Teaming with anti-fraud pros of many stripes

Opportunistic fraudsters often have an advantage over CFEs: They can freely and spontaneously select co-conspirators by skill, position and corruptibility. To level the playing field, CFEs can work more closely with other types of anti-corruption practitioners. Their experience and techniques, when combined with ours, frequently produce extraordinary synergies that outfox versatile criminals.

Fraud Magazine recently spoke with veteran ethics and compliance specialists Jonathan E. Turner, CFE, and Julie Myers Wood, J.D., plus white-collar-crime trial attorney John F. Lauro, J.D., about how fraud fighters in their respective professions can pool their skills and resources to proficiently investigate and help prevent executive misconduct.

Seemingly successful Bankrate Inc., a publicly traded financial services company headquartered in North Palm Beach, Florida, secretly harbored frauds committed by some of its executives for years. If its internal fraud fighters in various departments and external auditors had been as organized as the fraudsters, Bankrate could’ve been spared massive financial loss.

In February 2018, Bankrate held a routine earnings call. The company’s CFO, Edward DiMaria, had scheduled the February 2014 teleconference to apprise analysts, investors and the media of the company’s financial results for the full fiscal year ended Dec. 31, 2013.

“Bankrate is once again growing,” said President and CEO Kenneth Esterow. “In 2014, we will build on this momentum.” Esterow’s presentation assured his audience that revenue and earnings were steady, with the company poised for greater profitability.

Yes, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) — a broad measure of profitability — had dropped one percent from FY 2012’s level. But business was on the uptick. Total revenue for the fourth quarter of 2013 had soared 31% above that of the same period in FY 2012.

All in all, the picture was that of a competently managed enterprise, forging ahead through the up- and downswings of a post-recession economy, intense competition and the ever-changing communications technology underlying its most lucrative asset, Bankrate.com, the wildly popular consumer finance web portal.

As far as CEO Esterow knew, it all was true — except it wasn’t. CFO DiMaria had lied to his CEO, the board of directors, the internal and external auditors and everyone else with an interest in the company’s financial performance.