Professor Elam

Thursday July 30 2020

We have recently studied factoring the process of selling accounts receivable to a third party to raise cash. I warned that once this begins it is difficult for a company to extract itself from the process. And we might add there is great potential for fraud.

Ronald Schroeder has a long career in factoring.  Read about the fraud that caught Bank Chairman Bruce Bugg unawares.

This is also a good example of the lack of internal control.  Schroeder joined the bank as CEO of Texas Enterprise Funding. He began buying old accounts at way above market value. Apparently he pocketed some of the money that should have gone to the other firm. The fraud is $13.2 M, so far, and the bank says it has a $10 M insurance policy. I wonder if the issuers of thepolicy will demand to see adequate IC before paying off the claim?