Friday, May 14, 2010

"Netting" in simple terms "This for that and Give it back". Netting in pension fund fraud accounting has many uses.

At the bottom of this posting is an example of netting in bold font a term used in accounting fraud. In some forms it can be called "this for that and give it back" It appears you hold collateral for a sale or loan. Than at some point in time one side or the other makes what amounts to a small contribution towards the others fund and securities are returned. In the case of the Santa Barbara Pension no real change under the header in question occurs until the year 2008. The example I use is taken from the 2007 audit of the Santa Barbara County Pension fund found on page 22. With the heading “Securities Lending Income” “ Securities Lending Expense”. Now this form of accounting can be used to take funds off the books, make funds look as if they are real. All right before your eyes! There is one ledger I reviewed that shows a 400,000,000 negative difference between two given years. However when the bottom line is compared the loss only transfers as a minus 270,000,000. Now I don’t care what kind of math you use there is something wrong there. “Netting” can also give a false sense some benefits came at no expense to the fund or its members. If you review every Santa Barbara County Pension fund audit available you will find this practice in place. The New York Times ran a short piece and said to make an asset disappear you might call one side of the transaction a sale and the other party might call it a loan. The practice of making a financial statements appear healthier than it is happen all the time. A good example would be when quarterly reports are given by banks. Smoothing might relate to how an IPO would mask debts down the road while showing unexposed assets as free and clear. If you review the Santa Barbara county treasurers short term accounts. There audit claims to hold several million dollars worth of stock as collateral with a repurchase date from the originating firm. Than they settle for some ungodly sum of 32,000. Now I ask you why loan out money and get the smallest return of your portfolio as a favor to some one at the expense of the County Tax Payers and employees? All I can say to you all is this is a very short version of what is being done every where by every one. Please go to this web page and review what is available to help you understand accounting fraud.@
Or this web page for forms and information @
Now to those of you who have been getting my emails for years I mentioned the AT&T Cellular sale to Cingular Cellular and than the sale back to AT&T as “This for that and give it back”. AT&T customers were locked into there old contracts for 1.5 years beyond the sale to Cingular. Than after every one had been transferred into a Cingular cell phone contracts AT&T bought Cingular Cellular back making us all a captive audience or consumer. Was this nothing more than a form of “netting”? It bothered me way back in 05 and no one seamed to care. Am I stupid or when something makes no sense it may just be wrong? How can a Board of Supervisor site on both the failing Pension Fund and the County Budget deficit with out a conflict of interest? For that matter how do we separate the power of the local Tax collector Treasurer so as not to continue in there ways of violating the Fiduciary Obligations to there post and the public they serve? There are many problems right before our eyes. Who runs the Santa Barbara County Court House? Not the State of California and that is why we lack a separation of powers needed to run an ethical and legal Superior court system here in Santa Barbara. Now I may be wrong on every single point I try to make and if you know so please correct me for I wish to be properly educated in the matters I have shared here.

Hang in there we have a ton to cover. 300 million a year for County schools and we stink, think about that for a moment. Property tax revenues have doubled and some how as if by magic we still run in a deficit, how can that be? I have some eye opening facts coming your way soon. An the next subject has been bothering me since 1997.

Larry Mendoza

Below is taken from 2007 Santa Barbara County Pension Fund Audit a portion of page 22.


Employer $ 6 3,395,296 $ 5 3,976,749

Member 15,853,139 15,057,589

Total Contributions 7 9,248,435 69,034,338

Investment Income

Net Appreciation in Fair Value of Investments 2 34,289,600 127,740,795

Interest 1 9,532,891 19,466,663

Dividends 22,759,075 15,528,633

Total Investment Income 2 76,581,566 162,736,091

Less investment expense ( 5,330,158) (4,474,219)

Net Investment Income 2 71,251,408 158,261,872

Securities Lending Income 8 ,915,940 7,579,927

Securities Lending Expense (8,556,870) (7,174,176)

Net Securities Income 3 59,070 405,751

Other Income 2,233,265 55,990

Total Other Income 2 ,233,265 5 5,990

TOTAL ADDITIONS $ 3 53,092,178 $ 2 27,757,951

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