Making a Case to Work on the Defense

"How could you?!" - not an uncommon thing for me to hear among other professionals in the business of fighting fraud when I tell them I work criminal defense cases.

Admittedly, I struggled with the same issue the first time I was called by a defense attorney back in 2008. His client had been accused by a publicly traded company of stealing more than $5M in a sophisticated cash receipt theft scheme.

“The government is telling me she did it; she’s telling me she didn’t do it; the accountant’s report makes no sense, and I just need your help making heads or tails of all of this,” the well-known Portland criminal defense attorney told me.

Did I hear him correctly? He just wanted me to explain to him what all of the numbers meant?

After a follow-up meeting, I learned that was exactly what he wanted, an independent assessment of all of the information he had been provided.

When I was done with that case, I had to explain to him that it was my opinion that his client had stolen the money - there was no other explanation for the funds being in her bank accounts. I simplified the complicated report the government’s accountants had put together and walked him through the scheme, from how she billed the clients, to the funds being deposited to her accounts, to the write-off of the amounts on the company’s books.

What had been a complicated scheme was simplified for him. From there, he and his client could make informed decisions in determining how or whether to work with the United States Attorney to negotiate a plea deal.

I hate being the bearer of bad news, but he thanked me profusely for the work we did. And has proceeded to call me many times over the years for clients in similar predicaments.

In the nearly 10 years since that first case, I have been privileged to work dozens of criminal defense cases in local and federal courts.

“Privileged?” you may be thinking? Let me make my case:

1.     Defense work makes you a better Plaintiff’s Expert

When you understand that your fraud examination report will be scrutinized by a suspect’s legal counsel, their own forensic accountant, and eventually a judge or jury, it makes you hyper-aware of the importance of using sufficient, relevant evidence to prove your case. In this vein, as an example, if you have financial transactions backed up by sufficient, relevant evidence to make a case of fraud, make it. However, if there are other transactions that are suspicious or questionable but you don’t have the same level of evidence for those transactions as you do for the others; don’t include them in your case.

What’s more, you will not always be the one presenting your report. Your fraud examination findings must stand on their own. As such, writing clear and concise reports is also critical to making your case.

2.     Defense work doesn’t change your role

As a forensic accountant, my job is the same no matter who hires me. What do the documents and financial transactions say? How do I communicate that in a way that ensures decision makers (i.e. clients, lawyers, judges) can understand the facts and make informed decisions? When you see your role as the same no matter which “side” hires you, you can be confident in your ability to objectively perform your job.

This objectivity will also help you identify clients and/or counsel who may not have the same perspective as the defense attorneys I work with. I have met with unscrupulous lawyers who seem to already know what my opinions should be, before I even look at a document. Those are lawyers I don’t choose to do business with.

3.     Avoid the Appearance of Bias

An expert who exclusively works for one “side” or the other can be accused of bias when on the witness stand. This is never a good place to be. Having a well-rounded practice can help an expert avoid appearances of bias.

4.     Make a Difference

In the nearly ten years since I’ve worked defense cases, I’ve told many lawyers their clients are likely culpable of what they are being accused of. However, the work we’ve performed has also made significant differences in the outcomes of criminal cases:

• Found significant facts relieving a defendant of criminal wrongdoing in a multi-million dollar criminal fraud matter. Charges were dropped.
• Reduced a $3M alleged fraud loss to $1.5M, by analyzing more than 100,000 documents just days before a sentencing hearing.
• Reduced an alleged Medicare billing scheme loss of more than $1.2M by proving more than $500,000 of the loss had been double and triple counted by government accountants. Our findings significantly reduced the incarceration time of the defendant from years to less than one year.

The premise of the United State criminal justice system is that a defendant is innocent until proven guilty. Too often, that “proof” is lacking or the proof is presented in a confusing or convoluted way. As a forensic accountant or fraud examiner, don’t be afraid to offer your services to Clarify the Complex™. Your client and their counsel will greatly appreciate it and you never know – you may very well change the trajectory of a criminal case.  

Tiffany Couch, CPA/CFF, CFE is the owner and Principal of Acuity Forensics. She is also the author of The Thief In Your Company, an intimate look at the financial and emotional impacts of insider fraud. For more information, visit www.tiffanycouch.com.

What Message are you Sending?

We have learned more about Port of Seattle CEO Ted Fick’s recent suspension amidst concerns of an unauthorized wage increase, improper gifts from Port tenants, and a potential conflict of interest involving Fick’s father’s company.

These are only allegations at this time - and last Monday, Fick offered a defense. During last week's meeting in Seattle – the Port Commissioners made one thing certain:  Tone at the Top matters.

I agree with them. Tone at the Top DOES matter. One story in particular stands out as a perfect example of what happens when Tone at the Top isn’t a consideration within an organization.

Many years ago, I assisted in the investigation of a large international parts dealer who was preparing for an initial public offering. There was just one small problem… Corporate Executives at International Headquarters were concerned that their American CEO and his two VPs had been “bending the rules” with expense reimbursements and they asked that we take a look at the problem so that they could “head it off at the pass” with regulators.

So we did. We combed through the CEO’s expense reimbursements finding that he charged everything from his daily fast food breakfast to his personal skybox suites at sports arenas to the company. Between the CEO and his two direct reports, we identified $2 million in fraudulent transactions that spanned a few years.

Given extra time and scope, we were asked to look at the five deputies who reported to the three top executives, and wouldn’t you know? Their expense reimbursements, in earlier years, were meticulously supported by receipts, names of customers and business purposes. By the time we had analyzed those reimbursements through present day, we were looking at items such as kids’ swimming lessons, wives’ spa treatments, and family vacations being run through their reimbursements, too.

The unofficial company motto seemed to be, “If the boss is doing it, then we can, too!”

Tone at the Top has a trickle-down effect. Per the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, poor Tone at the Top is cited as one of the primary internal control weaknesses present when fraud occurs.

Because the Port matter has not been adjudicated in a court of law, there is no clear way to classify any of the alleged actions in the case as outright fraudulent behavior or an abuse of power. But in cases such as this, the most important step is for leadership to boldly address any potential fraudulent behavior and take immediate steps to reduce risk of potential fraud in the future. You see, while there is a direct correlation to fraud and poor tone at the top, the opposite is also true: an organization with a healthy tone at the top typically has a lower risk of fraud.

What does a Company with a healthy Tone at the Top look like?

·       Standard of ethical behavior is communicated, displayed by management, and expected of employees at all levels

·       Open-door communication between management and staff

·       Hotlines or other reporting mechanisms are in place and working

·       Support programs are available for employees in need

·       Low turnover of management and staff

In light of potential difficult decisions you may be facing in your own organization, have you considered the following?

1.     What message(s) are your decisions or business practices sending to employees at all levels?

2.     Would the decision indicate that there are different rules for different levels of employees?

3.     If Tone at the Top was a primary consideration, would it change the decision you are about to make?

Don’t underestimate the far-reaching impact of the Tone at the Top of your organization. Is it sending the message you want every employee to hear?

Why Amazon's "Miss"​ Is Really Good News for Investors

We have learned that Amazon’s stock fell 4 percent after missing its fourth quarter revenue projections.

With phrases like “stock pummeled”, “disappointing guidance”, and “revenue misses”, one must surely think this story is nothing but bad news.

I see it differently.

You see, in spite of the Street’s expectations, Amazon has apparently posted the results of its 4th quarter financial operations lower than anyone had planned.

A move that is easier said than done.

Earnings Estimates, Analyst Projections, Wall Street Expectations - heady pressures for any publicly traded company. But when your name is Amazon, well, you have a reputation to uphold.

I can only imagine the hand-wringing and late-nights the accountants and C-Suite executives have contended with as they’ve headed into this recent reporting cycle.

But unlike their counterparts at WorldCom, Enron, and HealthSouth (to name a few), they took the miss on the chin. In spite of what was likely insurmountable pressure, in spite of their “status” as a Wall Street darling, in spite of knowing the significant impact on stock price, they apparently chose to report their reduced revenues accurately.

I see this as leadership. I see this as a bold move. I see this as great news for investors who want to make sure they can rely on the financial reports they’re reading.

When one sees the headlines and fallout from today’s news, one can understand how easy it would have been for Amazon to have cooked the books. To have booked 4th quarter expenses in the new year, to have recorded revenue early. You know, cut a little here, embellish a little there. What are a few more journal entries to post just to make it through the quarter, to make it through the reporting cycle, and hopefully reverse the trend in the new year?

Rationalizations are so easy to come by.

Business, like life, is messy. We have dreams and goals. We hope for the best and prepare for the worst, and we take risks (and if you haven’t watched Amazon’s “risky” and “risqué” Goliath, you should). Sometimes, we are thoroughly disappointed. And other times, our luck takes our breath away. In other words, there is no straight line to success. Why is it then, when a Company like Amazon misses its financial projection in one quarter, the reaction is so deeply negative?

It is these very negative reactions, from the “pummeling” of the stock to the undesirable headlines, that cause so many other companies to more easily arrive at those rationalizations. To make the choice to “just get through the bad times” by painting a picture that isn’t real.

I get it. One need only log into their personal social media to understand this concept. How many of us report that we gained a few unwanted pounds, that someone we loved disappointed us, or that our kids really are imperfect. Heck, no!

So too, it goes, with business.

And so today, I celebrate Amazon. I thank them for restoring a little ounce of confidence in our reliance of big-corporation financial reporting and I am hopeful they will continue to make sound business decisions and take measured risks that will return big payoffs for their investors.  

4 Steps to Outsmart Financial Fraudsters

At the start of a new year, the last thing we want to imagine is bad things happening to nice people. But it happens all the time, every day. It’s even happened to me – a forensic accountant.

A year ago, I received a call from our bank informing us that someone had used our credit card to purchase a flight to Turkey, order items from large online retailers, and even “presented” the card (which was still in my wallet) at a department store on the other side of the country. We were victims of a large, well-known retailer credit card breach and thus, our losses were not necessarily our “fault.” But the time I spent to resolve the situation and the stress it caused inspires me to share a few things you can do to avoid inadvertent theft of your precious financial information.

Here are four tips to outsmart the fraudsters and keep your money safe in 2017:

•    When in doubt, use cash: Find a cute item from a street vendor or via a local public sales site like Craigslist? In addition to ensuring that you transact your business in a well-populated and safe location – like the parking lot of your local sheriff’s office or police station if they allow it – consider using cash to make the sale, rather than your credit card.

•  Don’t allow your computer to save your passwords, credit card numbers or other pertinent information: A “handy” feature in many web browsers and telephones is the ability to save your name, address, credit card numbers, and passwords. With the constant pop-up asking whether you’d like to “save this password” for next time is so annoying, it can be tempting to just enter the information and forget it.Just say no. It would take only a simple breach of one of those sites (similar to the Target breach), malware installed on your machine, or worse, a lost device, to wreak havoc on your finances and literally give the keys to your kingdom to an unscrupulous person or ring of criminals.

•  Review your Bank and Credit Card Statements: A timely review of your bank and credit card statements can quickly identify unauthorized usage of your cards, enabling you to stop payment on those transactions and close your accounts. Most banks and credit card companies provide you a 30-day window from the date the statement is issued to review and dispute charges. Be vigilant about reviewing those charges. Sometimes fraudsters will start with nominal charges. When those aren’t discovered, or disputed, fraudsters can be emboldened to make larger purchases or wipe out the entirety of your account.

•  Know what’s in your wallet: A lost or stolen wallet is a nightmare to deal with. This unfortunate situation can be more efficiently handled if you have copied the front and back of each of the credit cards in your wallet, enabling you to quickly call your bank and credit card companies informing them of a potential breach.

In the busy and automated world we live in, it’s so important to maintain privacy – especially privacy of our pertinent financial information. These small, simple steps can help you protect yourself and your money. And if you ever see something amiss or get one of those unwelcome calls from your bank or credit card company, you’ll be fully prepared to stop the fraudsters in their tracks.