| Introduction |
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1 Bogus Gold And Other Tales Of Woe |
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1 | (6) |
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It's not hard for a company's management to deceive investors when auditors accept their word at face value about the company's financial condition |
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2 Hercules Rescues The Auditors |
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7 | (6) |
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In making an informed investment decision, investors might feel reassured by an audited financial statement. That's a big mistake. Auditors say that investors cannot rely on annual audited financial statements to make investment decisions, and the Supreme Court of Canada agrees with them |
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13 | (9) |
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Since they can't rely on an annual audited financial statement to inform them about a company's financial condition, investors have to do their own sleuthing. Here's what to look for |
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22 | (6) |
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If investors decide to pursue a legal settlement from auditors who sign off on misleading financial statements, they can expect a long and expensive battle. One case began in 1992 and has turned into the longest-running trial in Canadian history |
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5 The Fox Still Guards The Henhouse |
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28 | (7) |
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Canada has an abysmal record of investigating and prosecuting white-collar swindlers. In large part, that's because Canada's securities and audit communities regulate themselves, and the regulations have little to do with protecting investors |
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6 A Quick Guide To Scams And Cover-Ups |
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35 | (5) |
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Deceitful executives have many recipes for cooking the books. With our lax regulatory environment, Canada provides them with the key to the kitchen |
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7 The Nuts And Bolts Of Revenue Scams |
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40 | (10) |
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As revenues rise, so does a company's stock price. No wonder scam artists focus on manipulating revenue, and they do it in all sorts of ways |
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50 | (7) |
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When Charles Ponzi used investors' money to provide a return on money raised from previous investors, he didn't realize that his name would be forever associated with the scam that will never die. Offering returns that are too good to he true, the same basic scheme continues to fool investors to this day. And most investors should know better |
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57 | (6) |
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If investors need more proof that they can't rely on regulators and auditors to protect them, they can look at the multi-million-dollar collapse of Crocus Investment Fund in Manitoba. In this case, investors sued the auditors, the board of directors, and the Manitoba Securities Commission |
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10 Canada's Securities Commissions: All Talk, No Action |
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63 | (7) |
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In 1999, Ontario's Securities Commission promised to clamp down on accounting shenanigans. As usual, the public-relations bark was worse than the regulatory bite---by far. The ensuing scams proved it |
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11 See No Evil, Hear No Evil, Speak No Evil |
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70 | (7) |
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While their investors wait patiently for a return on their money, executives of public companies play games that allow them to line their own pockets. With weak accounting rules in place, they have no trouble getting away with it |
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77 | (4) |
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Retail investors cannot easily evaluate the assets of a newly listed junior resource, technology, or biotech company. So why do they invest in such companies, especially when con artists will likely ensure that they never see a return? |
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13 Private Placements, Public Disgrace |
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81 | (5) |
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Brokers and executives may prosper, but retail investors will seldom see a dime from an investment in a private placement. At the very least, you should ask a few questions before you invest |
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86 | (7) |
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Con artists love Canada's resource sector. Assisted by vague accounting rules and weak stock exchange controls, they can fudge information that investors need to make decisions and make themselves look much more promising than they really are |
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15 One-Size-Fits-All Shoe Store |
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93 | (7) |
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With accounting rules that apply in the same way to sporting goods retailers as they do to gold-mining companies, Canada leaves its investors in the dark about what's really happening inside a public company. Such inadequate financial reporting has led to some of the country's biggest corporate failures |
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16 Cooking The Books, Feathering The Nest, And Other Lessons In Manipulation |
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100 | (10) |
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From capitalized expenses to excessive executive compensation, companies have as many ways of manipulating accounting rules as investors have ways of misinterpreting the results |
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110 | (7) |
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Investors can be misled by a company's cash-flow statements. A deceptive executive can manipulate cash flows just as easily as accrual income, and investors will never know it |
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117 | (6) |
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Once Canada's biggest company, Nortel used funny accounting, executive fraud, lax securities regulation, and compliant brokers to persuade investors to make bad decisions. No wonder it went bankrupt |
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19 Lessons From The 1920S To The Present |
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123 | (8) |
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When it comes to protecting investors, Canada has not progressed far since the 1920s. Instead of making life difficult for scammers, con artists, and Ponzi-scheme promoters, our lawmakers sit back and watch them go to work |
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131 | (5) |
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From translating systems to 3-D TV to the film business, scam artists operate in a wide range of industries. The scrapyard business seems to hold a particular attraction for fraudsters, who thrive, while our auditors and lawmakers look the other way |
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21 What Happens If You Sue? |
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136 | (5) |
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Investors in Canada stand little chance of recovering their money in court after a financial scam. The process takes years, and it costs an arm and a leg, and that assumes you can even find a law firm to take the case |
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141 | (6) |
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When a company promised to cultivate pearls from captive clams, it raised $7 million from public investors. But the clams stayed shut, and much of the money disappeared to Panama. If investors had looked beyond the company's audited statements, they'd never have given the company a penny |
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147 | (8) |
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If investors need an example of the way lax regulators, self-interested auditors, and incompetent lawmakers enable scam artists to thrive in Canada, they should look at business income trusts. This scam wasn't new, the scam artists were familiar, and nothing has been done to stop it from happening again |
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155 | (8) |
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If you think your insurance policy is impenetrable, try reading an insurance company's annual report. Under current accounting standards, even the worst-run insurance company can make itself look good to investors, who don't know what to look for |
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163 | (5) |
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Thanks to Canada's accounting environment, banks can use their audited financial statements to distort their financial condition. Investors have to know what to look for |
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168 | (4) |
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To avoid getting burned, investors have to make sure they deal with reputable advisors, brokers, and financial professionals. Word of mouth is not enough |
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172 | (4) |
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From income trusts to leveraged exchange traded funds to Nortel, the same advice applies: if it looks too good to be true, it probably is |
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176 | (4) |
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Just like the rest of us, high rollers in Canada fall for scam artists with a good story, especially if the story involves a reduction in taxes |
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180 | (15) |
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Canada's premature adoption of International Financial Reporting Standards will leave investors more vulnerable than ever to financial scams |
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195 | (8) |
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Here are some suggestions for improving the regulatory and reporting environment in which investors make decisions in Canada. But if you expect them to be adopted, don't hold your breath |
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| Appendix A Fifty Canadian Financial Fiascos |
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203 | (3) |
| Appendix B Financial Statement Interpretation |
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206 | (10) |
| Appendix D Significant Numbers: The Example Of National Business Systems |
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