FraudBasics: Fundamentals for all
The tall, pro-basketball-player-sized prosecutor straightened up from his draped position over the podium, pointed directly at me as I was sitting in the front seat of the gallery and thundered to the rapt jury, "If Ms. Simmons-Brown had done what defense counsel accuses her of — creating evidence and making things up — she wouldn't be sitting here as an employee of the county attorney's office right now. She would have been fired long ago and would have joined my colleague and me IN A CELL IN THE FEDERAL PRISON!" And the eyes of the jury followed his outstretched hand to me.
This was during the Hennepin County (Minn.) Attorney's Office's (HCAO) closing argument at the end of a seven-week mortgage fraud criminal trial, which resulted in jury guilty verdicts on two counts of racketeering and 17 counts of felony theft by swindle. I'd been intimately involved in the case as a paralegal for more than a year.
A solid year-plus of assisting prosecutors in gathering, analyzing, summarizing and preparing witness statements and documents; combing through oceans of real estate records; writing report after report; creating spreadsheet after spreadsheet; computing; re-analyzing; summarizing — all of which finally culminated in my testifying over the course of five court days. I'm glad it was only five, because I had run out of business suits by day four.
I have been a senior paralegal with the Hennepin County Attorney's Office for more than 13 years — many of those years assigned to its Complex Crime Unit. The unit, which focuses on complex financial crimes that usually have a substantial dollar loss attached, is a good example of creative use of employee talent. I have worked within this unit as a traditional legal assistant, investigator, analyst, criminal complainant, trial assistant and investigative witness. This work — and an association with an HCAO investigator who's a Certified Fraud Examiner with law enforcement and accounting credentials — led me to also become a CFE. I'd like to tell you about this fusion of paralegal and CFE duties that has stoked my interest in all things fraud.
PARALEGAL COMPARED TO CFE: DEFINITIONS, TRAINING, DUTIES
Paralegals are non-attorneys, who are specially trained to assist attorneys under their supervision, by performing substantive legal work — often preparatory in nature — for which the attorney is ultimately responsible. They're typically trained in legal research and writing, litigation, civil and criminal procedure, case preparation and investigation, and specialized practice areas, depending on where they're trained.
Their work products can be as varied as the practice areas of the offices that employ them. Paralegals are commonly present in private law firms, public offices with attorneys on staff and private businesses with legal departments. As non-attorneys they can't represent clients, offer legal opinions or advice, or appear as officers of the court (neither in person nor in writing), but they can do almost everything else with supervising attorney direction.
CFEs, as we all well know, are trained by study and work experience to investigate, identify, deter and prevent both legal and financial crime and fraud. "Fraud examination is a methodology for resolving fraud allegations from inception to disposition . . . (involving) obtaining evidence and taking statements, writing reports, testifying to findings, and assisting in the detection and prevention of fraud." (ACFE 's 2013 Fraud Examiners Manual, page I-1)
CFEs are commonly present in accounting firms, private businesses large and small, law enforcement agencies, municipal, county, state and federal offices of all kinds and, of course, in prosecutors' offices. Again, the CFE's work product can be as varied as the nature and demands of the particular entities. Perhaps the most important precept of a CFE's work is also from the Fraud Examiners Manual: "Each fraud examination begins with the proposition that all cases will end in litigation."
THE PARALEGAL CFE
Because of the complementary training, duties and skill sets of paralegals and CFEs in the anti-fraud legal arena, a paralegal CFE can almost do it all:
- Obtain, organize, examine and analyze evidence and documents.
- Investigate, prepare and manage cases (criminal and civil).
- Manage the production of discovery of all of the above to opposing counsel.
- Act as a liaison with law enforcement, victims and attorneys.
- File criminal complaints as complainant.
- Act as trial assistant and trial witness.
Attorneys, who are engaged in criminal and civil anti-fraud cases, benefit enormously from paralegal CFEs' skillsets whether they represent plaintiffs or defendants. They save a great deal of money because the functions of legal assistance and fraud examination are combined. The paralegal CFE is always close at hand and close to the case.
Because paralegal CFEs work directly for attorneys, they can view cases through attorneys' eyes. They avoid focusing on issues that aren't germane. Paralegal CFEs know cases intimately, so when crunch times happen (and they always do), no one wastes time trying to find documents, remembering what witnesses said or what in the world the evidence means.
POSTCARDS FROM THE EDGE
My experience as a paralegal CFE has been in state criminal prosecution. The range of cases the HCAO's Complex Crime Unit routinely handles closely mirrors the endless laundry list of financial transactions and fraud schemes found in your trusty Fraud Examiners Manual. Following are vignettes of three cases on which I worked in depth on both the paralegal and the CFE levels.
THE PONZI SCHEME NEXT DOOR
Defendant G.F.C. charged with 36 counts of fraud in the offer or sale of securities (felony)
G.F.C., a high-school-educated print broker who lived in a northern area of the greater Twin Cities (Minneapolis/St. Paul), got a little behind on both his personal expenses and his print-broker contracts. So, he began to solicit short-term loans with sweet and steady interest rates for fictitious printing contracts — first among his friends and then among associates of these friends plus aquaintances who not only invested but also solicited additional investors in other states.
As with most Ponzi schemes, the fraud grew as time went on (as did G.F.C.'s spending habits). It crashed when his main investors confronted him in a fancy hotel meeting room. The scheme had reached a dollar flow of more than $53 million from at least six states.
In this case I was the de facto investigator, bank- and credit-card-record analyst and criminal complainant. I was present for most meetings with the defendant (who proffered early on in the case), obtained and summarized financial records, interviewed various investors and receivers and reported on these interviews, and talked to prosecuting authorities in other jurisdictions as they investigated possible collateral cases.
G.F.C. was convicted on all 36 counts and sentenced to 96 months in prison.
LEAD HER NOT INTO TEMPTATION
Defendant T.L.O. charged with six counts of theft of property (felony)
T.L.O. was a well-liked real estate title closer with a prominent, long-established title company. She also was the only consistent breadwinner in a household of three teenagers and a chronically unemployed husband. For about four years, T.L.O. dipped into the firm's escrow accounts that were established at the closings of individual real estate transactions. She issued instructions to her company's accounting department purportedly to wire funds from these escrows to appropriate buyers or sellers, but instead she listed her personal bank account number as the wire beneficiaries. She masked the name of the beneficiaries by creating deceptive "melds" — combinations of the buyers' or sellers' names with her own. By the time these ongoing fraudulent transfers were discovered, she had stolen more than $100,000.
In this case, I was the de facto investigator and criminal complainant. I interviewed representatives of the victim business on several occasions; obtained and reviewed documentation of the actual wire transfers and their bank escrow account records plus T.L.O.'s personal bank records that clearly reflected the receipt of the fraudulently ordered wire transfers; and prepared reports and spreadsheets for the prosecutor's review, analysis and inclusion in the complaint.
T.L.O. was convicted on all six counts and was sentenced to 180 months in prison.
SHE DIDN'T QUITE UNDERSTAND WHAT ALL THE FUSS WAS ABOUT
Defendant K.J.B. charged with eight counts of theft by swindle and one count of aggravated forgery (felonies)
K.J.B. was first a trusted mid-level teller, then a teller-supervisor, of a community bank branch in a small town in northwestern Hennepin County. Over the course of eight years, she quietly filched bundles of cash ranging from $500 to $5,000, smuggled them out of the bank by hiding them either in her clothing or her purse, and manipulated the branch's accounting systems (both written and computerized) to cover up the shortages. She habitually recommended hiring young candidates for teller positions with little or no experience, which helped limit risk of the bank detecting her crimes. By the time the bank fired her, she had stolen more than $187,000.
This case was very challenging and intriguing to prosecutors (and to me). No one actually witnessed her thefts, and no one found a bright clear line on a page showing the flow of funds directly from the bank to her. I wasn't the investigator, but I was tasked to analyze bank account statements for 17 individual accounts under the defendant's control for a time span of approximately 12 years. I identified cash deposits, cash withdrawals (or, even more importantly, the lack thereof) and payroll deposits for her entire household.
I organized this data in spreadsheet and calendar forms to assist the prosecutors as they prepared a circumstantial case. I also reviewed the bank's records to identify the documents that demonstrated each theft and prepared extensive trial exhibits, which summarized all this data.
K.J.B. was convicted on all nine counts; as of publication she's pending sentencing.
A PRODUCTIVE FUSION
I've worked many more cases: individual employee embezzlements, sprawling mortgage frauds, racketeering, identity theft, insurance fraud, misconduct by a public official, perjury, forgery, coercion, classic paper-hanging check fraud, tax evasion, theft of inventory, failure to pay over state funds, securities fraud, etc. The point is that I couldn't have assisted prosecutors in these cases if I didn't have my CFE training in addition to my paralegal education and experience. Paralegal and CFE: a natural, efficient and highly productive fusion.
Annette Simmons-Brown, CFE, is the senior paralegal in the Hennepin County Attorney's Office in Minneapolis, Minn.
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