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Memorable cases, part 2

More pithy stories to instruct

ACFE members who are educators all want one thing for their students: case histories. Why is that? Because actual stories of how fraud examiners interviewed subjects, discovered evidence, scrutinized the books and used their intuitive abilities are instructive.

I'm guessing that just because you've graduated you haven't lost your desire to read about how other practitioners conducted their fraud examinations — you might just pick up a tactic that could turn the corner in your next case.

So we embark on a few more case histories from our ACFE faculty members. Enjoy.

Forged signature leads to much more

A vice president at a publicly traded company, and probably the CEO's heir apparent, was caught forging the CEO's signature on his expense reimbursement forms on Jan. 21, 2014. "The company hired my firm on Jan. 31 of that year to look at processes and procedures to ensure this wouldn't happen again," says Tiffany Couch, CFE, CPA/CFF, principal at Acuity Forensics. (She teaches Principles of Fraud Examination for the ACFE.) "They didn't think any malfeasance had happened but had asked that I verify that this was an error in judgment — not fraud," she says.

"We discovered the fraud the first day of onsite procedures," says Couch, an ACFE Regent. "First, we had asked for the vice president's calendar, to match up the alleged travel on the reimbursement forms. We found discrepancies. The case was blown open when I called a vendor to confirm the $8,610 in marketing materials he had claimed as purchased. I knew we had a problem when the vendor representative said, 'Ma'am, we don't sell anything for $8,610 … and we don't have materials with that name and description on any of our sales lists.' "

'Bad judgment' call

Couch's initial interview with the CEO revealed the vice president's lifestyle, background and sequence of events but also the biggest clue of all, she says. "You know, Ms. Couch," the CEO said, "I just don't understand why David would do this when he could authorize transactions up to $50,000 through the accounts payable system without any additional approvals. All of these marketing-related expenses could have gone through A/P without needing my signature. I just don't get it. I'm so disappointed that he made such a bad judgment call."

The vice president had submitted more than $1.6 million in expense reimbursements in 10 years, Couch says. "We itemized each and every receipt. We found that he used the same vendors over and over again to submit marketing lists, conferences, etc. as expenses," she says. "We used an audit technique — 'confirmation letters' — to confirm if the expenses were real. For the initial vendor I had called, the vice president had turned in $290,000 in receipts," Couch says. "The vendor's confirmation said that he had only purchased $1,500 in goods and services in the same time frame. Most vendor results were similar."

Couch says she sent copies of the receipts to the vendors, and they were all "extraordinarily helpful in walking us through" how the vice president's documents were forgeries.

His laptop and company-issued phone were important pieces of evidence, Couch says. "We found evidence of his forgeries, copies of 'budgets' showing his shortfall of cash at home and always plugging those shortfalls with the next fraudulent expense reimbursement on his computer."

Emails were important in proving the wire fraud for the federal government, she says. "He had processed some of his expense reimbursements through email exchanges with accounts payable. As a result, he was indicted on wire fraud."


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