Jim Barratt, CPA, CFF

This podcast delves into interesting aspects of historic and recent financial frauds with the aim of informing and empowering investors and businesses with knowledge to protect themselves from becoming victims of financial malfeasance. Seasoned forensic accountant and former federal investigator, Jim Barratt, breaks down the frauds in simple terms and provides Illuminating analysis and insightful commentary on financial frauds, scams and deceptive practices that plague the business world.… Show more

This podcast delves into interesting aspects of historic and recent financial frauds with the aim of informing and empowering investors and businesses with knowledge to protect themselves from becoming victims of financial malfeasance. Seasoned forensic accountant and former federal investigator, Jim Barratt, breaks down the frauds in simple terms and provides Illuminating analysis and insightful commentary on financial frauds, scams and deceptive practices that plague the business world. Experienced white-collar professionals join the podcast to share their experiences and perspectives. Learning the details of financial frauds can be informative and helpful and the stories and characters involved in these shenanigans are often stunning, unbelievable, and ridiculous. Show less

How long does it take to reach one billion?

Ray Kroc, the founder of the McDonald’s food franchise, posted the number of total hamburgers sold on their signs, starting in 1955. At the time, the number was over 1 million served, and they reached 1 billion hamburgers served in 1963, some eight years later.

It took 23 years for Warren Buffett to become a billionaire, but it only took five years for Jeff Bezos to join the billionaire’s club.

On September 15, 2021, the… Show more

How long does it take to reach one billion?

Ray Kroc, the founder of the McDonald’s food franchise, posted the number of total hamburgers sold on their signs, starting in 1955. At the time, the number was over 1 million served, and they reached 1 billion hamburgers served in 1963, some eight years later.

It took 23 years for Warren Buffett to become a billionaire, but it only took five years for Jeff Bezos to join the billionaire’s club.

On September 15, 2021, the Securities and Exchange Commission (“SEC”) announced that the SEC’s Office of the Whistleblower has now paid more than $1 billion in awards, since its inception in 2010. In just over ten years, more than 200 individuals have received awards, with approximately $500 million paid in fiscal year 2021 alone. SEC enforcement actions from whistleblower tips have resulted in more than $4.8 billion in financial remedies. Show less

In the classic rock song, “One”, by Three Dog Night, the lyrics state that “one is the loneliest number…”. However, with respect to earnings per share (“EPS”) rounding by publicly traded companies, it appears that four may be the loneliest number.

In their academic paper, "Quadrophobia: Strategic Rounding of EPS Data," authors Nadya Malenko, Joseph A. Grundfest, and Yao Shen identified the number four as the most under-represented number in the first post-decimal digital (10th of a… Show more

In the classic rock song, “One”, by Three Dog Night, the lyrics state that “one is the loneliest number…”. However, with respect to earnings per share (“EPS”) rounding by publicly traded companies, it appears that four may be the loneliest number.

In their academic paper, "Quadrophobia: Strategic Rounding of EPS Data," authors Nadya Malenko, Joseph A. Grundfest, and Yao Shen identified the number four as the most under-represented number in the first post-decimal digital (10th of a cent) of reported EPS results [1]. To illustrate, a company’s reported EPS results are rounded to the nearest cent: EPS calculations of 22.4 cents are rounded down to 22 cents, while calculations of 22.5 cents are rounded up to 23 cents. The most recent version of the paper describes a variety of statistical analyses based on the study of earnings reports across all publicly traded companies from the period 1980 to 2017. They found, among other things, that the number four appeared less often in the 10th of a cent place than any other digit in the calculation of reported EPS results, much less than would be expected by chance.

This pattern of the number four being significantly and consistently under-represented, was cleverly named “quadrophobia” by the authors. Quadrophobia is not to be confused with the title of the classic rock album, “Quadrophenia”, by The Who. Quadrophobia is an actual type of phobia related to the fear of the number four. The paper states that it, “…appears that individual managements engage in patterns of practice that are likely to generate strategic rounding behavior…”. This finding led the authors to the construction of a new measure of aggressive financial reporting practices called the quadrophobic score. A company that did not report a four as the first post-decimal digit over a number of prior quarters would result in a higher quadrophobic score. Show less

In Liu v. SEC, the Supreme Court ruled that disgorgement is limited to “net profits” and that “legitimate expenses” are to be deducted from any disgorgement amount. While the interpretation of what constitutes “legitimate expenses” will likely play out in various court decisions over time, the inclusion of legitimate expenses in a net profit calculation is essentially a threshold, or starting point, in a well-developed disgorgement analysis.

When a company and defense counsel find… Show more

In Liu v. SEC, the Supreme Court ruled that disgorgement is limited to “net profits” and that “legitimate expenses” are to be deducted from any disgorgement amount. While the interpretation of what constitutes “legitimate expenses” will likely play out in various court decisions over time, the inclusion of legitimate expenses in a net profit calculation is essentially a threshold, or starting point, in a well-developed disgorgement analysis.

When a company and defense counsel find themselves on the threshold of a negotiated settlement with government authorities, including the SEC or the DOJ, they have a valuable opportunity to minimize the amount of a disgorgement payment, which can often run into the hundreds of millions of dollars, while also satisfying the government authority’s statutory requirements.

The determination of net profits in connection with a settlement requires a thoughtful approach along with a detailed analysis in order to obtain the best financial outcome for the company. A robust profit disgorgement analysis that provides reasonable and supportable assumptions to government authorities can result in a significant reduction in the amount of a negotiated settlement payment. Show less

EARN TRUST By Changing Selling Into Helping is a business book that shares practical tips for business development and networking. This guide provides insight into ways to help each other and earn the trust of our customers and clients.