Tag Archives: the truth

Now That I Think About It…

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When we talk about fraud and how it tends to happen, the classic fraud triangle is most commonly used to help us understand how it all happens. The sides of this triangle represent opportunity, pressure and rationalization. In this triangle there is a person, just a regular old person, like you and me. Fraud can happen to anyone and fraudsters are often regular people who find themselves under pressure, faced with the opportunity to perpetrate a fraud and the ability to rationalize it all.

Sometimes this person may face pressures. Maybe she has a family member who gets sick and now they have to deal with massive bills. Maybe the person has a gambling problem. Maybe he wants to live the jet set life that he sees his friends living. Whatever the reason may be, these people feel under a lot of pressure to get their hands on more money than they are currently earning.

Pressure or not, maybe this person sees an opportunity to defraud. Perhaps he can sign checks, AND, he has custody of the checkbook AND he performs the company’s bank reconciliations. He has all this access and responsibility and no one checking his work. So, now he has access to the money and he can doctor the books to cover up his wrongdoing. However it works out, these people see a weakness that they can take advantage of.

The third leg of this triangle is rationalization. This is where a person tells himself that there is a justification for what he is doing. Maybe she tells herself that she really needs the money to deal with this one emergency and this will happen only once. Maybe she then tells herself that this will happen only once and, to boot, she has been a loyal employee for a while so the company really owes her a little leeway for all that she has done. Maybe she tells herself that once she is out of this spot of trouble, she will pay the company back and it will be like it never happened in the first place. Maybe he tells himself that he is underpaid and that what he is doing is merely taking the money that he is rightly owed for all the hard work and time that he puts into the business. The rationalizations that people use are practically endless.

Earlier this year, I listened to the podcast “Ponzi Supernova”, a podcast about Bernie Madoff’s Ponzi scheme and what has happened since. One thing that was fascinating about this series was the conversations that Steve Fishman, journalist and narrator of the series, had with Bernie Madoff, infamous perpetrator of a massive Ponzi scheme. Bernie talked about his childhood and how affected he was by his father’s financial failures. Bernie tells Steve that, after seeing his father lose a lot of money and what it did to the family, Bernie swore he would never let that happen to him (perhaps one could see this as a pressure looming over his life). In the early 1960’s, Bernie Madoff violated market regulations and his clients’ trust by losing their money on risky deals. Instead of letting them know that this had happened, he lied to his clients, borrowed money from his father-in-law and carried on as though he was a brilliant investor. Speaking with Fishman, Madoff made it sound as though, because he did not want to fail as his father had, he took these steps so that he could continue to, at least, appear to be successful and very talented.

Bernie Madoff spoke with Steve Fishman a couple of years after he was caught (though, in some versions of his story, he claims he quit). Bernie Madoff also spoke with Diana Henriques, who wrote the book The Wizard of Lies, which is now an HBO Film by the same title. Their interactions also occurred a couple of years after Madoff’s fraud was discovered. After he had plead guilty to his crime. Yet, over and over again, Madoff seemed to continue to make excuses for his behavior and try to minimize what he did. Even though, when pleading guilty, he claimed that he acted alone, he has since changed his tune and as co-conspirators have testified against him, he then seems to say, “well, except for that person, I acted alone”. So, it seems that even after being caught, he is only sharing as much of the truth as he needs to and, what I have found to be most interesting, is that he appears to continue to rationalize what he did.

In an ideal world, one would imagine that having a fraud exposed and pleading guilty would bring a fraudster to his senses. When we imagine a person committing fraud as a regular person who has fallen into irregular behavior, the hope is that putting an end to this irregular behavior will bring this person to her senses and get them to admit that what they did was without excuses; that, even though they rationalized their actions when they perpetuated the fraud, they now saw the error of their ways and realized that the rationalizations were all without merit. During the hearing when he plead guilty, Madoff read a prepared statement where he apologized to his victims. However, even that apology came with a “but” attached. “While I never promised a specific rate of return to any client, I felt compelled to satisfy my clients’ expectations, at any cost.” Yet, listening to Ponzi Supernova, you learn that some clients would demand an adjustment to their statements when they did not receive the return they had been promised. Madoff has also placed blame on his victims, claiming that they knew, or should have known, what they were getting into, that he had warned them and that they did not lose as much as they claimed. And, I have found that it is not just Madoff who does this. The Association of Certified Fraud Examiners talks to people who were convicted of fraud and, in video after video, the perpetrators found ways to hold others responsible for what they did – and this is after they had been found guilty and served their sentences. For instance, one blamed her supervisor for being too trusting, “I don’t blame them but…” she started her sentence. Another stated, “I asked you for help and you said no”, while yet another said “I won’t get caught again”, not “I won’t do it again because I realize it was wrong.

It may be human to not want to admit full responsibility. Perhaps it is too hard for most of us to admit that we have done terrible things. Who really wants to be a monster, blamed for ruining lives, even when those lives are laid out in front for you? And if we are not harshly judging ourselves, even when caught, then can we really adjust our behaviors to do right and get back on the straight and narrow? I don’t know the answers to this but it is something I think about as I perform my work as a forensic accountant. If a person is not able to strip away rationalization and admit that they were just wrong when they perpetuated their fraud, then what are the chances that it won’t be so difficult to do it again?

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2017! Three Words! Let’s Go!

img_1043-2Yesterday, I took a moment to look back at 2016 and I am glad that I did. After that exercise in honoring history, I actually changed one of my words for 2017. My words for 2017? That may be what you are wondering. Let me explain. In 2013, Tom Hood introduced me to the concept of Three Words (and that concept came from Chris Brogan). I use these three words to give the year ahead a theme, almost like a rhythm that I can dance to as I go through the year; and isn’t everything better with dance? The process of thinking about my three words and then coming back to them throughout the year, help consolidate, direct and give confidence to what I do and how I do it. As I read over yesterday’s post, I saw my 2016 Three Words dancing over my year, in ways that I had not thought about as I was writing the post – Learn. Fear. Community.

For several days, I thought about what my words for 2017 would be – and how those words would serve to seal my intentions for the days ahead. I think I have it now.

Embrace: In previous years I have written about changing things in my life. Transform was one of my words in 2014. Then, in 2015, Receptive was a word of mine. Last year we moved to a new neighborhood. When I was a kid, due to politics and other adventures in their lives, we moved around a lot. Between first and third grade, I went to four different schools in three different countries, in four different cities. During my first two years in New York City, I lost count of how many places I lived in. I even spent a couple of months camping out on a (very amazing) friend’s couch on weekends, while I worked in Florida during the week. Last year, I talked transformation and I was receptive to talk of moving but, now that I am here, I realize that it is not going to work until I embrace it. This is where I am now with my move, with my work, with my life. I can talk about how great innovations in my line of work are; I can marvel at how awesome some of the tools that are available to us are; I can wax lyrical about the incredible people who cross my path and make me better at what I do, but all of that is not worth much unless I dive in there, snuggle in and just embrace it all.

Persevere: When I started training to run long distance, I learnt about the power of a mantra. The mantra was invaluable to me, when doing hill repeats. I would chug up a hill and repeat, over and over again, “I love hills.” I will say this, I reached the top of that hill and many others AND I hate hills less and appreciate their value. I actually surprised myself when I told a cousin that I wished there were a few more hills around my new home. In 2015, I embarked on a new journey of sorts. I started my own business and decided that I wanted to do work that made me look forward to getting out of bed every day. I loved that my husband’s work, as a photographer, was something he also did for fun. I admired how excited he got about his projects and I wanted some of that. At times I would talk to some people about what I wanted to do and how I wanted to do it and they would tell me, “that will never work.” Fortunately, my incredible community (2016 word, hello!) took over and repeated the mantra I had not yet learnt to say myself. However, as the year came to an end, I started to believe. So this year, I shall remember to say to myself, “You got this. You can do this,” not just when I am running, or doing pull-ups. I shall tell myself this as I am serving my clients, community and the public.

Monchu: My last word is a word that I have borrowed from Chris Brogan. Chris tells us Monchu is an Okinawan word that means “one family”. It essentially means that we treat people who are not our blood as though they are family. I have benefited from this concept forever. As someone who lives very far away from most of my blood, I just don’t know where I would be with my one family. For instance, I just wrote about how I was able to crash on a friend’s couch when I first moved to New York. I didn’t mention that I had only known her for months and she offered her home to me, and her husband and adorable daughter didn’t seem to mind either. That is just one of a million of my stories. I know that I could do a way better job of keeping in touch with people to let them know that they are part of my one family. I know that this philosophy will guide me to be better at what I do and how I do it. I hope to also inspire others around me to embrace this philosophy.

As I share my words for 2017, I want to acknowledge my words from previous years:

2013 – Change, Discover & Motivate
2014 – Transform, Pursue & Collaborate
2015 – Receptive, Synergy & Service
2016 – Learn, Fear & Community

And now for 2017 – Embrace, Persevere & Monchu. I am excited for the year ahead and I know that the view from my new home will help me do so. You see it up above, I can see forever now. I got this.

Tell me, what are your words?

I hope 2017 is your best year ever!

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Over My Shoulder

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I was in high school before I realized how much I love history. Even though I read many historical adventures and would get so caught up in stories that I would find myself being moved in ways movies and television could, I never attached that excitement to any history I ever learnt in school. There was a separation of story and history until I ended up with a history teacher who was so gifted at bringing history to life that I didn’t even really feel as though I was in class.

What has taken a while to sink in is that history is not just about other people’s stories and what they might mean, but it is also about my own stories (along with people around me) and how what I have done, thought and felt in the past is something that I should not only want to record, remember and recognize but also find importance in. In 2013, I started a new approach to beginning my year. Since then, I have given my year a theme, encapsulated in three words. In order to better think on what I would like to make as my theme for next year, looking back at where I have been is invaluable. So, I am taking a moment to take a look at how 2016 went – to learn, to appreciate and to give myself a pat on the back where needed.

Throughout my year, I continued to be amazed by and grateful for the people I crossed paths with – friends, strangers and those in between. It may have been someone telling me not to give up at moments when the thought was threatening to become action. It may have been someone sharing words of wisdom that kept me and my fear, anger or ego acting out irrationally.

In 2016:

  • I moved to a new neighborhood. This was a big deal as I had lived in the same neighborhood for 16 years (my husband had been there for 20), we had many friends that lived conveniently close and more amenities than we knew what to do with. I miss it all AND I am excited about our new path forward.
  • A college friend invited me to take cello lessons with her and another friends and I said yes. We love it – we dream big and take small steps every week toward living those dreams. I know those around us, who get to hear us practicing, hope that we live those dreams sooner rather than later.
  • I was accepted into New York Community Trust Leadership Fellows, a program in non program that has both expanded my mind and exposed me to some truly inspiring, passionate and motivating people and organizations.
  • I had great conversations with high school students, college students and fellow professionals about forensic accounting, careers in accounting and working to do what we love, even when we have doubts about it.
  • I was part of a very exciting launch of the New York State Society of  CPAs Women’s Initiative and, at the end of the year, I became the Chair of the NYSSCPA Diversity and Inclusion Committee. Through the efforts and enthusiasm of my colleagues and the NYSSCPA, I am fortunate to be involved with such important initiatives and committees.
  • I have seen friends stand up for what they believe is right; I have experienced my communities come together in ways that renew my belief in humanity; I have applauded the sheer awesomeness of my people!

The night of 31 December 2016 turned out to be an incredibly windy one. My husband and I had planned on walking around the neighborhood, discovering the various New Year’s Eve celebrations in our new space. However, gale force winds led to a change of plan (isn’t that how life works?) We made dinner and spent the evening talking, laughing and watching various celebrations on television. I made sure to dance before and after midnight

Growing up, my father gave me a diary for Christmas, every year. I was always excited to get mine and, even as I moved away for college and started living away from home, I still got my diary. In yet another chapter of – Parents are Sneaky and Wise – I have discovered the power and importance of being able to look back and how much that helps in looking forward. So, farewell 2016! I am now turning my head to look ahead to 2017. Hello!

 

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Cheating Mysteries

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When I first started running long distance, my goal was to run the New York Marathon. After I completed the Chicago Marathon, things changed a little. Of course I still held my breath every year, hoping to make it into the New York Marathon. But I also had another distant dream – qualifying for the Boston Marathon. It was a distant dream because I would need to run a qualifying time in order to get into Boston and my pace at that time was nowhere near one that would get me into Boston. Over the last few years, my pace has improved and qualifying for Boston has become a more attainable dream. Over the years, I have also come to know more runners and have found that many of us aspire to qualify. I know I am always in awe of a person who has qualified for Boston – it is no mean feat.

With the line of work that I am in, I should not have been surprised, but I was, when I read a recent Runner’s World piece about people who cheat to get into the Boston Marathon. I wanted to run the New York Marathon because I was inspired by the runners who ran past my block, the runners who would touch all five boroughs that make up the city that I call home. I enjoy running races in cities and towns that I have never been to, as I find it a great way to visit and discover new places. When I think about Boston, I don’t necessarily think about running the race itself. The power of Boston, for me and for many that I speak with is in what it takes to qualify. That is the challenge. So, when I read about people who cheated by getting someone else to run a qualifying time in their place, or by cutting a course, I was baffled. Where is the joy in telling someone that you achieved something that you didn’t or that you had someone achieve on your behalf? When I speak with fellow runners, I tend to speak with like-minded people who are just as baffled as I am.

This article reminded me that just because one cannot understand the motivations of a cheater, it does not mean that the cheating will not happen. The fact that many of us cannot understand this motivation is exactly what those that cheat bank on. If no one can imagine how or why someone would fake qualifying for the Boston Marathon, the chances are high that a person will get away with faking in order to qualify for the Boston Marathon. This is something that we all should be mindful of, beyond the realms of the Boston Marathon. Way too often, a business owner or manager will forgo instituting checks and balances in their company, because that business owner can’t imagine that anyone that works for them could be the kind of person that would defraud them.

It is important to take steps to keep from being blindsided by your world view. Precisely because you can’t imagine how a person could behave in a fraudulent manner is why you should seek out the services of a forensic accountant, whose job it is to both imagine how a person could defraud you and how to prevent and detect such actions. We all hope that people will be honest, but it is a sad truth that for various reasons, people will cheat. In the context of the Boston Marathon, perhaps some people feel that they are so close to a qualifying time that a little cheat is not such a bad thing. Maybe some people hunger for praise, even if they have not earned it. Maybe some people just don’t think it is a big deal to cheat in order to get into Boston and see it as a victimless crime. In the context of a business, some people may face personal pressures that they feel push them to fraud. Some people may feel that they are not sufficiently appreciated by their employer and may, therefore, feel justified in taking from that employer. No one is immune from the pressures or motivations that lead to fraud, but what we can do is take steps to make it as difficult as possible to be defrauded.

 

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Here’s My Number And A Dime…

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“If you see something, say something”. Living in New York City, this is a message I come across often. I see it advertised all over the subway, I see it on buses and I have even seen it on television. Although the messages tell us to inform a police officer, MTA employee or call a toll-free number in the cases that we do see something and want to say something, I have often thought about the logistics of this. On my way home from work, I tend to end up in the last subway car. Now, say I get onto the train and I see something and I want to say something. I am in the last car and can barely see the subway conductor who is in the middle of the train. Do I try to run up the platform to get to the MTA employee before the train doors close and the train sets off? Do I perhaps hope that there is a police officer that I can alert, hanging out on the subway platform? My subway station is one of the few that now has cellphone reception, so I could call the toll-free number. However, I have never taken the time to actually take the number down so I have no idea what it is. All this said, I like to think that, on the day that I do see something and need to say something; it will be like the movies and things will fall in place and work out.

Previously, when talking about controls, I have discussed the importance of the segregation of duties and how having several people involved in a process means that there are other people who are watching what is going on and who, therefore, can report any untoward activities that they see. Annually, the Association of Certified Fraud Examiners (ACFE) publishes a Report to the Nations on Occupational Fraud and Abuse. The 2014 report stated, “Over 40% of all cases were detected by a tip – more than twice the rate of any other detection method.” That is a staggering statistic and emphasizes just how important people who see and say something are when it comes to fraud detection. The knowledge that there is an easy way for fraud to be reported may also serve as a deterrent to those contemplating committing fraud. In response to a series of huge financial scandals that led to losses in the billions of dollars and the end of companies such as Enron and WorldCom, the Sarbanes- Oxley Act was passed in 2002. Among its various provisions, it required that publicly traded companies establish a whistleblower system that makes it easy for employees and third parties to anonymously report financial misdeeds.

There is a television show called “The First 48”. The premise of the show is that the chances of solving a murder are cut in half, if investigators do not get a lead within the first 48 hours. On a few occasions, I have watched as detectives go from door to door in a neighborhood, asking people if they know anything about the homicide that occurred. Generally, the police are met with silence, shaking heads and closing doors. However once they get back to the police station, their phones start ringing and people leave anonymous tips that often lead to an arrest. Anonymity is a very important aspect of creating a whistleblower system. The fear of punishment for reporting fraud, such as being fired, demoted or even physically attacked, can keep a witness silent. It is vital that a person knows that they can safely make a report and remain unidentified, should they wish to do so.

There should be several reporting options available to the whistleblower, such as the telephone, an electronic system and U.S. mail, giving the whistleblower the opportunity to use the method that they are most comfortable with. Also, the system should be available 24 hours a day, 365 days a year. With the whistleblower hotline, a trained interviewer, who knows how and what to ask the caller should answer the phones. The last thing a nervous caller wants to deal with is voicemail.

In order to make the whistleblower system most effective, a corporate entity’s staff, vendors and other third parties need to know that there is a way that they can report wrongdoing and that action will be taken. This means that a company with a whistleblower system should distribute literature and hold training sessions on ethics, processes and how to report any financial wrongdoing. Several years ago, I caught a cab from Manhattan to Brooklyn. During my ride, the cab driver complained about having to drive to Brooklyn and tried, several times, to drop me off at a subway station. I insisted that he take me to Brooklyn, as I had requested. He then spent the rest of the ride swearing and protesting. Once we reached my destination and I stepped out of the taxi, he yelled out the window, “Bitch”, and drove off. Suffice to say, I was upset by this experience. Shaking, I walked into the building and called 311, New York City’s non-emergency information and complaint service. I told the operator about my experience and gave her the taxi driver’s medallion number. She took my report and asked whether or not I wished to remain anonymous. I chose not to, wound up facing the driver in a hearing, and winning my case. I did all this because I did not appreciate how the taxi driver had treated me and felt that I should not let him think that it was okay for him to behave in that manner. More importantly, I did this because I knew about and had access to an easy, and well-publicized service where I could lodge my complaint and have my issue investigated and resolved.

I have mentioned that publicly traded companies in the United States are mandated to set up a whistleblower system. It is in the interest of other entities to consider a system by which anyone who comes across financial crime can report the crime, knowing that something will be done about it and that no one will come after them for making the report. Sometimes something as simple as an anonymous mailbox can make a big difference – just knowing that there is a way to report crime gets people reporting crime. Then again, as an employee or a third-party, such as a vendor or a customer, there may be times when you feel as though the corporate culture is so corrupt that no one within the company will respond to your complaint. At times like this, you should look to the law for assistance. In New York City, you can call 311 for guidance and assistance. You can also visit the District Attorney’s website for information on how to report a financial crime. The power of people speaking up when they see something amiss cannot be underestimated and voicing your concerns is easier than you imagine; remember whistleblowers are the number one (by far) way in which fraud is discovered. So, really, if you see something, say something. You don’t even have to worry about the train leaving you behind.

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Who Runs Things?

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James Petrozzello

The tone at the top of an organization is vitally important. If the people running things are behaving in an unethical manner, how can one expect the rest of the firm to operate any better? If you are working at a company and you get the message that leadership is for those who operate without regard to the rules, then wouldn’t the probability be high that you would either leave or start breaking the rules yourself? Often when a leader of a company is caught breaking the law, stories follow about a culture of bad behavior at that company.

Craig Haber became a partner, based in New York, at Grant Thornton in 1993. In 2004, he opened a business checking account in the name of a company with a name very similar to Grant Thornton. Then, between 2004 and July 2012, Haber deposited $3.97 million in checks made out to Grant Thornton into the fraudulent account that he had opened. That is eight years of funneling almost $4 million in company funds into his personal account. How Haber managed to do this shows how he got the opportunity to take advantage of weaknesses in the Grant Thornton control system in order to perpetrate his fraud.

When Grant Thornton sends out bills to its clients, it attaches a page to the bill with instructions on how to either wire money into their account or send a check to their Chicago office, which is where their head office and billing department are located. Beginning in 2004, Haber would send billing statements to some clients and, instead of the usual payment instruction sheet, Haber instructed the clients to send payments to “Craig B. Haber”, in care of Grant Thornton, at the Grant Thornton New York offices. He also sent these payment instructions to some clients via email. When he received these payments, he deposited the bulk of them into the fraudulent account that he had opened. He got around the discrepancies by telling Grant Thornton that he had collected lower fees than what he actually collected.

It appears that Craig Haber had too much access to the billing system. In a company, seniority is no reason for reduced controls. Seniority should be a greater incentive for implantation of controls. Because it tends to be more difficult for an employee to say no to a higher up in a company, it is important that a system is built that says no on the employee’s behalf. All bills should have come from the billing department and the billing department should have sent clients billing statements detailing a running balance detailing payments received over a period of time. If that had been the case, some clients would have contacted Grant Thornton to find out why some of their payments were not reflected on their statement.

Grant Thornton should also have worked to limit what payments went to the partners, instead of being sent directly to the billing department. It is a challenge, but an occasionally reminding a client to send payments to the Chicago office may have gone a long way in reducing how much was stolen by Haber.

The fraud of almost $4 million translates into many billing hours that Haber was short on. I am not sure how he explained this shortfall but there should be a way to verify this for partners, in the same way that, I am sure, there is a way to verify billable hours for other employees of Grant Thornton.

Craig Haber received the Grant Thornton payments, which he then redirected to his personal account, via the US Postal Service. Therefore, when Grant Thornton discovered the fraud and reported it, the investigation was carried out by the US Postal Inspection Service and headed by Postal Inspector Melissa Atkin. True to the elements of the fraud triangle, Haber claimed that he started defrauding Grant Thornton because of financial pressure and, as you can see, he took full advantage of the opportunity to take money from the company. Haber was charged with and convicted of mail fraud and faces both a fine and prison time.

Being at the top in his firm did not stop Haber from committing fraud and perhaps being at the top of his firm meant that he was able to perpetrate his fraud without detection for longer. The Association of Certified Fraud Examiners (ACFE) has found that fraud by those higher up in an organization tends to be greater in value and to go on for a longer period of time. Being a CPA, who is supposed to practice according to a Code of Professional Conduct and uphold certain ethical standards, makes Haber’s crime even more disappointing. He stands to lose his CPA license, in addition to the jail time and fines. I would not be surprised if Craig Haber’s behavior had ripple effects among those that he supervised and dealt with, including a decrease in morale, cynicism about adherence to the code of conduct for CPAs and perhaps even bad behavior. If the people in charge are not minding the store, who will?

UPDATE

On March 12, 2014, Craig Haber was sentenced to 4 1/2 years in prison for stealing almost $4 million from Grant Thornton. During the time he was stealing that money, he earned nearly $6.9 million. Just goes to show that some people never have enough money. Now he gets to think about whether those millions were worth it. I, personally, would say no.

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Way Outside The Box

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Shock Absorber

I studied economics in college and in class we learned a lot of theories about things like supply & demand, consumption, and maximizing utility. Those lessons came with graphs and diagrams that were all very logical and pretty to look at. To know that there was an explanation for everything was both exciting and comforting. Learning that a change in the money supply would result in a provable response from the market was a powerful lesson. Everything worked just so, and followed the lines of the diagrams. The power of economics was amazing – all very logical, like a math problem (I also studied math and statistics, so I enjoyed how everything fell in place). It all made sense!

After college, I spent a few years in Zimbabwe and, during that time, I did a stint at an investment bank. I had studied various aspects of economics including micro- and macroeconomics, econometrics and neoclassical theory and so I was ready to step into my analyst position where I took market information and used it to explain and predict market activity. What I found, however, was that sometimes things worked according to the models that I created and the other times the market went rogue. When that happened I was stumped. What was wrong with the people? Why didn’t they act according to the graphs and predictions? Why weren’t they behaving in a logical manner? I wasn’t sure at times, whether to be upset with the people or with the economic theory that didn’t sufficiently warn me about the propensity of people to do what they are not supposed to do.

I left the bank to work in audit, at Deloitte. Just before I started there, an incident had occurred. A client, who was committing fraud, offered the audit manager a bribe to ignore the fraud and issue a clean audit report. When the manager refused to accept the bribe, the client tried to kill the manager. At work, my fellow employees were puzzled by this behavior – for one thing, it would have made more sense to try to bribe the audit partner, as that was who would sign off on the audit report. Was this client’s plan to kill every manager who took over the audit until he found one who was willing to not only take the bribe but also convince the audit partner that the books were fairly stated? It didn’t make sense.

I have found over the years that, unlike most of my mathematics problems, there are many incidents where human behavior does not make sense. A recent example is Scott London, a former senior KPMG partner who, although he earned a seven-figure salary, gave away insider information to his golfing buddy in exchange for a watch and jewelry that he could have bought himself and for about $50,000, cash that was small change in comparison to what he earned. He risked his career, reputation and, possibly, freedom for no good reason.

Why would he do that? It is a question that comes up just about every time a fraud is exposed. We are shocked by the lengths that people go to in order to defraud businesses and what they are willing to risk in their schemes and it is very likely that the fraudsters bank on our unwillingness to believe that anyone could do what they are doing. Often a fraud goes on for a long time because even when someone suspects that something is amiss, they cannot get their minds to go to the place the fraudster occupies. We have preconceived ideas of what a criminal is and so there are many that we don’t suspect:

  • We can’t believe that someone who has been a longtime, respected member of our community could steal from us.
  • We are stunned to discover that a friendly and fun coworker is defrauding the company.
  • In cases such as that of Rita Crundwell, the fraudster is the kind person who helps out when we are in trouble. How could that person be embezzling money?
  • The person fleecing the company could be the person who wins employee of the year awards because they put in long hours, never take vacation time and are always doing more than is expected of them.

At times, in order to see fraudulent behavior, we have to first shrug off our preconceived notions of what kind of person will commit these actions. In this way, we won’t shrug off any red flags or odd moments. Many times after a fraud is uncovered we hear people say things like:

  • He would say things sometimes and I would think maybe I heard him incorrectly;
  • I just assumed she had inherited money from a relative who had passed away;
  • When he started explaining things, he made it sound so complicated that I decided maybe I thought something was wrong because it was too difficult for me to understand.

Humans are odd creatures. We have the power of choice and sometimes that means that a person will make a choice that is absolutely illogical to you. For instance women will wear shoes that break their bones and disfigure their feet and, not only will they wear these shoes, but they will also play hundreds of dollars, sometimes thousands, for these foot-deforming shoes. For many, there is no good reason to destroy your feet in the name of cute shoes but for many others it makes enough sense for them to do it. I know this as a runner who has seen how wrecked we look at the end of a race – bleeding body parts, hobbling, missing toenails – and yet how absolutely triumphant we are. We often don’t make sense.

At times when things pop up that we don’t make sense, we need to be able to keep from thinking that the error is with us. Instead of creating explanations that make sense to us, at times it is important to step outside our boxes and open our minds to the possibility of the unimaginable. If it appears off, it may well actually be off and not be your imagination. It turns out that no one is too smart, too rich or too nice to commit fraud.

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A Little Secret Is Okay

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We live in an age of information and that’s generally a great and amazing thing. Pretty much wherever I go, I can access sports scores or be that obnoxious person who brings Google in to resolve a debate. Sometimes the age of information is not so great, like when the internet convinces me that the itchy throat I have may kill me. That information is so easy to come by and that we humans are social animals may contribute to how willing people are to share the information that they have. When that sharing leads me to a new, delicious and easy way to prepare the mountains of kale in my refrigerator, then that is fantastic. There are, however, moments when it makes sense to keep some information to myself.

The other day a friend of mine asked me for my opinion on sharing information with a person she does not know well. This person owes my friend money and, instead of sending a check, asked for my friend’s bank information so she could just wire the information. She asked  me because she did not have a warm and fuzzy feeling about sending this information out and I told her that she should go with her gut. It is the same sort of concept as when someone sends you an email telling you that you have won a million dollars in a lottery that you never bought tickets for. In order for you to receive these incredible winnings, the email will say, you should send them information, including your bank information, so that they can wire this money straight into your account. More often, what happens in these cases is that fraudsters will take money out of your account instead of any lottery (that you never entered) putting money into your account.

Granted, banks have many controls in their systems to help protect customers from fraud but it is smart to be proactive about safeguarding your money. You don’t want to end up reacting and working hard to try to get back money that has been taken out of your account. Granted, when you write a check out to someone, your bank account and routing number are listed at the bottom of the check. However, I would think that you have some kind of idea who you are writing the check out to and the check will have some information about who presented that check for payment. Either way, you should never feel pushed into using a form of payment that you are not comfortable with – if there is personal information that you don’t want to share with someone, and your bank account certainly counts as personal information, it is absolutely fine to keep it to yourself. Tell that person to use Paypal, QuickPay, send you a money order or just that check you asked for in the first place. These alternate payment methods that don’t involve sharing any of your bank information were made for people like us who don’t always feel like putting it all out there.

Generally, if there is a lack of trust when it comes to your money, go with what makes you feel warmest and fuzziest. Also, since wires cost a lot more (for both the sender and receiver) than putting a check in the mail, it may make sense to go with what costs you the least. You know, “just because you’re paranoid doesn’t mean they aren’t after you“. Keep your gut happy.

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You Better Think

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I just spent the last two weeks in Zimbabwe and Mozambique. I was over there to have a wedding and then go on honeymoon. Before I left the United States, I decided that I would get a prepaid line in Zimbabwe, with roaming capabilities in Mozambique. In this way. I would have a way to communicate while traveling. We went in to the phone store to purchase a line and air time and that, in and of itself, was a tale to tell. We came out of the store with almost no idea what we had. After telling the cashier in the phone store what we wanted to use our line for, she suggested that we buy $20 in air time and sent us on our way. We had no idea how much time we could spend on the phone, what the roaming rates would be while we were in Mozambique and we had no clue what was going on with our data. As a long time cellphone user, I was pretty sure that I could figure it all out.

Well, it turns out that sometimes a new system can be more complicated than one can imagine. I realized, pretty quickly, that I would have done well to have received an instruction manual or some basic training. I would have tried to search for information online, except I had no idea how to activate my data. After figuring out how to convert some of my air time minutes into data, I made a call to customer service to receive instructions on how to actually activate data on my phone. After a second call, I actually got data to work but I had no idea how to track my data use, how much data I was using or how much data I had left to use. The data availability was very erratic; sometimes I had it and then, randomly, it would be gone. When I asked a friend, who has recently moved to Zimbabwe, how it all worked he said that he couldn’t understand any of it. So I decided to enjoy my vacation, appreciate any data I did get and not sweat the stretches of time when I had no data at all.

Because we were moving around a lot, we also had very limited access to wi-fi. As a result, we spent a very lo-tech fortnight. Because I could not always get the internet to work, I was never able to Google anything. I was forced to remember what I had learnt about something or to perhaps wonder whether I had learnt it at all. It turns out that the people we spent time with also had a very different relationship with the internet than I have been accustomed to. Not once during the two weeks we were in Southern Africa did a person consult Google during a discussion. Conversations were very interesting – a group of five people could end up with five very different recollections of an event – what happened, who was involved, what the outcome was and what was behind the action. These conversations would be fascinating because as a listener, I would have to decide, all by myself, what to believe. Without access to the convenience of an internet search, I had to think things through and choose whether to be analytical or emotional when coming to some conclusions (or at least how to balance my approach). It was fun and refreshing to give my brain this workout and it also led to some very exciting and, sometimes, very funny conversations.

Though I return to my easy (and, at times, lazy) access to internet information, I hope that I do not forget the lessons of my brain exercise. I really do appreciate the reminder that it is important to unplug at times and take time to listen, think and work things out. Having technology is incredibly useful and beneficial but one must not depend on technology at the expense of processing information and reaching conclusions using our brains. This is a vital thing to remember, especially is this age of big data. Having a lot of data and not knowing how to use it, what questions to ask of it or what it all really means is as useful as not having any information at all – at times it may even be more dangerous.

I am very happy to be able to get data at the touch of a button but I am also glad to be reminded to use my head more, ask questions and consider my possible answers.

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Who You Gonna Call?

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After watching more television that I am sure is healthy, I often worried about who I might call should I need to say, “I’d like my lawyer.” My work as a CPA, in general, and specifically as a forensic accountant has helped me realize that there are many different situations in which a lawyer can make life a lot easier (and they are not always terrible situations). Just last week, I was talking about the importance of seeking out a qualified professional. It is important to have an idea what kind of help you need so you get the right professional for that need.

It is mind-blowing how many types of lawyers there are. Lawyers may specialize in criminal law, family law, mergers and acquisitions. You can call them to help you put together a lease and you can call them to help you decipher a lease. They can be the expert you hire when you are establishing a business or if you are trying to dissolve a business. In all these, and the countless other situations that are connected to the law, hiring a good lawyer who has knowledge and experience in the matter at hand could save you money and stress in the future. It would not be wise to hire a property lawyer to represent you in a criminal case and vice versa.

In addition to knowing the law, good lawyers will recognize when they need to work with an expert. For example, in the dissolution of a business, lawyers will call upon a business valuation expert. The lawyers may know the legalities involved in the dissolution but the lawyers also know that, in order to best serve their clients, they need to engage the services of a qualified financial professional. The relationships between lawyers and experts, including financial forensic experts, is a very important one. It is important for all parties involved in a legal matter to understand what everyone brings to the table.

Because a lawyer advocates for their client, the lawyer is who you need when you need a friend. Your lawyer will work very hard to best represent you. Your lawyer’s goal, in a nutshell, is to resolve the matter in your favor. In the process of giving you the best representation, your lawyer may call upon an industry expert. In financial matters, this expert is likely to be a forensic accountant and probably one who is certified in financial forensics. Because a forensic accountant advocates for the truth, the lawyer will engage the forensic expert to find and present the truth in your case. The forensic accountant deciphers complicated financial issues, seeks out the truth in those matters and presents them in a straightforward manner that is suitable for a court of law. Your lawyer, your friend, will find you a well-qualified expert who will take your complicated legal issue and present it as a set of uncomplicated, unbiased facts. In this way, your lawyer and the forensic experts that your lawyer engages will work together on your legal matter.

So when you need someone on your side, call your lawyer. Your lawyer will work hard to get the truth of your case out in a clear and uncomplicated manner. The best lawyers will know to call unbiased, qualified experts who will advocate for the truth and know how to make the truth clear, properly supported and at a standard acceptable in court.

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