Hiding in Plain Sight

For those who followed the Bernie Madoff scandal, you might recall that his company, which purportedly held nearly $65 billion in assets under management was – ahem – “audited” by a miniscule 3-person CPA firm located in a strip mall in bucolic Rockland County, N.Y.

Apparently, this accounting mismatch did little to attract any more than cursory attention from regulators and exactly none from the New York State Society of CPAs which, incredibly, allowed the owner to pen a regular column on auditing ethics. Let me repeat that auditing ethics. That was of course prior to the episode imploding into the biggest financial fraud in American history and earning Madoff a 150-year prison sentence.

Trust me, I can’t make this stuff up.

Along the same lines, but not nearly the same in scope, it has now come out that Key Worldwide Charity - the California non-profit at the nucleus of the burgeoning “Operation Varsity Blues” college admissions scandal failed to attract any notice from the IRS despite listing no employees, three officers who worked ZERO hours and no independent directors in its filings and taking in over $7 million in donations over the past four years.

And to think I got a rather terse email earlier this year from the IRS claiming an additional $3,000 in taxes stemming from a modest IRA disbursement.

And yet, with more yellow flags than undertow warnings at a beach resort, no one gave this organization a second look.

The foundation, headed by one William Singer, was advertised as helping provide education opportunities to underprivileged children but instead as it turns out, helped celebrities, executives and various folks with seven, eight and nine-figure bank accounts bribe test monitors, school officials and coaches ensuring their kids’ admission to top colleges and universities.

Key Worldwide also appears to have listed numerous partnerships on its website that have subsequently turned out to be false. According to reports, officials at three of the organizations Key listed as partners— Houston Hoops, Atlanta Xpress and Bizworld.org — said they had never even heard of the foundation.

Singer has since pled guilty to money laundering, racketeering, fraud and obstruction of justice.

It’s safe to assume he’ll live rent free courtesy of the government for quite a few years. Thus far, some 50 people have been charged including actresses Lori Laughlin and Felicity Huffman and the roster only promises to get larger.

To be fair to the IRS their prosecutorial efforts have been hampered in recent years due to cuts in staffing and budgeting and according to statistics a tax-exempt organization stood less than a 1 percent chance of being audited.

Yet they somehow found yours truly who that year even submitted a 1099 for $35.

There oughta be a law. Wait, come to think of it, there is.