28th Edition — August 18, 2019
“White-collar crime is more brutal than violent crime.”
Sam Antar, former CFO for Crazy Eddie
1. Here We Go Again – More CFO Fraud
This past week, we read about a former finance chief defrauding retail investors while working for 1 Global Capital LLC.
For whatever reason, the story of the Crazy Eddie financial fraud jumped to the forefront of my mind. I’m disappointed there is no book about the scam these family members pulled off. But a movie is in the works.
Out of sheer coincidence, Worth published an excellent article this week about the CFO who cooperated with the FBI, Sam Antar, the brother of the CEO who was incarcerated for his fraudulent business practices. Why the CFO of a Famously Corrupt Company from the 1980s is Working for the Government is worth bookmarking.
Quick sidebar–Sam Antar has a great piece on white-collar crime on his firm’s website. Very insightful as you consider beefing up your company’s internal controls.
2. Speaking of Fraud, The Next GEnron?
I start prepping for this newsletter each Friday afternoon, and I noticed GE shares were trending upward (microscopically) after the big bombshell dropped earlier in the week by the Madoff whistleblower, Harry Markopolos.
If you want to increase your financial analytical skills, read and/or skim his report about GE’s accounting practices which he believes are misleading and even fraudulent. Don’t let the 175-page document scare you–it’s worth bookmarking.
3. Is Your Company’s Training Effective?
As a long-time consultant, I’m a fan of the now-retired David Maister, the Peter Drucker of business advisors.
Since my work includes a training component, I was instantly drawn to Chapter 10 in Strategy and the Fat Smoker–Why (Most) Training is Useless. Some of my favorite lines are:
- “Many companies — if not most — use training as a business version of a ‘quick weight loss’ program.”
- ” … training is a wonderful last step in bringing about changed organizational and personal behavior, but a pathetically useless first step.”
- “Here’s a good test for the timing of training: If the training was entirely optional and elective, and only available in a remote village accessible only by a mule, but your people still came to the training because they were saying to themselves, “I have got to learn this — it’s going to be critical for my future … “
Is it time to rethink company training programs? Is there a better approach?
4. Not Your Typical Book on Buying and Selling a Business
The number of titles about business exits and exit planning are growing by the week, or so it seems. That’s why I waited a few months before starting The Messy Marketplace by Brent Beshore because I thought it would be just another M&A-type book. I was wrong.
I view the Messy Marketplace as Brent’s (and his private equity firm) playbook for:
- before the deal
- during the deal
- after the deal
I’m not sure I’ve read material like this coming from a private equity investor (Australia’s Tom McKaskill comes to mind). If you work in the M&A space, remember the book Buyout (out of print)? Buyout is not very readable–it’s more reference than narrative. Brent’s book is a two-sided finance book as both buyers and sellers can value from his wisdom and practical advice.
5. What are the Guiding Principles in your Company?
Amazon seeks to be Earth’s most customer-centric company according to its 2018 annual report. In the same sentence, they mention the four principles guiding their actions:
- customer obsession rather than competitor focus
- passion for invention
- commitment to operational excellence
- long-term thinking
If I approached you and asked about the guiding principles in your company, could you rattle them off quickly? And if so, are there systems, indicators, and reinforcements to ensure those principles are being followed?
Interesting. On a side note, if you scroll through the document and get to the auditor’s report, notice which statement is listed first–the statements of cash flows. I went back to prior reports. Same order. The P&L is always second. What does that tell you about management? I’ll also give you a hundred dollars if you can find an EBITDA reference in the report.
Thank You Very Much
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Take care and have a great week. Always be learning.