The Sherlock Holmes for your stolen money
Photo | Brad Kane
David McLaren, Managing Partner, McLaren & Associates CPAs, P.C., Shrewsbury.
Since 1993, David McLaren has been taking on forensic accounting cases. Along with expansions in his tax business, the rise in forensic cases has grown his accounting practice to where he is completing an addition to double the company’s office space.
What is forensic accounting?
Forensic accounting is really an investigation. It is tracking money that is missing. It is tracking where people have altered your records. You would have a partner who is stealing money. An employee who is stealing money. A divorce case where a spouse is hiding money. You have people at businesses who alter records to make it seem like a company is more profitable, so they get a bigger bonus.
How prevalent are these?
There is more now than ever. The white collar crime is the crime of the century. Our forensic work in the last year has doubled.
Almost a third of small businesses get hit with fraud, and half of them don’t even know it happened. Or they just determine the tip of the iceberg.
The tip of the iceberg?
Every forensic case we’ve taken, the person thinks a certain amount was stolen, but we find out the total amount was drastically larger. In one recent case, one person thought his partner stole $50,000. It turned out to be $2.5 million.
What is the most common case?
In the forensic world, the most common fraud cases are with the government and nonprofits. Government has a lot of issues with accountability. People aren’t looking, and the checks and balances aren’t there. With nonprofits, most people are not as skilled with the records. They are focused on the nonprofit’s cause, not tracking the money and where it goes.
How about from businesses?
We don’t see many employee-theft cases, because – unfortunately – 80-85 percent of employee-theft cases will never be repaid. So employers are not going to pay lawyers and forensic accountants to determine how much money was stolen. Small businesses owners are embarrassed when people are stealing from under their nose. It is common in small business because there are not as much segregation of duties. You might have one employee handing all the finances. The business owner is out growing his business but not necessarily looking at his records.
How do you find fraud?
When you say forensics, most people don’t know what that is. They think it is all fingerprints and blood splatter to find out who the murderer is. What we are doing is essentially that, except through financial data. Everything leaves a trail, even cash. Forensics is about getting deep in the weeds and seeing what doesn’t belong. We are skilled at interrogating people, reading body language, determining when people are lying. It is finding bread crumbs and tracking them down.
How can businesses prevent fraud?
The No. 1 biggest, easiest thing business owners can do is open up their own bank statements. Go through the cancelled checks and what money has been pulled out. So many of the cases we go through, people will say, “I never wrote checks for these. That isn’t my signature.” If you are opening your bank statements, you would pick that up.
How’s your expansion coming along?
The addition will add 3,000 square feet. We expect to move in by the end of March. All of the new space is already spoken for, so we are talking about potentially doing another addition.
You must be growing fast.
Two years ago, we grew 35 percent; last year, we grew 20 percent; and we will grow 25 percent this year. That is both from taxes and forensics.
How you decide to take a case?
We won’t take a case unless we know there is fraud there. We have the experience to tell right away, so you don’t have to worry about spending a whole bunch of money for us to say, “There’s nothing there. I hope you can sleep better at night now. Here’s my bill.”
We get people justice. We’ve won 99 percent of our forensic cases.
This interview was conducted and edited for length and clarity by WBJ Editor Brad Kane.
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