You’ll never understand fraud in my industry

“It is way too complicated for anyone outside the industry to understand. Fraud in our industry is just… well… complicated!”

– Senior Executive at XYZ company

I won’t disclose the name of the company, but the preceding statement was made by a Vice President of Internal Audit during a discussion about fraud within his company. I failed to convince the VP that the 80/20 rule applied. I believed, and still do, that 80% of the fraud schemes they experienced could be found in other industries, with the remaining 20% being industry specific. He believed the exact opposite, that 20% were common to other companies and that 80% were industry specific. I lost the argument (it was really a friendly exchange).

What I didn’t have available at the time was access to a database of previous fraud cases from within his industry. I do now. We have created a proprietary database that includes hundreds, soon to be thousands, of fraud cases from around the world. Here is an example of just one case in the database involving healthcare.

Ronald A. McFarland of Pennsylvania received a 37-month sentence for his role in embezzling $2.46 million from Rosewood and Oaktree Cancer Care. McFarland was the president of Verimed, a third-party billing company. Rosewood and Oaktree engaged Verimed to bill for outpatient radiation treatment programs for cancer patients.  So how did McFarland commit fraud? Very, very complicated (I jest). He billed for services, then kept the money he received. He then made fraudulent accounting entries to cover his tracks.

Could this type of fraud happen in your industry? Sure it could! The healthcare industry uses third-party billing companies a great deal due to the complexity and length of time it takes to collect from insurance plans. But you don’t have to be in healthcare to experience a loss of this type. If your company relies on a third party to bill and/or collect amounts due your company, the potential is there.

I do agree that fraud within certain industry segments is exceptionally complicated, hence my earlier statement that 20% of fraud is specific to an industry. But when you remove the industry and truly analyze the fraud modus operandi, the other 80% starts to come into focus. Regardless of industry, fraudsters want your money in whatever form they can take it (cash preferably!).

If I have learned anything from my career in fraud, it is that history repeats itself again, and again, and again. Certainly, fraud schemes that are specific to your industry must be understood to prevent losses. However, don’t believe your “own press.” Fraud within your industry is not so unique that you can’t learn from other industries. You’d be amazed at the similarities across industries. Trust me.

So next time someone says fraud is so complicated in their industry that you’ll never understand it, take the time to politely challenge their statement. You may have much more in common than you both realize!

Need a writer that understands fraud? When you hire me to write an article, blog post, newsletter, or white paper, you get an accomplished writer that is also an expert in fraud.


About Paul McCormack
I have over 20 years of experience in corporate fraud and intellectual theft prevention, detection and investigation. Unlike many fraud experts, I have both industry and professional services experience. To date, I have conducted over 800 interrogations of fraud suspects including numerous senior corporate executives. As a freelance writer, I have written over 1,000 articles on a broad range of topics. My areas of expertise include: • Asset Misappropriation • Big Data • Bribery, Corruption, and Collusion • Check, Wire, ACH, and Credit Card Fraud • Consumer Fraud • Corporate Security • Cybersecurity • Data privacy (Europe, Brazil, Russia, India, and China) • Drug Trafficking • Embezzlement • Employee Fraud • Executive Protection • Fintech • Financial Statement Fraud • FCPA • Healthcare fraud • Identity Theft • Intellectual Property Theft • Internal Audit • Interrogation Tactics • Loss Prevention • Mobile Fraud • Money Laundering • Operational Excellence • Organized Crime • Payments Fraud • PCI Compliance • Retail Fraud • Risk Management • Terrorism and Counterterrorism • UK Bribery Act • Workplace Violence

One Response to You’ll never understand fraud in my industry

  1. Joan T Wozniak, CFE says:

    Very well put………………………….fraud is fraud and repeats itself across industries!

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