Property Management Fraud

Posted on January 27 2015 by admin

A former Tucson real estate agent was indicted on more than 20 counts related to real-estate fraud. The agent began operating a property management company in 2008 after suffering declines in his personal income due to the real estate crash which hit Arizona. By 2012, numerous clients had filed complaints with the Arizona Department of Real Estate contending they were no longer receiving rent payments from the agent and that he was not returning calls. An estimate of losses to clients is in excess of $60,000.

A Coolidge, Arizona man was convicted of fraud and theft charges related to personal use of client deposits and other funds in 2011. State prosecutors had accused the former councilman of taking somewhere between $55,000 and $283,000 to pay for personal expenses including telephone bills, shopping sprees and trips to Las Vegas.

In April 2013, a Maricopa County property management company closed its doors after a “cease and desist” order was issued by the Arizona Department of Real Estate (ADRE). An investigation by the ADRE led to findings of multiple violations including the misuse of trust funds and faulty paperwork. The owner of the property management company was indicted one year later on theft, forgery and fraud schemes. It is estimated that client losses are approaching $300,000, much of which were used for personal expenses including trips to Hawaii and New Orleans.

Property managers are required to have a real estate license in the State of Arizona. But that license does not mean they have been properly trained in property management. The 90 hours of in-class training required for a real estate license hardly cover property management issues such as receipt and handling of rent and security deposits, use of trust accounts for the deposit of those funds and reconciliation of those trust accounts.

If you are in need of a property management firm, protect yourself with a few simple steps:

  • Verify they hold an active real estate license in the state
  • Inquire as to level/years of experience in handling trust accounts
  • Require monthly accountings to be submitted timely
  • Search for licensing and disciplinary records

If your property manager is not responding to your concerns, has treated you unfairly, or you have experienced a financial loss, file a complaint with the Arizona Department of Real Estate.

By Melissa Loughlin-Sines, ABV/CPA, CVA, CFE, CFF

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Qualified Personal Residence Trusts

Posted on January 20 2015 by admin



A qualified personal residence trust (QPRT) is a trust typically designed to transfer a primary residence (*) to your beneficiaries during your lifetime which, if you elect, permits you to serve as the trustee. The term of the QPRT is usually between 10 and 20 years. QPRTs are governed by IRS Section 2702(a)(3)(A)(ii).


You may live in the property until the end of the term, but you are required to pay all taxes and expenses associated with the residence, just as if you still owned it.


At the end of the term, the ownership of the home will be conveyed to your beneficiaries or to a trust for their benefit. At that juncture, you must enter into a lease agreement with the beneficiaries or trust and actually pay that rent. Otherwise, the IRS could argue upon your death that the property should be included in your estate because the QPRT was never valid.


If you were to give your home today to beneficiaries, free and clear, the value of the gift would be equal to the fair market value of the home. However, by gifting the residence to a QPRT; you remove the asset from your estate, lower estate taxes at the time of your death, and take advantage of the individual lifetime gift tax exclusion of $5,340,000.


The exact value of a gift made through a QPRT depends on several factors, including but not limited to:

  • Your age upon the creation of the QPRT;
  • The market value of the home as determined by a qualified appraiser; and
  • The length of the term of the QPRT. The longer the term of the trust, the lower the taxable gift.


In order for a QPRT to succeed, you must outlive the trust term. If you die before the end of the term, the home will be brought back into your estate and subject to estate taxes.
The value of the QPRT gift also depends on the IRS interest rate that is in effect for the month when the QPRT is created because it is used to calculate the present value of the beneficiaries’ remainder interest. The higher the interest rate, the smaller the gift associated with the QPRT. The IRS interest rate has been very low for the past few years, but as it starts to move upwards again, QPRTs will generally become increasingly attractive.


A QPRT is an excellent estate planning tool if structured with foresight and reasonable assumptions. It allows you to optimize the value of your home from both a gift tax and estate tax perspective while enabling you to retain the use and enjoyment of your residence for many years.

Gary Ringel, CGREA, Managing Director, Henry & Horne, LLP Business Valuation & Litigation Support Services Group

(*) The dwelling can also be a vacation home or boat as well as structures appurtenant to it.


One of the sources for this blog is an article published by Brown Brothers Harriman & Co. that was written by Michelle J. Hong, Vice President and Director of Wealth Planning.

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A Time to Reflect

Posted on January 7 2015 by admin

We just rang in the New Year, 2015, and it is now a time for reflection on 2014. First and foremost, I wish to thank all the clients we served during the past year. Henry & Horne, LLP’s Business Valuation and Litigation Support Services Group (H&H BV/LS Group) provided forensic, valuation and litigation services to more than 200 clients during 2014. This included business valuations for a variety of purposes: the litigation environment, damages analyses for litigation purposes, and forensic accounting services in fraud and litigation matters, among others. Thank you for your patronage.

I would also like to thank the many referral sources for your confidence in our ability to deliver high-quality forensic and valuation services. This includes attorneys, other CPAs, bankers, colleagues, financial professionals and clients. Without your referrals, we would not be in business. Thank you for the numerous referrals you have made to the H&H BV/LS Group during 2014.

I cannot forget to thank my co-workers. We are one of the largest forensic and valuation service groups in the Valley. Each of you brings a unique personality, background and experience that contributes to making the H&H BV/LS Group work environment collegial and enjoyable. Your individual strengths enhance the qualities of the other members and the H&H BV/LS Group as a whole. Your hard work and dedication to quality work contributed significantly to our success over the prior year.

No doubt, 2015 will bring challenges. However, with great clients, wonderful referral sources, and a strong core group of dedicated forensic and valuation professionals, the H&H BV/LS Group will be ready to meet them.

Happy New Year!

By Steve Koons, CPA, ABV, ASA, CFF

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Happy New Year!

Posted on December 30 2014 by admin

123014_Happy New Year

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Happy Holidays!

Posted on December 23 2014 by admin

122314_Happy Holidays

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Two Fast Background Checks to Determine Whether Your Boyfriend (Or Girlfriend) Has a Criminal Past

Posted on December 16 2014 by admin

HarveyOn her third arranged date, Alice met a man, Harvey, whom she thought would fulfill all her dreams of having “Mr. Right” in her life for the rest of her days. Alice made a dire mistake.

Alice decided to try the internet dating service, Ace Dates (“Ace”). She was looking for a future soul mate and put her trust in Ace to help her find the perfect man. Alice was required to provide a photograph of herself and some personal background information. The Ace people would then find compatible fellows in their database and submit each party’s personal information to the other member of the potential couple, with first names only notated.
Through this process Alice got hooked up with a couple of gents that she met via the date scene. She was unimpressed with both. On her third arranged date Alice met a man, Harvey, whom she thought would fulfill all her dreams of having “Mr. Right” in her life for the rest of her days. Alice made a dire mistake.

After several dates and becoming quite accustomed to having Harvey around, Alice noticed some subtle changes in Harvey’s behavior towards her. Harvey seemed to have quite a temper, sometimes berating Alice loudly in restaurants. One day Harvey got so irritated with Alice that he clenched a fist as if to strike her. This was not at all the kind of relationship Alice had envisioned. She parted ways with Harvey soon after.

It turned out that Harvey had served two prison sentences for aggravated assault. One of the charges stemmed from his causing physical harm to a past girl friend. The charges somehow escaped Ace’s screening processes. Had Alice known beforehand of Harvey’s dark past she never would have made the connection with him. There was a way that Alice could have run a check on Harvey without his knowledge and with no charge to her.

Alice resided in Arizona in the City of Phoenix which was in the county of Maricopa. Alice could have accessed the Maricopa County Superior Court website (*). There she would have had the opportunity to search Harvey’s name under various court categories: Civil, Criminal and Family Court cases. Searching under the Criminal Cases tab, she would have found Harvey’s name and all the related court actions from the time he was first charged with a crime to the time he was sentenced. She also could have read the court’s minute entries relating to the various hearings involving Harvey.

Now knowing that Harvey had been sentenced to one of the state’s prisons, Alice could have accessed the state’s Department of Corrections website (**) and found out much about Harvey’s prison record, such as: the details of his charges and how many years he served in prison; at what jobs did he work while in prison; whether he had any disciplinary actions against him while in prison, and other information.

Accessing criminal background information on Harvey using the county superior court and the state department of corrections websites would have alerted Alice that it might not be a bad idea to dump Harvey before too much dating time had elapsed. And, the information would have been provided at no charge. (***)

By Don Bays, CPA/ABV, CVA, CFF



(***) Although this article is applicable to background searches in Maricopa County, Phoenix, Arizona, readers in other Arizona counties and counties in other states may find that their counties offer similar research capabilities, at no charge.

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How Long Will It Take Until the Arizona Economy Recovers?

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According to experts gathered at the 51st annual Economic Forecast Luncheon on December 3, 2014 at the Phoenix Convention Center, it could take another two years for Arizona’s economy to recover from the depths of the Great Recession.

Below are some statistics, comments and opinions two of the panelists shared with the audience about the status and future of Arizona’s fragile economy,

Lee McPheter – Director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business

“As of May, the United States finished gaining back 100 percent of its jobs lost in the recession, but in Arizona alone, we’re only 69 percent of the way there. We expect to regain that last 96,400 jobs in the next year and a half.”

“So far this year, Arizona has experienced 2 percent job growth, while our state’s 30-year average is a much higher 4.2 percent. Still, this rate was good enough to rank Arizona as the No. 12 state for job growth as of October.”

“Arizona unemployment has dropped from 7.8 percent last year to 6.8 percent this year. However, we continue to recover much more slowly than from past economic downturns, and we continue to face risks from ineffective growth policies at the national level.”

“Population growth could go up from 1.4 percent in 2014 to 1.5 percent next year.”

Elliott D. Pollack – Chief Executive Officer of Elliott D. Pollack and Company

“We still see relatively sluggish employment growth, fewer people moving, millennials delaying home purchases, many people still waiting out their required seven years in the credit ‘penalty box’ after foreclosures, and overall difficulty in getting home loans.”

According to Pollack, full recovery is still years away and we agree with him. Consequently, we encourage you to be patient and conservative while maintaining a watchful eye for opportunities as the Arizona economy continues to grow.

By Gary Ringel, CGREA

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Tales of a Forensic Accounting Intern at Henry & Horne, LLP

Posted on December 9 2014 by admin

I have been fortunate the last three months to have mentored a forensic accounting student through a “Shadowing Opportunity” we offered at Henry & Horne, LLP. I absolutely love my profession, and being able to share my passion with someone just starting out has been a wonderful experience. Forensic Accounting is a dynamic and growing field, and an excellent career choice for those who are analytical, inquisitive and detail oriented. Forensic accountants are not limited to using their accounting, math, finance and investigative skills. They also utilize their verbal and writing skills on a daily basis. It is an extremely creative profession, as every case is unique and requires out-of-the box thinking and problem solving. Please enjoy the blog below from Teresa Judd about her first experience working in this environment. – Julia Miessner, CPA/CFF

When I began my career as a police dispatcher for a local police department, I didn’t imagine that nearly 10 years later I would be searching for a new career path. Even though I love parts of my job, I found myself seeking more opportunities to work at those tasks I most enjoy. The main task is skip tracing. In criminal justice it can be quite beneficial to be skilled in the art of finding people. I have scoured many public and criminal justice records in order to find a suspect, a victim or a vehicle for many detectives. The thrill of finding them is unmatched. You might think I’m a total geek, but I can live with that. Before working in law enforcement, I worked as a bookkeeper at a small auto garage. I had no experience upon gaining this position and had to teach myself the ins and outs of basic record keeping. Despite that, I found that I loved this as well. It was refreshing to work in black and white. As you know, numbers don’t lie. And despite the fact that I wasn’t very good in math during my high school years, I found that I was very good with numbers. Go figure.

So when I decided that it was time to go back to school and select a major, I sat long and hard thinking about those things in my life that I most enjoyed doing. Was there a way that I could combine my experiences in bookkeeping and criminal justice for a more fulfilling career? My answer was yes, in forensic accounting. I spent a lot of time researching this career path on the internet and could find nothing negative about it. The potential to work more normal hours (this is a big deal to a shift worker like me), investigations, working with numbers, it all sounded perfect. All I needed to do was complete my criminal justice degree and begin schooling at a university to obtain my Bachelor’s degree in accounting.

I was only two classes away from finishing my associates in Criminal Justice when I registered for a career work experience class at my community college. Once this class started, I found myself calling many accounting firms trying to gain an internship. However, I found it difficult to find an internship in my field of interest. Finally, my instructor and I decided an interview with a forensic accountant and a research paper would be accepted as replacement for internship hours. I called and met with Julia Miessner, a Forensic Accountant in the Business Valuation and Litigation Support Group of Henry & Horne, LLP. This meeting was awesome! Not only did I learn about different aspects of forensic accounting, but I was able to secure a “job shadowing” opportunity with the company!

Suffice it to say I was nervous. Despite having done research on the career, I had no practical knowledge or real world experience on which to base my desire to pursue this career path. I was nervous that I wouldn’t like it. Would I get bored? I was excited to find out. To begin, I assisted Julia with data entry in tracing and quantifying the loss in a fraud case. This task encompassed data entry into an excel spreadsheet known as a “model”. During the entry of this data, the numbers and transactions are scrutinized in order to uncover the fraud scheme being used and decipher how it was employed. Now this might sound boring, but it was actually the opposite. To me, the numbers tell a story. You see the patterns and it’s like solving a puzzle every day.

This basic data entry was a great way to begin working and gaining experience with the types of models used by forensic accountants in identifying fraud schemes and quantifying losses. I really enjoyed this internship. I learned how to use the models, as I said, and was even able to help identify fraudulent transactions within various fraud cases I assisted in. Additionally, I was able to spend time in the business valuation department learning about their excel model and inputting data into that as well. This allowed me to become more familiar with reading tax returns and financial statements such as balance sheets and profit/loss statements. Within this department I gained experience in valuing businesses that were for sale, stock options and valuing shares of a business. I also learned about the difference between valuing a business for sale vs. valuing a business for gift tax purposes. All in all, I feel that I gained a world of experience and knowledge that only furthers my desire to continue my pursuit into this interesting field.

By Teresa Judd, Guest Blogger

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Henry & Horne, LLP Gives Back Again…This Year at the Phoenix Zoo

Posted on December 2 2014 by admin

Last year I was fortunate to participate in Henry & Horne, LLP’s first firm-wide community service event. It was at the Florence Crittenton campus in Phoenix, Arizona. Florence Crittenton provides shelter, education, counseling and social support to nearly 2,000 girls, ages ten to twenty-one. Our three offices in Scottsdale, Tempe, and Casa Grande joined together for an afternoon of clean-up and general maintenance programs including painting, washing windows and moving gravel.

This year on November 14, the firm joined together again for an afternoon of volunteering at the Phoenix Zoo. Before we began, the zoo coordinator provided a little history and background on the zoo. The Phoenix Zoo opened in 1962 and is the largest privately owned, non-profit zoo in the United States. I was surprised to find out that it is larger in land size than the San Diego Zoo! The Phoenix Zoo began as a personal project of Robert Maytag, grandson of the founder of the Maytag appliance company. Mr. Maytag died a few months before its opening and the zoo was originally named the “Maytag Zoo”. It was renamed the following year to the “Phoenix Zoo” to identify more closely with the community.

The zoo operates on 125 acres of land, has over 1,400 animals and contains 2.5 miles of walking trails. It is divided into four main themed areas or trails: 1) The Arizona Trail – American Southwest flora and fauna; 2) The Africa Trail – animals from Africa; 3) The Tropics Trail – residents of the rain forests; and 4) The Children’s Trail – features Harmony Farm and a petting zoo. The zoo has always focused on animal conservation efforts and it contains a sanctuary to care for animals that are endangered or unwanted.

Our group of around 90 volunteers was assigned to clear and clean away debris in a large area of the zoo. We were able to fill to the brim an extra-large dumpster with debris. We brought gloves and rakes, many purchased by Henry & Horne, LLP, which were then donated to the zoo for later use. The area looked fantastic when we were done. It was both a great way to give back to the community and also a great team building event for the employees at Henry & Horne, LLP. I look forward to our firm-wide community event next year. Happy Holidays!

By Cindy Andresen, ASA


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Fraud in Non-Profits?!

Posted on November 25 2014 by admin

It can’t be. After all, these organizations are meant to help those less fortunate than ourselves. Why would anyone commit fraud against a non-profit organization?

Unfortunately, because they can is too often the answer. Many non-profit organizations simply don’t have the staff or the budget to implement proper internal control procedures to help mitigate the risk of fraud. Sometimes it is those that you would least expect to commit the fraud that do.

Recently a minister in Tulsa, OK pleaded guilty to three counts of wire fraud and one count of subscribing to a false tax return. The minister admitted to personal use of approximately $933,000 of funds donated to build a community center. The funds were used on automobiles, liquor, jewelry, hotels, gambling and renovations to his personal home.

In September, a husband and wife in Los Angeles County were charged with embezzlement from a nonprofit agency meant to help abused and neglected foster children. The executive director and assistant executive director of the Little People’s World agency are charged with 22 counts of embezzlement and misappropriation of public funds. The couple “borrowed” more than $460,000 from the agency over a period of several years to fund their own investments and vacations.

Management, including board members, of non-profits need to make fraud prevention a priority. Oftentimes management of non-profits are so focused on the mission, as they should be, that they become too busy or unconcerned about something they don’t think could happen. And when it is management that is committing the fraud, those around them may be too intimidated to speak up. But speak up they must.

Non-profits should be training their volunteers on the “red flags” of fraud. Why does the executive director take so many trips? How does he/she afford that new car every two years? Was that jewelry a gift? And they should be directed as to whom they should speak regarding their concerns.

We all want to be trusting, especially when working with others for a common cause. But we must also be vigilant to help protect that cause.

By Melissa E. Loughlin-Sines, CPA, CFE, CVA, CFF, ABV

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