DISAPPEARING DEVELOPING ENTIRE FRAUD 5 MOST SCANDALOUS OILfield FRAUD p.

44 EDITOR SAYS
PRINTER INK P. 8 PICTURE p. 24 FRAUD CASES OF 2020 p. 36 FAREWELL p. 50

VOL. 36 | NO. 1 | JANUARY/FEBRUARY 2021

Fraud-Magazine.com

r e m o t e

but
engaged
Conducting
investigations
from afar
P. 28
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 CONNECT
FROM THE PRESIDENT WITH US
FM

WE’RE REMOTE, BUT WE MUST CONNECT Read more Fraud

Magazine content online

2
at Fraud-Magazine.com.

020 is officially behind us, but its repercus-

sions will live with us for a long time. Noth-
ing prepared us — professionally or personally
FM
— for the pandemic. COVID-19 probably has perma-
nently changed the ways we operate. But we’ve been Download the Fraud
resilient as we work through tremendous disruptions. Magazine app for
We’re fighting the good fight to protect our organiza- iPhone or Android.
tions from fraud despite our limitations.
In October 2020, I had the honor of conducting an
ACFE webinar with a group of expert fraud examin-
ers to discuss the challenges and difficulties they and Like the ACFE on
their colleagues are facing. The two-hour discussion Facebook for the latest
flew by with the three speakers from consulting, news, photos, videos and
industry and law enforcement sectors. The discussion exclusive online content.
was so robust, we decided to expand the session to
become this issue’s cover story.
Our quarterly Fraud in the Wake of COVID-19 mem-
ber survey tells us 38% have already observed a signifi- Follow @TheACFE
cant increase in fraud, and 90% expect to see it increase in the next 12 months. (See ACFE.com/ on Twitter and keep
covidreport.) These results were the launching pad for our webinar and cover-article interviews. informed on breaking
The webinar covered a gamut of topics, but the cover story examines the paramount ques- news and industry trends.
tion: How do we stay engaged in our fraud examinations when we must be apart? The three
experts lament, as you do, our lack of physical interaction and inability to make connections.
The experts agreed that we, more than ever, must leverage up-to-date technology to perform
our jobs because we often can’t be present in person. They stressed the importance of brain- Make connections with
storming with IT departments to improve communication among remote staff members. fellow fraud fighters in
The experts feel extra pressure because even basic interviews now rely so much on technol- the ACFE Community at
Connect.ACFE.com.
ogy. As one of them said, we must be “overprepared” for the inevitable mishaps and interrup-
tions — especially for organizations operating in multiple countries.
Because our investigation procedures have changed, the experts also stressed that we must
closely work with our legal departments to ensure we’re still complying with all laws and regula-
tions. Even a basic component like maintaining evidentiary chain of custody are more difficult View stories and photos
in a remote environment. There’s just so much more to scrutinize now. on Instagram and never
It’s clear that the fraud risk landscape has changed dramatically since the beginning of miss exclusive Fraud
Magazine content.
the pandemic. However, if we come together and work collaboratively with IT, legal and other
groups — internally and externally — then we can share our knowledge and experience to figure
out the necessary solutions. Coincidentally, harnessing this collective knowledge and experience
is the hallmark of strong fraud risk assessments, which organizations must revisit as they seek
to assess and navigate the “next normal” in their fight against fraud. CONTRIBUTE
Just as fraudsters are looking for new ways to steal during the pandemic, we must find novel Share your expertise
methods to catch them. Even if we must do that remotely. ■ FM and earn up to 10 CPE
credits annually for your
published work. Visit
Bruce Dorris, J.D., CFE, CPA, is president and CEO of the ACFE. Reach him at: Fraud-Magazine.com/
President@ACFE.com. getpublished.

FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021 FRAUD MAGAZINE 3

 Contents Volume 36, No. 1, January/February 2021

COVER STORY

28
Remote but engaged:
Conducting investigations from afar
By Dick Carozza, CFE

How do fraud examiners conduct fraud

examinations when they often can’t
meet their team members and subjects
in person? These experts — during
pandemic constraints — discuss their
biggest investigation hurdles, main-
taining professional skepticism, best
practices, eDiscovery challenges, chain
28 REMOTE BUT ENGAGED of custody, interviewing constraints
and more.

FEATURES

24 DEVELOPING THE ENTIRE FRAUD PICTURE 36 5 MOST SCANDALOUS FRAUDS 50 FAREWELL

Developing Keys to the kingdom:

24 44
the entire fraud picture oilfield fraud
By Alexis C. Bell, CFE By Rick Roybal, CFE

5 Most scandalous A pillar of anti-fraud

36 50
fraud cases of 2020 education says farewell
By Hailey Ayres and Mason Wilder, CFE By Emily Primeaux, CFE

4 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM


COLUMNS AND DEPARTMENTS
FROM THE PRESIDENT
We’re remote, but
we must connect
Bruce Dorris, J.D., CFE, CPA
FRAUD IN THE NEWS
Ponzi schemer flees on wa-
ter scooter, shysters rent
parking spots and more
Compiled by Dick Carozza, CFE
CASE IN POINT
The case of the
disappearing printer ink
By Michael Yamma, CFE, and
Brian Malloy, CFE
8 DISAPPEARING INK
FRAUD EDGE
Cyberattacks in higher
education at an
epidemic level
By Cindy Greenman Ph.D., CFE;
Ross Johnston, Ph.D., CPA; and
Derrick Esplin, Ph.D., CPA
INNOVATION UPDATE
Are data-sharing
consortiums the future
of anti-fraud?
By Vincent M. Walden, CFE, CPA
GLOBAL FRAUD FOOTPRINT
2021 outlook for fighting
fraud in Europe
3 By Mason Wilder, CFE
FRAUD BASICS
Open public entities’
ledgers for transparency
By Ken Dieffenbach, CFE
6 J. Cano, Ph.D., CFE, CAS; Courtney Castelino, CFE,
CAREER CONNECTION
Time to shake things up
By Tracy G. Swaim, CFE
TAKING BACK THE ID
8 Covid-19 and utility
bill scams
By Robert Holtfreter, Ph.D., CFE
68 ALAN E. SMALL, CFE
I’M A CFE
Alan E. Small, CFE
12 By Dick Carozza, CFE
CPE QUIZ
16
FRAUD-MAGAZINE.COM
Publisher John Gill, J.D., CFE
Editor-in-chief Dick Carozza, CFE
Contributing editors
Cora Bullock; Scott H. Patterson;
Randi Zimmer, CFE
Legal editor Ron Cresswell, J.D., CFE
Contributing writers
Robert Tie, CFE, CFP; Donn LeVie Jr., CFE;
Emily Primeaux, CFE
Designers
Tracy Paccone, Jennifer Rother
Guest designers
20 Becky Plante, Mia Bain
Circulation manager Aimee Jost, CFE
Advertising coordinator Travis Kolaja
Contact: (800) 245-3321 | tkolaja@ACFE.com
Editorial Advisory Committee
Jonathan E. Turner, CFE, CII, chair; Emmanuel A. Ap-
58 piah, MBA, CPA, CFE; Johnnie R. Bejarano, DBA, CFE,
CPA, CGMA; Richard Brody, Ph.D., CFE, CPA; Jeimy
CPA, CA, CBV, CFF; Franklin Davenport, CFE; David J.
Clements, CFE; Peter D. Goldmann, CFE; Katya Hirose,
J.D., CFE, CAMS; Robert Holtfreter, Ph.D., CFE; Robert
Kardell, CFE, CPA; Thomas Cheney Lawson, CFE, CIA;
Philip C. Levi, CFE, CPA, FCA; Robert Loh, CFE, CFCS,
62 CIRA; Larry Marks, CFE, CISA, PMP, CISSP, CSTE; Jim-
my S. Pappas, CFE; Cecily Raiborn, Ph.D., CFE, CMA,
CPA (Texas); Dorothy Riggs, CFE; Daniel Semick, MPA,
CFE, CGFM; Rob E. Shaff, CFE; Katharina Shamai, CFE,
CIA, CA, IIA; Herbert Snyder, Ph.D., CFE; Stéphane
Vuille, CFE, PCI
2020-2021 Board of Regents
Lyn Cameron, CFE, LL.B; Kenneth R. Dieffenbach, CFE;
64 Bruce Dorris, J.D., CFE, CVA, CPA; Eric R. Feldman, CFE;
Bethmara Kessler, CFE; Jeanette LeVie, CFE; Victoria
Meyer, CFE, FCCA, MICA; John Warren, J.D., CFE
Fraud Magazine (ISSN 1553-6645) is published bimonthly
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68
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JANUARY/FEBRUARY 2021 FRAUD MAGAZINE 5
 FRAUD in the news Read more news at Fraud-Magazine.com

PONZI SCHEMER FLEES ON WATER SCOOTER ACROSS AND UNDER LAKE
Bernie Madoff needed an underwater
scooter! Accused Ponzi schemer Matthew
Piercey, 44, tried to escape authorities on
a red submergible Yamaha 350Li scooter
across, and under, Shasta Lake Nov. 16,
2020, in California, according to a U.S.
Department of Justice (DOJ) release and
The New York Times.
Piercey, of Palo Cedro, California,
fled in his truck to Shasta Lake when
members of the California Highway Pa-
trol tried to apprehend him. They arrest-
ed him after he emerged from the lake on
the scooter in wet street clothes. A grand
jury had returned an indictment Nov. 12
after charging him with wire fraud, mail
fraud, money laundering and witness
tampering.
Kenneth Winton, 67, of Oroville,
California, Piercey’s business partner,
was charged separately by criminal
SHYSTERS RENT U.K. PARKING
information with conspiracy to com- SPOTS THEY DON’T OWN
mit fraud.
According to the BBC, Simon
According to court documents, from
Gallagher received complaints from
about July 2015 through August 2020,
tenants at his London flat that strang-
Piercey carried out an investment fraud
ers were leaving cars in the dedicated
scheme that raised a total of approxi-
parking bays. He found that a fraud-
mately $35 million in investor funds.
ster was charging eight pounds per
Piercey used his firms, Family Wealth
day via the “Just Park” website for his
Legacy and Zolla, to solicit funds from
tenants’ parking spaces.
investors using a variety of false and
Other fraudsters were also raking
misleading statements, including those
in the pounds at other dedicated park-
about trading algorithms, the success of
ing spots around London through the
the companies’ investment strategies
online parking service and app.
and the liquidity of investments.
The Just Park’s company founder
(See the DOJ release, tinyurl.com/
and CEO apologized for the purloined
y442vzef, and “Ponzi Scheme Suspect
parking problems. “We do have strin-
Uses Underwater Scooter to Flee F.B.I.,”
gent checks in place to prevent spaces
by John Ismay, The New York Times, Nov.
from being listed fraudulently,” he
18, 2020, tinyurl.com/y3mgn4rp.)
said. The company said it removed
the unauthorized advertisements.
(See “Just Park apologises after
scammers place fake parking space
ads,” by Jon Douglas, BBC News, Nov.
8, 2020, tinyurl.com/y2b9trkm.)

ALLEGED FRAUDSTERS STEAL $6 MILLION IN FORECLOSURE SCHEME

Many distressed Southern Californians lost their homes because nine people allegedly
claimed they’d prevent foreclosures, but instead they stole $6 million from the victims.
According to the Los Angeles Daily News, the nine defendants claimed they could
halt foreclosures if homeowners would send them monthly payments. The alleged
fraudsters would then delay foreclosures and evictions by filing fraudulent bankruptcy
documents, false court documents and false fractional interest grant deeds, according
to the California attorney general.
The culprits would send the documents to the servicers of mortgage loans, which
would initially stop foreclosures by invoking the bankruptcy “automatic stay.” Regard-
less, victims would still lose their homes.
(See “9 people accused in Southern California foreclosure fraud scheme,” City News
Service, Los Angeles Daily News, Nov. 21, 2020, tinyurl.com/y57db767.)

6 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

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 CASE IN POINT Case history applications

The case of the disappearing

Printer ink
Despite futurists’ predictions, we don’t live in a paperless business world. Printer
ink and toner are still an expensive necessity. Fraudsters depend on ink costing or-
ganizations more than caviar. Here’s how to prevent this asset misappropriation and
possibly save millions.

S cores of people get taken to the

cleaners in Las Vegas. It’s just
that the one who ends up in the
red usually isn’t the local government.
But that happened to be the case when a
municipal purchasing analyst managed
to steal $6,715,531 in toner and ink car-
tridges from her employer within eight
years. That’s an average of $746,170 in
toner and ink per year!
The Las Vegas Valley Water District
hired Jennifer J. McCain-Bray in 2001
and in late 2007 promoted her to be its
purchasing analyst. She worked with de-
partment vendors and ordered supplies
but also began stealing what eventually
would amount to thousands of toner and
ink cartridges. (See the U.S. Department Court records from McCain-Bray’s of purchasing records, and McCain-Bray
of Justice release, Jan. 29, 2019, tinyurl. prosecution indicate that she also failed could read the laser printing on the wall.
com/y8wbhufg.) to report $2,339,156 in taxable income She resigned in December 2015. McCain-
McCain-Bray’s fraud was simple. from cartridge sales between 2011 and Bray was eventually sentenced to 51
She’d order unneeded cartridges and 2015. That averages to $467,831 in stolen
months in federal prison and ordered to
then ship them under a fake vendor toner income per year in just those five
pay back the entire $6.7 million.
name using the water district’s shipping years.
system to a company in New Jersey that McCain-Bray used the extra cash to
purchased and sold toner and ink on- remodel her home; travel; and buy gifts
Employee theft is on the rise
line. Her fake vendor enabled McCain- for herself, friends and family. Her hot The ACFE 2020 Report to the Nations
Bray to misuse the water district’s streak ended when a coworker became shows that theft of noncash property,
shipping system, so it even paid postage suspicious about a package addressed such as office supplies, rose from about
on the stolen cartridges. to the fake vendor. That led to a review 10% to 18% of fraud cases between 2002

8 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

and 2020. Those frauds had a nearly
$80,000 median loss.
So, what causes employees to steal?
They might have reduced hours, pay or
benefits. And the ACFE notes that em-
ployees who exhibit “excessive control
issues or unwillingness to share duties”
might be a fraud risk. (See the ACFE
Report to the Nations, ACFE.com/RTTN.)
Revenge or “seeking justice” can be
a reason for stealing at work. Perhaps a
fraudster has received a poor evaluation
from management and is concerned
about losing their job, or they see no
opportunity for advancement, hence
their revenge. Maybe they feel their hard
work has gone unnoticed and underap-
preciated, hence their justice seeking.
However, simple greed and the
opportunity of easy money often can be
the determining factors at work. Based
on the McCain-Bray story, fraudsters
can make a lot of cash by selling stolen
office supplies. Keeping these motives in
mind, let’s focus on why one mundane
and ubiquitous item — toner — seems
to stand out in the supply cabinet as the
jackpot of office supply theft.
Why toner and ink?
Not all office supplies are equal in the
eyes of a person looking to make an easy
buck. Printer toner and ink are particu-
larly prone to theft partially because of
their relatively small size. Like all the
other supplies an office consumes, print-
ing supplies aren’t always looked after
with the same level of scrutiny as the
actual printers. This doesn’t make much
sense when you think about it. After all,
what’s easier to stuff in a backpack — a
desk printer or a cartridge of ink?
Also, most employees’ only interac-
tion with the printer and ink world is
the five seconds it takes to make a copy
or retrieve a document. So, fraudulent
office-supply purchasing agents or
COLUMNIST
MICHAEL YAMMA,
CFE
INVESTIGATOR, OFFICE OF
THE CITY AUDITOR,
AUSTIN, TEXAS
COLUMNIST
BRIAN MOLLOY, J.D.,
CFE
CHIEF OF INVESTIGATIONS,
OFFICE OF THE CITY
AUDITOR, AUSTIN, TEXAS
Printer toner and ink
are popular theft tar-
gets because of their
high retail prices and
ease of resale.
others can excuse excessive toner use to
their organizations by saying, “We just
use a lot of ink.”
Printer toner and ink are also popu-
lar theft targets because of their high
retail prices and ease of resale. They’re
so expensive because many manufac-
turers sell their printers at cost or a loss
with the hope of locking users into buy-
ing their toner or ink, which is how they
make their profit. It’s not uncommon to
spend more on toner after only a couple
refills than on the printer that uses it.
Costly cartridge fun facts: Accord-
ing to PC World, ink can go for $22 per
quarter ounce, which is pricier than
Russian caviar; and a New York Times
economist found that printer ink was
priced at about $4,731 a gallon. The
price-to-size ratio is great if you’re look-
ing to steal from work. (See “Irate over
Ink,” by Tom Spring, PC World, Feb. 5,
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
2004, tinyurl.com/y4av4x25; and “Why
Printer Ink is the Other Black Gold,” by
Robert Siegel and Audie Cornish, NPR,
May 24, 2012, tinyurl.com/y3335svf.)
Gone are the resale days of dark
alleys and trench coats laden with stolen
goods. The ease and ubiquity of e-com-
merce has resulted in new outlets for
people to fence stolen items as easily as
non-fraudsters perusing Amazon. Some
grey market websites are dedicated
to selling printer toner and ink. They
provide instant offers and resell them at
a markup that’s still well below the retail
price of new toner and ink. The transac-
tion is just a FedEx shipment and PayPal
transfer away.
Disappearing ink happens
more than you think
So, is employee toner theft just a Vegas
problem because “what happens there
only happens there?” Well, it turns out
toner and ink cartridge theft occurs
across the world. Where there’s an ag-
grieved employee and weak controls,
toner theft can follow.
A municipal employee from San
Diego County stole $360,000 in ink
cartridges between 2007 and 2012 and
sold them to an online ink and toner
marketplace. For his efforts, he received
a three-year jail sentence. (See “County
worker loses benefits for stealing,” by
Jeff McDonald, The San Diego Union-
Tribune, Dec. 5, 2013, tinyurl.com/
yx94js5n.)
A former municipal Philadelphian
mail room clerk received two years in
prison for stealing $1,368,091 worth of
ink and toner cartridges in six years.
Like McCain-Bray, he managed to use
the city’s UPS account to ship his stolen
ink and toner to his co-conspirators.
Records show he made $545,412 from the
sales. That means he got just under 40%
of retail value for his hot toner and ink.
FRAUD MAGAZINE 9
 CASE IN POINT Case history applications
It seems like a steep discount, but then
again, it was all profit. (See U.S. Depart-
ment of Justice release, June 9, 2015,
tinyurl.com/yywpaue8.)
Owners of a Florida furniture store
opened two ghost companies that leased
Xerox printers. The leases came with
seemingly unlimited toner replace-
ment. The fraudsters would order more
cartridges than the printers needed
and then resell them. They eventually
worked themselves up to at least 63
Xerox machines so they could order and
resell toner in bulk.
They sold enough to receive about
$11 million from one buyer in Miami.
They were prosecuted for stealing ap-
proximately $24 million in toner from
Xerox in a scheme that lasted from 2008
until 2013. If the $11 million is roughly
their total gains from the sales, then
these guys got an impressive 46% of
retail value for their stolen toner. That’s
a solid step up from the Philadelphia
employee. (See “Xerox scam nets Haynes
Brothers furniture family members
prison time,” by Frank Fernandez, The
Daytona Beach News-Journal, July 29,
2019, tinyurl.com/y36gbsae.)
Guarding against toner
and ink theft
How do you prevent your organization
from being the next toner donor to an
aspiring office supply dealer? We’ve
identified several things you can do to
lessen the chances your toner ends up
on the internet.
We have two general recommenda-
tions before we get to the inky specifics.
First, fight toner and all other types of
fraud with a fraud-reporting hotline.
As detailed in the Report to the Nations,
43% of workplace frauds are discovered
10 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
through tips. That’s, by far, the larg-
est method for discovering workplace
frauds. Also, asset misappropriation is
the most common workplace fraud —
representing 86% of frauds. Add those
up and a fraud hotline will help fight
toner and ink theft.
Secondly, ensure your organization
has adequate separation of duties. All
the cited fraudsters took advantage of
their authority for ordering and receiv-
ing of goods.
This is so simple, but likely none
of the victimized entities took the time
to compare their toner purchases with
their paper purchases.
Toner, of course, is only used to
print on paper, so anyone spending
more money on toner should see a
matching increase for paper. Search for
a period in your purchase records when
toner purchases increased. It’s time to
investigate if you don’t see a matching
pattern in paper purchases.
Take these next steps if you’ve
found some evidence of suspicious
purchasing. If your potential toner thief
is as bold as some of those above, they
might be using your entity’s shipping
function to mail toner that was formerly
yours. Review your shipping records for
new addresses and new vendors.
If you’re concerned with purchasing
records, you might need to start look-
ing into the employee who orders the
ink. Review physical entry records like
badge-swipe data.
Employees who are over-purchasing
and then stealing ink want to avoid at-
tention as much as possible when they
remove toner from the premises or ship
it to their buyers. Look for the suspected
employee arriving at work unusually
early or staying late. Computer log-on
FRAUD-MAGAZINE.COM
records might also help you identify un-
usual working patterns if physical access
records aren’t available.
Once you identify a subject em-
ployee, review their web-browser history
and do a keyword search of their work
emails. Look for terms like pre-owned,
used, toner, ink, cartridge, the brand
of printer you have, plus the names of
ink and toner resellers. Review their
browser history for resellers and market-
places like eBay, craigslist and Facebook
Marketplace.
Interview your warehouse staffers
if they do the initial delivery intake.
Ask if any employees like their pack-
ages handled in particular ways or are
extra demanding. Ask about standard
practices for receiving and delivering
packages and if anyone has requested
exceptions to those practices. It might
even be helpful to ask those employees
who receive the most packages.
Don’t cry over spilled ink
Who knew ink and toner could be such
fertile soil for fraud? If you take some of
the simple steps we’ve shared, it should
meaningfully reduce the likelihood your
toner will end up for sale somewhere
on the internet. And if these steps lead
you to catch a toner fraudster magenta-
handed, don’t feel too cyan. You’re not
alone, and you probably won’t be the last
to find your ink disappearing. ■ FM
Michael Yamma, CFE, is an investiga-
tor for the City of Austin, Texas, Office
of the City Auditor. Contact him at
Michael.yamma@austintexas.gov.
Brian Molloy, J.D., CFE, is chief of in-
vestigations for the City of Austin, Texas,
Office of the City Auditor. Contact him
at brian.molloy@austintexas.gov.
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 FRAUD EDGE A forum for fraud-fighting faculty in higher ed

Cyberattacks in higher education

at an epidemic level
Cybercriminals hit public institutions hard with ransomware in 2019 and 2020.
Colleges and universities lost millions to fraudsters. These thieves endangered
students’ records and stole PII, which they sold on the dark web. Administrators must
train students, educators and staffs to avoid opening suspicious email attachments.

T he University of Utah cyber

event started with “an unknown
entity” hacking into the Col-
lege of Social and Behavioral Science
computer servers on July 19, 2020, which
left them temporarily useless. Admin-
istrative officials immediately notified
law enforcement and the university’s
information security office (ISO). The
university then hired an outside consult-
ing firm with specialized experience to
assist. The firm’s technicians immediate-
ly isolated the hacked computer systems
from the rest of the university’s systems.
They then scrubbed the systems, and the
ISO reinstalled the pertinent data from
previous backups.
Because the systems contained
student and employee personally iden-
tifiable information (PII), the university
— in agreement with its consulting firm
and insurance company — decided to
pay a $457,059.24 ransom, which the
hcakers demanded. The university did
disclose its insurance policy covered
part of the ransom. The university had
to pay the remainder. It didn’t disclose
the breakdown of the payments, but it
did specify that it didn’t use any grant
monies, donations, tuition fees or
taxpayer funds. (See “University of Utah
COLUMNIST
CINDY GREENMAN,
PH.D., CFE
ASSOICATE PROFESSOR,
by Art Raymond, Deseret News, Aug. 21,
2020, tinyurl.com/yyutuorb.)
The university continued to down-
play the incident and claimed the cyber
DIXIE STATE UNIVERSITY extortionists encrypted only .02% of
the available data stored on the system
COLUMNIST
before the university’s information
ROSS JOHNSTON,
security office discovered the attack.
PH.D., CPA
ASSISTANT PROFESSOR, (See “University of Utah pays $450K to
DIXIE STATE UNIVERSITY Stop Cyberattack on Servers,” by Scott
Pierce, Salt Lake Tribune in U.S. News
COLUMNIST
& World Report, Aug. 22, 2020, tinyurl.
DERRICK ESPLIN,
com/y64vwjyj.)
PH.D., CPA
CHAIR, DIXIE STATE Ten days after the attack, the
UNIVERSITY ACCOUNT- university sent a notice to faculty and
ING, FINANCE AND DATA
ANALYTICS students to ask them to update the
passwords they used to access the
pays $457K After Ransomware Attack,” school’s network. The university’s chief
information officer (CIO) said the delay
by Lindsey O’Donnell, threat post, Aug.
was because the university was involved
21, 2020, tinyurl.com/y6rklgwm.)
in the investigation and to ensure that
The University of Utah paid the “password resets went smoothly in each
unnamed cyber extortionists via Bitcoin campus entity.”
and the hackers provided a code that The CIO said the university was
released the locked data servers. Cyber- ascertaining the type of data accessed.
He said the event had helped the school
crooks regularly specify digital cryp-
specifically identify a weakness in its
tocurrencies for transactions because
security system. The CIO said the uni-
they’re fundamentally untraceable. (See versity corrected that vulnerability. (See
“Cyber swindlers take University of Utah the Deseret News article, tinyurl.com/
for nearly $500K in ransomware attack,” yyutuorb.)

12 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

 The University of Utah has approxi-
mately 24,500 undergraduate students,
and about 8,500 graduate students
and about 1,600 faculty members. (See
the Salt Lake Tribune article, tinyurl.
com/y64vwjyj.) At that time, university
officials were continuing to review the
accessed information and said it would
release more details. (See the threat post
article, tinyurl.com/y6rklgwm.)
Cybercriminals hit three
schools within two weeks
The University of Utah joins the club
of many higher-education institutions
that cybercriminals have targeted. In the
spring of 2020 alone, ransomware at-
tacks hit Michigan State University, Co-
lumbia College Chicago and the Univer-
sity of California, San Francisco (USCF),
within two weeks. Cybercriminals used
the malicious software, NetWalker, and
gave them six days to pay, or they’d sell
the stolen PII.
Michigan State University ap-
pears to be the only one of the schools
that chose not to pay the ransom. The
intrusion was limited to just the depart-
ment of physics and astronomy. MSU’s
information technology teams took
swift action to prevent further exposure,
including taking the impacted servers
and workstations offline and notifying
law enforcement, the university said.
“First and foremost, our priority is
determining what information was com-
promised and then working with anyone
who may have been affected to provide
them with the appropriate support,” said
MSU Chief Information Officer Melissa
Woo. “The safety and security of our IT
systems and the people who use them
are of paramount importance to MSU. It
is why MSU continues to work diligently
to strengthen and improve our informa-
tion security systems and share best
practices with our campus community,”
Woo said. (See Michigan State Universi-
ty won’t pay ransom after cyber attack,”
by Steve Marowski, MLive, June 3, 2020,
tinyurl.com/y2takbxg.)
Soon after the six-day deadline,
some of the leaked PII stolen from the
school’s department of physics and
astronomy was available for purchase
on the dark web. (See “Cyberextortion
Threat Evolves,” by Lindsay McKenzie,
Inside Higher Ed, June 11, 2020, tinyurl.
com/ybgg87nf.)
UCSF confirmed it paid a ransom
of $1.14 million (the highest reported
ransom so far) to the criminals behind
a Netwalker ransomware cyberattack.
On June 1, 2020, the hackers behind
the campaign attacked UCSF networks
within the school of medicine IT envi-
ronment. Thankfully, the attack didn’t
affect patient care delivery operations or
research work on a cure for COVID-19.
However, data on a “limited number of
servers” was successfully encrypted ac-
cording to an UCSF statement published
June 26.
The encrypted data “is important to
some of the academic work we pursue
as a university serving the public good,”
the UCSF statement said. Although
the cyberattack probably didn’t expose
patient records, the university said, “We
therefore made the difficult decision to
pay some portion of the ransom, approx-
imately $1.14 million, to the individuals
behind the malware attack in exchange
for a tool to unlock the encrypted data
and the return of the data they ob-
tained.” (See “The University of Califor-
nia Pays $1 Million Ransom Following
Cyber Attack,” by Davey Winder, Forbes,
June 29, 2020, tinyurl.com/y6yfd28b.)
There is plenty of interest in not
only how the attackers managed to get
their foothold onto the school of medi-
cine network but also whether backups
of the encrypted data were available.
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
The wording of the UCSF statement
itself does seem to suggest that back-
ups weren’t available. According to
the Forbes’ article, if that’s the case, Ian
Thornton-Trump, CISO at the company,
Cyjax, said the question is why “execu-
tives are willing to pay a $1 million ran-
som to cybercriminals, but not willing
to pay a fraction of that to implement
or maintain backups?” (See the Forbes
article, tinyurl.com/y6yfd28b.) Cyjax
offers incident response services and
threat intelligence.
Columbia College of Chicago
confirmed its IT systems detected a
breach of its computer system that was
contained to a limited number of serv-
ers within the college. The college also
confirmed that the hackers used the
same NetWalker ransomware used in
the other two attacks.
College officials sent an email to the
in which they admitted cybercriminals
had accessed some employee, student
and college data, but they were still
investigating the incident. They didn’t
reveal how much money the hackers de-
manded. (See “Breaking: Columbia stu-
dent information at risk in ransomware
attack,” by Kendall Polidori and Mari
Devereaux, The Columbia Chronicle,
June 5, 2020, tinyurl.com/yy77tftx.)
Emboldened cybercriminals
pursuing larger targets
Generally, hackers use ransomware, or ma-
licious software, to prevent owners of in-
formation from accessing it on their com-
puter networks. The cyber-extortionists
then ask for money (typically in the form
of Bitcoin) in return for codes to unlock
access to the information.
Just a few years ago, ransomware
attacks only happened to a few un-
lucky entities and they were forced to
pay a few hundred dollars to regain
access to their computer files. Now,
FRAUD MAGAZINE 13
 FRAUD EDGE A forum for fraud-fighting faculty in higher ed

cybercriminals have stopped targeting
select individuals and are pursuing
much larger targets, businesses, cities
and school systems. They’ve turned it
into a $13 billion-a-year industry.
Dozens of large ransomware as-
saults happen every month with the
average payout of more than $120,000.
South Korean web provider, Nayana,
paid a ransom of $1 million in 2017.
The cybercriminals hacked into more
than 153 Linux servers and shut down
more than 3,400 websites. The hackers
originally demanded $4.4 million, but
the company negotiators were able to
convince them that the company didn’t
have the funds to pay that amount. (See
“The 5 biggest ransomware pay-outs of
all time,” by Luke Irwin, IT Governance,
Oct. 2, 2019, tinyurl.com/y7k66o4t.)
A report from BitSight Insights
found ransomware attacks in 2016
targeted 13 percent of all higher educa-
tion institutions. (See “13% Of The
Higher Education Sector Has Been
Infected With Ransomware,” by Joel
Alcon, BitSight, Oct. 13, 2016, tinyurl.
com/y4hxrcyr.)
Another report by Emsisoft, a
cyber research firm, found ransomware
attacks in 2019 impacted 89 universi-
ties, colleges and school districts, with
operations at up to 1,233 individual
schools potentially affected across the
U.S. In some of these cases, schools
closed and others couldn’t access data
about students’ medications or aller-
gies, and students’ grades were lost.
The “extreme level” invasions cost
thousands of server and device shut-
downs, and lost data. (See “The State
of Ransomware in the U.S.: Report and
Statistics 2019, Emsisoft, Dec. 12, 2019,
tinyurl.com/u2pjvbo.)
Diverse constituents particu-
larly endanger higher ed
Higher education is highly susceptible
because hackers use malware that
they typically deliver surreptitiously in
phishing emails. With the number of
students, faculty and staff that all have
access to higher-education learning
platforms extortionists can easily gain
access when just one person clicks an
attachment or link in a phishing email,
invade the network with malware
and search for the most valuable data
without detection. (See “Study: Higher
education is the top target for ransom-
ware attacks,” Axiom Resources, June
2020, tinyurl.com/y4ptj2gp.)
Chris Ross, senior vice president at
Barracuda Networks, says that univer-
sity servers are becoming increasingly

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 appealing targets for cybercriminals be-
cause they hold treasure troves of valu-
able data, including sensitive student
and employee data, such as addresses,
passwords, payment details, bank infor-
mation and confidential research. (See
Blackbaud university ransomware – the
danger of supply chain attacks,” by Mark
Jones, techhq.com, July 24, 2020, tinyurl.
com/yxm45waf.)
During the global pandemic, more
students are depending on virtual learn-
ing, the risks are greatly increased and
access points for hackers are multiplied.
“With more students than ever rely-
ing on cloud infrastructure to manage
the transition to digital classes and
had experienced at least one security Cindy Greenman, Ph.D., CFE, is an
incident since the lockdown, with more associate professor of accounting at
than half (51%) recording an increase in Dixie State University in St. George,
the number of email phishing attacks,”
Utah. She’s received the ACFE Educator
Ross says in the techhq.com article.
of the Year. Greenman is a member of
the ACFE Arizona Chapter. Contact her
Training, training, training at drcindygreenman@gmail.com.
Because most ransomware is delivered
through phishing emails, the keys to
Ross Johnston, Ph.D., CPA, is an as-
prevention are awareness and training.
sistant professor of accounting at Dixie
Educating faculty, staff and students on
State University. Contact him at ross.
how to identify unsafe emails can greatly
johnston@dixie.edu.
reduce the chances of a ransomware at-
tack. Schools can also attempt to prevent
stolen PII by ensuring that they aren’t hold- Derrick Esplin, Ph.D., CPA, is chair of
ing onto information they no longer need. the Dixie State University Accounting,

online exams, the threat facing them (See “Cyberextortion Threat Evolves,” by Finance and Data Analytics Department
has never been higher,” Ross says. “In Lindsay McKenzie, Inside Higher Ed, June in St. George, Utah. Contact him at der-
fact, our recent research found that 46% 11, 2020, tinyurl.com/ybgg87nf.) FM ■ rick.esplin@dixie.edu.

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 INNOVATION UPDATE
Are data-sharing consortiums
the future of anti-fraud?
More organizations are collaborating with data-sharing consortiums to safely ex-
change fraud risk profile information that could improve their internal prevention
and detection activities. Here’s an interview with Matt Galvin, global VP of ethics
and compliance at Anheuser-Busch (AB) InBev, who discusses how cross-company
collaboration might affect the anti-fraud profession.
I n 2019, the ACFE and SAS Institute
released the Anti-Fraud Technol-
ogy Benchmarking Report, derived
from the answers to a 19-question survey
sent to 41,181 randomly selected ACFE
members. More than 1,000 responded.
(See ACFE.com/techreport.) One ques-
tion that caught my attention was, “Are
organizations contributing to data-
sharing consortiums to help prevent or
detect fraud?” I was surprised to learn
that more than a quarter of the respon-
dents (29%) do contribute to some
form of data-sharing consortium that
feeds particular data into an aggregated
database that all member organizations
can access.
According to the report, consor-
tiums design these initiatives to help
member organizations benefit from the
collective data by identifying trends
and protecting themselves from known
threats. Another 21% reported they
don’t contribute to a consortium but
would be willing to do so in the future.
(See the figure on page 17.)
Naturally, organizations can reap
significant benefits by sharing data. But
as the report indicates, organizations
might opt out of such initiatives for
16 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
Practical anti-fraud ingenuity
COLUMNIST
VINCENT M.
WALDEN, CFE, CPA
MANAGING DIRECTOR,
DISPUTES AND INVESTI-
GATIONS PRACTICE
ALVAREZ & MARSHAL
If organizations could
truly figure out ways
to anonymously share
fraud risk indica-
tors — such as those
from actual cases
of bribery, conflicts
of interest, financial
misstatements or
misappropriation of
assets — it would
revolutionize our
profession.
FRAUD-MAGAZINE.COM
numerous reasons, such as privacy con-
cerns and logistical challenges in dis-
closing their data to other organizations.
If organizations could truly figure
out ways to anonymously share fraud
risk indicators — such as those from ac-
tual cases of bribery, conflicts of interest,
financial misstatements or misappropri-
ation of assets — it would revolutionize
our profession. With that in mind, Fraud
Magazine interviewed Matt Galvin, a rec-
ognized thought leader in compliance
and anti-fraud technology innovation.
Galvin is vice president, global ethics
and compliance at Anheuser-Busch (AB)
InBev and leads a team of more than 50
legal, compliance and fraud risk profes-
sionals globally.
Galvin spearheads BrewRIGHT,
AB InBev’s award-winning compliance
technology and transaction monitoring
platform. BrewRIGHT uses machine
learning and behavioral analytics to
monitor billions of dollars in third-party
payment activities, investigations and
travel and entertainment data, and
many other compliance modules as
part of a data-driven compliance ap-
proach. Galvin is also very interested in
the concept of corporate data-sharing
 ARE ORGANIZATIONS CONTRIBUTING TO DATA-SHARING CONSORTIUMS TO HELP
���
PREVENT OR DETECT FRAUD?
50%
Do not contribute and
have no plans to do so
Cover and graph from the 2019 ACFE Anti-Fraud Technology Benchmarking Report
consortiums and has facilitated many
discussions with other business leaders
on the topic.
Here’s the interview with Galvin,
shortened and edited for clarity.
FM: As head of ethics, compliance
and investigations at AB InBev, why
do you see the need for companies to
collaborate and share fraud risk data
in a consortium-type manner?
Galvin: Well, we’ve been working on
BrewRIGHT platform for roughly four
years now, and one of our stated goals
at the outset was to get to the point of
prediction in terms of intercepting for
instances of fraud or corruption before
they would occur. Now, with any sort
29%
Currently contribute
21%
Do not currently contribute, but
would be willing to contribute in
the future
of data set and with any sort of data
science approach, the more structured
data that you have with meaning-
ful input [e.g., confirmed fraudulent
payments], the better your predictive
models get. Prediction to me is like the
Holy Grail. But to get there you need
a pretty robust data set as well as a lot
of instances of what a fraudulent — or
non-compliant — transaction looks
like.
I’m happy to report, I guess, that as
a single company, I haven’t had the num-
ber of instances of fraud and corruption
needed to create a data set robust enough
to get to effective prediction. So, where can
I get that sort of data set? I could track this
data over time, but it could take years to
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
collect such a data set, and by then it might
be obsolete. Or, perhaps, we can all start
to work as part of a cross-company con-
sortium and obtain that data set a whole
lot faster.
FM: What information would be
shared? And how would it be kept
sanitized or anonymous?
Galvin: We have a number of models
that we’re evaluating. One would be a
vendor profile repository [i.e., a black-
list of high-risk vendors], and another
would be a transactional profiling re-
pository [i.e., a library of validated risky,
fraudulent or non-compliant transac-
tions]. Actually, I’m very excited as I’ve
recently been thinking about how to
FRAUD MAGAZINE 17
 INNOVATION UPDATE Practical anti-fraud ingenuity

put contracts on a distributed ledger.
As background, a distributed ledger is
a database that is consensually shared
and synchronized across multiple sites,
institutions or geographies and acces-
sible by multiple people. For reference,
blockchain is a type of distributed
ledger.
Currently, there’s a fascinating legal
contract consortium in place now that
I’m partnering with to take [AB In-
bev’s] higher-risk vendor management
contracts and put them on a distributed
ledger in a way that would allow us to
extract the key aspects of the data for
each contract.
The nice thing about this kind of
distributed ledger technology is it allows
For the investment price of a data scientist on your
compliance or investigations team (which, in the
current economy, you can get someone decent), you
can start to understand the challenges that
you have and start figuring out things that can
create a lot of quick wins for you.
you to reliably share information blindly
(or anonymously), but also only shares
what you need to. In many respects,
like with a lot of our transactional pay-
ment models, you wouldn’t share any
transaction-specific information at all.
What you would be sharing is the for-
mula [or algorithm] generated from the
transaction and then get feedback on
that formula from other members of the
consortium. It’s basically like sharing
the recipe of a fraud-risk event without
sharing any of the ingredients. In that
model, you just get feedback on how
good the recipe is — effectively laying
the groundwork for distributed ledger
technology.
FM: What risks or challenges do you
see that companies need to think
through? Would it be a one-size-fits-
all consortium, or does it need to be
broken down by industry or com-
pany size?
Galvin: Two separate questions, right?
How universal can it be and then how
would it actually work? The two are
somewhat related. When I look at AB
InBev as a company, we’re operating in
over 80 countries where roughly 90%
of our value chain is local. So as much
as we’re global, we are also hyper-
local. This creates a virtual laboratory
of events and risk algorithms to learn
from throughout the supply chain
because we’re working with so many
people locally in different markets.
Now, that doesn’t mean every algo-
rithm I’ve developed will work for every
company everywhere. But it does give
me a high degree of confidence. From an
accounting perspective, most compa-
nies — regardless of industry — follow
the same accounting rules of what must
be captured in payments or sales. For
example, most follow generally ac-
cepted accounting principles [GAAP]
and/or international financial reporting
standards. I’ve talked to a lot of different
multinational companies in the mar-
ket — across energy, pharma, technol-
ogy and consumer products, to name
a few — and I don’t believe that every
algorithm I have will work for everyone
everywhere. But I do believe that some
of my algorithms work for everyone
somewhere.
FM: What advice do you have for
investigators or compliance profes-
sionals for becoming more familiar
with this consortium concept?
Galvin: In the short term, where I’ve
seen companies have greater successes
is when faced with the choice between
building or buying technology, they
choose to build. For the investment
price of a data scientist on your compli-
ance or investigations team (which, in
the current economy, you can get some-
one decent), you can start to under-
stand the challenges that you have and
start figuring out things that can create
a lot of quick wins for you.
Next, I would start looking at what
data sets you have that are going to
be overlapping with other organiza-
tions — instead of buying or renting a
third-party tool that sort of sends your
own data back at you. That’s not really
improved by any sort of expertise, nor
is that learning in any sort of important
way. This is where the consortium is go-
ing to bring tremendous value — where
you can get a lot of quick wins, leverag-
ing the collective knowledge of broad,
diverse data sets.
FM: So, your advice is, if you’re not
doing analytics now internally, you

18 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

 need to think about hiring a data
scientist. Because eventually, when
this consortium is ready, you need to
have something to contribute.
Galvin: Yes. You mentioned those stats
that SAS and the ACFE put out about
different developments and appetite
for fraud-based consortiums, and there
are different appetites and experiences
with that. But when you look outside of
fraud, you can think about the founda-
tion principles of how the credit card
system works in the banking industry.
To me, it’s no accident that credit
cards are way advanced in terms of
machine learning to spot fraud because
they are centralized, and a lot of transac-
tions flow through them. It’s a consor-
tium of banks sharing credit card fraud
risk data. That was a decision by banks
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to not replicate processes, and some-
thing that should indeed be centralized.
In the future, compliance and
anti-fraud should not really function as
something that everybody does manu-
ally and in a silo. There’s going be some
aspects of it that you couldn’t replicate
as a consortium, sure, but so much of
what we do as compliance officers and
investigators in our own companies is
the same as what other compliance of-
ficers and investigative professionals do
at their companies. That’s going to work
a lot better as part of consortium where
collaboration is key.
FM: Do you think you can give a
time frame for when a viable con-
sortium beta would be available to
organizations?
Galvin: So, I am working right now with
one company on a tech solution to get
something in beta in the first quarter of
this year, and then I believe things will
start moving very quickly. Stay tuned.
■ FM
Vincent M. Walden, CFE, CPA, is
a managing director with Alvarez &
Marsal’s Disputes and Investigations
Practice and assists companies with
their anti-fraud, investigation and
compliance monitoring programs.
He welcomes your feedback. Contact
Walden at vwalden@alvarezandmarsal.
com. Walden thanks Matt Galvin for his
contributions to this column. Contact
Galvin at linkedin.com/in/matt-galvin-
a039631.
 GLOBAL FRAUD FOOTPRINT
2021 outlook for fighting
fraud in Europe
Increased risks and pressure to do more with less
The pandemic is leading to increased fraud and criminals’ evolving tactics. Fraud
examiners are facing budgetary and logistical constraints, and operational limitations.
Here’s how these conditions could affect European anti-fraud efforts this year.
T he ACFE Fraud in the Wake of
COVID-19: Benchmarking Report,
December 2020 Edition (ACFE.
com/covidreport), said 79% of respon-
dents have seen an increase in the
overall level of fraud and 90% expect an
increase in the next year.
Europol features these COVID-19
fraud scams on its website, among
others:
• Bogus websites featuring fake news
about the virus or posing as chari-
ties to steal personally identifiable
information or infect visitors with
malware.
• Fake apps claiming to display live
information about the virus but
will infect devices with malware or
ransomware.
• Fake investment opportunities re-
lated to products or services that can
prevent, detect or cure the virus. (See
tinyurl.com/y49azw8n.)
In an interview with Fraud Maga-
zine, Natina Thalien, CFE, the global
head of security for governance, risk
and compliance at Ingenico Group — a
fintech company in Paris involved in
20 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
Examining cross-border issues
COLUMNIST
MASON WILDER,
CFE
ACFE SENIOR
RESEARCH SPECIALIST
electronic payment processing —
discussed cyberfraud related to the
pandemic.
“Anyone who downloads COVID-
19-related applications can also be
tricked into downloading ransomware
because it was disguised as a legitimate
application,” Thalien says.
Europol’s “Internet Organised
Crime Threat Assessment,” published
Oct. 5, 2020 (tinyurl.com/y65x94lr),
reported organized criminal elements
tweaking existing forms of cybercrime
to exploit the pandemic, which caused
an amplification of existing problems by
limiting the investigative capacities of
law enforcement authorities. The report
also attributed the success of most social
engineering and phishing attacks, which
enabled other types of cybercrime, to
FRAUD-MAGAZINE.COM
inadequate security measures or insuf-
ficient awareness of victims.
“There has been a significant spike
in phishing attacks since March 2020,
and the vital necessity to prevent and
detect is more crucial than ever,” Thalien
says. “Attackers are using COVID-19 as
bait to impersonate different media of
information and thereby trying to mis-
lead our employees or customers.”
The increased risks of cybercrime
associated with COVID-19 are exacerbat-
ed by organizations’ shifts in business
operations. “The means of working from
home has increased usage of personal
computers and phones, making it even
more difficult to identify and protect
systems and information,” Thalien says.
(See “Remote but engaged,” on page 28.)
A report from the Council of
Europe’s Committee of Experts on the
Evaluation of Anti-money Laundering
Measures and the Financing of Terror-
ism (MONEYVAL) found that “all juris-
dictions noted a significant and rapid
growth in the number of frauds related
to COVID-19 and the adaptation of well-
known fraud to the new (confined and
more remote) lifestyle of individuals and
businesses.”
MONEYVAL’s report also said
that criminals are seeking to exploit
temporary weaknesses in anti-money
laundering (AML) and counterterror-
ism financing controls (CFT) of financial
institutions, designated non-financial
businesses and professions and virtual
asset-service providers. MONEYVAL said
that companies are adding to their risks
when they relax or deprioritize mea-
sures and controls to boost economies.
(See “Money laundering and terrorism
financing trends in MONEYVAL juris-
dictions during the COVID-19 crisis,”
MONEYVAL, Sept. 2, 2020, tinyurl.com/
y4wh4tvj.)
Relaxation of anti-fraud controls
doesn’t bode well for 2021 European
fraud outlooks, especially when exist-
ing controls have failed to prevent
major crimes. AML procedures, such as
customer due diligence or know-your-
customer requirements, couldn’t stop
the laundering of billions of dollars
through Danish Danske Bank, Swedish Thalien, CFE. “Attackers are using COVID-19 as bait to
Swedbank AB, German Deutsche Bank
and many other major financial insti-
tutions in Latvia, Malta and Portugal.
(See “Europe Seeks Greater Powers to
Tackle Its Money-Laundering Prob-
lem,” by Patricia Kowsmann, The Wall
Street Journal, May 7, 2020, tinyurl.
com/yyqha9tc.)
The International Consortium of
Investigative Journalists’ publication
of its FinCEN Files investigation also
highlighted the failure of financial
institutions’ anti-money laundering
measures, including those of several
European banks, in preventing mas-
sive amounts of money laundering.
(See “The FinCEN Files: Another Major
Leak Implicates Major Banks in Money
Laundering Scandal,” by Mason Wilder,
The Fraud Examiner, Oct. 2020, tinyurl. $950 million in assets, before the lender
com/y44t5wak.) was shut down in July 2020. Internal and
In the recent Wirecard fraud scan- external audits didn’t detect the crimes.
dal, auditors signed off on Wirecard’s (See “Wirecard Echoes in Austrian Bank
financial statements without indepen- Fraud Raise Awkward Questions,” by
dently verifying the existence of more
Boris Groendahl, Bloomberg Quint, Aug.
than $2 billion of cash assets, which
15, 2020, tinyurl.com/y5r68nkn.)
supposedly sat in Filipino banks. (See
“Wirecard Left Insolvent After Massive,
Disparate regulations
Easily Avoidable Accounting Scandal,”
by Mason Wilder, The Fraud Examiner,
in EU nations
July 2020, tinyurl.com/y2m6cv5q.) After a string of financial scandals,
Following the Wirecard scandal, European organizations face major chal-
Germany’s coalition government agreed lenges. They’re paying the price from
on reforms that would extend the pow- ignoring or insufficiently heeding the
ers of its national financial supervisory work of anti-fraud professionals against
authority, BaFin, to include the ability the backdrop of across-the-board fraud
“There has been a significant spike in phishing attacks
since March 2020, and the vital necessity to prevent
and detect is more crucial than ever,” says Natina
impersonate different media of information and there-
by trying to mislead our employees or customers.”
to obtain information from third par- increases and operational limitations
ties, conduct forensic investigations because of COVID-19.
and inform the public earlier about its The European Commission (EC), the
efforts. (See “Wirecard scandal drives
European Union’s executive arm, has
German coalition to tighter oversight,”
cited the disparate nature of European
by Michael Nienaber, Reuters, Oct. 7,
countries’ anti-fraud regulations and
2020, tinyurl.com/y36t46g8.)
called for numerous uniform improve-
In another European fraud scandal,
similar to the Wirecard incident, Martin ments to anti-money laundering
Pucher, former CEO of Austria’s Com- requirements. (See Kowsmann’s article
merizialbank, admitted to faking almost in The Wall Street Journal.)
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021 FRAUD MAGAZINE 21
 GLOBAL FRAUD FOOTPRINT Examining cross-border issues

Overall budget for

4% 9% 46% 28% 13%
anti-fraud programs

Level of anti-fraud staffing 5% 9% 53% 24% 9%

Investment in anti-fraud technology 6% 9% 37% 33% 15%

Use of fraud-related consultants

or other external resources 8% 10% 44% 26% 12%

Budget for anti-fraud training and

professional development 10% 14% 39% 26% 11%

Budget for travel for anti-fraud staff 22% 16% 40% 16% 6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Significant decrease Slight decrease No change Slight increase Significant increase

Figure 1: Expected change in anti-fraud program budgets and resources over the next 12 months

60%

51% 51%
50%
46%

40%

Preventing fraud
31%
30%
26% 26% Detecting fraud

21% 21%
20% Investigating fraud
20%

10%

3%
2% 2% 1% 1% 1%
0%
Significantly more Slightly more No change Slightly easier Significantly easier
challenging challenging

Figure 2: Change in the difficulty level of anti-fraud activities

22 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

 EUROPEAN BANKING AUTHORITY RECOMMENDATIONS
• Harmonizing the EU’s legal framework for customer due diligence measures and
AML/CFT systems.
• Increasing the powers that AML/CFT supervisors are afforded to ensure financial institu-
tions’ compliance with their obligations.
• Reevaluating the list of entities obliged to comply with AML/CFT legislation to potentially
include virtual asset service providers, investment firms and investment funds.
• Clarifying legislation to ensure money laundering risks are addressed consistently.

In March 2020, the EC issued a call
for advice on money laundering reforms
to the European Banking Authority
(EBA), which responded with its recom-
mendations in September 2020:
• Harmonizing the EU’s legal frame-
work for customer due diligence
measures and AML/CFT systems.
• Increasing the powers that AML/CFT
supervisors are afforded to ensure fi-
nancial institutions’ compliance with
their obligations.
• Reevaluating the list of entities
obliged to comply with AML/CFT leg-
islation to potentially include virtual
asset service providers, investment
firms and investment funds.
• Clarifying legislation to ensure
money laundering risks are addressed
consistently.
(See “EBA Report on the Future
AML/CFT Framework in the EU,” Euro-
pean Banking Authority, Sept. 10, 2020,
tinyurl.com/yy2qqqh6).
Even if European countries stan-
dardize anti-money laundering expec-
tations, organizations will still need
to navigate the implementation of any
changes during a stubborn pandemic
that could still cause major recessions.
(See “European Businesses Could Face
Historic Recession,” PYMNTS.com, Sept.
28, 2020, tinyurl.com/y6ccqobd.)
Cybercrime risks continue to rise
because of the pandemic. Thalien says
organizations need to focus resources
on security awareness to mitigate the
risks of social engineering attacks such
as phishing.
“It just takes one phishing e-mail
to flip a company upside down, so a
continuous phishing simulation is key,”
she says. “With a continuous simula-
tion, the reminders of phishing stay at
the forefront of the employees, because
people understand phishing, but they
don’t practice it in reality,” she says.
However, the task might prove more dif-
ficult than it sounds on the surface. “The
challenge is having the budget, time and
resources to be able to conduct a proper
phishing simulation or campaign within
a company,” Thalien says.
Fraud conditions increase,
budgets decrease
The ACFE’s COVID-19 benchmarking
report showed that between 14% and
38% of respondents anticipate budget
decreases in their organizations for vari-
ous anti-fraud expenses. (See Figure 1 on
page 22.)
These difficulties will likely contin-
ue for European anti-fraud professionals
in 2021. But these difficulties won’t only
affect anti-fraud professionals, accord-
ing to Britta Bohlinger, CFE, founding
director of European risk mitigation
firm, RisikoKlar, in an interview with
Fraud Magazine conducted via email.
“I don’t see the anti-fraud profes-
sion in isolation,” she says. “It’s embed-
ded in wider shifts and societal changes,
whether resulting from COVID, eco-
nomic downturn, elections ahead or in
some parts of the world an increasing
willingness to address climate change as
a core matter spanning industries and
professions.
“So, it is hard, some might argue
— potentially misleading — to single
out one biggest question mark for 2021
beyond the certainty that more change
and requirement for agile solutions
and cross-discipline collaboration are
required in order to address the pressing
issues,” Bohlinger says.
Mason Wilder, CFE, is a senior re-
search specialist with the ACFE. Contact
him at mwilder@ACFE.com.

FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021 FRAUD MAGAZINE 23

Developing the entire
fraud picture By Alexis C. Bell, CFE
 Not every fraud scheme results in stolen money
CFEs should consider all aspects of a fraud case when calculating the impact of fraud.
Here are three primary calculations when reporting the amount of fraud impact:
total exposure
M
ost organizations that have an
internal fraud risk manage-
ment program find them-
selves playing the loss game.
They measure key perfor-
mance indicators based on how much or
little they lose to fraud. However, as they
move up the maturity curve, sophisti-
cated organizations understand fraud
is about more than loss. To illustrate,
ask yourself: Can there be a fraud com-
mitted without the presence of a loss?
What about a mortgage fraud where
counterfeit documents are submitted to
the lender inflating their assets? What if
the borrower makes all their payments
on time for the life of the loan? There is
no monetary loss, but the borrower re-
ceived a loan they would not otherwise
be entitled to based upon fraudulent
documents.
Here, the primary fraud scheme (the
main scheme) is classified as an industry
specific scheme: Financial institution
fraud > lending fraud > loan disburse-
ments > loan origination > overstated
assets.
The secondary fraud scheme (a
supporting scheme perpetrated so the
primary fraud scheme can be more
successful) is classified as a core fraud
scheme (those all organizations experi-
ence risk from, regardless of industry):
Fraudulent statements > non-financial >
internal documents.
fraud amount
Fraud can absolutely occur without
a loss of money.
Not convinced? Let’s take a look
at a misuse fraud scheme: an asset
misappropriation scheme under the
subcategory of non-cash: asset misap-
propriation > non-cash > misuse. In this
example, an employee with access to a
bulldozer during the workweek uses it
on the weekends, without permission,
for the employee’s separate company,
which they own on the side. No cash is
lost. However, there’s wear and tear on
that asset that wouldn’t have occurred
otherwise. This would be more than
a mere policy violation. It would be a
fraud, and remember: Fraud is a crime.
Now that you understand not all
fraud produces a loss, let’s examine the
calculations you should report from all
materialized fraud events.
Reporting fraud impact
In the absence of collusion, employees
can only manipulate activity based on
the assets, processes and records to
which they have access. It is important
to understand the level of risk for fraud
is based on three factors: total exposure,
fraud amount and known loss. Only
amounts substantiated by documented
evidence will be reported in each of the
impact calculations. All three of these
calculations are critical in effective fraud
risk management.
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
known loss
Total exposure
This is the complete exposure to a
company should an employee commit
fraud from the first day of their em-
ployment and with every transaction.
This represents the maximum risk for
fraud based on the total activity of the
employee during their entire tenure.
The total exposure reflects the amount
of money for which their direct supervi-
sor is accountable yet typically does not
properly manage.
Many times, fraudsters are in a posi-
tion of trust where a common internal
control weakness is a lack of proper
supervision. In the microfinance sector,
for example, loans can be as small as
$20 or $40. A common misconception is
the notion that a loan officer distributes
small amounts, and those amounts are
not germane to financial statements.
However, a loan officer has access to the
distributions for every loan they ever
made. Over the course of a long period
of time, that amount can, in aggregate,
become material to the organization.
Examples of total exposure calcula-
tions include:
•Loan officer — The total exposure for a
loan officer is equal to the distributions
for their loans during their tenure. For
example, if a loan officer worked in the
company for five years, calculate their
distributions from the date of hire to
FRAUD MAGAZINE 25
 Developing the entire fraud picture
either the termination date or the cutoff
date for the analysis.
•Chief executive officer (CEO) or chief
financial officer (CFO) — The total expo-
sure for a CEO or CFO is equal to the total
assets on the balance sheet. Both
executives have access to all the
assets under their control. Take
into consideration their operat-
ing areas of responsibility. If they
are at the international level, use
the consolidated balance sheet at
the global level. If the executive
is at the subsidiary level, use the
balance sheet for their operating
company.
Use the most current date
relative to the time frame in
question. For example, if it is
now February and there are
known fraud amounts commit-
ted in October of last year, and
the fraudster was still in the
company as of the first week of
December, the balance sheet
total assets figure should be as of
the end of November.
Fraud amount
This is the total amount of fraudu-
lent transactions. Keep in mind
that this is the sum of the abso-
lute value of the transactions.
monetary element to the
For example: (one transaction for
$12,345) + (one reversal of $6,789)
= (fraud amount of $19,134).
Getting this number wrong
could significantly understate
the fraud amount. In this exam-
ple, one transaction for $12,345 and one
reversal of $6,789 calculates as a fraud
amount of $19,134 because the math-
ematical equation would be: |$12,345| +
|-$6,789| = $19,134.
The amount of the fraudu-
lent transactions is meaningful in
26 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
classifying criminal charges. In some
countries, the classification can be the
difference between misdemeanors
and felonies where there’s a monetary
element to the classification. The clas-
The amount of the
fraudulent transactions
is meaningful in
classifying criminal
charges. In some
countries, the
classification can be
the difference between
misdemeanors and
felonies where there’s a
classification.
sification can also affect the determina-
tion between the amount of mandated
prison terms (jail time), and the calcula-
tion of fines and penalties.
To better understand this concept,
ask the question, if someone entered a
fraudulent transaction into the system
FRAUD-MAGAZINE.COM
for $500 and then fraudulently reversed
that entry, did fraud occur? Because
the person entered the transactions
fraudulently, the answer is yes. In this
example, the fraud amount is $1,000.
In cases of financial statement
fraud involving revenue recogni-
tion, one benefit to the fraudster
lies in the shifting of the timing
of the transactions. The core
fraud scheme is classified as:
Fraudulent statements > financial
> revenue recognition > timing dif-
ferences (overstatements).
Recognizing revenue before
it is earned in one month and
then reversing it the next month
is still fraud. This is a common
scheme in shifting revenue from
January to the previous month
of December to meet analyst
projections at year end. This
type of fraud affects manage-
ment bonuses and can manipu-
late the stock price for publicly
traded companies.
Another example is:
(one transaction for $2,468) + (one
transaction for $-3,690) = (fraud
amount of $6,158)
Where: |$2,468| + |$-3,690| =
$6,158.
Fraud can occur without a
readily identifiable amount. In
cases of a counterfeit document
such as a fake resume (classified
as a core fraud scheme: fraudu-
lent statements > non-financial
> employment credentials), it
is difficult to assign a number based
on transactions. Therefore, you must
calculate the total salary and benefits
(typically around 30 percent of sal-
ary) given to the employee as the fraud
amount. This is income, associated
benefits and any sales commissions,

if applicable, they would not have
received without the fraud act.
Known loss
This is the known amount of fraud
based on evidence gathered during
the course of the investigation.
Remember, only amounts substan-
tiated by documented evidence
will be reported in this impact cal-
culation. Known loss will often be
presented as net of recovery (when
you identify and recover over
payments and under-deductions
to suppliers) or restitution (recom-
pense for injury or loss: restoration
of something stolen and returned
to its owner).
It is important to understand
the known loss amount for filing
insurance claims to mitigate the
impact of the loss (when available)
as well as to submit during crimi-
nal proceedings to seek restitution
from the fraudster and for civil
damages in a lawsuit.
“Fraud can absolutely occur
without a loss of money.”
Total restitution includes at a
minimum the cost of the investiga-
tion, the cost of litigation and the
amount of loss. In some cases, it
can also include other factors to
make the company whole from
the fraud act(s), such as the cost of
monitoring imposed against the
company from a deferred prosecu-
tion agreement. Thus, the known
loss is just one part of the total
restitution calculation.
Another consideration of
known loss is that it is the amount
known at that time. It is im-
portant to understand that the
investigation might not uncover
all aspects of the total fraudulent
activity. Investigations are limited
by the amount of resources they
have — time, people, tools. Some
schemes might remain hidden.
Therefore, the verbiage includes
the word “known” because that is
the amount that is supported by
evidence as of that point in
the investigation.
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
Understand the full
impact of fraud before
finalizing your report
Consider three primary calculations
when you are reporting the amount
of fraud impact: total exposure, fraud
amount and known loss. They are dis-
tinct from each other. Each conveys
meaningful information that an or-
ganization should communicate to
stakeholders.
There is value in the ability
to report these figures to manage-
ment. It gives them the information
they need to make informed deci-
sions about fraud risk and how they
can allocate resources to effectively
manage that risk. Likewise, the
board can make informed decisions
about how best to fund and support
the fraud risk management pro-
gram. ■ FM
Regent Emeritus Alexis C. Bell,
CFE, is the founder and managing
partner of Fraud Doctor LLC. Contact
her at alexis.bell@fraud-doctor.com.
FRAUD MAGAZINE 27
REMOTE
BUT ENGAGED
BY DICK CAROZZA, CFE
How do fraud examiners conduct fraud exami-

nations when they often can’t meet their team

members and subjects in person? These experts

— during pandemic constraints — discuss their

biggest investigation hurdles, maintaining pro-

fessional skepticism, best practices, eDiscovery

challenges, chain of custody, interviewing con-

straints and more.

You’ve organized an interview with a subject whom you suspect has been
embezzling from your company. But he and you won’t be in the same room.
His lawyer and all your team members also will be in separate rooms. All in
front of computer screens. Sound familiar? Is this any way to conduct a fraud
examination?
That’s just one of the questions the speakers pondered during the recent
ACFE “Fraud in the Wake of COVID-19” webinar. They later elaborated for Fraud
Magazine on their webinar comments and discussed other aspects of remote
investigations.
Here we give you some of the insights of Anthony Campanelli, CPA, CFF,
partner at Deloitte Financial Advisory Services LLP; Leah Lane, CFE, director
of Texas Instruments global investigations; and Steven Merrill, chief of the FBI
Financial Crimes Section, to further help you in your investigations.
 Merrill says investigators have to contend with the risk
that witnesses will record interviews. “As such, each
interviewer should be appropriately cautious”
steven merrill
BIGGEST HURDLES
“The inability to meet face-to-face with
witnesses, subjects, and custodians of re-
cords are difficult hurdles for investigators
that they must overcome while investigat-
ing fraud remotely,” Merrill says. “Focus is
a vital factor necessary to develop rapport
and a personal connection. When meeting
in person, the investigator creates a private
environment and minimizes interruptions
so both the investigator and the witness
can focus on the interview or other tasks at
hand,” he says. “Unfortunately, the inves-
tigator cannot ensure or even control the
environment during remote interactions,
hindering productive developments.”
Lane concurs. “I think interviews
are definitely the most challenging to ex-
ecute remotely because we are not able
to travel and perform those interviews in
person like we’ve done in the past,” she
says. “In-person or face-to-face interviews
allow us to observe the interviewee and
their behavior a great deal more than in-
terviews through technology.” (See more
on the aspects of remote interviewing in
the sidebar, “Crucial parts of the interview
process,” on page 32.)
Campanelli says as the COVID-19 pan-
demic continues, virtual work and social-
distancing orders have made investigat-
ing fraud in a remote environment more
complex.
“But many of the challenging hurdles
can be overcome with proper planning and
the deployment of technology designed to
identify and analyze relevant unstructured
data — such as email and text messages
— and structured data — such as account-
ing and financial information,” he says.
Campanelli says hurdles can include:
• Discerning the matters that require
immediate investigation.
• Accessing personnel across different
time zones when the investigation
team would’ve been onsite.
• Identifying signs of verbal or non-
verbal deception in interviews.
• Exchanging key documents during an
interview.
• Executing certain forensic collections
of laptops and mobile devices without
warning.
• Obtaining relevant accounting
and financial data relevant to the
investigation.
• Relying on scanned documents in-
stead of original.
• Waiting on court re-openings to view
residing physical files.
• Working without the ability to “walk
the halls” and have impromptu con-
versations with company personnel.
Lane says one of the biggest hurdles
to investigating in a remote environment
is technology. “I think we all have to rely
on technology in a way that we’ve not had
to do in the past,” she says. “We have to
not only utilize technology to do inter-
views but we also have to use it to collect
evidence that we might have collected
in person prior to COVID-19, and to have
meetings with executives, subject matter
experts and HR.”
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
Merrill says distracting external stim-
uli during online interviews and conversa-
tions — gadgets, family members, pets,
noises — interrupt the connections and
rapport investigators need to maximize
the results.
“It is also more difficult during a re-
mote interview for an investigator to detect
truthful and untruthful non-verbal behav-
iors,” Merrill says. “Moreover, interviewers
in private face-to-face settings have the
luxury of time to let relationships organi-
cally develop.
“They are not concerned that technol-
ogy issues will interrupt, or even prevent
the meeting if the witnesses aren’t tech-
savvy, experience connection issues or
spontaneously terminate internet calls,
which leaves investigators little or no abil-
ity to return focus to critical interactions,”
he says.
Merrill says investigators have to con-
tend with the risk that witnesses will re-
cord interviews. “As such, each interviewer
should be appropriately cautious,” he says.
“The interviewer’s strategic decision re-
garding when to conduct the interview
within the scope of the overall investiga-
tion becomes perhaps even more impor-
tant, knowing any comment may become
public thereafter.”
The inability to meet face-to-face
with clients, coworkers and subjects can
affect key investigative procedures, Cam-
panelli says. “For instance, conducting in-
terviews with key personnel, exchanging
of confidential documents, and device/
FRAUD MAGAZINE 31
CRUCIAL PARTS OF THE
INTERVIEW PROCESS
“A successful interview requires the investigator to plan and think
through numerous aspects, including how to properly prepare for
the interview, how best to build a sincere rapport with the particular
witness, what questions to ask, what environment best serves the
goal of the interview,” says Steven Merrill, chief of the FBI Financial
Crimes Section.
“It also includes the investigator’s analysis of the witness’
verbal and non-verbal behavior during the interview. Regarding
preparation, our current remote posture constrains investigators
and examiners’ ability to control environments to increase chances
of success,” Merrill says.
“For instance, the preparation phase not only includes op-
portunities to review reports, interviews, etc., but to tactically
determine where and when the interview will take place,” he says.
“If a remote environment diminishes preparatory advantages, in-
vestigators and examiners should determine whether the exercise
will provide the anticipated results.”
Merrill says the success of his interviews has largely been
based on his ability to develop rapport with the person facing him.
“I’ve always aimed to develop a level of rapport, so the witness
believes I am non-judgmental, and both trusts and confides in me.”
He says some rapport development techniques are impossible
without sharing space with another party, such as comfortable body
language, sharing a drink or meal, or even noticing and comment-
ing on how the interviewee presents themselves.
“I’ve been in interviews where 95% of the time together was
spent building rapport,” he says. “However, when done remotely,
we tend to feel more rushed or ‘on a clock.’ A good interviewer
understands that the interview is like a baseball — versus a football
game — there is no ticking clock.
“Some interview environments showcase comfort, such as a
living room, or cozy café, while others may highlight the gravity of
the situation, like a police station interview room. When we use
interviews effectively and carefully, they can be a powerful tool.
Hence, the interviewer needs to evaluate how to mitigate the loss
of the optimal desired effect that occurs with remote interviews.
“We often only get one chance to interview someone — only
one chance to size up your subject or witness through review of
both verbal and non-verbal behaviors,” Merrill says. “Both are
tremendously important. I recommend trying to create environ-
ments that enhance your ability to capture 100% of the non-verbal
behavior despite virtual settings.”
data collection may be impacted,” he says.
“However, the current environment does
not mean that these procedures cannot be
executed efficiently. Give careful consid-
eration when planning an investigation
to ensure you execute impacted investiga-
tive procedures in a manner that does not
impair the legitimacy of an investigation.”
Campanelli says the inability to in-
teract face-to-face with clients poses
additional challenges for cross-border
investigations. “Cross-border investiga-
tions already pose several distinct consid-
erations, including language barriers, cul-
tural differences and resource limitations,”
he says. “Such challenges further the need
for companies to adapt their cross-border
investigative strategies so they can pro-
ductively and proactively investigate al-
legations of potential misconduct outside
the U.S.”
Lane agrees. “One of the most impor-
tant challenges in performing electronic
collection is cross-border captures,” she
says. “I think we all need to stop and re-
mind ourselves that just because you can
capture something in another country, is
it legal to actually do so and then transport
it back to your home country?”
Increased professional
skepticism
Fraud examiners, by nature, are skeptics
when it comes to discovering evidence.
Pandemic conditions have necessitated
increased professional skepticism.
“When people feel like they have no
choice or they have a great financial need,
they may commit fraud for the first time,”
Lane says. “That’s why I think red flags are
more important than ever and need to be
scrutinized more heavily in today’s envi-
ronment. I think as investigators, we really
need to follow up every suspicious item
that we can.”
 Campanelli says that while we expect
the number of fraud cases will continue to
increase as a result of the pandemic and
the new remote-work environment, it’s
more important than ever for investigators
to apply increased levels of professional
skepticism throughout investigations’
lifecycles.
“Investigators can carefully analyze
electronic documents to identify red flags
or indications of manipulation, such as
fabrication of invoices, differences in in-
voice templates etc. For example, conduct-
ing a forensic analysis of PDF file metadata
can help determine if documents were
recently manipulated — and, often, by
whom,” Campanelli says. “If discrepan-
cies are found, investigators can discuss
them with appropriate personnel —ideally
on videoconferencing — to assess verbal
and non-verbal cues.”
Anthony campanelli,
cpa, CFF
Campanelli says
that while we
expect the number
of fraud cases will
continue to increase
as a result of the
have someone sit with your interviewee
during the interview.”
Campanelli agrees that over-planning
is paramount. He provides these best
practices:
• Ensure the interviewee is on-camera.
• Utilize the best video technology
available.
• Organize key documents for use dur-
ing interviews and reduce the need to
share screens.
• Rehearse the interview flow to ensure
technology and document sharing
works properly.
• Provide sufficient time for interviews
and be cognizant of time differences.
• Consider the number of individuals
who’ll be interviewed and determine
whether any special language skills
are needed.

Best practices
“The FBI has successfully investigated even
our most sophisticated cases throughout
the pandemic,” Merrill says. “To the extent
possible, the FBI has continued to conduct
field operations while taking the utmost
precautions to ensure everyone has proper
personal protective equipment (PPE), and
that our personnel have enough PPE for
our witnesses and subjects.”
Lane says that best practices for get-
ting the most out of remote interviews are,
of course, evolving. “The first best practice
is preparation,” she says. “You have to al-
most be over-prepared for remote inter-
views. You have to prepare how you are
going to present evidence virtually and
still be able to observe the interviewee.
“Ensure the interviewee has video and
audio capabilities. Have a backup plan in
place in case that technology fails,” Lane
says. “Review the backup plan with the
interviewee at the beginning of your inter-
view in case any disconnections or inter-
ruptions occur. If it is possible arrange to
pandemic and the • Assess what could go wrong and how
you’d react.
new remote-work • Prepare your steps if your subject
confesses during a guilt-confession or
environment, it’s admission-seeking interview.
more important
than ever for eDiscovery collections’
investigators to challenges
In normal times, discovering and gathering
apply increased electronic evidence can be daunting. Lay a
pandemic on top of that process, and your
levels of challenges grow exponentially.
“Data collection should run in a near-
professional normal state since enterprise collections,
such as email, are typically done remotely,”
skepticism Campanelli says. “Custodian devices —
which can be imaged remotely or physi-
throughout cally shipped in — present a larger, yet
investigations’ solvable logistical challenge. After iden-
tifying relevant data sources, discovery
lifecycles. specialists can coordinate with IT teams to
access and download enterprise or cloud
data sources.

FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021 FRAUD MAGAZINE 33

 “An in-country evidence custodian can help when
evidence is collected abroad while you are working
remotely in another part of the world,”
Lane says.
Leah lane, cfe
“When custodian devices with enter-
prise collection capability for PCs are in
place, there should be little to no impact
to collections beyond internet upload
speeds,” Campanelli says.
“In the absence of enterprise collec-
tion capability, collections will likely re-
quire custodian notification, increasing
the risk that information may be deleted
or destroyed,” Campanelli says.
“Such an approach might involve
mailing an encrypted hard drive preloaded
with scripts directly to custodians to con-
nect to their devices. Devices can then be
accessed and controlled remotely, or even
automatically, to securely extract and col-
lect the data,” he says.
“Server eDiscovery software solutions
further enable for the digital production,
review, and tagging of documents,” Cam-
panelli says.
(For more information on remote data
collection see the July/August 2020 Fraud
Magazine “Innovation Update” column by
Vincent M. Walden, CFE, CPA, “Forensi-
cally preserving electronic evidence dur-
ing a lockdown,” tinyurl.com/y6fzsotx.)
Merrill says reviewing records is best
done collaboratively in person with all par-
ties so they can exchange information
and ask probing questions. “This critical
process is severely impacted without the
ability to personally verify comprehension
of the materials and verify the records are
exactly what is sought.”
34 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
Chain of custody
If evidence is subject to change over time
or susceptible to alteration, the offering
party might need to establish that the
evidence hasn’t been altered or changed
from the time it was collected through its
production in court. Fraud examiners do
this by establishing a chain of custody to
establish authenticity.
The chain of custody is both a pro-
cess and a document that memorializes
(1) who has had possession of an object and
(2) what they’ve done with it. It’s simply a
means of establishing no material change
of alteration to evidence. (See the ACFE
Fraud Examiners Manual, tinyurl.com/
y4r3cack.)
Obviously, keeping chain of custody of
evidence has become more difficult during
the pandemic.
“An in-country evidence custodian
can help when evidence is collected abroad
while you are working remotely in another
part of the world,” Lane says. “When you
need to store or transport the evidence,
attach a chain-of-custody form. Some key
points of information that form should
have is a description of all evidence or
property collected during the investiga-
tion, who initially collected it and when,
who it was collected from and who has
controlled access to it.”
Campanelli says investigations might
require collection of hard-copy and elec-
tronic documentation. The investigation
FRAUD-MAGAZINE.COM
manager typically controls a chain-of-
custody register of the persons and/or
locations from which documentation or
evidence can be obtained. The register,
he says, typically contains:
• Type of document: e-mail, internal
memorandum, written note, etc.
• Dates and times related to the docu-
ment collection.
• Document numbering.
• Details of the persons involved in the
collection.
• Retention period, if any.
• Physical storage and security con-
siderations, especially for hard-copy
documentation.
“To maintain an accurate and com-
plete chain of custody, it’s critical to limit
the number of individuals handling evi-
dence and any transfer involves properly
sealed packaging and signed receipts,”
Campanelli says.
date secured and
privacy maintained
Lane believes confidentiality of internal
investigations is the cornerstone for your
employees to place trust in your office.
“This is accomplished by securing inves-
tigative data and maintaining privacy on
case-related documents,” she says. “This is
really difficult when you have to go outside
your company’s firewalls to use technology
for interviews.
 “You should have your IT security
department research and approve what-
ever technology you use in your investi-
gations. You should also mention in your
interviews that all documents presented
today belong to the company and are pro-
tected under company policy,” Lane says.
Campanelli says investigators are of-
ten confronted with the challenges of bal-
ancing document preservation with con-
fidentiality and privacy concerns. “There
are potentially severe consequences for
missteps,” he says.
He says those involved should:
• Institutionalize the journey of infor-
mation governance (IG) in your orga-
nization’s culture. The IG governance
structure will need to approve poli-
cies and standards. Your organization
will need to provide resources to test multi-factor authentication) to safe-
adherence and measure quality. guard against unauthorized access to
• Give adequate consideration to local sensitive data.
data privacy laws (e.g., General Data
Protection Regulation, California
Consumer Privacy Act) because of im-
Together apart
We’ve scratched the surface. This, of
plications for handing organization-
course, is an ongoing story. Agree, dis-
al, employee and third-party (such
agree and add to this information at
as vendors) data to those outside the
Fraud-Magazine.com. Begin a thread in
organization.
the online ACFE Community, tinyurl.com/
• Consider necessary communication
y33erqgv.
channels to implement and enable
Despite the odds, you’ve persevered
effective remote information-sharing
in your job regardless of pandemic condi-
among investigative teams.
tions. Charge on — remote but engaged.
• Consider whether online sites are ■ FM
secure enough to exchange electronic
documents. Dick Carozza, CFE, is editor-in-chief of
• Establish additional security mea- Fraud Magazine. Contact him at dcarozza@
sures (e.g., remote desktop access, ACFE.com.

March 10-12, 2021 | Online Virtual Conference

The 2021 ACFE Fraud Conference Europe will be online

March 10-12, 2021. Learn anti-fraud best practices from leading
experts, plus network online with fellow fraud fighters.

Watch sessions
online or
on-demand.
Earn CPE.
Learn more at FraudConference.com/Europe.
05
most
SCANDALOUS

fraud cases
of 2 0 2 0

We were all glad to discard our 2020 calendars.

Fraudsters took advantage of COVID-19 conditions,
but not all of them needed a pandemic to pull off
some big frauds. We’ve distilled a long list of cases
to give you a few shockers.

By Hallie Ayres and Mason Wilder, CFE

D
espite the seemingly unending and
unpredictable chaos of 2020, one
aspect of contemporary culture
was entirely — and unfortunately —
precedented: the continued prevalence
of big frauds. To take stock of last year
and its implications for the anti-fraud
profession, the ACFE compiled a list
of the top five most scandalous frauds
of 2020, as well as a few dishonorable
mentions, with the assistance of the
ACFE Advisory Council. These fraud
cases will not only live on in infamy, but
also provide meaningful insights for anti-
fraud professionals.

01/ COVID-19 frauds

infect society
Perhaps, unsurprisingly, the most widespread and impactful frauds of this year were directly connected
to the novel coronavirus. As the pandemic led to massive shutdowns in many nations, governments responded
with a wide range of stimulus measures, including loans, enhanced unemployment benefits, direct payments to
citizens and more.
Some fraudsters were quick to exploit these government stimulus plans, while others used COVID-19 as
a premise for a plethora of cyberfraud and consumer fraud schemes ranging from phishing attacks to sales of
counterfeit personal protective equipment, testing kits and bogus cures.
By the beginning of August, Reuters reported that U.S. losses related to coronavirus fraud had reached $100
million, with a large swath of cases originating in identity theft. Cases like these were especially common with
fraudsters who used stolen personally identifiable information (PII), such as Social Security numbers (SSN), to file
for unemployment benefits as more and more workers faced furloughs and desperately sought funds. (See U.S.
cornonavirus fraud losses near $100 million as COVID scams double,” by Steve Gorman, Reuters, Aug. 4, 2020,
tinyurl.com/yyfwz5fq.)
Myra Walker, a New Jersey retail worker who was furloughed in March, found she’d been victimized by this type
of scheme in the same way many others have discovered these frauds: when she applied for unemployment benefits.
The U.S. Department of Labor informed her that someone had already created an account under her name
and had used her SSN to receive payments starting in February. While the U.S. Federal Trade Commission (FTC)
received more than 3.2 million reports of identity theft and other consumer frauds in 2019, these numbers are
often severely understated, and will no doubt be much higher this year.
(See “Woman tries to file for unemployment but can’t. Someone else is
getting benefits in her name.” by Karin Price Mueller, NJ.com, May 12,
2020, tinyurl.com/y2ucxucq.) A woman walks out of a drugstore
The same breed of identity theft remained prevalent after Congress in Times Square Nov. 15, 2020.
passed a bailout package that included stimulus checks to an estimated (Photo by Paul Marotta/Getty
Images)
150 million eligible households. Scammers posing as government
employees attempted to swindle taxpayers out of funds by asking for
financial information, claiming it was necessary for the victim to receive
their promised funds. (See “Coronavirus stimulus check scams are out
to swindle you out of $1,200: What you need to know,” by Susan Tompor,
Detroit Free Press, March 28, 2020, tinyurl.com/tmnwwz2.)

5 m o s t s c a n d a l o u s f r a u d c a s e s of 2 0 2 0
 5 most scandalous fraud cases of 2020

Stolen PII has also been the catalyst for frauds that originate
through contact tracing text message scams. Fraudsters devised
schemes to masquerade as contract tracers, sending fake text
messages, which contained links that installed malware onto
their victims’ phones thus allowing the fraudsters to access bank- 02/ Wirecard’s
missing $2 billion
ing information and SSNs. (See tinyurl.com/y9qdgp9u, FTC.)
While identity theft and types of financial fraud dominated
the fallout of the pandemic, the coronavirus also exposed the
medical and public health industries to a range of scams. In May,
the city attorney of Los Angeles sued Wellness Matrix Group for
selling coronavirus testing kits they claimed had been approved When the German financial technology
by the FDA and a “virucide” that purportedly killed the virus. company Wirecard delayed the public release
City attorney Mike Feuer said the company “attached false gov- of its 2019 financial results in June 2020 after
ernment registration numbers to these products and fabricated revealing it couldn’t account for more than
phony scientific studies and white papers to substantiate their $2 billion in cash assets, the news reduced
false claims.” (See “LA Sues California Company, Alleging ‘So- the company’s stock price by more than 90
phisticated’ COVID-19 Fraud,” by Tom Dreisbach, May 27, 2020, percent and prompted the resignation of CEO
NPR, tinyurl.com/ydbvaxhe.) Markus Braun. Soon after, Braun and several
A majority of coronavirus-related scams feature fraudsters other executives were arrested on accounting
preying on those who are dependent on government aid or sim- fraud and market manipulation charges.
ply trying to keep themselves safe and healthy. However, some Founded in 1999, Wirecard, which
business owners committed another brand of coronavirus fraud processes payments and sells data analytics
to scam the U.S. government.
services, was at one point considered to be
After the Small Business Administration (SBA) rolled out
one of Europe’s foremost technology firms.
the Payroll Protection Program, valued around $650 billion in
Between 2013 and 2018, the company’s
loans to small businesses, a moving company owner in Florida
reported revenues quadrupled, coming in at
received nearly $4 million in loans, which he’d declared would
nearly $2.2 billion in 2018. With nearly 6,000
cover his company’s monthly payroll. However, an investigation
employees spread over 26 countries and a
revealed that his company’s monthly expenses averaged around
place on Germany’s list of top 30 companies,
$200,000. The man was arrested, and charged with fraud, after
the fintech behemoth must have thought itself
he was involved in a hit-and-run while driving a luxury Lambo-
too large to fail. (See “Wirecard CEO quits after
rghini, which he’d bought with money from his loan. (See “He
$2 billion goes missing and fraud accusations
bought a Lamborghini after getting a $4 million PPP loan. Now
fly,” by Charles Riley and Eoin McSweeney,
he faces a fraud charge,” by Jay Weaver, Miami Herald in Tampa
CNN Business, June 19, 2020, tinyurl.com/
Bay News, tinyurl.com/y66uk9gp.)
yxlssj9v.)
Assistant U.S. Attorney Michael Berger noted that SBA loan
After a series of fraud allegations and
scammers had become increasingly common because the agency
investigations into its accounting practices
was so overrun with applications that it had stopped checking
over the course of 2019, Wirecard confessed
the accuracy of applicants’ claims. The Florida man’s criminal
to the disappearance of more than $2 billion
affidavit recounts, “In the ordinary course of providing the loan
from its assets. Shortly before the explosive
guaranty, neither the SBA nor any other government agency
announcement, Wirecard was worth more
checked IRS records to confirm that the applicant had paid the
than $26.9 billion but plummeted to less than
payroll taxes represented in the PPP applications.”
$3.6 billion by the end of June 2020.
From benefits fraud, loan fraud, identity theft and non-
Though the announcement of the missing
delivery scams, to counterfeit products, telemedicine fraud,
$2 billion sank Wirecard’s value drastically
insurance fraud, contact tracing scams and supply-chain fraud,
and nearly immediately, the company’s
fraudsters exploited the global COVID-19 pandemic like no other
downfall began in January 2019, when the
crisis in recent memory. /01

38 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

 Corporate headquarters of payments processor Wirecard during a raid by
investigators July 1, 2020, in Aschheim, Germany. (Photo by Lennart Preiss/
Getty Images)

Financial Times published an

investigation that came to light
via a whistleblower who alleged
a series of forged contracts and
suspect transactions in Singapore.
Despite the denial from Wirecard,
authorities in Singapore promised
an investigation, and Wirecard’s
shares dropped significantly. (See
“Executive at Wirecard suspected
of using forged contracts,” by
Dan McCrum and Stefania Palma,
Financial Times, Jan. 30, 2019,
tinyurl.com/y73d29n8.)
Financial Times solidified
Wi r e c a r d’s r e p u t a t i o n f o r
suspicious dealings in late 2019
deleted. (“Wirecard says it cannot rule out ‘fraud of considerable
with the publication of documents
proportions,’ ” Reuters, June 18, 2020, tinyurl.com/ybqzd8pr.)
that exposed reports of inflated profits and sales at Wirecard’s
Soon after, Braun resigned and Wirecard filed for
Ireland and United Arab Emirates offices. Wirecard also denied
insolvency to protect itself from the $4 billion owed to investors.
these claims, though a separate KPMG investigation revealed
that Wirecard hadn’t made enough information public to fully (See “Police Raid Wirecards’ Offices In Two Countries,”

absolve themselves of Financial Times’ claims. (See “Wirecard’s
suspect accounting practices revealed,” by Dan McCrum,
Financial Times, Oct. 14, 2019, tinyurl.com/y4zdub7z.)
Following the disappearance of $2 billion in cash, Wirecard
claimed the money had been held in bank accounts in the
Philippines, but these banks refuted the claim. (See “Wirecard
stock plummets 37% after the payments firms says $2 billion in
missing cash likely doesn’t exist,” by Shalini Nagarajan, Markets
Insider, June 22, 2020, tinyurl.com/y3kzgzbz.)
Braun even attempted to suggest that Wirecard had been
the victim of fraud: “It cannot be ruled out that Wirecard has
become the aggrieved party in a case of fraud of considerable
proportions,” he said in a video statement that has since been
PYMENTS.com, July 1, 2020, tinyurl.com/yx8m7sgn.)
EY auditors faced significant criticism for signing off on
Wirecard financial statements for 2016 through 2018 without
independently confirming the existence of cash assets. (See
“Critics’ Ire Turns On Auditor EY After Wirecard Collapse,” by
Jean-Philippe Lacour, Barron’s, June 28, 2020, tinyurl.com/
y223934h.) This oversight has now become the subject of a
German lawsuit that alleges EY overlooked $1.1 billion worth of
assets that had been incorrectly processed. (See “Ernst & Young
Sued Over Wirecard as Accounting Woes Add Up,” by Karin
Matussek, Bloomberg, June 8, 2020, tinyurl.com/y4el4bzx.)
Apparently, Wirecard’s story will continue throughout
2021. /02

FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021 FRAUD MAGAZINE 39

 5 most scandalous fraud cases of 2020

03/ FinCEN files identifying involved parties and only filed

exhibit huge money-laundering cases
In September 2020, leaked documents
provided to BuzzFeed News, and passed
along to the International Consortium of
Investigative Journalists (ICIJ), implicated
major international banks — including
Deutsche Bank, JPMorgan Chase, HSBC,
Standard Chartered and Bank of New York
Mellon — in the laundering of more than
$2 trillion linked to oligarchs, criminals
and terrorists from 1999 to 2017. (See “Dirty
money pours into the world’s most pow-
erful banks: The FinCEN files,” by Jason
Leopold et al., BuzzFeed, Sept. 20, 2020,
tinyurl.com/y434smjo.)
The ICIJ’s reporting involved ana-
lyzing more than 2,100 suspicious ac-
tivity reports (SARs) filed by banks and
other financial firms to the U.S. Financial
Crimes Enforcement Network (FinCEN).
After receiving the trove of documents
from BuzzFeed News, ICIJ enlisted the
assistance of more than 400 journalists
— dispersed among 88 countries and 110
news organizations — to investigate the
inflammatory materials. The ICIJ thor-
oughly investigated these 2,100 reports,
but they’re only a miniscule fraction of the
12 million SARs reported to FinCEN from
2011 to 2017. (See “Global banks defy U.S.
crackdowns by serving oligarchs, criminals
and terrorists,” ICIJ, Sept. 20, 2020, tinyurl.
com/yxfxkbec.)
The ICIJ’s report noted that even
though the guilty banks had been fined
for money laundering violations, they
kept processing transactions without
SARs years after the transactions in many
cases.
JPMorgan, the largest U.S.-based
bank based in the U.S., was found to have
transferred more than $1 billion for one of
the key figures in Malaysia’s 1MDB fraud
scandal and more than $2 million for a
Venezuelan energy company that alleg-
edly scammed the government and played
a role in causing electrical blackouts that
consistently left millions of people without
reliable access to energy. Of the total $2
trillion identified in the complete investi-
gation, around $1.3 trillion moved through
Deutsche Bank, while JPMorgan handled
$514 billion.
Elizabeth Rosenberg, a former U.S.
Treasury Department sanctions official,
told The Wall Street Journal, “The FinCEN
files illustrate the alarming truth that
an enormous amount of illicit money is

Samsung’s succession gone wrong

Dishonorable
mentions
The unfortunate deluge of
fraud cases each year makes
it impossible to highlight all
but the most inflammatory
stories, so we’ve included a
few dishonorable mentions
that feature fraud cases nota-
ble for the brazenness of the
fraudster or the sheer shock
at the degree of ineptitude
or scandal.
Authorities in South Korea indicted Lee Jae-yong, the vice chairman
of Samsung and arguably the most influential South Korean busi- a s of p res s time,
nessman, along with 10 other current and former Samsung officials.
The charges include stock price manipulation, unfair trading and
L ee J ae-yong
h a d n’t been
audit-rule violations. They stem from an allegedly systematic effort a rres t ed becau s e
to help transfer managerial control of Samsung to Lee from his fa- t h e S eou l Central
ther, Lee Kun-hee, who was incapacitated by a heart attack in 2014. D i s t ric t Cou rt has
(Lee Kun-hee died Oct. 25, 2020.) r ef u s ed to is s u e
Lee Kun-hee was previously convicted twice of bribery and other
a wa rrant f or his
corruption charges, and Lee Jae-yong previously spent a year in
a rres t.
confinement on charges that he bribed the impeached and ousted
former president of South Korea, Park Guen-hye. However, as of
press time, Lee Jae-yong hadn’t been arrested because the Seoul
Central District Court has refused to issue a warrant for his arrest.
(See “Samsung’s heir faces fraud charges,” by Kang Jin-Kyu, Asia
Times, Sept. 1, 2020, tinyurl.com/yxzmkxft; “Samsung Chief Lee
Jae-yong To Be Arrested On Fraud Charges,” by Tom Grater, Dead-
line, June 4, 2020, tinyurl.com/y28jf8wk; “Samsung Heir Is Indicted
but Avoids Jail,” by Choe Sang-Hun, The New York Times, Sept. 1,
2020, tinyurl.com/yyydjspp.)

(Photo by Chung Sung-Jun/Getty Images)

40 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

sloshing around our financial system, and that U.S. banks play host and
facilitator to rogues and criminals that represent some of America’s most
insidious national security threats.” (See “Leaked Treasury Documents
Prompt Fresh Calls for Updated Anti-Money-Laundering Regulations,”
by Ian Talley and Dylan Tokar, The Wall Street Journal, Sept. 21, 2020,
tinyurl.com/yxh9chuj.)
While the FinCEN Files have exposed the vast and rampant cul-
ture of money laundering that has plagued the highest echelon of the
American financial system, they’ve also unearthed the ways in which
Treasury is unequipped to properly surveil the trillions of transactions
that pass through U.S. banks every day.
Banks tend to file a staggering number of SARs to satisfy supervisors The headquarters of Deutsche Bank in Frankfurt,
and auditors, but this strategy obscures Treasury officials from sifting Germany (Photo by Thomas Lohnes/Getty Images)
out potential laundering cases, especially when they’re filed years after
related transactions occur. “That formula is not the ideal way to protect
America from security threats and crime,” Rosenberg said. /03

Carlos Ghosn’s disappearing act Oh, the irony

In May 2020, U.S. authorities arrested a former U.S.
Green Beret soldier and his son, both of whom were
wanted by the Japanese government for assisting
Carlos Ghosn, the former CEO of Renault and Nissan,
in escaping from Japan to Lebanon in late 2019.
Ghosn was awaiting trial on charges of alleged
financial misconduct when he was smuggled onto a
private jet and taken to Lebanon, via Istanbul, despite
being prohibited from leaving Japan. In September
2020, U.S. Magistrate Judge Donald Cabell approved
the extradition of the men, sending the final decision
up to the U.S. State Department. Despite attempts
by the men’s lawyers to block Japan’s request, on
Oct. 29, 2020, the State Department declared the
men will be sent to face trial in Japan’s court system.
(See “Men accused of helping ex-Nissan chief Carlos
Ghosn escape from Japan arrested,” by Luke Barr,
ABC News, May 20, 2020, tinyurl.com/y5cagthf;
new source for approved the men’s extradition; “2
Americans accused of helping ex-Nissan Chair Ghosn
escape fight extradition,” by David Yaffe-Bellany,
Bloomberg News in The Detroit News, Oct. 18,
2020, tinyurl.com/y3xekhlt. “Two Americans Can Be
Extradicted to Japan in Carlos Ghosn Escape Case,
State Department Rules,” by Mark Maremont and
Nick Kostov, The Wall Street Journal, Oct. 29, 2020,
tinyurl.com/y658nsbn.)
Sometimes, those closest to the anti-fraud profession end up
on the criminal side of fraud examinations. Despite their seem-
ingly good intentions, our final dishonorable mentions are almost
laughable for their callousness in turning their anti-fraud work on
its head.
In Nigeria, Ibrahim Magu, the acting chairman of the country’s
Economic and Financial Crimes Commission, the agency respon-
sible for looking into and charging companies and individuals
with financial crimes, was arrested for involvement in re-looting
recovered funds. (See “Nigeria’s anti-corruption boss arrested for
corruption,” by Aanu Adeoye,” Mail & Guardian, July 9, 2020,
tinyurl.com/y4vdrnmg.)
On the other side of the world, the Las Vegas-based fraud
prevention startup NS8 was forced to lay off hundreds of em-
ployees after the SEC announced an investigation that alleged
the company had reported fraudulent revenue and customer
information. Adam Rogas, the CEO of NS8, resigned follow-
ing the investigation announcement and has been charged with
securities fraud and wire fraud for lying to investors after secur-
ing $123 million in venture capital — $17 million of which Rogas
kept for himself. On Oct. 28, 2020, NS8 filed for bankruptcy. (See
“Fraud Prevention Startup NS8 Lays Off Hundreds, CEO Departs
Amid SEC Fraud Investigation,” by David Jeans, Forbes, Sept. 11,
2020, tinyurl.com/y3zt5dkg; “CEO Of Cyber Fraud Startup NS8
Arrested By FBI, Facing Fraud Charges,” by David Jeans, Forbes,
Sept. 17, 2020, tinyurl.com/yynaku4g; “CEO’s fraud charges push
Las Vegas tech firm into bankruptcy,” by Jonathan Ng, Las Vegas
Review-Journal, Oct. 28, 2020, tinyurl.com/y39vfssm.)

FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021 FRAUD MAGAZINE 41

 5 most scandalous fraud cases of 2020
04/Airbus’ routine briberies
In January 2020, France-based aviation
company Airbus agreed to pay combined
penalties of more than $3.9 billion, the
largest fine ever recorded in a bribery case,
to settle foreign bribery charges from au-
thorities in the U.S., France and the U.K.
The settlement put an end to nearly four
years of investigations surrounding allega-
tions that Airbus hired third parties to bribe
government officials in various countries to
purchase Airbus’ planes, helicopters and
satellites — instigated by Airbus’ ongoing
competition with rival Boeing.
The company also entered into a de-
ferred prosecution agreement with the
U.S. Department of Justice as a result of the
settlement, after facing charges in the U.S.
of conspiracy to violate anti-bribery provi-
sions of the Foreign Corrupt Practices Act
and conspiracy to violate the Arms Export
Control Act and its implementing regula-
tions, the International Traffic in Arms
Regulations. (See “Airbus to Pay $4 Billion
to Settle Corruption Inquiry,” by Liz Alder-
man, The New York Times, Jan. 31, 2020,
tinyurl.com/t22s7cu.)
Prompted by a March 15, 2020, report
by The Wall Street Journal that document-
ed Airbus’ $4 billion bribery settlement,
multiple law firms filed a class-action law-
suit in August 2020 on behalf of share-
holders who claim that Airbus misled
them and misrepresented their operations
from 2016 to the present. (See Andrew
J. Korneck, et al. v. Airbus, tinyurl.com/
y6bjnk9g.)
Airbus A320 assembly at Hamburg,
Germany, factory (Photo by Sean Gallup/
Getty Images)
42 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
In late 2012, the U.K. Serious Fraud Of-
fice investigated GPT Special Project Man-
agement Ltd., a subsidiary of Airbus, for
compliance issues in contracts with Saudi
Arabia. The same office launched a crimi-
nal investigation into Airbus in late 2016 in
response to suspicion that Airbus actively
engaged in fraudulent dealings predicated
on bribery and corruption. (See “SFO Charg-
es Airbus Unit, Three Individuals in Saudi
Probe,” by Ellen Milligan, Bloomberg, July
30, 2020, tinyurl.com/y3wvgw6g”; “Air-
bus to pay SFO €1bn in corruption settle-
ment,” BBC News, Jan. 31, 2020, tinyurl.
com/yy36ehdz.)
As a result of the Serious Fraud Of-
fice’s allegations after their probes, U.S.
and French authorities joined the inves-
tigation, which led to the nearly $4 billion
settlement, split between the countries with
2.1 billion euros going to France, 984 mil-
lion euros to the U.K. and the remaining
526 million euros to the U.S. (See tinyurl.
com/t22s7cu.)
FRAUD-MAGAZINE.COM
Though Airbus was the subject of these
investigations, the company initiated the
probes after finding a trail of questionable
business practices during an internal audit
in 2016. Airbus subsequently reported these
findings to French authorities — a strategic
move that’s estimated to have saved Airbus
a fine that likely would’ve been closer to
$8 billion. (See “Airbus Enters Into A Co-
ordinated Resolution Of Foreign Bribery
Investigation With U.S., U.K. And French
Authorities For A Total Of €3.6 Billion,” by
Jonathan S. Kolodner et. al., Mondaq, March
2, 2020, tinyurl.com/yywbsvwy).
In the DOJ’s announcement of the
settlement, U.S. Attorney Jessie K. Liu un-
derscored the importance of the interna-
tional scope of the investigation with the
cooperation of three nations. “This case
exemplifies the ability of our prosecutors
and law enforcement to work with our for-
eign counterparts to ensure that corruption
around the world is prevented and punished
at the highest levels,” Liu said. (See tinyurl.
com/v3h3lel.) /04
 05/Luckin Coffee’S
large mug of fraud
The Nasdaq-listed, Chinese-based coffee
company Luckin Coffee Inc., which man-
aged to overtake Starbucks in total loca-
tions within just more than two years of
being founded, announced in April 2020
that an internal audit revealed allegations
of fabricated sales figures. (See Luckin Scan-
dal Is Bad Timing for U.S.-listed Chinese
Companies,” by Selina Wong and Matthew
Campbell, Bloomberg Businessweek, July
29, 2020, tinyurl.com/y6xq95dd.)
The discovery resulted in a drop in
the company’s stock of more than 90 per-
cent within a month and led to the firing
of Luckin’s CEO Jenny Qian and COO Jian
Liu, who also lost their seats on the board
of directors.
In July, a filing issued by the U.S. Secu-
rities and Exchange Commission (SEC) con-
firmed more than $300 million in fabricated
revenue that began around the time of the
company’s IPO on Nasdaq and determined
that the stock should be delisted because of
public interest concerns.
Luckin took the coffee shop industry
by storm in 2017, when Joy Capital — one
of the largest venture capital firms in China
— along with the Singapore fund GIC, in-
vested in its app-based takeout and delivery
coffee service, according to the Bloomberg
Businessweek article. The influx of capital
valued the company at nearly $1 billion and
allowed the chain to open nearly 5,000 lo-
cations throughout major Chinese cities.
Bolstered by this initial success, Luckin con-
vinced investors like BlackRock and banks
such as Credit Suisse Group AG to back the
business. In May of 2019, when Luckin took
its shares public, it raised $561 million and
dominated the Nasdaq stock exchange.
In hopes of competing with Star-
bucks in China, Luckin operated accord-
ing to an almost opposite business model:
instead of building stores with tables and
Luckin Coffee at Beijing Mall, Wangfujing (Photo by N509FZ/Creative Commons
Attribution-Share Alike 4.0 International license)
chairs, they operated out of kiosks with no
seating to minimize rent and labor costs.
The coffee was far cheaper than a cup at
Starbucks, though this level of immense
discounting didn’t make up for Luckin’s
operating expenses. As company records
show, in 2018, Luckin was operating at ex-
penses that were almost triple its total sales.
In January of 2020, Luckin’s stock was
valued at $50 a share; the initial value had
been a mere $17. However, at the end of the
month, an investigations firm released an
89-page document chronicling results of a
consumer research study that claims Luckin
had been inflating its revenue and the total
number of items sold per day. As a result of
the study, Luckin’s stocks plummeted, but
the company recovered within a month.
However, auditors quickly confirmed the
truth of the report, which led COO Jian Liu
to declare that the company had forged
more than $300 million in revenue, accord-
ing to the Bloomberg Businessweek article.
By mid-May 2020, Luckin Coffee had
fired its CEO and COO, and suspended six
other employees who played a part in the
scheme. The NASDAQ barred Luckin stock
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
from being traded beginning in April after
its shares had plunged by 83 percent follow-
ing the exposure of the fraud. As of press
time, the chain remains in operation. In
fact, app downloads surged directly fol-
lowing the news of the fraud as Luckin at-
tempted to regain its company’s value by
offering a free cup of coffee to new custom-
ers. (See “Luckin Coffee ousts chairman Lu,
names GUO as CEO,” Reuters, July 13, 2020,
tinyurl.com/yxgxs2m4; See “Luckin Coffee
fires CEO, COO after sales fraud investiga-
tion,” by Amelia Lucas, CNBC, May 12, 2020,
tinyurl.com/ycjepyts; “Demand for Luckin
app surges as Chinese rush to drink up after
admission of fraud,” by Sophie Yu and Jen-
nifer Hughes, Reuters, April 7, 2020, tinyurl.
com/yxarp3ep.) /05
Hallie Ayres is a freelance writer and
guest contributor to Fraud Magazine.
Contact her at halliehalliehalliehallie@
gmail.com.
Mason Wilder, CFE, is a senior re-
search specialist with the ACFE. Contact
him at mwilder@ACFE.com.
FRAUD MAGAZINE 43
KEYS TO THE KINGDOM:

OILFIELD SERVICES COMPANY USES

BILLING SCHEMES TO SIPHON $2
MILLION FROM FORMER EMPLOYER
 e didn’t take long
to come up with
the idea. As he put
down the large Ma-
son jar of sweet tea, Jerry scribbled down
some additional notes in his company
notebook, which he always kept by his
side. He used it as some might use a thumb
drive. It was a repository of his operational
notes, passwords, musings and his busi-
ness plans. Housed in this notebook was
his dream to bring in more money than he
ever thought possible.
While his dream was still a few
months away from taking off, the reality
was, Jerry needed cash today. He’d just
paid for his eldest daughter’s wedding, his
twin sons had just begun their sophomore
year at college, and his youngest teenage
daughter — who’d always had a sense of
entitlement — was asking for a new car
for her 16th birthday.
Jerry had also recently complained to
several colleagues about the bills piling up,
along with the 20 miles of his Texas ranch
that needed new fencing. And his wife’s
cosmetic surgery invoices were coming
in fast and furious. The pressure for ad-
ditional cash was heavy on his mind. These
money woes took him away from the half-
eaten chicken-fried steak and cold lump of
mashed potatoes on the plate.
“No time to eat,” he said quietly as
he scooted his chair back. He stood up,
drained his tea, picked up the bill and left
$20 on the counter as he quickly left the
restaurant.
Speeding past the Pecos city-limit sign
on his way back to his company field office,
Jerry knew he had a long list of tasks to
check off to get the new business off the
ground.
A month later, he’d ticked off many
of those to-dos and was well on his way to
becoming the principal of his new venture,
Diamond Machine Works. Never mind
that he was still working for his employer,
Desert Rose Petroleum. Never mind that
Desert Rose’s conflict-of-interest policy
prohibited employees from engaging in
personal business ventures that could
lead to divided loyalties. Had someone at
Desert Rose been paying attention, they
would’ve seen Jerry’s noncompliance with
the policy. But no one seemed to notice or
care. So, Jerry devoted himself to ensuring
that Diamond would profit from Desert
Rose’s lack of attention.
On a Friday afternoon, with a click of
the mouse, his resignation letter hit his
supervisor’s inbox. By the time his boss
had read the electronic missive, Jerry
had placed on each colleague’s desks his
new Diamond business cards and a $100
Amazon gift card — a small token of his
gratitude.
He also left each of them a handwrit-
ten note entreating them to consider his
business when new projects became avail-
able. With or without the note, Jerry knew
that his colleagues would most likely use
his services.
“Why not?” he asked himself. “Every-
one knows me, and I know that my rates
will be lower than everyone else’s.”
He was also confident that Desert
Rose would quickly add him to their ap-
proved vendor list without having to go
through the time-consuming vendor-on-
boarding process. He reasoned that Mike,
the Desert Rose employee who performed
vendor due diligence, would give him the
okay. Mike and Jerry had become good
friends over the years. Jerry was correct;
Mike approved Diamond in five minutes.
Jerry’s business model was very sim-
ple: provide general oilfield labor services,
also known as roustabout services, to in-
stall and maintain equipment and other
oilfield assets.
Jerry hired 10 men with broad ranges
of experience. During their brief inter-
views, the prospective employees had
said they wouldn’t mind working 12-hour
days. In return, Jerry had promised to keep
them busy five days a week with possible
overtime hours on weekends and holidays.
With a crew ready to work and a company
issuing work orders, Diamond Machine
Works was truly open for business.
Every evening, Jerry’s foreman, his
“Pusher,” received work orders from Desert
Rose. The next morning before the sun had
a chance to peek over the desert plains, the
crews would drive their company trucks
to the “leases” (a term used by exploration
and production companies to denote the
leased property from local landowners)
to complete their tasks. Workers took few
breaks, and the last crews wouldn’t leave
their jobsites until the sun dipped in the
West. Work from Desert Rose was mostly
consistent; it always had equipment on the
aging leases that needed repair.
And, that’s how it went for the next
three months. Regardless, Jerry’s income
statement was in the red. He just wasn’t
going to make his new company work if
he stayed at the current rates and with his
current business model.
 Keys to the kingdom: oilfield fraud
On a Sunday afternoon, six months after he
had left Desert Rose, he saw the handwrit-
ing on the wall. He’d have to make some
tough decisions, which included letting
some of his excellent performers go. Over
the next couple of weeks, he’d hand out
pink slips to half of his labor force. It hurt
because he’d made some solid friends with
his crew members. But the greater pain
was the draining personal and company
bank accounts.
For solace, and to stir the creative
juices, Jerry returned to his notebook and
began to jot down some questions: How
can I bring in more to offset my debt? Can I
offer more services without having to take
out additional loans? How can I cut a few
corners to squeeze out more margin?
If anyone had been watching his face
as he finished writing down the last ques-
tion, they would’ve seen his face relax. The
proverbial lightbulb had turned on. Jerry
saw some opportunities for committing
fraud. He began to outline his mental
checklist.
His first task was to text all the Desert
Rose foremen: “Send me more jobs, I’m
taking on more crews. Diamond is grow-
ing. ” This text was the first lie but cer-
tainly not the last.
The next day, his Pusher’s phone was
blowing up with texts, emails and calls
from Desert Rose clamoring with new
orders.
“I’ve got too many jobs,” the Pusher
told Jerry. “I don’t have enough crews,”
he said.
“Not a problem. Take on what you can,
but send me all the details of the jobs you
can’t do. I’ll sub it out.” Lie No. 2. Jerry had
no intention of subbing out the work.
That evening, he invoiced Desert
Rose for the work the Pusher’s crews had
completed. The service hours were pretty
much in line with what Desert Rose’s ap-
provers expected, but Jerry knew that if he
46 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
added a half hour here or maybe an hour
there, it would still be allowed. He even
brazenly invoiced Desert Rose for the work
he couldn’t get to. He was very selective in
what he chose to falsely invoice them for.
He made sure it would be work that really
could wait or could be considered simply
busy work.
“Invoice 23654. Three hours and a
two-man crew to spray the weeds and
spread caliche around the well pad. That’s
reasonable,” he said to himself.
The names on the invoice were ficti-
tious. The work description was very much
busy work. The total for Invoice 23654 was
$360. He reasoned that this was an invoice
that wouldn’t even get a second glance,
and he was right.
In the previous year, Desert Rose’s ac-
counting department had built in a new
process that would automatically approve
invoices below a $1,000 threshold. When
Jerry worked for them, he thought it was a
solid idea to free up foremen like him from
some of the time-consuming process of
invoice review. Now, he thought that the
procedure was brilliant and would help
further his scheme.
He smiled as he submitted the last in-
voice into Desert Rose’s online invoicing
system and entered the total on his 10-key
pad. All of today’s invoices totaled $15,750,
a 45% increase from his previous largest
daily amount. He could feel his tension
drain away.
Over the next few weeks, he’d open the
emails he’d received from Desert Rose’s
online invoicing system and read that
they’d been approved. One night after his
family had gone to bed, he wondered if
there was a way to bring in even more. First,
he Googled the phrase “best way + forge
+ signature.” He scrolled down the search
results page and opened the “WikiHow”
FRAUD-MAGAZINE.COM
page that piqued his interest. The instruc-
tions were fairly easy, and after a few tries,
he had it. He pulled out the retirement card
his former employees gave him and suc-
cessfully forged many of their signatures.
The next day, bleary-eyed but hum-
ming along with massive amounts of caf-
feine, Jerry submitted a false invoice for
$2,275. Because this invoice was over the
automatic-approval amount, he had to
include a forged signature of one of his
former colleagues. Before he’d left Desert
Rose, he’d forwarded several of his work
emails to his home email. One of those
contained a list of unique identification
numbers for all the Desert Rose foremen.
Typically, employees don’t share this
type of information among themselves,
but Jerry and his former colleagues col-
lected and distributed the list in case
they had to approve each other’s invoices
if someone were out sick or on vacation.
With the forged signatures and the
unique identifiers, Desert Rose would pro-
cess these invoices without much fuss or
further review. The invoicing system raised
some red flags, but the company didn’t
have an official process to review or vali-
date those flags, so the invoices were ap-
proved. Twelve hours later, Jerry received
the automated email with “Invoice Ap-
proved” in the subject line.
“Genius, Jerry. This is too easy, espe-
cially when you have the keys to the king-
dom,” he said to himself.
Two years later, on a chilly Saturday after-
noon as he sipped his beer and watched his
beloved Texas Tech Red Raiders play, he
suddenly had this feeling come over him.
The dream that he’d played out in his mind
so many times years earlier had become a
reality. His wallet wasn’t strained, his wife
continued to seek out the latest beauty
treatments and undergo new cosmetic sur-
geries, and the now 18-year-old daughter
Elevate Your Career.
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Professional Sharpen your skills with world-class

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Development Certified Fraud Examiner.

Networking Connect with more than 85,000

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 Keys to the kingdom: oilfield fraud

• Provide ongoing conflict-of-interest and ethics training to ensure employees receive critical guidance on
recognizing and handling conflicts.
• Ensure your new vendor due diligence policy addresses former employees who want to work as contrac-
tors for your organization.
• Perform periodic due diligence on current vendors to review vendor financial health.
• When your company has implemented automated-invoicing approval processes, perform periodic in-
voice reviews of random invoices to ensure reasonableness and validate that the controls are operating
effectively.
• Develop a policy and process by which alerts from invoicing systems are investigated, reviewed and
cleared.
• Perform a vendor audit risk assessment to identify potential audits. Ensure the risk assessment consid-
ers both financial and operational risks.
• Conduct ongoing vendor audits to ensure goods and services have been received and validate invoice
amounts.

was a freshman in her posh condo, just
a mile from where his Red Raiders were
playing. Life was certainly good.
However, Jerry didn’t know that
Desert Rose’s internal audit depart-
ment had recently commenced several
there might be something more than
just some contractor back-office issue.
The auditors’ hunch and keen data
analysis paid off. When they made an
unannounced visit to Diamond’s Pecos
office, Jerry’s wife, Helen, quickly texted
Almost four years to the date of leav-
ing Desert Rose, Jerry found himself
dressed in a suit seated behind a long
wooden table. The table hid his tapping
feet and his sweaty hands. Resting his

contractor audits. Audit wouldn’t have him “ASAP … come to office; auditors.” hands on the wool cloth, his fingers ner-

normally selected Diamond Machine Less than 30 minutes later, Jerry was vously strummed the material. The judge

Works because its annual expenditures
didn’t meet the dollar-risk threshold.
However, this year the audit department
had begun to flag numbers of invoices
and analyze keywords in invoices’ de-
scription fields. This latter area moved
Diamond to the audit shortlist.
Desert Rose’s auditors had identified
certain repetitive keywords that al-
ways appeared in the same order. For
example, 25 invoices with service de-
scriptions for the same group of leases
for the same crew read, “Cleaned sight
glasses, tightened valvs, and picked up
trash.” The same three keywords in the
same order with the same misspelled
word “valve” had the auditors thinking
in the office. The auditors asked him
to provide payroll and other employee
records for the field employees. Jerry
also downloaded and gave the auditors
GPS data records for their trucks for the
previous two years.
As the auditors inquired about
Diamond’s operations, Jerry would fre-
quently interject, “You know, you guys
owe me for the last two months. I have
a number of invoices that you haven’t
paid yet.” His plea for money fell on
deaf ears. It was true, he hadn’t been
paid. But once the auditors identified
numerous anomalies, Desert Rose’s
controller had placed Diamond on
“Payment Hold.”
calmly read out the charges, which in-
cluded multiple counts of identity theft,
one count of wire fraud and one count
of money laundering. Jerry’s attorney
could proffer little. He reasoned that
Jerry should serve three years. However,
the judge ordered Jerry to serve 10 years
and to pay back around $2 million in
restitution. Desert Rose and the courts
had taken away the keys and changed
the locks. (See the case that this article is
based on at tinyurl.com/yaszgauh.) ■ FM
Rick Roybal, CFE, is project manager at
Martindale Consultants Inc. in Roanoke,
Texas, and president of the Oil and Gas
Vendor Roundtable. Contact him at
rick@vendoraudit.org.

48 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

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 From its early days as The White Paper to the
72-page bimonthly publication it is now, Fraud
Magazine’s continued credibility and necessity
to the anti-fraud profession is in part thanks to
the leadership of its editor-in-chief, Dick Caro-
zza. After 25 years at the helm, Carozza is step-
ping back and retiring. Here we take a look at
the history of Fraud Magazine and the large role
Carozza played in its success.

By Emily Primeaux, CFE

Photos by Karl Massdam
 Dick Carozza

On a sweltering day in the

summer of 1995, Dick Carozza
stepped foot into the Gregor
Building in Austin, Texas, for
the first time. He and his wife,
Sue, had recently relocated to
Austin — she’d taken a posi-
tion as the cancer epidemiolo-
gist for the State of Texas to
be closer to her Austin-based
family.

Carozza, who’d quit his job to follow

Sue, saw an advertisement in the Austin
American-Statesman (the major daily
newspaper for Austin) calling for someone
to create a magazine for the ACFE. Carozza
was keen to start a magazine from scratch,
so he mailed in his résumé post-haste.
Following an initial interview with
then-CEO Kathie Green (now Lawrence),
Carozza met ACFE founder and Chairman,
Dr. Joseph T. Wells, CFE, CPA. “Of course,
he wore a Hawaiian shirt,” Carozza says
in an interview with Fraud Magazine. “I
thought, ‘Well, this is interesting.’ ” Dr.
Wells shared his vision of the ACFE and
how this magazine could benefit anti-
fraud professionals working in the field.
Carozza was sold.
Since that stifling Texas day, what be-
gan as The White Paper has morphed into
Fraud Magazine, a bimonthly publication
that brings fraud fighters top-tier anti-
fraud principles, profiles, education and
more. Carozza’s 25-year endeavor to help
fraud fighters battle corrupt and nefari-
ous conduct using practical content has
consistently empowered ACFE members
to persist.
Multiple states and
a hodgepodge of industries
Ever since Carozza can remember, he’s
wanted to work in the editorial field. He
embarked on his career by obtaining his
degree in journalism from the University
of Missouri in Columbia. His major was in
the magazine sequence with an emphasis
in design.
“I really enjoyed design work,” Caro-
zza says. “At one point I wanted to be a
graphic artist, but I did a lot of editing
when I was in high school, so I thought,
well, I’ll play both.”
But magazine work wasn’t abundantly
available then, so he worked as a journal-
ist for a daily newspaper and did design
work on the side. After working as the city
editor of a small-town Kansas newspaper
for 2½ years, he became the director of
community relations and development for
the local hospital because they wanted to
start a magazine.
He then moved to Colorado to work on
a magazine and marketing at a nonprofit.
Carozza met Sue in Colorado and in 1983
— shortly after they were married — they
moved closer to Carozza’s family in New
Hampshire.
Carozza worked for the Catholic Dio-
cese of Manchester, which covered New
Hampshire, as the director of commu-
nications. He handled publications and
public relations work. Sue worked for a
few years for an environmental consult-
ing firm. She happened upon a newspaper
advertisement for an epidemiologist posi-
tion at the New Hampshire Department of
Public Health. Though she had no experi-
ence in epidemiology — her degree was
in fisheries and wildlife from Texas A&M

52 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

 ACFE STAFF and FRIENDS
reflect on Fraud Magazine’s
University in College Station — she enjoyed statistics and numbers, so she success under Dick Carozza’s
applied and got the job. “She went from counting fish to counting people,” guidance
Carozza jokes.
Sue’s jump into the world of epidemiology would be the catalyst for
bringing them to Texas … eventually. She was enjoying epidemiology, but
she figured if she was going to do anything in the field she’d need a gradu-
ate degree, so she applied to Johns Hopkins University and the University of “When Dick Carozza came to
North Carolina (UNC) — both had stellar public health schools — and ended work for the ACFE 25 years ago,
up in Chapel Hill at UNC. our association was seven years
Carozza didn’t find work immediately, traveling back and forth from New
old and had less than 10,000
Hampshire to North Carolina for interviews and to visit Sue. After 11 months he
landed a job as the director of communications for the Motor and Equipment members. He retires as the
Manufacturers Association in the Research Triangle Park in North Carolina. third senior employee when
“I knew nothing about cars or trucks, but they needed someone to do their our membership is over 85,000.
publications, and they said, ‘you can learn,’ ” Carozza says. “Basically a theme Everyone loves Dick and with good
of a good part of my career is I find myself in these new professions and new
reason. He is diligent, respectful
industries where I know nothing — like book publishing, the medical field,
the auto parts industry and fraud examination — but I had a good education
to our authors and his fellow
in journalism to be able to ask the right questions and find the right sources employees, and has a great sense
and to learn. That’s been the fascinating part: to be in all of these different of humor. Plus he is an amazing
industries meeting various types of people and learning what I need to know writer with an uncanny ability to
in order to write about those industries.” bring out the best in others. We
will miss him immensely.”
Carozza modernizes The White Paper — Dr. Joseph T. Wells, CFE, CPA,
Once Sue graduated with a doctorate from UNC, they made their move to Austin, founder and Chairman of the ACFE
and Dick got the job at the ACFE after interviewing with Dr. Wells. “They offered
me the job, and I was slightly bummed because it had only been two months of
my little vacation between jobs,” Carozza says with a laugh.
At that point the ACFE was producing a printed newsletter called CFE News
and a publication called The White Paper, which followed a magazine format.
“What they wanted to do was combine the two and come up with a professional “The best thing I can say about Dick
magazine,” Carozza says. “That was enticing to me. I could start from scratch, Carozza is that I’ve never heard
and I was eager to do that.” anyone say anything negative about
But when Carozza started, the ACFE was still relatively small. “I remember him. That is the absolute truth.
Joe, Kathie and Jim [Ratley, the ACFE’s former president] telling me, ‘We’re
not association people, we’re investigators.’ They were figuring it out as they
He started one month after I did,
went along. so I witnessed firsthand how he
“Because the whole area of fraud was new to me, I was learning how to created a brand-new magazine from
put out this magazine at the same time I was learning the field and getting to basically scratch. From the first
know people,” he says. “I remember they had the San Antonio annual confer- issue, the magazine has not only
ence shortly after I started in July, so I said, ‘If you’re having a conference, why
looked good, but it has educated
can’t I go?’ … So, I went for a day.”
Carozza says he quickly bought into Dr. Wells’ mission of providing the and informed thousands of fraud
best anti-fraud training and service in the world. “I like to have a mission within examiners for 25 years. Thank you,
my job, not just a means to make money,” he says. “I’d worked for nonprofits Dick, for the contribution you have
and service organizations where you’re helping members obtain their goals.” made to the ACFE membership.”
Giving practical tools to fraud fighters was appealing to Carozza. When
he first interviewed at the ACFE, Carozza says he thought all accountants — John Gill, J.D., CFE,
and auditors searched for fraud. He was surprised when he realized finding ACFE vice president - education

FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021 FRAUD MAGAZINE 53

 Dick Carozza

fraud wasn’t necessarily on their roster of issue of The White Paper in its refur- The White Paper became Fraud Maga-
duties. But when they did discover fraud, bished form. Carozza and Dick Reeves, zine in May/June 2004 after the Enron and
they often didn’t know how to report it, a GRAMMY award-winning freelance WorldCom scandals. Carozza says that the
investigate it or — most importantly — designer in Austin, comprised the en- Sarbanes-Oxley Act of 2002 — which was
how to prevent and deter it. tire editorial staff until Carozza hired created in the wake of these massive corpo-
“That’s always been Joe and Jim’s in- an assistant editor a few years later. rate frauds to help protect investors from
tent,” Carozza says. “It makes more sense fraudulent financial reporting by corpora-
to prevent and deter fraud than it does tions — was a boon for the ACFE because
to find it, investigate it and get rid of it.
Revamped Fraud Magazine
it had a tremendous emphasis on anti-
It’s much more economical — you save
highlights newsmakers, fraud efforts within organizations. The
tremendous amounts of money that you
whistleblowers ACFE’s president at the time, Toby Bishop,
would lose to fraud, and there’s less repu- Carozza says he was excited to use a bi- used the momentum to help take the as-
tational damage. And those are really im- monthly publication to give anti-fraud sociation more global, and the magazine
portant reasons, especially for large firms. professionals who were hungry for some changed names.
“Back then, and even now to a certain practical, down-in-the-trenches informa- In 2008 and 2009, the recession and
extent, many corporations didn’t want tion. “And not necessarily to catch the bad sub-prime mortgage crisis created anoth-
to use the ‘f’ word, ‘fraud.’ That was the guys,” he says. “Information to find the er boost for anti-fraud efforts and Fraud
beauty of the ACFE at this point — they evidence, the hard evidence, that shows Magazine expanded to 72 pages. “Accoun-
gave tools to people who were fraud exam- that there is or isn’t fraud. That this per- tants had to play catch up in their anti-
iners or who wanted to be fraud examiners son is culpable or not culpable. … If fraud fraud education,” Carozza says. “I’ve seen
but saw no clear way of doing that in their examiners don’t have the tools, then they the membership grow exponentially, so
jobs,” he says. can’t find the evidence of fraud. If they our scope has changed quite a bit in the
In January/ February 1996, the aren’t trained in the ACFE Fraud Tree, then magazine since 2004.”
ACFE published the first 56-page they don’t know what to look for.” Carozza says the May/June 2004 Fraud
Magazine featured its first “newsmaker,”
Douglas R. Carmichael, CFE, the initial
chief auditor and director of professional
standards of the Public Company Account-
ing Oversight Board. And the first of many
“Looking back on my career in editorial, I can point to two cover whistleblower profiles was of Marta
individuals who stood out as much more than bosses; they Andreasen, the European Commission’s
were mentors and role models for me. Dick was one of former chief accounting officer, in the
those individuals. I learned a great deal from Dick simply September/October 2004 issue.
by watching the way he approached his responsibilities “The most gratifying part of my job is
interviewing whistleblowers through the
and treated the people around him. Integrity is woven years,” Carozza says. “I admire them so
into everything he does, but he doesn’t take himself too much. I ask myself often, ‘Could I do what
seriously. Dick has a great sense of humor and emanates they’re doing?’ I’ve never met a whistle-
a personable warmth. I never doubted that he really cared blower that has not paid for their truth, for
about my well-being and respected my opinions. I feel very their honesty — professionally, financially
fortunate to have worked for him early on in my career. He and personally.”
absolutely helped to shape the way I choose to show up for Carozza says his interview with Bun-
myself and others as a leader.” natine “Bunny” Greenhouse in the July/
August 2006 issue (Bunny was the U.S.
Army Corps of Engineers whistleblower)
— Katie Ford, executive director at Truth Be Told (truth-be-told.org)
was the first interview that really created
and a former Fraud Magazine assistant editor
his passion for telling whistleblower sto-
ries. “Against all odds, she pushed,” he
says. “Once I interviewed her and then
met her at the annual conference, I started

54 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

“The quality of Fraud Magazine over these many
decades under Dick’s direction has elevated the “Dick Carozza was one of the first employ-
prestige of our profession. He is also one of the ees I met when I started at the ACFE in
kindest, most humble and genuine souls I’ve ever 1996. I worked with Dick as the circula-
met, which lifts us all.” tion director for The White Paper, which
— Jeanette LeVie, CFE, is currently Fraud Magazine. Working
ACFE vice president and chief operating officer with Dick was always such a pleasure. If
he was having a bad day you would never
know it because he always had a positive
attitude. Dick and I could sit for hours
“Dick was wonderful to work with and was always and talk about the good times we all had
open to my creative ideas, and contributed many at the ACFE — great memories. I will
of his own. I know the magazine and anti-fraud always to be grateful for the support Dick
profession wouldn’t be what it is today without provided me during my years of working
his dedication, ingenuity and drive for top-notch with him. I wish Dick a restful retirement
storytelling. I wish Dick all the best for this next and joyful years ahead.”
chapter!” — Angela Fletcher, CFE, ACFE review course
— Helen Elliott, creative lead at St. Edward’s University and manager, one of Carozza’s first ACFE colleagues
former Fraud Magazine art director

Fraud Magazine gained more notori-
ety when Carozza nabbed interviews with
whistleblowers Cynthia Cooper, CFE, and
Sherron Watkins. Cooper formerly served
as the vice president of internal audit at
WorldCom where her team exposed the
largest accounting fraud in U.S. history.
Watkins is the former vice president of cor-
porate development at Enron. She alerted
then-Enron CEO Kenneth Lay of account-
ing irregularities in financial reports and
was called to testify before committees of
the U.S. House of Representatives and Sen-
ate about her warnings to Lay. Each woman
was named as one of three “People of the
Year” by Time magazine in 2002.
Carozza says the work has allowed
him to meet many other fascinating peo-
ple. He mentions George J. Mitchell, the re-
nowned mediator for the Northern Ireland
peace process; U.S. Sen. Paul Sarbanes and
U.S. Rep. Michael G. Oxley (the Sarbanes-
Oxley Act); U.S. Sen. Chris Dodd (the Dodd-
Frank Wall Street Reform and Consumer
Protection Act); Preet Bharara, former U.S.
attorney for the Southern District of New
York; and actor Richard Dreyfuss.
“In the magazine, we’ve tried to em-
phasize areas of anti-fraud principles that
maybe the rest of the association isn’t,”
he says. “We overlap a lot with ACFE ma-
terials, and we don’t include things that
are outside the canon — we still exist
within the boundaries of the Fraud Exam-
iners Manual. But we’ve tried to push the
envelope.”
When Sue joined the faculty at Texas
A&M University and they moved to Col-
lege Station, Carozza agreed to stay on as
editor-in-chief as a contractor at the behest
of Dr. Wells. They now live in Corvallis,
Oregon, where Sue has been faculty at
Oregon State University in the College
of Public Health and Human Sciences
since 2009. Carozza has continued to
run the magazine and travel to the an-
nual conferences, and occasionally to
Austin, ever since.
New expansion for
Fraud Magazine
“The ACFE has been able to give CFEs not
just a platform, but the bona fides, the pro-
fessional support and reputation that they
didn’t have before,” Carozza says. “There are
a lot more CFEs in the governments around
the world, and it really holds a lot of weight
because they deliver results.”
Carozza expands, saying that these
days when CFEs approach fraud exami-
nations, they know how to investigate for
fraud and interview subjects; about law re-
lated to fraud; about financial transactions,
fraud schemes and criminology; and pre-
venting and deterring fraud.
“I’m glad to have been a small part
of that,” he says. “I’ve wanted to be able
to challenge fraud examiners to think a
little broader than where they are, or to
give them something they want more edu-
cation on that they haven’t been getting.
With my leaving, there’ll be a chance for
someone to expand tremendously in areas
I hadn’t considered.”
Carozza also has enjoyed working with
the many authors who have contributed
their work to the magazine, plus the edito-
rial staffers that have come and gone during
his tenure. “I want to thank the editors that
I’ve collaborated with: Stephanie Dodds,
Katie Ford, Suzanne Mahadeo, Amy Logan,
Cora Bullock — who’s still a contributing
editor — and Emily Primeaux — now a
contributing writer,” he says. “And our in-
ventive art directors, from Dick Reeves to
Helen Elliott to Becky Plante, really made
the magazine sing. Designers Tracy Pac-
cone and Jennifer Rother also contribute
their talent. It’s one thing to have a good
article; it’s another to have the art direction
to attract people to read it.
“My thanks also go to our longtime
talented contributing writers, Bob Tie,
CFE, and Donn LeVie Jr., CFE; contributing

FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021 FRAUD MAGAZINE 55

 Dick Carozza

editors, Scott Patterson and Randi Zimmer, CFE; and

“I remember the first time I spoke to Dick on the
phone for my assistant editor interview. He asked
if I was an introvert or extrovert, and when I noted
I was an extrovert, he said gleefully, ‘Great! So am
I! So, you won’t be annoyed when I call you.’ That
level of management and sense of humor is rare.
Not only is Dick a crackerjack editor, always
staying abreast of the seemingly endless updates,
changes and reversals to the AP style guide, he’s a
wonderfully compassionate person. I remember
how lovingly and patiently he tended to his
mother-in-law when she moved into the house he
shares with his wife, Sue. He often speaks of his
pride for Sue, an epidemiologist, and the rest of his
family. It’s been my pleasure to continue contact
with him via my contributing editor position, and I
shall miss his patience, enthusiasm and energy for
all things anti-fraud and writing.”
— Cora Bullock, former Fraud Magazine assistant editor
contributing columnist, Mason Wilder, CFE. Carozza also
thanks Circulation Manager Aimee Jost, CFE; Advertising
Coordinator Travis Kolaja, Legal Editor Ron Cresswell,
J.D., CFE; and Kate Pospisil, CFE, who maintains Fraud-
Magazine.com. “This magazine has always been a team
effort to get it to the members on time every two months,”
Carozza says.
“Though Joe Wells still reads every word of every
issue, he’s always had a hands-off approach with the
magazine,” Carozza says. “I’ve appreciated his support
through the years.
“The ACFE members are the greatest. I’m always
challenged by their resolute devotion to prevent and deter
fraud especially when they’re fighting uphill battles,” he
says. “I’ve learned so much from the hundreds of authors
and columnists who’ve appeared in the magazine’s pages.
“I want to thank so many other ACFE individuals in
the last quarter-century,” Carozza says. “I’m grateful and
honored for the relationships I’ve had with the wonderful
people who make the ACFE gears mesh.” ■ FM

“I wouldn’t be the writer, editor or Emily Primeaux, CFE, is a contributing writer at Fraud
employee I am today without Dick’s Magazine. Contact her at emprimeaux@gmail.com.
tutelage. I’m forever grateful for the
skills and teachings he’s instilled
in me these past 6½ years. I left
the ACFE knowing I would forever
have a mentor and a friend in Dick
Carozza. He was always patient with
me, but firm in his expectations of
my work. When I expressed a desire
to write more, he encouraged my
passion and let me ‘steal’ some of
the more enticing stories from him.
After his years of service to the ACFE
and the anti-fraud industry, I can’t
think of anyone more deserving of a
peaceful and enjoyable retirement.”

— Emily Primeaux, CFE,

former Fraud Magazine associate editor

56 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

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 FRAUD BASICS Fundamentals for all

Open public entities’ ledgers

for transparency
Imagine if citizens, journalists, oversight agencies, and internal and external audi-
tors were able to view all transactions of taxpayer and donors’ money online. The
fraud prevention and deterrence possibilities are endless.

T
he 2019 movie, “Bad Educa-
tion,” chronicles the discovery in
2004 by Rebekah Rombom, an
earnest high-school newspaper
reporter, of a $250,000 embezzlement
that eventually snowballed into the
exposure of two senior school district of-
ficials who’d perpetrated a $11.2 million
fraud scheme. (See “Roslyn HS reporter
who broke ‘Bad Education’ story speaks
out 16 years later,” by Rose Weldon, the
island now, April 21, 2020, tinyurl.com/
y5t4n8jx.)
The fraudsters, for many years,
misused school credit cards and created
bogus purchase orders supposedly for
school supplies and equipment, but the
administrators directed the funds into how the school was specifically spend- Property Tax Refund Fraud Scheme
their pockets. ing money. Sentenced to 17½ Years,” June 30, 2009,
My favorite scenes in the movie in- The scheme that Rombom uncov-
U.S. Attorney’s Office, tinyurl.com/yx-
clude the actress playing Rombom shar- ered has some basic elements shared by
ing a purchase order with a chemistry wpxfsk); or Channing Smack, who stole
other fraud cases, like Rita Crundwell’s
teacher who shakes his head and says, $53.7 million theft over 20 years from $370,000 from the Girl Scouts of Greater
“No, I never received those glass beakers the city of Dixon, Illinois [see “Former Los Angeles by facilitating checks to a
…” and when Rombom ventures into Dixon Comptroller Rita Crundwell sham landscaping business he owned
New York City she discovers a school Sentenced To Nearly 20 Years In Federal that provided no actual services to the
“vendor” is located in the superinten- Prison For $53.7 Million Theft From
charity. (See “Westside Man Arrested
dent’s apartment. City,” Feb. 14, 2013, U.S. Department of
On Money Laundering Charges Related
Rombom’s efforts to follow up on Justice (DOJ), tinyurl.com/y8hjtyp8];
school vendors and specific purchases Harriette Walters’ $48 million theft To Alleged Embezzlement Of Nearly
were significantly hampered by her over 18 years from the Washington, $370,000 From Girl Scouts,” Dec. 18,
inability to gain access to records about D.C., government (see “Leader of D.C. 2013, DOJ, tinyurl.com/y2yqa7qg.)

58 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

 While most entities have several layers of oversight to help ensure managers
use funds appropriately, one primary and persistent problem exists:
Transaction-level spending transparency is often nonexistent.
Publicly traded and privately held
companies have similar challenges. But
I’ll only address nonprofits and govern-
ment entities in this column because
their spending of taxpayer funds is
clearly a matter of public interest. (Pri-
vate entities have a plethora of reasons
for maintaining privacy about how they
spend their monies.)
The problem
Governmental units and nonprofits
worldwide properly manage the vast
amount of public dollars as intended.
However, some will always find creative
ways to redirect these dollars for per-
sonal gain or other improper purposes.
While most entities have several layers
of oversight to help ensure managers
use funds appropriately, one primary
and persistent problem exists: Trans-
action-level spending transparency is
often nonexistent. Taxpayers and other
stakeholders shouldn’t be burdened by
having to determine exactly how their
government and nonprofits spend their
public dollars.
A solution
I have a solution! Of course, every gov-
ernmental and nonprofit entity main-
tains an internal accounting system
that tracks each financial transaction to
include the date, payee, amount, fund or
program, and other data.
For example, let’s say, on Jan. 1,
2020, a $50,000 bonus was paid to a
John Jones, or a $15,000 rent check went
to ABC Enterprises. Accounting systems
must also have an accompanying system
COLUMNIST
REGENT KEN
DIEFFENBACH, CFE
SPECIAL AGENT
U.S. DEPARTMENT
OF JUSTICE
of internal controls to help ensure
transactions are legitimate, supported
by adequate documentation and are
recorded accurately in the ledger.
What if we made more and perhaps
all this spending data publicly available?
Perhaps as a “Report to the taxpayer”
or “Report to our donors”? This infor-
mation would explain exactly how the
government or nonprofits use public
funds and donations.
Imagine if citizens, journalists,
oversight agencies, and internal and
external auditors were able to view this
level of detail without having to rely on
audits, data collection efforts, Freedom
of Information Act requests, lawsuits,
subpoenas or site visits. Imagine
the power of crowdsourcing all this
information.
Imagine that a fraud examiner
could quickly determine a school vendor
and its superintendent share an address
— the first time that superintendent
executes a corrupt purchase order not
years into the scheme.
And, most of all, imagine the deter-
rence and prevention effect that would
nudge people toward good behavior.
I have a bit of personal experience
here — with spending data, not com-
mitting fraud! Once a year, I spend a few
hours to log on to my bank’s website and
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
download every banking transaction for
our checking, savings and credit card
accounts. I do a bit of data cleaning,
standardization, and cutting and pasting
until I have one nice spreadsheet with
the date of each transaction, the payee,
the amount and the category. (My bank
automatically categorizes each transac-
tion based on the vendor, and I’ve found
that I rarely need to correct them.)
Now, with that information all
in one place, I can do pivot tables and
charts and graphs and see what it costs
to be “us.” My first insight every year
is always, “Holy cow, the cats cost how
much?!” After I calm down, I’m amazed
at the instantaneous insights I can
gain about who we send our money to,
the purpose areas and the percentage
of overall spending for each type of
transaction.
These types of insights are only
available with analysis of transaction-
level spending details — if I only relied
on my monthly bank statements and
tax returns, I’d never gain most of these
insights. Nonprofit board members,
audit-report readers and city council
members are at a disadvantage when
they rely exclusively on high-level sum-
mary analysis without details. Proper
due diligence and oversight requires
more than just the dollar totals.
I know what you might be thinking:
Bad actors will just lie in their account-
ing records. True, that could and likely
is happening at this very moment. But
our identification of clear evidence of
falsified records, which can only happen
with release of all financial information,
FRAUD MAGAZINE 59
 FRAUD BASICS Fundamentals for all
will only enhance organizations’ and
governments’ abilities to remediate is-
sues swiftly and efficiently.
We’d be able to say to suspected
fraudsters, “You clearly claimed to have
spent the money on X, but, in reality, you
did this other thing and intentionally
tried to cover your tracks.” Additionally,
if a person claims to have sent funds to
a vendor, but the hard data shows they
kept the funds for themselves, vendors
will more readily notice their names
were used falsely. A fraudster working
at a high school who creates a sham
purchase order stating they purchased
“chemistry supplies” runs the risk that a
chemistry teacher or the chemistry club
To see how every fire department, school, town
hall, homeowners’ association, animal shelter
and economic development authority spends the
people’s money would serve to make them more
effective and accountable.
will flag the transaction and demand
answers.
Additionally, transparency of
spending data would allow analysis —
on a level not previously possible — to
flag suspicious contract-award patterns
and other illogical and anomalous
transactions. Organizations often don’t
appreciate that ensuring procurement
systems are free from price fixing, col-
lusive bidding and other unfair prac-
tices is critical to prevention of corrupt
contracting practices.
Two models
For those thinking this would be too
cumbersome, complex and generally
60 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
unfeasible, I offer a model: the U.S. Fed-
eral Election Commission (FEC, fec.gov).
Campaign finance laws require that the
FEC collect, maintain and make publicly
available detailed transaction-level data
on certain political candidates’ revenues
and expenditures.
This data allows anyone to deter-
mine those political candidates who
prefer Dominos versus Pizza Hut or how
much a campaign paid a particular ven-
dor and when. Some states have similar
campaign finance disclosure laws and
databases.
The U.S. state of Ohio offers another
similar model. The Ohio Checkbook,
launched in 2014, provides transaction-
level spending details for every dollar
spent by the Ohio state government,
public schools systems and units of
local government, including credit card
transactions. (See checkbook.ohio.gov.)
For example, did you know that on Nov.
27, 2019, the Ohio Board of Cosmetol-
ogy paid Fusion Technologies East LLC
$6,785 for “IT & Network Services”?
I have no idea what that means, but I
discovered this after about 10 minutes
of exploring how the board spent $2.8
million in 2019.
Other states have sunshine and
other open-records laws, but I am
unaware of any that have this advanced
data-sharing system.
FRAUD-MAGAZINE.COM
The details
Governments and other organizations,
of course, need to work on many details.
How would they handle “public avail-
ability”? Would entities simply post data
to their existing websites? Would a neu-
tral entity or a large tech company create
a way to easily host data and perhaps
even create simple analysis dashboards?
How would they handle salary and other
sensitive information?
I propose we start with the pre-
sumption that the public deserves to see
how every taxpayer dollar and charitable
contribution is used and then work out
the necessary exceptions.
The why
The best part of this concept is that it’ll
go a long way to fulfill fraud examiners’
highest calling: fraud prevention and
deterrence. Would-be fraudsters might
refrain from committing crimes if they
know their credit card transactions,
checks, transfers and contract payments
will be shared with the world.
Crundwell was only caught when
she took a vacation and a co-worker no-
ticed unusual transactions. Walters was
identified when a bank challenged her
niece’s attempt to negotiate a six-figure
check.
Would Crundwell have been able
to do as much damage if the Dixon
taxpayers, mayor or city hall employees
had earlier access to all her transac-
tions? Could Walters’ scheme have been
flagged sooner if Washington, D.C., had
a spending data-sharing program? What
if they’d each stopped their schemes
at the $45 million mark? Would their
thefts have ever been identified? Could
someone have flagged Smack before he
collected his 23rd unearned check?
Disclosure of transaction-level
spending details by all publicly funded
and nonprofit entities could usher in a
 new era of accountability and transpar-
ency. To see how every fire department,
school, town hall, homeowners’ associa-
tion, animal shelter and economic de-
velopment authority spends the people’s
money would serve to make them more
effective and accountable.
It would allow stakeholders to
provide technical assistance to those
entities that are failing to make spend-
ing data available, and it would allow the
public to understand exactly what their
governments are spending their tax
money on and what they’re doing to find
cost-savings strategies.
In “Bad Education,” the actress
playing our intrepid newspaper re-
porter, Rombom, visits the assistant
superintendent and asks to see certain
spending records. After much back and
forth, the official tosses Rombom a key
to the basement storage room so she can
We all want to see the hundreds of billions in annual
charity and public dollars used to help make life
better for everyone — not just a handful
of fraudsters.
rummage through the archived records.
We should all have that key and be able
ACFE Regent Ken Dieffenbach,
to review spending data without the risk
CFE, is the special agent in charge of
of paper cuts.
the U.S. Department of Justice Office
We all want to see the hundreds of
of the Inspector General Investiga-
billions in annual charity and public
dollars used to help make life better for tions Division Fraud Detection Office
everyone — not just a handful of fraud- and is deputy director of the DOJ OIG’s
sters. We have a right to see how govern- Office of Data Analytics. He’s had a
ments and nonprofit organizations are 23-year federal law enforcement career
spending our money. Readily accessible in fighting fraud. (His opinions in this
transaction-level spending transparency column are his own.) Contact him at
would help. ■ FM kenneth.r.dieffenbach@usdoj.gov.

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 CAREER CONNECTION
TIME TO SHAKE THINGS UP
“Ikigai,” the Japanese notion of being truly fulfilled and how a person’s work re-
lates to their purpose, spurred former paralegal Tracy Swaim to seek more. Con-
versations with a fraud investigator excited her about entering the field. She earned
her CFE and now works in a job that checks all the boxes for her: mission, passion,
vocation and profession.
T en years into my paralegal ca-
reer, 5,000 miles away from my
hometown, and with a spouse
on deployment somewhere in the mid-
dle of the Pacific, I decided things were
too quiet. It was time to shake things up.
I’d been working in the legal
department of a small bank in Hawaii
in a fantastic job. But it didn’t seem to
be pushing the right buttons for me
anymore. One day, I was presented with
a bankruptcy petition that didn’t look
quite right. I saw that it had all the mark-
ers of bankruptcy fraud. I alerted the at-
torney to whom I reported and wrote an
internal report for the fraud department
to review. I outlined my suspicions,
attached the petition and the appropri-
ate account numbers to the report and
moved along with my bankruptcy file. I
had no idea where this would eventually
lead me and how different things were
going to be a few months later.
Talking with an anti-fraud pro
The following morning, a fraud investi-
gator at the bank found me at my desk
to ask me some questions about the
bankruptcy. After a great conversation,
she asked me if I had done this before.
Done what? I had never written a fraud
report, but I had plenty of experience
62 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
Building your professional future
COLUMNIST
TRACY G. SWAIM,
CFE
ENTERPRISE FRAUD
MANAGER AT HEARTLAND
FINANCIAL USA INC.
with briefs and case notes. Did I really do
a good job on it?
Either by coincidence or some guid-
ing hand, the universe placed a blog post
into my feed reader that evening about
questions to ask yourself if you’re look-
ing for your dream job. I gave the article
the side-eye (how did it know I was un-
fulfilled at work?) and almost went right
past it. The questions, as it turns out, are
fairly simple: What did you enjoy writ-
ing papers about in school? What do you
find yourself talking about frequently,
reading books about, and what gets you
fired up? The answers to a lot of those
questions, for me, was (and still are)
financial crimes, victim advocacy and
consumer fraud prevention. The stars
were starting to line up, and I had a lot of
thinking to do.
In the following weeks, I had a se-
ries of conversations with that fraud in-
vestigator about how she got where she
is. I couldn’t get enough. We discussed
FRAUD-MAGAZINE.COM
what type of person does well in the role.
And I wanted to hear all her stories.
I kept rolling it around in my brain.
How fascinating it all sounded! This
fraud investigator had a much cooler
job than almost anyone else I knew. She
agreed with me that it was very cool and
continued to say how much she enjoyed
her work.
I was familiar with the concept of
“ikigai,” the Japanese notion of being
truly fulfilled and how one’s work relates
to their purpose. This investigator
seemed to be camping out in that sweet
spot covering all the key points: what
the world needs, what you love doing,
what you’re good at and what you can be
paid for.
Boarding the CFE train
I took the investigator’s suggestion of
considering the ACFE as a resource to
learn more. The more I investigated
the CFE credential and credentialing
process, the better it sounded. I had a
couple of advanced certifications from
the National Association of Legal As-
sistants; one more should be a piece
of cake. Spoiler alert: It’s not a piece of
cake.
Discussions with my husband and
my family highlighted how fortunate I
am to be surrounded by people who be-
lieve in me. At this point, I should men-
tion, my husband was in a submarine
in the middle of the Pacific Ocean with
near-zero contact as I was going through
this existential crisis — but no biggie.
What I did get from him boiled
down to “Sounds awesome, you’d be
great — go for it!” That was all I needed
to hear to know that he was behind me
100%. I leaned on my parents — who
were five time zones away — to talk
about study guides, work stress and
whether I’d even be any good at it. I
leaned on my friends who understood I
needed dedicated time to study and of-
fered encouragement at every turn.
I purchased a couple of used text-
books by Dr. Joseph T. Wells, CFE, CPA,
founder and Chairman of the ACFE,
signed up for the CFE Exam Prep Course
and got to work.
Dedicating 15 hours per week,
spread out in evenings and lunch breaks,
I was able to get through the course and
practice tests in about three months.
I surprised myself when I saw my high
scores and felt so good about my deci-
sion. I knew that I was on the right track
when I woke up from dreaming about the
case studies I read and wanted to go back
to sleep to find out how the stories ended.
Educating service members
I wish I could say I changed my career
path immediately. I remained in the job
I had for another few months, while
working at home on victim advocacy
and consumer fraud prevention articles
and presentations. (My goal was, and
still is, to hold workshops in my com-
munity on red flags of fraud, how to
spot scams and what to do if you’re a
victim of fraud. I have since hosted these
events, and they are every bit as fulfill-
ing as I’d hoped for.)
An opportunity presented itself
when I approached the military base’s
Military & Family Support Center (also
called Fleet & Family Services) to offer
my time as a volunteer to talk about per-
sonal finance and fraud prevention with
service members and their families.
While they didn’t have any volun-
teer opportunities at that time, they
did have a position open to be facilitate
similar workshops and classes. The
coordinator I spoke with encouraged me
to apply as a way to work toward being
a personal finance educator. I thought
that was a wonderful idea, but I didn’t
know how to teach stress management
and work-life balance. I was struggling
with these myself. Well, I got over that
once she said service members would
appreciate my perspective and probably
learn a lot from me. I applied and started
working more toward my goal on this
strange and meandering path toward
ikigai.
At the support center, I was pre-
sented with opportunities to make a real
impact on my community. I worked with
my colleagues to create additional class-
es on entrepreneurship, to incorporate
consumer fraud and identity theft pre-
vention into existing personal finance
classes, and host events I otherwise
would’ve never dreamed of teaching.
This was well outside my comfort zone,
and I loved it. I learned so much about
adult education, presentation skills and
workshop facilitation that I carry with
me every day through my current role.
A move and a fulfilling job
The time came to leave the support
center. We were moving back to the East
Coast for my husband’s next duty station
in South Carolina. I took about six weeks
off to work on some light renovations to
our new home and to get settled in, but
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
I started getting that itchy feeling that I
needed to get back to work.
I started looking online and after a
few days of hunting, a job posting nearly
jumped off the screen at me: fraud
investigations supervisor for a regional
bank. This was it. What a great position.
I would love to do something like that! I
hadn’t yet managed a team, though I had
a feeling I’d enjoy it. I took a deep breath
and applied.
Fraud investigations management
checks all the ikigai boxes for me: mis-
sion, passion, vocation and profession.
Or, what the world needs, what you love
doing, what you are good at and what
you can be paid for. The world needs
dedicated anti-fraud professionals fight-
ing the good fight. I love being a victim
advocate and helping those who other-
wise can’t use the system to fight these
battles. I found that in the legal field,
and I’ve continued to find that in fraud
investigations and fraud prevention.
I keep current on fraud trends, and I
have a knack for spotting red flags. As a
member of the ACFE, I’m able to attend
conferences to meet and learn from
others from around the world. While
volunteering to do this is incredibly
rewarding, the fact that we get paid to do
it is icing on the cake.
Today, I lead a team of diverse and
dedicated fraud investigators. Our cases
are fascinating and complex. We help
customers who are victims of all types of
financial crimes: check fraud, wire fraud
scams, business email compromises,
identity theft and the current spate of
unemployment benefit and SBA loan
fraud. I find ikigai with each new chal-
lenge we face.
CONTINUED ON PAGE 73
FRAUD MAGAZINE 63
 TAKING BACK THE ID Identity theft prevention analysis

COVID-19 and utility

bill scams
The pandemic is bad enough, but scammers are out there waiting to steal your
money and identity via COVID-19 fraud. Here also is the newest utility bill scam.

R obert Smith was worried about

his health. He was exhibiting
COVID-19 symptoms, such as a
fever and cough. He saw an ad for a com-
pany that claimed he could come in for a
free test. However, when he arrived, the
company ran a battery of tests he didn’t
need, including an MRI and complete
blood count test. It turns out that the
company then billed Medicair for all the
tests and pocketed the extra cash.
This fictional case is just like ones
that reporters Monica Williams and Joe
Duce of an ABC affiliate in Phoenix, Ari-
zona, reported on its website (“Charges
announced in 3 COVID-19 related fraud
cases in Arizona,” tinyurl.com/y3rv-
abdp) on May 27, 2020.

Clinical trial COVID-19 scam

The U.S. federal government has in-
vested billions of dollars in companies to
produce a vaccine to prevent individuals
from contracting COVID-19. As their
research studies move forward, the com-
panies have enlisted individuals to take
part in trials to determine the effective-
ness of their products. According to an tinyurl.com/y2wunvyh) on the Federal produced fake websites and promotional
Oct. 23, 2020, article (“COVID-19 clinical Trade Commission’s (FTC) website, the materials to lure volunteers into what
trial: real or fake? Learn how to tell the problem is that fraudsters have taken appears to be valid COVID-19 vaccine
difference,” by Jim Kreidler, advantage of the situation and have trials.

64 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

 Some individuals have a natural
inclination to help others in situations
like this, not knowing that they might
end up being conned out of their money
and/or personal identifiable information
(PII). According to Kreidler, “They might
promise you a doctor’s care and more
than $1,000 in payment ... but as soon as
they try to charge you for access, or ask
for your Social Security, bank account or
credit card number, your Spidey sense
should start tingling, because, unfortu-
nately, some of these so-called ‘research
studies’ are fake.”
Fraudsters commonly take advan-
tage of a national and international cri-
sis and develop related scams according-
ly to rob individuals. This clinical trial
scam is just another prime example.
The FTC offers this advice if you’re
considering to be a volunteer in a
clinical COVID-19 trial or some other
research study:
• Don’t pay to participate. Real clinical
trials will never ask you to pay them.
• Search the name of the clinical trial
and the words “scam,” “review,” or
“complaint” online to make sure the
trial is real.
• Legitimate clinical trials must screen
participants for COVID-19 trials, so
they might ask for your name, contact
information, age, gender, race, eth-
nicity or various pre-existing condi-
tions (associated with higher risk of
a COVID-19-related mortality). But
they never ask you to give your Social
Security number (SSN).
• Never share financial information
(like your bank account or routing
number). Most trials will offer to pay
people to participate in the trial, but
you can ask to be paid by check rather
than direct deposit. Beware if they
offer more than $2,500, about the
maximum trials pay for Phase III.
COLUMNIST
ROBERT
HOLTFRETER, PH.D.,
CFE
ACFE ADVISORY COUNCIL
AND EDITORIAL ADVISORY
COMMITTEE
• The National Institutes of Health
(NIH) and the National Library of
Medicine (NLM) maintain ClinicalTri-
als.Gov, a free searchable database of
clinical studies on a wide range of dis-
eases. You can also use the database to
get more information about studies,
including whether they are recruit-
ing participants, and their contact
information.
• If you’re interested in volunteering
for a COVID-19 trial, you can sign up
at the COVID-19 Prevention Network
(coronaviruspreventionnetwork.
org), a site run by the NIH’s National
Institute of Allergy and Infectious
Diseases.
If you encounter a trial that asks for
money to participate or requests your PII
such as your SSN or bank account num-
ber, inform the FTC immediately. You
should also share your experience with
your local media outlets and file a com-
plaint with your attorney general regard-
ing consumer issues, frauds and scams.
You can find your state attorney general’s
office at consumerresources.org.
Utility bill refund scam
Have you ever received a telephone call
that mentioned that you overpaid your
utility bill and that you qualify for a
refund and discount? A lot of individu-
als are receiving them in this new scam
that’s robbing them of their money and
PII. Lisa Lake, a consumer education
specialist at the FTC, reported on this
scam on Oct. 23, 2020 (“Overpaid your
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
utility bill? That’s probably a scam,”
tinyurl.com/y6z88enr). The call says all
you need to do is press a number on your
phone to get the refund and discount.
But you need to stop and think: Do
utility companies normally do this? No,
they don’t! If you overpay a utility bill,
they’ll normally credit your account.
Also, utility companies usually don’t
give discounts when you overpay a bill.
The FTC offers the following advice
if you receive one of these phone calls:
• Hang up immediately. Don’t press
any numbers or respond to any
instructions.
• Never give the caller your SSN, ac-
count details or anything else. It takes
very little information for scammers
to rob you.
• Call your utility company, using the
number on your bill, and tell them
about the call.
• If you want to consider using a third-
party utility company, check with the
utility regulatory agency in your state
(tinyurl.com/y5zg6gde) to understand
your rights and how these companies
are supposed to work.
• Tell the FTC at ftc.gov/complaint.
COVID-19 government
imposter scams
Since the advent of COVID-19 in early
2020, fraudsters have been actively
developing numerous scams to steal
money and PII from individuals and
businesses. Their scams have addressed
such issues as stimulus payments and
“cures” and “treatments” for COVID-19.
Of course, they have an active audience
because everyone is looking for a magic
bullet from a government agency to ad-
dress the problem.
Businesses have been promot-
ing the government stimulus checks
to put more money in the pockets of
FRAUD MAGAZINE 65
 TAKING BACK THE ID
the NEWEST SCAMS and how to stay safe
CLINICAL TRIAL SCAM
• Don’t pay to participate.
• Do search the name of the clinical
trial and the words “scam,” “review,”
or “complaint” online.
• Don’t give your Social Security
number.
• Don’t share financial information
and beware if they offer more than
$2,500.
• Do check the National Institutes of
Health and the National Library of
Medicine. They maintain ClinicalTri-
als.Gov databases.
• Do sign up at the COVID-19 Preven-
tion Network (coronaviruspreven-
tionnetwork.org), if participating in
a trial.
individuals to help the economy and
keep people working. But individuals
and businesses need to be vigilant to
avoid being scammed because there
are a lot of imposters in the shadows
waiting to pounce on uninformed and
impulsive victims. They might get in
touch by phone, email, postal mail, text
or social media. So, beware!
The Consumer Financial Protection
Bureau provides this advice to avoid
being scammed out of your money and
PII from government imposter scams
(tinyurl.com/y42x3djf):
• Know that the government will never
call, text or contact you on social
media saying you owe money or offer
help getting your Economic Impact
Payment (EIP) faster. If you receive
66 FRAUD MAGAZINE JANUARY/FEBRUARY 2021
Identity theft prevention analysis
Utility Bill Refund Scam
• Do hang up immediately.
• Don’t give the caller your SSN, ac-
count details or anything else.
• Do call your utility company, using
the number on your bill, and tell them
about the call.
• Do consider using a third-party utility
company,
• Do tell the FTC at ftc.gov/complaint.
a message from someone claiming
to be from a government agency
through social media, it’s a scam.
Report it to the FTC at ftc.gov/com-
plaint. If you’re eligible and haven’t
yet gotten your EIP, visit IRS.gov for
information.
• Visit government websites directly for
trustworthy information. Don’t click
on links in an email or text message.
(You never should anyway!) Instead,
open a new window and search for
the name of the government agency.
Visit coronavirus.gov for continually
updated pandemic information.
• Say “no” to anyone claiming to be
from a government agency asking
for cash, gift cards, wire transfer,
cryptocurrency or PII, whether they
FRAUD-MAGAZINE.COM
COVID-19 Government
Imposters Scam
• Do be aware that the government
will never call, text or contact you on
social media saying you owe money.
• Do visit government websites directly
for trustworthy information.
• Don’t click on links in an email or text
message.
• Do say “no” to anyone claiming to be
from a government agency asking for
cash, gift cards, wire transfer, crypto-
currency or PII.
contact you by phone, text, email or
even showing up at your door. Don’t
share any of your PII with them.
On the same website, the Consumer
Financial Protection Bureau also warns
individuals of the following more com-
mon COVID-19 scams:
• Vaccine, cure, air filter systems and
testing scams. Of course, a cure or
vaccine doesn’t exist for this virus
yet. If you receive any type of com-
munication via phone call, email, text
message or letter with claims to sell
you any of these products, it’s a scam.
• Fake coronavirus-related charity
scams. Beware of any telephone call
where the caller asks you to make a
donation to a COVID-19 charity or if
you’re contacted with a “follow-up”
 call regarding a donation pledge that
you don’t remember. If you feel that
you’re financially capable of contrib-
uting to a charity, then you make the
call to them.
• “Person in need” scams. This is a
coronavirus version of the famous
grandparents scam. You get a phone
call supposedly from a relative or
friend who claims to be sick, stranded
in another state or foreign country or
otherwise in some sort of trouble, and
they ask you to send cash or gift cards
ASAP without telling anyone. You
should hang up, collect your thoughts
and then call the parents of the rela-
tive or friend “in trouble.”
• Scams targeting Social Security ben-
efits. A caller tells you that your Social
Security benefits have been suspend-
ed or decreased due to COVID-19, and
you need to provide PII or pay by gift
card, wire transfer, internet currency
or mail cash to maintain benefit pay-
ments. However, the Social Security
Administration (SSA) won’t suspend
or decrease your payments. Report
the scam immediately to the SSA
inspector general at oig.ssa.gov.
Spread the word
to help others
Include these important scams and
important information to protect your
online identity in your outreach pro-
grams and with your family, friends,
and business associates. As part of my
outreach program, please contact me if
you have any questions or identity theft
or cyber-related issues that you would
like me to research and possibly include
in future columns or as feature articles. I
don’t have all the answers, but I’ll do my
best to help. I might not get back to you
immediately, but I will reply. Stay tuned!
■ FM
Robert E. Holtfreter, Ph.D., CFE, is
a distinguished professor of account-
ing and research at a university in the
Pacific Northwest. He’s a member of
the Accounting Council for the Gerson
Lehrman Group, a research consulting
organization, and is a member of the
White-Collar Crime Research Consor-
tium Advisory Council. He’s also on the
ACFE’s Advisory Council and the Edito-
rial Advisory Committee. Holtfreter was
the recipient of the Hubbard Award for
the best Fraud Magazine feature article
in 2016. Contact him at doctorh007@
gmail.com.

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 I’M A CFE
Alan E. Small, CFE
Assistant Director,
State of Maryland Office of
Internal Audit and Compliance
Management at
Morgan State University

Alan Small, CFE, first became

acquainted with fraud investiga-
tions in 1973 as a member of
the Baltimore (Maryland) Police
Department. His first assign-
ment was with the criminal
investigation division where
he reviewed and followed the
assignments of experienced
detectives engaged in the in-
vestigation of high-profile cases,
which included fraud. During
the next 48 years, he worked
in areas that required his at-
tention for either awareness
or investigation of fraud. Small
now applies his diverse skills to
preventing and deterring fraud
at Morgan State University
in Baltimore.
Interview by Dick Carozza, CFE
Photo by Mathew M. Karmel
I was born in an outlying suburb
of Baltimore, Maryland, during
the 1950s. I spent eight summers
on Kent Island at our family summer
residence on the Chesapeake Bay.
When I was growing up, some
of my favorite activities included
playing on the Kent Island Lions
baseball club plus fishing, crabbing
and boating on the Chesapeake
Bay. I once hit three home runs
in a Lions game! In Baltimore, my
favorite activities included playing
recreational soccer and baseball,
and running varsity track at Cardinal
Gibbons High School.
During my high school years, I
volunteered at a local hospital, so
I considered working in the health-
care profession. But I found myself
personally engaged with police
officers who’d come to the hospital
after a car accident or on investi-
gations. So, I set my sights on law
enforcement.
I graduated from the University
of Maryland with a bachelor’s in
business management (cum laude).
I obtained my certificate in account-
ing, which required 36 credit hours,
and allowed me to obtain the
Certified Internal Auditor credential
in 1985 while still engaged in law
enforcement. During this time, I
was a police agent in the Baltimore
Police Department assigned to the
fiscal division where I worked with
command staff throughout the
agency investigating and resolving
fiscal matters.
I realized I had business acumen,
so I began work on an MBA in
finance from Johns Hopkins Uni-
versity with a focus on accounting,
internal auditing and fraud inves-
tigation. I also realized I needed
experience in various fields of busi-
ness to pursue my career objectives
in law enforcement areas.
My work in the State of Mary-
land Office of Internal Audit and
Compliance Management at
Morgan State University includes,
among other duties, conducting

68 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM


My career advice is to talk a little and
listen a lot. And measure your evidence
twice, but record it only once.
internal audits and reviews; assign-
ing organizational and functional
activities to ensure that various
control objectives are met; identify-
ing areas of fraud, waste and abuse;
developing a risk-based methodol-
ogy to identify and select appropri-
ate university activities for audit;
preparing audit plans; and manag-
ing all misconduct, fraud, waste and
abuse investigations, and training
programs.
Throughout my career I have had
the opportunity to be integrated
and employed into many indus-
tries. I attribute the success of my
investigative skills that I learned
along the way to an enriched ability
to use my interviewing and probing
skills.
At one of my jobs, the comptrol-
ler assigned me to a furniture
retail operation to determine
how the business operated. The
comptroller believed expenses
were higher than what an operation
of that size should be experiencing.
After several months, I did indeed
notice that furniture repair expenses
were inconsistent with what a busi-
ness like this should have.
When I examined the invoices,
I noticed that within a short period
new vendors were added to the
accounts payable journal that the
purchasing department hadn’t ap-
proved. I discovered the vendors,
which had post office box numbers
as mailing addresses, were making
thousands of dollars in furniture
repairs.
I determined that company
checks were being authorized in
the check ledger with what ap-
peared to be authorized signature
authority. I determined that the
signatures on the canceled checks
didn’t match the authorized sig-
nature, although there was a very
close resemblance. The accounts
payable manager admitted to forg-
ing signatures on the checks to the
unauthorized vendors and setting
up the post office boxes. He would
receive the checks and place them
in his personal bank accounts. Sub-
sequently, the company fired the
employee and prosecuted him.
The top fraud examination les-
son I have learned is to challenge
responses to answered inquiries.
Learn how to ask one question five
ways to verify the creditability of the
information you are seeking.
I first heard of the ACFE through
other law-enforcement peers.
Learning that the FBI acknowl-
edged the CFE as a professional
credential for recruiting encour-
aged me to earn it.
The CFE credential has benefit-
ted my career by adding profes-
sional recognition to the authority
I have been given to perform my
work. A substantial amount of work-
ing knowledge of the profession
FRAUD-MAGAZINE.COM JANUARY/FEBRUARY 2021
is required to earn the credential.
Applicants can only pass the CFE
Exam by intensely studying the
fraud examination body of knowl-
edge for hundreds of hours. The
ACFE then requires extensive hours
of continuing education to maintain
your credential. Combined with the
experience from applying the prin-
ciples and practices of the profes-
sion, you’re ultimately qualified to
work in the field.
Organizations that truly seek to
protect the assets of their opera-
tions often rely on professionals
with the CFE credential to assist
them in preventing and detecting
fraud.
My career advice is to talk a little
and listen a lot. And measure your
evidence twice but record it only
once.
My greatest personal achieve-
ment is having raised, with a very
dedicated and loving wife, children
who have achieved great things
personally and professionally. My
most cherished business-related
achievement is obtaining a recog-
nized and respected worthy reputa-
tion among my peers.
I love to attend Ravens and Orioles
games with my grandchildren and
their dads. I collect law enforce-
ment agency coins with my peers,
and volunteer in civic and religious
organizations.
I am the most-recent past president,
2017-2019, of the ACFE Maryland
Chapter and was a member of the
ACFE Advisory Board. n FM
Dick Carozza, CFE, is editor-in-chief of
Fraud Magazine. Contact him at
dcarozza@ACFE.com.
FRAUD MAGAZINE 69
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WORKBOOK SELF-STUDY Anti-fraud training in digital or print editions

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Fighting Fraud in the
Government
Government entities fall victim
to every conceivable kind of
scheme, and everyone pays,
directly or indirectly. This course
focuses on strategies to prevent,
CPE
detect and investigate govern-
20 ment fraud schemes.
Finding the Truth: Effective
Techniques for Interview
and Communication
In this course, you will gain insight to
In this course, you will discover the
skills necessary to become a better
communicator and a more effective
CPE
16 interviewer.
Making Crime Pay: How to
Locate Hidden Assets
In this course, you will learn how to
locate hidden assets and how to
identify and trace hidden payments
and sources of income. You will
hear from fraudsters about how
CPE
to hide assets and from anti-fraud
20 experts on how to find them.

$ 199. 20 $ 183.20 $ 199.20

$299 Non-Members
$249 Non-Members $249 Non-Members

ONLINE SELF-STUDY Get immediate, 24/7 access to premier anti-fraud training

CPE CPE CPE

2 2 4

NEW! BEST SELLER!

Fraud in Higher Education
In this course, you will learn how higher educa-
tion institutions in the United States operate, how
those operations can be manipulated by people
to defraud those institutions and how technology
Social Engineering
In this course, you will learn about how and why
social engineering scams work, from the psycho-
logical aspects to the nuts and bolts of common
methods and schemes.
10 Infamous Fraud Cases of the
21st Century
In this self-study course, learn from 10 infamous fraud
cases to better protect your clients, employers and
the general public from similar schemes.

71.20 /$89 Non-Members

affects fraud in higher education.
$
$ 71. 20 /$89 Non-Members $ 135.20 /$169 Non-Members

NANO LEARNING 10-minute explorations of anti-fraud topics

CPE CPE CPE

0.2 0.2 0.2

NEW!
Health Care Provider Fraud Behavioral and Lifestyle Red Flags COVID-19 and Consumer Fraud
In this course, you will learn about common prac- of a Fraudster Schemes
tices used by health care providers that cause In this course, you will discover behaviors that This course will address some of the COVID-19
unnecessary costs to health care programs or individuals who engage in fraudulent activity often consumer fraud schemes that have been report-
patients. exhibit that can serve as red flags that something ed and provide you with guidance to help pre-
could be amiss and warrants investigation. vent yourself and others from becoming victims.
$ 8.80 /$11 Non-Members 8.80 /$11 Non-Members
$ $ 8.80 /$11 Non-Members
= This course fulfills the annual ethics CPE requirement for CFEs. For more information on ACFE self-study courses including refund and ordering policies,
fields of study, learning objectives and course levels visit ACFE.com/selfstudy.
 CPE QUIZ No. 154 (January/February 2021, Vol. 36, No. 1)

The Fraud Magazine CPE quizzes are now available
online only. Please visit ACFE.com/FMQuiz or view
the CPE Quiz form on the next page for more
information on how to earn your 10 CPE.
1. According to the article, “Developing the entire fraud
picture”:
A. All fraud produces a loss.
B. Fraud can absolutely occur without a loss of money.
C. The level of risk for fraud is based on three factors: partial
exposure, fraud amount and known loss.
D. If someone entered a fraudulent transaction into the system
for $500 and then fraudulently reversed that entry, fraud did
not occur.
5. According to the article, “5 most scandalous fraud cases of
2020”:
A. Wirecard hasn’t confessed to the disappearance of more
than $2 billion from its assets.
B. The ICIJ’s reporting involved analyzing more than 3,500 sus-
picious activity reports.
C. Stolen PII has also been the catalyst for frauds that originate
through contact tracing text message scams.
D. The U.S. Department of Justice arrested three Airbus C-suite
executives in January 2020.
6. According to the article, “5 most scandalous fraud cases of
2020,” Luckin Coffee Inc. ceased operations after an internal
audit revealed allegations of fabricated sales figures.
A. True
B. False.

2. According to the article, “Developing the entire fraud

picture”: 7. According to the article, “Keys to the kingdom: oilfield
fraud,” Jerry:
A. Fraud can’t occur without a readily identifiable amount.
A. Bribed subcontractors.
B. “Known loss” is the known amount of fraud based on evi-
dence gathered during the course of the investigation. B. Submitted fraudulent billings.
C. “Fraud amount” is the total amount lost minus expenses, C. Committed tax fraud.
depreciation and fees. D. Stole from company coffers.
D. “Total restitution” only includes the costs of the investigation
and litigation.
8. According to the court trial in the article, “Keys to the
kingdom: oilfield fraud,” the judge ordered Jerry to serve 10
3. According to the article, “Remote but engaged,” Leah Lane, years and to pay back around $2 million in restitution.
CFE, said: A. True
A. “Data collection should run in a near-normal state since B. False
enterprise collections, such as email, are typically done
remotely.”
B. “Moreover, interviewers in private face-to-face settings have
the luxury of time to let relationships organically develop.”
C. “Server eDiscovery software solutions further enable for the
digital production,review, and tagging of documents.”
D. “An in-country evidence custodian can help when evidence
is collected abroad while you are working remotely in an-
other part of the world.”

4. According to the article, “Remote but engaged,” Anthony

Campanelli said, “Cross-border investigations already pose
several distinct considerations, including language barriers,
cultural differences and resource limitations.”
A. True
B. False.

DO NOT SUBMIT THIS FORM. Log in to your My Transactions page after purchasing the Fraud Magazine Quiz
! set to submit your answers or record your answers on the answer sheet and submit online when you are ready.

72 FRAUD MAGAZINE JANUARY/FEBRUARY 2021 FRAUD-MAGAZINE.COM

 CPE QUIZ

9. According to the article, “A pillar of

anti-fraud education says farewell,” Dick
Carozza said:
The Fraud Magazine CPE Quiz has moved to an online self-
A. “Fraud examiners need practical info but
also encouragement.” study format, making it easier for CFEs to earn 10 ACFE
B. “I’ve learned so much from ACFE mem- (non-NASBA) CPE. CFEs can earn 10 CPE by taking quizzes
bers.” online after reading featured articles in Fraud Magazine.
C. “A magazine can hold only a small
percentage of the anti-fraud body of
knowledge.”
D. “The most gratifying part of my job is Visit ACFE.com/FMQuiz and follow the steps below:
interviewing whistleblowers through the
years.”
1. Select the Online Fraud Magazine CPE Quizzes by year
10. According to the article, “A pillar of from the dropdown*.
anti-fraud education says farewell,” Dick
Carozza said, “The ACFE has been able to
give CFEs not just a platform, but the bona 2. Click the “Add to Cart” button and complete the
fides, the professional support and reputa- checkout process.
tion that they didn’t have before.”
A. True 3. Read featured articles in Fraud Magazine that corre-
B. False spond to the year of the quiz set you purchased.

4. Access your quiz set by logging into your ACFE.com

account, clicking on the “My Transactions” tab and
CONTINUED FROM PAGE 63 clicking on the quiz set you purchased.

I don’t know what the rest of my jour- 5. Pass 5 of 6 quizzes with a score of 70% or higher and
ney will include, but I’m approaching it with receive your CPE certificate instantly via email.
personal and community-focused fulfillment
in mind.
Remembering back to the first conversa-
tion I had with a fraud investigator at the bank
For more information, please review the “CPE Info”
in Hawaii, I find I enjoy this reflection on my and “FAQs” tabs or contact a representative:
path. We never know what impact we have
MemberServices@ACFE.com
on those around us, so I encourage you to talk
to others about what we do and why we do it. (800) 245-3321 / +1 (512) 478-9000
Find your ikigai and share it widely. n FM Secure online chat service

Tracy G. Swaim, CFE, is enterprise fraud

manager at Heartland Financial USA Inc. Con-
tact her at tracygswaim@gmail.com. *Quizzes will be added to the current year’s set as issues of Fraud Magazine are published.
CPE can only be obtained from the current year’s quizzes after the fifth quiz is made available
in September.

Please Note: The Fraud Magazine CPE Service CPE credits apply only to the CFE status and
not to any other professional designations. Fraud Magazine CPE is not registered with the
National Association of State Board of Accountancy (NASBA).

The ACFE collects and stores your personal data in the U.S. to provide member services and
fulfill transactions requested by you. For a full explanation of your rights regarding how we
store and use your data, visit ACFE.com/privacy-policy.aspx.
Calendar of Virtual Events
ADVANCE YOUR CAREER WITH
VIRTUAL TRAINING FROM THE GLOBAL
LEADER IN ANTI-FRAUD EDUCATION.
ACFE.COM/TRAINING
DECEMBER 2020
DEC CONVERSATION WITH A
17 FRAUDSTER: JAMES BRANDOLINO
Online Webinar
December 17, 2020 | CPE: 2
JANUARY 2021
JAN BRIBERY AND CORRUPTION
6 Virtual Seminar
January 6-7, 2021 | CPE: 16
JAN CONDUCTING INTERNAL
19 INVESTIGATIONS
Virtual Seminar
January 19-21, 2021 | CPE: 16
JAN VIRTUAL CFE EXAM REVIEW
25 COURSE
Virtual Seminar
January 25-28, 2021
For information or to register, visit ACFE.com/training
Calendar subject to change.
FEBRUARY 2021 MAR VIRTUAL CFE EXAM REVIEW
FEB DETECTING FRAUD WITH 22 COURSE
Virtual Seminar
8 DATA ANALYTICS WORKSHOP
Virtual Workshop March 22-25, 2021
February 8-11, 2021 | CPE: 12
MAR MONEY LAUNDERING
2021 SCHEMES WORKSHOP
FEB DEVELOPING AN INTEGRATED
23 ANTI-FRAUD, COMPLIANCE Virtual Workshop
AND ETHICS PROGRAM March 2021
Virtual Seminar
February 23-24, 2021 | CPE: 16
MARCH 2021
MAR 2021 ACFE WOMEN’S SUMMIT
4 Virtual Conference
March 4, 2021 | CPE: 7
MAR 2021 ACFE FRAUD CONFERENCE
10 EUROPE
Virtual Conference
March 10-12, 2021 | CPE: Up to 20
Which Online Event is
the Best Fit For You?
It is our top priority to keep you up-to-date on the latest in fraud by providing cutting-edge, relevant training.
We also understand that the in-person benefit of networking with other attendees is an important element
to staying up-to-date on the latest in anti-fraud trends and best practices. We are adding new online events
every day keeping these goals in mind.

We now offer a wide selection of different types of online events. Below you’ll find a guide for choosing
which type of online event best suits your training needs.

Online Webinar Virtual Seminar

Online webinars are typically 100 minutes and offer up to
2 CPE. We offer a wide range of topics ranging from lead-
ership skills to data analytics. This is the perfect option if
you are looking for a shorter, more specialized training.
We are offering several different types of virtual seminars
ranging in length and number of CPE credits. Virtual
seminars vary in length from 4-16 hours. In addition, many
of the in-person seminars we typically offer have been
converted into a virtual format. We are adding new virtual
seminars every day, so keep an eye on the calendar for
updates. This is the perfect choice if you are looking for
in-depth training on a specific topic and needing to earn
more CPE.

Virtual Seminar Workshop Virtual Conference

The virtual seminar workshops are longer and offer
more CPE. Most importantly, these workshops are very
interactive. You will interact with other attendees and
the instructor in these workshops. This is the perfect
choice if you are looking to receive the benefits of net-
working with other attendees and the instructor while
learning in a hands-on environment.
Virtual conferences are a great way to get the many
benefits of attending a live conference from the com-
forts of your own home. You should attend the virtual
conferences for many sessions which offer a large
range of topics, often specific to the region in which the
conference is held. Many conferences offer ways to get
the added benefit of virtual networking, more CPE and
on-demand session recordings after the conference.

Free Members-Only Webinar Virtual CFE Exam Review Course

Free webinars are only available for ACFE members.
This is a benefit for ACFE members to receive CPE, free
of charge. These are 50-minute webinars that cover a
specialized topic. This is a great option for an on-the-go
ACFE member who wants to attend a webinar and learn
the latest, without having to cut into your work schedule
too much.
Virtual CFE Exam Review Courses are a great opportu-
nity to get the many benefits of attending the CFE Exam
Review Course virtually. This live course allows you to ask
the instructors questions, and interact directly with other
attendees. This is a great choice for you if you’re looking
to earn your CFE credential and need hands-on training to
help you pass the exam on your first try.
 172.31.255.188

474-99-3743 673-99-6204

2440 Bristow Ave

John S.
(524) 361-8438
jsmith22@yahoo.com

pei_zhang@burnstech.com

(324) 641-9142

625 Jamestown St 192.168.255.255

(645) 633-2945 1749 128th Ave

Ron J.

2894 Victoria Dr

10.255.255.255
ron.johnson@bmail2.com