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?

International Fraud Awareness Week - What do you Need to Know?

The ACFE, in conjunction with an impressive list of supporting organizations, is promoting “International Fraud Awareness Week” this week (November 13th – 19th).

Why, might you say, is this important?

Because fraud is a risk every business faces. In fact, according to the ACFE Report to the Nations, on average, businesses lose 5% of their gross revenues to fraud.

In my upcoming book The Thief In Your Company (look for it in January 2017),I explain that no organization is immune from the risk of fraud. From the smallest of companies to large publicly traded ones, from non-profits to government entities – fraud risk is real.

There are several contributing factors to clients who experience fraud, and they include:

·        An “It Can’t Happen Here” attitude
·        Implicit trust of employees
·        Little to no oversight over financial transactions
·        Lack of timely or accurate financial reporting

Every single one of my clients is shocked when fraud occurs in their organization. They simply cannot believe it to be true. They believe they are immune from this ever happening to them.

Take it from my client, a local hospital foundation. Earlier this year, their long-time Executive Director was sentenced to three years in prison for stealing hundreds of thousands of dollars by misusing the foundation’s credit cards. This woman was a rising star in the community, someone who had contributed to successful fundraising campaigns for the foundation, and who was a beloved mother and friend.

Her fraud was uncovered by accident when a new assistant, who inadvertently intercepted and opened the mail, discovered questionable charges on the foundation’s credit card.

The monetary losses of the organization did not stop when the fraud was uncovered. The foundation has suffered with declining contributions as a result. And we have not begun to discuss the emotional impacts of the crime on the board members, the employees of the hospital and its foundation, and on many members of the local community.

The impacts of fraud go beyond the loss of money.  The heartbreak is palpable.

Whether your organization is large or small, there are simple, yet effective, steps you can take to mitigate your fraud risk.

The ACFE has a great infographic on actionable items to address fraud risk.

A few additional points come to mind:

1.    First, you have to Look

The #1 fraud schemes are fraudulent disbursement schemes. Simply put, your money is in the bank and your employee uses those funds to benefit themselves. The best way to uncover these frauds includes a simple step each month, which I’m finding more and more organizations neglect. Namely, a thorough review of:

                                         i.   Bank statements and cancelled check images

                                        ii.   Credit card statements

                                       iii.   Payroll reports

2.    Pay attention to the numbers…and your gut

My clients often tell me that “something wasn’t quite right”. Or, “I kept getting information that was inaccurate or late”. A doctor client of mine explained to me that he was seeing more patients and thinking about hiring another practitioner, yet he was taking less and less money home. His office manager was stealing hundreds of thousands of dollars from him.

All of my clients had “bad bookkeeping” and/or a “gut feeling”, but they never obtained supporting documentation to figure out the source of the problems.

3.    Leave the door open

There are likely others in your organization who know when something isn’t right. They may even know about a specific scheme or suspect an individual. Whistleblowers must overcome immense internal and external hurdles to find the courage to come forward. Typically, it is because the fraudster is the most well-liked or trusted person in the organization. Or, the fraudster is concerned about backlash or jeopardizing their job. Or, they simply don’t believe they will be believed.

Talk about the importance of whistleblowers in your organization. Celebrate when those people come forward with new ideas or innovations, and follow through when they provide a tip regarding a problem.



In my office, every week is “fraud week” – we have no shortage of fraud cases we’re working on at any given time, and new cases come in quite regularly these days.

It is my hope that International Fraud Awareness Week will be successful in doing what it sets out to do, creating awareness on the topic of fraud and fraud risk. Take a few simple steps today to talk to your board members, colleagues, management, and staff on this topic. Assess controls in key areas. Implement a hotline. Call your bank and get those statements and check images returned to you each month. Ask questions about those financial reports and request the source documents that back up some of those numbers.

Take your newfound awareness and use it to create the change necessary to reduce fraud risk in your organization.

Tiffany Couch, CPA/CFF, CFE is the founder and Principal of Acuity Forensics, a forensic accounting firm located in the Pacific Northwest. She is currently the Chairwoman of the ACFE Board of Regents and is the author of the upcoming book, The Thief in Your Company. 

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.

Don't let your business become a victim of bank fraud

Your bank or credit union is the lifeblood of your business and critical spoke in the wheel of daily commerce. To their credit, financial institutions are working hard to make doing business more convenient for us.

Recent interactions with clients, however, has led me to the conclusion that some of these conveniences, used improperly or without oversight, can increase a company’s risk of fraud.

This doesn’t have to be the case! Understanding these products – what they can and can’t do – and your role in proper oversight over your banking transactions increases the likelihood that these products can work in your favor and decreases the chances that a fraud scheme goes unnoticed.

Positive pay

Simply put, positive pay ensures that the bank only pays on checks presented to them that match the amount and check number you have provided in advance. Checks presented to the bank that do not match the positive pay file, commonly called “exceptions,” must be cleared prior to being paid. I highly recommend that companies ensure that exceptions are cleared only by someone other than the person who initiates the positive pay file or who has access to the company’s check writing system.

Online bill pay or funds transfer access

I once investigated a fraud where an unscrupulous controller directed $5 million of my client’s funds to his own account using online bill pay. The bank statements indicated that expenditures were legitimate. It was only when the set up file was reviewed that it was discovered the funds were being misdirected to the controller’s personal account. Any online transfers of funds from your company to an outside source should be set up by one person and authorized by another. Many online banking systems can be set up with these dual controls, requiring the actual funds transfer be approved by a user different than who set up the initial transaction.

Remote deposit

“We only go to the bank once a week because we only receive checks, we don’t take cash.” Checks written to your business are as easily converted for someone’s personal benefit as cash. It is highly recommended that cash and checks be taken to the bank daily, this eliminates the risk of theft or loss (and increases your cash flow!). Many banking institutions provide remote deposit machines that allow you to deposit checks as you receive them. While there are transaction fees associated with this convenience, it can be a convenient way to increase your cash flow and decrease your risk of fraud from a skimming scheme.

Online banking

Access to banking transactions online is one of the most delightfully convenient products banks provide. Too often, however, my clients are choosing not to receive paper statements and/or choosing not to receive images of their cancelled checks. As such, the most critical oversight function in a business, the review of the bank statements and cancelled checks, is foregone. Take it from me, it is excruciating to wait for cancelled check images to load and most business owners don’t have that kind of time! Fraudulent disbursements (i.e. someone writing checks to themselves or their vendors for their personal benefit) are the number one fraud scheme, and the review of statements and cancelled checks is the number one way such a scheme is uncovered. Ask your bank to send you paper statements with the cancelled check images and perform that simple review function before your bookkeeper or accountant reconciles the account.

Work with your banker to identify what conveniences make sense to streamline banking functions and add additional security. And as with any of life’s conveniences, don’t lull yourself into a false sense of security. Your active participation in oversight and monitoring is the best internal control you can implement.

Published in the Vancouver Business Journal July 25, 2014

Combating Fraud

Want more tips to prevent fraud? We've got them!
The Association of Certified Fraud Examiners (ACFE) has published simple steps any organization can take to identify and effectively manage potentially costly fraud losses:

1. Be proactive. 

Establish and maintain internal controls specifically designed to prevent and detect fraud. Adopt a code of ethics for management and employees. Set a tone at the top that the company will not tolerate any unethical behavior. 

 

2. Establish hiring procedures. 

Every company, regardless of size, can benefit from formal employment guidelines. When hiring staff, conduct thorough background investigations. Check educational, credit and employment history, as well as references. After hiring, incorporate evaluation of the employee's compliance with company ethics and antifraud programs into regular performance reviews. 

3. Train employees in fraud prevention. 

Once carefully-screened employees are on the job, they should be trained in fraud prevention. Are employees aware of procedures for reporting suspicious activity by customers or co-workers? Do workers know the warning signs of fraud? Ensure that staff know at least some basic fraud prevention techniques. 

 

4. Conduct regular audits. 

High risk areas, such as financial or inventory departments, are obvious targets for routine audits. Surprise audits of those and all parts of the business are crucial. 

 

5. Call in an expert. 

For most accounting and law firms, fraud examination is not a core business component. That's why, when fraud is suspected or discovered, it is imperative to enlist the anti-fraud expertise of a Certified Fraud Examiner (CFE). The CFE credential is recognized by businesses and governments worldwide as the standard for fraud prevention and detection. 

We can help you at Acuity Forensics. Give us a call at 360-573-5158.

Source: http://www.acfe.com/uploadedFiles/ACFE_Website/Content/documents/tips-to-prevent-fraud-2012.pdf

Simple ways to protect your business from fraud

The client call I recently received sounded familiar. On the phone, a distraught business owner described what he had found: “I caught her writing checks to herself; one for $5,000! She has worked here for years and is the best employee we have.” I expressed my regrets about what he was experiencing and asked several clarifying questions. In all seriousness, he asked me, “Do you know her?”

No, I didn’t know the fraudster who took $550,000 from him, but I definitely know her type. The most heartbreaking part of my job is the realization that most fraud schemes are easily detectable. No matter the amount of loss or the type of scheme, there are common denominators that business owners can learn from.

Fraudsters are typically well-liked by owners/management.

Would you give the keys to your kingdom (i.e. access to your money) to someone you didn’t like? Fraud occurs when someone is experiencing an internal pressure (e.g. debt, unemployed spouse, family crisis), can rationalize their behavior (“I am worth more.” “I will pay it back next time.”) and has opportunity to commit the act. This can occur when someone has access to the money and knows they are trusted in their job. Fraudsters are affable and have an answer to everything. They know you’ll believe them and they don’t have to show “proof” when you ask a question.

Ask questions and demand backup documentation, even if you know the answers. Employees are less likely to perpetrate a crime if they know there is oversight over their work. Trust is not an internal control.

Reviewing monthly bank statements and cancelled checks will uncover the majority of all frauds.

Well over 50 percent of all frauds are attributable to fraudulent disbursement schemes. Overpaid payroll, fictitious expense reimbursements, and check tampering schemes are so common that it’s often the first place I look.

Review your bank statement every month. Are there any electronic payments that look odd to you? Ensure your bank returns cancelled check images. Are there payments going to any individuals or vendors that are out of place? What about payments to credit cards, utilities or other common vendors used by businesses and individuals? Are there two per month, indicating that someone is paying your bills in addition to their own? This review should be performed by someone other than the person in charge of accounts payable.

Incoming cash and checks are easy to steal.

Incoming cash and checks are easy pickings for fraudsters who think they need your money. Yes, you read that correctly, incoming checks written to you are easily converted to benefit the fraudster – just ask my recent client who lost over $250,000 from a similar scheme!

Internal controls over cash receipts should include a receipt method for all monies received. Those receipts should be sequenced and reconciled to the amount of cash and checks deposited to the bank. Checks should be endorsed the moment received and all funds should be taken to the bank daily. Review your accounting records to ensure no unauthorized credits or write-offs have been posted to customer accounts, which would indicate money has been skimmed.

Most frauds exceed six figures and have occurred for 18 months by the time they are uncovered. Being a business owner myself, I know how busy you are. I also know how you love running your business and bookkeeping is a chore (yes, even this accountant thinks so!). Internal controls and proper oversight do not have to be cumbersome, involve multiple people, or cost more. Keep it simple and effective and save yourself the heartache of learning that your best employee has actually been your worst one.

This piece originally appeared as an Accounting & Finance column in the January 24, 2014 edition of the Vancouver Business Journal.

Fraud Article of the Day - March 2, 2011

Accountant to the Stars Senteced for $60M Ponzi Scheme.

Financial Statement Fraud - Not Just Wall Street's Problem!

I wrote an article about financial statement fraud in today's Vancouver Busienss Journal. Financial statement fraud is not just Wall Street's Problem! Click on the blog title to read more!

Fraud Article of the Day - February 8, 2011

US Marine Sentenced on Iraq Fraud Charges - War On Terror News

US Marine accused of perpetrating a $1.7M contract fraud in Iraq. Federal Government seizes property and cash.

Fraud Article of the Day - February 7, 2011

New York Mets' Owners sued over Madoff Fraud Profits.

Was the team financed from fictitious profits "gained" from the Madoff scheme?

We Found Fraud, Now What?

1. Log all communications and events
a. Using a simple legal pad, keep track of events surrounding discovery of potential theft; conversations with suspect and key witnesses; notification of counsel, police and/or insurance company; and, actions taken.

2. Take a deep breath
a. Uncovering a fraud is a process, it won’t happen overnight
b. Emotions will run high, calm heads need to prevail

3. Secure computer and facility access
a. Ensure that the suspect does not have access to the computer system or the office/facilities
b. This includes access via remote log-ins, co-workers, etc.

4. Secure the following in a safe:
a. Original and 2 copies of the suspect’s computer hard drive
b. Backup copy of the company’s computer server

5. Secure key documents
a. Bank statements and cancelled checks are usually key documents
b. May also include financial statements, vendor invoices, deposit slips, or other intellectual property of the organization

6. Contact key individuals
a. Owners/Management/Board of Directors
b. Legal Counsel

7. Call the insurance company
a. What are the policy limits?
b. Will the policy cover the professional fees of a forensic accountant and/or legal counsel?

8. Understand the end game
a. Will termination of an employee or multiple employees occur?
b. Is prosecution a possibility?
c. Is an insurance claim to be filed?
Understanding the end game is imperative to properly scope and navigate the investigation and ensure that appropriate counsel and experts are retained.

9. Consult with a forensic accountant
a. They have specific knowledge to properly conduct an investigation; including knowledge of proper procedure, evidence collection, report writing, and expert witness testimony.

10. Mitigate risk going forward
a. Educate staff to understand risk, recognize key indicators, and how to report suspicious behavior.
b. Contact your bank to consider whether their products (e.g. positive pay or a lockbox) will provide additional protections
c. When in doubt, call Acuity Group at 360-573-5158!

Justices Limit Use of "Honest Services" Law Against Fraud

This Sumpreme Court decision potentially impacts the ability for the Courts to find individuals guilty of "Honest Services Fraud". More specifically, the High Court rules that "Honest Services Fraud" is tied specifically to cases of bribery and kickbacks (i.e. corruption cases).

In the case of Jeffrey Skilling, he was convicted of Honest Services Fraud as a result of his falsifying the financial statements at Enron. The government argued that he benefited from this financial statement fraud by receiving bonuses, salary increases, and the sale of stock. He was ultimately convicted.

The High Court now places this conviction in jeopardy because, "the government never argued that he "accepted side payments from a third party in exchange for making the financial statement misrepresentations." In other words, there was no evidence of specific bribes or kickbacks paid to Mr. Skilling that would ultimately fall under the "Honest Services Fraud" statute.

Stay tuned to find out if high-profile convictions are ultimately overturned.

Another One Bites the Dust

Sandra Page.....

http://www.yakima-herald.com/stories/2010/6/5/theft-lands-school-bookkeeper-in-prison

Yes. This was one of my cases. One of the more unfortunate ones. A non-profit. A tight-knit community. Money pegged for children.

What is it about taking other people's money? I wonder, now that she sits behind bars, was the thrill of the theft worth the trade-off of telling her child that she wouldn't be home for the next three birthdays...the next three Christmases? Was the money that she frittered away worth the wasted years of her life in prison?

Do you (or your clients) believe fraud can't happen to you?

Think again.

And consider the following:

1. Everyone loved her.
So much so, that when I attempted to interview co-workers and friends, I was vilified ("You are on a witch hunt!" "How dare you?!" "She would NEVER do what you claim she's doing").

2. There wasn't enough money to steal.
Not true! I was able to prove a $240,000 loss. So much money was being stolen, there wasn't enough money to pay the bills on time. But, blaming losses and weak operating results on a bad economy provided the perfect excuse.

3. A CPA Firm was overseeing their monthly financial reports..
Just because you (or your client) have a CPA firm providing tax or financial statement services (think Compilations, Reviews, and AUDITS); their procedures are most likely NOT going to uncover any fraud.

4. Internal Controls Work.
It is a common misconception that a small organization is unable to mitigate fraud risk because of the lack of staff available to provide accounting services. SIMPLY UNTRUE. Unfortunately, however, this misconception often allows fraudsters to perpetrate their crimes for long periods of time. In this case, when controls were placed over cash disbursements (for reasons other than the theft that was later discovered), that particular scheme stopped.

Bottom line: Every single fraud I've investigated involved the one person owners and/or management loved the most. And every single one could have been caught earlier with simple, but effective, controls or monitoring over that person's activities.

If you own, manage, or advise a business then make it your mission to arm yourself with knowledge and pass that knowledge on.

Knowledge is Power.