AVOIDING FRAUD By

Stategies for Avoiding Fraud

AVOIDING FRAUD

By: Mark R. Osherow, Esq.
(October 2005)

1. If it seems too good to be true, it probably is.

2. Do not take anything you are told at face value if it involves money.

3. Test all assumptions.

4. Presume anything that might be "window dressing" is; test it; presume nothing.

5. Presume that if they can cheat you, they probably will.

6. Presume all financial projections are grossly exaggerated.

7. Presume all prior financial results are miscalculated, based upon erroneous assumptions, and that most expenses and losses were booked as assets or capital, until proven otherwise.

8. Presume the people you are dealing with are grossly overpaid or underpaid.

9. Presume all income and earnings are derived from other people's money, not real money resulting from sales or services rendered.

10. Presume they are already bankrupt (even if appearances suggest very much otherwise), until proven otherwise.

11. Ask all the questions you want, but do not show your hand.

12. Even the simplest disclosure must be responded to in full. Make sure the disclosure accurately and fully meets the substance of your request. Listen carefully and review fully. If not, walk away.

13. Presume equity financing will go directly into the pockets of the principals of the business, unless proven otherwise.

14. Fast talkers are just that and usually nothing more.

15. Listen to what people do not say as much as what they do say. Train yourself to "read" between the lines.

16. Never let those you ask questions to make you feel inferior or that you have no right to really inquire.

17. Do not be made to feel stupid by ridiculous explanations that you do not understand.

18. Subtle misrepresentations or inaccuracies are usually the tip of the iceberg; walk away.

19. And finally remember the old adage "keep your friends close and your enemies closer."