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Fraud

How the Vatican’s Blessing Helped Hide $1.3 Billion in Missing Money

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In June of 1982, a postal worker walking along the Thames in London noticed something hanging beneath Blackfriars Bridge. At first, he assumed it was construction equipment, like scaffolding or a tarp caught on a pipe. Looking closer, he realized it was a man, still wearing a suit, with bricks in his pockets and a rope around his neck. For a few days, nobody knew who he was. Then the name came out: Roberto Calvi. Suddenly, a lot of very powerful people were very interested in who was under that bridge.

That story opened a recent episode of the Oh My Fraud podcast. Host Caleb Newquist dug into one of the largest and strangest banking scandals of the 20th century, the collapse of Banco Ambrosiano and the unsolved death of the man they called “God’s Banker.”

In this story, institutional prestige became the most dangerous fraud enabler of all. When a bank’s credibility rests on religious authority, secret power networks, and cultural trust rather than transparent financials, $1.3 billion can vanish through circular offshore schemes while everyone assumes someone else must have checked the books.

How a Methodical Banker Became “God’s Banker”

Roberto Calvi wasn’t supposed to be a mysterious figure. Born in Milan in 1920 to a working-class family, his early life followed the same path as many of his generation: World War II, military service, and rebuilding from the rubble. He joined Banco Ambrosiano in the late 1940s as an entry-level hire. By all accounts, he was exactly what institutions want: diligent, methodical, and reliable. As Caleb puts it, he was “the kind of person institutions tend to reward because they don’t rock the boat.”

And for decades, he didn’t rock it. Roberto climbed steadily, and was promoted to general manager by 1971, and chairman by 1975.

Banco Ambrosiano was one of Italy’s largest private banks, with deep ties to Catholic financial networks. Italy’s banking has always carried layers of political influence, regional loyalty, and religious connections. Banco Ambrosiano sat comfortably within that ecosystem.

The most important relationship was with the Vatican Bank, officially the Institute for the Works of Religion, which, as Caleb notes, “sounds less like a financial institution and more like a retreat center, but it functions as a bank.” It handles investments, transfers, and assets for church operations worldwide. Banco Ambrosiano became one of its primary external banking partners.

That partnership was worth more than money; it was reputational gold. “If a bank is trusted to handle the Vatican’s money, then a lot of people are going to assume it’s safe,” Caleb explains. And that assumption is where the trouble starts.

The financial press started calling Roberto “God’s Banker.” It was shorthand for “this guy has some serious connections.” But the nickname also fused the bank’s identity with one of the most trusted institutions on the planet. Investors were buying into the idea of a bank backstopped by centuries of religious authority.

“Where there’s a very deep sense of trust, there’s often a lesser degree of scrutiny,” Caleb points out. “Not explicitly, but psychologically.” The reputation became the product. When reputation does the heavy lifting, the actual financial structures don’t get tested nearly as hard.

During the 1970s, the bank genuinely grew through international expansion, complex financial products, and global operations. Some of that growth was legitimate. But growth also meant operating in jurisdictions where oversight was, as Caleb puts it, “loose.”

Italian regulators raised eyebrows more than once at the complex corporate structures, foreign subsidiaries that were hard to track, and financial guarantees that weren’t always transparent. Individually, each could be explained. Collectively, they formed a pattern. But the God’s Banker halo did its job of absorbing questions that might have demanded harder answers.

The Machinery of Fraud: Circular Money and Comfort Letters from God

Over a billion dollars doesn’t go missing all at once. It happens gradually, through structures so layered that by the time anyone understands them, the money’s already gone.

By the mid-1970s, Banco Ambrosiano was expanding aggressively into international markets. Foreign subsidiaries multiplied across Luxembourg, the Bahamas, and Panama, where regulatory oversight was minimal. Some entities served obvious purposes, such as international lending, currency transfers, or supporting clients abroad. But others had extremely vague business descriptions and corporate structures so layered that tracing ownership took real effort.

According to Caleb, the core scheme worked like this: “Some of those offshore companies weren’t really operating like independent businesses at all. They borrowed money from the bank, made deposits back into related entities, issued guarantees to support loans made to other subsidiaries in the same network. Money moving in a loop that created the appearance of capital strength without much actually underneath it.”

Circular financing isn’t automatically illegal. Multinationals do inter-company lending all the time. “The problem starts when those underlying assets aren’t as solid as everyone assumes, because then what looks like strength is really just confidence shifting from company to company,” Caleb explains.

His metaphor nails it: “It was financial scaffolding. Scaffolding works great while the building’s going up. Less great when someone leans on it expecting a finished structure.”

The Vatican Bank’s letters of patronage kept people from leaning too hard. These were essentially comfort letters, or assurances that were, as Caleb jokes, “about as secure as the Lord’s blessing.” But banks and counterparties treated them as something stronger than they technically were. If the Vatican says it stands behind something, who’s going to push back?

The ecosystem around Banco Ambrosiano was getting darker. Michele Sindona, another Vatican-linked Italian financier, had already blazed this trail. His banking empire collapsed in the mid-1970s through similar aggressive financing and opaque offshore deals. He was convicted of fraud in the U.S., later convicted of ordering a murder, and died in prison in 1986 after drinking cyanide-laced coffee.

Then there was Propaganda Due (P2) officially a Masonic lodge. When Italian authorities raided it in 1981, the membership list included Italian cabinet ministers, military leaders, intelligence officials, judges, and media executives. Roberto’s name was there, too. P2 members called themselves “Frati Neri,” Black Friars. Yes, the grim coincidence: Roberto was found under Blackfriars Bridge.

“Membership alone doesn’t prove wrongdoing,” Caleb notes, “but it suggests proximity to power, and in finance, proximity to power can smooth scrutiny, accelerate deals, and sometimes delay uncomfortable questions.”

Add another red flag. In 1981, Roberto was convicted in Italy for illegally exporting currency. He received a suspended sentence but it was still a criminal conviction tied to financial conduct. “Prior financial misconduct usually justifies closer monitoring, not looser scrutiny,” Caleb observes. Instead, institutional trust filled the gaps.

By early 1982, roughly $1.3 billion was unaccounted for. That’s in early 1980s dollars. Investigators later found a 2,400-pound safe in a secret office. When they cracked it open, they found a handwritten list of gold and silver items. No actual gold or silver. Just the list. “A pretty fitting metaphor for the whole operation,” Caleb says.

On June 5, 1982, Roberto wrote to Pope John Paul II warning the bank’s collapse would “provoke a catastrophe of unimaginable proportions in which the church would suffer the gravest damage.” On June 10, he fled Italy with a fake passport under the name Gian Roberto Calvini, having shaved off his mustache. Communication became sporadic, then stopped.

Death Under Blackfriars Bridge and the Lessons Left Hanging

The day before Roberto’s body was found, Graziella Corrocher, Roberto’s 55-year-old secretary, jumped from the fifth floor of the bank’s headquarters. She left a note that said, “May Roberto be double cursed for the damage he has caused to the bank and all of its employees.”

“That doesn’t sound like someone caught up in financial technicalities,” Caleb observes. “That sounds like betrayal.”

As for Roberto, the path from “dead banker” to “unsolved murder” took decades. The initial ruling was suicide. A 1983 inquest returned an open verdict. In 1998, authorities exhumed his body. Forensic analysis found neck injuries inconsistent with hanging and no traces of scaffolding paint, rust, brick dust, or limestone under his fingernails, evidence you’d expect on someone who climbed there himself. By 2002, Italian courts ruled it a homicide.

In 2007, five defendants including alleged Mafia figures went on trial. After twenty months of testimony, hundreds of witnesses, and mountains of forensic evidence, the judge threw out all charges for insufficient evidence. The public prosecutor said, “Roberto has been murdered for the second time.”

After negotiation and public pressure, the Vatican contributed between $224 and $250 million toward creditor settlements. The church framed it as a moral gesture, not an admission of legal liability. Caleb describes it as “the financial equivalent of saying we didn’t do anything wrong, but here’s some money anyway.”

What Accounting Professionals Should Take From This

Caleb closes with five key lessons from the wreckage:

  • Institutional trust is not a control. A respected name doesn’t guarantee sound financial structures. “A good reputation can chip away at skepticism, and reduced skepticism is exactly where fraud tends to thrive. People assume that someone must have checked.”
  • Complexity is not the same as sophistication. “Sometimes complexity is necessary, but it’s also camouflage.” If understanding the structure takes longer than anyone’s willing to spend asking questions, that’s probably a red flag.
  • Prior misconduct deserves attention. Roberto’s 1981 conviction didn’t doom the bank, but it should have triggered closer monitoring. Instead, institutional trust papered over a conviction that should have triggered alarm bells.
  • Liquidity crises expose accounting illusions extremely quickly. “A lot of frauds don’t collapse because someone discovers them. They collapse because cash gets really tight.” When creditors want repayment instead of extending credit, reality tends to win.
  • Fraud rarely happens in isolation. “This wasn’t just one banker making bad decisions. It was a network.” Most frauds reveal a rotten system, not just one bad apple.

The Banco Ambrosiano scandal is ultimately about how prestige substitutes for scrutiny. Four decades later, we still don’t know who killed Roberto Calvi. We do know what killed Banco Ambrosiano: a system where reputation did the work that controls were supposed to do.

Every era has its version of institutions where reputations function as a get-out-of-scrutiny-free card. The vehicles change, but the dynamic stays the same. When trust replaces verification, fraud finds room to grow.

Listen to the complete episode of Oh My Fraud for the full story, including the prequel villain who died from prison coffee, a safe full of nothing but lists, and a mustache shave that fooled no one.

And remember Caleb’s parting advice: if the chairman of your bank ends up hanging under a bridge named Blackfriars, you’re probably not having a normal quarter.

A $600 Credit Card Complaint Unraveled One of the Biggest Frauds of the 1980s

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The auditors stood in what looked like a massive insurance restoration job. Equipment everywhere. Workers milling around. Paperwork ready and in order. It looked like a thriving construction site.

Except it wasn’t real.

The workers were hired actors. The paperwork was fake. The project didn’t even exist. And the company behind it was worth hundreds of millions of dollars on paper.

This is the story of Barry Minkow and ZZZZ Best. On a recent episode of the Oh My Fraud podcast, host Caleb Newquist explained this financial crime with his trademark dark humor that resonates with accounting professionals and true crime fans alike.

Starting in the Garage

Barry was born in 1966 and grew up in Reseda, a middle-class suburb in the San Fernando Valley. He wasn’t an athlete or particularly popular. His classmates nicknamed his old Buick “the bomb,” which tells you where he stood socially.

But Barry wanted to stand out, and business seemed like the way to do it.

At 15, Barry started a carpet cleaning company out of his parents’ garage. He called it ZZZZ Best. The four Zs represented the number of kids he wanted someday. The name also put the company at the end of the phone book listings, which wasn’t great marketing, but he was 15. What did he know?

Actually, Barry knew more about the carpet-cleaning industry than most teenagers did. His mom worked at a carpet cleaning company, and he’d done telemarketing there as a kid. He understood how to pitch services, how pricing worked, and what customers expected.

The business was real at first. Barry hustled, running local ads, making aggressive sales calls, and working long hours. ZZZZ Best built a modest reputation by showing up when scheduled, charging what they quoted and working late to finish jobs. Compared to competitors known for bait-and-switch tactics, ZZZZ Best seemed like the most honest option.

But running a business as a teenager created problems. California law didn’t allow minors to sign binding contracts, so banks would shut down his accounts once they realized how old he was. He wasn’t even old enough to drive at first, so he needed rides from friends to meet customers.

The biggest problem was cash flow. There are upfront costs like equipment, supplies, advertising, and payroll. Revenue comes later, after you do the work. When you’re 15 with no savings and no credit, those gaps become huge problems.

That’s when the shortcuts started. Check kiting to cover expenses. Overcharging customer credit cards and only refunding if someone complained. He staged burglaries at his own office to collect insurance payouts and even sold his grandmother’s jewelry to raise cash.

These actions could have landed him in jail. But at this stage, it wasn’t massive corporate fraud. It was just a young business owner scrambling to keep something afloat.

The Pivot to Fake Restoration

The thing about solving cash flow problems with fraud is you’re not actually fixing anything. You’re just postponing the problem and adding new ones.

The carpet cleaning business was real, but it wasn’t wildly profitable. And it definitely wasn’t generating the kind of money Barry was starting to claim publicly. He needed something bigger. Something that could explain rapid growth and put impressive numbers on paper.

Enter insurance restoration.

The pivot made some sense. Carpet cleaning and disaster restoration overlap—smoke damage, water damage, that kind of work. But the real appeal was scale. Residential carpet cleaning might bring in a few hundred dollars per job. Commercial restoration contracts could run hundreds of thousands, sometimes millions of dollars.

Restoration work also offered complexity. Multiple parties were involved, including insurers, adjusters, contractors, and property owners. Work spread across multiple locations. Payments happened in stages. Lots of documentation. From the outside, it’s hard to tell what’s actually happening on any given job.

Around this time, Barry met Tom Padgett at a gym in the San Fernando Valley. Tom was an insurance claims adjuster and was established in the industry. He understood exactly how insurance companies documented and approved restoration claims. That gave him credibility Barry didn’t have.

Together, they began creating restoration projects that existed mostly on paper. Contracts showing large commercial cleanup jobs. Work orders and invoices—the kind of supporting documentation you’d expect if major restoration work was actually happening.

To make it more believable, they created Interstate Appraisal Services. On paper, it looked like an independent firm verifying restoration projects for insurers. In reality, it was part of the same scheme.

With those fake restoration contracts documented, Barry started factoring receivables. That meant selling ZZZZ Best’s accounts receivable to banks at a discount in exchange for immediate cash. Instead of waiting months to get paid, you get most of the money now. The bank collects the full amount later.

The problem was that the invoices weren’t tied to real projects, so there was nothing for the bank to collect. New contracts had to appear to cover old obligations. More documentation. More fake projects. Bigger numbers. It wasn’t exactly a Ponzi scheme, but it worked like one. Except the people being recruited were banks instead of investors.

By the mid-1980s, ZZZZ Best was reporting roughly $50 million in annual revenue. Most of it came from the restoration business that largely didn’t exist.

Fooling the Auditors

Going public would solve many of Barry’s problems. He’d get access to capital, legitimacy, visibility, and the kind of validation that makes lenders and partners more comfortable.

But there was one obstacle: auditors.

Before a company can go public, independent auditors must review the financial statements, verify revenue, and confirm contracts exist. The numbers have to reflect reality. That’s a big problem when much of your revenue is fake.

ZZZZ Best hired Ernst & Whinney, one of the then-Big Eight accounting firms. It was a serious firm with a serious reputation. Exactly the kind of name you’d want if you were trying to build credibility.

Ernst & Whinney did what auditors do. They asked questions. They requested documentation. Eventually, they wanted to see some restoration projects in person.

Paperwork alone wasn’t going to be enough anymore. So the fraud evolved.

Instead of just fake documents, Barry and his team created fake job sites. Barry temporarily staged buildings that weren’t ZZZZ Best projects to look like they were. They brought in equipment, added signage, and had workers show up. They prepared paperwork in advance. There was enough activity to create the impression of a functioning restoration job.

Put yourself in the auditors’ shoes. You’re visiting a site for a brief period. It’s your first time there. Management is guiding you through everything. From your perspective, everything lines up. The site visit confirms what you’re being told. Independent appraisals exist. The documentation matches.

Ernst & Whinney issued an unqualified audit opinion. They believed the financial statements fairly reflected the company’s finances. ZZZZ Best cleared a major hurdle.

The company went public in January 1986 through a reverse merger with a shell company already publicly traded. It’s a faster route to the stock market that can involve less scrutiny than a traditional IPO.

The stock began trading at around $4 per share. Within months, it climbed to about $18. Barry Minkow, barely out of his teens, was suddenly CEO of a publicly traded company worth nearly $300 million.

The $600 Complaint That Brought It All Down

For a while, everything looked like it was working. Media coverage was positive. Barry conducted interviews, leaning into the young-entrepreneur success story. But behind the scenes, pressure was building. Some lenders were asking more detailed questions about restoration contracts. Industry people wondered how such a young company had landed so many large jobs so quickly.

Then came a problem with a flower order.

Barry owned a small side business called Floral Fantasies. It wasn’t a major part of ZZZZ Best, just another little venture. A Los Angeles secretary named Robin Swanson was overcharged by about $600 on a credit card purchase. She complained and tried to get a refund. She kept calling but got nowhere.

Most people would eventually let it go. Not Robin.

She started asking questions, talking to other customers and comparing experiences. What she found suggested a pattern of repeated questionable charges tied to Barry’s businesses. She documented names, dates, and amounts and took it all to the Los Angeles Times.

When reporters started digging, they weren’t initially investigating the restoration business. They were looking at credit card complaints. But when journalists pull at one thread, they tend to find others. Questions about Floral Fantasies led to questions about Barry’s business practices, which in turn led to scrutiny of ZZZZ Best’s restoration contracts.

The article hit on May 22, 1987: “Behind Whiz Kid Is a Trail of False Credit Card Billings.”

At first, it didn’t look catastrophic. But it accelerated scrutiny that was already building. In early June, Ernst & Whinney abruptly resigned as ZZZZ Best’s auditor, citing unresolved questions about certain restoration contracts.

When your auditors suddenly quit, that’s about as reassuring as a smoke alarm going off in the middle of the night.

The stock price plummeted from $18 to the mid-$6 range. A proposed acquisition that might have stabilized everything fell apart. By July 1987, Barry resigned as CEO, citing health reasons. Shortly afterward, ZZZZ Best filed for bankruptcy.

When the dust settled, the company that once had a market value of nearly $300 million had remarkably little underneath it. Just some equipment and a few vehicles for a small, legitimate carpet-cleaning business. Investor losses topped $100 million.

Prison, Pastor, and More Fraud

In January 1988, a federal grand jury indicted Barry and several associates. The charges covered securities fraud, mail fraud, racketeering, bank fraud, tax violations, and conspiracy. After a trial lasting several months, Barry was convicted on dozens of counts.

In March 1989, Judge Dickran Tevrizian sentenced Barry to 25 years in federal prison and ordered him to pay tens of millions in restitution. Tom Padgett, who helped create the fake restoration projects, pleaded guilty and was sentenced to eight years.

That’s where most fraud stories end. But Barry’s story was just beginning.

While serving his sentence in Colorado, Barry went through what he described as a religious conversion. Raised Jewish, he became a born-again Christian in prison. He got involved in ministry programs and studied theology. He was released in 1995 after serving about seven and a half years.

Barry enrolled at Liberty University and earned a master’s degree in divinity. By the late 1990s, he was pastor of San Diego Community Bible Church. He also founded the Fraud Discovery Institute in 2001, positioning himself as someone who could spot fraud because he’d committed it.

He spoke at churches, universities, and accounting conferences. He wrote books about ethics and redemption. Media profiles framed him as a cautionary tale-turned-expert. By the late 2000s, Barry had rebuilt surprising credibility.

Then came Lennar.

The Fraud Investigator’s Fraud

Lennar Corporation is one of the largest homebuilders in the United States. In 2009, right after the housing market collapsed, the company was under pressure, as was much of the construction industry.

Barry released a report through his Fraud Discovery Institute accusing Lennar of accounting misconduct. He alleged financial irregularities and potential fraud at the executive level. He filed complaints with regulators and spoke publicly about the allegations.

Lennar’s stock dropped from about $11.50 to the mid-$6 range within weeks. Media coverage amplified the claims, prompting analysts to ask questions.

But there were problems with Barry’s allegations.

Before going public with his claims, Barry had taken short positions against Lennar stock, meaning he bet that Lennar’s stock price would go down. If negative news about Lennar came out, Barry would profit.

Also, a San Diego developer named Nicolas Marsch III, who was already suing Lennar over a failed real estate deal, hired Barry to investigate the company. The fraud allegations weren’t coming from a neutral source.

Federal investigators concluded that key elements of Barry’s fraud claims against Lennar lacked evidence to support them. Prosecutors charged him with conspiracy to manipulate Lennar’s stock through false allegations.

He pleaded guilty in 2011. Judge Patricia Seitz sentenced him to five years in federal prison and ordered him to pay $583 million in restitution, essentially the amount Lennar’s market value dropped after his report. She said Minkow had “no moral compass.”

The Pastor Who Stole from His Flock

While the Lennar situation was unfolding, something else was happening at Barry’s church.

During much of his time as pastor of San Diego Community Bible Church, prosecutors said Barry was embezzling money from the church itself. According to the U.S. Attorney’s office, he stole more than $3 million through unauthorized accounts, forged checks, and diverted donations.

Some victims were individual church members who knew Barry personally and trusted him spiritually. One victim was a widower who thought he was funding a humanitarian hospital project overseas. Investigators concluded the project didn’t exist.

Churches tend to operate on trust, which means financial oversight often relies on good faith rather than verification. That didn’t help here.

In January 2014, Barry pleaded guilty to conspiracy to commit bank fraud, wire fraud, mail fraud, and defrauding the federal government related to the church schemes. Federal prosecutors called him “a professional con man expertly plying his craft, a predator from the pulpit.”

The judge called it a “despicable, inexcusable crime” and imposed the maximum sentence allowed: another five years in federal prison on top of the Lennar sentence.

Lessons for Accounting Professionals

Barry was released from federal prison in June 2019. He reportedly works in addiction counseling now. He owes $612 million in restitution across his various convictions. He’ll be paying that back for the rest of his life.

His three-decade criminal career offers several lessons:

  • Fraud escalates. ZZZZ Best didn’t begin as a massive public company scandal. It started with check kiting and overcharging.
  • Small rationalizations become bigger ones. A “temporary” cash-flow fix becomes fabricated contracts that turn into staged job sites. Early ethical lapses are often leading indicators rather than isolated incidents.
  • Revenue deserves skepticism, especially when growth outpaces reality. ZZZZ Best reported explosive revenue from complex restoration contracts that few people fully understood. When you see rapid growth tied to opaque transactions, multiple third parties, or heavy reliance on estimates and documentation, that’s a cue to dig deeper.
  • Independence and professional skepticism matter more than reputation. A Big 8 firm with a string name wasn’t immune to being deceived. Don’t outsource your judgment to management narratives, staged environments, or impressive paperwork.
  • Verification beats trust. The fake restoration sites worked because auditors saw what they expected to see. Fraudsters exploit expectations. Time pressure and client relationships can dull the instinct to “trust but verify.” Independent confirmations, third-party evidence, and corroborating documentations are essential safeguards.
  • Culture and governance are risk factors. ZZZZ Best was led by a charismatic founder with little oversight and a board that lacked the experience or backbone to challenge him. That same pattern reappeared at the church and in the Lennar situation. Weak governance structures and concentrated authority create environments where fraud can thrive. When evaluating clients, ask hard questions about the tone at the top and real accountability.
  • Small complaints can uncover big problems. ZZZZ Best started unraveling over a $600 credit card complaint. Pay attention to the outlier, the small anomalies, and the client who keeps asking questions. Those moments often reveal more than polished financial statements ever will.

When the Paperwork Looks Perfect, Look Closer

The story of Barry Minkow and ZZZZ Best is part cautionary tale, part masterclass in how fraud evolves and how even sophisticated professionals can be misled.

For accountants, auditors, and advisors, it’s a reminder that our role is both ethical and technical. It requires curiosity, courage, and the willingness to challenge narratives that feel too neat.

For a full breakdown, listen to the complete episode of Oh My Fraud. It’s a fascinating look at one of the most audacious frauds in modern business history and the lessons it still holds for the profession today.

Three Fraud Schemes, Two Decades, and a Quarter-Billion Dollars in Stolen Money

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On January 20, 2021, the last day of Donald Trump’s first presidential term, Eliyahu “Eli” Weinstein got a phone call that would rank among the best days of anyone’s life. The President of the United States had commuted his sentence, freeing him after eight years of a 24-year prison term for running a $200 million Ponzi scheme.

Six months later, he was already planning his next fraud.

In this episode of Oh My Fraud, host Caleb Newquist traces the jaw-dropping story of a fraudster who got a presidential second chance and immediately used it to steal another $44 million. It’s a tale that spans two decades, three separate fraud schemes, and over a quarter-billion dollars in losses.

The Community Leader Who Betrayed Everyone’s Trust

Eli wasn’t some shadowy figure operating from the margins. He was a pillar of the Orthodox Jewish community in Lakewood Township, New Jersey—home to Beth Medrash Govoha, the largest yeshiva outside of Israel. The son of a Jewish community leader and school principal from Brooklyn, Eli was known for his devout faith and generous donations to religious organizations. He spent millions on Judaica, Jewish devotional artwork and artifacts.

Starting around 2004, Eli began raising money for real estate deals. His pitch was simple: he had access to below-market properties, could flip them quickly to developers he had lined up, and everyone would make guaranteed returns with little risk. In the tight-knit Orthodox community, where deals often happen on handshakes with minimal paperwork, a respected leader’s word was his bond.

According to the 2011 federal indictment, just three investors—two in the UK and one in Bronxville, New York—put in over $136 million. The total losses exceeded $200 million.

The details in the indictment would be darkly funny if real people hadn’t lost everything. Eli raised $5.4 million for a project involving a national supermarket chain in Trotwood, Georgia. The only problems were there is no Trotwood, Georgia, and the supermarket chain had never heard of him.

Then there was the widow in Los Angeles who worked to help orphaned and poor children in Israel. Her dream was to open a music school for these kids. Eli convinced her to give him $1.2 million, promising to repay it in three weeks with interest. When she emailed asking him to “stop screwing around” and return her money, Eli’s response was two words: “f— you.”

He told a widow who helps orphans to go *$#%! herself.

But wait, it gets worse. When meeting with one victim’s representative, Eli asked what the representative’s wife and Eli had in common. When the man said he didn’t know, Eli replied, “We both f***ed you.”

The Judge Saw Right Through Him

At sentencing in February 2014, Judge Joel Pisano didn’t mince words. “You are a cheat. You lied and your deception is relentless. You’re consumed by deception.” He sentenced Eli to 22 years in prison, plus $250 million in restitution and $215 million in forfeiture.

But Eli couldn’t stop, even while awaiting trial. In February 2012, already under indictment, he started pitching investors on pre-IPO Facebook shares and Florida real estate he didn’t have. He used the money he raised to pay his lawyers for the fraud case.

That earned him an additional 24 months, bringing his total sentence to over 24 years. By white collar crime standards, it was harsh. But Eli had something most convicted fraudsters don’t: connections to people who could get his case in front of the President.

A Second Chance Immediately Squandered

The campaign for Eli’s clemency was well-organized. Criminal justice reform advocates argued his sentence was excessive. The White House statement noted that “numerous victims had written in support” and emphasized his seven children and loving marriage.

On Trump’s last day in office, he granted clemency to more than a dozen people facing fraud charges, which was a dramatic break from historical norms. As Caleb notes in the episode, white collar criminals were “very infrequently chosen for clemency” before Trump.

By July 2021, just six months after his release, Eli was building his next scheme. But his name and face had been everywhere. So he became “Mike Konig.”

The vehicle was Optimus Investments, Inc., supposedly dedicated to brokering deals on personal protective equipment (PPE) like masks, gloves, and hand sanitizer. This was mid-2021, when COVID supplies were still the hottest commodity on earth. “Mike Konig” claimed to have networks of government agencies, Turkish factory owners, and Israeli lawyers. He was always cagey about details. If everyone knew his contacts, he said, they could “reverse engineer him out of business.”

Richard Curry and Christopher Anderson started Tryon Management Group to raise money for these deals, eventually bringing in tens of millions. Investors received regular updates with videos of factories producing masks. “This is something that potentially has major legs,” Curry wrote enthusiastically.

Except almost none of it was real.

The Elaborate COVID Con Unravels

The deception was breathtaking. They hired temporary staff to pretend to be factory workers for videos. Someone in Vietnam procured just enough medical gear to fill a few kits for show. They purchased 5,000 empty boxes, wrapped them, and put them on pallets to represent orders.

The red flags were everywhere. A spreadsheet of Optimus’s expenses included a line reading “mystery expenses” next to $41,028,233.05. As Caleb observes, “A company dealing in medical supplies should not have mystery expenses. The only type of business that should have mystery expenses is whatever Scooby-Doo and the gang are always up to.”

Everything unraveled when Alaa Hattab, an Optimus associate, accidentally revealed the truth to Curry and Anderson. The baby formula deal was fake. The biggest mask deals were fake. The first aid kit deal was also fake.

Then came the bombshell: Mike Konig was actually Eli.

Curry and Anderson confronted him with hidden recording devices. On tape, Eli admitted, “I finagled and lied to people to cover us.” Then he asked them to keep his secret and help him continue. Incredibly, they agreed—at least temporarily.

By November 2022, with inflation surging and investors demanding their money, Tryon halted redemptions. When investors compared notes and found inconsistencies, one filed an SEC whistleblower report. The FBI arrested Eli at his home on July 18, 2023.

The Lessons for Accounting Professionals

After a seven-week trial, Eli was convicted in 2025 of securities fraud, wire fraud, money laundering, and conspiracy. In November 2025, he received a 37-year sentence. Over two decades, he had stolen more than a quarter-billion dollars.

Yitz Grossman, who had championed Eli’s clemency, told Bloomberg, “I still feel sick and embarrassed to speak with some of these people who gave me a letter to help out this family. My conclusion is he’s sick and he can’t control himself. He’s a deal junkie. He thinks he’s smarter than everybody else.”

This case is a reminder to accounting professionals and fraud examiners to look out for red flags appear over and over again, like:

  • Guaranteed returns with little risk
  • Short turnarounds that seem too good to be true
  • Minimal documentation or transparency
  • “Mystery expenses” in the tens of millions
  • Deals involving places that don’t exist

It also highlights how affinity fraud remains devastatingly effective because it weaponizes the trust that holds communities together. Eli’s victims trusted someone who demonstrated a commitment to their shared values.

On the political front, Obama’s administration created the Financial Fraud Enforcement Task Force in 2009 to prosecute financial crimes. Trump terminated it and replaced it with his own version. As Caleb observes with characteristic bluntness, Trump is “mercurial, petty, vindictive” and wouldn’t be above granting clemency to people Obama prosecuted simply because Obama prosecuted them.

The broader lesson is that when we reserve mercy for the wealthy and connected while ordinary offenders remain incarcerated, that’s not mercy at all. “That’s callous. That’s malevolent. And now maybe it’s American,” Caleb says. 
Eli’s lawyer maintains his innocence and will appeal.

Listen to the full episode of Oh My Fraud to hear all the jaw-dropping details, damning quotes from court documents, and Caleb’s sharp commentary on what this case reveals about fraud, mercy, and American justice. Because when someone uses a presidential pardon to immediately start stealing again, we all need to pay attention.

When Bots Listen to Robots and Real Money Disappears

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Picture this: a computer on stage playing songs to an audience of computers. No humans involved, just machines performing for machines in an endless digital loop. Yet somehow, millions of dollars change hands.

This isn’t science fiction. It’s happening right now on streaming platforms, and it’s just one of the mind-bending fraud schemes explored in this episode of Oh My Fraud. Host Caleb Newquist opens with a relatively new conspiracy theory called the Dead Internet, which suggests that most online activity, including posts, likes, followers, and streams, isn’t human anymore. It’s “bots talking to bots, talking to bots,” creating an information superhighway filled with self-driving cars that have destinations but no passengers.

But what happens when someone exploits this artificial ecosystem for real money? That’s exactly what we’re about to find out.

The $121 Million Email That Fooled Silicon Valley

Between 2013 and 2015, a Lithuanian man named Evaldas Rimašauskas pulled off something that shouldn’t have been possible. He convinced two of the world’s smartest companies, Google and Facebook, to wire him $121 million. His method wasn’t sophisticated hacking or complex algorithms. He simply pretended to be someone else.

Rimašauskas impersonated Quanta Computer, a real Taiwan-based hardware manufacturer that actually did business with both tech giants. He set up a company in Latvia under Quanta’s name and opened bank accounts in Latvia and Cyprus. Then his team got to work, calling Google and Facebook customer service lines to gather intelligence, including names of key employees, contact information, and other details that would make their lie believable.

Through phishing emails and what Caleb describes as “a maze of phony invoices, contracts, letters, and corporate stamps,” Rimašauskas created enough confusion to convince someone at Google to update the bank account they had on file for Quanta Computer. In 2013, Google sent $23 million to his account. Two years later, using the same playbook, Facebook wired him $98 million.

The money flowed through accounts across Latvia, Cyprus, Slovakia, Lithuania, Hungary, and Hong Kong. And here’s the kicker: these amounts were so insignificant to Google and Facebook that they “went virtually unnoticed.” As Caleb puts it, “$23 million and $98 million aren’t even rounding errors on the amount of revenue for Google and Facebook. It’s less than pocket change.”

Eventually, someone at Google caught on. Rimašauskas was arrested in March 2017, extradited to the U.S. that August, and pleaded guilty to wire fraud in March 2019. He got five years in prison, and both companies got their money back.

From IT Mogul to Music “Producer” to Alleged Fraudster

Our second story shifts from simple impersonation to something far stranger. Meet Michael Smith, a 52-year-old with a resume that reads like three different people’s lives smashed together.

According to the research, Smith made his first fortune in the 1990s with an IT business where he allegedly wrote “one of the main fixes for the Y2K millennium software bug.” He then ran chains of medical clinics, which landed him in trouble in 2020 when he and two associates paid $900,000 to settle Medicare and Medicaid fraud allegations.

But here’s where it gets weird. At age 39, Smith decided to become a music industry player. Despite having no apparent musical background, he somehow ended up judging a BET hip-hop competition called “One Shot” alongside DJ Khaled, T.I., and Twista. As Wired magazine described it, he was “a relatively unknown record producer with a checkbook” among actual stars.

When Caleb asked producer Zach Frank if he’d ever heard of anyone building a successful music career starting in middle age, Zach’s response was telling: “It’s extremely, extremely rare. Not without money, at least.”

The Streaming Revolution and Its Discontents

To understand Smith’s alleged fraud, you need to understand how dramatically the music industry has changed. Zach, who comes from a family of professional musicians, explained how streaming completely upended the business model.

In the old days, people bought physical albums for $12-15 at stores like Tower Records. Artists made real money from album sales. Then came Napster and peer-to-peer sharing, which Caleb admits using extensively in college. “People were listening to all this music completely in its entirety for free,” he recalls.

Today’s streaming platforms like Spotify and Apple Music operate on a subscription model. Users pay monthly fees for unlimited access, and artists get fractions of pennies per stream. Spotify made $17 billion in 2024 and claims 70% goes to the music industry, but individual artists see almost nothing.

The numbers are staggering. According to Spotify’s former chief economist, more music is released every single day in 2025 than in the entire year of 1989. And here’s what makes it worse: bigger artists negotiate better deals, while smaller artists, as Zach puts it, “get screwed.”

Building an Army of Fake Listeners

This is the landscape Smith allegedly decided to exploit. Starting in 2017, he orchestrated what the Department of Justice calls a scheme to steal millions in royalties by fraudulently inflating music streams.

The mechanics were brilliant in their simplicity. First, Smith created thousands of bot accounts using fake email addresses and names. He even told a coconspirator to “make up names and addresses” but to “make sure everyone is over 18.” He paid $1.3 million in subscription fees because, as Zach explains, paid subscribers generate higher royalty rates than free users.

By October 2017, Smith had 1,040 bot accounts spread across 52 cloud service accounts. Each bot could stream about 636 songs per day, generating approximately 661,440 total daily streams. At half a cent per stream, that meant $3,307 daily, $99,000 monthly, or $1.2 million annually.

But Smith had a problem: he needed content. Lots of it.

When AI Makes Music for Bots to Hear

Initially, Smith used music catalogs from coconspirators and even tried selling his streaming service to other musicians desperate for plays. But as he wrote in May 2019, “I can’t run the bots without content and I need enough content so I don’t overrun each song. If we get too many streams on one song, it comes down.”

His solution? Artificial intelligence. Smith partnered with Alex Mitchell, CEO of an AI music company called Boomy, who began providing thousands of AI-generated songs each week.

The song and artist names were gloriously terrible. Song titles included “Zygotic Washstands,” “Zygoptera,” and “Calvinistic Dust.” Band names ranged from “Calm Knuckles” to “Camel Edible.” As Caleb jokes, “I don’t know what camel edibles are. Perhaps they are THC gummies for camels.”

To demonstrate just how far AI music has come, Zach used Udio.com during the podcast to generate two complete songs about Oh My Fraud in just 10-15 seconds. The results were unnervingly good, professional-sounding tracks that could easily pass for human-created music. “There’s a lot of AI music on Spotify at the moment without people knowing it’s AI,” Zach notes.

Smith used VPNs to hide that all streams came from one location and spread activity across thousands of songs to avoid detection. When flagged for “streaming abuse” in 2018, he protested: “We have no intentions of committing streaming fraud.”

By February 2024, Smith’s scheme had generated 4 billion streams and $12 million in royalties.

Folk Hero or Fraudster?

The reaction to Smith’s indictment has been surprisingly divided. Some see him as a criminal who stole from real artists through the “stream share” system, where royalties are distributed based on each rightsholder’s proportion of total streams. Others view him as a folk hero exposing an exploitative system.

The case raises uncomfortable questions. When the band Vulfpeck released an album of complete silence and asked fans to stream it while sleeping—earning $20,000 before Spotify banned them—was that fraud or performance art? As Zach asks, “If someone’s playing blank music, who are they to say that’s not real?”

Smith has hired the prestigious law firm that defended Diddy and plans to fight the charges vigorously. This will be the first major streaming fraud case fully litigated, potentially setting precedents for how we define fraud in digital spaces.

What We Learned

As Caleb reflects at the episode’s end, these cases reveal something profound about our digital economy. Google and Facebook, companies worth trillions with founders worth hundreds of billions, got tricked by simple schemes. A middle-aged entrepreneur with a checkbook created a phantom musical empire that earned millions.

For accounting professionals, these are warnings about the future of fraud detection. When documentation can be perfectly faked, when bots are indistinguishable from humans, when AI creates content that only machines consume, traditional audit procedures become obsolete.

These cases force us to confront questions about power, technology, and authenticity in the digital age. When companies make billions while creators earn pennies, algorithms determine value instead of human appreciation, and the line between real and artificial completely disappears, that’s when people start rooting for the fraudsters. Not because they’re right, but because the system itself feels so wrong.

Listen to the full episode to hear Caleb and Zach grapple with these questions, including those AI-generated songs that sound disturbingly human. Because in an age where machines create for machines while extracting real value from real people, understanding these frauds helps preserve what makes us human in an increasingly artificial world.

Deloitte’s $440,000 AI Fabrication Scandal Exposes the Accounting Profession’s Deepest Fears

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A startup founder discovered $2.1 million in embezzlement by his co-founder in just 18 minutes using Claude AI. The company’s internal auditors, external auditors, and even the CFO had completely missed it. Meanwhile, Deloitte was forced to refund the Australian government hundreds of thousands of dollars after delivering a report filled with AI-generated fabrications.

In this episode of The Accounting Podcast, hosts Blake Oliver and David Leary dig into these stories. They explore how AI is both exposing massive frauds and creating embarrassing failures, examine the chaos from the government shutdown, and question whether traditional accounting services still matter when 86% of major companies use broken charts that nobody even notices.

When AI Catches What Humans Miss (And Creates What Shouldn’t Exist)

The accounting profession is experiencing an AI identity crisis. On one hand, artificial intelligence can spot complex fraud that teams of professionals completely miss. On the other hand, professionals are using it to generate work that looks legitimate but is actually riddled with fabrications.

Let’s start with Deloitte’s spectacular failure. The Big Four firm charged the Australian government $440,000 AUD (about $290,000 USD) for a 237-page report on welfare compliance systems. The problem? It contained over 20 AI-generated errors, including completely made-up quotes from federal court judgments and references to non-existent academic papers.

Chris Rudge, a Sydney University researcher, spotted the errors immediately. One fabrication attributed a non-existent book to constitutional law professor Lisa Burton Crawford on a topic completely outside her field. “I instantaneously knew it was either hallucinated by AI or the world’s best kept secret because I’d never heard of the book, and it sounded preposterous,” Rudge said.

Even after getting caught, Deloitte insisted its findings and recommendations were still valid. This prompted Australian Labor Senator Deborah O’Neill to observe that Deloitte has “a human intelligence problem.”

But here’s where it gets interesting. While Deloitte was using AI to create fake references, a startup founder used it to uncover real fraud. He exported his company’s QuickBooks data into Claude AI and asked one simple question: “What’s wrong with this picture?”

In just 18 minutes, the AI found what everyone else had missed: 17 fake companies routing $2.1 million to his co-founder’s personal accounts through shell companies. The AI spotted patterns humans overlooked, including fake vendors paid on 23-day cycles while real vendors were paid on 28-day cycles, and payment amounts that followed Fibonacci sequences, which humans subconsciously create when making up numbers.

The founder has since turned this into a business, selling AI-powered fraud detection prompts for $10,000 each to 47 clients. He’s probably making more money from his fraud-detection business than from his original startup.

As Leary points out, this creates both an opportunity and a threat for accounting firms. “The real risk of AI taking accounting jobs isn’t that AI will take the job away. Clients are just going to say, ‘I can do that myself. I don’t need to pay somebody $400,000 to do a half-assed ChatGPT thing.’”

Government Shutdown: When Critical Systems Break Down

The conversation then turned to the government shutdown’s impact on air travel and tax services. The situation has become genuinely dangerous, with cascading failures that reveal how fragile our systems really are.

Air traffic controller-related delays jumped from a typical 5% to 53% as workers called in sick rather than work without pay. Oliver experienced this firsthand when his flight was delayed for hours with no official explanation, though flight attendants privately blamed air traffic control shortages.

The scariest incident happened at Burbank Airport in Los Angeles, where the tower went completely unmanned. “When that happens, there is a backup procedure, which is that the pilots have to do their own air traffic control,” Oliver explains. “They get on a shared frequency and have to communicate with each other. There’s no intermediary. So that not only slows things down. It also creates risk. There’s a huge risk of these planes crashing into each other because they miscommunicate.”

The economic impact is staggering. The US Travel Association estimates $1 billion in weekly losses to the travel economy. Over 750,000 federal workers have been furloughed, while more than a million work without pay. For TSA screeners earning an average of $51,000, the situation is untenable. “If they don’t get paid, they are not paying their bills,” Oliver notes. “They’re going to go drive for Uber to pay the bills.”

The IRS shutdown creates serious problems for accountants. Nearly half of IRS staff have been furloughed. While electronic returns continue processing and automated refunds still flow, human support has collapsed. Phone support is essentially gone, paper returns sit unprocessed, and audits have stopped. Yet interest and penalties continue to accrue, and all deadlines remain in effect.

Adding to the chaos, Trump fired over 4,100 federal workers instead of furloughing them. The Treasury alone lost 1,446 employees, including about 1,300 IRS workers. “It’s the first time in modern history that mass firings have happened during a funding lapse,” Oliver observes.

The administration also created a new “CEO of the IRS” position to bypass Senate confirmation, appointing Frank Bisignano, former CEO of Fiserv, who still owns about $300 million in company stock. This creates obvious conflicts of interest, especially since Fiserv is involved in launching digital stablecoin initiatives. “This is why you have to have hearings. You can’t just appoint somebody to a position,” Leary emphasizes.

When Independence Becomes a Joke

Next, Oliver and Leary discussed how financial entanglements are destroying audit independence while regulators focus on trivial violations.

Take BDO’s current crisis as an example. The firm took a $1.3 billion loan at approximately 9% interest from Apollo Global Management to finance its employee stock ownership plan. The debt forced the company to lay off employees, freeze travel, and conduct emergency cost reviews across all divisions.

But while BDO was giving First Brands a clean audit opinion, Apollo was actively shorting the company. First Brands collapsed months after BDO’s clean audit. “If I’m BDO and I audit a company that is being shorted by a company I took a $1 billion loan from, where’s the independence?” Leary asks. “What is the fraud triangle? Opportunity, rationalization, and financial pressure. All the parts of the fraud triangle are here.”

Meanwhile, EY is celebrating a “dramatic audit quality turnaround,” with its deficiency rate dropping from 46% in 2022 to below 10% in 2025. They achieved this miracle by firing 132 public company audit clients. In other words, the problematic audits didn’t disappear. They just moved to Deloitte and KPMG. “Have we actually achieved anything here? Or have we just shifted the bad audits somewhere else?” Oliver wonders.

The hosts also discussed a new scheme where crypto promoters target CPA firm clients. The Truevestment Bitcoin Legacy Fund wants CPAs to help raise $150 million from their clients, which institutional investors will then match before merging into a Nasdaq entity—essentially a SPAC wrapped in Bitcoin speculation.

The marketing compares buying Bitcoin today to “buying the Dow at 900.” But as Leary points out, when the Dow was at 900 in the mid-1960s, it consisted of companies like AT&T and General Electric—”companies that made things” and created real value, not speculation.

Why Nobody Cares About Financial Reports Anymore

Perhaps the most damning revelation from the podcast’s recent news roundup is that 86% of major companies are using broken charts in their financial reports. A CPA Journal study found bar charts with misleading axes, pie slices that don’t match percentages, and deliberate distortions to exaggerate performance. Of 1,584 charts reviewed, 12% had fatal flaws that completely misrepresented the data.

“The fact that so many of them have errors and nobody’s pointing them out indicates to me that nobody’s reading them,” Oliver observes. Indeed, 10-K filings get downloaded an average of just a few dozen times.

The hosts even shared a bizarre example where social media bots criticizing Cracker Barrel’s new logo caused the stock price to tank. According to Wall Street Journal data, 44.5% of posts about the logo change were from bots. “Maybe nobody cares about your charts because nobody even cares about the financial statements,” Leary suggests.

What This Means for Your Firm

The key insight from Hector Garcia stuck with David: “AI is never going to do perfect accounting, but it’s going to do it good enough.” For most clients, “good enough” financials that they can generate themselves might be perfectly adequate.

Accounting professionals can embrace AI for meaningful fraud detection and insights, or watch clients realize they can generate “good enough” work themselves. As this episode of The Accounting Podcast makes clear, the traditional value proposition of professional accounting services is crumbling. The firms that survive will be those that identify and deliver human value that transcends what AI can do: strategic insight, ethical judgment, and genuine expertise that no algorithm can replicate.

Listen to this episode to understand not just the challenges facing accounting, but what you need to do differently starting today.