Collecting and Preserving Evidence

(BAB 6)

Several methods and techniques are used to obtain evidence in all

types of investigative work. These methods and their applications vary at
the discretion of the investigating agent. For successful financial
investigations, interviewing, documentation, and observation are three
critical elements in gathering evidence. The perpetrators of white collar
crimes are often first-time offenders. Those committing financial crimes
through deception and fraud are usually nonviolent, and attempt to talk
their way out of responsibility. The witnesses in financial crimes are
usually well educated, successful in business, and have a higher social
status in the community. Friends, relatives, and associates rarely believe
that the subject of the investigation is capable of committing a crime or
perpetrating a fraud.
Based on these characteristics, the investigator needs to adjust the
interviewing techniques to these situations. Objectivity is always required
in any investigation, and this should also extend to the witnesses from
whom evidence is gathered. The investigator must also realize that the
business professional is apt to have much more knowledge of the
regulations relating to his or her business than the investigator and also
probably substantial expertise in the field. Preparation for witness contacts
plays an integral part in the success of the contact and the quality of the
evidence obtained. Such preparation should include knowing the
background of the witnesses, their relationship to the subject of the
investigation, their reputation in the community, and the frequency of their
financial transactions with the subject.
A financial investigation involves the connection of a series of
unrelated financial transactions that, when presented in total, provide a
complete picture of an individual’s financial activity over a set period of
time. The evidence to support this picture is circumstantial in nature and
needs to be obtained thoroughly for each transaction. It can be compared
to working on a jigsaw puzzle. Sections of the puzzle are completed and
joined together, and the entire picture is revealed. The investigator needs
to apply patience, diligence, and constant analysis of the pieces of
evidence to be able to see and understand the financial activities of the
subject, so as to determine whether a financial crime has occurred
and whether others are involved.
Examples of applying these factors will be provided as we discuss
the three critical elements in gathering evidence in a financial
investigation.

Interviewing
Interviewing a witness involves a basic understanding of human
nature. Aspects of communication, sociology, and psychology all play a
part in gaining testimonial evidence and evaluating that information. The
first set of interviews will be with the most likely suspects in relation to the
financial discrepancies that initiated the investigation. Tis may encompass
all the employees who could have perpetrated the embezzlement, or all
the executives who could have orchestrated a securities fraud scheme, or
it may be as simple as the one individual who facilitated an investment
scam.
In any interview, it is important to maintain objectivity. The
investigator is on a fact-finding mission and not “out to get” anyone. If the
investigator fails to do this, and the witnesses feel that the results are
preconceived, it can taint or ruin the case. A wrong attitude can also cause
a witness to withdraw from providing complete or additional information
and explanations. The investigator should conduct the interview without a
personal or emotional attitude and in a professional manner. Courtesy and
professional sociability with the witness can go a long way toward making
the interview a success. Investigators must also keep in mind that they are
conducting the interview and avoid being distracted from gaining the
information they are seeking. For example:
  You meet the witness for the interview, and his or her first question
to you is whether he or she is the target of your investigation. Even
if the witness is currently the most likely suspect, the interviewer
should state that he or she is interviewing everyone who may have
information to determine who is actually responsible for the financial
discrepancies. Once all of the information is obtained and analyzed,
a determination will be made as to whether the discrepancies
occurred due to a systemic problem, by mistake, or were
intentional.
 During the interview, the witness expresses an interest in the local
sports team. You respond without displaying that you are also an
avid fan but for another team. The witness enters into a blow-by-
blow analysis of his or her team, the individual players, and the
coach. In a polite but firm manner, you have to direct him or her
back to the questions you need to have answered.
Prior to arranging an interview, it is important to know your witness.
The investigator should be aware of the witness’ ability to provide the
needed information. Was there a part-time clerk at the store? Was it the
store manager or owner at the store? Who handled the transaction? The
investigator may need to conduct more than one interview relating to a
specific transaction if a part-time clerk made the sale, the store manager
approved financing the sale, and the owner made several prior sales to
the subject.
The investigator needs to know the business relationship between
the witness and the subject. Is the witness in a subordinate position to the
subject? If this is the case, how much influence will the subject have over
the degree of cooperation from the witness? If they are partners or close
associates, the discovery that a financial fraud was perpetrated could have
an adverse effect on the business and reputation of the witness.
Disclosure of a financial fraud can also be devastating to the business that
suffers the fraud, especially if the business relies on customer confidence
to make a profit. Examples include a bank in which an employee
embezzles funds or a construction company that has a foreman who uses
inferior materials for kickbacks.
The investigator also needs to know what the personal relationship, if
any, is between the witness and the subject. If the witness is a relative of
the subject, he or she often will be hesitant to provide any information.
Demonstrating objectivity in this circumstance may open the witness to
providing information that would tend to exonerate the subject from
culpability. Relatives and associates may also have strained relationships
with the subject and may provide biased information to implicate the
subject. The investigator has to sort out the emotions involved and
concentrate on the factual information needed. Remember that in a
financial investigation the case hinges on the facts about the financial
dealings of the subject and not whether the witness sees the subject as a
good or bad person. A former spouse, a party in a lawsuit versus the
subject, or a customer or client who believes the subject has
cheated him or her is naturally going to voice complaints during the
interview. To remain objective, the investigator must take care not to take
sides in the dispute or be overly sympathetic to the witness:
 The witness is the ex-wife of the subject, and you discover that
she and their child are dependent on the subject for support. The
investigator can begin with very general questions to take the
witness’ focus away from her dependency or begin with questions
about the divorce to remind her of former adversarial conditions
between them.
 A general contractor is the witness in an investigation of faulty
materials being used by a subcontractor with whom he or she has
dealt with for years. The contractor may be hesitant to provide
information for fear that he or she will suffer “guilt by association.”
The investigator could allay some of the fear by reminding the
witness that the fraud appears to cover only a certain time period
and that its discovery without his or her assistance may turn out to
be worse for him or her than helping to remedy the situation.
 The investigator should fully develop the lead information that made
the interview necessary and ponder over what other information the
witness may have. This gives the investigator an opportunity to consider
what areas may require follow-up questions and how to prepare for those
questions. Such preparation will greatly reduce interruption in the flow of
the interview and the need for additional interviews with the witness to
clarify information.
In a financial investigation, the investigator has to weigh and assess
the information currently being obtained in the context of all the prior
information gathered. The investigator also needs to be aware that
witnesses and the subject will have difficulty in remembering the specifics
of everyday financial activities. As such, having pertinent records ready to
refresh their memory is very beneficial.
It is often helpful to limit the initial interview with the subject of an
investigation to the history, background, and general financial or business
practices until the investigator has had time to review and analyze the
records and documents provided. In involved cases, it is not unusual to
interview the subject several times to clarify issues that develop, that is, if
the subject is willing to provide the investigator with the information.
Individuals involved in complex schemes and conspiracies will often feign
innocence and try to convince investigators that nothing illegal has
occurred. Those involved in fraud conspiracies will often deny knowing the
existence of or extent of the fraud scheme, or try to convince the
investigator that they were told what to do without any explanation as to
why. Another explanation often given is that they only made a mistake. All
of these reasons are common defenses in conspiracy cases:
 In the analysis of financial records, you find a check for $2000.00
issued to a Mrs. Jane Doe. It is the only payment to an individual
written on the business account. Research into her background
shows that she is married to John Doe, the owner of JD’s Jewelry.
The business account also shows several payments made to JD’s
Jewelry written off as repair expenses. Upon checking the
 business directory, there is no listing for a JD’s repair shop. During
the interview, Mrs. Doe admits that the check she received and the
ones written to JD’s Jewelry were for jewelry purchases.
 During your interview with Mrs. Doe, she states that some pieces
of the purchased jewelry were picked up by and fitted for a blonde
lady in her late 20s. You met the subject’s wife earlier, and she is
a brunette and 47 years old. At your request, Mrs. Doe searches
the records and finds the name and address of the blonde. This
provides the investigator with a new lead on potential
expenditures.
 The witness is a loan officer who has approved several loans that
have defaulted. The loan files are complete and do not appear to
be falsified. The defaulted loans are unique in that the proceeds
for each were distributed in cash. The witness states that mistakes
may have been made in approving the loans but he did nothing
outside of the bank’s regulations. All the loans defaulted were
processed by the same collections officer. Analysis of the two
employees’ records show cash deposits of 50% of the loan
proceeds to each of their accounts on the day the proceeds were
disbursed. Confronting the witness with these facts will
often lead to an admission and implication of the other conspirator,
or the witness will fabricate a reason for the deposits. Fabrications
are made off the cuff and are usually easy to disprove.
Individuals involved in white collar and organized criminal enterprises
are usually intelligent and adept in their field, or have access to and use
specialized legal and accounting professionals. This means that the
investigator must have a basic understanding of the type of enterprise
under investigation or work under a serious disadvantage. Large
corporations may have thousands of employees in several locations, and
utilize a large and elaborate record-keeping system. Often, there is an
attempt to conceal fraud by moving the fraudulent funds through several
accounts or fictitious businesses created to conceal the proceeds. In these
cases, the investigator must familiarize himself or herself with the business
operations. Several interviews may have to be done for this purpose
before investigative interviews are conducted.
It is often necessary to employ the services of an expert as witness
to explain intricate business or accounting events. This is the same as
using expert testimony for medical, psychological, or other specialized
areas in court proceedings. See the following case examples:
 The witness is the stockbroker to the subject of the investigation.
The subject has heavily invested in a wide variety of securities,
commodities, and mutual funds, and trades in these securities
several times each week. The investigator may need to be walked
through the transactions step by step to understand the financial
ramifications of the account on the subject. The cash flow into the
account could be substantial, or it may be that the investments
have done well and the transactions are the result of moving the
same funds around within the account. The financial investigation
needs to determine the dates and amounts of money going in and
out of the account. The broker will himself or herself provide
assistance in analyzing the account or have someone in the office
assist the investigator. Expressing an interest in the area of
expertise that an individual has goes a long way in getting the help
needed.
 The subject uses an elaborate fraud scheme involving alleged
tax-deferring trusts. The trusts are a scam, and the subject uses
the monies invested in the trusts for personal purchases. An
expert in the field of trusts, living wills, and tax deferment through
these types of investments can be called upon to explain how and
why the trust documents are fraudulent. The same individual may
be called upon for testimony in court if the case goes to trial.
Interviews of individuals and companies not related to the subject or
involved in the scheme are usually referred to as third-party witnesses.
These interviews involve verification of normal everyday business
transactions. Courtesy and a professional attitude will help to soften the
interruption of the normal business activities of these witnesses. The
investigator should be prepared for questions from the witness without
implying that the subject of the investigation is guilty. Remember that the
subject is often a regular and good customer of the witness. As witnesses
may have hundreds of customers, be ready to refresh the former’s
memory with the lead information that brought you to their establishment.
The next two chapters will go into more depth on documentary
evidence and the evidence gained through formal observation techniques.