is needed on at least an ed that ll employees be company are arrested or oyees, customers, and and abuse. formal hotline. Instead, ‘companies did nothave ow for anonymous and x. The hotlines must be all allegations received cold standard for fraud stected by having CFEs to detect, investigate, al in fostering a climate lcrosoft Corporation, in fraud detection, ‘ecutive Roadmap to Wiancé, published by oun BO Information Superhighway BARRY DAVIDOW PP" Green served eight years on the New South Wales police force in Australia. He measured in at slightly over six feet, but his perfect, sharp posture made him appear taller. People guessed that he was in the military orlaw enforcement when they met him— he had the look of a respectable authority figure. ‘When Phil decided to quit the force, he was a highly regarded detective; he had made a ‘name for himselfas a hardworking and effective member of a specialist team. His superior officers tried to talk him out of leaving, convinced that he was destined to move quickly up the ranks, That's what he told me, at least. He wasiin his early 30s when he left the force. He loved the police service but feltthat he needed a less risky and more lucrative job for his family’s sake So Phil opened an office as a private investigator. He relied on his vast network of personal contacts in the law enforcement and criminal world to obtain information about suspicious people and their activities. Phil could find people who ran away from their debts, families, and lovers. He received a steady stream of clients and felt secure within a year of starting his new business. “L was doing okay but I wanted some real money.” he said. “A client told me that if wanted to get rich I should follow the cash, like Slick Wille, to the banks.” He soon learned that banks and insurance companies were owed substantial amounts of money from clients, absconding, The financial institutions were willing to pay high fees to get their money back. Phil discovered that using the electoral roll for tracking people was not very helpful Even though they were required by law to give the electoral office their real addresses, people who didn’t want to be found didn’t always do so. Phil learned that the most reliable database of addresses was in the New South Wales Roads and Traffic Authority (RTA) ‘The RTA’s major functions are to test and administer driving licenses, register and inspect vehicles, and improve road safety. In order to avoid losing their driving licenses, people made sure to inform the RTA about their changes of address. The difficulty was that the RTA didn’t allow disclosure of information from their licensing and registration database to outside parties ‘The financial institutions had a dilemma. The employees at the RTA didn’t want to disclose personal information from the database, and the banks didn’t want to bribe them, 477478 CHAPTER SO INFORMATION SUPERHIGHWAY because they considered bribery unethical. That is why they wanted Phil to get the information for them. Phil was proud of the way that he could turn honest RTA employees into corrupt officials. “[ would find the most helpfal, courteous, and sincere person at the motor registry” he said, adding that most of the workers who fit this description were male and more gullible than females. “I would then put a folder on the counter and tell him that I was so worried about the case I was working on that I couldn't sleep. Opening the folder, I would show documents and say something like “This case here is about how a crook has built up a debe with Bill and Greta Johnston. They are the nicest people you could hope to meet—the real salt ofthe earth. They are in their 80s and run a small corner shop. A guy, Fred Bloggs, has been buying from them on credit and now owes them over $20,000. I checked on him and he has a criminal record longer than you could imagine—a real crooked fraudster. He's stolen from charities, orphans, and many people like Bill and Greta. He preys on good people. Anyway, Bill and Greta had to mortgage their home to finance theit business, and now they're going to lose everything if I can't track down this Fred Bloggs. They'll lose their business and their home. They'll be out on the street. I can see that you're a good person. I've seen how you go out of your way to help people atthe registry, Please help me to save Bill and Greta. I can't let them lose everything, Please, look up Bloggs’s addres. Nobody will ever know, and you'll help save this wonderful couple and make sure that this crook gets his just deserts? Invariably the clerk would give me the address. I'd drop off a fancy box of chocolates and tell him that it was from Bill and Greta and although they did not know the name of the person who had helped them, they were extremely grateful The person would feel good about what they had done and I would leave it at that fora couple of months. Then I would return with another ‘case’ and I'd get them to help me again. After the second time I would not wait too long before the third. After that I would give thema shortlist ofnames, Before too long they would be giving me the addresses fora whole list of people in return for money. “Of course,” he added, “there had never been a Bill and Greta and the whole story was nonsense, but it got the clerks in and they earned a good income. Nobody got hurt, until this whole ICAC thing, but that's not my fault.” I met Philat an audit conference a few years after the Independent Commission Against Corruption (ICAC) inquiry. I had presented a paper on it and other cases concerning unauthorized information disclosure and theft. During one of the breaks Phil introduced himself to me. “T was one of the many key players who got away.” he said, explaining his story and details of his involvement in the trade, Thave been a fraud investigator for over 20 years and have always found it fascinating to hear the accounts of people entangled in these activities. Phil was obviously very proud that he had been so successfal in corrupting government employees and obtaining the information required for his clients, If he had any regrets, it was just that the gameranted Phil to get the mployees into corrupt the motor registry.” he male and more gullible n that I was so worried ¢ folder, I would show cook has built up a debe hope to meet—the real ‘A guy, Fred Bloggs, has 1. [checked on him and crooked fraudster. He’s ta, He preys on good ance their business, and ed Bloggs. They'll lose see that you're a good registry. Please help me ok up Bloggs’ addres. and make sure that this e address. I'd drop off a aand although they did rere extremely gratefl tld leave it at that for a ['d get them to help me third. After that I would agme the addresses fora and the whole story was Nobody got hurt, until int Commission Against ‘other cases concerning + breaks Phil introduced explaining his story and says found it fascinating ‘nil was obviously very mployees and obtaining + was just that the game DRIVER'S EoUCATION 479. As a result of the ICAC inquiry, which seeks to reduce corruption against the government, many of the clerks lost their jobs, were publicly disgraced, or had theit career prospects severely affected A large number of private investigators, inquiry agents, and debt collectors convinced government employees to release confidential information in contravention of their duties, often in breach of the law. People involved in the trade included those from the Department of Social Security, the Department of Immigration, the Australian ‘Taxation Office, the Australian Customs Service, Medicare, Telecom, Australia Post, the RTA, police services, electricity suppliers, financial institutions, solicitors, and others. ‘The purchasers of information were not only those chasing “legitimate debts.” Known, criminals were also buying confidential police information. Money did not change hands forall ofthe data released or traded. For example, a chief superintendent inthe police force stated that he dispensed information to a good friend “under the old chum’s act,” even though he knew that it was improper for him to do so, ‘Some government officials spent so much of their time improperly accessing data for sale that their work suffered. The ICAC commissioner noted a particular police officer. “When time permitted, he was the officer in charge of detectives at a large Sydney suburban police station,” the commissioner said. Some officials couldn't keep up with the demand from their “connections.” They subcontracted or franchised this fraudulent business to other corrupt government officials, One investigator told me that in several government units, there were pyramids of people selling confidential information. “In some departments it was bigger than Amway.” he said ‘Many people who were supposed to be part of the solution became part ofthe problem. For example, the RTA established a team to set up a computer security program to better protect their records. Unfortunately, some of the people working on this team took the opportunity to download confidential records and sell them. Is not known how many people participated because most were never detected. The ICAC report noted that more than 250 people have been identified as participating in the trade. A private investigator who had been actively involved told me that only a small minority of the people had been caught. “I would not know how many people there were, but [ know that most of the private investigators and their connections got away clean. If5 to 10% were caught, that would be a lot,” he said There were probably thousands of people involved in some way. Some estimate that the most widespread corruption in Australian history occurredasa result of the improper trade of information. Driver’s EDUCATION ‘The New South Wales RTA was established on January 16, 1989, from the amalgamation of three public sector agencies: the Department of Main Roads; the Department of Motor480 cHAPTERSO INFORMATION SUPERHIGHWAY ‘Transport; and the Traffic Authority. As mentioned earlier, the RTA is responsible for testing and licensing drivers, registering and inspecting vehicles, and improving road safety, Managing the licensing of drivers and the registration of vehicles has resulted in two ‘major corruption inuiries before the ICAC. “The first inquiry dealt with corrupt payments made by driving instructors to driver examiners of the RTA and its predecessor, the Department of Motor Transport. The ICAC noted that even though only a small number of perpetrators were involved, the payments made by those individuals were habitual. The investigation concluded that corruption was endemic ata number of motor registries in the Sydney metropolitan area lover a 10-year period. There were times when all the driver examiners at 2 particular registry took money. Sometimes the cash was pooled between them on a daily or weekly basis. Sixty-one people were involved in making bribes that were estimated to cost millions of dollars. ICAC acknowledged that they were unlikely to have identified all corrupt individuals, and the figures are likely significantly greater. Jeffrey Williams was appointed to the position of corporate anti-corruption coordinator, reporting directly to the chief executive. The ICAC report noted that Mr. Williams “is a person from whom a good deal can be expected.” ‘Many ofthe initiatives he introduced became standatd practice in Australia and strongly influenced guidelines issued by regulatory authorities, His task was a major challenge due to many factors. According to ICAC, in the Department of Motor Transport, “the corrupt were encouraged.” Corruption was widespread in certain areas, there was resistance to reporting corruption, and significant corruption was being ignored in other public sector agencies. One of the most successful initiatives was an ethics campaign. The RTA ethics campaign slogan was: “Support Your Values.” The Australian culture i traditionally one of rugged individualism combined with strong relationships. This results in fierce loyalty to friends and colleagues, along with skepticism of those managing others’ conduct, Jeflrey reasoned that co-opting people into the campaign so that they could insist on an honest work environment would overcome this cultural resistance. The campaign promoted colorfal posters that encouraged people to “speak up” about unethical conduct. Humorous pictures, case studies, and light articles in internal publications, ethics workshops, and briefings, in addition to management awareness initiatives, all combined to enhance the ethical culture in the RTA substantially. It abo encouraged people to report corruption. Before the campaign, people were extremely reluctant to report corruption. After it the number of reports and successful investigations increased dramatically. Other initiatives included the introduction of rigorous investigation standards, assessments of fraud risks, improving systems of internal control, close codperation with internal auditso that they could better detect fraud and corruption, enhancing human resource and other policies to reflect high ethical standards, and so on. The initiatives resulted in major advances in the organization's efforts to tackle corruption.XTA is responsible for , and improving road les has resulted in two g instructors to driver Motor Transport, The ors were involved, the gation concluded that dney metropolitan area aminers at a particular sm ona daily or weekly nated to cost millions of identified all corrupt sorate anti-corruption SAC report noted that ted” in Australia and strongly asa major challenge due Transport, “the corrupt there was resistance to ed in other public sector heRTAeethics campaign ditionally one of rugged a fierce loyalty to friends conduct. Jeffrey reasoned rsist on an honest work aple to “speak up” about ght articles in internal ‘management awareness 2TA substantially. It also sort corruption. After it sed_dramatically. Other standards, assessments of ion with internal audit so tuman resource and other Jiatives resulted in major LaWwAND ORDER 481 Law AND ORDER ‘The New South Wales police service came into posession of some documents from a jential information from police and RTA records. The commissioner of police passed the documents to ICAC. ‘When investigators interviewed the inquiry agent, he claimed that he was a lawyer with a bachelor of aw degree from the University of Sydney. The investigators later found that he was neither lawyer nor had he obtained a degree. With this in mind, the investigators were skeptical of the man’s denial that he had access to confidential police and RTA records. The ICAC decided that there were sufficient concerns based on the actual evidence and complaints to launch an investigation. The RTA followed suit. Searches were conducted of the records of private investigators who were suspected of being involved in the illicit trade of confidential government information. Parts of the investigation were relatively simple, as not all people involved in the information trade private inquiry agent who unwittingly suggested that he had access to con took steps to hide their involvement from showing in their financial and other records. For example, an invoice was found in a private investigator's records that contained a charge for relating to this man’s criminal form, then drinking with them for long periods.” ‘Another investigator showed his payments to RTA officials in his financial records listed neatly under the heading “bribes.” ‘One private investigator printed a brochure for his clients showing the services he offered and the charges. The brochure showed the sources of information, including the Department of Motor Transport, Medicare, social security, immigration, criminal history, corrupting several members of the Police Force and obtaining printouts ip 8 PI telephone, and post office. Since this information was not offically available, it was clear that the sources were not legitimate. ‘A number of private investigators kept records of the information they purchased. One particular investigator kept computer records that contained confidential government information concerning about 10,000 individuals. ‘Many other private investigators made sure that they did not keep any incriminating, records, Some of them destroyed incriminating evidence when word of the ICAC investigation spread “1 took all of my paper records to the garbage dump,” one private investigator told me, “Tknow many of my colleagues shredded theirs or burnt them. [had too many records to shred. If V'd spent that long hunched over the shredder I'd have ended up looking like Quasimodo, and if 'd burnt them all the fire would have been so big it would have gotten out of control.” Private investigators were questioned about their involvement, and particularly about the people who were supplying them with the confidential information. Invariably, the answers were evasive. “My connection has been giving me information for over 10 years” ‘was a typical response. This one came from a private investigator who had been a top detective in the police force for many years. He had years of training and experience in482 HAPTER SO INFORMATION SUPERHIGHWAY observing details and remembering names, places, and other televantinformation. Yet, he continued, “I can't remember his name. I only ever knew him as John. I’mnot sure where he worked or how he got the information. [ methim ina pub. He saverage looking. I can’ really describe him more accurately than that.” ‘Another private investigator claimed never to have seen a police officer who was selling him confidential information, “I received a telephone call,” he explained, “rom someone who said ‘I think you may need some foreign orders done’ I knew that that ‘was obviously police slang for obtaining confidential information I had requested, 1 agreed, and the man mentioned being paranoid about security. He explained that the security had to be ‘watertight’ and asked if I had a letter box and spare keys. I told him that I did.” According to the private investigator, he used the post office box to make the payments and had ‘“no personal dealings, no face-to-face dealings with the individual or individuals involved.” ‘The identity of the person whom the private investigator was trying to protect ultimately came out, as many of the printouts had the unique registered numberand access code of a certain police officer. After a while, the private investigators’ responses became fairly predictable: Mr. Dark claimed that he received a phone call from “a gentleman who rang me up at work and said, ‘I can provide DMT information. Are you intereste “Now let me guess, he made some arrangement through a box or post office box or telephone, only gave you a Christian name or no name, and you've done business with him and you've paid him, and you can‘ tell us what he looks ike or what his name is. How close am I? “P've never met him,” he said “How close am I, Mr. Dark?" “You were very close, and I’m sure you've heard it all before,” he admitted ‘The attempts of some private investigators to protect their government connections bordered on farcical. For example, the records of one private investigator indicated that he had paid “Jenson” for confidential information. “Do you know someone by the name of Jenson?” Yes,” he said “Who's that?” “es an alias,” he said. “For whom?” “Me,” he said Even though large quantities of documents and electronic evidence discovered, they were carefully examined to produce the maximum benefit. Handwriting was carefully examined, documents forensically assessed, and fingerprints lifted from papers and other articles. Phil Green told me that many of the private investigators spoke to each other about the ICAC investigation. The general view was that they should deny their involvement slong as they could. “Our slogan was ‘Lie till you die? Many of us kept to that.”tinformation. Yet, he wn. I'm not sure where verage looking, [can't lice officer who was "he explained, “from one! I knew that that on I had requested. 1 de explained that the spare keys. I told him office box to make the with the individual or was trying to protect rednumberand access predictable: tan who rang me up at sted?" < or post office box or Jone business with him hisname is. How close * he admitted. vernment connections igator indicated that he dence discovered, they sdwriting was carefully from papers and other to each other about the veir involvementaslong ot to that.” orniciateniaL 483 ‘The government officials who were suspected of selling confidential information were also the focus of attention. Some of the corrupt public officials did not trust the private investigators who were bribing them, so they kept records of each item of confidential information that they accessed for sale. “If they are crooked enough to bribe me, they are crooked enough to cheat me,” said one official. The officials would use their own records to check that they were being paid the correct amount at the end of the week, fortnight, or month. Some of these officials kept these records in their diaries or even in their desk calendars, which satin plain view to anyone walking past their desks, However, many were cautious and didn’t keep any electronic or documentary evidence of their actions. Others destroyed evidence before investigators had an opportunity to collect it Orriciat DENIAL Some ofthe government officials at frst tried to deny that they had been involved in selling, confidential information. Many changed their story after extended questioning and after documentary and other evidence was produced to show their involvement. One constable repeatedly denied selling information. When evidence was produced, he still denied t. Finally he stated, “I misled you... .T as confused.” He then admitted that he had been paid for each piece of information that he provided but was later put on a monthly retainer. When he was questioned again roughly eight weeks later, he changed his story, even though he had given the previous information under oath. Have you supplied information from police records? “I could have,” he replied “Why do you say you could have?” “Well, I could have and I couldn't have. I don’t remember,” he said vaguely. Some government officials at first denied supplying printouts of confidential information and photocopies of confidential documents, In many cases their denials evaporated when photocopies and printouts were shown to have theit fingerprints and the occasional note handwritten by them, Some government employees who had limited legitimate access to confidential information obtained the passwords and access codes of others who did have legitimate ‘There were government employces who wanted information from other government departments and misused their position to mislead staff in those departments that the information was required for legitimate official purposes. The employees then sold that information to private investigators. ‘A number of government employees were supplying information to more than one private investigator. When questioned, one police sergeant admitted to supplying information to seven private investigators. The investigators gathered evidence about the involvement of banks and insurance companies in the illicit trade of confidential government information. Of course, typically484 cHAPTERSO INFORMATION SUPERHIGHWAY the banks and insurance companies were reluctant to help. In many cases they attempted to place obstacles in the way of investigators and tried time and time again to mislead investigators. For example, one bank, when compelled to produce documents, handed ‘over documents in which references to illegal checks had been whited out. Here is an except from a typical interview. “Were you aware that Smith Investigations Ltd. was used by the bank during thar period?” Mr. Black was asked. “That is correct,” he said. “What was it used for?” “To obtain information,” Mr. Black said “From where?” “{ really don’t know sir.” he responded Mr. Black later admitted that the bank used codes to indicate the source of information that it was using. For example, social security was code one, the RTA was code two, and so on. “And why do you think it was deemed appropriate to hide where the information was coming from?” “Because I believe it was probably incorrect, si.” he said. “Improper “Yes, si:” he admitted. “Illegal?” “Yes, sin.” “When one of the banks was asked to respond officially to allegations that its staff had knowingly bought confidential government information, the bank replied that its staff never asked where the information came from. Evidence had already been obtained to show that the bank’s response was misleading. ‘The bank then tried to distance itself from its misleading response by claiming that the author of the response was not authorized to put his signature to the letter and forward itas the bank’ reply; in doing so he had acted without authority, “but in the belief that he did have authority” ICAC concluded that the corporate secretary's reply in the name of the bank is, indeed, the reply of the bank. Some financial institutions went to significant lengths to hide the fact that it was obtaining confidential government information improperly. In some cases employees | were told to put the information onto the computer records as ifit had been contained in the original loan applications and other legitimate documents from the individuals concerned. One file contained the following note to a new employee: “Remember, don’t put info on scteen about doing licfense] checks. It’s illegal” Employees admitted the true nature of confidential information once there was evidence that certain information should not be recorded in the computer records. “Was there a policy against recording the type of inquiry that produced the cone employee was asked.ccases they attempted to time again to mislead se documents, handed shited out. the bank during that dicate the source of ade one, the RTA was re the information was sations that its staff had nk replied that its staff sponse was misleading, se by claiming that the 2 letter and forward itas in the belief that he did eply in the name of the de the fact that it was some cases employees shad been contained in 5 from the individuals member, don't putinfo tation once there was computer records. ty that produced the CRIMEAND PUNISHMENT 485, “Yes,” she responded. “And why was that?” “Well, information that was obtained through license checks along with registration checks was obviously illegal information,” she said confidently “And is that why it wasn’t submitted into the computer?” “Td say so” Senior management in many of the banks and insurance companies sought to distance themselves from the practice of obtaining confidential government information improperly. Some had even gone so far as to establish written policies forbidding the practice. One such policy was produced to indicate that if anyone from the financial institution had been engaged in the illicit trade of government information, then that individual would be a “rogue employee” acting in contravention of instructions: The Corporation, in general, and Consumer Financial Services, in particular, will not condone any practice which we believe to be unethical or know to be illegal. Consequently, it is Consumer Financial Services Policy that we will not be a party, cither directly or indirectly, to the procuring, oF use, of any information which is not legally available. This was supported by a memorandum that stated: ‘At times it will be tempting for staff to seek and use such information which may be available, either directly or indirectly, from a number of sources including a number of government bodies ... The Crimes Act of 1914 contains severe penalties which may be imposed upon informants, recipients and users of information which is not normally legally available. Please ensure all staff members ae fully conversant with our policy in this matter and strictly adhere, Despite these policies, in this particular financial institution, there was sufficient evidence to allow ICAC to conclude that the purchase of confidential government information “occurred with approval at the managerial level, managers indulging in the practice themselves.” It emerged that not only were some of the banks indirect purchasers of confidential government information, but some were also supplying confidential information about their own customers as part of the “information club. CRIME AND PUNISHMENT One of the outcomes of the investigation was the careful examination of the adequacy of legislation dealing with information protection in the commonwealth and state agencies found to have been used as sources of traded confidential government information. Privacy laws were eventually passed to help prevent the trade. The Crimes Act and other legislation was toughened to overcome loopholes and to introduce new offenses486 cHAPTERSO INFORMATION SUPERMIGHWAY relating to unauthorized computer access and other methods of improperly obtaining information, ‘A number of employees in both New South Wales and the commonwealth public services resigned or took early retirement rather than face disciplinary action: Disciplinary action was taken against a number of people who were found to have engaged in corrupt conduct. The results of the disciplinary actions ranged from official warnings to dismisea Many private investigators who had earned a good living participating in the information trade found themselves blacklisted by financial institutions and insurance companies, many of which had been their customers in the trade. Phil Green was one of these. He was bitter about what he described as “a betrayal by the financial institutions.” “They were very keen players in the game,” he explained, “yetafter the inquiry they acted as though the only villains were the private investigators.” He closed his private investigations business soon after the inquiry and accepted a position asa senior investigator for a large organization. He was one of the many participants in the information trade who escaped detection and prosecution, ‘Most of the financial institutions and insurance companies revised their practices to censure that information would no longer be obtained in an illegal or improper manner. Many debt recovery managers and other managers who were named in the CAC report as having been purchasers of confidential government information were moved sideways in their companies or had their careers adversely affected. There were a range of prosecutions of those considered to be corrupt and those who had lied under oath to ICAC. Investigations in Commonwealth agencies were taken as result of evidence uncovered by this investigation, which in eur led to suspensions and dismissals of staff, disciplinary actions, and improvements to the systems of control to protect confidential information,