Fraud Is a Constant Concern
Jacen Dinoff, CTP, is co-founder
and CEO of KCP Advisory
Group, a business advisory firm
providing creative solutions to
rehabilitate businesses. Dinoff has
hands-on accounting, finance,
management, and operations
experience that complements
his technical expertise in
bankruptcy case administration
and financial advisory. His
career has included financial
and operational restructurings,
asset divestitures, and senior
debtor/creditor advisor roles for
public and private companies.
BY JACEN DINOFF, CTP, APRIL GUEST EDITOR
case who wanted to discuss the debtor’s
controller. This controller had previously
committed fraud at the company of one
of my clients, though we fortunately
saved the client’s business after the
fraud case was settled in mediation. And
now, per the trustee, another business
had been rendered insolvent, quite
possibly due to this controller’s actions.
Had it invested in risk management,
background checks, and other due
diligence, the debtor may have avoided
such a devastating situation.
According to Kroll, businesses saw a
significant increase in fraud and risk
incidents during 2016. Kroll’s “Global
Fraud & Risk Report, Building Resilience
in a Volatile World, 2016/17” states
that although companies have taken
significant strides toward building
resiliency, they still need to do more.
This month’s JCR features several
articles, examples, and refreshers on
the subject. Michael Goldman, head
of KCP Advisory Group’s Forensic
Accounting and Litigation Support,
offers “Fraudulent Conveyance Actions
Provide a Tool for Asset Recoveries,”
based on his recent case experiences.
The article focuses on the transfer of
property for less than equivalent value.
Last year the Panama Papers scandal
unfolded. Jon Barooshian of the
Bowditch & Dewey law firm says the
case is a reminder for companies to
guard against money laundering. An
unprecedented leak of 11. 5 million files
from the world’s fourth biggest offshore
law firm, the Panama Papers were shared
anonymously with the International
Consortium of Investigative Journalists.
The documents show how offshore
shell companies can be used to make
dirty money look clean. Twelve national
leaders were among 143 politicians,
their families, and close associates
from around the world shown to be
using such offshore companies.
Nicholas Kajon and Eric Robinson
of Stevens & Lee provide valuable
commentary on the use of litigation
finance as a tool to boost creditor
recoveries in cases of fraud and other
misconduct. They discuss a case in
which they helped a bankruptcy trustee
monetize a $213 million judgment
the trustee had won but that was
being appealed. Kajon and Robinson
believe it is the first such transaction
in a pending bankruptcy case.
Lisa Vandesteeg and Jonathan
Friedland of law firm Sugar Felsenthal
Grais & Hammer share the results of
a recent case in their article on the
risks encountered when businesses
fail to respect corporate formalities.
Along with a general overview of the
benefits of the corporate structure in
terms of preventing personal liability,
they provide insight on the exceptions
to the rule. They discuss a case in
which the court successfully pierced
the corporate veil, along with what
that meant to the bankruptcy case.
Harold Bordwin and Heather Milazzo
of Keen-Summit Capital Partners LLC
provide commentary on the advantages
of stalking horse bids, with “higher and
better” bids unleashing added value with
respect to real estate transactions. Given
our industry’s current focus on retail
restructuring opportunities, Andrew
Moser of the recently formed Scargo
Hill Capital provides perspective on
retail lending and recovery. While not
fraud-related, these topics are highly
relevant to current restructuring cases.
Staying informed and vigilant
on fraud can mitigate risk and
ensure corporate resiliency. J
The Journal of Corporate Renewal serves the turnaround industry as a key resource, with content
that provides relevant commentary
on key trends in industry and finance.
One of the constants in turnarounds
is dealing with fraud and litigation.
Fraud is often a critical part of a
turnaround case. Recently, I received
a call from the Chapter 7 trustee on a