This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Accounting Fraud: A 'How-To' Guide

Stocks in this article: CCME LFT

NEW YORK ( TheStreet) -- When Anthony "Tino" De Angelis, a soybean-oil magnate based in Bayonne, New Jersey, wanted to fool his auditors, he filled his warehouse tanks almost to the brim with water, then floated a few yards of oil on top. Uncritical auditors took a peek into a handful of those tanks, saw what they'd come to see, and signed off on the De Angelis audit: all clear.

With his assets officially sanctified by his accounting firm, De Angelis used those Bayonne assets as collateral for loans from many banks, including Chase Manhattan. And he used the funds from those loans to attempt a bold ploy: the cornering of the soybean-oil market. The inevitable collapse of his scam brought American Express (AXP) (one of his creditors) to its knees; its stock lost half its value. Two Wall Street brokerages went belly up. Fifty banks failed.

This was in 1962 and 1963. The scam cost investors, banks and their counter-parties nearly $220 million. In today's dollars, that's $1.6 billion.

"It was a textbook example of accounting fraud," says Louis Straney, an expert on high-level financial larceny and, as it happens, the author of the textbook Securities Fraud: Detection, Prevention and Control. And its lessons are the lessons of all corporate accounting deceit, from Enron to Lehman Brothers. "De Angelis presents the classic example of how a man can exploit a complicated situation and use the credulity of high financiers for tremendous gain," commented Time magazine when De Angelis was arraigned in federal court in 1965.

White-collar swindling on a possibly massive scale has yet again entered the minds of investors in recent months, this time caused by a burgeoning raft of fraud revelations and allegations directed at Chinese companies that have sold shares in the U.S. So many China-based companies -- such as China Media Express (CCME) and Longtop Financial (LTF) -- have blown up amid accusations of fictitious profits that some investors have come to doubt the financial reports of an entire nation.

Investigating Chinese Reverse Mergers

The types of fraud allegedly perpetrated by these Chinese companies aren't new. The hoaxes, cons and scams used by white-collar criminals inhabiting the world's C-suites haven't changed all that much since the days of De Angelis and earlier, when accounting standards were first codified.

1 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs