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.

The Gift of Knowing

Earlier this week, I met with a new client, who I understand, has spent years concerned that things “aren’t quite right” with his business’ financials. He’s been afraid to ask basic questions, for fear that doing so will “hurt the feelings” of or “offend” his long-time bookkeeper.

Unfortunately, this is not an uncommon story. Just today, I got another call. This case appears to be a significant fraud loss – my client’s losses are at the hands of a woman she implicitly trusted. For the first time in her business’ existence, she was headed to the bank to obtain  statements and cancelled check images she had never thought to look at.

A few years ago, a prominent City Councilor called to get my input on the budget and other financial information being presented to him. He was terrified of asking questions during a council meeting for fear of embarrassing himself, admitting that he often voted with the rest, “hoping he was doing the right thing.”

Why is the “unknowing” business owner or manager or public official a recurring theme in my forensic accounting practice?

I’m no psychologist, but in more than a decade as a forensic accountant I have come to recognize that this theme stems from a few commonly-held fears that many of my clients have revealed when they say things like:

• “I’m just no good at numbers, I don’t want to ask questions and appear foolish.”

• “If my trusted accountant or bookkeeper leaves because I offend him or her with my inquiries, what will happen to my business? How will we survive without them?”

• “What if something IS wrong? Facing something that terrible would make me feel like an idiot that I let it go on. I would rather not know.”

• “I’m just so busy, I hired my accountant(s) to handle this for me. I don’t have time to worry about it.”

If you find yourself in a similar frame of mind, there is help. Simple steps you can take. During this holiday season, as we think about gifts for our family, friends, and colleagues, give yourself and your organization a gift too - the gift of knowing. Give your business the gift of gaining an understanding about your organization’s financial health.

Here’s how you can get started:

1. Regular Financial Reports

A financially healthy organization is able to produce financial reports with a simple click of a button. One of the biggest red flags of fraud is the lack of timely or accurate financial reports. At the minimum, ask for regular balance sheet, income statement, accounts receivable, accounts payable, and check register reports.

2. Practice Asking Questions and Gaining Access

The perception of detection is often a big deterrent to fraud. This perception starts when you ask questions. But you can’t stop there. Fraudsters are the most believable people I’ve ever met. They have an answer for everything. Questions must be combined with a request for relevant documentation.

Pick a few checks from the check register report and ask for the backup documentation supporting those expenditures. Don’t understand why a loan account balance on the balance sheet is so high? Ask for the supporting loan statement.

When you practice asking questions and requiring documents be provided to support your answers, fears about how others perceive you will dissipate, handing your power back to you, squarely where it belongs.

3. Ask for Help

Do my suggestions still strike terror in your heart? Then, don’t be afraid to ask for help. Inquire about the services of a trusted CPA or forensic accountant who can be your surrogate. This doesn’t have to cost you a lot of money. In a matter of a few hours for most business or nonprofit organizations, these professionals will know what questions to ask, what documents to review, and assess areas of your business where resources can be allocated, if necessary (e.g. increased internal controls, review of source documents to verify income is being deposited and funds aren’t being fraudulent disbursed, mitigation of risks going forward).

We all have to start somewhere, but starting is the key. Giving yourself the gift of knowledge this holiday season will give you a healthier, stronger and more stable organization in the New Year. 

How a Small Little League Handled a Big Curveball

My client’s former treasurer, a 40 year old woman with a husband and young children at home, was recently sentenced for embezzling funds from the local little league organization. The case resonated with us at Acuity Forensics for many reasons.

First, the victim(s). A small non-profit with volunteers working hard to provide a great experience to the youth of a small rural town in Southwest Washington.  The money missing was to be used to fund better equipment, uniforms, and the registrations for kids whose economic backgrounds could not afford for them to play.

Second, the navigation of the client through the turmoil they were experiencing. Embarrassed, frustrated, and feeling as if they were the only ones dealing with these emotions, clients typically feel all of this and more. A better part of our job here is to provide clients with the reassurance that, in fact, they aren’t alone and their emotions are quite normal in situations such as these. And the situation was a difficult one. A small group of board members wanted to have the issue of missing money looked into. Another group of board members were incensed that anyone would accuse the treasurer of wrong doing. How “dare they” even think it?!  Once the evidence became irrefutable and there was no other explanation for the missing funds, the group had to wrestle with whether or not they should have it investigated.

These politics are quite normal. Emotions in embezzlement cases run high. Why? White collar crimes involve a major breach of trust. In fact, it is the very people organizations like and trust the most who are stealing the money. Instead of accepting this, clients will turn inward, thinking, “What’s wrong with me that I trusted him/her” and/or “What will people think of me if I accuse him/her of stealing?” It is often this mentality that will allow frauds to go on longer or not to be investigated at all.

Lastly, this case was important because the crime was primarily the skimming of concession stand cash. How do you prove how much money came into the concession stand in the first place? There was concern among all parties, this fraud examiner included, that the theft would be hard to prove.

Undaunted, we set out to understand the role of the treasurer. It was her job to attend all registration sign-up events, receipt the funds collected and deposit those funds to the bank. Incredibly, there were receipt books for those events. We calculated the carbon copy receipts and traced the deposit of funds to the bank. Bingo! Only the checks were deposited; none of the cash. We now had irrefutable evidence that a cash skimming scheme was happening with registration fees.

Now to the concession stand. In the months of May and June not one single solitary dollar bill or coin was deposited to the bank. As most of us in America know, May and June are prime little league months and the concession stand is a popular place to be on game day.

This little league had heard us speak on good internal controls over concession stand money and had even implemented a process whereby two people in the concession stand counted the money at the end of each shift and prepared the funds for deposit.

Just one problem. It was the treasurer’s job to pick up the count sheets and the money and take it to the bank. All the count sheets and all the money were missing.

Back to square one.

That’s where the accountant in me kicked in. I had the league’s bank statements spanning many years, even years prior to when the treasurer took her role. I was able to figure out how much money they deposited for concession sales and I was able to compare that figure to the cost of the food they purchased from big-box stores like Costco and Cash N Carry. What did that analysis tell me? For the four years prior to the treasurer’s role, the cost of goods sold for the league was approximately 50% of sales. In other words, for every one dollar of candy or popcorn sold, the cost of the food was $.50 and the league was making money.

The first year that the treasurer took over, the cost of goods sold jumped to 78 percent. One cannot blame an increased cost of food on an increase in cost of goods sold by more than 25 percent in a single year.

The second year the funds were in the treasurer’s hands, the cost of goods sold jumped to 101%. This was the year that the board continued to ask for bank statements and financial reports that never came. Once the board obtained the bank statements, it became immediately apparent that not one regular deposit had been made in the months of May and June (unless those deposits were credit-card related).

Our analysis, along with the evidence on the registration thefts, were provided to the league who then reported the crime to the police.

The rest, as they say, is history, the treasurer plead guilty to the crime just a few months after being charged. She was sentenced yesterday to 45 days in prison for a loss of approximately $20,000. 

A Crisis of Culture

In the last week, we have learned that Wells Fargo has fired more than 5,300 employees and will pay $190 million in penalties and fines in the wake of an ongoing and widespread fraud scheme. The fraud involved the opening of more than 2 million accounts, which customers never authorized but were charged for.

The sheer number of accounts, number of employees losing their jobs and the total fines Wells Fargo will pay, are astounding and newsworthy on their own.

Personally, I am more intrigued by the information Acuity Forensics is finding in the follow-up stories coming out this week. It is the information in these stories that could spell real trouble for Wells Fargo. The threat they are facing isn’t the loss of the employees or the loss of money they will pay in fines. The real trouble facing Wells Fargo is what I call a “culture crisis”.

Last week we found this article, stating that Wells Fargo executive Carrie Tolstedt, in charge of the very unit deeply involved in the fraud, will retire early and walk away with more than $95 million in stock.

Wells Fargo has gone so far as to put their CEO John Stumpf on the “campaign trail” with major news media. His message? The fraud was the “responsibility of low level employees.”

The pieces of this puzzle tell an interesting story. A widespread, systemic fraud, involving thousands of employees, and millions of unauthorized accounts, opened for the sole purpose of meeting sales and commission goals. The walking away, with nearly $100 million, by the executive in charge of the unit perpetrating the fraud. And the CEO shaming the position of the very employees who lined his pockets, because surely, these frauds equated to profits. And what do profits generally equate to? Higher pay and higher stock prices.

In our experience, it is not typical for widespread, systemic fraud to be perpetrated in a vacuum or unbeknownst to management. Simply put, 5,300 employees don’t participate in a fraud unless it is known, out in the open, and accepted practice.

And where do 5,300 employees opening more than 2 million accounts understand accepted practice? From the top. From the CEO, to the Executives, to the Managers.

If you’re reading this, you’ve been an employee, a manager, an owner somewhere in your lifetime. In each of those organizations, how much power did the low-level employees have? How much decision-making authority?

None.

Why do 5,300 otherwise honest, hard-working employees participate in a fraud in the first place? Typically, it starts with Pressure. Pressure to perform, meet sales goals, earn commissions. But, pressure goes deeper than monetary pressure.

Pressure includes the pressure to be included in a group of co-workers and not be considered an “outsider”. Pressure includes the pressure to keep one’s job and pay one’s rent and keep one’s medical benefits. Pressure includes the prestige of having a great job at a “great bank” and pressure includes avoiding the stigma of suffering a job loss.

It is my experience that this kind of fraud could not have happened unless Wells Fargo’s management sent the message that money and numbers were more important than anything. The pressure came from the top and trickled down.

Wells Fargo then sent another message. A message to its high-level executives.

It’s okay. You can oversee and facilitate one of the largest and most-systemic frauds in banking history, and not only keep your job, you can walk away on your own terms with an obscene amount of stock options.

When you make crimes okay, when you make the consequences of overseeing and having knowledge about significant frauds equivalent to winning the lottery, there will be a trickle-down effect. More frauds will occur. More harm will be done. And when caught, what will those perpetrators say? Nothing. They won’t need to. They need only to point to Ms. Tolstedt and ask for the same deal she received.

One only need to look at Mark Whitacre, otherwise known as “The Informant” to understand the importance of sanctions when fraud is uncovered. He knew that a former C-suite executive had stolen millions from the organization and when caught? That executive walked away with stock options, a company car, and little more than a pink slip. In several interviews, Mr. Whitacre figured that the worst that could happen to him would be the same deal that the former executive had received.

As we place the pieces of the Wells Fargo puzzle into their proper places, then the picture becomes clear. The picture reveals a set of arrows, pointing in the direction of the C-suite and Mr. Stumpf, himself. The place where messages of “more profits” and “more money” and “it wasn’t me” come from.

With a message such as that, a forensic accountant like me can’t help but be pessimistic about Wells Fargo’s ability to change its corporate culture and find its way back to ethical, responsible, and accountable practices.

Are the investors and their representatives on the Wells Fargo Board of Directors going to stay silent? Accept the message as is?

Or, are they going to take the courageous step to change the message and reset the bank’s ethical tone?

How about starting with “I’m sorry” followed by “We were wrong”?

Over time, with actions that include ethical messaging, integrity in account management, and follow through when employees are charged with unethical or illegal behavior, Wells Fargo’s culture will thrive, and the puzzle picture will instead reveal a bright future.

Expense Reimbursement Schemes

Expense reimbursements. In our world, we call it "low hanging fruit." In other words, if we are asked to look into allegations of fraud, we always ask for the suspect's expense reimbursements, too. It is not unusual to find additional fraud in plain sight on employee expense reimbursement forms.

I have seen several million-dollar expense reimbursement schemes (yes, you read that correctly) involving high level executives. These individuals had W-2 forms that would be the envy of most, yet they expensed everything from their daily Egg McMuffins, to their Thanksgiving dinner at the country club, to their personal trips to Hawaii. I have seen priests expense personal items through a church's coffers, and I have seen low-level employees alter receipts. Expense reimbursements are easily perpetrated by all members of an organization.

All for the purpose of securing additional cash.

Recently, a client of mine found that their second in command (and likely next CEO) had forged the CEO's signature on his expense reimbursements. They thought it was an error in judgment, for the purpose of getting his reimbursement through the system more quickly.

They thought wrong.

Within a few hours, using the employee's reimbursement forms, his calendar, and conducting a key interview, we discovered a fraud scheme that resulted in losses of $1,450,000 to our client. That executive traded in his extraordinary and comfortable lifestyle for a jumpsuit and a prisoner number in a federal penitentiary in Washington.

Expense reimbursements come in varying forms, including:

• Fictitious Reimbursements: Employee remits reimbursement for expenses that never occurred.
• Mischaracterized Reimbursements: Employee remits reimbursement for personal expenses as if they are a business expense (e.g. a receipt for a pink toy remitted as a meal expense).
• Altered Reimbursements: Employee alters a receipt for a legitimate business expense (e.g. writing in a larger tip amount on a meal expense or altering a cab fare).
• Duplicate Reimbursements: Employee remits a receipt for the same expenditure more than once or returns the item for cash after already reimbursed for the expense.

Expense reimbursements (including P-Card purchases) should be considered as necessary for higher-level scrutiny in all organizations. This includes at least one additional review and approval before the expenses are paid, spot checking "audits" of employee expense reimbursement forms, and a robust and enforced policy that includes the remittance of timely and original receipts and copies of credit card statements.

Proper oversight of expense reimbursements is as critical as internal controls over incoming cash and outgoing disbursements. And remember, when employees know that significant scrutiny is applied to their reimbursements, they will be less likely to manipulate them.

EXPENSE REIMBURSEMENT BEST PRACTICES:

• Require original receipts be presented for all expenses.
• Require original signatures on all reimbursement forms.
• Ensure meal expenses include names of participants and business purpose of meal.
• Compare an employee's calendar with purported business travel.
• Use simple online searches to verify prices match remitted receipts.
• Use analytics to monitor employee reimbursements (e.g. total paid to employees over time, budget to actual reports, etc.)
• Request copies of credit card statements be remitted along with receipts. 

Good Guys vs. Bad Guys

This article was originally published in Fraud Magazine - March/April 2015 issue.

“I love getting bad guys — I think that would be so fun to do with you!” said the prospective job applicant sitting across from me. I’d just asked her why she would want to come to work for my firm.

I considered my next move carefully. “Tell me how you would feel about working for one of those bad guys,” I said. The furrowed brow and crook of her neck indicated that she was perplexed. I obliged her. “Well, in this office we work for white-collar criminals, tax evaders and people sometimes perceived as the ‘bad guys.’ So how would you feel about that?” I asked. I then sat back to observe what her verbal and nonverbal cues would be (I practice my interviewing skills any chance I get, don’t you?). She was suddenly parched, swallowed multiple times and took a deep breath before answering, “I didn’t think you would ever do such a thing. I mean, I guess, well … I always thought of you as someone who worked for the good guys.”

I didn’t hire the applicant.

I had a similar conversation with a fraud examiner over lunch during a recent speaking engagement. She clearly was frustrated by her clients who chose not to prosecute their alleged fraudsters. She told the group at our table about a couple of prosecutions that had resulted in the alleged fraudster “only having to do community service and a small amount of restitution.” She was physically and emotionally upset about these outcomes. My curiosity got the better of me and I asked, “Why does this bother you so much?” She explained that she had put so much work into these cases and it wasn’t “fair” or “right” that these people avoided more formal or significant punishment for their alleged crimes.

I gently reminded her that it wasn’t our job to exact punishment. Most importantly, our own ACFE Code of Professional Ethics expressly prohibits us from opining on a person’s guilt or innocence. She acknowledged this, but I pressed further. How many defense cases have you worked? The reaction from her was similar to my job applicant. “None!” she said. “I don’t see how I could ever defend someone who had committed a fraud!”

Encounters such as these aren’t uncommon. Admittedly, they’re delicate conversations — often ones that those of us in private practice discuss in private.

ACFE training is unlike any other. If you want to be a fraud examiner, there’s no better place to get your education, training and credential (and I don’t say this just because I’m an ACFE faculty member and member of the Board of Regents). However, the training applies to both sides. In my own private practice, there’s plenty of room and good reason to work defense cases. In fact, the work is similar no matter what side you’re working on.

If you’re considering how or whether to take on defense cases, read on.

Consider your ability to be impartial

Discovering “why” you’re doing your job is important (it certainly makes going to work every day easier). A predisposition to “get” a bad guy can be a detriment in a case and can place blinders on a fraud examiner who might see questionable documentation as a crime — when in fact it’s only red flags of fraud. Zealotry could lead to unnecessary work, false accusations, inaccurate employment-related decisions and potential liability, which can then harm the client or others.    

Consider a recent case of mine. A woman (I’ll call her Betty) had worked 30 years as the office manager for my client’s medical practice. A new physician-partner in the group was trying to get up to speed, so he asked Betty for bank records, financial statements and other standard documents. She refused. An office-sized firestorm ensued. Doctors took sides, and accusations flew among staff members even though they didn’t yet have any real information.

I walked into the perfect climate for possible fraud: A long-term trusted office manager who never took vacations and who was now refusing to provide simple financial documents.

My interviews discovered that Betty was the sole person responsible for billing insurance companies and patients, collecting funds and taking them to the bank, writing checks, reconciling the bank account, processing payroll and managing the financials. Sounds familiar? Surely I would find fraud, right?

We scoured the bank statements, canceled checks and payroll records. We didn’t find any fraudulent disbursement schemes. We searched the billing system and analyzed customer credits. Betty had supported them with appropriate documentation. We traced funds to the bank with no exceptions. After all that, we still didn’t find fraud.

We recommended stopping the investigation, but the medical practice asked us to keep going back further. More records, more expense but still no fraud.

When I finally talked to Betty, she said she had “hurt feelings” when the new physician began asking questions. Why wouldn’t he trust her when she’d worked there for so long and gave all of herself to her job? However, I gently reminded Betty that her sole custody of these funds meant that she was unsafe in her job, and any missing money would point to her. Betty’s demeanor changed immediately, and she was suddenly ready to start offloading some of her responsibilities.

We didn’t take this job as a true defense engagement, but our work resulted in effectively clearing someone who was “on the defense” against potential criminal allegations.

Fraud examiner’s role

As fraud examiners, our roles are the same in plaintiffs’ or defendants’ cases: We’re fact finders. We conduct interviews, examine documents, identify evidence, prepare reports, and, yes, even work on obtaining confessions.

I’ll never forget the first time a defense attorney called me. My firm was new and I, too, thought my role was to go after “the bad guys.” A call from a new attorney, Steve, changed all of that. His client was accused of taking nearly $10 million from a publicly traded company. She was looking at significant jail time. I wrongly assumed he was calling to ask me to “defend her” (i.e. find some angle or story to get the charges dropped). I couldn’t have been more wrong.

“Ms. Couch, I need help here. The government is telling me she’s taken millions. My client is telling me she didn’t, and it can all be explained. I don’t know who to believe.”

Admittedly, the government’s case was terrible. The feds’ work-up of the case was cumbersome and confusing. The CPA firm that’d originally handled the case hadn’t prepared a written report. I accepted the case, and Steve’s client became my client.

I traced millions of dollars of the public company’s funds into our client’s account. I told Steve the facts — what had happened and how. I had no plausible explanation for these funds being in this account. Amazingly, I worked with our client (the defendant) to confess and admit to her wrongdoing. Steve then could negotiate a plea deal with the government. Our client went to prison for many years. And since then, the attorney has brought or referred countless cases to us .

Communicate your role

Some attorneys will want to pay you to testify to certain positions early in cases. Run away. Fast. Not only do I disengage from these matters, I refuse future calls from these people. Clients pay us for our expertise and our time. They don’t pay us for our opinions or for “prescribed” testimony.

Testimony is based on facts and work performed. You don’t need to worry if cases are for “plaintiffs” or “defendants” when you’re clear in your role and responsibilities and you’re able to communicate that role via your engagement letters and in meetings with your clients. You only need to be concerned that you have the resources to perform the work well.

Bias

For those of us in private practice, we also have a business reason to take on cases from “both sides.” Opposing counsel is going to immediately question your credentials and experience to see if you’re working for “our side” or the “other.” He’s going to try to infer a perception of bias. But he can’t do that if you have had a healthy balance of clients who are plaintiffs and defendants.

Working for the defense can help you construct better plaintiffs’ cases. You’ll better understand your work, the necessity for simpler and easily comprehended reports, and that all findings need to be documented with evidence.

The ‘why’ of my job

In the decade I’ve had the privilege of calling myself a Certified Fraud Examiner, I’ve discovered my “why”: I work hard for my clients — whether plaintiffs or defendants — who trust me to assist them through what can be the most difficult times in their lives and who thank me for support and expertise.

When we’re able to take complex and confusing information and turn it into clear and concise deliverables, then our clients are able to make educated decisions. When a client thanks you for doing that, you can’t receive a better compliment.

Taking the leap to start your business

Have you ever wondered what it would be like to start your own fraud examination practice? To be your own boss? To be free to take the reins on a case? Perhaps you’re already a self-employed fraud examiner, and you’re looking for ideas on how to find balance in your life.  Or perhaps you’re looking for ideas on how to find clients. If so, I hope my experience and advice will help you on your journey.

In 2007, with a promising career at a well-known firm ahead of me, I thought I was set. Visions of partnership and my own (corner) office danced in my head! What I couldn’t foresee were the changes taking place that forced me to stand up for my ethics and change my definition of success.  I had plenty of employment offers — many from other prestigious accounting firms — but I found myself at a crossroads. Building a practice for another firm seemed daunting, at best.

I discussed it with my spouse, who said, “If you don’t start your own business now, you may never get another chance.” “Who, me? A business owner?! The one who plays it safe, who has a plan? Who isn’t, by nature, a big risk taker? Yeah, right!” The idea was as farfetched as my flying to the international space station.

But, nearly seven years after that conversation, that’s exactly who I am. A business owner operating a thriving forensic accounting (fraud investigation and litigation support) practice.

While the practice has grown exponentially over the last several years, it hasn’t been easy. I’ve learned several important lessons along the way, which I will share here.

Take time to plan

A quote by an unknown author says it all: “If you fail to plan, you plan to fail.” Planning your business takes time and energy. And planning is not a one-time effort culminating in a static document.

At a minimum, plan your budget. Consider costs such as business insurance, professional liability insurance, taxes and licensure. If you intend to immediately secure office space, be certain to factor in the cost of rent, leasehold improvements and utilities of the new space.

Research professional fee rates in your area, and price yourself in a median range. Take your minimum budget requirements, divide it by your set hourly rate and you’ll have the minimum number of hours you’ll need to bill clients and generate revenue.

But don’t stop there. You’ll need to factor in at least 30 percent more time for running your business. Marketing, billing and other administrative tasks will devour more time than you can imagine. This is work that doesn’t generate revenue but is crucial to running a successful business.

Regularly take time to evaluate your plan and measure it up to your reality. Rework as necessary.

Don’t navigate waters alone

If you’re a fraud examiner you need the skills of an accountant, a psychologist, an attorney and a technical writer (to name just a few). Realistically, most of us don’t come to the table with all of these skills. For example, I’m a CPA. Before I was exposed to fraud and litigation work at a big firm, I could tell you about preparing tax returns and performing financial statement audits but nothing about writing a fraud examination report.

Perhaps you have a background in law enforcement with excellent investigative and interviewing skills, but you’re unsure of the accounting-related facets of an engagement. Whatever the case, don’t attempt to offer services or skills that you don’t possess. You don’t have to be everything to everyone. (Remember the third point in the ACFE Code of Professional Ethics: “A Certified Fraud Examiner … will accept only assignments for which there is reasonable expectation that the assignment will be completed with professional competence.”

Much of my success has come from putting together teams of professionals who offer complementary skills. It’s not uncommon for me to be engaged on a matter and subsequently contract with a computer forensic specialist, a business valuation expert or a private investigator with more interrogation skills.

Stick to what you know and do it well. Team up with other professionals in your area. You will find that they, in turn, will remember you next time they need your specific skills.

Communication is key

Client communication at our firm starts with a robust engagement letter. This letter communicates the type of service to be performed, document retention, fee schedules, billing and payment agreements and dispute resolution. We don’t perform any work until the client (and its attorney, if applicable) executes this engagement letter.

Communicating and understanding expectations is key to any successful engagement. Not all clients (or their attorneys) are the same. Some attorneys loathe email communication as it relates to their client’s matter; others use it as the only means of communication. One client might want a full written report of investigation when you’ve completed your assignment; others may only want an oral report. It’s imperative to understand your client’s wants and needs up front to ensure you understand what the end goal looks like.

Communicating about fees can be difficult for some, but it’s imperative for cash flow. A common fee issue is when an estimated budget clearly isn’t going to be sufficient for the amount of work necessary to do a job well. You’ll know this is the case when you’ve spent one-half of the client’s money, but you’re not nearly halfway through the work. When this happens, stop working. We call a timeout and contact our client. We explain the nature of the issue (perhaps it’s a lack of documents, or we’re finding more than we first expected) and ensure there’s an agreement for further funds. Or, we give the client options for a different scope of service. Communicating with your client at all times during the engagement helps to ensure that you’re meeting their expectations and they’re honoring their obligations.

Pick your head up

Unlike a traditional tax or accounting practice, a fraud examiner doesn’t have the luxury of annuity work. It can easily be feast or famine. Just when I’m convinced that no work will ever come through the door again, numerous potential clients will call me or dormant cases will fire up again.

So, when there’s work to be done and we’re being paid by the hour, we often put our heads down, pencils up and charge forward. However, losing yourself in your work can ultimately damage your practice. You have to find time in your day to do some sort of marketing. Take a local attorney to lunch, write a newsletter or schedule yourself to speak at a professional networking function. Consistent, frequent and targeted marketing (even when you’re busy with client work) helps to ensure your pipeline will always be full.

Cash is king

You’d think a CPA would have cash flow down to a science, but it can be an ongoing struggle, especially with a feast-or-famine practice. But losing the cash-flow worries can be as simple as working on retainer.

Admittedly, it’s not easy to ask someone to pay you money before you’ve even met them or started work. The first time I asked for a retainer, a whopping $1,000, I prepared myself for the refusal, or worse — the potential client walking away from the engagement. So, I was surprised when he pulled out his checkbook and wrote a check immediately! We hold client retainers in a separate account until we’ve earned the money. We then transfer the funds to our operating account for paying bills immediately. Another way to manage cash flow is to bill clients weekly, semimonthly or immediately when we complete an engagement.

We’ve made it a practice to stop working if retainers haven’t been replenished, or if monthly invoices aren’t paid by the tenth day of the month. We communicate this clearly in our engagement letters, and sometimes we’ll stop work on a case. It’s funny how the money arrives in the mailbox when you cease working. Don’t waste your time or talent on clients unwilling to pay you.

It’s a marathon, not a sprint

Building a client base does not happen overnight. We’ve cultivated a successful practice by making clients happy — one at a time. Happy clients tell others about you. Cultivate your own satisfied clients by knowing your strengths, planning for your future and communicating clearly and often. Success may not look like the dream of the corner office you once had in your head. However, perhaps, like me, you’ll find that the reality of entrepreneurship is better than any dream you could imagine.

Published in Fraud Magazine, September/October 2014 Issue