Fraud Risk Of the $687 million in fees to Axes America and Axam Investments from 2006 to 2010, Olympus had paid $17 million to Axes America by Nov. 26, 2007, including $14 million in 2007 alone, PriceWaterhouseCoopers said in its report. The remainder of fee -- a total $670 million -- was paid to Axam Investments from September 2008 to March 2010, PriceWaterhouseCoopers said. Berson & Corrado LLC, an accounting firm in New York and Ramsey, New Jersey, served as Axes America’s auditor. Mark Corrado, a partner at that firm, didn’t respond to e-mails or phone calls about Axes America’s audited filings. Catanach questioned whether the audits of Axes America in 2006, 2007 and 2008 were sufficient to find that the brokerage complied with Generally Accepted Accounting Principles, the standard typically used to review company finances, as auditors had found. Axes America’s advisory fee revenue jumped from $324,000 in 2005 to $3.2 million in 2006, signaling that the nature of its business had “dramatically changed,” said Catanach, who is also the Cary M. Maguire Fellow at the American College Center for Ethics in Financial Services in Bryn Mawr, Pennsylvania. That should have triggered a new review of internal controls, the “underlying economics” of the transaction, and the role of related parties, he said. “One big fraud risk factor is that 100 percent of revenue comes from one source,” he said. “This puts huge pressure on the client to succumb to ‘customer’ wishes.” To contact the reporters on this story: David Glovin in New York at dglovin@bloomberg.net; John Helyar in Atlanta at jhelyar@bloomberg.net
2011 Media Report Villanova School of Business Page 229