Pivoting to Fraud
Comscore Fraud
The web analytics company and its CEO were charged with fraud by the SEC. From AdWeek:
From February 2014 through February 2016, Comscore and its then-chief executive Serge Matta improperly inflated revenue figures, made false and misleading disclosures about Comscore’s product and its customer base, the SEC said in the charges, details of which were released Tuesday. The SEC also found that Matta, who was removed from his position as CEO in August 2016, lied to Comscore accountants and an external auditing firm about the figures.
The big deal here, and part of the reason this announcement made a splash on Media Twitter, is that many companies relied in Comscore for their web traffic metrics, which some believe led to many “pivot(s) to video” and countless lost jobs. The fact that the company was juking the stats is likely a bitter pill for many laid off journalists to swallow.
According to the SEC, Comscore and Matta also entered into non-monetary transactions where they negotiated the exchange of sets of data with a third party without cash payment. Instead, Comscore recognized revenue on those transactions based on the fair value of the data, and then improperly increased the value of that data in order to inflate revenue figures.
Ominous! Comscore, along with Quantcast and Nielsen, have spent years insisting that their data is trustworthy, when plenty of evidence suggests that it’s not. Expect more scandals and lawsuits as the industry struggles to get a handle on click and ad fraud. I don’t expect most of you to feel bad for brands and advertisers more generally, but this sort of thing lines the pockets of bad actors, and has driven many good publications out of business. Support your local paper, or blog!
Oh, Mann
Remember last week, when I wrote about the payroll company who stole everyone’s money, and how the cops thought it might be a “complicated” case? Well, good news.
Federal prosecutors have charged the owner of a payroll processor with a $70 million bank fraud in the latest twist in a scheme that temporarily left thousands of employees of small businesses with missing paychecks.
In a criminal complaint filed in U.S. District Court in Albany on Friday, the Justice Department said that Michael Mann, the owner of MyPayrollHR, admitted that he fraudulently obtained about $70 million from banks and other financial institutions in a scheme that dated back to 2010 or 2011.
There were a few additional layers to this caper, which the owner has now fessed up to.
Mr. Mann told law-enforcement authorities that MyPayrollHR was legitimate, but “admitted to creating other companies that had no purpose other than to be used in the fraud,” according to the court filing. He obtained loans and lines of credit by borrowing against “non-existent receivables,” the filing said.
Bloomberg’s Matt Levine hypothesizes Mann’s thought process during his 9 years of bank kiting:
The guy with a button that says “Steal $30 Million of Paychecks” doesn’t press it the first chance he gets. That would be stealing! He is a moral human being, he has standards, he stays well away from that button even if he is also simultaneously running a bunch of complicated frauds. You can look yourself in the eye when you’re running a complicated fraud; those fake receivables are just to bootstrap your real business idea and who’s to say what is “fake” and anyway the banks had it coming, you know how it is, it is complicated morally as well as financially. If you just press the steal-paychecks button you know you’re a thief. When you press that button things have gotten really desperate; pressing that button is not so much the final step in your cunning caper as it is a cry for help that is quickly followed by a confession.
Hopefully someone in the government is spending energy on making sure those workers get their money back.
Pathé to Profits
After I wrote about the voice deepfaker a couple of weeks ago, a friend of mine sent along a story that was big news in Holland last year.
The Dutch operation of the Pathé cinema group was ripped off by internet con men to the tune of over €19m, court documents published on Friday show. The con cost both the chief executive and financial director of the Dutch operation their jobs, and it is unclear if any of the money has been recovered.
Again, it’s remarkable to me that these sorts of scams can be pulled off on fairly sophisticated, large companies. As always, the humans are the weak links.
‘The transaction must remain strictly confidential. No one else must be made aware of it for now in order to give us an advantage over our competitors,’ the email said. ‘I and I alone will notify the affected parties in due time.’ After more to-ing and fro-ing, Meijer sent the correspondence on to Slutter with the comment ‘strange don’t you think?’
I’m not a CFO, or any sort of accounting professional, but when the CEO of your company is asking you to wire millions of dollars to offshore accounts for confidential corporate takeovers, maybe you run it by your legal counsel, or hover your mouse over the sender’s email to make sure it’s the person you think it is? Perhaps a quick phone call or text to your boss?
I do appreciate the Dutch legal system’s response to the fraud, however:
The court decided that Slutter had been lured in by the con men in a sophisticated trap and that he should not have been sacked in the spot, even though he ignored several red flags.
We’re all human. Sometimes our boss may actually want to buy a company in Dubai and we aren’t allowed to tell anyone else. It happens!
Short Cons
NY Post - “A couple from Indiana is accused of ditching their adopted 10-year-old daughter and moving to Canada — but they claim the girl is actually an adult with dwarfism running a psychotic scam, according to reports.”
CBS News - “Two weeks before the move, she received an email that she thought was from her attorney, asking her to wire almost $11,000 for closing costs. The email had her lawyer's name, but not the correct email address.”
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