Essay on Financial Fraud Case

Case Summary

In 2013, the FBI received fraud allegation reports against a businessman in Atlanta and the woman, Cynthia Vinson; he had hired to manage finances. The duo was accused of pocketing an investor’s finances as he claimed his money was never invested appropriately. A joint operation by IRS and the FBI discovered Franklin Trell; the Atlanta businessman had a history of financial misconducts and fraud lawsuits (FBI, 2018). Now, the current $20 million allegations are closely related to his past fraudulent business dealings. The primary issue was that Trell advised his investors to stay as silent partners, and in most cases, investors lost all their money as he created shell companies (FBI, 2018). He further conducted his fraud by using false statements, manipulated financial statements, complex financial arrangements, and myriad corporate entities (United States Department of Justice, 2018). For such acts, Trell was sentenced to over seven years for conspiracy to commit money laundering, bank fraud, and wire fraud.

Relevance of the Case

Franklin Trell’s orchestrated fraud demonstrates the irresponsibility of different stakeholders. First, he had previous fraud and business misconduct records, and no investors were determined to conduct background checks. Before investing, investors typically ascertain whether the entity they invest with has an excellent performance track. Accepting to stay as silent partners shows blind trust and irresponsibility. Further, the duo used false statements to secure multi-million-dollar loans, demonstrating financial institutions’ irresponsibility in confirming such shell companies’ existence. For over seven years, Trell used doctored financial statements, intricate financial statements, and multiple corporate entities to defraud financial institutions (Rosca, 2018). This clearly shows how the entities have failed to institute essential measures and systems to detect fraud.

Different stakeholders were involved in Trell’s fraudulent dealings. Investors were key stakeholders since they injected their finances into his business ventures. The largest investors made a $20 million investment (FBI, 2018). However, investors had an obligation to ensure their investments were safe using their financial advisors to follow up their investments. Also, investors had rights to a true and fair representation of financial statements. Financial institutions had the choice to deny Trell and Vinson more loans. Moreover, they had the choice to conduct extensive financial background, given Trell’s history of financial fraud. Trell and his partner should also have chosen not to defraud investors. Vinson and Trell benefited by over $9 million from the fraud, where Trell used $50,000 for family vacations, $80,000 for his daughter’s wedding, and some to purchase a house (The Newnan Times-Herald, 2018). However, the scheme cost both a significant jail term.

The fraud should have been prevented through financial background scrutiny. Investors do not invest blindly in the contemporary business world but after solid recommendations from experienced financial advisors. I fail to believe that none of such financial advisors would have missed Trell’s seven years of fraud. Investors were considerably impacted by the situation, whereby one lost $20 million. Financial institutions also suffered financial losses from massive loans secured through false statements (United States Department of Justice, 2018). I believe readers should question the responsibility of investors before committing funds to any project. They should also raise concerns regarding the role of financial institutions in scrutinizing documents presented to secure loans. Lastly, readers should continually question the government’s role in preventing future financial fraud since the US has been largely affected by financial crimes.

I find it shocking for one person to engage in financial fraud for over seven years without detection by available systems or responsible parties. To have defrauded many investors for such a lengthy period, the duo must have been “good.” However, the US authorities uncover massive financial fraud from large corporate entities, like the WorldCom scandal, within a shorter period. I think Trell’s case may have been disregarded from time to time since it involved smaller amounts. To deter future fraud, I think financial statements should be regularly audited and peer-reviewed by external auditors. Such an internal control would enable investors to seek a third opinion from other auditors regarding the company’s financial position (Gonzalez & Hoffman, 2018). Financial institutions can also avoid being defrauded by verifying from third parties that financial statements are not manipulated.

References

FBI. (2018). $20 Million Investment Fraud | Federal Bureau of Investigation. Federal Bureau of Investigation. Retrieved 9 February 2021, from https://www.fbi.gov/news/stories/two-sentenced-in-atlanta-investment-fraud-scheme-042318.

Gonzalez, G. C., & Hoffman, V. B. (2018). Continuous auditing’s effectiveness as a fraud deterrent. Auditing: A Journal of Practice & Theory, 37(2), 225-247.

Rosca, A. (2018). Cynthia Vinson and Franklin Trell: Alleged Fraud Scheme. Investorlawyers.org. Retrieved 9 February 2021, from https://investorlawyers.org/cynthia-vinson-and-franklin-trell-alleged-fraud-scheme/.

The Newnan Times-Herald. (2018). Meriwether woman to be sentenced in March for fraud scheme. The Newnan Times-Herald. Retrieved 9 February 2021, from https://times-herald.com/news/2018/02/meriwether-woman-to-be-sentenced-in-march-for-fraud-scheme.

United States Department of Justice. (2018). Fraudster sentenced for perpetrating $20 Million investment fraud scheme. Justice.gov. Retrieved 9 February 2021, from https://www.justice.gov/usao-ndga/pr/fraudsters-sentenced-perpetrating-20-million-investment-fraud-scheme.