I don’t know what life was like for you, growing up, but my youth was full of lectures. I never just got into trouble. I got into trouble AND I got a lecture to go along with it. We never just went on vacation; we went on vacation, had to write an essay about our experiences AND we got a lecture about how both things were important. We didn’t just discuss our report cards, good or bad; we discussed our report cards AND got a lecture about the long-term benefits of each class we were taking. The lectures often came with true-life stories about one or both of my parents, someone they knew or someone who lived in their “day”. I am not saying that I was lectured a lot, but I did hear some stories more than once. On the occasions that I tried to interrupt to say that I had heard the story, I was told either that there was a new lesson to be learned, or asked why, if I knew the story and the wisdom it imparted, I continued to make the same mistakes.
Well, at last, I get it. Because the other day, I came across a case that includes so many lessons on fraud that, if I were teaching a semester on fraud, I could use it as an example in just about every lesson. This is the case of Christopher Myles, a former bookkeeper in New York City. He worked at Central Park Realty Holding Corp., and some of its affiliates, and reported to the President of the company. Tragically, in May 2010, the President, suffered a stroke and ended up in “a comatose-like state until her death in February 2012”.
With the president incapacitated, no one stepped in to VERIFY Myles’ work. By the time September 2011 rolled around, Christopher was aware that he could pretty much do whatever he wanted without anyone really questioning what was going on. He knew that he now had the OPPORTUNITY to defraud his employer and he took advantage of this opportunity. True to the trend, Christopher Myles started his fraud on a small scale, using the President’s credit cards to pay for personal expenses. He escalated quickly and by early 2012, he was transferring funds out of her personal bank account in order to pay his and his mother’s bills. He did this until there was no longer any money in the President’s bank account. Myles did not let this empty bank account stop him though; he then started transferring money from the business accounts, first, into the President’s personal bank account and, subsequently, into his own personal accounts. On days when he felt particularly bold, or reckless, Myles would transfer money straight into his and his mother’s personal bank accounts. Christopher Myles had unfettered access to all of these accounts, both business and personal, and never needed anyone else to sign off on any of the funds he moved into and out of these accounts. The lack of segregation of duties made this fraud simple for Myles.
If anyone had been watching him and taking notice, they may have noticed that Christopher Myles was living beyond his official means. He used his ill-gotten funds to buy a new home, go on shopping sprees and fancy vacations. This is another red flag for possible fraud. Throughout this fraud, created falsified bank statements and recorded all of these illicit transfers as business transfers. Unfortunately, no one followed up closely on any of these untruths. Perhaps none of those looking at the fake bank statements understood how the company worked and what kind expenses would appear as out of character, or maybe no one was familiar with the ledger and how to analyze it. I am not sure, but, the result was that Myles was able to continue his fraud for over two years (just a little bit longer than the median duration of a fraud), until November 2013, when he resigned.
It was only when his replacement discovered the fraudulent invoices that Myles created, in attempt to disguise his embezzlement, that Christopher Myles’ theft was discovered. A forensic investigation revealed that, in two years, Myles had stolen about $1.3 million from his employer. Myles’ former employer reported all of this to the authorities and, in addition to an indictment for the theft, Christopher Myles is also facing tax evasion charges. This is because, in the manner of Al Capone, Christopher Myles did not report any of his fraudulently acquired income on his tax returns.
Almost like a bonus in the lesson that keeps on giving series, once his theft had been exposed, Christopher Myles sent an email to all parties involved. In this email, he RATIONALIZED his fraud, claiming that he was entitled to the funds because he was due a raise and compensation for having to deal with a difficult coworker.
As I read the press release about Christopher Myles’ indictment, my jaw hung open. I said out loud, “wow, this has all the classic markers; it’s unbelievable!” Yet, the markers are classic for a reason. There are probably a lot more lessons to learn from the story of Christopher Myles, but don’t get me started!