Does The CFTC Know Their Butt From A Hole In A Ground?

 

After reading this article, I’m am  really getting a bad attitude with anything related to government more and more each day. The phrases “Do they know their butt from a hole in the ground?’ and “Clueless” keep coming to my mind. They need to find someone who know what they doing.

Time to Clean House at the CFTC by Paul B. Matthews over at American Thinker

While most of the American media focused much of the past week on where Mitt Romney invested his money, or exactly what his role was at Bain Capital a decade and a half ago, another major financial scandal has hit the American financial markets with little to no fanfare.

For the second time in less than a year, a large Futures Commission Merchant (FCM) has collapsed after firm officials stole customer money to fund business operations and their exorbitant lifestyles.

With last week's collapse of Peregrine Financial, the U.S. Congress should be asking, "Do any of the field examiners and their managers at the Commodity Futures Trading Commission (CFTC) have any clue what they are doing, particularly since they signed off on the firm's financial statements as recently as January 2012?"

Peregrine collapsed after its founder could no longer hide his theft of approximately $200 million in customer funds.  In a detailed suicide note outlined in Russell Wasendorf, Sr.'s federal arrest affidavit, he admitted he was able to fool incompetent government regulators for a period of twenty years using nothing more than a post office box, a scanner, Photoshop, Excel, and an inkjet printer.

As a certified public accountant (CPA), I am stupefied at the sheer lack of sophistication used in this fraud.  As a taxpayer, I am horrified by the absolute lack of competence or pure laziness exhibited by regulators at the CFTC.

According to the arrest affidavit, this fraud was perpetrated by Mr. Wasendorf's ability to do nothing more than create and pass off fictitious bank statements to government regulators.  It was really that simple.

Unfortunately for the CFTC, the level of simplicity is exactly why this should never have occurred.

In any entry-level audit course, students are taught to use "professional skepticism" with regard to all aspects of an audit.  In this case, the CFTC clearly failed to live up to this mantra.

The indications that fraud was likely occurring at Peregrine were about as numerous as grains of sand at a beach.

First, Mr. Wasendorf was the only person allowed to see firm bank statements at Peregrine.  Moreover, all such bank correspondence was to be directed to him, and all bank letters were to be delivered to his office unopened.

Mr. Wasendorf was also the only person at Peregrine allowed to interact with any person from their bank (US Bank).  In addition, he was the only person in the entire firm allowed to have access to their online banking portal.

These simple facts should have been known to any regulatory auditors doing their job.  As part of any audit, auditors are supposed to interview multiple sources from inside and outside the firm in an effort to document the firm's internal controls.  Had this simple process been done just one time in the past 20 years, this fraud would not have been able to be carried out for as long as it did.

Read more: http://www.americanthinker.com/2012/07/time_to_clean_house_at_the_cftc.html#ixzz20zJiSegw