How to get away with securities fraud

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How to get away with securities fraud is a perplexing question on the mind of everyone in high finance.  It’s a valuable skill not taught in colleges anymore.  But you don’t need a four year degree from Harvard to get away with securities fraud.  If you follow these ten steps you will be committing securities fraud successfully like the world has never seen.  Who knows?  Maybe you will become the next Bernie Madoff.

Step One: After graduating top of your class from a top ten business school get a job as an investment banker on Wall Street.  Here you will learn to throw all ethics you learned in ‘Business Ethics 101’ in the trash.  Everything in your life now about money.

Step Two: Lever up your personal spending to levels you didn’t know possible as a young graduate.  Spend as much money as you with a credit card.  You’ll want to be spending at least $200,000 per year.  When you spend this kind of money you will get used to this sick lifestyle.  You will also need to keep feeding the beast.  The more money you spend the more money you will need to make.  People in desperate for money tend to come up with the most interesting ways to make more money.

Step Three: It’s time to start frequenting high end strip clubs regularly.  But slow down, it’s not about the dancers.  It’s about meeting politicians and networking with the scum.  Politicians are well known to frequent adult night clubs – it’s the only place where they can be themselves without the wife around.  You need to befriend a few politicians.  When you start committing securities fraud, a politician in your pocket is an escape rope.

Step Four: Read The Smartest Guys In The Room: The Amazing Rise and Scandalous Fall of Enron and Bad Blood: Secrets and Lies in a Silicon Valley Startup a few hundred times each.  Learn the techniques of these master fraudsters and how they got caught.  Jeff Skillings and Elizabeth Holmes should become your mentors.  Consider tattooing their faces to your chest so you see them everyday in the mirror when you wake up.  If you want to get away with securities fraud you need to learn from the best.

Step Five: After a few years of experience as a highly paid investment banker it’s time to land a job at a hedge fund.  This is where the securities fraud starts.  After you get a job at a hedge fund you need to get as much insider information as possible.  You can get creative here.  Here are a few great ways to get insider information.

  1. Go to bars where the CEO frequents and hire a lady of the night to seduce him into giving out insider information.
  2. Break into the CEO’s office at night time and steal his laptop.
  3. Hide in the closet where the board of directors has their meeting.
  4. Use extortion techniques – reading up on Michael Avenatti will be helpful.
  5. Take the boys outs from your old investment banking job to get information on mergers they are working on.
  6. Dress up as a lady and seduce the CFO into giving you next quarters EPS numbers.
  7. Kidnap the executive teaexecutive teamm and force them to give you information on the deal they are working on.
  8. CEO’s love pillow talking with their mistress.  Hide under the bed and wait until the pillow talking starts.
  9. Bring the CEO weed brownies.  All CEO’s slip up when given weed brownies.
  10. Chase the CEO with a car and yell out of the window with a bull horn how you are going to run him over if he doesn’t give you insider information.

Step Six: After a few years of working at a hedge fund and trading as much as you can on insider information its time to step up to the big leagues.  By this time you should already be on your third marriage with a foreign supermodel who is the same age as your daughter from your first marriage.  The hedge fund business was profitable but your ambitions for committing securities fraud is humongous.  It’s time to get a job in the C-Suite level at a public company.

Step Seven: Hire your best friend from the banking business as your CFO, who by the way is a total scum bag. The guys who get away with securities fraud always hire their scum bag best buds as a CFO.  You’ll want to award your CFO for committing blatant securities fraud.  Base your CFO’s bonus on unreachable goals that are easily manipulated.  A bonus based on exponential revenue growth is always a good one.  You know, because of channel stuffing?  Equity appreciation is also good.  A CFO who massages the numbers to get a stock price up so he can take a vacation to Italy this summer is a gem worth having.

Step Eight: Become chairman of the board and hire all of your college buddies to be on the board.  If you want to commit securities fraud at the public company level you need to control the board.  The best way of controlling the board is becoming the chairman while you are also the CEO.  Once you have the chairman title hire all of your old college buddies to sit on the board.  Oh and remember that politician you made friends with back at the adult night club?  Hire him to sit on the board too.  These guys will all look like independent directors, but they really won’t be.  Pay them hefty salaries like $500,000/year to become your yes man.  Give them a crazy amount of stock options.  The thing about board members is this, if you pay them enough they will become over-glorified and overpaid yes men.

Step Nine: Hire a really bad auditor that no one has ever heard of.  You’ll want to find the worst auditors around.  An auditor shop with like three guys from India who work out of their mom’s basement would be ideal.  You know, a firm like Arthur Andersen.

Step Ten: Buy a house in Belize and get a private airplane.  By this time you should be committing securities fraud at a massive level.  Channel stuffing.  Fake revenues.  Overstating your inventory.  Mark to market accounting of assets and adding back these fake gains into adjusted EBITDA.  You’re likely paranoid by now.  A house in Belize and a private plane is your escape route.  The last defense against the scummy Securities and Exchange Commission (“SEC”).  If anything ever happens grab that escape bag you have in the safe in your home.  You know, the one with $3 million of cash in it and a fake passport.  And just book it out of the country to your home in Belize.

Step Eleven: Congratulations!  If you followed all of these steps you just got away with securities fraud.  Now enjoy your time on the beach with your foreign side chick you met in Belize.

 



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