Confirmation.com Uncovers Another Multi-Million Dollar Financial Fraud
BRENTWOOD, Tenn., June 18, 2013 /PRNewswire/ -- In less than nine months after uncovering the $215 million Peregrine Financial Group (PFG) fraud, Confirmation.com's electronic audit confirmation service was used to uncover another financial fraud. This time it was hedge fund owner and operator James A. Shepherd of Vass, North Carolina who pled guilty to stealing millions of dollars from more than 100 investors over a seven-year period.
According to court records, James Shepherd engaged in a commodity pool fraud where he solicited pool participants to invest in the Shepherd Major Play Option Fund (Major Play Fund). Instead of using the funds for trading on-exchange options on futures contracts, he stole approximately 60% of the fund's assets to support his personal lifestyle including building a $2 million home. To conceal his fraud for so long, he used Adobe Acrobat to create fraudulent bank statements and misdirected the auditor's bank confirmation letters.
"The Shepherd fraud is almost identical to the Russell Wasendorf PFGBest fraud," said Chris Schellhorn, CEO of Confirmation.com. "Just like Wasendorf's 20-year fraud, for over seven years Shepherd used readily available software tools to create fake bank statements, he directed the auditors to send bank confirmation letters to a PO Box he had rented, forged a fictitious bank employee's signature, and he sent the fraudulent audit confirmations back to the auditor."
The fictitious bank statement from December 31, 2012 indicated that the Major Play Fund had $6,041,085 in cash, but the fund's only bank account had a balance of approximately $81,584. It was the auditor for the National Futures Association (NFA) that insisted on using Confirmation.com to verify the fund's bank balance electronically that led to the discovery of Shepherd's fraud scheme.
"He (James Shepherd) failed to authorize Confirmation.com to electronically confirm the balances," said NFA President Dan Roth in the official case against Shepherd. In the statement by the U.S. Attorney's Office from the FBI's website, "the accountant insisted on verifying the cash balance of (the) fund's bank account electronically, through the audit confirmation website www.confirmation.com, which is now the commonly used method of verification by accountants. Shepherd delayed and then refused to give the accountant authority to utilize the website to verify the cash balance."
"Like Wasendorf, by refusing to give the auditor authorization to use Confirmation.com to confirm the fund's bank balance, Shepherd was essentially admitting guilt," said Brian Fox, founder and chief marketing officer of Confirmation.com. "When an auditor's client won't authorize the use of Confirmation.com that's a strong warning sign that fraud is taking place."
Auditors and financial institutions in more than 100 countries use Confirmation.com because the propensity for fraud and the magnitude of those frauds on a global scale are both increasing. By verifying the authenticity of each user, the Confirmation.com's cloud-based solution not only improves the quality of audits, it greatly improves investor confidence in the audited financial statements.
Confirmation.com is the creator and world's leading provider of secure electronic audit confirmation services. It processes over $1 trillion in confirmation information annually for a majority of public companies, as well as private companies, non-profits and government agencies. In addition to its bank confirmation solution, the company provides solutions for more than 30 different types of audit confirmations including accounts receivable confirmations. Confirmation.com holds six patents and is the Preferred Provider of Electronic Confirmations for the AICPA Trusted Business Advisor™ Solutions Program and is endorsed by the American Bankers Association. Confirmation.com has also received numerous awards including being a multi-year alumnus on the Inc. 500 list for 2010 and 2011. Several hundred In-Network responding companies including all of the Top 10 banks in the U.S. and over 11,000 accounting firms in more than 100 countries trust Confirmation.com for their audit confirmation needs. For more information, visit Confirmation.com.
The U.S. Attorney's Office filing on the FBI website can be found here: http://www.fbi.gov/charlotte/press-releases/2013/investment-fund-owner-and-operator-agrees-to-plead-guilty-to-defrauding-investors-of-approximately-6-million
The National Futures Association (NFA) filing can be found here: http://www.nfa.futures.org/basicnet/CaseDocument.aspx?seqnum=3590
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