Transnational transactions and the potential for fraud and corruption

Over the last 10 or more years, the number of business transactions in foreign jurisdictions has skyrocketed. With the US and Europe’s economy facing slow growth, the markets abroad look very inviting. Many of my audit clients and public company clients are foreign firms doing business with or getting capital from US partners. Just how safe are these transactions? I have several seen several China and Vietnamese deals that were very dubious. You never know where your money is going!



I came across an interesting site ( www.transparency.org ) that offers the Corruption Perceptions Index which investigates each country’s business practices and ranks each country by perceived corruption. While one size never fits all, still some of the conclusions from the report are quite interesting and should be heeded. Certainly a US or Canadian firm doing business in foreign country should pay attention to this ranking and perform due diligence accordingly.



Interestingly enough, the good old USA comes in 22st . well behind our neighbor to the North, Canada (6). We are more corrupt than Chili (21) Barbados (17) and Iceland (11). Some other surprises await in the report:



Italy is 67th ( I guess a little graft over red wine never hurt anybody)
Panama is 73rd ahead of India (87) and China and (78) and Russia (154)
Be very careful of Somalia (178 and last) unless you are a pirate.

Of Note

The purpose of this blog is to highlight matters of importance and interesting tidbits of information that are relevant to attorneys, accountants and others who provide or support litigation and dispute resolution services. I have provided consultative support and expert witness services on a number of cases in California and also audited many private companies and a number of public companies traded on the American, NASDAQ, and OTC:BB stock exchanges. In addition, my real life experiences add to my professional background including being an owner of a tie-dye company (really!), President of the Board of the Names Project (The AIDS Quilt), CFO of a Chinese high technology company and founder of a food distribution program in San Francisco. Life is for the living folks, and I expect to continue living voraciously.

So a story for today:

I was cross-examined at a Dispute Resolution and Mediation Center by an attorney who was obviously frustrated by the inconsistencies of his client, the defendant. I too had taken awhile to reach my conclusions as the initial information received from the plaintiff and his attorney didn't quite jibe with the independent accounting information I obtained. The truth does always seem to prevail though, and after a time I discerned the truth (or at least the truth I could support) regarding the plaintiff's damages and artfully presented my findings in my report.

It was difficult at first to get the plaintiff to accept my calculations as he had envisioned a damages amount many times higher than the amount I showed in my report but once his attorney had a chance to question my findings, the attorney accepted the damages calculation without change.

At a break, right before the judge was to conclude the oral presentations, the judge and I happened upon each other at the coffee pot and he said to me: " Don't these two SOBs really deserve each other?". How I love working with a rent-a-judge! Anyway, my client prevailed and the judge upheld, to a large degree, my damage calculations. I guess, even among SOBs, the truth shall prevail. But SOBS being SOBS, as soon as the award was announced, the defendant took the next plane out of the country and was never seen in the United States again. The plaintiff never collected a dime and I could not collect the balance of my fees. I guess these two guys really did deserve each other.