Rather than just reviewing the past, let’s see how the ACFE pioneers have shaped the next generation and how young CFEs are poised to travel even further.
About the participants
As the ACFE begins celebrating its 25th anniversary, we thought it would be good to look to the future. So, we asked numerous senior CFEs in many different industries and fields to send us the names of young, promising CFEs in their 20s and 30s who are beginning to make a mark in the fraud examination profession. They supplied us with 41 prospects, and 27 responded to our questionnaire. We’ve distilled the answers into a two-part article; part 2 will be in the November/December issue.
We realize that these 27 individuals don’t accurately represent all young CFEs (though they do show some of the great diversity in the ACFE). Fraud Magazine will profile other young members from around the globe in future issues. However, their views might give you a picture of the face of the fraud examination profession in the next quarter century. (We believe we’ll be in good hands.)
When the ACFE began in 1988, many — if not most — of the first members were middle-aged men. They generally were well established in accounting, auditing and law enforcement positions, but they hungered for practical fraud examination education they couldn’t find elsewhere.
Today, a new CFE often is a 20- or 30-something. They might come to the ACFE with fraud examination knowledge from collegiate anti-fraud programs that didn’t exist in the ’80s. In fact, many of those first members — or even some of their professional descendants — have recruited young CFEs.
This second generation of fraud fighters (and it really has only been two generations since the ACFE established the profession) enters the ring with the advantages of learning from their predecessors who fought hard to incorporate fraud examination principles.
However, no one comes fully formed into the anti-fraud arena. Practitioners need years of experience and mentorship to gain fraud examiners’ intuition and savviness.
Let’s now hear from some young CFEs (14 in this issue and 13 in the November/December part 2 article) early in their careers as they discuss how they got into the field, their influences, memorable fraud cases, learning from the first generation, deterring fraud and other topics.
FIRST INTEREST IN FRAUD EXAMINATION PROFESSION
|Will Bader, CFE
Ryan J. Dobson, CFE, a senior associate with Ernst & Young, credits his first interest in fraud to working high school summers as a float teller for a local bank. “My first introduction to bank compliance and regulatory requirements for banking institutions was drilled in during a two-week boot camp detailing the ins and outs of money laundering, counterfeit money, the Bank Secrecy Act, customer identification and recordkeeping,” Dobson says. “Later that summer, one of the branches I was working at terminated a long-time employee for some mischievous behavior. The corporate investigators interviewed me and that’s how I became interested.”
Carla L. Hodge, CFE, director of internal controls at Prince Minerals Inc., also saw her first fraud in a summer job. She was 16 and was working at a McDonalds. “Customers would tell us they had previously paid a manager for food earlier that or on a different day,” Hodge says. “These customers would have large orders like 100 hamburgers and 100 fries. It really disturbed me that no one investigated.”
Later in her career as an auditor she saw a series of internal frauds in lending and payroll. She subsequently found that the fraudsters were well-known community members. “We went to church and attended civic functions with them. None of us had a clue,” Hodge says.
“When Enron hit I remember seeing people on the news crying because they had lost their life savings or their pension plans. After all that, I wanted to learn about fraud examination,” she says.
For Laura Beltran-Schmitz, CFE, CPA, CGFM, assurance manager at CliftonLarsonAllen, the interest has been closer. “My dad [Alfred Beltran-Romero, CFE] is in this line of work and has been my entire life,” she says. “He worked with the FBI when I was growing up, and I remember being absolutely captivated by his work stories. I love ‘talking shop’ with him now; it feels good to follow in his footsteps.” (Now there’s a literal example of the first generation passing on knowledge to the second.)
Will Bader, CFE, senior associate with Grant Thornton’s forensic, investigative and dispute services, can remember the moment he needed to become a fraud examiner. “While at the Federal Deposit Insurance Corporation, a report I had created showed how a contractor billed for 29 hours of work in a single day,” Bader says. “Anyone in the field knows that twinge of excitement the first time you find something that shouldn’t be there. I don’t think I had a choice after that.”
Caitlin Glass, CFE, CPA, forensic analyst with Forensic Strategic Solutions Inc., was well on her way to medical school after completing several biology classes. “Fortunately, I was required to take an accounting course during my sophomore year to satisfy the last of my core requisites,” Glass says. “This class was my first introduction to accounting and was what eventually led me to discovering the world of forensics and fraud examination.”
Glass said her father, who served as a reserve special agent with the Air Force Office of Special Investigations, inspired her in her career.
Rie Araki, CFE, CIA, internal auditor with MassMutual Life Insurance Co. in Tokyo, also experienced that thrill of the chase. “I first got interested in fraud examination when our internal audit department received an anonymous whistleblowing email,” she says. “I felt like a character in a detective story!”
Min Cai, CFE, CISM, CISA, manager of fraud investigation and Dispute Services for Ernst & Young in Melbourne, Victoria, Australia, was hooked early in childhood because “the computer forensic examiners on Hollywood movies looked very cool!”
The movies — or at least one particular movie — also strongly affected Chris Ekimoff, CFE, CPA, CGMA, MAFF, vice president with Duff & Phelps, LLC. “My original interest in fraud examination came from the 1987 crime film The ‘Untouchables,’ ” he says. “The movie depicts the investigation and eventual arrest of Al Capone and the role of accounting and tax evasion in his conviction. The movie’s emphasis on the accountant and IRS investigator caught my eye, as they worked to best the criminal with their minds instead of their guns.”
ACFE higher-education scholarships, awarded through the Ritchie-Jennings Memorial Scholarship Program, have helped many students pursue fraud examination as a course of study.
“Terry Unruh, accounting professor at Oral Roberts University, encouraged me to apply for the ACFE scholarship,” says Jeremy N. Baker, CFE, assistant inspector with the FBI. “Through being awarded the honor, I met Cam McFayden, CFE, of the Tulsa, Okla., ACFE chapter. Both encouraged me in academic and professional endeavors, and I eventually pursued the CFE credential because of their support for me and other students. They gave me opportunities to learn about fraud examination firsthand.”
FIRST AND SECOND GENERATIONS WORKING TOGETHER
Ekimoff sees his CFE contemporaries as a solidifying group in the fraud examination world. “Fraud has been on the minds of industry professionals for at least a decade, especially in light of major fraud schemes like Enron, Tyco, Adelphia and WorldCom,” he says. “Now that most professionals are more aware of the risks of fraud in their business, the role of this second generation may be to formalize and actualize plans to mitigate those risks.”
Brett A. Johnson, CFE, forensic accounting manager for Eide Bailly LLP, says because everything is paperless now “we are increasingly noticing a need for computer forensics in obtaining evidence.
“The fraud schemes themselves are very similar to what the first generation has taught us,” he says. “Now we have to learn how to apply our detection methods to the ever-evolving technological culture we live in. E-discovery, utilizing the Internet, social networks and new technology are all things young professionals are generally more familiar with than the first generation in how to apply these tools in fraud examinations.”
That is a familiar theme among many of the young CFEs: Because they grew up with high tech, computer forensics comes easily to them.
“I see my place as trying to continue to improve how fraud examinations are completed, primarily through a greater use of technology, and to pass on my passion for this as a career to those members of my team,” says Jim Carroll, CFE, CPA, manager – audit investigations for United States Steel Corporation. “The most important lesson learned from the first generation is to have intense focus and pay attention to the details because that’s where the answers are; the devil is in the details. I think the new generation brings a lot to the table in terms of our ability and willingness to utilize technology and stretch the abilities of available technology.”
Lindsay Harder Gill, CFE, director of forensic technology for Forensic Strategic Solutions Inc., says she “has learned from the first generation of fraud examiners that you cannot perform an examination in a vacuum. It takes a team of diversified skills and personalities.”
Bader says he has learned interviewing techniques from the first generation. “Also, the second generation of fraud examiners is benefiting from a strong library of professional resources and standardized practices to assist in the fraud examination process. These resources have only just begun to solidify and appear to be improving year over year. I look forward to seeing how professional fraud examination standards continue to evolve over the next 10 years.”
DETERRING FRAUD — NOT JUST DEALING WITH IT AFTER THE FACT
The CFEs have seen improvements in deterrence because businesses are more aware. Also, prevention saves money and keeps people out of jail.
“My role is primarily dealing with ways to deter and prevent fraud by determining areas of high risk,” says Kimberly Fleishmann, CFE, senior auditor, global audit services for Wal-Mart Inc. “Conducting fraud risk assessments aids us in concentrating our proactive efforts in high-risk areas before something occurs as opposed to afterwards. I see companies more intent on taking preventive steps because it makes good business sense.”
Ekimoff believes that the fraud examination profession has seen a “great paradigm shift” in fraud deterrence. “Although my practice serves most cases by consulting after allegations of fraud have been raised, more and more projects are developing involving proactive consulting regarding proper accounting procedures up front,” he says. “Companies are continually learning from others’ mistakes and asking after a fraud has been discovered, ‘How can you help us avoid this in the future?’ ”
When he first began his fraud examination career, Corey J. Dunbar, CFE, manager, fraud investigation and dispute services for Ernst & Young, says the vast majority of the work he engaged in was reactive. “An incident would occur, and we’d get the call to assess the magnitude of the incident and identify any additional areas for follow-up,” he says.
“Now, the exact opposite is true. I am still involved in reactive investigations; however, a large portion of my work focuses on helping clients develop fraud and compliance monitoring programs in a proactive manner,” he says.
“Through the use of forensic data analytics, we’ve been able isolate risk areas and specific patterns of activity before they grew into matters of significant concern. The number of organizations implementing data analytics into their programs is continually growing as many have proven their effectiveness in preventing and detecting fraud before it occurs on a large scale,” Dunbar says.
Bader says hundreds of tools are available to assist in deterring fraud, but organizations should also focus more on time-tested basics from the first generation, such as “tone at the top.”
“Setting the right ethical tone and educating your employees on policies and procedures will do more to deter fraud than any other internal control,” he says. “I worked an investigation centered on allegations of employees using related parties as vendors. Leadership had no idea it was going on and was completely caught off guard.
“During a series of staff interviews, it was clear that the problem was prevalent throughout the company, and employees didn’t see anything wrong with what they were doing,” Bader says.
“Halfway through the investigation, someone from the management team pulled out an employee code of conduct and pointed out that the employees are clearly prohibited from bringing in related parties to do business. Did any of the employees see this code of conduct? Did they receive any training? Did anyone from management ever take the time to discuss what was acceptable or not?
“I am much more likely to follow a policy if management 1) tells me there is a policy and 2) explains what the policy says and means. Companies need to implement ethics programs that educate their employees on the right thing to do, what will be tolerated and what won’t,” Bader says.
"You can't always count on an employee's common sense to dictate the best course of action."
Fraud, as all crimes, has jumped borders in the last 25 years. This generation has known that from the start. “The training and conferences of the ACFE provide me with vast opportunities to stay up to date with the global situation,” says Beltran-Schmitz.
“Last year, I flew to Bolivia to help with a litigation support case where fraud was alleged,” says Johnson. “I found out very quickly that fraud is everywhere, and it has no limits.”
“The Foreign Corrupt Practices Act is the perfect example that fraud is a borderless crime,” says Dunbar. “A significant portion of my recent work has been focused on our anti-bribery and corruption analytics offering. I have helped lead several large FCPA and U.K. Bribery Act assessments and investigations. Such efforts have included the design and implementation of predictive models as well as other forensic data mining methodologies.
“Recently, our practice assisted a Fortune 100 company in conducting a global review of bribery and corruption risks related to a multibillion-dollar acquisition. The assessment encompassed over 30 business units in disparate and decentralized countries,” Dunbar says.
“As an FBI agent and supervisory special agent, I have seen frauds large and small,” says Baker. “I have been involved in investigations in which sizeable companies and banks had millions of dollars embezzled, and I’ve also seen small business be crippled through the same. While the culprits are oftentimes employees, they also could be hackers in distant lands. A recent assignment in Eurasia emphasized this borderless nature, made possible through cyber techniques utilized by organized crime groups and individuals.”
“Check an international news website, and I’ll be surprised if there isn’t an article about fraud on the first page,” Bader says. “Someone found horsemeat in food in Great Britain, terrorists are laundering money through Iran and North Korea, Nigerian royalty asked your grandma to forward her bank information, and a former Italian prime minister recently defended the use of bribery as a necessity. Fraud is all around us, no matter where we are.”
IT AND THE FRAUD EXAMINER
Most fraud examiners — first or second generation — now have to use high-tech tools. Whether it’s digital document forensics, data mining, data visualization, mapping or case management, CFEs have to be tech savvy. But should they become quasi-IT experts, know enough so they can partner with the tech people or someplace in between?
“Unless fraud examiners work for large firms with dedicated IT staffs, fraud examiners need to be skilled in IT areas,” says Baker. “And, even those in large firms would be more effective with a high degree of competence in IT areas. The best IT decision I made in the last year was increasing my security of my network and computers.”
Ekimoff says he works to strengthen his working relationships with the tech pros. “The best IT decision I’ve made in the past year is to understand the strengths of the technology-versed professionals I work with and to help them understand mine,” he says. “By creating a two-way street related to work product creation and analysis, we can both rely on our skills and trust in those of the other to bring out strong conclusions from the data.”
Bader says that fraud examiners don’t have to become IT experts but they should be competent with computers and data. “What happens in a fraud investigation when you have to access accounting records? You talk to the IT guy,” he says. “The IT guy will mention ‘nested loops,’ ‘custodians’ and ‘structured or unstructured data.’ You may not need to know how to perform different IT functions, but you need to at least understand what the IT guy is talking about,” Bader says. “Learning about IT can help you more effectively communicate with the IT professionals that will be helping you during your investigations. This will lead to faster turnaround time and better analysis.
“Developing IT competencies will only help you uncover more fraud,” Bader says. “You may not need to review one million transactions or review a suspect’s email every day, but it will happen, and you need to be ready when it does.”
“Most investigation teams should include a tech expert who can help the investigation to focus in a direction that the less tech-savvy expert would think to examine,” Gill says. “The best IT decision I made last year was to partner with experts in network security and system audits.”
Araki agrees that each fraud examination team needs to have at least one IT expert. “And our parent company has a team within Internal Audit that has high expertise in data mining.”
WHAT'S NOT WORKING AND HOW TO FIX IT
The 2012 ACFE Report to the Nations shows that occupational fraud, waste and abuse is increasing despite greater emphasis on anti-fraud controls and legislation to combat fraud. The CFEs pondered this quandary.
“Fraud, waste and abuse may be increasing; however the growing demand by business stakeholders for corporate governance and improved internal control processes is also on the rise,” Glass says. “The public needs to be educated on what fraud looks like and encouraged to report it. The combination of increased regulation and stakeholder demand for a greater degree of due diligence and accountability will continue to drive organizations to improve their controls and processes to actively deter fraud.”
Gill believes the focus shouldn’t be on what’s not working. “The focus should be on how we can become more innovative and technologically advanced in our approach to investigations,” Gill says. “We must continue to educate and encourage proactive audit approaches for organizations.”
Araki believes that organizations’ fraud awareness is increasing, and employees are speaking out more when they find it. “However, some pertinent information may not always be reported in some cases because of pressure from supervisors. And the credibility of information that is reported may be low,” she says.
“Because of resource limitations, fraud examiners might be forced to ignore reported information. Therefore, those who report fraud may become discouraged because they think the company will overlook it. To fix this, a team could report the result of preliminary research to employees or information providers even if the cases were not found to be fraud,” Araki says.
Hodge believes that fraudsters often just aren’t held accountable. “Sometimes, organizations terminate them but don’t prosecute, or they’re not fired, and their penalties or fines are minimal,” she says. “I am sure that’s one reason why fraud is on the rise.”
Carroll believes that employees’ increased workloads make them feel they’re entitled to extra privileges. “Thus they either defraud the company to get what they want or spend the company’s money without regard to what’s best for it,” he says.
“Organizations need to make sure they are communicating the important issues and priorities and ensure that employees are rewarded for meeting them instead of just processing a predetermined number of transactions or getting the books closed,” Carroll says.
Fleischmann also believes that organizations place their employees in untenable positions. “There are more pressures to succeed with fewer resources while reducing expenses,” she says. “Items that should be at the forefront of organizations are placed on back burners until situations arise that require attention. Employees often are not aware or included in organization decisions, which leads to misunderstanding and anger.
“Openness and transparency about business decisions and desired outcomes give employees more ownership and a greater desire to be a help instead of a hindrance,” Fleischmann says.
Beltran-Schmitz says that fraud examiners can’t predict if a fraud would have occurred if controls weren’t in place, “so we can’t quantify savings from implementing sound internal controls. We need to continue to scare people with the realities of situations so they will realize they could easily become a statistic.”
ALL FOR ONE …
Fraud Magazine asked the young CFEs if they feel a greater esprit de corps among fraud examiners because of more emphasis on anti-fraud measures in the workplace.
“I think fraud examiners do feel a greater sense of pride because you’re not looked upon as being in as much of a negative role,” Carroll says. “People at all levels understand the value fraud examiners can bring to the table and how they can help in many aspects beyond just the investigation, such as: suggesting new or revised anti-fraud controls, identifying gaps in control structure or activities or providing fraud risk management advice.”
Bader agrees. “The Internet and sensational nature of news has made the public much more aware of and sensitive to fraud,” he says. “This coupled with the growth of the ACFE has stirred greater camaraderie among fraud examiners. The key to strengthening fraud examination as a profession will be focusing that energy into professional development, best practices, and increasing networking opportunities to share ideas.”
Baker says that he’s always felt camaraderie among CFEs. “However, in the last three years, I have sensed more people wanting to become involved with the organization, especially by attending conferences,” he says.
ADVICE FOR THOSE CONSIDERING A FRAUD EXAMINATION CAREER
Cai says would-be fraud examiners need passion but also patience. “You must not just do it, but do it right,” he says.
Glass advises to “seek out leaders in the industry and surround yourself with individuals who you can learn from and are willing to serve as mentors.”
Dobson says that those not yet in fraud examination positions should “take the initiative. Offer to sit in on calls and take notes, stay late to organize evidence or support binders and always seek feedback from those who task you with projects.
“Slow your desire to become an immediate subject matter expert,” he says. “This field of work changes with the ebbs and flows of the business world, and the more exposure you get the more informed you’ll be as you start focusing your technical skills.”
Fleischmann says prospective fraud examiners shouldn’t necessarily search for “fraud” jobs but instead become fraud subject matter experts in the jobs they currently have. “I have seen many people looking for jobs classified as anti-fraud positions, but the reality is that fraud fighters are needed in all types of positions and areas,” she says. “If they tune into only those positions with ‘fraud’ in the title, they limit their searches and restrict the experiences that they can gain by working in other areas.”
Johnson says it’s important to specialize. “You don’t have to try to master every aspect of fraud examination,” he says. “Find out what you like most about the profession, and you can become great at it. Computer forensics, economic damage calculations, forensic accounting, interviewing, etc. are all elements of the profession. It’s more valuable to be a master of one, than dabble in everything.”
Araki and many others suggest earning your CFE credential as soon as possible. Beltran-Schmitz says that her “auditing experience created a wonderful foundation for fraud examinations. I suggest anyone interested in this career to obtain a well-versed auditing background to develop their ‘testing’ skills.”
Bader doesn’t want to sugarcoat the profession. “Fraud examination isn’t something you can just pick up,” he says. “Successful examiners have spent years in the profession and have developed technical skills along with good intuition and instincts. Don’t expect to sit down on day one and begin unraveling a Ponzi scheme.” And the schedule is tough. “Last week, I told my wife I was done traveling for a current engagement. Today, I found out I am leaving the state — tomorrow.
“Also, after a few investigations, you will begin to see fraud everywhere,” Bader says. “Last week a friend told me he hadn’t taken a vacation in a year and a half. I asked if it was because he’s stealing from his company!”
However, he says, fraud examination jobs matter. “Whether you work in law enforcement or in the private sector, people are counting on you.
“You have a moral obligation to know what you are doing and to do it well,” Bader says. “The people you are working for have been stolen from, ripped off and betrayed. You don’t have the option of phoning it in or having an off day.”
Dick Carozza, CFE, is editor in chief of Fraud Magazine.
Young CFEs share some memorable case histories
Beware of confidential trips and special friends
“I worked on a Foreign Corrupt Practices Act case once for an industrial products company that turned into an internal corporate investigation of one of their CFOs. The work had our people conducting site visits and interviews with teams at various subsidiary businesses. Interviews of one office’s admin revealed a CFO who frequently took ‘confidential’ trips that he described to her as ‘important business development.’
“Further review of travel records and expense account detail led us to a group of unusual transactions, which had nothing to do with confidential business meetings. One particularly interesting transaction was traced back to a local car dealership and was used to fund a vehicle purchase for a ‘friend’ the CFO later admitted was a woman with whom he was having an affair.”
Ryan J. Dobson, CFE
Don’t ignore the ‘special accounts’
“I worked a civil case in Hawaii about a partnership dispute. During our examination of bank statements, I found one page of a bank statement we hadn’t seen before. The account was named ‘special account.’ Because we only had one page of the account, we set it aside and continued our examination.
“The next day we identified transfers from the operating account going to the ‘special account.’ Once we obtained all the special account statements, we found that one of the partners had been using this business account to fund his lifestyle. Credit card payments, car loans, mortgages and other expenses of this person were all coming out of this account. It is now an ongoing joke within our department for every case for us to not ignore the ‘special account.’ ”
Brett A. Johnson, CFE
Conversation was going fine until …
“I was working on an audit of an organization and identified what I believed to be evidence of procurement fraud. I performed very detailed test work to gather substantial evidence and was interviewing the suspected fraudster during an audit, not a fraud examination, so I wasn’t trying to get any confession — at this point.
“I thought I had a nice conversation going in which I gleaned much worthwhile information. After the meeting was over, she said, ‘If I get in trouble for anything I told you, I'm coming after you!’
“She was found guilty of procurement fraud, didn’t come after me and is serving time in federal prison. This just goes to show that fraud won’t always rear its head in an audit or a fraud examination. It taught me to be aware and maintain professional skepticism.”
Laura Beltran-Schmitz, CFE, CPA, CGFM
He started with the granddaddy of major litigation cases
“I was fortunate to work on the expert witness team for the trustee overseeing the Bernard L. Madoff Investment Securities bankruptcy. I was able to experience, from soup to nuts, the entire development and execution of the lawyers’ casework. I had never worked on a major litigation case. I learned a lot about etiquette and best practices in the legal realm.”
Chris Ekimoff, CFE
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