Tag Archives: the truth

It’s All Good

adult-american-football-athlete-209954

I have written before about the importance of whistleblowers as a prime tool for detecting and discovering fraud. The ACFE’s 2018 Report to the Nations states that 40% of frauds were discovered through a tip from a whistleblower. This is, by far, the most common way in which fraud is uncovered. At 15%, internal audit came in a distant second. That’s huge. It is important to note that, in a business, a whistleblower can report wrongdoing in many areas – dangerous weaknesses in the design of a product, dishonest marketing and anything else going awry in an organization.

The history of the whistleblower in America dates back to the late 1700s when ten members of his crew and 2 citizens reported Esek Hopkins, the nation’s first commodore, for torturing British prisoners of war among several allegations. Hopkins was suspended and, in turn, retaliated by having the whistleblowers arrested. These whistleblowers appealed to the congress claiming that they were “arrested for doing what they believed and still believe was nothing but their duty”.  Congress responded by creating the country’s first whistleblower protection law. I love this story because it covers the entire whistleblower cycle. First, we have people seeing behavior that they believe is wrong and then taking steps to report this. We then have authorities taking action on the reported wrongdoing. We see the ugly side of things when Hopkins retaliates, something that, unfortunately, happens too often when whistleblower complaints are filed. Finally, we have whistleblower protections, as lawmakers recognize that it is important to have a system in place that protects those who call out what is wrong.

Sadly, this was not the moment when the world realized the importance of the whistleblower, holding the role in an esteemed position, where whistleblowers would be lauded and admired for all time. Instead, over time, in all spaces, including the movies, whistleblowers were given a bad rep and uncomplimentary labels like “snitch”, “informer” or “rat”. Instead of being admired for uncovering wrongdoing, whistleblowing was viewed as violating a sacred code of silence. We were being told that it was better to be a criminal, stealing money, jeopardizing people’s livelihoods and sometimes even their lives, than to be the person shining the light on all of this. We found ourselves in a space where, yes it’s terrible if someone runs off with your money or turns a blind eye to safety in a product, in pursuit of profits, but it is so much worse if someone tells us about it.

In 1971, Ralph Nader, the famous consumer activist, made it his mission to remove the tarnish from whistleblowing. He described whistleblowing as “An act of a man or woman who, believing that the public interest overrides the interest of the organization he serves, blows the whistle that the organization is involved in corrupt, illegal, fraudulent, or harmful activity.” He worked tirelessly to put a positive spin on the word whistleblower and as people view the role more favorably, whistleblowers can be better protected from retaliation.

We should recognize that it is not easy to be a whistleblower. Most people have a level of loyalty, if not to their job, then definitely to their colleagues. When they see fraud or other wrongdoing happening, they are torn and conflicted and often hope that they are wrong. Most of us like the people we work with and may know about their families and may even socialize with them. The second last thing we want is to find out that a coworker is perpetrating a fraud, only because the last thing we want is to be the person reporting this. At times, people will leave a job before they report a fraud. Other times, a person will keep quiet, hoping that someone else takes on the burden of reporting the fraud. It is a heavy emotional burden.

This is all before a whistleblower has to consider possible retaliation for reporting that wrongdoing. Many people fear losing their job or being ostracized after blowing the whistle on fraud. Unfortunately, sometimes these people are correct. At times the retaliation will not be overt but can happen in insidious ways where those retaliating try to find loopholes and legal ways in which to push a whistleblower out. When this happens, any other potential whistleblowers can be scared into silence. We tend to find out about this retaliation when a fraud is uncovered and we discover that, perhaps for years, others had tried to report the fraud but were fired, ostracized as people who were not team players, or treated as though they were insane for suggesting such a thing.

With these things in mind, it is paramount to business leaders and all others to act to hold whistleblowing as a positive action and to encourage and protect whistleblowers. Unless you are a leader perpetrating a fraud at your organization, why wouldn’t you want a whistleblower in your midst? Here are a few steps you can take to make this happen:

  • Your onboarding process should include information to employees encouraging whistleblowing and giving them clear and easy ways in which they can make reports.
  • Provide employees with an anonymous way in which they can share a tip. Also provide various places or a third party, in case the whistleblower does not feel that the option provided is one that is safe and one that will act on the tip.
  • Have zero tolerance for retaliation. This should not only be communicated to employees but be an active part of your company’s culture.
  • Show clearly that you have acted on a tip and that such actions are encouraged and appreciated in your organization.
  • Keep information on reporting whistleblowing prominent in your firm and remind employees regularly.

We are in the midst of football season and many fans are very upset with referees right now because it seems they are not making calls that they should, and they are letting players get away with things that lead to what fans view as unjust outcomes. If we feel this strongly about referees blowing the whistle on bad plays, shouldn’t we be bringing at least the same level of passion to blowing the whistle on wrongdoing in businesses and other organizations?

 

Tagged , , , , , , , , ,

Nobody’s Perfect

stockvault-fortune116480

Barings Bank was the United Kingdom’s oldest merchant bank and the second oldest merchant bank in the world. In 1992, the bank sent 25-year-old Nick Leeson to be the general manager at its new office in Singapore. During that first year there, Leeson made unauthorized trades that earned Barings £10 million in profits. The bank should have had a system where one person was a trader, and another was double-checking and then authorizing these trades. Instead, Leeson did everything with no checks and balances. Yes, these trades were unauthorized, but they made the bank a lot of money and so, instead of nipping the unauthorized trades in the bud, Barings paid Leeson a massive bonus and labeled him a rising star. Things changed very quickly, and Leeson started losing money on his trades. Instead of reporting his losses, Leeson hid them in a suspense account, that he created and tried, unsuccessfully, to recoup his losses. He would then hide those losses in this suspense account as well. By the end of 1994, the losses stood at £208 million. In February of 1994, Leeson left a note stating, “I’m sorry”, and fled Singapore, leaving Barings Bank with £897 million in losses (equivalent to $1.4 billion). Barings Bank could not recover from those losses and, after being in business since 1762, collapsed and was bought by ING for £1.

The story of Barings Bank and Nick Leeson is like one of those puzzles where you circle the ten things wrong in a picture – there are that many problem areas and weaknesses that led to the downfall that we could revisit this story many times for lessons. Today we shall focus on Nick Leeson hiding his bad bets. Initially, Leeson made errors and miscalculations on some trades that he made and lost money from those errors. From some of the accounts from Leeson, it is implied that mistakes were not looked upon kindly. Leeson claimed that he first opened the suspense account in which he hid losses after a colleague lost £20,000 after making an error herself. Instead of either one of them reporting the error, they decided to hide this error from leadership. Nick Leeson then went on to hide more of his trading errors here, thinking, in the manner of a gambler, that he could gain the money he had lost back, and his bosses would never find out what he was doing.

I thought about Nick Leeson this week because I am reading Principles by Ray Dalio. In it, he tells the story of how his employee Ross, who was in charge of trading at the time, forgot to make a trade and that cost the business “several hundred thousand dollars”. Dalio tells us that, with such a costly error, he could have dramatically fired Ross and “set the tone that mistakes would not be tolerated. Instead, Dalio recognized that mistakes happen to us all the time, he himself had made mistakes so large that he had essentially lost his business at some point. Dalio’s approach, which is an approach that I am a huge fan of and have tried to follow for a long time, is to think about what to learn from mistakes and how to improve things to minimize the chances of those mistakes happening again, or at least how to minimize their impact should they occur. As I have written before, Dalio recognized that punishing Ross for his mistake would likely result in other people working hard to hide any errors. Dalio saw that would cost his business a lot more in the long run. At his firm, Bridgewater, Dalio and Ross created an error log where errors were tracked and addressed. Instead of people getting into trouble for making mistakes, they would get into trouble when they didn’t report mistakes.

With Leeson (and Barings Bank) and Dalio in mind and the different outcomes that have resulted from their approaches to dealing with mistakes is very telling. One person brought down the second oldest merchant bank and the other has what is considered to be the fifth most important private company in the United States. Some things to keep in mind when considering how to manage responses to errors in your business:

  • Create an environment where everyone is comfortable reporting errors that they have made. Be explicit with this, both in what you say and how you respond.
  • When you discover a mistake, take the time to look, with your team, into how this mistake might have been avoided or recognized and resolved earlier. An example is, with a missed trade, it is likely that Dalio and his team looked at the process and sought to put in checks to make sure that there were others aware of the trade, checking to make sure the trade was made and having a way to check in with Ross to make sure he had not forgotten.
  • Review your systems to see where there are checks and balances and if especially important areas are not put on one person. Make sure that someone else is checking – we all make mistakes and that is why there is a checking system. Not to make us feel bad about ourselves but in recognition of our humanness.
  • Have open discussions about errors and get input from all levels on how to avoid or detect errors. At the leadership level, you may come up with a system, but you may find that staff find that process cumbersome, don’t stick with it and errors can go undetected for a while. And if an error has not even been detected, it can’t be reported.

These are just a few things to think about but the most important part is creating an environment that is open to communication, not just about success, but about the things that have gone wrong. You should think about making the environment open for the hard conversations the priority because it is simple to report and celebrate success but failure and error are what kill our business. With that in mind, are there situations that you have found yourself in where either you or someone on your team made a mistake? How did you respond, how did others respond, and how did things turn out?

Tagged , , , , , , , , , ,

Even When You Don’t Want To…

9ea73231-a8e0-4d06-9589-da7f1dc5e372

Linda Kadzombe

Linda was not my friend. I was in high school, sitting in the car, in the school parking lot, with my father, waiting for my little sister to show up. She ran up, with a friend and they stood by the car, smiling and sporting matching nose rings. My father looked up and the two girls, and their matching noses, and exclaimed – “I suppose nose rings are part of the school uniform now.” That is my first significant memory of Linda, who was my sister’s friend. Along with a great group of friends, Linda and I rang in 2000 in Victoria Falls. We talked about the fact that we were both moving the United States and we promised to keep in touch with each other. This vague promise turned into a relationship that the word “friend” does not do justice. With our families far away, we checked in with each other almost every day and often the conversation started this way: “Just checking in. I’m alive.” Once, I called Linda when I stuck in a dress I had ordered online and that I was trying on. She was living in Boston and I was in New York City and yet, she was the first number I thought of dialing. We were travel buddies and talked about becoming the sweet old lady travelers that we often came across during our trips. We shared a love of European chocolate and I was a person she taught, and gave permission, to stab her with an EpiPen should the need arise.

On March 6th, I received a call that had never even drifted into my imagination. While flying back home from an epic vacation with her cousins, Linda passed away. The news was devastating; it still is. At the same time, there was a lot to do. Whether or not you have planned for death, when death happens, there is a lot that needs to be done, not only to put your loved one to rest but also to sort out your loved one’s affairs. Friends and family came together for Linda and, as we navigated various issues, we were frustrated, energized, and touched, often all at the same moment. It made me think about the importance of planning, not only for the workplace, but also for one’s personal life.

The first step is the dreaded will. No one wants to ever think about their mortality but, even when you think you have nothing, you always have enough to put in a will. At the very least, you have your wishes. Even when you think to yourself – oh, I am single, and/or I don’t have children – you still should have a will. Remember that a will is a legal document and you should be sure to comply with the law, or your will may not be accepted as binding. For instance, the rules about whether or not a handwritten will is recognized varies by state. You should also see if your financial accounts can be set up to be transferrable or payable upon death, as this will save survivors the headaches of dealing with probate court. In addition to letting people know what you want done with your stuff, you should also think about how and where you wish to be laid to rest, if that is something that is important to you.

We live in an age of paperless billing and most business being transacted through online accounts. This means that, for many of us, all our accounts have a login and information about accounts and their existence may only exist in our email accounts. To questions about what accounts and liabilities Linda might have, we could only shrug and guess. Dashlane estimates that the average user has 90 online accounts! Consider making a list of your accounts that you will keep safeguarded in a safe, or with a lawyer, if you keep your will with a lawyer. There are various ways in which to work to both safeguard your personal information and also ensure that your accounts are known and closed correctly, after passing.

If you don’t already have it, get life insurance. The policy doesn’t have to be a big one; just enough to cover the costs that may come up due to death. These include:

  • Payment of final expenses;
  • Taking care of your loved ones, if you have loved ones that depend on you;
  • Payment of debts, so that your next of kin are not on the hook for them;
  • Payment of estate taxes

It may seem horribly morbid to talk about death and it is certainly no fun to deal with the affairs of a loved one. In the midst of grief, you don’t want to deal with some of the headaches that can pop up around the administration of everything – dealing with hospitals, funteral homes, airlines or whatever. Fortunately, Linda had an amazing network of people who loved her (and some incredibly kind strangers who saved the day more than once). All worked hard to get her home and laid to rest near her family. We also were able to spend a lot of quality time with friends and family that we had long promised to spend time with you. You know how that happens – next week, next month or next summer turns into ten years. However, through it all, we had a lot of figuring out how to do something or where to find things because we had never even thought about navigating this terrain.

Take some time to think about what you have and what you want done about it. Talk to your loved ones and tell them to make plans, if they have not already. Remember that it is never too early to plan and, unfortunately, often too late.

Tagged , , , , , , ,

One Team, One Dream

 

Pyeongchang Olympics Cross Country Men

The Winter Olympics are going on and I am filled with joy. From the opening ceremony until the end, I am inspired over and over again. Just the other day, Ester Ledecka, from the Czech Republic, won a gold medal, on skis she borrowed from USA’s Mikaela Shiffrin. Athletes, representing their countries, come together to compete against each other while, at the same time, showing incredible sportsmanship, teamwork and support of each other. Four skiers from so-called “tropical” or “exotic” nations (Colombia, Morocco, Portugal and Tonga), who were among the last to finish, waited for the last athlete, from Mexico, to finish. They cheered him across the finish line and raised him in exultation. How incredible is all that?

Since I stepped out and started my own company, I have been spending a lot of time alone. Honestly, even though I was working in offices, my last few positions had me working mostly on my own. Seriously, I could go for weeks without talking to anyone about what I was working on. I would sometimes wonder if anyone cared. I started working on a project a few months ago and I am being reminded how powerful a great team can be.

Modern offices are designed to have more interactions among people – offices are more open, there are games set up in the office and people can hang out on couches. Imagine that, comfortable furniture in the office. With all of that, though, I am finding that the real trick to interaction and successful communication at work sits with the people. I have been in open office spaces where, for days on end, people say barely a word to each other. I have walked down hallways where the person heading towards me will risk breaking their neck by looking anywhere but at me – the horror of a greeting is strong, apparently. The Inner Auditor kept me thinking about the priority of people in a business and on a team.

In the work that we do, we are often under pretty stressful conditions – clients are almost never happy to see us, we have tight deadlines and we are often trying to make sense of things that don’t make sense to the people doing those things. Each of us is incredibly busy and run the risk of keeping our heads down just get through everything assigned to us, while staying within budget. With that kind of pressure, the temptation is high to just put our head down, plug in our earphones and only engage when absolutely necessary. I am sure that approach can get the job done but I know, without a doubt, that the structure of the team that I worked with ensured that we excelled.

We did not choose our team, but I ended up working with three incredible women who have made me better at what I do and how I do it. I believe that we all agree that we have benefitted from our experience together. Each member of the team has a knowledge strength and is more than willing to share what they know and help us get a little stronger too. Even as deadlines have loomed and hours have stretched, our team has prioritized wellbeing. We have been taking time to read more, laugh more and talk to family and friends more. Because our team has come together on these various levels, we are also able to communicate the difficult information that comes up during our work. Sometimes, a person may come across information that will either upset the client or lead to more work. Sometimes a person may realize that they missed something. In these cases, if communication is not good, that person may choose to remain silent. Instead team members may end up spending energy on hiding issues and hoping that they are not discovered. That is never a good thing. Not only did our team feel comfortable about bringing up the issues, we were always willing to brainstorm and work together to resolve them.

Although this may sound like I am seriously crushing on my awesome team (which I am) it is also a great lesson in the incredible value of having a team that is talking to each other and working together in order to produce great work. In an office where no one is talking, and people are not interacting, how long do you think it will take to realize that something is wrong? If people view saying good morning as something to be avoided at all costs, who are they going to tell when they think the person in the cubicle next to them is doing things that they shouldn’t? If people are not talking about what their fellow work mates are doing, how are they to know who to turn to for assistance and will they even feel comfortable approach Janice who barely grunts when they come across each other in the office’s common space? And then, when fraud or error is found at the company, can you really be surprised that it took as long as it did for it to be discovered?

The time you take to get to know the people you are working comes with benefits that are worth far more than that time. It takes more than knocking down walls and providing great coffee. We spend a lot of time talking and reading about the impact of communication. We know this in theory but how often do we put energy into putting this into practice? I know that each one of us stepped outside our comfort zones in order to get to our Dream Team status. Each one of us made a conscious effort to reach out and share of ourselves. Each one of us was determined to produce exceptional work and communication was a key element of achieving that. I have been inspired by these women that I have worked with. I have laughed, been moved and been brave with them.  I shall be truly sad when this project is over and eternally grateful for the great experience. #OneTeamOneDream

Tagged , , , , , , , , , , , ,

Now That I Think About It…

408H

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?

Tagged , , , , , , , , , , , , , , , ,

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!

Tagged , , , , , , , , , , , , , , , , , ,

Over My Shoulder

img_1069

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 nonprofit leadership 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!

 

Tagged , , , , , , ,

Cheating Mysteries

Cheating-feature-photo2

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.

 

Tagged , , , , , , , , , , ,

Here’s My Number And A Dime…

nyc-phone-booth

 

“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.

Tagged , , , , , , , , , , , , , , , , , ,

Who Runs Things?

Image

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.

Tagged , , , , , , , , , , , , ,