Epic Charter School Failure & Rita Crundwell is not doing so well

Virtual school cashes in on ghost students. Now that’s a crazy headline. But that’s exactly what happened in one state. And in other news, Rita Crundwell is not doing so well. So she is released from prison early. Don’t know who she is, shame one you. Tune in to hear more.

Your Friday Fraudster hosts are passionate about ethics, fraud and good business practices.

Kelly is known as the Pink Collar Crime guru. If there is fraud, she can find it.

Jo is the Ethics Expert. She can identify and correct those stick organizational ethical issues.

Robert is a process. He looks at the controls to determine if you are performing actions to get your desired results.

Join Kelly Paxton, Jo Erven and Robert Berry on this weeks episode of the Friday Fraudster.

Find Kelly at https://kellypaxton.com/

Find Jo at https://www.auditconsultingeducation.com

Find Robert at www.thatauditguy.com

Transcript
Rob Berry:

Hey, welcome to episode number 20 of the Friday froster Episode Number 20 That's crazy. really crazy. So guys you will join with Kelly Paxton, Joe Ervin and Robert Berry and we are friends talking about fraud on a lovely Friday afternoon hopefully it's lovely where you guys all because it's lovely where I am. You know what to do. As you enter the chat room please drop that emoji into the chat that signifies the mood that you are in right now because we care about you and we want to know how you're doing we want to make sure that everyone is doing well. We have a few people coming in already Mark says Good afternoon. My fraud finding friends. Well Mark it's always good to have you here my friend because you make the day a whole lot brighter Kelly is saying loving. Sorry Heather is saying loving my alone time and the smell of the rain today. Well Heather, you know it rains every day at approximately 333 in Jacksonville, Florida where you are just the fact right. It is a fun friday Kelly and a friend Penny Archer is here saying attending my first one Robert Berry. I can't wait. Well, you can't wait. So let's get started. Dan is saying Rita is out. Dan. Hold on tight because we are getting there. And Thomas says 20 That is amazing. Is it is Thomas I mean really amazing. And Thomas is in a really good mood today with his cowboy hat on. Now. Joe, what is it?

Jo Erven:

It's a tense I'm leaving for camping. As soon as we're done you guys I am spending my last hour of work week with you all and then I'm getting I'm getting out there and going camping for the weekend.

Rob Berry:

You see how special we are guys.

Jo Erven:

That's right.

Rob Berry:

Yeah, we're very special that I couldn't miss it. So now Dan is flexing his muscles today. Who is odd? This is David David gust is a dog.

Kelly Paxton:

He's in my old neck of the woods. I used to literally drive by the jewelers mutual sign every day of highway 41 to go from Oshkosh to Appleton Hey David.

Rob Berry:

Nice well Heather says it's too hot to camp in Florida. Well yeah, I mean Heather, you only got like one week a year that you can go camping and

Jo Erven:

it's pretty hot to camp in Colorado right now to Heather I'm we are actually going boating which is the only relief. My sister happens to have a boat so we get to tag along for the fun there and that is why we can stay in camping in 95 degree heat.

Rob Berry:

But here's the big question. Do you have gators in Colorado?

Jo Erven:

Remember go dogs. We don't even talk about gators or Florida Gators at all? In my house there.

Rob Berry:

Now Alicia is here she says that she agrees with Heather Yeah, right there with you. But Alicia, you're in South Florida the watch what's even worse there Or even better, depending on how you look at it right. Alright guys, so another Friday, another Friday fraudster episode. We know that many of you are doing well because you've dropped those emojis into the chat. So here's what I'll say. The Friday froster is on your favorite podcasting platform unless your favorite podcasting platform is Apple. So we're everywhere else except apple. Be sure to spread the word tell your friends so that they can watch and if you want to get CPE just for watching us. You can go to $7 cpe.com or Friday froster calm and as you would have guessed the CPE for one hour is $7. Hence the name $7 cpe.com. Right now, in other news Kelly has a podcast great women in fraud Be sure to check that out. Kelly is that website great women in fraud calm or

Kelly Paxton:

Yeah, and I just have to say next week is a shocker. And I am finally validated that women are better embezzlers than men so you guys have to listen to it. It is truly amazing. I'm even changing my screenshot. Hopefully I can because I never like show the video. But I asked the guy if I could show the screen shot where I'm like, Yes, because he's validating that women make better embezzlers the men statistically not survey not Whoo, statistically. Oh, you guys gotta listen to it on Tuesday.

Rob Berry:

Now the I should be interesting and that is Tuesday on your favorite podcasting platforms including apple and in other news Kelly, and Joe have a fraud retreat. It is August the fourth and fifth, next year. We're planning early you guys because we want this thing to sell out. It is fraud retreat.com they have a slew of good guests lined up. So if you want to go to a kick butt fraud retreat with some of the best in the business, go ahead and book it now. book it early. Is there an is there an early discount or anything, Joe?

Jo Erven:out there right now for like:Rob Berry:

Look at that fraud. retreat.com. And the last thing I'm going to say before we jump right into a few stories is my solo, show, podcast, whatever the heck we're gonna call it is coming next week, next Wednesday, Mark your calendars 12pm Central Standard Time 1pm. Eastern Standard Time, that'll be 11 Mountain and 10. Pacific. I'm calling it audit bites. Somebody just asked that I finally settled in on a name. That was a name that I had chosen initially. And then so many people gave me so many different ideas. But some people suggested that I call it the Robert berry show. And I'm like Who the heck wants to see me for 30 minutes. And it's just me. I mean, but no, in all seriousness, audit bias is what we're calling it. Episode One is going to be titled, auditors must assess the aftermath, you should tune in, because you're going to like it every once in a while, we will have guests on that show. So it's going to be a combination of just me. And sometimes guests, it's going to be anywhere from 10 to 30 minutes, depending next week's is going to be 30 minutes. And you will also be able to get CPE for this as well at that same website $7 cpe.com that seven the number $7 cpe.com. So now, let's jump right into our first story, which is going to be a surprise because we didn't have it on the trailer on the teaser. And Kelly's gonna talk to us about one of her quote unquote favorite people, not really one of her favorite people. But you know, let's just go read a chrome oil. Yeah, who is Rita? Let's talk about who is Rita?

Kelly Paxton:so I think he was up at like:Rob Berry:

To tell the people what she did, though.

Kelly Paxton:

So she stole $53.7 million. She was the Comptroller of Dixon, Illinois, which is really, really funny. Oh, I should have worn it today. My trust but verify. That is Ronald Reagan's hometown is Dixon, Illinois, and read a criminal stole 53.7. And the picture that Robert put up with her in her cowboy hat. She was an eight time champion Quarter Horse breeder. When they win, the gig got up and the gig got up because of a whistleblower Kathy Swanson. While Rita was on vacation, which I say, you know, most people don't take vacations, but she was so cocky. Joe, are you drinking out of a pink cup today? Just channeling the pink. Um, so she got almost 20 years she pled guilty. She got almost 20 years, she's been trying to get out due to health issues and COVID. And she is out. And I will put it in. Wait,

Jo Erven:

here's a little over eight years or something I found out.

Kelly Paxton:

And I'll put a link in the show notes of the Facebook like article and, and comments. And oh my god, it's over 300 comments on just one article. But so she's out. So, like, I was talking to my daughter who's you know, 22 and she goes, What's the point of keeping her in? It's costing us money. And I'm like, Well, you know, she's done eight years. They've gotten a lot of the money back. We're paying for her. Like, I get a little conflicted. Like between that. I mean, I you know, I don't know what do you guys think?

Jo Erven:

I just hope that it doesn't influence people to change their cost benefit analysis when it comes to committing fraud because I think a lot of it, we've talked about this, they don't serve enough time, they don't get punished enough. So they, they almost just risk it even more. And so it's it's influencing fraudulent behavior. That's just my opinion. Okay, I know I'm torn.

Rob Berry:

Let's put this into perspective when it comes to real crime. Well, though, Dixon was not a huge town didn't have a large budget, right, she was able to steal $53 million from them. Not only did she take $53 million, she used it to prop up her horse breeding and horse racing and horse shows, companies and whatnot. So she used the company essentially a see the city essentially as seed money for her own outside ventures. And she had a lot of she had an extravagant lifestyle. So essentially, she fleeced the people in this small town, took their money and use it for her own benefit, and then showed it off in their faces. I mean, just a blatant disrespect for the funds that she was supposed to be over to that extent. Keep her in jail, lock her up, throw away the key. I'm sorry, because you're right, though. She, um, you know, yes, she served her time for this crime. But think about the money that was taken away from people who needed it in that city.

Kelly Paxton:

Oh, yeah. That's where I'm conflicted. Because it's like, it's costing us money. Um, you know, she's not gonna, well, the only job she can get is probably doing something with horses, but allegedly, she has health issues. And you know, that's not gonna work. It's gonna be really interesting to see what happens to her. So I'm secretly a little excited to see what happens to her. Um, I don't think she'll go near Dixon. I mean, I think they'll Pitchfork.

Jo Erven:

Yeah. Do you think she'll do like interviews now? Kelly? Do you know she won't? I was just curious to see if it?

Kelly Paxton:

No, I don't think she will. And if I if I go to, if I go to Chicago anytime soon, I'm literally I'm going to drive out to Downers Grove. And I mainly put on my surveillance goggles, and I am going to all sit there for a day just to get a sighting of her.

Rob Berry:

Yeah, so David says, For those who want more info recommend the Netflix documentary on this fraud. You guys know the name of it, I forgot the name all the Queen's

Kelly Paxton:

horses, like Kelly Richmond Pope. And I'll put some I'll put some links in the show, or in today's stuff for you guys to take a look at. It's just, you know, it's it's a terrible look. Um, but at the same time, like, you know, when do we say enough is enough. But you know, there are other people out there who have done for last who haven't been able to get out. That's where I'm more conflicted about the people that have done Far, far less, they can't get out.

Jo Erven:

So that's my bigger company and equity in this, which drives us crazy. Really, which everybody on here agrees with that?

Kelly Paxton:

Yeah, mark this significant deterrence. I do totally agree with that.

Rob Berry:

100% agree with Mark. Now, Heather makes a good point, though. Heather says so she's gonna be out and probably on disability, so we'll be paying for anyway. And social security. Oh, that's right. She is on SSI. So if she's on Social Security, and now the government is paying her to be out, why not pay to keep her locked up? Seriously?

Jo Erven:

Well, here's it sad that this is what crossed my mind because we know those repeat offenders. I'm like, Okay, so now she's out. And she might cost some other city money if they you know, hopefully, there's enough about her out there that it would be very hard for her to commit a second fraud, but, I mean, I don't get that cross your mind. Like, what is she gonna do now? I

Rob Berry:

don't know. I think she's, quote unquote, famous enough to where no one will actually hire her again. But Mark, Mark says she will be healed quickly.

Kelly Paxton:

Well, yeah, I want to see the miracle. You know, bent over, like with a cane, or something like that. So she can't ride horses. I mean, I think her biggest her bigger punishment for her not for us, is that she can't be around horses. So she's out. But she still won't be able. She like when you looked at her videos. She loved her horses, like absolutely love them. Yeah, so yeah. So I will keep you guys posted on LinkedIn when I see anything exciting and anyone in Downers Grove. You know, go find her. Hey, go find.

Rob Berry:

Yeah, Downers Grove is a nice little suburb right outside of Chicago, I think. Yep.

Jo Erven:

Another hashtag there. Kelly like fraudster Papa Razzi.

Kelly Paxton:

Like love that

Jo Erven:

if you spot any of those frauds So we've talked about or you know, famous fraudsters

Rob Berry:

Wait, here we go. It's the fraudster Razzi

Jo Erven:

Oh boy, to another level Rob

Rob Berry:

Okay, here's Mark Mark saying he will, it'll be a problem again, because none of the other cities have the same internal controls as the city she came from. Absolutely, right. Alright, so you guys read accom rail is out. She has stolen 50 some odd million dollars from a small city and used it to build a business for herself where she bred horses and did horse shows and anything horse related. I guess she was deep in the horse stuff.

Unknown:

So

Rob Berry:million in profits from:Kelly Paxton:

Oh, my husband is a professor of education. And my kids went to a charter school and Joe your son's going, isn't he? Yep,

Jo Erven:

he's already here. Yeah.

Kelly Paxton:

Yeah. So like my kids. Charter School was really a ground neighborhood community effort. There was no big money. There were parents and you know, my husband. So there are really good charter schools. Now, there's a woman who stole $3 million from an LA charter school group, and she used Well, she is almost three 100 grand to go to Disney, Disney and cruises and stuff like that. So I, I'd be hesitant to set to send a kid to a capitalist charter school. And I say this from my husband's education PhD in educational psychology. They think it's the corporatization of schools like you, you know, there's so much measurement like, well, business people can run schools better than educators. And it's just okay, soap over. Okay. Over,

Jo Erven:

I just want to say thank you, Robert, for picking these stories. Because as a mom, whose son has been in public schools for the last four years, and he's going to a charter school for the first time, I hadn't done my due diligence on looking at the transparency of the school. So I can just tell you, I spent hours this afternoon after I read these articles, which I've posted all of them in the comments, looking at how transparent they are, who makes up the board, you know, all of I mean, they have a huge government. So this is the good news, huge government's page, you know, all the financial transparency that you would like to see. So to Kelly's point, you know, again, we can't say this is all of them. But another article that I just posted out there does compare them a charter schools to Enron, which is an interesting comparison. And some of those stats that Robert used, I think came from that one, but

Kelly Paxton:

I mean, do you want a business person teaching your kid? Or do you want an educator? Like, I mean, my kids didn't have any sort of like, special needs, or IEPs, or anything like that. But like, I mean, some charter schools, and I think of you about this, Joe, is there's incentive to provide less. Like, if you can do it for less do it for less, should someone who started a charter school make $14 million on it? Mmm hmm. You know,

Jo Erven:

you know, Mark says, I'm not very ethical for not doing my due diligence. Oh, my goodness, that's a little harsh, Mark, I'm going to take that personally. Um, but he's right, in that it's not looking at what your charities or nonprofits that you're supporting or spending your money on. Where I think people don't take that to the next extreme is because we don't pay for charter schools. So they seem like public schools to us. And so I don't think I think it's an education thing. More people need to educated on the difference between charter schools, because we just as parents think they're free. They're public still, you know? Yes, there might be other requirements to get into them. But anyway, I think it is. It's, that's where it's it's similar, but not similar. Because it's the education of it.

Rob Berry:

Yeah. So well, let's talk about some of those differences. So you got public schools that are run by local public school districts, right, and they're funded by the public, and they must follow state, as well as federal education laws. Now you have charter schools, which are independent schools, they are funded by public funds, as well as private donor funds. However, they must only follow education laws, but they do have the freedom with some of the rules. Now, in general, though, when you think about certification to though, public school teachers must be certified. However, charter school teachers, it depends on the laws of your state. Same thing with a private school, it depends on the laws of your state. Now, as far as being accountable for student achievement, under federal laws to the federal government, public schools are definitely responsible, accountable to the federal government, charter schools are as well, but private schools are not. So those are some of the major differences. But what I will say is when it comes to charter schools, they can receive the same federal funding as a public school. So for example, Title One is a federal program where low income neighborhoods, schools and low income neighborhoods receive additional funding for various things a lot of times when you see schools that have completely free lunch programs, is because it comes from title one. So that's why you will find a lot of a lot of these schools in lower income neighborhoods because you get more money from the government, which means less money has to be put in from the private sector. So it's almost like a public private partnership that exists there. So you know, I I can see where there's some benefit to it. But Mark brings up a really, really good point. And it was one thing that I was thinking and all honesty, it's like prisons, but not from the standpoint that the students are being treated like prisoners in school, but but when you think about the funding, prisons have now been privatized. So now there's an incentive to keep people in prison and to scamp. That's why most prisons look horrible, you know? They aren't kept up well, because the less in you, the less expenses you have, the more revenue you have when it's privatized. So yeah, I was thinking the same thing, Mark.

Jo Erven:

And I think, you know, to go back to our story at hand, there's a whole nother layer to this. So we're talking, you know, public versus charter versus private schools. Let's talk in person versus versus your virtual, because that's the real issue here. And I think Heather was the one that caught on to that real quick. Is this gonna happen more because this story, you know what, it kind of goes good with the Rita connection, because I don't know if you guys picked up in one of the articles, they said that they were counting students enrolled, whose parents had them training horses and learning horses. They weren't even in school for homeschooling. They weren't doing anything they were at, like horse camp.

Rob Berry:

They got better than that, though, right? Remember? Okay, so So let's talk about this for a minute, and how they what type of fraud they were accused of perpetrating. So they had ghost students, as Mark said, Casper students, and they were supposedly enrolled in the epic school. Excuse me, but yeah, they were being homeschooled or some were enrolled in small religious schools. However, here's what they were doing. They had these, these this fun that they call annual learning funds. And what they were doing is they were paying the parents bribes to keep their children in the schools. So parents were removing their scared kids from the public schools, and rolling them in these private schools, getting paid to enroll their kids in the private schools, and then not making sure that their kids are doing the homework in the private schools. So some of them were kind of sorta ghost students because they weren't attending the schools at all. And some of them were kind of enrolled and halfway attending, which, and not passing either on top of that, but all in all, the parents were making money off of their kids. There was a search warrant that cited the parents who received money admitted that they had no intention of receiving instruction from Epic. One family withdrew its 10 children from the public school system, and was receiving approximately $8,000 per year and allow their kids that's the one that allowed their kids to ride horses instead of attending school. So that was that was cited in a search warrant. So we know that there's probably some truth to that now, it hasn't gone all the way through the court system yet, but the search warrant show that the parents admitted this

Jo Erven:

Yeah, yeah. So you know, this this kind of reminds me of the college admissions scandal because it's not just the school that guilty in these scenarios. There are lots of my favorite big mean characters in this story, because there's a lot of parents going along with it. There are a lot of teachers still at this school if you google epic charter schools still exists. These teachers are still and I saw in one article they say they're persuaded to follow the unusual policies of or procedures of the school you know, that's a load of you know what because you know, you're not persuaded to follow unethical policies and procedures the you know, these are supposed to be educators of children of our future and that's what's scary to me are the parents that went along with it the teachers that are going along with this Not to mention the the high level owners right of this charter school that are profiting from it. There's there's many players

Kelly Paxton:

so you guys know I'm a huge fan of podcasts and not just my own and ours, but this week I listened to swindled and I put it in that in the show notes it's about the beach house sheriff in this crazy crazy law that a shift sheriff's in I can't remember if it's Arkansas, Alabama I'm having a brain blip but I'm the extra money from the food the sheriff's got to personally keep so and I was listening to this out on you know, my walk and I was thinking of you Joe, like the fact that I mean there was one jail where they got to corn dogs corn dogs twice a day and that was it. Because this this Sheriff could keep the extra money so you guys have if you're interested swindled is awesome, but this one is really really good. It's that that incentive tied to pay is like it in the epic

Jo Erven:

incentive money. I mean, influences behavior. I don't think any would argue and I mean, that's why you're the auditor, auditor No, like if you are not looking at how people are not just incentive plans, individual group, but annual bonuses, just compensation in general. I mean, how are the employees that your organization's earning their pay? You know, are they are I mean, are they tied to the numbers in any way possible? That is that is where you find not only cutting corners, and just, you know, maybe unintentional meant, I'm going to say that it's, it's going to be intentional, if you're going to try to get to a certain number, you've got to start looking at that stuff.

Rob Berry:

Alright, so let's take this one step further, though. So when you look at this one big picture, and you just kind of drill down to it, right? You look at the incentive structure, they were paying parents to enroll their children in school there. Now, from what I saw, a lot of the teachers were trying to speak up. And I say trying loosely, right, because you could have easily just blown the whistle. And you could have quit. However, when you look at how pro charter schools versus public schools are regulated, I'm almost willing to bet that most of those teachers didn't have the state certification required to teach in a public school. So they could teach in a private school. So now, that's their incentive to stay, even though they don't like the environment. So the incentives don't always have to be financial. Well, I guess that is if you're getting paid, it's it is financial as well, because you getting paid but but you know, they probably felt trapped as well to be in that environment, not saying they are victims in this either, because you can make fun of it. It says they made fun of the program and called it the $800 program. But if you made fun of it, why didn't you report it to your local authorities? or Why didn't you quit? Why didn't you take a stand, you still accepted your paycheck. But I'm willing to bet that most of those teachers weren't state certified so that they couldn't easily just go get a job with a public school and the public school system.

Kelly Paxton:

Well, and can you imagine, like you are, you're teaching your kids at such a young age? Like, oh, yeah, we get this extra money for you to fake go to school. I mean, I'm sorry, but what are those kids going to do down the road? I mean, oh, my goodness,

Jo Erven:

I call that big meat parenting. I have a slide for that in my presentation. And it's called Big knee parenting, because that is unfortunately, what a lot of people are showing their kids, and they don't even know at the time that they're doing it.

Rob Berry:

Well, if you think about it, though, and I'm not going to go down the huge rabbit hole here. I'm just gonna throw it out here and this society that we're in now, you have a lot of incentives to use your children for various purposes to benefit yourself. This just being one of them. But there are, there are a lot of things that this society has made it Okay, and incentivize people using their children for nefarious purposes for their own benefit. So I'll just leave that.

Jo Erven:

Can I just can I plug my book and the It's okay, son, everybody, does it poem or story that's in there? Would you guys know, I read that to almost every one of my ethics trainings, and I at least always get an email going, Wow, that was insightful. Why? Because here's one example in the story. They tell their son when he's 13. Hey, say you're still 12 to get or the kid discount, right? When they're go to the movies. It's as simple as that. But those are the lies that our children grow up with that then they feel like it's okay to buy the test dancers in college. You know, that's because they have had those little white lies, if you want to even call them that along the way in their lives.

Rob Berry:

Yep. And Mark says, we're seeing the results of that in society all the time, he has investigated so many of them. Look, I gotta tell you, when when I've taken the opportunity to speak up when I've seen wrong, I've been called several names. Oh, you're just boring. Oh, you're just a square. I'll be that. But I will have my ethics and my morals in the right place. You see a lot of times where people tell white lies and been the truth. Like it's okay. No, it's not okay. No, this is not this is not a anyways, it's not okay.

Jo Erven:

known to be called Pollyanna, I think a couple times. But you know what, keep calling me that all you want. I think we all have our own decisions we can make about how we lead in corporate America, how we lead in our personal lives. But you know, it's your choice. It's, it's your choice.

Kelly Paxton:

Well, another interesting thing is okay, so the guy who sold the school, that what people think and this is so not happened is they think that I'm too little for law enforcement to bother with me. bullcrap. So, you know, it's too big to jail. Well, when you're one of the pawns in the scheme, don't think you're too small to be, you know, looked at you or no one is too small to be looked at. You get on someone's wrong side on a wrong on a bad day. And all of a sudden, I mean, there's the woman who lied about her two daughters living with or living at the grandfather's address. Very And she went to jail for like 30 days or whatever. And it's like, you just kind of think, Oh, it's too little, they wouldn't bother with that. Well, you know, what little is easy? And a status of staff. Yeah.

Jo Erven:

And it goes back to what we talked about it at the beginning of this episode. It's sad that people do that cost benefit and in general, just to eat like, it's, it's not that big of a deal. Well, that means you're even putting thought to what you're doing. And that to me makes it even worse.

Rob Berry:

Right? Right. And both of you are right, when you start telling your kids, the little white lies, especially like, Joe, that's a perfect one. I know you're 13 but just tell the people that you're 12 so that we don't have to pay 150 more dollars to get in Disney. That is wrong. And your kids see that. And then you wonder why they lie to you. But you know, Mark says he's been fired. Of course, when you when you show up, honestly, when you show up with integrity, you will be fired because everybody will start to dogpile on you. And that is exactly what my show next week on audit on audit bites is going to be about auditors must always assess the aftermath. When someone is fired. Look at who is fired. We're going to have a huge talk about that. Now pose always the comedian says that she's losing a lot of money by not having kids. But uh, but she says she tried telling certain people not to involve their kids in bad decisions. But they look at short term additional funds. That is correct. You got to even look at, you know, claiming other people's kids on taxes and things like that when people do that. It is it's abysmal. And Mark is right. A lot of them say I'm too smart for law enforcement. They just can't deal with me. And Kelly has the hashtag right fired at 53. We talked about that in Kelly's episode of the corporate quitters podcast, my other podcasts which by the way, folks, it is now going to be live on LinkedIn. Live Tuesday mornings at 7am central standard time so you'll be able to catch it live or throughout the day or on your favorite podcasting platforms. Unless that favorite platform is Apple. I love that. I love that you're

Jo Erven:

doing it live. I feel like we're all so much better when we improv like this this show you guys this is so much better than if Kelly Robin I like pre recorded this podcast because you make it what it is. But I just I love that you're switching it to live. That's pretty cool.

Rob Berry:

Yeah, we are going live. But yeah, like Kelly said, fired at 53 Mark has been fired. It's It's a shame hasn't been fired.

Jo Erven:

Well, technically, I resigned and then got locked out after that. So I don't know. Anybody wants that story. You can come ask me any time. But, you know, a lot of years they have too much knowledge of the company. Right?

Rob Berry:

Right. Well, you know, there is a story that we're probably going to do here about a woman who she refused the severance package, you know, because when they want to fire you what they do is they make you sign a severance package that comes with a nondisclosure agreement so that you can't talk about anything that you know, well, this young lady refused the severance package. And now she's talking. Mark says, I hadn't been fired until I was right, right. You were performing stellar up until that point, you probably got raises got really good performance reviews, until you investigated somebody that was a friend of somebody, and they told you to delete something from your report or not interview a certain person. And then the next thing you know, your heads on the chopping block for being honest. auditor should always assess the aftermath. Whenever someone is let go whenever someone quits, or whenever someone resigns. board members should ask auditors to assess the aftermath. What the hell happened? That should be your first question as a board member, you know, board members,

Jo Erven:

people I'm excited for that episode next week, Robert, because people always kind of laugh at me. I feel like when I say a part of auditing culture should be looking listening to those exit interviews. I think I said it on here. And somebody said what exit interviews, you know, because companies add it. Right. Yeah, you said that. But looking at complaints again, yeah, looking at those people that are walked out. Why are they walked out? Why are people quitting? No. What are they saying on Glassdoor about your company? Indeed, you know, all of those plays. I mean, that's a good way to look at culture you've got to talk to because those are whistleblowers in their own on their own right in their own right. A lot of them

Kelly Paxton:

calm.

Rob Berry:

Yeah. Oh, wait, that's a real site.

Kelly Paxton:

Oh, my God. It's just joyous. Wow. Yeah.

Unknown:

The lake.

Rob Berry:

Oh, man. You guys. We may not make it to the other story this week. But that's fine. Lay off calm. Hey. Mark just said he investigated. A guy got him fired and then he came back as his boss, Mark him. You Let me just say one thing. You didn't get him fired, he got himself fired based on his own actions. Apparently he got himself rehired too, though.

Jo Erven:

Hey, can we go back to this parent child thing for just one second? Because, you know, I was thinking about the mantra that a lot of people live by, to ask forgiveness, not permission. And, I mean, I never thought of it in the context of fraud. You guys like I mean, Kelly, Doesn't that seem like something that a lot of these embezzlers would do? Because they do go in and try to just plead? You know, I'm so sorry, a lot of times because they loved their employers, right? They were close to the they were like, family, we hear this all the time. But I think too many people are living the unethical mantra. Let's ask for forgiveness, not permission. And I don't know why. But when we started talking about kids, I think we're teaching our kids to ask forgiveness if we get caught lying to the movie theater, and not just giving ourselves and our kids permission to do things right the first time. I mean, that's why the subtitle of my book is doing things the right way, the first time. And it's every time of course, but it's the first time because that's the memorable moment.

Kelly Paxton:

Yep. And in the tech world, it's like what, you know, move fast and break things. Like and, you know, Scott Galloway, that idolatry of tech. And it's like, who can? Who can afford to break things all the time, when? Or who wants to break things all the time when you actually own it? Yeah, a little different when you're playing with other people's money.

Jo Erven:

I mean, you're exactly right, when I stood up at an IT conference and talked about the move, move fast and break things mentality, and had people almost like shaken to stand up and talk about how their employers are asking them to throw out test environments, because they want to be the first to the market. And they are so uncomfortable with it. But it is they all these companies want to ask forgiveness later, when something bad happens, they want to react, they don't want to be proactive. It's all the same concepts that we've talked about.

Rob Berry:

Alright, let's make this fun. Let's see if you can guess who I am. Well, I just invented this new device that will speed up blood testing. It doesn't work right now, but it will in the future. So if we do it, we can fix it on the back end, because I know that I'm smart enough to make this technology work. Who am I?

Jo Erven:

Oh, I already gave it away.

Kelly Paxton:

Well, and you know what? You know what I want to add to that is the board. Yeah, the board. The board is theranos the board of wework. I'm all about we work I'm on this crazy. We work thing right now. Kelly, should

Jo Erven:

we plug our, our 15th events. So you guys know how I have a CPE book club? Well, Kelly, my dear friend bought the domain CPE movie club.com. So we're gonna do a crossover event about we work. So Kelly and I are going to talk about the wework book, right. What is it called? The Cult of weed? Yeah. Which I haven't read yet. So by September 15, I'm going to be on that. And then the documentary, of course, which we both watched. So yeah, September, I think it's the 15th. Right, Kelly. So it's not yet but we'll be promoting that I totally forgot about that.

Rob Berry:

Alright, for those who don't know, talk a little bit about wework. And what happened.

Kelly Paxton:

So it was a it was a co co working space. And there's a title Oregon and actually, so Adam Newman and Google Adam Newman. And he, he was like this really well, I don't think he was really good like, and he was a very toxic charisma. He was from Israel. He came to the United States. He thought and I haven't written the LinkedIn post. He got the smartest investment makers in the world to invest in, you know, basically desks. And it's, it's crazy, it crashed. They never went public. And the SoftBank Investment Group saved it. But just the most insane tone at the top and I will tell you not to ruin anything for our book club. It took a woman to shut him down.

Jo Erven:

Oh, I like that. And it's the epitome of big knee. You know? Yeah. Oh, yeah. So there's there's gonna be a lot of ethical. You know, things to dissect about that one.

Rob Berry:

Yeah. All right. So Dan gets theranos when I said Who am I? So did hell Elizabeth Holmes and sorted militia now you guys know she's my favorite villain, but Dan Riedel was released to make room for Elizabeth Holmes.

Kelly Paxton:

Hey, the best today.

Jo Erven:

That could be the one liner of the day. Thanks, Dan. Hey, but what about the guy who I just posted on LinkedIn the article about how he faked his electric car working? What is it Nikola, or something about how he literally rolled the car down the hill to go invest? Working when it never worked? Like, I thought it was a crazy Elizabeth Holmes. Number two, let's fake that this works until we make it.

Rob Berry:

Oh, yeah. So let's go back to one of our big lessons here. One of our big lessons is board members. When someone leaves a company, figure out why they left. I told you guys at one, one, in one of our episodes that I worked for a company where I was responsible for the whistleblower hotline, too many complaints were coming through, and we were actually looking at them, they took the hotline away from me, that should have been a red flag to any board member. Like, why would you do that? Well, especially when you saw the reports that were produced based on the complaints, so they weren't frivolous complaints. You have board members have to start being more involved in asking questions, not more involved in the business, but more involved in looking at some of the red flags that you see. As a matter of fact, I think that former chief audit executives should be more people should be on more boards, there should be more representation on boards from former chief audit executives, because we tend to look at the whole picture and we tend to think things through from beginning to end. Now will that happen? Probably not. Because what you would see is a lot more companies would will be forced to do things that they probably don't want to do.

Jo Erven:

So to Kelly's point that she just put in there. So often being on a board is just a big me accomplishment, which I agree with. So my question to you, Robert is and maybe you can tackle this here or in your audit bites is I always tell auditors to audit the board, the board position who's on it, right? Because we know that's what companies like theranos lacked because the board was incompetent. They didn't care. It's what the Florida coalition of domestic violence board who approved $7 million of compensation to their CEO for over a three year period. They lacked the competence, maybe the skill set to be on there. They were just big knees like Kelly said. So what can auditors do when they find that their board is not made up with the right composition? Because I get this question a lot. I think we've got a lot of auditors out there who are willing to do it. But where do you go with something like that? What do you do with that? Do you have ideas for us, Robert?

Rob Berry:

Oh, yeah. First houses, I give boards more credit than they deserve? Yeah, you're probably right. You're right. But but but yeah, think about this, though. Okay. So for companies that are publicly traded, you do have a resource, you can go to the SEC, you can go to NASDAQ, you can go to the pcaob for heaven's sake. Now, for private companies, probably not so much. But you know, the The problem is, people are too afraid. And I say this all the time. People are too cowardice. They're afraid that they're going to lose their job, they're afraid that people are going to talk about them. Screw all that. Because what's happening is you're actually messing up more lives than anything, when you are too afraid to speak up. Get some co honies. Oh,

Jo Erven:

well, and I let you know how says you go to another go to another company, you know, and I asked the question, would you quit your job before you quit your ethics? I do think there's that line where you have to speak up, say something and leave if it doesn't work. My first thought went to private companies, because that's the story I hear more like the public companies, yes, they might have a route. It's the smaller companies where I've had people come up to me and say, I went to my CFO told him financial statements were off by revenues off by, however, half a million dollars. He said, ignore it. I went to the CEO. They said ignore it. I went to the board chairman, they said, I don't ever want to hear from you again. And so what did that guy do? He quit his job. Right? He he had no option. And he said that was one of his first jobs and his tire career as a CFO, one of my favorite stories to tell. So I get that we can leave. But you know, my first gut was what Kelly said. Go to the public notice journalism. investigative journalists are some of the best auditors out there at the play. Go to them. Let them take the story from you. I think it's it's a great option.

Kelly Paxton:

yourself. Yeah. Yes,

Rob Berry:

I have a friend that's a journalist and we talk regularly. Well, I haven't talked to him in a while used to be regularly anyway, about the similarities between auditing and investigative journalism. And Dan says, culture audit by a Yes, absolutely. Then hell says you can also hold your career permanently. Yes, you can, my friend. But I mean, honestly, would you rather keep a career and have some morals and ethics that don't align with who you are as a person? Or would you rather try and find some way to make it and here's the thing that's unfair about that you can commit a crime, steal millions of dollars, go to prison come out, then hit the speaking circuit, and continue to make millions of dollars. However, you can be an honest person who tries to stop fraud, be a whistleblower and get ridiculed or don't even be a whistleblower just quit because you don't want to play the games that they're playing, and be blackballed in your own career. That is sad. That's a sad state.

Jo Erven:

I'm at Can I answer Mark's question that he put up there, I think it was Mark, if it's it is such a soft issue, auditing the competence of a board. But here's the thing with competence. To me, that's one of the easier culture ones because there was no healthcare experts on theranos. This board, not one person that had any medical background at all. And this is a medical device, blood testing company. So in in some regards, I think competence can just be resumes that, you know, what is what are the board composition backgrounds? What do they look like? Do they even match our industry? Do they match? You know, what expertise we need? When it comes to a board? Remember, boards are supposed to, to manage the objectives reaching the objectives of a company, they have to have some sort of background in it. That's my opinion, anyway.

Rob Berry:

Yeah. And look here, Dan says he refused to sign an audit report because they wanted him to remove an environmental issue that management didn't want the board of directors to see. And here's the thing, too, let me just say, here's what I love about the show that we're doing here. We give real talk there. There's so many people out there who are afraid to tell auditors what they need to know, if you're a junior auditor, you need to listen to this show. You need to put it on your podcast playlist. Because this is no sugarcoating here. What do we have to lose? We have nothing to lose, because we don't work for any corporations. But if there's something that you see this wrong, if you see something bad, you need to say something because this is crazy. The road that we're going down the number of frauds I'm sorry, let me get off my soapbox. Let me just say, the number of frauds that we see happening, these things can be prevented if people stop taking just you know, just having a blind eye towards it.

Jo Erven:

Yeah, we can't stop trying just because it's too hard. Right. So my Maxwell quote, quote, it's on my sticky note, living an ethical life may not always be easy, but it need not be complicated. Like, you know it, you got to at least have some sort of ethical mantra like that. I think. Well, inhale

Rob Berry:

brings up a good point who hires the board? What is the root cause of it in any any competent board? Which any Elizabeth Holmes case, we know she wanted a board that, you know, that she could manipulate?

Jo Erven:

Yeah. We can't, we can't not not look at boards, just because it's hard, though. So yeah, it is it is hard. That is the hard part to influence somebody to take action on it. But it's still our responsibility to with that Philly, see something, say something. Right symbol of that.

Kelly Paxton:

And we see these examples, like the wire card, which we talked about, you know, it was found via a tip well, that whistleblowers long, but like, and when people see that, you know, all of a sudden, 28 private investigators are following various people around. It's really, really scary. So, you know, there it's just, it's really hard. And those are huge cases. Think of all the so much lesser cases that don't get the, the publicity.

Unknown:

Yeah, absolutely.

Rob Berry:

pozo asked a good question. How do you screen companies, executives, hiring managers for their ethics?

Kelly Paxton:

I just put in the chat ethical system, a link to ethical systems.org, which I'm pozo that's in New York, it's at NYU, it is amazing resource. Follow Alison Taylor. I am like, I'm a little too scared to ask Alison to be on my podcast, but I think I'm going to do it anyway. Because, oh my god, I have such a fan girl crush on her and she is amazing. Like, the stuff that they put out. Ethical systems.org like they have things and they tweet and everything like that. There are so many resources. This is what I love about tech is the three of us are talking every week, and people are here every week. If we didn't have tech, we couldn't be doing this.

Jo Erven:

Well, I mean to like my version of I love that idea. Kelly, there are a lot of resources, my Easy, easy answer to some question like that for post Though is, you know, start looking at the LinkedIn of those people like start, you know, there's a it look up Cleo and Shannon funaki. And she lied all over her LinkedIn, she ended up getting fired as the CEO of her startup company in Silicon Valley, because a Forbes investigative journalist started looking at her LinkedIn, you know, when they lie, they lie on those kind of things. And so, you know, you might not be able to ask those direct ethical questions, because you probably aren't the ones interviewing these people at the companies, but you can still look into them. You could still look at their backgrounds. And so I think there's there's a lot we could do that's like, you know, that's more like investigative journalist for sure. And I think house question. Yeah, I was just gonna say, we've kind of already answered that. That's what we're trying to answer is, you know, do we go to the public? Do you go to the, you know, the journalists? I think that's,

Kelly Paxton:

what about is that, you know, if they have activist investors, go to the activist investors, there's our, you know, not nothing that gets cats. There's lots of ways to skin cats. You know, if anyone in this runs into this, and you have a question, I'm going to speak for Robert and Joe come to us, we are happy to help. I love connecting people. And if it's a connection for whistleblowing or anything I come to us,

Rob Berry:

and here's the thing, let's make no mistake, it is not going to be easy. You will be mocked, you will be ridiculed, you will be blackballed. But is there a cost for your moral and ethical compass? I mean, what

Jo Erven:

if I agree, but that's why we're called Pollyannas. Robert, we think that we can all change the world, but I'm still gonna go around thinking that so? Well,

Rob Berry:

I just think, you know, if, if you're willing to be dishonest on a lot of small stuff, then you'll probably be this honest on big stuff. So like when you find people who you hear them hedging their bets, you can hear them in conversation when they're waffling on different things, something is wrong. Like that. It doesn't make any sense. It means that you're not a person who's in pursuit of the truth, which you shouldn't be in the audit compliance or Fraud Investigation career field to begin with, because we're in pursuit of the truth, not the best truth for the moment not so like, for example, the difference between your chief legal counsel for your organization and your auditor, big difference. The chief legal counsel is looking out for the organization's best interest period. And that's their job. And I'm not saying that's good or bad. I'm just saying their job is to look out for the organization's best interest. And auditors job is to find the objective truth. We provide reasonable assurance that something either is operating as intended, or it is not operating as intended. And that means you need to find the objective truth. There is only one truth. There's not my truth. There's not your truth. There are different versions of the truth, but there is only one objective truth when you look at it. So

Jo Erven:

yeah, I gotta go camping. Y'all.

Kelly Paxton:

Got an awesome weekend.

Jo Erven:

And this was so fun. What a great, what a great day.

Unknown:

I love it.

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