Interesting article: How CIOs Can Learn to Catch Insider Crime (with help from yours truly…)

I thought my readers might be interested in an article that CIO magazine just published on insider crime. A writer from CIO magazine interviewed me about a month or so ago and I am proud to say that I am quoted extensively throughout the article. Here is just one of my sound bites:

“I’ve yet to meet any C-level person who says, ‘I’m so proud that we have 500 people preventing fraud.’ It’s not what people want to put out there as a badge of honor. It’s a necessary evil.”

Please check out the full article. In my opinion, the writer did an excellent job discussing insider fraud from a number of angles.

I hope you enjoy the article. Please let me know what you think!

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.

paul@mccormackwrites.com

Payroll and inventory fraud – are you next?

Apparently, there is quite a bit of money to be made from gourmet mushrooms (no, not that kind). So much so that Gino Silva and Steven Perei, both employees with D’Artagnan, a mushroom distributor set up their own company in direction competition with the employer.

Starting in December 2007, Silva and Perei made sales on behalf of their own company, Mediterra, then stole D’Artagnan’s inventory to complete the sale. To conceal the theft, Silva enlisted the help of D’Artagnan’s inventory control specialist to manipulate purchase order records and alter inventory records. This scheme was simple, yet quite brilliant – by using their employer’s inventory for their new company, top line sales essentially equaled bottom line profit. Why pay for inventory when someone else can foot the bill? The mushroom scheme lasted just over 12 months.

The mushroom scheme was not Gino Silva’s “first rodeo”. From 2005 to 2008, Silva was vice president of operations for Philips Accessories and Computer Peripherals. While working there he conspired with others to add “ghost” employees to the company’s payroll that ended up being paid approximately $1.2 million for nonexistent services (Ghost employees may be real people or fictitious but they do not work for the company).

Silva pleaded guilty to the payroll scheme in December 2008. In June 2009, he received a 27 month sentence and a restitution order for $843,414. In April 2011, Silva pleaded guilty to the mushroom scheme, and in March 2012 received a 28 month sentence, a year of supervised release and $71,179 in restitution for the mushroom scheme.

Silva committed two very different frauds and was eventually caught and sentenced twice. Is he a criminal mastermind? Certainly not, but he still managed to defraud two companies with relative ease. Will he commit a third fraud once he is released from prison? Who knows? But, the temptation may be too great… and this time, he probably knows how not to get caught!

I can tell you that there a literally thousands of companies that he could join and commit exactly the same frauds without being caught for at least a year. Is your company next?

Read more here

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.

paul@mccormackwrites.com

Oh what a tangled web we weave… what happens when you can’t trust anyone?

Of all the government agencies to steal from, the National Security Agency would probably be the last one on my list. If just half of what the media says they can do is true, surely, they have the capability to uncover a fraud perpetrated by a vendor.

Yet, Bechdon which made metal and plastic parts for the NSA, successfully defraud the agency over a ten year period. The father son team of William and Donald Turley overbilled the agency for hours that their company never worked. As an aside, I am curious as to why the NSA would pay for parts produced by the hour and not on a fixed price basis, but I suppose we’ll never know the reasoning behind that decision.

The father son duo both confessed to the fraud during clearance interviews as part of the process for bidding on sensitive NSA contracts. Surprisingly, they confessions came over a year apart. William Turley confessed in March 2006, and Donald the following year in April (Why it took the NSA more than a year to complete the second interview is anyone’s guess).

Now for the twist that all good stories involving the NSA should have… Enter Christina Turley Knott, William Turley’s daughter and Donald Turley’s sister…

Christina is by far the more accomplished fraudster. She managed to embezzle $4.5 million from Bechdon without the knowledge of her father or brother! Presumably, while the father and son were busy bilking the NSA, they didn’t pay attention to the fraud happening beneath their noses. Christina will be sentenced shortly for her fraud, but initially the family declined to turn her in as they feared she would disclose the NSA overbilling scheme.

The moral of the story? Don’t expect your employees to act in an ethical manner if they see your company’s leadership defrauding others. The “tone at the top” is often thrown around as important to preventing fraud. In this case we can see what happens when owners or senior executives abandon their ethics at the front door. There is no honor among thieves, especially when there are millions up for grabs. Just ask the Turleys…

Read more here

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.

paul@mccormackwrites.com