X_Zachary_Wright

Police Blotter

jayhartman@gmail.com — Mon, 6 Feb 12 16:49:00 UT

At 11:45 am on February 5, a Manhattan Beach woman looking for her cat in the trees on the north side of Grandview Elementary School found a small metal box hidden under some vegetation. After opening the box, she determined it contained marijuana and promptly contacted the police department. A police officer arrived, and she led the officer to the box. The police officer inspected the contents of the box and found a small plastic toy gun, rolling papers, and several commercially produced teabags that were labeled "green tea."

Both the officer and the woman's husband (who mentioned to the officer that he grew up around hippies and consequently knew the smell of marijuana quite well), smelled the contents of the box and determined it contained no marijuana. The woman had never smelled marijuana before but given the clandestine location of the metal box, she had assumed it contained marijuana when she opened it. The officer took the box with him and speculated that kids in the neighborhood had heard that you could "get high" by smoking green tea. The officer admirably restrained himself from laughing at the situation (at least until after he left the scene), genuinely thanked the woman for her concern about keeping the neighborhood safe, and assured the woman and her husband that this incident would not be showing up in the real police blotter.

Social Network

jayhartman@gmail.com — Thu, 2 Feb 12 17:08:00 UT

I had two thoughts about a well known social network.

On the one hand, I have recently better understood one part of the addictive nature...I think most of us have a little bit of Pavlov's Dog in us...post something interesting and your friends click "like" or write a few nice words...an electronic pat on the head. And it feels good and you want to keep coming back for more. Of course there are lots of other reasons for being on a social network. I find it interesting to see what old friends are up to, and several people I am connected to post interesting links on a regular basis.

On the other hand, could it be a giant conspiracy and the numbers are massively inflated? Well, no, I actually think the chances of that are about 1 in 850 million, so this NOT a theory of fraud; it's more of an idea for a movie plot. ("Social Network Part II"?)

It goes back to a day in 1995 when as a young banker,I was asked to go to an FBI-sponsored fraud detection seminar that was headlined by a fresh-out-of federal prison but "100% redeemed and cured" Barry Minkow, of ZZZZ Best Carpet fame. (Who has recently been back in the news for...you guessed it...fraud.)

Incredibly, as a very young man, Minkow had totally bamboozled a big accounting firm and Wall Street as his company went public, only to collapse in scandal; Minkow went to jail because he was a fraud.

One example of the festival of deception at ZZZZ Best was that the company reported one year that it did more insurance restoration work (e.g., a carpet in an office building gets replaced after a sprinkler system goes off accidentally) than was done in the entire US that year. In hindsight, this was obvious but his auditors and Wall Street completely missed it.

Minkow was a brilliant con man and he did things like creating fake invoices and fake bank statements...and even took auditors to fake job sites. In the seminar, Minkow got into a lot of detail about how he did it and what we need to watch for. As a side note, a couple years ago, I was given a totally phony letter of credit, allegedly from Bank of America...it was on B of A stationery, and had all sorts of stamps and signatures on it; it was a little masterpiece of fraud.

Back to the movie idea (don't worry, I am not quitting my day job!) if you have a few sharp former auditors on your staff, who know the tricks of the trade, it's remarkable what you can convince people of.

In the case of a big social network, there are various external and internal methods of verifying their claims and for example, it would probably be just about impossible to claim you have 850 million users while really only having, say, 300 million. But if you have a very small team of highly dedicated people who are "in on it," with the rest of the company in the dark, extraordinary deceptions can and have been carried out. For example, the amount of money Madoff stole from investors is reported to be in the range of $50 billion, far more than has ever been raised in any IPO.

So that's the movie idea: A very, very high flying internet company whose numbers are made up, but they fool everyone for a long time...until...??? This movie will of course need to feature Brad Pitt, the main force behind the success of Money Ball. If not for Mr. Pitt, how many people would have gone to see a movie about, at its heart, the analysis of baseball statistics?

Just Like You and Me Only Different

jayhartman@gmail.com — Tue, 31 Jan 12 10:14:00 UT

Politicians go to great lengths to try make the case that they are regular people who you could sit down and have a beer with. I am not buying (the beer or their case).

The senate just passed a bill making it illegal for themselves to engage in insider trading, with 93 "yes" votes, five Senators who did not vote, and two "no" votes (Tom Coburn and Richard Burr). Coburn and Burr may have reasons for not voting yes on this but it doesn't matter what they are; their "no" votes were absurd. Coburn said the bill is meaningless, and maybe he is ultimately right--I haven't read it--but he misses the point. Doesn't he realize that next election, his opponent will gleefully point out that Coburn voted "no" on banning insider trading for members of congress?

This is one of those moments where I sadly shake my head and wonder how in the world we got to the point where congress can do things (like insider trading) that the rest of us would go to jail for. The really sad thing is that Coburn may be right, maybe it's meaningless and watered down so much that members of congress will just go right on with their insider trading with impunity, all the while sanctimoniously pointing to their vote which banned it.

Speaking of government sponsored entities doing things that the rest of us would go to the steel chateau for, it reminds me of the classic Fannie Mae press release from about six years ago, in which they proudly announced that they had "banned falsified ledger entries."

You Eat That?

jayhartman@gmail.com — Mon, 30 Jan 12 16:58:00 UT

Excellent Article in the WSJ today entitled "You Eat That?" My link didn't work but if you want the article, let me know and I can email to you.

From the article, a couple of items that I can't wait to sample:

"Among the most hard-core variants of fermented food is the Icelandic delicacy hakarl. Hakarl is made from the Greenland shark, which is indigenous to the frigid waters of Iceland. It is traditionally prepared by beheading and gutting the shark and then burying the carcass in a shallow pit covered with gravelly sand. The corpse is then left to decompose in its silty grave for two to five months, depending on the season. Once the shark is removed from its lair, the flesh is cut into strips and hung to dry for several more months."

And:

"Casu marzu is a sheep cheese popular on the Italian island of Sardinia. The name means "rotten cheese" or, as it is known colloquially, "maggot cheese," since it is literally riddled with live insect larvae.

To make maggot cheese you start with a slab of local sheep cheese, pecorino sardo, but then let it go beyond normal fermentation to a stage most would consider infested decomposition (because, well, it is). The larvae of the cheese fly (Piophila casei) are added to the cheese, and the acid from their digestive systems breaks down the cheese's fats, making the final product soft and liquidy. By the time it is ready for consumption, a typical casu marzu contains thousands of larvae.

Locals consider it unsafe to eat casu marzu once the larvae have died, so it is served while the translucent white worms, about one-third of an inch long, are still squiggling. Some people clear the maggots from the cheese before consuming it; others do not. Those who leave the maggots may have to cover the cheese with their hands-when disturbed, the maggots can jump up to six inches."

Bon Apetit!