Inside a High-Stakes Ponzi Scheme Defense: The Role of a Forensic Accounting Expert
Written by: Jay Sickler, CPA, CFF, ABV, ASA
Ponzi Scheme investigations are often highly complex and challenging to unravel. Cogence Group was called in as a defense expert by Umpqua Bank in the widely publicized class-action lawsuit Shela Camenisch, et al v. Umpqua Bank.[1] In this role, I was asked to (i) explain how accounting fraud investigations are conducted, including what types of financial analyses are required to form conclusions and expert opinions about whether a business is engaging in fraudulently activity (such as operating a so-called “Ponzi scheme”); and (ii) assess the analyses and conclusions presented by the international consulting firm FTI, which alleged that Professional Financial Investors, Inc. and its affiliated entities were operating as a “Ponzi scheme” or “Ponzi scheme-like” enterprise.
A Ponzi Scheme is a type of financial fraud and investment scam that involves the payment of purported returns to existing investors using funds contributed by new investors. A Ponzi scheme typically promises artificially high rates of return, claiming little to no risk to investors, creating the illusion of a successful and legitimate enterprise. In reality, no underlying business or investment strategy exists; rather, the scheme relies entirely on a continuous influx of new investor funds to sustain payouts.
In a Ninth Circuit Court of Appeals case, a Ponzi scheme is described as “…an arrangement whereby an enterprise makes payments to investors from the proceeds of a later investment rather than from profits of the underlying business venture, as the investors expected. The fraud consists of transferring proceeds received from new investors to previous investors, thereby giving other investors the impression that a legitimate profit-making business opportunity exists, where in fact no such opportunity exists.”
I provided expert testimony to the jury on the process and methodology of accounting fraud investigations, specifically regarding the types of financial information necessary to form professional opinions about fraudulent conduct. I also provided rebuttal testimony as to the work carried out, and expert opinions offered by the expert from FTI. The trial, held over several weeks in the San Jose U.S. District Court, resulted in a deadlocked jury. According to an April 1, 2025, OregonLive article, “Plaintiffs were seeking as much as $360 million in damages.”[2] A second trial was scheduled to begin on April 28th, but before that, the Plaintiffs and Umpqua entered into settlement negotiations. This resulted in a reported $55 million settlement in favor of the Plaintiffs.
If you’re facing complex financial litigation or need expert forensic accounting support, Cogence Group is here to help. Our team brings clarity to complicated matters—whether in the courtroom or behind the scenes. Contact us today to learn how we can support your case.