Have Calculator, Will Travel

Who strikes terror into the hearts of corporate con men, insurance swindlers and unscrupulous financiers?

By Alyssa A. Lappen |
Forbes | January 1991

Two old chums are walking along the beach. “You wouldn’t believe my business,” says one. “My main factory just burned down.”

“That’s nothing,” his friend replies. “My main factory just got flooded.”

“Oh, yeah?” says the first fellow. “How do you do a flood?”

How do insurance companies protect themselves against fraudulent, or simply inflated, claims? Meet Chris Campos, whose Teaneck, N.J.-based Campos & Stratis is the nation’s largest independent investigative ac counting firm.

Campos spent days last March in the Phoenix Federal Depository poring over reams of documents filed by Charles Keating’s failed Lincoln Savings. Campos won’t confirm the name of his client, let alone what he found. But it seems more than coincidental that in late 1988 and early 1989, after things began to turn sour at Lincoln, Keating took out $14 mil lion worth of directors’ and officers’ liability insurance for himself and fellow board members at Lincoln’s parent companies. The insurers-including Saul Steinberg’s Reliance Insurance Co. and Lloyd’s of London’s HS Weaver arm-could be on the hook for Keating’s legal defense bills which could exceed $10 million. Reliance is using the evidence Campos unearthed to support its suit to rescind its Lincoln Savings coverage.

Auditors like Campos scrutinize claims for damage, loss of business and negligence suits. Since starting out in 1969, Campos has opened 25 offices in North America and 2 over seas, added 33 partners and built billings to $18 million a year. Campos & Stratis’ biggest rival, Chicago’s Matson, Driscoll & Damico, had 1989 billings of about $10 million. (Campos’ first employee and longtime partner, Elia Stratis, died in the Pan Am explosion over Lockerbie, Scotland in 1988.) The firm now counts among its hundreds of clients Westinghouse, Aetna and Cigna.

Campos, 61, got his first taste of forensic accounting at the old Ernst & Ernst. He had joined the firm as a traditional auditor fresh out of Rutgers in 1951. Then in 1955 Hurricane Carol hit New York. Insurers needed investigators to review business interruption claims. Campos got the work. He painstakingly matched his subjects’ results against industry averages, company histories and fore casts. “You’re matching wits with people who know their industries a lot better than you do,” Campos says proudly.

In 1966 Campos met Robert Vesco, who wanted Ernst to audit his Inter national Controls Corp. Campos then 36, found the numbers a shambles. “Vesco wanted to maximize profits and minimize taxes-in ways that I just couldn’t allow,” he says. On Campos advice, Ernst never did the audit.

The opportunity to go out on his own came in the form of an audit client who offered Campos $15,000 to help him go public-only months after Campos had become an Ernst partner and the father of twin girls. Campos jumped at it. “I took a big chance,” Campos grins today. “All red-blooded American college-grad accountants wanted to be partners at a big firm, and here I was giving it up. Ernst’s other first-year partners thought I was nuts.”

Thanks in part to the litigation explosion, Campos’ business has grown an average of 30% a year for the last three years. A potential investigative audit lurks behind every legal claim. Campos’ fees go up to $7.00 an hour, but the clients’ potential savings, too, are big.

In 1985, for example, a Texaco oil drill broke through the floor of Lake Peigneur in Louisiana, flooding a Diamond Crystal salt mine 1,200 feet be low sea level. Diamond sued Texaco for $200 million.

Campos, representing Texaco, spent months reviewing documents at the site. He called in engineers who reported the mine’s life was substantially less than the 40 years Diamond Crystal had claimed. Economists told him the interest rates Diamond Crystal had used to determine the mine’s discounted present value were too high. The case was settled for S25 million.

Campos always takes a low-key approach. “Going in like a bull in a china shop is not the way to get information,” he says. Yet he is occasion ally thrown out of an office or refused the documents he needs. When that happens, Campos & Stratis calls in the lawyers.

Remember the 1980 MGM Grand Hotel fire in Las Vegas? MGM filed claims for $210 million with Kemper to cover the loss of its “growing” business and to rebuild the hotel. But Campos’ careful checks of hotel records showed that, except for the week of a prize fight in October, bookings had fallen in 1980; construction records also showed that MGM included some improvements in its claim for “rebuilding” The two claims were eventually settled for about $150 million .

The future? Campos is bullish. He says recessions always bring more arson and fraud, and maybe even a flood.

Alyssa A. Lappen

Alyssa A. Lappen is a U.S.-based investigative journalist. She is the former Managing Editor at the Leeb Group (2012-2017); a former Senior Fellow of the American Center for Democracy (2005-2008); and a former Senior Editor of Institutional Investor (1993-1999), Working Woman (1991-1993) and Corporate Finance (1991). She served six of her 12 years at Forbes (1978-1990) as an Associate Editor. Ms. Lappen was also a staff reporter at The New Haven Register (1975-1977). During a decade as a freelance, her work appeared in Big Peace, Pajamas Media, Front Page Magazine, American Thinker, Right Side News, Family Security Matters, the Washington Times and many other Internet and print journals. Ms. Lappen also contributed to the Terror Finance Blog, among others. She supports the right of journalists worldwide to write without fear or restriction on politics, governments, international affairs, terrorism, terror financing and religious support for terrorism, among other subjects. Ms. Lappen is also an accomplished poet. Her first full-length collection, The Minstrel's Song, was published by Cross-Cultural Communications in April 2015. Her poems have been published in the 2nd 2007 edition of Blood to Remember: American Poets on the Holocaust and both 2007 issues of Wales' award-winning Seventh Quarry: Swansea Poetry Magazine. Dozens of her poems have appeared in print and online literary journals and books. She won the 2000 annual Ruah: A Journal of Spiritual Poetry chapbook award and has received a Harvard Summer Poetry Prize and several honorable mentions.