Going after the bad apples: forensic accountant Paul Regan cut his teeth in a fraud case against Howard Hughes, and he's become a leader in a specialized area, mostly attempting to recover money for shareholders.

• Author: Sweeney, Paul
• Position: FRAUD

Whenever Paul Regan reads The Wall Street Journal and sees that a major financial scandal is brewing at a Fortune 500 company, the San Francisco-based accountant reckons "there's probably a 30 to 50 percent chance that I'll be called in."

Coming from somebody else, that declaration might sound a trifle boastful. But Regan, who at 61 is president of the 100-person forensic accounting firm, Hemming Morse, is just telling it like it is. Since graduating from the University of San Francisco in 1968 and taking his first job at Peat Marwick Mitchell--where, early in his career as a certified public accountant, he examined suspicious dealings of aviation-and-movie mogul Howard Hughes--Regan has delved into many of the highest-profile financial frauds of the past four decades.

In the 1980s, as an independent auditor, he was called in by several U.S. regulatory agencies, including the Resolution Trust Corp., to help with investigations into the savings-and-loan scandals. He and his team pored through the entrails of some 25 expired thrift institutions in California, Texas, Florida and New York to reconstruct their often byzantine dealings.

In the 1990s came the cases of massive accounting irregularities at Phar-Mor and MiniScribe (see "Miniscribe, Maxi-Fraud, page 26), as well as Xerox Corp. and Sunbeam Products Inc., both of which he helped unravel for the U.S. Securities and Exchange Commission and which brought SEC sanctions against top accounting firms.

The new millennium has brought calls from shareholders and their lawyers for assistance in lawsuits seeking redress for multibillion-dollar rip-offs and insider trading abuses in the highly publicized frauds at Adelphia Communications, Parmalat SpA and, of course, Enron Corp. The engine driving these and other world-class frauds over the last two decades or more, Regan says, has been the explosive growth of the global stock exchanges and debt markets in which trillions of dollars are at stake every day.

"The most common, recurring issues are the misstatement of a company's financial position," Regan says. "Typically, what I see the most is a company claiming revenues that did not represent a legitimate transaction and did not result in a seller actually collecting those revenues."

Positive quarterly earnings can have the immediate effect of sparking buzz and excitement on Wall Street, running up a company's stock price and enriching top corporate officials at public companies, especially CEOs, who may be lavisly compensated with stock options and grants. For many leading national attorneys who specialize in seeking recompense for aggrieved investors--as well as bondholders, employees, suppliers, financiers, creditors and other stakeholders--Regan is the go-to guy.

"He is one of the top gurus in the country," says Houston attorney Allan Diamond. "I've been relying on him as an accounting expert for 25 years, particularly in complex financial litigation that involves audit malfeasance and malpractice."

As a de facto white-collar crime detective, Regan, who holds a master's degree in accounting and is also a certified fraud examiner, covers the waterfront. His areas of investigative expertise include mortgage banking, the steel and automotive industries, securities trading, highway and power plant construction, motion pictures, airline acquisitions and insurance.

Bob Ivey, an attorney at the Los Angeles office of Holland & Knight, has hired Regan as an investigator, analyst and expert witness in numerous cases, including a years-long trial involving the collapse of two shoddily built luxury hotels at the Royal Palm Resort on Guam in an August 1993 earthquake. "Paul has a variety of skills," Ivey says. "We have often used him for determining the level of damages in construction cases."

Ivey acknowledges that Regan displays the "tenacity of a bulldog," but says...