acfe dark side - wild apricot › resources › documents › … · l. rene brison, cpa, cfe...
TRANSCRIPT
1
Fraud Cases
L. Rene Brison, CPA, CFEMiddle Tennessee Chapter ACFE
Annual Fraud SeminarMarch 4-5, 2019 1
Lessons Learned from the
Dark Side
ThankYou!
Relax
1
2
3
2
This presentation represents my opinion only.
The materials presented herein do not necessarily reflect the opinions of the
State of Tennessee or any part thereof.
Session Objectives
4
5
6
3
Session Objectives
Discuss recent fraud casesDetection
Investigation
Adjudication
7
8
9
4
Session Objectives (cont.)
Share lessons learned
End Goal
Provide some takeaway that will help you become the best fraud examiner you can be.
10
11
12
5
The
Master Illusionist
13
14
15
6
NotificationMaterials Management Tech
requested adjustment to correct error
Senior Accountant suspicious
Senior Accountant researched (called vendor).
16
17
18
7
From Vendor In File
19
20
21
8
NotificationMaterials Management Tech made
several personal purchases on P-card
Concealed by creating false receipts for frequently purchased items
Manipulated quantities and receipts to match charges listed on P-card.
Fraudulent charges of over $2,400
Clarksville Gas and WaterFYE 2016
Proprietary Funds of City
Expenses
Gas - $19 mil+
Water - $39 mil+
Clarksville Gas and WaterFYE 2016
Customers
Gas - 26,000+
Water - 55,000+
22
23
24
9
Triage ConsiderationsDoes allegation have merit?
How do they know?
Consider source.
Can COT add value to investigation?
Is it beneficial to legislature/taxpayers?
Triage ConsiderationsDoes entity or other agency
have adequate resources to investigate?
Does COT have adequate resources to investigate?
25
26
27
10
COT Clarification
COT Clarification
Shipped to personal address
COT ClarificationInterviewed employee
28
29
30
11
Employee
Only at Cabelas!
“Don’t recall” making improper purchases from other vendors.
COT ClarificationEmployee placed on
Administrative leave pending termination
Planned to speak to DA
COT Triage
Discussed Value-Added
Initiate COT Investigation
31
32
33
12
Triage
Don’t over-extend your resources
Lessons Learned
TriageAlways keep main
purpose of triage in mind…
How do we best allocate resources?
Lessons Learned
34
35
36
13
First Steps
Spoke to detective
Spoke to entity
Spoke to DA
InvestigationMet with finance officials,
including accountant
Discussed purchasing process
Obtained recordsP-card statements
Supporting Doc’t - Scanned POs and invoices
Entrance (or before)Be NICE
Lose ArroganceNeed information!
Want compliance and cooperation
Acknowledge their turf
Lessons Learned
37
38
39
14
Tony Hams Worked for city since 2000
Worked for CGW since 2004
Married
3 Sons
Involved in youth sports
Tony Hams
Moved in with in-laws
Had unpaid traffic tickets
Had suspended license
Tony Hams – Observations by staffVery nice and personable
Previously refused promotion
Would always tell me exactly what I wanted to hear
Progressively worsening reviews
40
41
42
15
Tony Hams – Observations by staff
Office secluded in warehouse
Often laid back with feet kicked up on desk
Tony Hams – Observations by staffCleaning business on side –
stored supplies in city warehouse
Currently working as Target cashier
Investigation
Last four years:
P-Card purchases over $434,0000
43
44
45
16
InvestigationInitial Vendor Selection:
Vendor sold items for work and personal use
Frequency/$ amounts
Inadequate or suspicious documentation
Called Vendors
46
47
48
17
Mr. Hams’
home address
Compound Bow
and Arrow Kit
49
50
51
18
52
53
54
19
Mr. Hams’ home
address
Warehouse Requisitions
55
56
57
20
Warehouse Requisition
58
59
60
21
Facebook FindsEaster Pics
COTInvestigative
Results
61
62
63
22
Misappropriation totaling at least
$47,518
$15,170.48Hunting equipment and gear, rain gear
Jackets, gloves
Pants, shirts, shorts, swimwear, sleepwear, socks
Boots and shoes
Yetti
Hats, visors,
etc.
$9,224.66
135+ pairs of shoes
A few jackets
64
65
66
23
$8,270.43
Clothing (men and kids)
Shoes (men and kids
3 pair RayBan sunglasses ($130 to $150)
$5,964.7829 pair Oakley
sunglasses most in the $120 to $280 range – and a few other things
InvestigationVendor Selection:
Shots in the dark
67
68
69
24
$3,911.98$2,934.83
$1,623.29
LogoSportswear.com - $306.43 – visorsSmartBuyGlasses - $111.95 – RayBans
False computer entries
70
71
72
25
Investigative Results –Additional IssuesLack of separation of duties
Inadequate supporting documentation – lack of scrutiny
Failure to verify receipt of online orders
Where did it all go?Personal/family
Use?
Sports teams?
Sold online/flea markets, tournament booths?
Invoices for one vendor had no telephone number, website or address
Numerous purchases that could have been used at CGW (but probably not)
73
74
75
26
Vendors could not/would supply invoices
Cleaning supplies used for personal business
3 counts of Theft over $10,000
1 count of Official Misconduct
10 counts of Forgery
Friendly conversation with vendors usually improves chances getting documentation
Be skeptical
Be persistent
Lessons Learned
76
77
78
27
Know when to quit – you’ll rarely, if ever, get it all.
Give credit.
You sometimes never determine the WHY.
Lessons Learned
The Wolf in Sheep’s Clothing
L. Rene Brison, CPA, CFE, Deputy Chief InvestigatorDivision of Investigations
(615) [email protected]
79
80
81
28
The Wolf
in
Sheep’s Clothing
Thursday, March 10
Mayor
City of Luttrell
Justin Wilson, Comptroller
State of Tennessee
82
83
84
29
Is it normal practice for an employee to
make deposits in a city bank account using a
personal check?
City of Lutrell
85
86
87
30
?
Bank Research
5 checks totaling over $10,000 to city recorder’s husband
Maybe extra checks to city recorder
????????????Second signature
name on bad checks is vice-mayor’s
88
89
90
31
MayorCity Recorder paid from
two separate bank accounts EVERY WEEK!
City Recorder paid extra check EVERY WEEK for cleaning city hall
Checks with his signature are legit
Side
Utility Management Review Board
MayorCity’s water/sewer
system billing handled by a local utility district (LBC)
System in Financial Distress
91
92
93
32
MayorCity Recorder claimed
LBC not turning over all the city’s money
He told city recorder to request John Greer from UMRB to investigate LBC
MayorTold family and 3 close
confidantes
Wants to talk to Vice-Mayor
Needs to tell Board
Next meeting is March 21
94
95
96
33
Always be Prepared
Investigations - “Time is Right” often does not apply
Make use of available resources when possible
And…….
Lessons Learned
City of Luttrell
Population < 1,000
97
98
99
34
100
101
102
35
City Recorder – Rebecca AilorEmployed 8 years as CR
36 years old
3 young children
Obtained CMFO certification
103
104
105
36
City Recorder – Rebecca AilorHusband Steve does NOT
work for city in any capacity
• Day 1
Monday, March 14
106
107
108
37
Entrance
Entrance
Met with CR
Discussed water/sewer concerns with LBC
Look at other stuff
Requested Records
Bank Accounts/Statements8 bank accounts
Signators – City Recorder, Mayor, Vice-mayor
Accounts not Reconciled
Per CR - Imaged checks not available and bank will not provide even though she asks
109
110
111
38
112
113
114
39
115
116
117
40
118
119
120
41
121
122
123
42
Forged Signature
Forged Signature
124
125
126
43
127
128
129
44
Extra payroll checks
Travel
Travel
130
131
132
45
Transfers Between Accounts
316
$1.6 million
133
134
135
46
136
137
138
47
139
140
141
48
Talked to Mayor and Vice Mayor
Computer Access Concerns
142
143
144
49
Misappropriated Over $120,000
145
146
147
50
What we found
Over 140 fraudulent checks to city recorder or husband
Forged vice-mayor’s signature on most of fraudulent checks
148
149
150
51
Over $92,000
Dating back to February 2015
151
152
153
52
Accounts Payable
Over $92,000
Dating back over a year
Aggregate Bank Accounts -
$3,590
154
155
156
53
Indicted
One count of Theft over $60,000
One count of Tampering with Evidence
Sentencing
11months 29 days
25 years probation
Restitution
Review source documents when possible
Gather and retain needed records/evidence early
Lose the blinders
Sometimes you have to get your hands dirty
Lessons Learned
157
158
159
54
Work is usually not over when report is issued.
Lose the Arrogance
Keep It Simple
Look at the jurors
Defense Attorneys – Don’t take it personally
Adjudication -Lessons Learned
Contact Me
162
L. Rene Brison, CPA, CFE, Deputy Chief InvestigatorDivision of Investigations
(615) [email protected]
160
161
162