From The President

By James D. Ratley, CFE

Is there a correlation between a country's national security and its level of fraud? Certainly, a nation is stretched when corporate leaders run businesses into the ground because of their mismanagement or criminal actions. As we've seen, employees and investors lose life savings, financial institutions weaken or fail, and a country loses its luster and influence.

Former Department of Homeland Security (DHS) Director Michael Chertoff, in this issue's cover interview, said that even though "fraud is not a national security issue, terrorist and other security threats frequently involve fraud. Document fraud is almost always essential to terrorists because they need false identification to cross borders or enter secure areas. Money laundering is critical for those engaged in terrorist finance. And some terrorist groups use fraud and crime as financing mechanisms." Few know that before Chertoff became head of the DHS, he was a fierce prosecutor and fraud fighter. He'll tell his story as a keynote speaker during the 20th Annual Fraud Conference and Exhibition July 12-17 in Las Vegas.

All social systems are built on trust. Of course, we've seen what happens when that trust dissipates in the banking industry. But what happens when you can't trust your city? The citizens of San Diego had that problem. As George Dasaro reports in "City Abuses Citizens' Trust," the good people of San Diego endured a succession of fraudulent activity that will leave current and future citizens reeling under enormous financial burdens.

The Securities and Exchange Commission (SEC) charged the city with nondisclosure to the investing public of its pension fund deficiencies to the investing public when it issued municipal securities for sale. In an offshoot of the fraud, the SEC also cited the city's independent auditor with professional incompetence. Read how the frauds unfolded and what we can learn from the city's mistakes.

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