ACFE Insights

Affinity Fraud: Lower than Low

2013-06-17T18:30:36Z

GUEST BLOGGER

Cora Bullock
Fraud Magazine Assistant Editor

I had a mild experience with a Bernie Madoff-type of sociopath right after college when I moved into an apartment with a girl that was a friend of a friend. She was the life of the party; people flocked to her like moths to a flame. When she chose to be friends with you, you felt honored. But it was all a deceiving façade.

She claimed to be going to school (which she wasn't). She was aghast when I told her that my credit card company sent me past-due notices for bills I had never received. A mutual friend, upon hearing my lament, sat in silence on the other end of the phone and then said, "Check the drawer of her nightstand." Sure enough, there sat my credit card bills full of charges from my card that I had never made. I went to restaurants and businesses around Austin and found copies of the credit card receipts, with a signature that was quite obviously not mine, some during vacations when I was out of town. I confronted her, and she denied, denied, denied, until I waved the receipts in her face. Then she broke down, swearing she'd pay me back. And I believed her because I wanted to.

The final straw came a few months later when I walked into our house and thought we'd been robbed - all of our stuff was missing. Turns out our landlord had taken some furniture, all of the electronics and sporting goods - all of which happened to be mine - as collateral for unpaid rent. Guess who wasn't paying rent?

I eventually got all of my stuff back by involving her parents, but she never reimbursed me for the credit card charges (no more than $600). I consider myself lucky.

Of all the frauds perpetrated in this world, the most heinous is affinity fraud. I envision these people carefully searching and screening their future victims. Once they find the ideal candidates, they set about manipulating them, building rapport, only to take them for all they've got. It makes my blood boil.

I edited the Fraud Magazine March/April 2013 article, "Affinity is only skin deep: Insidious fraud of familiarity." The opening story is outrageous. Seng Tan got in good with the Cambodian community through the shared pain of the Pol Pot regime, during which thousands disappeared and died. These people had lived in terror and escaped with nothing but their lives to the U.S. They met this woman, who " knelt in their temple to pray, and they cried and laughed together over their shared experiences." And what did Tan and her husband do? Robbed them of every precious penny of their life savings, to the tune of $30 million, to live in luxury and comfort. What? Are you kidding me? They are sociopaths and completely disgust me.

The latest video on Fraud-Magazine.com is of Kevin Forrester, a fresh-faced, charming man who stole from his own grandmother. What kind of person steals from their grandmother? Though he was convicted and served time, he's still trying to burnish this lowest of low behavior.

Is Fraud Investigation Right For You?

2013-06-13T14:35:45Z

GUEST BLOGGER

Kathy Lavinder
Owner and Executive Director of Security & Investigative Placement Consultants

Self-awareness is an often over-looked success indicator. Two recent conversations brought this to mind:

An investigator expressed unhappiness doing phone interviews. It makes her uncomfortable and, as a result, she usually stumbles through interviews and tries to avoid doing them.
A career law enforcement investigator with years of experience professed a desire to “train the next generation” and to move away from day-to-day case management.

Do you know where you should be focusing your career? Fraud investigation is hard work, and it’s not for everyone. Here are some realities:

You will have to be able to ask really uncomfortable questions, put others in awkward positions and refuse to accept pat answers. When you’re in the midst of an intense investigation, it’s likely your blood pressure will go up and almost certain that the same thing will happen to your target – should he or she be aware of the investigation. Are you okay with that?
Don’t expect people to like you. After all, you’re the person who, by definition, has to take a long, hard look at things. Many of these “things” could be issues and concerns that your employer doesn’t even want to know about. Are you the right person to do that?
You will have to be persistent, even a bit obsessive at times. There will be roadblocks, diversions, prevaricators and delays in your path. Are you driven to see things through to completion?
You will go down blind alleys, dig holes that are dry wells and perhaps even shine a bright spotlight on someone who is completely innocent. Mistakes happen, and people can mislead, sometimes intentionally, sometimes not. Can you live with the consequences?
It may sound like fun, until you do it. If it turns out that it’s not your passion or your calling, can you admit to that?

If you’ve been tapped to do a job you don’t love or think you’ve been miscast, it’s time to speak up. You will do yourself and your employer a favor. If you’re asked to do something that is contrary to your nature, accept that it’s not working and help your supervisors to see that. Just be sure to have at the ready some concrete ideas of how you can add value in other areas. Be prepared to demonstrate your appreciation for an employer’s willingness to work with you and find a role that is a better fit. That will mean redoubling your commitment and demonstrating your dedication every day.

There are supporting roles in fraud investigation that may still be suitable – data analytics, for instance. You may prefer to work on the front end – fraud prevention or detection – and leave the investigations to your colleagues. Just be sure to play to your true strengths.

Networking, Networking, Networking

2013-06-10T17:26:53Z

AUTHOR’S POST

Mandy Moody, CFE
ACFE Social Media Specialist

One of the most popular questions I get in our online Career Center’s Ask the Expert section is about how to meet more anti-professionals, either to share ideas or look for career opportunities. I consistently reply with, “Networking, networking, networking.” And, not just social networking, but face-to-face networking; the kind of networking where you look someone in the eyes and convey who you truly are and what you really represent. One of the biggest benefits of attending the upcoming 24th Annual ACFE Global Fraud Conference, June 23-28 in Las Vegas, is the opportunity to experience that vital kind of networking. Through a series of coordinated events, you can meet with practitioners, specialists and other anti-fraud professionals face-to-face to not only make an impression, but share ideas, best practices and lessons learned.

Here are some ways you can do that:

Welcome Reception: Sunday, June 23 • 7-9 p.m.

This is a great opportunity to meet vendors while getting a sneak peek at the latest anti-fraud services and products. And, of course, enjoy the refreshments and hors d’oeuvres.

International Attendee Reception: Sunday, June 23 • 7-9 p.m.

Held in conjunction with the Welcome Reception, this first-ever networking opportunity allows attendees from outside the U.S. to meet other global fraud fighters.

Networking Lounge

Connect with attendees facing similar challenges during a dedicated Networking Break for your group or industry. View the time and industry breakdowns.

Create-Your-Own Networking

Join the 24th Annual ACFE Global Fraud Conference LinkedIn Group or log on to the ACFE Member Forum to begin connecting with others in your industry. Also, once you arrive at the ARIA, check out the Bulletin Boards located near registration for another opportunity to create your own networking group. There you'll find sign-up sheets to allow attendees to create or join a group for an informal meeting, group dinner or social outing.

Attendee Networking Reception: Tuesday, June 25 • 7-9 p.m.

Tickets: $75 per person

Enjoy drinks and hors d’oeuvres while building your professional circle in the poolside setting at the ARIA. Visit with colleagues and potential clients and customers in a relaxed, social setting. Tickets may be purchased at the registration desk or at the reception entrance on the day of the event.

Industry Networking Tables

Gather with attendees from your industry before and during the General Sessions. Reserved tables, located along the center aisle in the Bristlecone Ballroom, will be available for the following groups: Financial Institutions, Government and Law Enforcement, Women in the Anti-Fraud Profession, Investigators/Corporate Security, Young Professionals, Governance, Risk and Compliance, CPA/Chartered Accountants, Internal Auditors, International Attendees, Chapter Leaders and Self-Employed CFEs.

The list above is only a few of the ways you can network with other attendees at the ACFE Global Fraud Conference. Visit FraudConference.com for more information and to plan your Conference.

Working Smart with New Clients: Recognizing economic and emotional tolls

2013-06-05T15:30:45Z

SPECIAL TO THE WEB

Robert Tie, CFE, CFP
Contributing Writer, Fraud Magazine

"Sadly, it’s always the employee that the company owner loves the best,” says Tiffany Couch, CFE, CPA, an ACFE faculty member and the founder and principal of Acuity Group, a forensic accounting firm in Vancouver, Wash.

Couch, of course, is referring to a trusted staff member who commits major fraud.

The economic consequences of such betrayal can hit business owners hard but its emotional toll also can be potent. That explosive combination can confuse and nearly immobilize some victims, who aren’t sure what to do about an apparent — and, for them, a previously unthinkable — insider fraud.

“That’s why they should get the help they need,” Couch says. “The sooner a forensic specialist is involved, the better, because average business owners understandably don’t even know what not to do. Their layman missteps might jeopardize an investigation, hinder asset recovery or create legal liability for them, the victims.”

Couch’s own experience — working with federal, state and local law enforcement officials on embezzlement investigations — has taught her how important it is for CFEs to understand and attend to clients’ volatile feelings as well as their losses, especially in the first days after signs of a potential or confirmed fraud emerge.

STABBED IN THE BACK… AND IN THE HEART

“I grew up in a small agricultural community,” Couch says. “And you can take my word on this: Farmers are not known for shedding tears.”

But there are exceptions. One arose, and with good reason, when a potential client sought Couch’s help in a crisis.

A farmer who owned a large fruit-growing company had just learned that his controller — a 20-year employee and personal friend — had misappropriated a mountain of company cash.

This embezzlement surfaced after the client had formed a partnership with another company, and he wanted the controller to train his counterpart at the new firm. During the joint review of the financials, the controller had failed to satisfactorily explain certain huge losses on the books. They were, in fact, the result of an ill-fated risky investment he had made — outside of established guidelines and without authorization — on the company’s behalf.

Prudently, the owner looked closer at the financials and asked the controller to provide the bank statement reconciliations. The controller complied and promptly went on vacation. The owner and his accountant examined the reconciliations and found the controller had made a suspicious $300,000 adjustment to the cash account.

The owner felt he had no choice, so he reluctantly notified the controller that he was immediately putting him on administrative leave pending an inquiry into the unauthorized investment and the questionable cash adjustment.

Nevertheless, after his vacation, the controller returned to work — accompanied by his attorney — who stunned the owner by saying, “My client has ‘borrowed’ $750,000 from your company’s accounts over the past several years. If you agree not to press charges, he’ll repay that ‘loan’ and cooperate with your investigation of this matter.”

A business associate of the owner recommended Couch’s firm; the owner phoned her and requested a forensic investigation as soon as possible.

“I took that call on Friday,” Couch recalls. “I could see this case required immediate attention to, among other things, secure potential evidence, so I went to the farmer’s office on Monday. By Wednesday, I had uncovered proof the losses were much worse than the controller had acknowledged: At least $1.2 million was missing — $500,000 more than he had admitted taking. Of course, this was the last thing any business owner would want to hear. So in addition to communicating the bad news, I had to counsel the farmer on how best to deal with the situation.”

That day Couch sat down with her new client and spelled out exactly how and why the controller’s story didn’t add up. To make matters worse, the controller’s concealment of his unauthorized transactions was suspicious, she told the farmer. Couch had expected him to be distressed by the additional bad news, but his intense reaction took her by surprise.

“That big, strapping man just broke down and wept,” Couch says. “His controller’s breach of faith devastated him. ‘How could it be?’ he asked. 'If I can’t trust him, I can’t trust anyone!’ I remember thinking, ‘This isn’t just about the money … it’s also about the relationship. He’s lost a lot more than $1.2 million.’ ”

Read the full article at Fraud-Magazine.com.

3 Ways to Spot a Fraudulent Charity

2013-05-31T19:38:09Z

SPECIAL TO THE WEB

Jacob Parks, J.D., CFE
ACFE Research Specialist

The sudden and vivid destruction caused by tornadoes, tsunamis, man-made catastrophes and other crises compels us to contribute to the people affected. There is a particular urgency in responding to disasters because the victims often lack the supplies or help they need to survive. As a result, donors often choose to contribute as soon as possible to a charitable organization that pledges to help the disaster victims.

But fraudsters swarm to take advantage of highly publicized emergencies, and many bogus charities that pop up under the guise of helping victims are just pocketing the donations. Worse, some organizations described as charities actually function solely to fund organized criminal groups.

Fraud involving disaster relief might be among the most immoral of financial crimes, but it happens so often that we should not be surprised or unprepared. There are many actions that individuals and organizations can take to help give them confidence their donations will not be misused.

DO THE HOMEWORK

The nature of disasters does not leave as much time for performing due diligence checks as most situations — the victims need relief right away. Even so, donors can do some research on an organization in a short amount of time using the following methods:

Search a charity evaluation site for the organization, such as Charity Navigator or GiveWell. These sites use several factors, such as transparency and how funds are used, to rate charities. Additionally, you can find the charity’s authorized contact information to compare to what solicitors have sent you.
Check to see if the organization is tax exempt or has had its exempt status revoked using this IRS site (or check with the applicable tax authority).
Simply running an online search for “scam” and the name of the charity might bring up revealing results. Charity scams typically involve mass solicitations, and whistleblowers often identify potential scams online.
If responding to a solicitation, call the charity using its official contact information to ensure that it is the true solicitor.
Check to see if the charity is registered with a state government agency (most states require registration with the State Attorney General’s office or similar agency).

BEWARE OF CHARITIES WITH LITTLE TO NO HISTORY

Suppose you come across a charity and find no negative history, or not much history at all for that matter. Even if a new charity is legitimate, it's questionable that it has the infrastructure to effectively move the donations to the area or people in need. Every charity has to start somewhere, but disaster relief organizations are especially vulnerable to fraud and mismanagement. Finding another organization with a strong history that will suitably pursue the cause is a safer option. If no alternative exists, ask the charity’s representatives for details on their logistics for providing aid to the victims of a disaster.

HAVE AN EFFICIENT IDENTIFICATION PROCESS

Disaster relief organizations often operate at or near the disaster sites, where there is a system of procuring and distributing resources. Unfortunately, con artists are pervasive near disaster sites because there is a trust that everyone else is there to help. After Hurricane Sandy tore through the New Jersey shore, for instance, con man David Scott Ruddy convinced shelter volunteers for several weeks that he was a FEMA representative. He was not, and by convincing people that his role was to help, he allegedly bilked victims out of at least $50,000 in relief funds.

Many organizations use photo ID cards or badges for workers authorized to handle supplies and other valuable assets. The recurring theme of on-site disaster-relief scams is a person claiming to have governmental authority without any actual association with the government. Don’t be afraid to question authority; most of these schemes can be avoided by verifying a person’s credentials.

Read the full article at Fraud-Magazine.com.

Finding a Needle in a Haystack

2013-05-29T13:18:05Z

AUTHOR’S POST

Mandy Moody, CFE
ACFE Social Media Specialist

Looking for a needle in a haystack is best only used figuratively. No one actually wants to spend a Saturday afternoon digging through haystacks for fun. But what if finding that needle saved you time and lots of money? And, what if you had special tools that helped you isolate the needle, amplify it and find it in a fraction of the time it would normally take? What if you could even predict where that needle would most likely be before you stepped on it and felt its effects?

That’s exactly what many data analysts are doing with predictive analytics software designed to detect patterns, anomalies and trends associated with fraud. Tomorrow, May 30 at 2 p.m. EDT, the ACFE will host a 100-minute webinar detailing how fraud examiners can use Predictive Analytics to Prioritize Investigations and Audits of Contract Fraud, Waste and Abuse. Two speakers from Elder Research, Inc. will detail exactly how predictive analytics can help find those needles in the haystacks.

You will walk away knowing how to:

Define predictive analytics and the myths associated with it
Start a data mining or predictive analytics group at your company
Help your organization prioritize high-risk leads or audits for investigators and auditors by using predictive analytics
Use predictive analytics to produce high ROI by focusing agents and analysts on cases with higher probability of being fraud, waste or abuse

You can learn these lessons and more at the webinar tomorrow at 2 p.m. EDT. If you can’t make it tomorrow and will be attending the 24^th Annual ACFE Global Fraud Conference in Las Vegas next month, be sure to add this session to your schedule.

ACFE Wraps Up Seminars in Asia-Pacific Region

2013-05-24T14:11:03Z

AUTHOR'S POST

Mandy Moody, CFE
ACFE Social Media Specialist

Donald Cressey’s Fraud Triangle is not a concept that only applies to one gender, culture or country. Whether you are investigating fraud in Bangkok or Belfast, pressure, opportunity and rationalization are three universal factors that know no regional boundaries. Just as these motives are universal, so are the training and skills needed to fight them.

In April the ACFE was proud to host seminars in Shanghai, Jakarta and Melbourne in an effort to offer more anti-fraud training and education in the Asia-Pacific region. With a diverse group of anti-fraud professionals in attendance at each course, the enthusiasm and need for education regarding internal fraud and investigations, as well as fraud risk management, were apparent.

“The fraud schemes themselves are universal – there seem to be very few differences in the schemes from one part of the world to another,” ACFE Faculty Member Gerry Zack, CFE, CPA, CIA and President of Zack, P.C. said. “When I was asked to teach these courses, I expected to really enjoy meeting anti-fraud professionals from all over the world and hearing their stories. And I was not disappointed.”

Zack traveled first to Shanghai, China, April 15-16 to teach the two-day Auditing for Internal Fraud. The fraud fighters assembled there explored the challenges auditors face when identifying fraud and learned about the common schemes, detection techniques and methods of preventing occupational fraud. He then taught Conducting Internal Investigations in Jakarta, Indonesia, April 18-19 and wrapped up in Melbourne, Australia, April 22-23 with Fraud Risk Management.

Lim Kurniawan, CFE, is the Managing Director at Awesome Consulting in Jakarta. He knew of Zack before attending the Conducting Internal Investigations course because he bought the book, Fair Value Accounting Fraud, written by Zack. In the book, Zack highlights the risks of the International Financial Reporting Standard, a standard that is adopted as a local accounting principle in Indonesia. Kurniawan and Zack not only share the challenges of implementing global standards, but they also experience the same successes and trials during the interviewing process.

Kurniawan plans to use the lessons from a simulation Zack used in the course to help clients interview witnesses. “The skills taught in this course were practical, which I believe to be very applicable,” Kurniawan said. “Gerry offered specific examples from his own life, not fictitious ones. It was such an honor for Indonesia to be visited by an amazing international speaker. I hope in the future such a richly rewarding course could be attended by more people, thus Indonesia could be more blessed in this way.”

Cooking the Books with Fuel Fraud

2013-05-21T15:41:39Z

SPECIAL TO THE WEB

Robert Tie
Contributing Writer, Fraud Magazine

The nation's energy industry might soon seek more CFEs. False-statement frauds have plagued a complex federal program that mandates production of renewable fuel to reduce consumption of gasoline and diesel fuel and reliance on foreign oil.

Federal district courts in Maryland and Texas, in unrelated trials, recently convicted two men of stealing $60 million from the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard (RFS) program and numerous energy companies participating in it.

Under RFS, the EPA mandates the production of ethanol, biodiesel and other renewable fuels in volumes that by law increase annually — from 9 billion gallons in 2008 to 36 billion gallons in 2022.

Civilian tips on the suspects’ unusual behavior alerted investigators to both schemes, which until then had evaded existing EPA controls. The crooks were particular about how they got around. One, looking ahead, bought a Patton tank and a Gulfstream jet. The other, living in the moment, accumulated a fleet of ostentatious cars.

The fraudsters reported producing vast amounts of renewable fuel but actually made none. Through those misrepresentations they illicitly earned renewable fuel production credits that they sold on an EPA-hosted online trading system to buyers who, in good faith, assumed the credits were valid.

A proposed EPA Quality Assurance Program (QAP) designed to detect and deter such frauds could create employment or engagement opportunities for CFEs who are familiar with the energy industry and can demonstrate how their special skills could be useful in QAP.

JUST DESERTS FOR ALL?

The fraudsters have given up their toys, paid heavy fines and restitution and begun serving 12 to 15 years behind bars. They weren't the only ones punished, though.

RFS participants’ confidence went into a tailspin when EPA took enforcement actions against the victimized companies for not satisfying the renewable fuel quotas they were trying to meet when they were swindled.

The fines amounted to de facto penalties for not performing better due diligence before completing transactions with the fraudsters, who also participated in the RFS program.

“Since its inception in 2007, this has been a ‘buyer beware’ market,” says David Bennett, CFE, CPA, founder of RIN Attest and Advisory Services, LLC, a Stamford, Conn., firm that provides compliance and advisory services to more than 100 companies in the renewable fuel sector.

Read the full article at Fraud-Magazine.com.

Finding Your Professional Happily Ever After

2013-05-17T18:12:36Z

GUEST BLOGGER

Leslie Simpson, CFE
ACFE Director of Events

When I graduated from the University of North Texas I believed I would search for and find the job of my dreams. I thought I would go to work every day, be the model employee, and my perfect career path would be laid out for me. It would just happen, right? Fast-forward to present times. I have learned that it doesn’t just happen and in order to stay fulfilled in my career there is a lot of effort, personal and professional improvements to constantly make, and strategy involved in finding that happily ever after.

Professional development means different things to different people at different stages of their lives, and luckily the ACFE’s Career Connection at this year’s 24^th Annual ACFE Global Fraud Conference will address many of those scenarios. Whether you’re seeking a job, embarking on a career change or simply looking to advance and improve, the Career Connection has something for you:

Featured Employers

The hardest part of finding a new job is getting your foot in the door and gaining the face-to-face time that allows you to show the remarkable personality a cover letter and résumé can’t convey. Conference attendees will have the chance to connect in person with staff and recruiters from the anti-fraud industry’s top companies and government organizations. They will be on-hand to talk about their organization’s work culture, share any job opportunities available and even informally interview on the spot.

Career Coaching

One of the most valuable benefits of the Career Connection is the coaching. Find answers to your professional questions or obtain useful advice during a private counseling session with a leading career strategist. These experts specialize in addressing your questions and concerns no matter what professional scenario you face.

Résumé Review

Making a lasting impression in less than seven seconds is a challenge, but it has to be done in order to grab a hiring manager’s attention for a possible interview. Attendees are encouraged to bring their résumé and sign up for one-on-one résumé reviews where coaches will cover proper formatting and highlight the accomplishments that will help convince hiring managers that you are the problem solver they have been looking for.

Mock Job Interviews

For the first time, attendees will be able to participate in mock job interviews. Our career strategists are prepared to ask the tough, open-ended questions typical in professional interviews. They will provide instant feedback that will help you to develop better interview strategies, improve your communication skills and manage the stress of the interview.

Special Presentations

The Presentation Stage, located in the Exhibit Hall, will offer brief career development presentations that are full of tips and suggestions on how to get ahead and stay ahead in your career, all presented by a veteran hiring manager.

Jim Albright, my college copywriting professor gave me great advice when he said, “Do what you love, and the money will come,” but he should have followed that statement with a head’s up that the path to excellence is always a work in progress. The professional development to be obtained at this year’s Career Connection is priceless. I hope you will take advantage of it.

A Bit of Advice: Speak Up

2013-05-13T17:19:48Z

GUEST BLOGGER

Christopher Ekimoff, CFE, CPA
Manager, Investigative Accounting & Financial Litigation, Duff & Phelps
Washington, D.C.

As a boisterous child, I never found it hard to speak up. Whether shouting out a response without raising my hand or sharing my thoughts during lunch with a friend a few tables away, speaking up got me noticed early on (and not always positively). That characteristic has transitioned into my career as well. I’m always the first to comment on the quality of the food I’ve ordered or the potential inefficiencies in a particular process.

The idea of “speaking up” has grown in the media and around the business world in recent years. In light of the 2008 financial crisis, more and more investors, Congressional committees and regulators have asked, “Why didn’t more people speak up?”

In the May/June issue of Fraud Magazine, Preet Bharara, U.S. Attorney for the Southern District of New York, and keynote speaker at the upcoming ACFE Global Fraud Conference in Las Vegas, Nev., outlines his focus on creating an environment that supports whistleblowing:

“First, there has to be a culture in which people who see something bad going on feel comfortable coming forward, and second, people who are taking in the complaints have to be smart enough and care enough to do something about it.”

In career terms, speaking up can be daunting. From reporting questionable behavior to inquiring about a specific task, fear of judgment by a superior can silence even the most confident individual. Often, however, the worry is twice as bad as the result. Speaking up to your superior about any number of issues can also work in your favor:

Speaking up shares ideas – For any continually successful team, office or firm, sharing ideas and diverse viewpoints is necessary. By soliciting and valuing the opinions of all members, solutions come more easily and are more readily implemented.
Speaking up differentiates you – A team member willing to share his or her ideas demonstrates confidence, a mastery of a certain set of tools and the ability to work collaboratively in a team setting.

Sure, we can’t all be famous whistleblowers. And being a whistleblower is hard. Harry Markopolos shared his take on Bernie Madoff with numerous government regulators, industry publications and media sources without being heard. Michael Woodford was fired as CEO of Olympus and shunned by his colleagues after reporting his concerns of improper write-offs to the Board of Directors. But, in time, their honesty and integrity erased any stigma that originated with speaking up.

Don’t be afraid to speak up. If you don’t, who will?