PFGBest used a one person accounting firm to audit their books, this for a company that had $500 million in customer accounts.
Russell Wasendorf Sr., founder and CEO of PFGBest has admitted to stealing $100 million over 20 years. He was the only one who had access to the bank accounts and always had bank statements delivered to him unopened (so he could make phony versions.) He faces decades in prison.
An ethical and competent auditor would have not accepted bank statements coming from the CEO only. And using a one-person accounting firm should have been a huge red flag to anyone investigating the firm.
But as usual, our supposed watchdog agencies were curiously asleep and ignored the obvious.
The watchdog that missed for nearly two decades the blatant fraud at failed brokerage PFGBest has frequently sent out fresh college graduates to look over the books of complex financial firms, people familiar with its operations say.
“When they come in and do an audit, they’re not experienced enough,” said a former employee of PFGBest.
While the National Futures Association did finally uncover the fraud, it took them twenty years and they then perservely boasted about it.
“They are the ones that uncovered this whole thing,” Hehmeyer said of NFA auditors. “If they hadn’t caught him, it could have gotten a lot bigger.”
If NFA hadn’t been comatose for 20 years, the fraud might never have happened at all. NFA is industry-funded, an approach that obviously isn’t working too well considering they missed this huge fraud for two decades.
I would love nothing more than to deregulate a bunch of things when it comes to businesses, as it would save businesses a whole lot of money they are spending to meet those regulations, however time and time again we’re shown that businesses in a general way simply cannot be trusted to do the right thing at all times. If businesses had their way, it wouldn’t be a matter of who’s got the best product, it would be who’s got the product that will do the least amount of harm. Take lead for example. If businesses had their way we’d have to choose products over who’s got the least amount of lead in them, not which products don’t contain any lead.