Lessons from Fraud, Growth, and Even a Little “Green Eyeshade”

After a full and fast-paced day of sessions discussing fraud, lender diligence, and the now well-known First Brands situation, at SFNet’s Supply Chain Finance Convergence on March 3 in New York City, I couldn’t help but think about an unexpected cinematic analogy: Raiders of the Lost Ark. I do love movies, and I find it hard to believe that Raiders is now 45 years old. Goodness. 

In the movie, every player is chasing something super valuable, each with different motivations.  Clues and insight are scattered and difficult to secure. Helpful folks warning about the dangers are everywhere. Still, our heroes (and villains) ignore the well-meaning warnings. Finally, when the “box” is finally opened, the consequences are far bigger than anyone anticipated. Far. Bigger.

The discussions throughout the day felt similar to that story arc. Conversations were defined by themes surrounding growth, fraud, diligence, and human nature. None of these themes are necessarily new, but they are all worth revisiting.

When Growth Hides What’s Beneath

While discussing First Brands, one of the primary takeaways was rapid growth hiding underlying issues. When a portfolio is expanding quickly, the headline numbers often look deceptively strong. Growth dilutes warning signs. Overall percentage metrics may appear stable or improving, even if individual companies within the portfolio are deteriorating.

Roll-ups create similar dynamics. When multiple companies are acquired at once, consolidated performance masks problems that exist deeper within the structure.

In reality, the relevant facts create a much more complicated plot. During the postmortem review of First Brands, this memorable quote came to mind - “Why did it have to be snakes?” - which may be the most fitting given the background.

The postmortem reminded me of Raiders of the Lost Ark in a strange way. Everyone in the movie is racing toward the same prize, but few people stop to fully understand what they’re actually chasing — or what might happen when they get it. And yes, when we reach the end of the story, there really were snakes below the surface.

In finance, rapid growth can create that same narrative dynamic. Momentum becomes the story. We see deployment. We see growing revenue. We see rich fees. We see competent participants in a deal — yet we sometimes don’t stop long enough to do our research and look around. We  might forget the fundamentals. It’s a little like the opening scene in Raiders, when Indiana lays eyes on the prize and swaps the golden idol with a bag of sand. He went too quickly, focused on the wrong thing. And, for a moment everything seems balanced. A moment later, the temple starts collapsing. Indiana had misjudged the situation.

 In First Brands, most of the lenders involved were not true factors or even traditional asset-based lenders. They were not executing on the time-tested foundations that built this niche sector of the private credit market. However, their tale is still a good reminder to those in the specialty finance space to stop, dig in, and make sure the underlying data is being reviewed and assessed and that the story and the facts are consistent. Do your own due diligence.

The Power of the Narrative (and a Little FOMO)

Another theme that surfaced throughout the discussions was the influence of “narrative” in complex financing structures. Rapid growth, recognizable brands, and a compelling roll-up strategy can create confidence across a lending group. When a company is expanding quickly and new lenders enter the structure at different points in time, it becomes easy for each participant to assume that someone else has already done the deeper digging.  Players buy the “narrative’ more than the “credit.”

There’s also a subtle, but powerful, dynamic that can creep in: fear of missing out. When a deal is moving quickly and participation is filling up, the pressure to stay involved can quietly replace the instinct to slow down and ask uncomfortable questions.  For anyone tracking the private credit markets, there is a consistent theme of immense pools of capital chasing limited opportunities to invest.

 In situations like the one discussed throughout the conference, the scale of the platform and the number of financing programs involved meant that many lenders saw only pieces of the broader structure. Strong growth stories can reinforce confidence, but they also discourage the kind of granular questioning that sometimes reveals underlying issues.

 Similarly, in Raiders, every group believed they understood the nature of treasure they were pursuing.  In reality, each was working from only part of the map, never seeing the full picture.

Fraud Vulnerabilities: The Same Lessons, New Terminology

Another conference segment featured a fraud task force discussion including surveys on the top vulnerabilities facing lenders today. Three stood out:

1. Less stringent monitoring and controls
2. Insufficient training
3. Increasingly complex deal structures

The session also spurred discussion about how emerging technologies, especially AI, make it easier to fabricate documentation or manipulate information. Interestingly, despite all the conversation about technology, the core takeaway was definitely “old school.”

The biggest protections against fraud are still discipline, curiosity, and skepticism. In other words, the financial version of Indiana Jones’ instinct to question and interrogate his surroundings, rather than blindly following the map.

Ask questions.

Dig deeper.

Take a minute to look around and see if the story tracks.

The Value of Getting Out of the Office

One of the strongest reminders from the sessions was the value of physically visiting businesses.. Today, lenders have endless digital tools — data platforms, AI analysis, video calls, electronic reporting. Still, the panels repeatedly emphasized something simple: you learn more when you show up.

 You can walk the warehouse. Look at the inventory. See what items are piling up, not moving, or being returned. You can interact with employees and get a sense of the culture and the operation. These small observations can reveal realities that no financial report will ever show.

I mean, Indiana Jones doesn’t solve problems by merely reading about the temple. He walks through it. He investigates. He notices traps other people miss.

Sometimes the clues are right in front of you, but you have to be there to see them. Otherwise, you might find yourself, as Indiana famously quips, “digging in the wrong place.”

Fraud Indicators: Old Tricks, New Names

Several terms surfaced repeatedly during the Supply Chain Finance Convergence panel discussions. Some sounded new, but the underlying concepts have been around for years. Terms like “Fresh Air Invoicing” refers to invoices created without legitimate transactions behind them. Fake invoices, dummy invoices — cutting-edge names for vintage fraud tactics.

 “Zombie Inventory” describes inventory that technically exists on reports, but is effectively unsellable or repeatedly re-aged. It keeps coming back to life on your borrowing-base certificate. (Personally, I am terrified of zombies, so the term feels appropriate as I hate re-aged inventory reports too.)

“Harvesting” refers to situations where owners extract cash from a business while the underlying operation deteriorates. In many cases, these issues surface through inconsistencies in the data that don’t fit into the overall picture.

 For example: A company showing $1 million of current receivables, but only $500,000 in monthly sales.

Or: Financial reports that don’t reconcile with bank deposits.

Sometimes these situations create what people refer to as a “solvency float,” where the financial picture looks healthy on paper, but the underlying cash flow and performance details tell a different story. These moments are a little like scenes in Raiders when the environment starts giving subtle warnings before the real danger appears. “Something feels off...” Unfortunately, in specialty finance we don’t get the benefit of dramatic warning music.

 The Return of the “Green Eyeshade”

One panelist made a comment about account executives or relationship managers being “green eyeshade” A/Es. Um, what?

The term originally referred to early accountants and bankers who wore green visor shades while working under bright lamps reviewing ledgers all day. Over time, “green eyeshade” became shorthand for the person in the room who:

• Focuses intensely on the numbers
• Questions inconsistencies
• Looks at financial information with a skeptical eye

 In other words, the person who isn’t distracted by the story and keeps digging into the math. We all need a little green-eyeshade mindset when reviewing transactions.

Of course, we all bring different skill sets to the table. Rotating account executives or examiners can sometimes help review portfolios from different perspectives. Fresh eyes may see something others missed. Occasionally, they might even catch a little “fresh air invoicing” (couldn’t help myself with that one).

 Sometimes the person with the green visor is the one who notices the trap in the temple before anyone else steps on the trigger.

 Structural Complexity and the First Brands Case

The Case Study Discussion involved attorneys and field examiners reviewing elements of the First Brands structure. Details relating to this conversation are available for SFNet members in more detail for those interested. One overarching theme that emerged was limited visibility.

 Different lenders entered the financing structure at different times. Multiple SPVs were involved. Financing programs were layered on top of one another. As a result, participants often saw pieces of the structure — but not always the entire picture.

 Further, stories came out implying that when lenders asked difficult questions or raised concerns, they were threatened with being kicked out to allow another lender to step in.  Lenders must be willing to walk away and not succumb to the power of “FOMO.”

 Final Thoughts: So, What’s in the Box? Look First.

Rapid growth can hide problems. Complex structures reduce transparency. Small inconsistencies often signal larger issues. Despite all the advances in technology, the most effective risk management tools are generally the simplest.

 Ask questions.

 Look closely at the numbers.

 Visit the business.

 Talk to people.

 Keep a little green-eyeshade skepticism nearby.

Because in finance, as in Raiders of the Lost Ark, sometimes the smartest move is to do research, dig in, and look carefully at what’s inside the box before anyone opens it. And right now, you’re probably happy I didn’t reference another movie about another box… but you know you’re thinking about it.