Fraud Examination 5th Edition Albrecht

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Albrecht: Fraud Examination, 4e

Chapter 9

CONVERSION INVESTIGATION METHODS

Discussion Questions

1. Most investigations of conversion involve searching public records and other sources
to trace purchases of assets, payments of liabilities, and changes in lifestyle and net
worth.

2. When people enter into financial transactions, such as buying assets, they leave tracks
or “financial footprints.” Trained investigators who know how to follow, study, and
interpret these tracks often find valuable evidence that supports allegations of fraud.

3. Understanding how perpetrators convert and spend their stolen funds is important for
two reasons: first, to determine the extent of the embezzlement, and second, to gather
evidence that can be used in admission-seeking interviews to obtain a confession.

4. Public sources include many federal, state, and local agencies that maintain public
records in accordance with various laws. These records include such databases as
driver’s license records, marriage records, property tax records, etc. Private sources
are comprised of non-governmental records and include gas, electric, water, and other
utility records, bank and brokerage records, and other financial institution records.
Private sources include all sources other than federal, state, and local agencies.

5. State, federal, and local public records contain valuable information that is extremely
helpful in fraud investigations. Local courts maintain records on past law violators,
employment history, personal and physical information, and prior charges. Federal
sources, such as FBI records, contain large databases that can be accessed by local
law enforcement agencies. State records, such as those of the Secretary of State,
contain valuable information, such as UCC filings.

6. The Internet includes many databases, public and private, that can be accessed. By
accessing information such as how individuals have spent their money (e.g.
purchased boats, real estate, automobiles, etc.), investigators can determine the
approximate amounts an individual has spent and the amount of assets he or she has.
This information is helpful both to determine a person’s net worth and also to
compare the spending with known sources of income to make a net worth calculation
of a possible perpetrator.

7. Net worth calculations are valuable because only assets and reductions in liabilities
that can be discovered enter into the calculation. Net worth calculations tend to give a
conservative estimate of stolen funds. Because these calculations are conservative, the
stolen amounts are usually readily accepted as evidence by courts. Additionally, they
often facilitate investigations in the obtaining of confessions from suspects.

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8. Some of the more advanced techniques available when searching for information on
Google include searching by phrase, minus search terms, domain restrictions, Google
Groups, cached results, and Google News.

9. Because the Internet contains so much information, it is often difficult to conduct

effective searches. The advanced techniques help researchers conduct effective
searches by allowing them to search entire phrases, to narrow searches and avoid
words not associated with the search, and to get cached results as well as search news
events.

10. There are four types of information sources available to investigators searching public
records. They are government sources, private records, online databases, and Internet
searches.

11. The Gramm-Leach-Bliley Act, passed in 1999, prohibits the use of false pretenses to
access the personal information of others. It also allows financial institutions to sell
customer information unless customers have opted out. This act is both restrictive and
helpful to investigations. While preventing false pretenses, it allows the investigator
to get information from financial institutions in more accepted ways. This is
especially useful since most customers do not opt out.

12. Trash investigation is the discovery of information by looking through a person’s

trash. This can be useful since many perpetrators do not shred documents. In addition,
software can put shredded documents back together, and many documents are still
kept electronically on the computers where they were created.

True/False

1. False. Perpetrators rarely save what they steal; rather, they usually spend their ill-
gotten gains.

2. False. One of the most useful investigation techniques is determining how

perpetrators spend their money, not their time.

3. False. Investigations of net worth and lifestyles are usually performed for two
reasons: to determine the extent of the embezzlement and spending, and to gather
evidence that can be used during admission-seeking interviews to obtain a confession.

4. False. While some federal databases are available only to federal agents, there are
databases that the public can access—some online and some by going to the offices of
federal agencies.

5. True

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6. False. Counties and other local agencies contain records that are among the most
useful in fraud investigations, including property records and records containing
personal information.

7. True

8. True

9. False. In recent years, the net worth method has gained prominence among fraud
investigators as very useful.

10. True

11. True

12. False. The Gramm-Leach-Bliley Act made it easier for officials and private citizens
to access information from financial institutions. While individuals can now “opt out”
from having their records sold by financial institutions, the act also made it legal for
financial institutions and others that have notified their customers of the “opt out”
provision to sell customer databases.

13. True

14. False: State and local agencies usually provide more valuable records than federal
agencies do. It really depends on what type of information you are seeking.

15. True

16. True. Unless customers “opt out,” even confidential customer information can be
sold.

17. False: The net worth method is very useful in determining the extent of stolen funds.

18. True

Multiple Choice

1. c

2. b

3. d

4. d

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5. a

6. b

7. d

8. c

9. d

10. e

11. e

12. d

13. e

14. c

15. a

16. d

17. c

18. c

19. c

20. a

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Short Cases

Case 1

Comparative Net Worth-Asset Answer

Year 1 Year 2 Year 3

Assets
Residence $100,000 $100,000 $100,000
“Baseball cards” 15,000 15,000 25,000
Automobiles 0 30,000 50,000
“Paintings” 50,000 150,000 250,000
Cash 6,000 12,000 14,000
Total Assets $171,000 $307,000 $439,000

Liabilities
Mortgage Balance $ $100,000 $50,000 $0
Auto Loan (0) $30,000 0
Total Liabilities $100,000 $ 80,000 $0

Net Worth $71,000 $227,000 $439,000

Change in Net Worth $156,000 $212,000
Plus Total Expenses 30,800 30,800
Total Income $186,800 $242,800
Less Known Income 40,000 42,000
Equals Unknown Income $146,800 $200,800

Based on this information, it appears that there is a likelihood of illegal income. The amount
of unknown income, as shown above, is $146,800 in Year 2 and $200,800 in Year 3.

Case 2

1. There are many possible reasons why the employee has exhibited behavioral changes.
There are also many possible reasons why the employee has experienced an increase
in unknown income. One reason for the unknown income is that a family member,
such as a parent or sibling, could have passed away and given the money to the
employee, but there is always the possibility that the employee is committing fraud.
With net worth information, it is impossible to know the reasons for the emotional
change and the increase in unknown income. Before jumping to conclusions, the
investigator should conduct additional investigations such as preparing a vulnerability
chart to help correlate all aspects of the “suspected” fraud, and should search public
records such as obituaries or wills to see if a close relative recently died.

2. It is impossible to conclude from these facts that the suspect has been committing
fraud. Conversion evidence is circumstantial. Since it is necessary to prove intent to
convict someone of fraud, circumstantial evidence is helpful in obtaining confessions

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and other evidence, but it is not sufficient. To prove fraud, you usually need a
confession, an obviously fraudulent document, or a series of repeated similar
fraudulent actions from which intent can be inferred.

Case 3

1. It is very difficult to draw any conclusions from this analysis. Coworkers of the
controller have not noticed significant behavioral or lifestyle changes except for a few
“extravagant” vacations. The net worth analysis resulted in a very low estimate of
unknown income. However, if the controller embezzled funds to support vacations,
those expenses would not be factored into the net worth calculations.

2. Because of the lack of definitive information, an investigator would probably not feel
comfortable interviewing the controller at this point. The controller should have no
problem explaining the low amounts of unknown income shown in the net worth
calculation. Interviewing the suspect at this point may result in unnecessary
embarrassment to all parties involved, and possibly even in a “slander” lawsuit
against the company.

3. An investigator could determine the location, frequency, and duration of the

vacations. With this information, a travel agent could give an estimate of how much
money these vacations cost. Additional interviews may provide information as to the
travel agency used by the controller or other spending information or patterns. Once
additional information is known, another net worth analysis could be performed.

Case 4

All wills become public information upon the death of the testator through a legal process
called probate. Therefore, a visit to the county courthouse would provide access to a copy of
Uncle Eddie’s will, containing information about beneficiaries and the amount of bequests.
The most difficult challenge may be finding out Uncle Eddie’s full name and the state and
county in which he lived. This information could be discovered by interviewing Bill’s known
relatives or by searching genealogical databases. You might conduct a death notice or
obituary search in a periodicals database, such as LexisNexis, National Automated
Accounting Research System (NAARS), etc. The company’s personnel records may also
contain information that reveals the names of Bill’s parents. If Eddie were a maternal uncle,
Bill’s parents’ marriage license at the county clerk’s office would reveal his mother’s maiden
name, which is probably also Eddie’s last name. Finally, Bill claims that all of Eddie’s
nephews received a portion of the inheritance. You may find out if Bill’s brothers’ lifestyles
have changed as dramatically as his.

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Case 5

1. Unusual behaviors and lifestyle symptoms in this case are decreased sales activity
generated by the employee, quick payoff of multiple loans by the employee despite
lower sales results, and his poor treatment of customers. The poor treatment of
customers may be caused by stress created from trying to cover up fraudulent
behavior. The changed behavior could also be caused by difficult personal crises
unrelated to the job.

2. This employee could be receiving kickbacks from automobile repair shops. He could
also be creating fictitious sales records to increase his personal commissions or just
stealing parts or other supplies from the dealership.

Case 6

You should look for changes in spending patterns, changes in banking relationships or
patterns, and changes in lifestyle. You should also look for changes in Janet’s attitude.
Finally, you should compute Janet’s net worth and try to determine if there is income from
unknown sources.

The Internet and public databases provide many valuable resources for looking up credit
histories and even banking activities. You could also request or subpoena Janet’s financial
information from her bank or other sources. Using the net worth method will help you
discover if Janet is living beyond her means.

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Case 7

Year 1 Year 2 Year 3 Year 4 Year 5

1. Assets
Residence $200,000 $200,000 $275,000 $275,000 $275,000
Automobile 50,000 50,000 75,000 75,000 90,000
Stocks and Bonds 75,000 75,000 100,000 100,000 125,000
Cash 15,000 16,500 18,150 19,965 21,962
Total Assets $340,000 $341,500 $468,150 $469,965 511,962

Liabilities
Mortgage Balance $175,000 $50,000 $125,000 $107,000 $40,000
Auto Loan Balance 40,000 20,000 35,000 25,000 10,000
Total Liabilities $215,000 $70,000 $160,000 $132,000 $50,000

Net Worth $125,000 $271,500 $308,150 $337,965 $461,962

Change in Net Worth $146,500 $36,650 $29,815 $123,997

Plus Total Expenses 49,000 61,000 64,300 70,930
Total $195,500 $97,650 $94,115 $194,927
Less Known Income (110,000) (117,000) (135,000) (143,750)
Income from Unknown
Sources $85,500 $(19,350) $(40,885) $51,177

Income
Salary $100,000 $107,000 $125,000 $133,750
Other 10,000 10,000 10,000 10,000
Total Income $110,000 $117,000 $135,000 $143,750

Expenses
Mortgage Payments $12,000 $18,000 $18,000 $18,000
Auto Loan Payments 7,000 10,000 10,000 13,000
Other Living
Expenses 30,000 33,000 36,300 39,930
Total Expenses $49,000 $61,000 $64,300 $70,930

This person could be committing some type of fraud. Income from unknown sources in Year
2 is quite high. Even though years 3 and 4 almost reverse the effects of Year 2, it is not
enough. Further, Year 5 shows income from unknown sources again. We might conclude
from this that in Year 2, the person committed a large fraud and then decided to wait it out
and see what happened. Or he spent his stolen money in years 3 and 4 in assets you could not
trace or identify. It is likely that he decided in Year 5 to try his fraud again.

2. Several additional factors are important to consider. First, you should notice some
strange trends in this person’s asset and liability accounts that might be worth

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additional investigation. Second, you can see that data from several consecutive years
provide a better idea of what might really be occurring.

3. Is this scenario realistic? Perhaps not. Most evidence shows that fraudsters continue
to commit their frauds, usually without interruption, and that over time their frauds
increase in amount and frequency. It may not be realistic to see a data pattern like this
where fraud was possibly committed one year and then not again for several years.

Case 8

1. Red flags appear to exist in the financial data. This person has purchased
automobiles, boats, and stocks. The person has also decreased mortgage, auto, and
other loans.
2.

Year 1 Year 2 Year 3

Net Worth $102,500 $150,000 $272,000
Increase 47,500 122,000
Expenses 47,000 47,000
Total Income $94,500 $169,000
Known Income 90,800 130,800
Unknown Income $3,700 $38,200

A possible fraud exists in years 2 and 3. However, one must be careful not to reach
immediate conclusions. It is possible that the person has received unknown inheritances that
have not been reported to any agencies, has had gambling or other earnings, or has received
income from other sources.

Case 9

There are several approaches you could use to investigate possible fraud in Big Time Inc.
First, you could check invoices of companies from which there have been increased
purchases. Then, you could check publicly available databases to ascertain the legitimacy of
all companies that Big Time purchases from, concentrating on the ones with suspicious
invoices or increased sales during the past few years. This search could be conducted using
Dun & Bradstreet or Dialog. This search would help determine if any of the “suppliers” are
fictitious. If you discover fictitious companies, you should check the financial records of Mr.
Bezzle, who has sole responsibility for all purchasing decisions. This could be done by
contacting banks or other financial institutions or by obtaining a subpoena.

Finally, interviews of unsuccessful vendors, other employers, and even Mr. Bezzle would
provide information about Mr. Bezzle’s sources of income, lifestyle, and other relevant
factors.

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Case 10

1.

Assets
$120,000
Liabilities (70,000)
Net Worth $ 50,000
Prior Year’s Net Worth (10,000)
Net Worth Increase $ 40,000
Living Expenses 50,000
Income $90,000
Known Income (60,000)
Unknown Income $ 30,000

2. An effective interviewer would first ask Tom to list all sources and amounts of
income he has without Tom knowing the reasons for the questions. After determining
all of Tom’s sources of income and assessing whether it matches the $60,000 of
known income, the investigator could reveal to Tom (a little at a time) information
about the $30,000 of unknown income. When faced with this unexplainable fact, Tom
may confess.

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Case 11

Year 1 Year 2 Year 3

Assets

Personal Residence $100,000 $100,000 $100,000

Automobiles 20,000 40,000 90,000
Stocks and Bonds 30,000 30,000 30,000
Boat 30,000 30,000
CDs 25,000 25,000 50,000
Total Assets $175,000 $225,000 $300,000

Liabilities
Mortgage Balance $ 90,000 $ 40,000
Auto Loan 10,000 5,000
Total Liabilities $100,000 $ 45,000

Income
Salary $ 37,000 $ 40,000 $ 42,000
Other 4,000 4,000 4,000
Total Income $ 41,000 $ 44,000 $ 46,000

Expenses
Mortgage Payments $ 6,000 $ 6,000 $ 6,000
Auto Loan Payments 2,000 2,500 2,500
Other Living Expenses 15,000 15,000 20,000
Total Expenses $ 23,000 $ 23,500 $ 28,500

Net Worth $ 75,000 $180,000 $300,000

Change in Net Worth $105,000 $120,000

Plus Total Expenses 23,500 28,500
Total $128,500 $148,500
Less Known Income 44,000 46,000
Income from Unknown Sources $ 84,500 $102,500

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Case 12

Comparative Net Worth—Asset Method

Year 1 Year 2 Year 3

Assets:
Residence $150,000 $150,000 $150,000
Residence #2 85,000
Stocks and Bonds 10,000 20,000 35,000
Automobiles 18,000 35,000 35,000
Boat 22,000 22,000
CD 8,000 27,000 50,000
Cash 3,500 7,500 18,000
Total Assets $189,500 $261,500 $395,000

Liabilities
Mortgage Balance #1 $84,000 $42,000 $15,000
Mortgage Balance #2 $85,000
Auto Loans 12,000 38,000
Boat Loan - 22,000 5,0000
Total Liabilities $ 96,000 $ 102,000 $105,000

Net Worth $ 93,500 $159,500 $290,000

Change in Net Worth $ 66,000 $130,500
Plus Total Expenses 46,500 68,000
Total $112,500 $198,500
Less Known Income 54,000 62,000
Equals Income from
Unknown Sources $58,500 $136,500

It appears that there is a likelihood of fraudulent income. The amounts are $58,500 and
$136,500, as calculated above.

Case 13

1. You would probably gather information about the manager’s change in net worth,
living expenses, and income so you could make a net-worth calculation. You would
search public records, bank records (if you could get them), credit bureau records,
real estate and UCC records, and any other records that provide evidence of
expenditures.

2. The records that allow you to make a net worth calculation would be most useful—
any record that provides evidence of expenditures.

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CASE STUDIES

Case Study 1

1. The two most apparent fraud symptoms are the fact that Mark has dramatically
increased his standard of living over the last four months, and new customers
complaining that their balances are off by $20, $30, and even $50.

2. It is not possible to know from the information given that Mark is committing fraud.
All we know is that Mark has increased his standard of living and that new customers
are complaining that their accounts are off. No matter what the situation is, the fact
that new customers’ accounts are off definitely signals a red flag that needs
investigation.

3. A reasonable action the supervisor could take if he or she suspected that Mark is
committing fraud would be to investigate further Mark’s actions while he has been
working as a teller. The following are possible actions the supervisor could take to
investigate further:

• Determine if the customers who are complaining that their balances are off
have had interactions with Mark.
• Perform a net worth calculation to determine the extent of unknown income.
• Audit Mark’s account balances over the last four months.
• If possible, do a background check to determine if Mark’s grandmother has
indeed passed away.

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Financial Data for Mark

Assets: Month 1 Month 2 Month 3

1992 Geo Prism $1,000

2004 Jeep Grand Cherokee $45,000 $45,000
Savings Account $3,000 $6,000 $7,000
Checking Account 600 800 500
CD 2,000 2,000 2,0000
Laptop 2,500 2,500 2,500
Television $1,000
Total Assets $9,100 $56,300 $58,000

Liabilities:
Auto Loan 45,000 45,000
Total Liabilities $45,000 $45,000

Net Worth $9,100 $11,300 $13,000

Change in Net Worth 2,200 1,700

Plus Total Expenses 2,130 2,230
Total $4,330 $3,930

Less Known Income 1,300 1,300

Income from Unknown Source $3,030 $2,630

Income:
Salary $1,000 $1,000 $1,000
Other 300 300 300
Total Income $1,300 $1,300 $1,300

Expenses:
Rent Payments $700 $700 $700
Small Expenditures 130 130 130
Auto Loan Payments 600 600
Other Living Expenses 400 700 800
Total Expenses $1,230 $2,130 $2,230

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Case Study 2

End Year 1 End Year 2 End Year 3

Assets
Residence $50,000 $50,000 $200,000
Stocks and Bonds 10,000 10,000 10,000
Automobiles 15,000 15,000 40,000
Cash 5,000 8,000 20,000
Total Assets $80,000 $83,000 $270,000

Liabilities
Mortgage Balance $40,000 $30,000 $0
Auto Loan 8,000 5,000 0
Student Loans 10,000 8,000 0
Total Liabilities $58,000 $43,000 $0
Net Worth $22,000 $40,000 $270,000
Change in Net Worth $18,000 $230,000
Plus Total Expenses 26,000 23,000
Total $44,000 $253,000
Less Known Income 36,000 41,000
Equals Income from Unknown Sources $ 8,000 $212,000

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Case Study 3

Assets: Year 1
Residence $250,000
Cars 90,000
Home Shopping Network (furniture) 12,000
Total Assets $352,000

Liabilities:
Mortgage Balance $232,000 1500 * 12 (interest free loan)
Car Auto Loan 78,000 1000 * 12
Credit Card Balance 6,000 500 * 12
Total Liabilities $316,000

Net Worth $ 36,000

Expenses:
Credit Card $ 1,200
Food 9,600
Cruise 3,500
Miscellaneous 18,000
Ring 3,000

Total Expenses $ 35,300

Total Income $ 71,300

Restaurant Salary (Known income) 15,000
Unknown Income $ 56,300

Note: Car and house payments are not included as expenses because the purchase of the
house and cards are included above as assets.

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Case Study 4

Year Before Last Year This Year

Last
Assets:
Personal Residence $70,000 $70,000 $200,000
Automobiles 15,000 45,000 45,000
Houseboat 30,000 30,000
ATVs 12,000 12,000
Total Assets $85,000 $157,000 $287,000

Liabilities:
Mortgage Balance $35,000 $30,500 $100,000
Auto Loan 2,500
Loan on Houseboat 15,000 11,000
Total Liabilities $37,500 $45,500 $111,000

Net Worth $47,500 $111,500 $176,000

Change in Net Worth 64,000 64,500
Plus Total Expenses 25,700 30,400
Total 89,700 94,900
Less Known Income 61,500 63,000
Income from Unknown Sources $28,200 $31,900

Internet Assignments

1.
a. The U.S. Postal Inspection Service is the law enforcement branch of the U.S.
Postal Service, empowered by federal laws and regulations to investigate and
enforce over 200 federal statutes related to crimes against the U.S. mail, the
Postal Service, and its employees.
b. Postal inspectors investigate any crime in which the U.S. mail is used to
further a scheme, whether it originated in the mail, by telephone, or on the
Internet.

c. You can protect yourself against the phony “one-shot” credit card offers by
being very careful when you are considering opening a new credit card
account. If you have poor credit, be skeptical if you are offered a pre-
approved card with no credit check. Be sure you know the specific purpose of
the card. If you are not satisfied with the information provided by those
marketing the cards, do not pay the required fee. You may also wish to check
with your local Better Business Bureau, state Attorney General’s office, or
Postal Inspection Service office to determine if the company offering the
credit card is under investigation.

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d. Characteristics of telemarketing fraud could include the following:

• The offer sounds too good to be true.

• High-pressure sales tactics are used.
• Insistence on an immediate decision to invest.
• You are one of just a few people eligible for the offer.
• Your credit card number is requested for verification.
• You are urged to provide money quickly.
• There is no risk with this investment.
• You are given no detailed written information.
• You are asked to trust the telemarketer.
• You are told you won a prize, but you must pay for something before
you can receive it.

2. Some Internet fraud schemes include:

a. Auction and Retail Schemes

b. Business Opportunity Schemes
c. Identity Theft
d. Investment Schemes

3.
a. Answer: Investigative Professionals, the company that has the Web site
“HowToInvestigate.Com,” provides several different types of background
checks including basic background checks, extensive background checks, due
diligence background checks, criminal records check, employment
background checks, tenant background checks, assets searches, business
background checks, people finder super searches, and people identifier
reports.

b. A basic background check provides the following information:

i. Personal Information and Identity Verification

1. Identity Verification. Important database searches prove or
disprove identity; discover or confirm “identifiers” like DOB,
SSN, and addresses
2. Also Know As (aka’s). Discover other names associated with
subject
3. Social Security Number (SSN) Search and Verification. Has
your subject used other SSN’s in the past? This could be a
cause for concern
4. Date and Place that the SSN was Issued Others Associated with
Subject’s SSN. Current and Previous Addresses. Database
returns important dates of occupancy

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5. Names of Persons at Each Address Subject has Resided. May

include spouses, family members, roommates, domestic
partners, and common-law spouses
6. Property Owners of Subject’s Residence
7. Neighbors
8. National Death Index

ii. Financial Information

1. Nationwide Property Ownership Records

2. Motor Vehicles Registration. Most states. Some restrictions
apply
3. Boats and Aircraft Ownership
4. Bankruptcies, Tax Liens, and Judgments

iii. Professional Information

1. Occupational License Verification

2. Partnership Affiliations
3. DBA (Doing Business As)

iv. Criminal Records

1. Sexual Offender Search: State's lists of sexual offenders

2. Nationwide Criminal Record Search: National Felons Database
3. DUI Check

c. The three giant commerical credit bureaus are:

• Equifax: 1-800-685-1111 (general) or 1-800-525-6285 (fraud); PO

Box 740241, Atlanta, GA 30374; www.equifax.com

• Experian: 1-888-397-3742 (general and fraud); PO Box 2002,

Allen, TX 75013, www.experian.com

• TransUnion: 1-800-888-4213 (general) or 1-800-680-7289 (fraud);

PO Box 2000, Chester, PA 19022; www.transunion.com
4.
a. A complete business background investigation includes:

• Business name
• Business address
• Telephone numbers
• Names of business owners
• List of products or services
• Labor, union, or personnel disputes

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• Ratings by Baron’s and Standard & Poor’s

• Names of key officers, managers, and employees
• Names of suppliers, buyers, and competitors
• Profit and loss statement
• Property owned
• Litigation

b. To check out a contractor who will be doing work on your house, you can call
the county or state department of business regulation to see if the person is
licensed to do business in your county or state. You may also want to call the
Better Business Bureau or the local Chamber of Commerce to see if there
have been complaints against this contractor.

Debates

1. Appears to be committing fraud. The evidence is circumstantial that this person is

involved in fraud. He may be jealous because he sees the money the owners are
enjoying and wants his piece of the pie. He is likely irritable because he is nervous
and doesn’t want to get caught. The early and late hours the employee works also
appear to be very strange, and his purchase of the new Porsche makes him a possible
suspect of fraudulent behavior.

Not committing fraud. There is insufficient evidence, and the symptoms that are
available are circumstantial at best. Fraud could be a possibility; but, due to the
circumstantial nature of the evidence in the case, no conclusions can be drawn. To
determine if fraud is being committed, you will have to investigate further.

2. Pro: The use of mail is common in the perpetration of many types of fraud,
including employee fraud, investment scams, and management frauds. Because of the
high use of mail, the most important ally in investigating frauds is the local postal
inspector. Armed with a strong understanding of mail fraud statutes, a good
relationship with the local postal inspector goes a long way in discovering evidence to
support fraud allegations. In addition, if law enforcement is involved, subpoenas and
search warrants can be issued and access to government databases, such as National
Crime Information Center (NCIC), can be obtained.

Con: There is no need to involve local law enforcement because they are too
bureaucratic and too slow. There are plenty of sources available without law
enforcement’s help, including records of the Department of Motor Vehicles, the
Department of Business Regulation, the County Clerk, the County Land Office and
Tax Assessor’s Office, and the Uniform Commercial Code (UCC) filings at the
Secretary of State’s office. In addition, without law enforcement, you can access
private credit records, utility records, and numerous publicly available databases.

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Albrecht: Fraud Examination, 4e

Answers to Stop and Think Questions

1. Why are state and local sources of information generally more useful than
federal sources of information?

a. Federal sources of information are generally less specific than state and local
sources.
b. The inherent nature of the information generally kept by state and local
governments (leins, real property, business registrations, local court records,
etc.) is generally more useful.
c.
2. The Gramm-Leach-Bliley Act protects against the use of false pretenses. In what
ways did this act have positive investigative consequences?

a. The Gramm-Leach-Bliley Act allows the investigator to get information from

financial institutions in legal, straightforward ways because institutions are
able to share information under the act unless customers have specifically
opted out. This is especially useful since most customers do not opt out.

3. This book lists only a few of the many resources available online. What other
sources do you know about or can you find through searching?

a. Every time we teach this course, students come up with new and exciting
sources of information online. You may want to have a few students present
their findings to the class.

4. What is the best time during an investigation to calculate the net worth method
on your subject?

a. The best time to calculate the net worth method is when you have sufficient
information on earnings and expenditures. While an investigator generally
won’t use the information until the final suspect interview, it is useful to have
the information as early as possible. As more information becomes available,
the calculation can be updated to become more reflective of reality as the case
progresses.

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