Fraud No Longer a Dirty Word

GUEST BLOGGER

Kevin Taparauskas, CFE
ACFE Events & Marketing Director

Fraud is no longer a dirty word. Ten to 15 years ago, you couldn’t find a company executive out there who was willing to speak frankly on the subject. I suppose they thought that if they didn’t talk about it, everyone would think that it didn’t exist within their organization. Then came Enron…and Worldcom…and Madoff. Thanks in part to these high-profile scandals and publications such as the ACFE’s 2010 Report to the Nations, the prevailing opinion regarding occupational fraud has shifted. It is no longer a question of whether it is taking place within your company, but rather what are you doing about it?

Clearly, the answer to that question for many professionals was to join the ACFE and learn, develop and hone their anti-fraud skill set. Our association has grown exponentially over the past 10 years at a time when many trade groups are either treading water or shrinking in size. Throughout the course of our history, it has been largely an individual decision to become involved with the association and pursue the CFE credential. The reason for this was simple: it was about the knowledge and skills of that particular person. To that end, we built and cultivated relationships with people and not companies. And this model has proven to be successful – both for the anti-fraud professionals that have gained personally and professionally and for the ACFE, which has thrived as an association.

With the changing mindset towards the subject of white collar crime, many large organizations are now interested in making it clear to shareholders, regulators, the media and investors that they are taking proactive measures to prevent, detect and deter fraud. And it’s no wonder, as a recent study found that news of an alleged fraud resulted in a 17 percent stock price decline in the two days surrounding the announcement. Wanting to send a strong message, many members have reached out to us over the last few years seeking opportunities for their companies to become involved with the ACFE. And we have listened.

Last month, at the ACFE Annual Fraud Conference in San Diego, we rolled out the new ACFE Corporate Alliance Program to the delight of many members. This program has been in the works for several years and in pilot mode since last December with three Fortune 150 organizations. Our goal is to support anti-fraud best practices by providing large companies with access to the world-class tools, training and resources that the ACFE has come to be known for. Oh, and they will get to use a cool new logo, too.

In the coming months, the ACFE will be forging partnerships with companies choosing to join the new Corporate Alliance. I invite you to learn more about the program and find out whether it is a fit for your organization.

Follow Up: It’s a New Dawn, It's a New Day in Corporate Governance

GUEST BLOGGER

Sheila Keefe, CFE, CPA
Principal, BDR Advisors LLC

FOLLOW UP: Board directors must devote adequate resources to address fraud

James Murdoch, News Corporation’s deputy chief operating officer, found his career implode shortly after his testimony in front of Parliament was disputed by two high-level News Corp. executives. According to the executives, Murdoch knew that the hacking was a more pervasive problem as early as 2008. Perjury aside, the corporate governance concern has to be the lack of adequate investigation and response employed by Murdoch. Rather than launching a full investigation into the hacking as he had claimed, News Corp. underwrote only two limited-scope investigations. The first in 2006 was a preliminary investigation in the wake of the reporter’s arrest. The second investigation, supposedly more expansive, took place in 2007 in response to a wrongful termination lawsuit by the shady reporter; that investigation involved questions focused on just five staffers related to the terminated reporter.

Lack of adequate investigation into suspected fraud has been at the center of other recent board director woes; specifically, infoGroup Inc. and DHB Industries. For infoGroup, audit committee chairperson Vasant Raval was prosecuted for inadequately investigating fraud. In response to allegations of self-dealing by the CEO, Raval conducted a one-man investigation that lasted just 12 days. According to reports, the audit committee chairman did not look into the CEO’s expenses. With DHB Industries, the SEC charged three ex-directors who served on DHB Industries Inc.'s audit committee for being "willfully blind to numerous red flags" of fraud.

The SEC has come out and said that it does not wish to concern the majority of hard-working board directors: "We will not second-guess the good-faith efforts of directors. But in stark contrast, Krantz, Chasin and Nadelman were [DHB Industries] directors and audit committee members who repeatedly turned a blind eye to warning signs of fraud and other misconduct by company officers," said Robert Khuzami, director of the SEC's Division of Enforcement.

What can be learned from these recent scandals involving News Corporation, infoGroup Inc. and DHB Industries is that board directors and audit committee members must be strident in their investigations into allegations of fraud and devote adequate resources to address fraud, known and unknown.

It Pays to be a Fraud Fighter

GUEST BLOGGER

Bruce Dorris, J.D., CFE, CPA
ACFE Program Director

Every week, ACFE brochures, newsletters and magazines make their way across my desk. I often see quotes from members or course attendees that jump out at me and remind me of the reason we strive so hard to be the best association in the world dedicated to fighting fraud, stopping at nothing to reach that goal. While testimonials in our publications and quotes on our website do speak volumes about what we do, there is nothing like hearing a success story from someone face to face.

I was recently talking to an attendee at the Annual Fraud Conference in San Diego, and something she said really stuck with me. She took great pleasure in telling me how much she had learned and all the people she met at the conference, but then she stopped, and the conversation took a more personal tone. Like many before her, she had taken the time and used her personal funds to attend a CFE Exam Review Course in Chicago. She distinctly remembered me saying in class that half of the attendees present will not pass the CFE Exam — not because they can’t, but because they will go back home and not take the time to actually sit and take the exam. What was striking to me was what happened after the class and the way she described her trajectory as a new CFE.

She went from having just a “job” to a new career as a fraud examiner with a completely different company — with higher compensation, more benefits, the works. All of the work, studying and saving paid off…literally. She was able to achieve this because she set herself apart by dedicating the time and resources to obtain the best fraud credential in the world. It is a credential that showed her employer that she was serious about the anti-fraud profession. Success stories like that are awesome. It reinforces the principles that the ACFE was founded upon.

If you are not a CFE, I encourage you to take a look at it and seek out a new path for your professional life. If you are a CFE, use the 2010/2011 Compensation Guide to strengthen your current position, showing the value the marketplace holds for such a prestigious title.

Are you up for the challenge? Find out more about the CFE credential here.