Tracy Coenen: A Fraud Investigator with Investigative Intuition

Strickland Bonner: So your lawyer and your clients are squeezing you for lower fees. How do you put more cash in your pocket? We want to expose you to new ways of practicing law. Endless hours with no home life and a lease on an expensive office are so 1999. It's time to make a change for the better. Here to help you with that are your hosts Ron Bockstahler and Kirsten Mayfield. Welcome to the 1958 Lawyer Podcast.

Ron Bockstahler: Welcome to the show, the 1958 Lawyer. I am your co-host Ron Bockstahler,

Kirsten Mayfield: and I am Kirsten Mayfield, and we have with us today Tracy Coenen. She runs her own forensic accounting and fraud investigations firm, Sequence Inc. It's been around for over two decades at this point, but do not get hung up on the word accounting here. She is by all means a detective. She may not be rolling into a crime scene, looking at a broken watch and saying this crime happened at three, but she will find that Michelle watch your wife doesn't know about in your bank statements. Although I imagine most of her cases aren't that simple, she also does white collar crimes like embezzlement and investment fraud. Tracy, thank you for joining us. How are you today?

Tracy Coenen: I am awesome. Thank you for having me.

Kirsten Mayfield: Yes, absolutely. Now, in a detective scene, it's very obvious to me there's a victim that calls the police, but who calls you? How do you come into these cases?

Tracy Coenen: I typically come into the cases when the attorney of record calls me. You know, makes a determination in the case that a forensic accountant is the person that we need to help us figure out where the money went. So I like to tell people I find money.

Kirsten Mayfield: I wish I had that skill.

Tracy Coenen: Well, the catch is I don't get it back for you. I can tell you where it went, but then you've got to have the attorney who can help you try to get it back. I

Ron Bockstahler: was going to have you come to my house and help me find some money, but all right, never mind. Hey, let's jump into family law. I know you work in a couple, three different areas: that family law litigation, and I don't know-is litigation tied in with just research work or fraud? Fraud, I guess, would be the other one. Corporate fraud,

Tracy Coenen: right? The three areas are fraud, like you said, corporate fraud, typically executive stealing, sometimes maybe estate matters where there is some sort of theft. The second area is family law, so higher earners, higher net worth folks who need some analysis on where their money has been going and such, and then the third area is litigation, economic damages, and expert witness testimony, and all three of those tend to overlap a whole bunch. So they're not necessarily three separate areas. There's a lot of overlapping, and so we just take all those and roll them up under the heading of forensic accounting.

Ron Bockstahler: So you've authored three books, and the one I want to start with is lifestyle analysis in divorce cases. And and and lifestyle analysis is a process. Did you patent that?

Tracy Coenen: I did not, but I do have the URL if that counts for anything. lifestyleanalysis.com

Ron Bockstahler: Yeah. Can you walk us through that? I want I want the family law attorneys that are listening to get a better idea of when and why they should be calling you to get better returns and better results for their clients.

Tracy Coenen: So lifestyle analysis is a process where I am going through all of the spending that happened. I'm looking at the bank statements, I'm looking at credit card statements, investment statements, and tracing of the money, and so there's a few different reasons why we might do that. We are typically focusing on what was spent, but we can also look at what was coming into the account. So, is all of the income accounted for? You know, if we know how much one of the spouses was making at their job, or how much they said their business was profiting, did that money actually come into the family's accounts? So that's the income side. The expense side, where we typically spend more time, is looking at every single transaction, figuring out what the family spent money on. Why would we do that? There's a few different reasons. So when you talk about very high income earners in divorce, they typically don't fall onto the traditional charts where child support might be a percentage of income or something like that. So, the way that, in general, we would figure out how much alimony or how much child support is to be paid would be based on the family's lifestyle. What was the cost of the lifestyle during the marriage? And the general presumption is that the parties are entitled to continue living a similar lifestyle after divorce. So, for example, if the family, let's say, has been spending $30,000 a month on their fabulous residence, then there would be a presumption that going forward, that a similar quality of residence should be able to be available for both of the spouses to live in, right? Extreme example, but that's kind of the concept. So that's sort of the straightforward use of the lifestyle analysis in terms of figuring support calculations. We also might be using it to try to figure. Whether there was dissipation, so spending money for a non-marital purpose. Think of drugs, hookers, affairs, that type of stuff. That stuff is always interesting. You know, it's fun finding the credit card transactions to some nondescript sounding LLC, and then you do a little background research and find out that that LLC is actually the the ATM machine at the strip club, right?

Ron Bockstahler: So, question. I want to stop you real quick because you don't do investigative work. That we have a mutual friend, Bill, a New York attorney.

Tracy Coenen: Uh huh.

Ron Bockstahler: His last name's escaping me, but I know he does more investigative work. Now you don't get into that, correct?

Tracy Coenen: So I do. I do some of that investigation stuff on a more basic level. So I will do some background stuff on the folks that are involved in the litigation, in the divorce, or whatever. Looking for businesses they may have owned. Looking for personal relationships between people, things like that. But if you want to really dig into that kind of stuff, that's when you hire someone like our friend Bill.

Ron Bockstahler: Okay, I didn't mean to interrupt you. If you want to keep no

Tracy Coenen: interrupting is great because who wants to just sit and listen to me the whole time, right? Well,

Ron Bockstahler: I do, but you know, maybe everyone else don't. So you know, I just I look at this, and of course, you know, I've been married a long time. So to me, this is all kind of foreign. But I suppose as people are kind of married and they things are maybe going off the different ways, a lot of things happen, and so that's where this comes up. And and I could look at my wife and say she has no idea about her financials. So I'm guessing that's not a common.

Tracy Coenen: Well, that's exactly it. Most of the times I'm hired in a divorce where one of the spouses has had little to no involvement with the finances of the family and really doesn't know where the money went. And sometimes they have very strong suspicions that money may have been siphoned off or that there's something improper going on. Other times they're just saying, "I need to get comfort with our financial situation before I sign off on a divorce. I just want to know where the money went and know that it was all accounted for.

Ron Bockstahler: So let's. I guess I'm the wife works. What's come of the hypothetical? And I know you've been involved with well over 400 cases, and you've been an expert witness 75 plus times. But I'm just going to make up my own case, like, and let's just have a little fun here. The woman's the main bread holder. We'll kind of change things up a little bit, and the guy has no clue what's going on when they're going through this divorce. He's kind of close. Says the financials. Can he decide? Look, I think we need to really get someone to look into these financials so I can understand what I what my options are. I mean, is that kind of

Tracy Coenen: yeah? Of course, he can decide that he wants to look into it. Now, the question, of course, is going to be who's going to pay for that? Is he going to have to fund that out of whatever money he has? Maybe he's being paid temporary support, and he's going to have to fund his expert out of that. Is the money spouse, the wife, going to be responsible for paying for it, and then will she want an expert of her own, or might they come together and say, you know what, divorce is already expensive enough. Let's agree on one expert who's going to be sort of a neutral expert in this and is just going to look at the numbers and give an opinion that we're both going to use as we go forward in the litigation,

Ron Bockstahler: and that's going to be up to the attorney to help bring those two sides together, or the attorneys, because they're each going to have their own attorneys.

Tracy Coenen: You know, but it's hard because in many divorces there's a lot of suspicions and a lot of negative feelings, and so in order to to effectively use one expert, there has to be a trust level there. There has to be trust that that expert isn't in cahoots with one side or the other, things like that. That's sometimes a hard place to get to.

Kirsten Mayfield: Now, when you go in, do you go in if you're trying to keep this distance from the cahoots and all that? You can't go in and be like looking for what they're they're thinking is happening in their bank statements. So, do you just kind of gloss over everything and the numbers speak to you, or how how do you get the information and the whole story from what are probably Excel sheets and nothingness to other people?

Tracy Coenen: Yeah, so I I want to hear what they're thinking if they've got their conspiracy theories, whether they're they're nutty or not. I do want to hear them within reason, of course, because I'm not a I'm not a licensed psychologist, and so I'm not going to be a therapist for them. So I do have my limits on some of the conspiracy theories, and and so I guide the conversation to try to stick to the facts. But you know, if if they say, you know, I I think he's been spending money on hookers, okay, what information do you have that leads you to believe that? Do you know of something specific that happened, or do you just sort of have a sixth sense about this? And I will use their response accordingly. If they have some solid information, then that's going to be pretty important to me. If it's just he's a lying bastard, and I just think that that's the kind of thing he would do. Yeah, okay, fine. Until I see some evidence of that, I'm not going to pay too much attention to that. So I will take. Information from both sides, and then yes, you are kind of right. The numbers do sort of speak to me. I do, I kind of talk about something I call investigative intuition, and just having sort of a feel for when something isn't right. And I can go through statements and pick out certain transactions and go back to the client and say, these transactions I'd like you to look at, and can you tell me anything you might know about them, or is there anything unusual looking? And I can't tell you how many times a client come back comes back and says, "I didn't know about those transactions, but there's a couple here that are really stinky. And I don't know how you pick those out, but there's a problem with them.

Kirsten Mayfield: Is this a skill you've always had, or was it something that you saw develop as you kept working in your career.

Tracy Coenen: I have had this skill ever since I started reading Encyclopedia Brown books as a kid.

Kirsten Mayfield: Oh, nice!

Tracy Coenen: Yep, Encyclopedia Brown was my jam.

Kirsten Mayfield: See, so all it takes is a little bit of children's fiction, and you can grow up to be a real life detective.

Tracy Coenen: See,

Ron Bockstahler: so do you have a fiduciary duty to either of the parties, or both the parties?

Tracy Coenen: Are you talking about a case where one party hires me, or both parties? I

Ron Bockstahler: guess I'd be thinking if both parties like where's your fiduciary lie? Is it who pays you?

Tracy Coenen: Well, okay, so we don't call it a fiduciary duty in my work, my line of work, but you know, I I do have a general duty under the professional standards to be objective in my work and things like that, you know. And I have confidentiality rules that I have to follow and such. So,

Ron Bockstahler: okay,

Tracy Coenen: I think the spirit of what you're thinking about is in fact true, and and so if I'm if I'm working as that neutral in between both of the parties, then I think my duties include things like full disclosure to everyone. It's interesting because, right? I'll have a conversation with wife privately. I'll have a conversation with husband privately, and you're thinking to yourself, like, what do I disclose to each of them about the conversations that happen, and and they're going to want to tell me, you know, like secretish stuff. And and with me, if I'm the neutral, there can't really be any secrets. But at the same time, I'm not running to the other party and say, "Hey, guess what she said about you. But yeah, so it does get interesting when you're the neutral.

Ron Bockstahler: But you know, if I'm the attorney for one of the parties, I'm really concerned about that. That's got to be a conversation.

Tracy Coenen: Are you concerned that there's side conversations that are improper? Are you concerned that there might not be full disclosure? Yeah, yeah. I suppose that that's probably a concern. I'm working on one right now. The thing is that both of the attorneys have had me as an expert on their cases separately in the past, so they both know that I'm completely above board and that they can trust me to be the decent human being in the middle. But you're right; if one of the parties hadn't worked with me before, I think maybe we're we've got a different trust level that would be happening.

Kirsten Mayfield: Do you ever work in like collaborative law situations for this? Then this is a new term for me, but it feels like this could all blend together.

Tracy Coenen: Yep. So, so my role would be in collaborative law as this neutral. Yes, the case that I just mentioned isn't technically in collaboration collaborative law, but they are trying to, you know, work towards an amicable resolution of the case, which is why they said, okay, we're gonna we're gonna just hire one expert.

Ron Bockstahler: So for the for the benefit of the attorneys that are listening to this show, your qualifications. I mean, obviously you got a lot, but you know you're a master analyst in financial forensics. You're certified in financial forensics. You're a CPA. What's all that mean?

Tracy Coenen: What it means is I've taken some really hard tests, and the people who give the tests have said, "You know the numbers. And I, you know, I do the continuing education to keep my skills current and things like that. I think that's what those credentials really speak to. I think early on in your career, when you don't have a ton of experience, those credentials are super, super important because they give potential clients at least some comfort that you've had some education and training as you get further along in your career, like I have, and I've been doing this, you know, for gosh near 25 years. Yes, those credentials are still still important to have, but you know, my reputation is probably more important.

Kirsten Mayfield: So it seems there's a person factor here because you say you've this is the Encyclopedia Brown that taught you how to be a proper forensic accountant. You've got that like je ne sais quoi that. So do you have do you do consulting? Like how do lawyers know this is the woman I want to talk to? As you said, a test alone isn't gonna be everything for a successful case.

Tracy Coenen: I think that attorneys know once they talk to me, whether they find me through a referral from someone else or they've simply done a Google search and found me, they talk to me on the phone or a video conference. Whatever it may be, and you know they say, okay, you know we're we're talking to a couple other folks as well. I say that's great. After you talk to those other folks, you're going to have a feel for who you can work well with. You know it's a combination of a personality match. I think it's also, you know, when they hear me talk about their issues and their case, I think that they can get a sense that I actually know what I'm talking about, right? I use the proper terms. I can identify hot button issues. You know, they start talking about a case, and I say, you know, I think it might be really important for you to look into this. And they say, oh gosh, yeah, you that that sounds really important. And so I sort of improving my worth from that first conversation.

Ron Bockstahler: I could totally see where an attorney would be bringing value to their clients by bringing you in, in specific cases where you know there's questions, so and their values there. Absolutely,

Tracy Coenen: you know sometimes in cases the attorneys will say, "Well, we don't want to spend a whole lot on this analysis because there's not that much money available to fight over, and that's a valid concern. But at the same time, there is a value that you maybe can't quantify, and that is the peace of mind that comes from knowing what happened to the money. Again, especially in these situations when one spouse is what we call the out spouse, who hasn't been, who isn't the money earner, hasn't been in control of the finances, and just doesn't know what's been happening, there is that comfort that they can get from having this independent analysis done, so that they know what happened to the money.

Kirsten Mayfield: There's so much going through my mind right now because it seems like if you're experiencing this kind of work and you've been in the deck in this for two decades, have you seen any like shift in the cases that you're having, like, are people starting to become better with mixing finances as we all go through life and the world is changing? And as Ron aptly switched the two spouses, we're all trying. Are people becoming better at finances, or we still been maintaining just poor financial?

Tracy Coenen: People are as dumb about the money as they've always been. Okay,

Ron Bockstahler: they think they can get away with it. That's that's the killer, right? That's why you do it. Well,

Tracy Coenen: yeah, you know the people who are hiding the money think they can get away with it, and they forget that they always leave clues behind. There is always a breadcrumb trail, and it's a matter of whether there's going to be someone good enough and persistent enough to find that, right? You know, it's like all the electronic banking has made it in some ways a little bit easier to steal because a few clicks of a button and you could transfer money out of your company's bank account to you personally. The thing is, there's going to be more documentation of that than there ever was before. If someone takes the time to dig in, so

Kirsten Mayfield: so like maybe it increases fraud because people are seeing the opportunity is easier, but then they're also getting caught easier. So does more work for for forensic accountants maybe is is what the future really holds.

Tracy Coenen: Listen, I will never be out of work ever ever ever.

Ron Bockstahler: So let's jump into fraud because you wrote another book, Expert Fraud Investigation Step by Step Guide.

Tracy Coenen: A step by step guide.

Ron Bockstahler: Yeah, I mean, so we could look. I don't know. Create a case. What's a great case that maybe a company, a divorce, a corporate divorce that, or someone just found that their CFO or their controller was actually embezzling money. Yeah, let's go

Kirsten Mayfield: white collar.

Ron Bockstahler: White collar.

Kirsten Mayfield: Yeah,

Tracy Coenen: you know the white collar stuff. A lot of those cases are the thing where it's a it's a smaller, closely held business, and one of the owners has been a little more hands off. The other one has been more in control of the money, and they decide they're not getting along anymore. And then, oh boy, the one who's been in control of the money might have been stealing, and I wasn't paying attention. That's pretty typical. That's pretty typical. So

Kirsten Mayfield: the exact same thing as a marriage,

Tracy Coenen: exactly. I mean, it really is very similar. And so, what I would do in a case like that is, I always say the bank statements never lie, right? The bank statements tell you exactly where money came from and where money went to. So if you can get the bank records, I can reconstruct your books, compare them to what your books say, and we can find discrepancies. So there was a check written out for $30,000 It's recorded in the books as consulting expense for ABC Company, and I see in fact that it was you know written to your co-owner.

Ron Bockstahler: So you know, before we move on, I wanted to correct your statement because I remember being a young student in college, and my bank was always wrong with how much money I actually had in there. I was you know constantly bouncing checks because you know they messed up, right? At least that's what I thought at the time.

Tracy Coenen: Well, yeah, and they they they may have messed up in charging your fees, but still, whether the fee was charged or not is on the face of that bank statement and

Ron Bockstahler: is true. You know, it's funny. I remember starting my company, I don't know, over 20 years ago, and thinking. You know, there's one thing that always was in my mind. I don't want to be doing the books, but the same person that's doing the day-to-day entry can't be the same person that can sign a check, which can't be the same person that does bank reconciliations.

Tracy Coenen: Yes, and what do we call that in the world of accounting, Ron?

Ron Bockstahler: Oh, I have no idea. There's a word for it.

Tracy Coenen: There is. There's a phrase. It's called segregation of duties. Two little words that can save you from being stolen from if you are a small business owner, right? And so even if you have a super super small company, they say, "Oh well, we don't have multiple employees, so how would I ever divide up these duties? Right, because that that's all it is. Segregation duties is literally just taking the money handling process and dividing it up between multiple people so that they're sort of naturally double checking each other. Well, how could I possibly do it in my small company? Very simply, have the bank statement sent to your home, mr. Owner. Don't let anyone open that bank statement. Be the first one to open. Oh, by the way, you actually do have to open it and look at it, and and you should let your employees know very subtly that you're opening and looking at it because it's it's a great deterrent.

Ron Bockstahler: Interesting because I haven't looked at a bank statement in years, but I do know that this person that does the bank reconciliation does nothing else with the books. There's no entries; they don't sign checks. So there's always in our company has been a separation for that very purpose. Don't give people the opportunity. Great people with an opportunity could do bad things,

Tracy Coenen: right? Even someone who is otherwise very honest and and someone who thinks of themselves as a person who would never steal. You just never know what could happen in their life that could cause them to have a neighbor. They say, you know, I'm just going to borrow it from the company for a moment.

Ron Bockstahler: So let's let's go back in time a little bit because I have a little fun with this conversation. You didn't start off wanting to be a forensic accountant. You kind of were more interested in the criminal justice system. So didn't you want to work in a prison?

Tracy Coenen: So my ultimate goal was to be a prison warden. I went into college at Marquette University in Milwaukee, as a criminology major, because I always had a fascination with the criminal justice system. I love prison psychology. I love you know the social constructs, the the communities that are created in prisons, and all of the psychology behind that. I love that kind of stuff. And so my plan was: I'm going to get this criminology degree, and I'm going to go to work in in a prison, and eventually become a prison warden.

Kirsten Mayfield: So some kids grow up; they're like, "Oh, I want to be a doctor, a veterinarian, a lawyer, and you're you're like prison warden. That's

Tracy Coenen: isn't that so weird?

Kirsten Mayfield: I've never heard that. I love that.

Tracy Coenen: So it was like this. I was, you know, I was deciding one weekend. I can still picture it. I was sitting on the couch at my mom and dad's house, trying to decide if I was going to go to Marquette University or go to Northwestern. And there were different majors that were available at each of the schools. And ultimately, Marquette went out because it had this criminology program. Versus Northwestern did not have a program like that at the time, and you know, I cooked up this whole be a prison warden idea.

Kirsten Mayfield: Ron, what did you want to do when you were sitting on your parents' couch? I wanted to be a writer, so mine isn't that much fun.

Ron Bockstahler: I actually always thought I'd be a lawyer. Yeah, from a young age.

Kirsten Mayfield: Weird.

Ron Bockstahler: Glad I'm glad that didn't turn out. But now that you know, we have over 800 attorneys at our at our business. Great friends that are lawyers. I don't. I think that I'm just not detailed or smart enough in many ways to be a good fit in that area. But I respect those that are.

Tracy Coenen: When I was early on in my forensic accounting career, I had this bright idea that I was going to go to law school and get a law degree just for fun and never use it. And then I came to my senses.

Kirsten Mayfield: Yeah, that's just a fun that enterprise. That's I'd rather take that you know couple 200k to go have fun in a different country,

Tracy Coenen: right?

Kirsten Mayfield: Yeah.

Ron Bockstahler: So I don't want to get too political, but let's kind we can we talk a little bit about the criminal justice system or the the prison system that are you keeping up with things? You got an opinion on where it's at? I mean,

Tracy Coenen: I don't know how how you improve it, right? I I am a believer that the primary purpose of prisons is to protect society. That has to be the number one purpose of it. And so, so you get an individual that has done some things to a point where they need to be separated from the rest of the people for a period of time in order to protect those people, rehabilitation is the the ongoing challenge, right? Because you don't want to turn folks out of prison having taught them nothing or given them no opportunities, because then they just turn right back to crime. But how to effectively do that has been a problem for decades.

Ron Bockstahler: So I just recently someone sent me over a 60-minute piece about I think it was an English attorney who went over to Kenya, Uganda, and started using the Justice Defender. That's what it was. The Justice Defenders is the group, and they are teaching or educating prisoners and turning them into lawyers through program out of London, I have to get the details on it, but I thought, God, that's-I mean-it's really brilliant, right? You're giving them an education, and some of these prisoners have a lifetime sentence or even a sentence to death, but are still, you know, studying and getting their law degree and helping other prisoners defend themselves because the numbers are like 80% of those prisoners over in those countries don't even have legal representation. They just don't understand what their rights are. Yeah. So I've asked a friend of mine, yeah, could we not do that in the United States? Put programs together. So and it's those that you know you can't be in trouble. You can't you know you got to follow certain rules while you're in prison, but then you get access to the education, and then you know you just said it. When we turn people out of prison, how many are going right back because they didn't learn anything while they were there? You know the system's fundamentally flawed. Yes,

Tracy Coenen: the system's also so big that it's hard to implement programs on a wide scale, right?

Ron Bockstahler: Absolutely. It

Tracy Coenen: was interesting because after I got my criminology degree, I was a probation officer for a year in the inner city in Milwaukee, and I walked into that job young and stupid, and seeing myself as sort of a social worker and thinking that I was going to be dealing with people who were getting this second chance. They they got probation instead of prison time, and so they've got a year or two where they've got to be under supervision. But I can offer them programs and opportunities, and this is going to be great. And I'm helping them sort of turn turn their lives around. And within a few months, that whole concept was gone because it was clear to me how many of the people on my caseload wanted nothing to do with bettering themselves and only wanted to just you know do their time and be done with it? Very discouraging.

Kirsten Mayfield: So that's why you turn to to numbers who can't can't make you feel bad, can't can't make society feel horrible. It's just the facts.

Tracy Coenen: Well, I sort of I as I was in the criminology program, I took a course. It was a special course that was offered called financial crime investigation, and that's when I started picking up on the numbers thing. So I started taking accounting courses, and I still graduated with the criminology degree. But I was I taking all the courses. I started on my MBA part time and was trying to get enough accounting credit so I could sit for the CPA exam and eventually become a forensic accountant, and and so I was being a probation officer kind of in the meantime, and also wanted the experience. Right, that was my firsthand experience with the criminal justice system that I thought was going to be really fantastic, and it was interesting in some regards, but also very demoralizing in others.

Ron Bockstahler: So here you are, 21 years later. You've had your your company 21 years. You've got over 400 cases under your belt. You've been expert witness numerous times, author of three books. So you've proven yourself as the expert in your field,

Tracy Coenen: I guess, but it's up to each and every judge to decide if I can testify as an expert in that case. So yes, I can call myself an expert witness, but in each individual case, until the judge says that they are going to admit me as an expert, it's up for grabs.

Ron Bockstahler: Well, Tracy, it's been-I think the world of you. I think you know that. So a lot of respect. I think you're brilliant. I think anyone listening to this show that has a case, they should call you to get a consultation to find out if it's a right fit because you can definitely assist their clients. How can they get a hold of you?

Tracy Coenen: They can go to my website sequenceinc.com. They can find me on LinkedIn. Just search for Tracy Coenen. I'm there. I think probably you do a good job of posting the links and things like that as well, so that'll be pretty easy.

Ron Bockstahler: Tracy Coenen, that's C O E N E N. Tracy, it's been great having you. So thanks for joining us today, and look forward to having you back someday soon.

Tracy Coenen: Thanks for having me.

Strickland Bonner: Thanks for listening to the 1958 Lawyer Podcast. If you like the show, tell a friend, and please subscribe, rate, and review us on Apple Podcasts, Google, Spotify, or wherever you get your podcasts. If you'd like to hear more about Ron, Kirsten, or Amata, go to amataoffices.com All the links are also available in show notes.