NCJ Number
144711
Journal
FBI Law Enforcement Bulletin Volume: 62 Issue: 8 Dated: (August 1993) Pages: 10-13
Date Published
1993
Length
4 pages
Annotation
This article describes the technique (cash flow analysis) used by the Ventura County District Attorney's Office (California) to investigate Ponzi schemes.
Abstract
Ponti schemes, named after a swindler who emigrated from Italy to the United States in the early 1900's, continue to flourish throughout the United States. In a typical scam, an offender lures unsuspecting investors with claims of unusually high yields on their investments. Although the offender provides contributors with vague background information on the firm or venture to be backed, no such entity actually exists. Instead, the offender attracts more and more investors, using their new money to make interest payments to previous investors. The offender uses the bulk of the immense cash reserves to finance an expensive lifestyle and pay personal bills. The Ventura County District Attorney's Office now uses an investigative technique that, when appropriately applied, significantly reduces the time required to investigate Ponzi cases. It uses cash flow analysis, a technique accountants and auditors have long used to trace the flow of funds into and out of particular bank accounts. The overall objective of the cash flow analysis method with regard to Ponzi scheme investigations is to establish how offenders illegally received and spent their victims' money, the total amount of money stolen, and the number of victims involved. Forensic accountants are used to audit suspects' financial records, so that prosecutors can call upon these expert witnesses to trace the trail of the stolen funds. 2 notes