Robert A. Bonavito, CPA PC

New Jersey Auditing Services: Business Fraud

Video Transcript 

My name's Robert Bonavito, New Jersey forensic accountant. This video is part of a series of videos where I discuss forensic accounting topics for educational purposes only. If this was a litigated matter, I would take a different approach, have different conclusions based on different facts and circumstances. Today's video topic is going to be investigations of business fraud.

Well anybody who picks up the paper or looks at television knows that the crisis in 2008 was mainly caused by business fraud. It almost brought down the U.S. economy. And as a forensic accountant, business fraud is a big part of the work we do. I know that the one case that comes to mind is, again, it had to do with mortgages. We had a mortgage company we were brought in to investigate. And what the mortgage company was doing was they were buying properties for $10,000, they were getting appraisals on the properties of $200,000, and then getting loans for like $180,000 when they sold these properties to investors. And what eventually would happen is the investor would have a house that's worth $10,000, he'd pay $200,000 and he borrowed $180,000. It was good for the mortgage company because they were able to give him mortgage for $180,000. That mortgage was sold to somebody else, and eventually the people who bought the property realized what they bought and they couldn't rent it out for a fair rent, and they walked away from the property.

So now what do we have? We have an individual who owes money on a house that's only worth $10,000 and he paid $200,000 for, we have a bank that loaned $180,000 on a property that's only worth $10,000, we have a mortgage company that got paid for the mortgage, and a lotta times they got absorbent fees for these mortgages, $8,000 closing fees, high interest rates, all kinds of crazy documentation fees. And this investigation we did is one small example of business fraud. And this business fraud was done, you know, throughout the country, and it's the main reason why we had the 2008 financial crisis.

If you have any questions on this video, feel free to give me a call or email me.

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