Turnaround Authority

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Fraud Prevention Tips from a Former Con Man

Talk about using your super powers for good. Before he was even old enough to vote, Frank Abagnale became one of the most notorious con men in history. From the age of 16-21, he posed as a pediatrician, lawyer, sociology teacher, film director and even an airline pilot to hitch rides all over the world. He estimates he flew a million miles to more than 26 countries, all in his impressive Pan Am uniform he got by calling the company’s headquarters and telling them he had lost his while traveling.

He also defrauded a lot of banks. After stealing more than $300,000, he was caught and served time in France, Sweden and the United States. After being granted parole at the age of 26, he was hired by the FBI and is now a respected authority on forgery, embezzlement and document fraud.

Once a notorious con man, Frank Abagnale is now a respected authority on fraud prevention. “What I did 40 years ago is 4,000 times easier to do today than when I did it," he said.

Once a notorious con man, Frank Abagnale is now a respected authority on fraud prevention. “What I did 40 years ago is 4,000 times easier to do today than when I did it,” he said.

After appearing on Johnny Carson’s show nine times, Frank was urged by him to write a book. “Catch Me If You Can” is the fascinating story of his life, which Steven Spielberg made into a movie starring Leonardo DiCaprio in 2002.

Frank also started his own company, Abagnale & Associates, to educate others on fraud prevention. Looks like he’ll never run out of work. Fraud is still a huge problem in the U.S., costing more than $900 billion a year.

According to the most recent Payment Fraud and Control Survey, 87 percent of cash managers, analysts and directors claim to have incurred instances of check fraud in 2012.

Although claims have been made for years that the U.S. would soon be a checkless society, around 75 percent of payments from one company to another are still made by check. Abagnale believes the U.S. is still 20-30 years away from being completely paperless. And it’s never been easier to create a counterfeit check.

“What I did 40 years ago is 4,000 times easier to do today than when I did it,” he said in an interview on CNN, talking about his counterfeiting. Back then he needed an entire room to set up a large press to create fake checks, a tedious process. Today all you need is a stolen check for the account number, a laptop and a scanner.

Frank shares tips on how to prevent all types of fraud. Here are a few of his tips for businesses:

• Tear out the hard drive of any printer or copier you discard. They store images of everything that is copied on them, some of which may be confidential information. Be sure to destroy any hard drives before getting rid of them.

• Use a black uni-ball 207 pen when you sign documents, especially checks. The ink in these pens forms a bond to the paper that prevents the signature from being stripped. It is the only pen whose ink cannot be altered by chemicals or solvents.

• CFOs and chief auditors need to play an active role into the purchasing of the company’s checks. Purchasing agents often opt for the cheapest checks. Companies need to invest in checks that contain the latest security features. These include Thermochromatic inks that react to temperature changes and cannot be replicated and prismatic backgrounds with multiple colors that are difficult to reproduce.

For more fraud prevention tips from Frank, buy his book “The Art of the Steal: How to Protect Yourself from Fraud, America’s #1 Crime.” (There are also plenty of tips in my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEO’s Mistakes.”)

Frank has made it his life’s mission to prevent people being stolen from. “If you make it easy for someone to steal from you, someone will,” he says. “Don’t make it easy.”

As the Turnaround Authority, I’ve worked with many companies that made it way too easy for employees to steal from them. One of my favorite stories is about a company in Dallas that had invested in surveillance equipment to keep a watch on inventory that might walk out the door. The problem was that the surveillance room was kept unlocked.

This was back in the days of cassette tapes, so after somebody stole some inventory, he or she simply went to the surveillance room and either erased or replaced the tape. One thoughtful fellow merely placed the tape player on pause, then restarted it when he was done.

While some thieves have to be incredibly creative, like Frank, to steal, others merely jump on an available opportunity. Don’t give them one.

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Sharing My War Stories

I’ve always known that reaching a major goal takes a lot of work. Completing my new book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” was no exception.

It took me decades of work in the turnaround field to experience all the stories that are contained in the book, many of which would be difficult for me to believe if I hadn’t been there myself. Who gets shot at – twice – while working in this industry?

There are a lot more stories, although they don’t generally involve gunfire. One involves a knife – brandished by a son at his mother after he got fired. You’ll also read about church ladies stealing, CEOs cheating, CFOs lying, and a multi-million dollar company that rationed toilet paper for its employees.

One reader familiar with my industry commented, “You even figured out a way to work sex into a book about the turnaround industry.”

The first newspaper article about my new book appeared last week, and I’d like to thank the reporter, Bobby Tedder, for interviewing me and writing the story below. I’m not sure whom the headline about Titans refers to, though. I never played football for Tennessee. But I like the alliteration and the phrase Turnaround Titan would look nice on a business card.

Note: I’ll be interviewed this Tuesday on WREK, FM 91.1, the radio station at Georgia Tech in Atlanta, on the “Let’s Talk Business” show from 12:30 to 1:00 p.m. 

Business Turnaround Titan Pens Book of Wisdom

By Bobby Tedder, btedder@neighbornewspapers.com

Lee Katz, whose reputation as a company fixer precedes him, is finally offering a bound volume of words of wisdom for public consumption.
The Katz-penned “How Not To Hire a Guy Like Me: Lessons Learned From CEOs’ Mistakes” recently hit the market.

“It’s written for anyone. … Any business owner can benefit from it,” he said.

The Sandy Springs resident product has specialized in turning firms of varying sizes and covering a broad range of industries around. His crisis management career, including stints working with public and private companies, spans three decades.

He called the book the culmination of discussions with his many clients and friends.

“They told me I have so many great war stories to share,” he said.

That group of confidants reads like a virtual Who’s Who list from the business realm.

That would include former Home Depot co-founder Bernie Marcus, whose endorsement of Katz’s book is found on the back cover.

“Read it. Learn from it. Benefit from Lee’s many years as the Turnaround Authority,” Marcus wrote.

Among the many topics Katz tackles in the book are the elements of solid leadership and detailed advice on how to recognize and respond to internal fraud.

“People keep asking me what took me so long to come out with a book,” said Katz. “The answer is that I’ve been working 60- and 70-hour weeks all these years.”

The Georgia Tech alum’s tome could gain added traction beyond the business elite considering its content is not on the esoteric side.

The book is written in a language that is accessible to the average reader — or “folksy,’’ as Katz put it.

“Those people who have read it say it [reads] like me talking. … It’s very straightforward,” he said.

© neighbornewspapers.com 2013

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Initial Steps of a Turnaround: Nothing is Sacred

Sometimes people ask me what prompts a business to hire me as a Turnaround Authority. At what point does a business decide it needs some outside person to come in and tell them how to run their own company?

Sometimes I am hired by a bank to assess a company’s viability prior to it making a loan. However, the primary way I am hired is at a bank’s request when a company is in default. Generally there are provisions in the loan documents from banks or bondholders that upon a default, a financial advisor will be retained by the borrower.

In the absence of such provisions in the loan documents, the bank can still “strongly suggest” that the borrower hire someone either in the case of default or because the bankers have become concerned that the company has lost money over the past few years. They are worried about its long-term survivability.

The Board of Directors may also be concerned about whether management has been evolving and changing in response to its customers and market trends. Senior management may be starting to worry whether their jobs are secure.

As the situation becomes more unstable, all this negativism starts to infect the entire company and flows through other key employees. They in turn then become less efficient and the downward spiral starts.

Everyone is feeling under pressure and often the CEO or business owner has become so overwhelmed he or she doesn’t know where to start and sometimes has pretty much given up on making any decisions at all.

That’s often when I am called in and am hired as a consultant or interim CEO. Now their problems become my problems. So how I do I get started to turn this business around?

For the next few posts, I’ll discuss the initial steps I take when I am hired to turnaround a company. Let’s start with what I look at.

Everything.

I want to look at everything that happens in that company, between the front door and the back. I want to look at all their vendor relationships. I was to see an organization chart of all the people at the top. I want to see all contracts, personal guarantees of senior personnel and loan docs.

I want to know about all the assets the company owns, information about all its products lines or services, what distribution channels are set up and how much is spent on shipping and freight. If the business generates scrap, where does that scrap go?

I always ask to see the current business plan. I’ve long since given up being surprised when I find out that when the “current” business plan was last reviewed, we were all listening to “Thriller” on cassette tapes, talking about Reaganomics and trying to solve Rubik’s Cubes. (I’ll write more on the necessity of having an updated business plan later.)

I tell the senior management that nothing that is in place is sacred. Nothing is untouchable, not even the idiot son with the big corner office whose interest in the company doesn’t extend past the big numbers on his paycheck. I will be looking at every aspect of the company.

We may need to shut down product lines. I don’t care if Grandpa Joe invented that rocking widget when he was down to his last dime and there’s a bronze cast of it proudly displayed in the lobby. It hasn’t made money since the Carter administration. It’s going to be retired.

We may need to change facilities, order inventory differently and collect receivables faster.

The point is to throw away all the old assumptions so we can begin to look at operations in a new, fresh way that may generate ideas to cut out the fat to operate more efficiently and discover ways to become profitable.

Next week I’ll write about how I determine which key personnel will stay in the new company, and which ones will go.