CommentsPERSPECTIVE-I occasionally watch Shark Tank. Some of the concepts the contestants pitch are novel. The panel of experts dispense their advice with confidence, which is occasionally laced with a little arrogance.
It’s an intelligent show. One can learn a thing or two about both the rewards of entrepreneurship and its pitfalls.
But lest you think that the panel, which includes the likes of Mark Cuban, are infallible, think again.
Panelist Barbara Corcoran started as a waitress and turned a $1,000 loan into a multibillion-dollar real estate venture, that according to her website.
However, there are times when even the best experts are probably too far removed from their day-to-day business ventures – understandable given the stakes they have in play, but no excuse not to rely on other experts, in other professions, to cover their backs.
Ms. Corcoron’s bookkeeper was scammed into believing that an email request to wire $400,000 in payment to an overseas real estate company was sent by Ms. Corcoran’s executive assistant.
The bookkeeper apparently asked a few questions, the answers to which seemingly aligned with his/her boss’ business interests abroad. The bookkeeper sent the wire request to the bank and, presto, the funds were immediately sent.
The email address of the executive assistant contained an additional character; the bookkeeper only realized it was a scam after informing the actual assistant. The sender used a Chinese IP address; the funds are unlikely to be recovered.
If Ms. Corcoran had been the CEO of a publicly traded corporation, she would have been fired. The event indicates internal controls are so fundamentally flawed at her firm that one might doubt if she even understands the term.
Segregation of duties was obviously absent; it shouldn’t take a CPA to figure that out. Even simple approval levels for large transactions must not have been in place. Written documentation for the transaction’s validity should also have been required. Didn’t her external accounting firm review cash controls?
A person’s success in business does not necessarily transfer to assuring the existence of appropriate management practices.
Remember that when anyone approaches you with an investment opportunity, even if he or she is a well-known TV celebrity.
(Paul Hatfield is a CPA and serves as President of the Valley Village Homeowners Association. He blogs at Village to Village and contributes to CityWatch. The views presented are those of Mr. Hatfield and his alone and do not represent the opinions of Valley Village Homeowners Association or CityWatch. He can be reached at: [email protected].) Prepped for CityWatch By Linda Abrams.
