Scheme

Scheme

Scheme is a podcast about accounting fraud. Not run-of-the-mill fraud like passing $200 of bad checks, but large-scale frauds involving millions of dollars that ruined people’s lives. Each episode discusses how a fraud was carried out, and what we can learn from it. Scheme is created and produced by Michael McLaughlin, an accounting professor and creator of Edspira.

Episodes

March 29, 2021 9 min
Opening

Grand Theft Auto is one of the best-selling video games of all time.  If you’ve never played it, it’s a unique experience.  You can do almost anything – change the radio station while you’re driving, go scuba diving, or enjoy a night at the movies.  But you can also kill prostitutes and police officers.  This has made Grand Theft Auto the poster child for violence in video games.  The company that makes the game, Take-Two I...

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Opening

It’s 2006, and you just received a phone call about an exciting opportunity in real estate development.  A company called Cobalt has been acquiring, developing, and marketing residential properties for decades, and it’s looking for new investors.  Under the leadership of CEO William Foster, the company has acquired several well-known hotels in Miami.  Some of the properties have earned returns as high as 204%!

It’s a great ...

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December 14, 2020 11 min
Opening

In the early 2000’s, Interpublic Group was a successful advertising firm with over $6 billion in annual revenue. Interpublic had dominated the ad industry for decades and had a stellar reputation. But the company’s public image was about to change.

In 2002, Interpublic was forced to restate its financials going all the way back to 1997. In 2002 alone, the company had overstated its profit by 496%.

Executives blamed the prob...

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November 5, 2020 6 min
Opening

Nevin Shapiro had what many would consider a great life. He drove nice cars, had a beautiful home in Miami Beach, and spent his nights partying with famous athletes like Shaquille O’Neal. Shapiro was living the high life, and people assumed his high-roller lifestyle was funded by his business, Capitol Investments.

But, Shapiro’s business hadn’t conducted operations in years. The money was actually coming from investors who ...

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October 5, 2020 12 min
Opening

In 2008, Satish Gabhawala ran a motel off the interstate in Harvey, Illinois. The motel had a 24-hour diner and was used primarily by truckers. But Gabhawala had a vision: he was going to transform the motel into a Holiday Inn and conference center.

There was just one problem: Gabhawala didn’t have the money. So he contacted an advisor, who convinced the city of Harvey to raise $14 million from bond issuances to back the pr...

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September 5, 2020 10 min
Opening

When you think of high-growth companies, you probably don’t think of life insurance. But Equity Funding Corporation of America was the exception. The company reported strong growth for nearly a decade, culminating in a record profit in 1973.

But just a few weeks later the firm imploded. It seems the company wrote insurance policies for people who didn’t exist, and it wrote so many fake policies that the fraud wouldn’t have ...

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Opening

In 1998, American Bank Note spun off part of its business in an IPO.  Investors were excited. American Bank Note had been making products to prevent counterfeiting since the 18th century. This was a chance to invest in a company with a long tradition, and that made products which prevented fraud. But just 6 months after the IPO, the company said it needed to restate its financials. A company that had been created to prevent...

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July 6, 2020 9 min
Opening

Electronic Game Card had created an innovative new product. After spending hundreds of thousands of dollars on R&D, it had patented a small digital device, about the size of a credit card. The CEO said this device was in high demand; particularly from the lottery industry, where companies saw it as an alternative to the scratch card. Sales were growing and the company was profitable; the future looked bright.

But there ...

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Opening

In March of 2002, Adelphia was the 6th largest cable TV provider in the U.S. But then the company made one tiny financial disclosure…AND WITHIN 3 MONTHS IT WAS BANKRUPT.  Shareholders filed lawsuits, the SEC alleged there was fraud, and executives went on trial.  What the heck happened?

I’m Michael McLaughlin, and this is Scheme.

The founding of Adelphia

Adelphia’s founder, John Rigas, came from humble beginnings.  He was b...

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July 5, 2020 12 min
Opening

In 2013, Homex was the largest real estate development company in Mexico.  The Mexican government had pushed to increase the amount of affordable housing, and Homex had responded.  It rapidly built homes in cities across Mexico, while investors made millions.  But just one year later Homex was bankrupt, and under investigation by the SEC.  It turns out that much of the company’s revenue was completely bogus.  And the SEC ha...

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