Second ACFE COVID-19 report; Timothy Alan Pearson, Emily Primeaux and Joseph R. Dervaes; Nigrini questions calculations

Second ACFE COVID-19 report finds 77% have seen overall fraud increase

Of the anti-fraud professionals surveyed for the ACFE Fraud in the Wake of COVID-19 Benchmarking Report, September 2020 Edition, 77% have seen an increase in the overall level of fraud as of August, compared to 68% who’d observed an increase when the ACFE published the first COVID-19 report in May.

Ninety-two percent of the survey participants expect the overall level of fraud to continue increasing over the next 12 months. Forty-eight percent expect this increase to be significant.

Participants said the top fraud risks, based on current observations and expected increases, are: (1) cyberfraud (2) unemployment fraud (3) payment fraud (4) fraud by vendors and sellers.

Thirty-eight percent expect an increase in their overall anti-fraud budgets over the next year, while 14% expect a decrease. Here are notable changes to specific budget areas:

  • 42% expect a decrease in budget for travel for anti-fraud staff; 23% expect a significant decrease.
  • 33% expect an increase in budget for training/professional development for anti-fraud staff. However, 28% expect a decrease in this budget item.
  • 56% expect their level of anti-fraud staffing to remain about the same; 30% expect an increase and 14% expect staffing reductions.

A majority — 68% to 76% — say that preventing, detecting and investigating fraud are more difficult now than before COVID-19.

An inability to travel is still the No. 1 challenge in combating fraud. But more people are citing conducting remote interviews as a current top challenge for them, moving this up to the No. 2 spot.

In Memoriam: Timothy Alan Pearson

Timothy Alan Pearson, a former executive director of the Institute for Fraud Prevention, and a colleague and friend of many ACFE members, passed away July 28 in Savannah, Georgia, from complications of COVID-19. He was 63.

Dr. Pearson was born on June 13, 1957, in Madison, Wisconsin. A lifelong academic and educator, he earned his Bachelor of Science, Master of Professional Accountancy and doctorate from the University of Wisconsin-Madison.

He worked as a professor of accounting and in college administration for more than 30 years — first at the University of Wisconsin-Eau Claire, then at West Virginia University and finally at Georgia Southern University.

At the time of his death, Dr. Pearson was director of the School of Accountancy and Professor of Accounting at Georgia Southern University. He was an expert in forensic accounting and served as editor for multiple academic journals, published numerous peer-reviewed articles and secured millions in grant funding, according to his colleagues.

“Tim was a dear friend, gentle as a teddy bear, always positive, hard to rattle, a person who never said ‘no,’ ” said a former colleague, Dr. Richard A. Riley Jr., CFE, CPA, Louis F. Tanner Distinguished Professor of Public Accounting at West Virginia University. “When I arrived at WVU as a newly minted Ph.D. and WVU faculty member, and became frustrated with my dissertation, Tim jumped in to help get it published,” Dr. Riley said. “It’s hard to imagine that I’ll never be able to talk with him again."

“Tim was a very special person,” said Patricia Johnson, MBA, CFE, CPA, visiting assistant professor at Daemen College. “He was kind, knowledgeable, a true professional who always had time to talk. His quiet sense of humor and genuine concern for people stand out in my memory. It was a privilege to know him. I will miss him."

“Tim Pearson was charitable and kind in his interactions with everyone, and an unassuming, self-effacing leader,” said Dr. Sridhar Ramamoorti, CFE, CPA, CIA, associate professor of accounting at the University of Dayton. “A quintessential family man, we need more ‘gentle giants’ like him in this world. I was fortunate and blessed to know him.”

“Tim was a friend to everyone,” said Dr. George R. Young, CFE, CPA, director of the Florida Atlantic University School of Accounting. “He had an easygoing manner that made all who encountered him feel very fortunate. I will miss him.”

Dr. Pearson is survived by his wife of 35 years, Lori; and his four children, Nathan, Joshua, Skylar and Samuel; plus his granddaughter Violette; Samuel’s partner, Cassidy; his brothers, Dave and Bill; and his sisters, Pegge and Judith.

Fraud Magazine associate editor leaves ACFE

After 6½ years with the ACFE, Fraud Magazine Associate Editor Emily Primeaux, CFE, has moved on to other creative opportunities.

“I couldn’t have asked for a better associate editor,” says Fraud Magazine Editor-in-chief Dick Carozza, CFE. “She showed tremendous enterprise in reporting for her cover-story articles, and her editing skills were excellent,” he says. “She transformed and developed a great FM app. Emily contributed podcasts and was a fastidious project manager for other ACFE endeavors. We’re going to miss her greatly.”

Primeaux says working on the magazine and with the ACFE has been a highlight of her career. “Under the mentorship of Dick Carozza, I was granted opportunities to interview headline-makers, hone my skills as a writer and editor, and help contribute to the global fight against fraud,” she says. “It wasn’t easy deciding to leave the ACFE — and certainly not during a worldwide pandemic — but after learning so much, I was ready to tackle new endeavors and find new professional challenges.

“I’ve met hundreds of CFEs from around the world over the years. Your passion for rooting out fraud and corruption has made my time with the ACFE so fulfilling,” Primeaux says to the members. “I’ll miss talking to you in person at ACFE Annual Global Fraud Conferences and other events, and I thank you for allowing me the opportunity to help in your dogged pursuit of truth and justice."

Primeaux began her career as a 7th grade English teacher and athletic coach in 2008. In 2010, she moved to Dublin, Ireland, and worked as the volunteer programme officer at Suas Educational Development, a nonprofit with a goal of tackling educational disadvantage in India, Kenya and Ireland.

In 2011, she moved to Gibraltar to work as the news and onsite marketing coordinator at Tradimo, a company that teaches laypersons how to trade in financial markets. At the beginning of 2014, Primeaux moved to Austin, Texas, and began with the ACFE shortly after.

Pacific NW Chapter honors Dervaes by naming student scholarship after him

The ACFE Pacific Northwest Chapter Board recently honored Regent Emeritus Joseph R. Dervaes, CFE, CIA, by naming its higher-education student scholarship after him in recognition of his service to the chapter. Dervaes was the chapter’s founding president in 1993. He served in that position and as president emeritus on the chapter board for 25 years.

“Joe Dervaes is a true legend in the fraud-fighting world,” says Mike Nurse, CFE, president of the Northwest Chapter. “He has left a legacy that continues to touch people’s lives every single day. I couldn’t imagine a more appropriate honor for Joe because the scholarship represents the continuance of everything he has dedicated his life to — education and the fight against fraud.”

Dervaes was chair of the ACFE Board of Regents for three years. In 1999, he became the first ACFE Fellow. The ACFE presented him with its highest honor, the Cressey Award, in 2003. In 2004, he joined the ACFE Foundation Board of Directors. In 2007, he received the ACFE Outstanding Achievement in Community Service and Outreach Award. He was a longtime author of the “Fraud’s Finer Points” column in Fraud Magazine.

“I was so pleased to be notified by the ACFE Pacific Northwest Chapter that the board had changed the official name of its student scholarship program to the ‘Joseph R. Dervaes Scholarship,’ ” Dervaes said. “I have always known that the future of the ACFE rested with future generations of university students who pursue fraud studies. And, that is why supporting student scholarship programs would become an important part of my professional life. While on the chapter board, I was pleased to lead the effort to launch our scholarship program for students who were studying fraud examination at universities in Washington state.”

Dervaes retired in 2006 after 42½ years of federal, state and local government audit service. At his retirement, he was the audit manager for special investigations at the Washington State Auditor’s Office where he was responsible for managing the agency’s fraud program.

Nigrini questions calculations in Benford’s Law article; author responds

Mark J. Nigrini, Ph.D., a well-known Benford’s Law advocate, contends that in the May/June 2020 Fraud Magazine article, Benford’s Law still works: Practical applications for finding fraud in a business scenario, by Venkat Kesha Pillai, CFE, ACA, that the chi-square test statistic wasn’t calculated correctly. Nigrini says in the page 39 table, the observed frequency and the expected frequency columns should show the actual and the expected counts, and not the actual and expected percentages. See “Figure 1” below.

Figure 1: Nigrini’s Excel file showing calculations

Pillai responds, “With respect to the method of working out the chi-square test statistic, as you [Nigrini] have observed, I went by the difference in frequencies (not count) between the observed (actual) and those expected (advocated by principle of Benford's Law) and correspondingly worked out the degrees of freedom at 1% and 5% level of statistical significance for the acceptance or otherwise of the null hypothesis,” Pillai says. “I contend there is no real difference between count and frequencies. So long as the percentages total to 100, mathematically, it should not matter. It is bound to give the same eventual results.” See “Figure 2” below in response to Nigrini’s contentions.

Figure 2: Pillai’s further Excel chi-square test calculations