It’s that time again… Time to share your predictions for fraud in 2013

Gypsy looking at an eight ball to predict the futureEach year, I ask readers of this blog to share their predictions regarding fraud in the following year.

If you have time, please visit the poll I created on LinkedIn.

I’ll share the results at the end of January.

Thanks for voting!

Paul McCormack

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

Old enough to know better?

Mary Ella Hixon, what are we to do with you?!?

The 91-year-old former mayor just pleaded guilty to stealing $201,000 from River Falls, in southern Alabama.

The judge sentenced Mary to 10 years in prison. However, luckily for Mary, he suspended the sentence due to her age. She will instead be placed on probation for five years.

All going well, at age 96, Mary will be free to do whatever 96-year-old people do, sleep I guess…

Did the judge make the right decision? Should age play a role in the sentencing of white-collar criminals?

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

Open letter to would-be fraudster

Source: famliymwr

Dear Mr/Mrs Would-Be Fraudster:

I know you read this blog… I can see the search engine terms that you used to find “Fraud Happens”.

So, you want to commit fraud and don’t want your employer to catch you? I am glad that I can help! What have you learned from reading this blog?

Well, you’ve probably learned that committing fraud really isn’t that hard to do, and you may end up with millions of dollars. You may have also learned that working with a co-conspirator has its downside. If you work at a large company, you probably know that they respond to fraud losses differently than small companies. If you’re a government employee, you found out that fraud in the public sector can be just as damaging as fraud in the private sector. Finally, you may now know what could happen if you are caught. I guess that you are trying to determine if you would serve time, or merely receive a “slap on the wrist”. I hope you also learned that fraud destroys lives.

So what have you decided to do? Is the probability of getting caught so low that are willing to take the risk? Have you thought about how you’ll spend the money? Maybe you want to punish your employer? After all, you really don’t get paid enough…

Before you make the leap and begin stealing, do this for me… Close your eyes and begin to envision what your world would look like if you ended up getting caught. Will your significant other stay with you? How about the kids, will they understand why the new toys you just bought have to go back to the store? Will they want to visit your new “home” – the one with all the other “bad people” wearing the same clothes? What about your parents? How do explain your decision to embezzle money from your employer? After all they have tried to teach you, if only you had listened…

I understand why you are tempted to commit fraud. You and I both know that there is a chance that you’ll steal just enough to pay off overdue bills or buy that fancy car you’ve always wanted and not get caught.

Just remember this… there are people just like me all over the world that have dedicated their careers to fighting fraud. We’re not always perfect and we do make mistakes. However, for the most part, we’re really good at what we do. I hope you learned a great deal from reading my blog. If you’ve learned anything, I hope you’ve decided not to commit fraud. Contrary to what many would like to believe, fraud doesn’t have to happen. Ball’s in your court…

Paul McCormack

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

If you want to learn more about the “art” of interviewing fraud suspects, here is an interview that I gave on the subject. Let me know what you think…

CPE Link Blog

An interview with Paul McCormack, fraud investigator and educator…

How many fraud suspects have you interviewed in the course of your career as a certified fraud examiner?

After the first hundred, I actually stopped counting, but I’ve easily interviewed more than 500 people while investigating employee and third party fraud.

How is interviewing a fraud suspect different from the interrogations we see dramatized on TV?

The goals are very different. On TV, the actor-detective wants to force a confession. It makes for entertaining television. The goal of the interview in a private company is to encourage the employee to share information. Threatening him or her, with termination or legal action, isn’t appropriate or effective. In fact, there are legal risks to it. Tactics that may be appropriate for law enforcement can get you in trouble if you employ them as an interviewer in a corporation.

What qualities make a…

View original post 498 more words

Sorry valued customer, an employee just stole your identity

Customer data theft

Source: Mel B

As a freelance writer, I often write for companies around the globe.Here is an article that I wrote for Memento – a leader in enterprise fraud management.

The post discusses the theft of nearly 3,000 customer identities by a bank manager with a very troubled past.

Click here to read the post.

Please feel free to leave comments here, or on Memento’s blog letting me know what you think.

If you would need an article, newsletter, blog post or whitepaper, please contact me at paul@mccormackwrites.com.

P.S. I ghostwrite too!

Intel engineer helps himself to $400 million

Photographer: Stephen McCormack

Intel Corporation is a world-class organization that has dominated the market for computer chips for many years. In fact, there is a high probability that the device you are using to read this post has an Intel chip inside. However, based on a recent case involving Biswamohan Pani, an Intel Senior Staff Engineer, it may need a little help protecting its intellectual property.

According to the FBI, here are the facts of the case:

  • From February through April, 2008, Pani was looking for a job at other computer chip manufacturers and ultimately obtained a job at Advanced Micro Devices Inc.
  • Pani kept his job search secret from Intel. (Why wouldn’t he?)
  • When he announced his departure on May 29, 2008, he told the company that he might work for a hedge fund
  • Pani told Intel that he wanted to take the next one-and-a-half weeks as vacation until his last day at work on June 11, 2008
  • Unbeknownst to Intel, Pani had started downloading from Intel numerous secret documents about Intel’s manufacturing and design of computer chips. The intensive downloads began on May 28, just before he announced his departure, and continued on May 29
  • Pani started working at AMD on June 2, while he was still on Intel’s payroll and still had access to Intel’s computer systems
  • On June 8 and June 10, Pani remotely accessed Intel’s computer system numerous times and downloaded 13 of Intel’s most valuable documents
  • Along with other confidential and proprietary information, Pani downloaded a document explaining how encrypted documents could be reviewed when not connected to Intel’s computer system
  • Pani backed up the downloaded files to an external hard drive for access after he left Intel
  • On June 11, 2008, Pani reported to Intel for his exit interview and falsely stated that he had not retained any of Intel’s property, when, in fact, he had kept the electronic equivalent of boxes full of downloaded documents and some printed Intel documents at his apartment
  • Documents taken by Pani were found a month later when the FBI searched his home. Intel has valued those documents as worth $200-$400 million, at minimum
  • The FBI was able to recover these documents quickly, before Pani could use them to Intel’s disadvantage, largely because Intel reported the theft quickly and assisted the investigation. AMD also cooperated with the investigation, and there was no evidence that AMD or its employees had asked Pani to take these documents or even knew that he had them

Based on the fact pattern above, it appears Pani knew exactly what he was doing. He grabbed documents before, during and after Intel knew that he was leaving. He also bought time by convincing Intel that he was leaving the industry. I can’t imagine that lying about his ultimate destination stopped Intel from blocking his system access. They probably just forgot to do it. After all, Pani was still on the payroll and “burning” his vacation allotment. Why block an active employee?

Who knows what actually took place, the net result was that Pani had one-and-a-half weeks of access to Intel’s systems during which time he did the most damage. So how did Intel figure out Pani had stolen trade secrets? Clearly, after the fact, but not much else has been mentioned in the media.

This case is eerily similar to another case that the FBI investigated involving Sanofi-Aventis. Is it really that easy to steal trade secrets from Fortune 500 companies? Apparently so…

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

Employee fraud – the problem may be bigger than you think…

Before you can tackle employee fraud within your organization, you need to know how big a problem you have. An article that I wrote for Memento – a leader in enterprise fraud management – discusses a common mistake that banks make when tackling employee fraud. The principles that I share in the post are applicable to more than just banks.

Click here to read the post.

Please feel free to leave comments here, or on Memento’s blog letting 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

$2.7 million embezzled from Arizona National Guard

While members of the Arizona National Guard were in harm’s way, James Eugene Burnes, a retired Army colonel took care of business on the home front. Unfortunately, he put his personal business above the needs of the National Guard. Between May 2003 and August 2011, Burnes embezzled $2.7 million from the Arizona National Guard Family Emergency Fund and the Arizona National Guard Emergency Relief Fund.

Apparently, Burnes had fallen on hard times. Just three years after retiring from the Army on presumably a healthy pension, he began committing fraud in his new role as a resources manager for the Arizona Department of Emergency and Military Affairs. From all accounts, he had a gambling habit that needed to be fed. To cover his tracks – as so many perpetrators of fraud do – he created fake financial statements and audit statements.

Here is how he stole the money:

  • Withdrew $1.9 million in cash during 675 separate visits to the bank (He visited the bank as often as 20 times a month).
  • Wrote 169 checks totaling more than $400,000
  • Purchased 32 cashiers checks for more than $332,000
  • Authorized electronic transfers of $40,000

Management oversight was apparently lacking and numerous red flags were ignored. In fact, an employee within Burnes organization uncovered the fraud and shared the information with a supervisor. The fraud continued for another five months before the supervisor confronted Burnes and initiated a review of bank records which confirmed the fraud.

I am sure that the Arizona National Guard thought it was appropriate to trust “one of their own” – a retired Army Colonel. If only life were that simple… Burnes may have been an exemplary officer while on active duty, but as I have said before, even good people make mistakes. Burnes will found out soon how much he’ll have to pay for his mistake when he is sentenced later this year.

Trust too much, and employees may view it as a sign of weakness. Call me cynical, but if my experience has taught me anything, it is that organizations routinely place far too much trust in their employees. If you ever catch yourself saying that you trust your employees and they would never steal from you, it may already be too late. Trust me; I built my career as a fraud consultant based on employers trusting that their employees will never steal. Guess what? Fraud happens.

Learn more about the case here and 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

Who is to blame for $10.2 million embezzlement?

Just when you think you’ve heard it all…

This case involves the Pope, travel on corporate jets, the Superbowl, and a celebrity chef. In fact, it is so unusual that I had to include it in our proprietary global knowledge center (enter 8688JGT for 3 months free access). Since it is included in our database, we have already analyzed the case and provided a list of lessons learned. Before I share some of that information here, let’s learn about the fraud.

Patricia K. Smith, the former controller for Baierl Acura, pleaded guilty to taking $10.2 million from the dealership over a 7 year period. Smith moved money from the dealership’s business accounts to her personal account using over 800 Automated Clearing Housing (ACH) transfers. Smith then used the proceeds to fund the following expenses:

•    $1.8 million billed to American Express for private jet charters; travel to seven countries in Europe and four islands in the Caribbean

•    $44,500 for four club-level tickets along with full hospitality at Super Bowl XLV

•    $32,500 for a luncheon for six people prepared by Food Network star Ina Garten at her barn in East Hampton, NY

•    $5,000 for “The Vatican Package,” which included Mass in Papal Audience with VIP seating, air fare for four, VIP tour of the Vatican Museum with a private tour guide, and a private tour of the Sistine Chapel with family before it is open to the public

•    $2,500 for a Phantom of the Opera experience, including costume fitting, wig fitting, an escort onstage during the Hannibal Opera sequence, and four seats for the performance.

She also purchased the following assets which will be subject to forfeiture:

•    Four houses— three in Pennsylvania and one in Georgia

•    10 vehicles, including three Acuras, four Hondas, and a Mustang convertible (At least she remained loyal to Acura / Honda)

•    Stocks, jewelry, cash, gold coins and personal property, including flat-screen televisions, a mink coat and a baby grand piano.

I have my own thoughts on who is to blame, but I would like to hear your perspective before I weigh in. Please register your vote in the poll at the top of the article. I’ll share my thoughts in a subsequent blog post.

FBI Press release

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