clients paid between Dh50,000 to Dh100,000 per certificate. The first occurrence that made national headlines was in 2015 when the United States Federal Bureau of Investigation informed Pakistan officers of the scandalous diplomas that were identified in the mail (Farooqui, 2018). Early on in the investigation, evidence was acquired and resulted in on the of the largest internet scams. Axact gathered money from over 200,000 people in about 200 different countries, one third being in the United States (Walsh, 2016). The company used threats, false promises, and mimicked government officials to scandal money. They had a revenue of nearly $89 million the final year of operation (Walsh, 2016). This company was legitimate according to Pakistan documentation but rather produced fabricated degrees. To think this occurs across the world is disappointing to hear as a college student. References: Farooqui, M. (2018, November 07). Pakistan jails Axact boss over $140m fake diploma scam. Retrieved March 12, 2019, from https://gulfnews.com/world/asia/pakistan/pakistan-jails-axact-boss-over-140m-fake-diploma-scam-1.2283215 Walsh, D. (2016, April 10). Behind Fake Degrees From Pakistan, a Maze of Deceit and a Case in Peril. Retrieved March 12, 2019, from https://www.nytimes.com/2016/04/11/world/asia/pakistan-axact-degree-scam.html Wells, J. T. (2014). Principles of Fraud Examination (4th ed.), Hoboken, NJ: John Wiley & Sons, Inc. · SRJ Enterprises The example of fraud regarding a shell company that I found was located in the Journal of Accountancy’s database, called “Billing Schemes, Part 1: Shell Companies that Don’t Deliver”. This article was written by Joseph T. Wells, who also wrote our textbook. This article highlights the case of a man named Stanley who worked at an advertising firm. Stanley and his girlfriend (who worked in the accounting department) came up with a plan to deceive the advertising company that they worked for by setting up a shell company, SRJ Enterprises. They set up this fake business so that “if he submitted phony invoices to the company they worked for, she could get them approved and paid” (Wells, 2002, para.6). They would then take the money that they received from the advertising firm and put it into a local bank. The couple successfully managed to embezzle $700,000 from this company before Stanley’s wife tipped off the internal auditor for the advertising company. Part of the reason that their scheme worked so well is that the girlfriend knew that the company did not investigate invoices that were under $5,000 so they would bill the invoice for just under this amount; then she would stick the invoice for SRJ Enterprises in a batch with other invoices that needed to be paid. After reviewing the books, the auditor was able to determine that the couple was indeed stealing from the business, however, because they were first-time offenders, they only received probation for their crime. There are some ways that this fraud could have been discovered beforehand. For instances, if the invoices lacked enough evidence to support the billing it should have been a red flag. Additional red flags include if more than one invoice came in for this company by the same vendor in the same month, company names with only initials, unfamiliar vendors, or information on the invoice that doesn’t match company records. Furthermore, when trying to prevent or discover fraud, companies should be looking for “information that doesn’t make sense given the nature of the business relationship…no discernable online presence…payment is made to or received from an unrelated third party” (Hubbs, 2014). Furthermore, the company could have prevented this by establishing stronger internal controls. For example, one interesting discovery by the auditor was that he noticed that the invoices were not folded, indicating that they were not received in the mail. Stronger internal controls would delegate that one person is in charge of obtaining and documenting the mail with a received date, then another person would be in charge of processing the invoice, and another would approve the expense, etc. Moreover, if the company would have spent more time reviewing their past financial history, they would have been able to see that the vendor, SRJ Enterprises, had been increasing both the frequency and amount of billing that they were receiving. Hubbs, Ryan. (2014). Shell Games. Fraud Magazine. Retrieved From: https://www.fraud-magazine.com/article.aspx?id=4294983054 Wells, Joseph t. (2002). Billing Schemes, Part 1: Shell Companies That Don’t Deliver. Journal of Accountancy. Retrieved From: https://www.journalofaccountancy.com/issues/2002/jul/billingschemespart1shellcompaniesthatdontdeliver.html · The Panama Papers According to the text, a shell company is “A fictitious entity created for the sole purpose of committing fraud” (Wells, 2013, p. 117). As a novice in the world of fraud examination, I have always viewed shell companies in terms of Grisham-esque legal dramas and Caribbean tax havens. However, as the assigned article from Fraud Magazine illustrates, “Shell companies aren't just for big tax evaders anymore,” rather, “they're the financial and deception vehicle of choice for some of the most corrupt, dangerous and ruthless individuals and entities in the world” (Hubbs, 2014, p. 1). Specifically, in a fraud involving a shell company, “the primary purpose is like any other basic fraud scheme: to conceal. This may include the nature, origin, or destination of misappropriated funds and/or concealment of the true owners and decision-makers of a criminal act or conspiracy” (Hubbs, 2014, p. 2). This begs the question: if the purpose of this type of fraud is to conceal some nefarious activity, what is the best way to combat this concealment and bring light to shady activities? The Panama Papers case, involving the leaked documents from Panamanian law firm Mossack Fonseca, provides interesting insight to the above question. Specifically, this law firm spent decades helping to form shell companies for an international clientele of the world’s wealthy and powerful, a fact that came to light following the release of millions of documents to a consortium of journalists, documents that would come to be called the Panama Papers. In the United States, two of the first four individuals to actually face charges for the events surrounding the Mossack Fonseca shell companies were Ramses Owens and Dirk Brauer. According to Bloomberg, these two individuals spent nearly two decades helping “U.S. taxpayer clients of Mossack Fonseca conceal assets, investments and the income generated from them, through offshore trusts and undeclared bank accounts, using “sham” foundations to own the shell companies and conceal the identities of the wealthy clients” (Berthelsen et al, 2018). It’s counterfactual now, but it’s unlikely that these crimes would have been uncovered without the release of the Panama Papers. However, as the assigned case study suggests, one technique that likely could have uncovered at least some of the shell companies fraudulently established by Owens and Brauer via Mossack Fonseca would be evaluating the online presence of these shells, as “shell incorporators have a hard time faking an active and robust online presence because these companies technically don't exist” (Hubbs, 2014, p. 4). The lesson: scrutiny and due diligence require both regulators and other stakeholders to go beyond simply reviewing documents of incorporation – even a cursory review of some of the Mossack Fonseca-related shells’ websites (or lack thereof) should have raised red flags well before the release of the Panama Papers. References Berthelsen, C. and Voreacos, D. (2018). US accuses four of fraud in first Panama papers charges. Bloomberg. Accessed 11 March 2019 at https://www.bloomberg.com/news/articles/2018-12-04/u-s-charges-four-with-fraud-in-relation-to-panama-papers-probe. Hubbs, R. (2014). Shell games. Fraud magazine. Accessed 11 March 2019 at https://saintleo.brightspace.com/content/enforced/60960-co_ACC-505-MBOL1-2019SP2/ACC505_CaseStudy_Mod2.pdf?_&d2lSessionVal=kDbnO5zueLEuTE6FPTrHmHXwU. Wells, Joseph T. Principles of Fraud Examination, 4th Edition. Wiley, 2013-10-14. VitalBook file. · Discussion 3-Albizu I was able to find a very interesting case of fraud utilizing a Shell company, the fraudsters were submitting claims to Medicare through illegal kickbacks for radiology, audiology, neurology and cardiology services. They tried to hide the money by transferring it into a shell company called BONB, LLC aka BioScan and other entities. The fraud was estimated to be around 2.5mil and it was found by the Medicare Fraud Strike Force. One of the managing members Leonard Austin has “pled guilty to conspiracy to commit money laundering of health care fraud proceeds (Justice.gov, 2019).” These fraudsters submitted a total of 12mil worth of claims to Medicare in the time they were open, although I am sure some of the activity was legitimate and those amounts are not unlikely for a health clinic. However, I am aware that Medicare conducts audits to the businesses they take claims from, so how exactly did they not figure out that there was this much fraud going on? I believe it has a lot to do with their audit process, and how much they actually investigate on their visits to a clinic. In my opinion I think this could have been avoided by having annual inspections with the owners of the clinic which also includes a random selection of cases to analyze. I also think that interviewing those selected patients would help an auditor identify if fraud is being committed or not. Again I am not sure how this was all missed, but I don’t believe you can falsify a medical diagnosis which is needed for a claim. I think taking a look at the investigators that were conducting these investigators would help shed some light on this case as well. Overall, this case could have been avoided or at least the owners would have been caught a lot sooner with the right processes in place. Cited: “Shell Company Operator Pleads Guilty in Multi-Million Dollar Health Care Fraud and Money Laundering Scheme.” The United States Department of Justice, 8 Jan. 2016, www.justice.gov/opa/pr/shell-company-operator-pleads-guilty-multi-million-dollar-health-care-fraud-and-money. Shell games Shell games Investigating shell companies and understanding their roles in international fraud RYAN C. HUBBS, CFE, CIA, PHR, CCSA July/August 2014 Criminals use shell companies to launder money, evade taxes and perpetuate all manner of fraud. The author defines and dissects shell