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. 

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.