Collin Street Bakery Check Fraud Scheme

Sandy Jenkins committed check fraud to pay his personal expenses

How did Sandy Jenkins commit his check fraud?

He would make payments out to his credit card company and to cover make identical $ amount ones to a vendor but wrong check numbers and never mail them.

Litigation process phases

Pre-litigation Complaint Discovery Trial Appeal

Pre-litigation phase

The stage before a lawsuit is officially filed, where the parties investigate the dispute, gather evidence, assess the claims, and may try to reach a settlement

What happens in the pre-litigation phase?

Dispute comes to light Informal information gathering Informal damage assessment Issuance of "demand letter"

Issuance of "demand letter"

A formal letter sent by one party to another requesting payment, action, or resolution of a dispute before filing a lawsuit

Complaint phase

The stage when the plaintiff officially files a complaint with the court, explaining the facts of the case, the legal claims, and what they are seeking from the defendant

What happens in the complaint phase?

Plaintiff files "original petition" Defendant responds (can issue counterclaim) Petition can be amended to reflect updates of causes of action & damages

Common Causes of Action

Breach of Contract Breach of Fiduciary duty Negligence Fraud

Discovery phase

Both sides gather and share evidence to build their case

What happens in the discovery phase?

Requests for Production Requests for Admission Interrogatories Expert Reports (expert witnesses) Depositions (testimony)

Discovery phase - Expert reports

A report where an expert explains what they found and gives their professional opinion about the case

Discovery phase - Depositions

Fact witness (internal accountant) Expert Witness (forensic acct hired) Corporate Rep Deposition (behalf of co.)

Trial phase

Both sides present their cases, and the judge or jury makes a decision

What happens in the trial phase?

Can last 1 day to 4+ weeks Pre-trial phase - settlement conference - submit trail exhibits & demonstratives Forensic acct's involvement - prep for direct examination - prep for cross examination - prep attorney for cross examination of opposing expert

What are the trial phases?

Jury selection Opening statements Plaintiff's case Defendant's case Closing arguments Results

Primary Parties - Civil

Plaintiff vs. Defendant

Primary Parties - Criminal

State/US vs Defendant

Standard or Proof - Civil

Preponderance of evidence (It is more likely true than not true)

Standard or Proof - Criminal

Beyond a reasonable doubt (Very high level of certainty)

End result - Civil

Monetary judgement

End result - Criminal

Jail-time/penalties

Federal Rules of Evidence - Rule 702

Rule 702 determines whether a forensic accountant is qualified to serve as an expert witness and whether their testimony is reliable and relevant.

Rule 702's 4 requirements

1. Sufficient facts or data 2. Reliable principles and methods 3. Reliable application 4. Helpful to the court

Federal Rules of Evidence - Rule 26

Requires parties to disclose certain information about their expert witnesses and expert reports

Rule 26's report requirements

Statement of opinions and their basis/reasons behind them Facts/data considered Any exhibits Witness's qualifications Other cases during prev 4 years Statement of compensation to be paid

Types of Experts

Valuation Expert Construction/Engineering Expert Medical Expert Digital Forensics Expert Handwriting Expert

Checklist for determining reliability of expert testimony

Test Peer review Error rate Standards General acceptance

Daubert v. Merell Dow Pharmaceauticals, Inc. (1993)

Daubert established that judges act as “gatekeepers” to make sure expert testimony is relevant and reliable before it is presented to the jury

Kumho Tire Co. v. Carmichael (1999)

Kumho extended Daubert from scientific experts to all types of expert witnesses, including technical and professional experts

Statement on Standards for Forensic Services 1 (SSFS 1)

SSFS 1 sets the rules CPAs should follow when performing forensic accounting work

SSFS 1 Paragraph 6

The general professional standards apply to forensic services: Professional competence Due professional care Planning and supervision Sufficient relevant data

SSFS 1 Paragraph 7

Be honest and unbiased, and don't let anyone pressure you into changing your professional opinion

SSFS 1 Paragraph 8

Client interest—the member should work toward the objectives agreed upon with the client while maintaining integrity and objectivity

SSFS 1 Paragraph 9

An expert witness generally can't have their fee depend on whether their side wins or how much money they recover

SSFS 1 Paragraph 10

The forensic accountant can present the facts and explain whether the evidence is consistent with fraud, but the judge or jury decides whether fraud actually occurred