Who’s Who: The Valley’s Top CPAs Court-Appointed Receivers Face Constant Uphill Battles By JACQUELINE FOX Staff Reporter When a consumer makes a successful complaint against a company let’s say, after becoming the victim of a vacation home scam what happens? Often, once a legitimate case against a fraudulent company is filed by the courts, it’s a local accountant who’s called in to help consumers get their money back. Because CPAs in many cases have detailed knowledge of bankruptcy laws and other facets of what is known in the industry as forensic accounting, they’re in a position to extend those skills into a career as a court-appointed receiver. In taking a fraudulent company into receivership, they essentially become CEO, CFO and general manager, with powers to hire and fire employees at will, including the owners. And it’s not a job for the feint of heart. “I show up at a company we are about to take over with a lot of law enforcement behind me because I don’t want anybody to freak out or get crazy” said Adrian Stern, a receiver and CPA with Clumeck, Stern, Phillips & Schenkelberg in Encino. Stern made the switch from a straight CPA into receivership about two years ago. He said he got hooked on the bankruptcy business when his wife was studying law at USC. “It started out as a hobby,” he said. Typically, publicly traded companies in financial trouble for instance, those that have made headlines this year are investigated at the federal level. It’s the Better Business Bureau, Federal Trade Commission and similar agencies at state and local levels that handle most complaints lodged against smaller, private firms. But because the books at smaller, closely held companies that run telephone and credit card scams, for example, aren’t open to public scrutiny, they’re much, much easier to cook. That, however, also makes the money harder to track. So, in nearly all instances, receivers who handle such cases go in unannounced, and ready for just about anything. Cases can last a day, two weeks, or two years. And, according to Stern, in most instances, it’s nearly impossible to turn a fraudulent company around. “We don’t know what we’re going to find when we walk inside a company,” said Stern. “But I can say that in the two years I’ve been doing this, I’ve only managed to rehabilitate one, but that’s because the problems were not company wide. They were isolated to one department.” Stern has served as a receiver, CPA or both in cases for the Los Angeles office of the Federal Trade Commission, which oversees the courts that order companies into receiverships. Tom Syta, assistant regional director for the L.A. office, said there’s little chance of his agency recovering stolen money from companies without the assistance of a trained accountant. “Usually, receivers in our cases are attorneys who are appointed by the courts,” said Syta. “But in many instances, they don’t have the expertise of a an accountant to track down all the assets. People with Adrian’s experience come in with the skills and the court authority to lock the doors, wind the company down and start digging up the assets. ” “That’s not always easy to do because, in many cases, the money that comes in is used on legitimate expenses and it’s gone and can’t be returned to the consumer,” said Syta. “So we look for funds that might be in personal accounts overseas and who knows where. Certainly that’s right up the alley of a CPA.” Syta said Los Angeles has one of the highest number of fraud complaints against private companies of any region in the country. His office typically oversees between 10 and 20 cases a year from throughout Southern California. A case against a private company can be launched only when enough complaints against it are filed and a judge is convinced there is cause to shut the company down. The FTC or the firm handling the takeover has the option of appointing a receiver of its choice. A receiver, however, doesn’t have to be a licensed CPA to do the work. One example is Sun Valley-based Robb Evans, CEO of Rob Evans and Associates LLC. As a retired banker, Evans said he typically will serve as the receiver in a takeover case, usually involving bank liquidations overseas, and enlist the help of one of his own CPAs to follow the money trail. The company recently recovered roughly $30 million in assets from now defunct Malibu-based JK Publications, which was accused of defrauding customers by selling bogus online subscriptions to pornography sites. The case impacted one Valley based company: JK had reportedly bought the list of credit card numbers it used to scam consumers from Agoura Hills-based Charter Pacific Bank, which was subsequently sold. “This is a great field for CPAs to get into and many times we align with outside CPAs,” said Evans. “I think it’s very important to have the knowledge of forensic accounting or have a staff person who does. A lot of times receivers are attorneys without the skills to dig into the numbers and trace assets. So they have to spend their own resources hiring an outside CPA and that can get very expensive. So they (CPAs) are a crucial part of the business of receiverships.” Stern also works closely with the Ventura County District Attorney’s Consumer Protection Division. Mitch Disney, head DA for the agency, said using a CPA who can also serve as the receiver often allows for a faster settlement period, saving both time and money. “In a recent case involving the selling of fraudulent businesses that Adrian served on for my office, we were able to negotiate terms of a settlement quickly because, as a CPA, he and the company CFO were able to speak the same language,” said Disney. “We went up to the top floor of the company the day we shut it down with an army of police behind us.” Stern downloaded the books from the computers and quickly assessed the financial condition of the company,” Disney said. “Within days we were able to present our case to the company’s attorneys and come up with a settlement without having to call one victim in to court. That certainly saved us a great deal of money and resources.”
