High Art, Low Value, Part 1: How a Connoisseur Became a Convict

Lawrence Fairbanks was a respected, well-liked university official. But he had a bad habit of buying artistic treasures and antiquities and charging them to his employer. Here's how the university's audit department investigated his crimes and shut down the "Fairbanks Collection."

If there were a law that required people to trade their names for a single adjective, Lawrence Fairbanks would be cosmopolitan. A tallish, gaunt man of 45, Lawrence held the position of assistant vice chancellor of communications -- the glitziest job in the glitziest department of Aesop University. In the vast sea of academe, Lawrence's ship steered clear of the lecture halls, laboratories, and weekly beer orgies on Fraternity Row. I doubt that Lawrence ever met a professor, much less a student. Instead, he sailed the waters of media and public relations. Lawrence was in charge of making sure that the university's good side was featured in every last magazine, newspaper, and brochure that dropped off the printing press.¹ 

The position of communications AVC fit Lawrence like a second skin. Aesop recruited him from a renowned magazine empire, and it showed. Two decades in the publishing world had secured him the professional trust and personal admiration of the writers, editors, photographers, and graphic artists who produced award-winning publications on behalf of the university.

Moreover, Lawrence wore the cultured charisma of a man well-studied in the arts. His knowledge and taste far surpassed the better known works you might guess on "Jeopardy!" or in a game of "Trivial Pursuit." Lawrence was captivated by the black-and-white photography of the early 20th Century. He was versed in original oil paintings and ceramic pieces by important -- though not mainstream -- artisans in New York, San Francisco, and London. The breadth of Lawrence's interests included antiques -- all kinds that ranged from old books to the earliest cameras, apothecary items, steam trunk luggage, and toys. Lawrence also had a fondness for period furniture of the sort you might find in a museum. Art was Lawrence's life.

Lawrence's high regard among the university communications creative staff was shared by the administrative employees who reported to him. Though fluent in the language of the elite, Lawrence Fairbanks was no snob. He always greeted the accounting clerks, the administrative assistant, and the receptionist by name. At Christmas, he arranged a destination luncheon and tour of the newly opened museum -- the one that had a year-long waiting list. Every employee in the department was invited.

Lawrence's glad-handing social ease endeared his university colleagues and impressed the literati and glitterati of the media and art worlds. It also won him a lovely, intelligent wife. Having waited until his late 30s to marry, Lawrence was now the father of six-year-old Ruthie and three-year-old Bobby. It was touching to see how a keen art connoisseur had reserved the outer surface of his office desk as a mini-gallery for the framed works of his two little Crayon masters.

Lawrence's wife, Allison, worked as a mid-level corporate attorney; yet, despite their dual income that exceeded $250,000 a year, the family home was unpretentious. In a city that sweats opulence, the Fairbanks' home stood unremarkably among other homes of its style in a neighborhood better known for its nearness to prominent cultural venues than its prominent residents. The cozy, single-story, clapboard house of pre-World War II construction had three bedrooms and a single bathroom. It was just big enough for four people who, by all appearances, followed the script of the American Dream.

But there was more to Lawrence's life than his wife, his children, and his job -- and there was certainly more than met the eye to the way he approached his love of art. Normally, when one speaks of a love of art, they refer to a hobby that provides enjoyment and enrichment. Normally, one's most cherished pieces are shared with family.

Normally.

We often hear that the most public personalities can mask the most private souls. And while the inner reflections of a private soul are normal, the secret, shame-driven need for certain objects is called "obsession." No one -- not even Allison Fairbanks -- knew the extent of Lawrence's love for art nor the lengths to which he would go to acquire it, hide it, and ultimately dupe employer and supplier alike into feeding his passion.

Art nourished Lawrence's troubled heart even as it starved his soul to death.

Art was Lawrence's life.

THE FACE OF MANY
Aesop University, the largest campus in a state university system, enjoys an eminence that rivals the Ivy League. Founded in 1871, Aesop grew from a state teacher's college to an institution with a world reputation for scholarship, research, and community service.

Modestly put, the university produces and attracts the "Who's Who" of every imaginable field. Every orange and burgundy sweatshirt in the student bookstore proclaims its logo, Omnibus Punim, which is translated to mean "The Face of Many." Aesop's family portrait includes famous actors, Olympic athletes, a Supreme Court Justice, and several Nobel Laureates. The Aesop Medical School successfully pioneers new treatments for the most hopeless conditions. Its doctors have ministered to the destitute and distinguished alike.

On any given day, Aesop's total student enrollment reaches 35,000 among its undergraduate, graduate, and professional schools. To keep this educational behemoth running, Aesop employs upwards of 25,000 staff and faculty. And, though situated in the highest-rent district of one of the three largest cities in the United States, Aesop's 500-acre campus has earned the uber-school its very own zip code. Aesop's football team, the Thundering Bison, has secured the celebrity campus a regular spot on the eleven o'clock news. More importantly, its three-billion dollar budget has won it a set of permanent box seats in the crosshairs of the state legislature.

The university's in-house business and technology experts have patiently guided this tradition-steeped grandfather of higher education toward the Information Age. With the steady, gentle prodding that got Daddy to trade his turntable for a CD player, Aesop eventually migrated from its old recordkeeping system of manila folders and microfilm to the "give-it-to-me-now!" world of computers.

By the mid-1990s, Aesop's entire purchasing and accounts payable system was computerized. Just enter a log-on ID and password, and an authorized employee is soon staring at any financial transaction processed in any of the university's departments. Push another few buttons, and you'll know which employee entered a purchase request before he or she fired it off to the campus's central accounts payable department. You'll see the serial number of the university check and the day it was cut. You'll even know whether that check was sent out to the vendor through the U.S. mail, or whether it was first sent back to the department that requested the payment.

Any business with as many moving parts as Aesop University must make sure that its bills are paid efficiently but not recklessly. So, along with the streamlining of the accounts payable process comes a few built-in security measures. One big safeguard is the university's purchasing policies -- in particular, the policy that dictates spending limits.

Aesop's "low value" purchase delegation policy places a ceiling on how much any one campus department can spend with a single vendor on a given day without obtaining formal approval from the Central Purchasing department. Exceeding that limit causes the Materiel Acquisition and Disbursement (MAD) automated system to halt a department's purchase request and reroute it to campus' Central Purchasing unit.

That is, if more than $2,500 worth of business per day -- plus a small, additional margin for tax and deliver -- is going to any one supplier, Central Purchasing will automatically gain control of the purchase. There are all kinds of good reasons, too -- for example, making sure that old Aesop, a public university, is given the best deal in the marketplace and that it obeys a long list of state and federal laws.

You can almost see the buyers in Central Purchasing standing there, sneering, arms folded, tapping their feet, and wondering what the accounting assistant in the Department of Norwegian Poetry was thinking when he ordered $2,984.32 worth of Viking Translation guides from the Oslo Down company. That type of order immediately results in an e-mail from one of those sneering foot-tappers to the immediate supervisor of the accounting assistant in the Department of Norwegian Poetry.

You might question how a fiscally responsible outfit could extend so much green rope, every day, to a few hundred campus departments. Yet, that is exactly the rationale behind the Low Value Purchase Authority -- a mouthful of a term that simply means that a $3 billion-dollar university is placing up to $2,500-and-change worth of trust in any one department to buy whatever it needs from a single vendor on a given day.

The low value order (LVO) policy allows an organizational giant like Aesop University to function more efficiently by not paralyzing the Central Purchasing department with routine, non-recurring purchases. Sure, it involves a measure of risk, but the alternative is a mountain of overdue payments and a premier university with some really bad credit.

Aesop University's purchasing policies and automated safeguards served the institution well. But not for long.

DESIGNING A FRAUD
It began with a mid-morning phone call from a hoity-toity furniture store – the kind that omits the word "furniture" from its name. A man identifying himself as "Squire's chief financial officer" called the Aesop University Internal Audit Department and told our receptionist that he needed to speak to an auditor. He had to report a fraud.

Our receptionist directed the call to me, just as she did all others that struck her as odd. I am one of 25 audit professionals in the Aesop Audit department. Since Aesop is the largest of the 12 campuses in our state university system, there's more than enough work to occupy an audit staff of our size.

Ours is a department of specialty units dedicated to particular areas of the campus such as health care or, in my case, a specific discipline like forensics. Although six of us are Certified Fraud Examiners, I am the audit manager of investigations. That is, I am responsible for looking into matters of "alleged financial misconduct." Or to be less euphemistic, "alleged stealing."

I answered my ringing extension as I always do, with my first and last name. Satisfied that he had an auditor on the line, Mr. CFO repeated his announcement -- he was calling to report a fraud. He knew it was fraud because Mr. CFO had previously been an auditor for a "Big 8" accounting firm.

Mr. CFO then informed me that he was holding a photocopy of Invoice Number 5432, bearing Squire's logo. The invoice, in the amount of $2,664, requested payment for "design and illustration services." It also made reference to one of Aesop University's fancy publications, "Bison Quarterly," a glossy magazine with feature articles on our institution.

Mr. CFO continued. Invoice No. 5432, he said, was accompanied by a recently cut university check in the same amount, payable to Squire. Fairbanks had authorized the payment. His signature was more than legible; it was artistic. Moreover, the billing and shipping addresses were in care of his university office.

"Just a minute," I said to Mr. CFO, "I can look up the invoice on our system." Using our MAD (Materiel Acquisition and Disbursement) system, it took all of 90 seconds to get the electronic version of Invoice 5432 on my computer screen.

"Okay," I said, "Invoice 5432 certainly looks like a normal type of expense for the communications department." But, I wondered aloud to Mr. CFO, why was a furniture store calling me to discuss it?

Then, the explosion:

Mr. CFO explained that the hoity-toity store personnel immediately recognized Lawrence Fairbanks as a regular customer, but they didn't know – or care – about his fancy university title.

And while the invoice copy that accompanied the university check described "design and illustration services" for Bison Quarterly, Squire's own copy of that same invoice instead authorized the fabrication of a one-of-a-kind chaise lounge. Prophetically, this chair -- or rather, this chaise -- was named "Ophelia," the psychologically and physically doomed heroine in the Shakespearian tragedy, "Hamlet."

As I silently recalled a verse from our high school production, the Bard was trumped by this chilling quote from Mr. CFO:

"Lady, I don't know squat about magazines. Should I make the chair or not?"

JUST THE FAX
If there's one thing I know, it's that big guns make big holes, and I sensed that Mr. Lawrence Fairbanks had fired a cannon. I asked Mr. CFO to fax me everything he had that pertained to Invoice Number 5432. Within moments, I heard the tinkling of the fax machine in our copy room a few yards from my office.

As I lifted the warm pages from the fax tray, I first inspected Invoice 5432, for $2,664, the version that Lawrence Fairbanks had enclosed with the university's check. It read "design and illustration services for Bison Quarterly." Along came a copy of a low value purchase order (LVO) in the amount of $2,400. The $264 difference was for sales tax and delivery.

Finally, the fax printed out Squire's version of Invoice 5432. It looked similar to Aesop's copy. The layouts of the invoices were identical. The billing address, "Mr. Lawrence Fairbanks, c/o Aesop University Communications," was the same. Even the boxy, 3-D logos at the top-center of the invoices matched.

But the descriptions of the purchases didn't.

In the body of the Squire invoice, in place of "design and illustration services," were details for the fabrication of a one-of-a-kind "Ophelia Chaise." It gave precise instructions for the fabric and color – mauve damask, to be exact. It also contained a note that Squire was to contact Lawrence Fairbanks when the chair was ready.

While my first impulse was to carry my handful of trouble straight into the audit director, Frank Adams's office, I slowly walked back to my own office to eat a banana and contemplate. Was this a one-time indiscretion on the part of a respected university official, or was this a slip-up in an ongoing scheme?

I clicked my mouse on the icon that led me back to MAD, and I entered the department code for university communications. The department had a $4 million annual budget. If I was going to find more examples of the "Squire type," I knew that I would have to drill carefully. I started by typing the four-digit code that university communications used to identify publications expenses on the ledger.

A list of transactions cascaded down my computer screen. As I scrolled through them, I noticed that many of the amounts over the past year or two were under $2,500 -- many by only a dollar or two. I also noticed a number of "regular" payments in identical amounts, paid to the same vendors over the course of two to six months. The amounts were rarely under $1,000, and never more than $2,499.

I clicked open 20 payments. The online LVO and invoice details were similarly worded: "design and illustration," "stock photos," "reprints of original artwork," or "printing and layout." All made reference to an Aesop magazine, newsletter, or brochure.

Next, I examined the vendors' addresses. One was in San Francisco, another in New York, and still another in Chicago. Publishing ignoramus that I am, it made no sense that so much of the design and illustration work was done out of town. I chose one vendor named Lincoln Photography, partly because it had a San Francisco address, and partly because MAD displayed six consecutively numbered invoices under the low value threshold.

I Googled the address. Not surprisingly, what I got back was not Lincoln Photography, purveyors of stock shots, but Lincoln Galleries, exclusive dealers specializing in early 20th Century black-and-white photographs snapped by artists who probably tortured themselves to death.

Finally, I broke the news to Frank, the audit director. He listened to my account of the phone conversation with Mr. CFO, the faxed Ophelia Chaise invoice, and the low value payments to out-of-town art galleries. Frank uttered a one-syllable expletive, and, with that colorful pronouncement, he authorized me to proceed with a full investigation.

The central purpose was clear -- to identify the bogus invoices, to quantify the total loss to Aesop, and to collect the evidence to prove it to the university police and the district attorney.

I started by isolating payments that fit a handful of criteria as follows:

• One or more payments to a single vendor
• Under $2,500
• Consecutive or closely numbered invoices
• One-word vendor names
• Vendor address out of town, or out of the United States, or in a major city
• Vendor address in the "artisan" sections of our city

Given that university communications was an artsy kind of business to begin with, I expected that my initial search for phony transactions would include some that were really A-OK. Yet, I wanted to make certain that I wasn't dancing over any rocks that were covering up snakes.

Eventually, I identified 52 vendors and 200 LVO purchases that spanned a three-year period, and I obtained copies of the front and back of each cancelled university check.

YOU CAN TAKE IT TO THE BANK
As the paper drifted in, I started matching up the endorsements on the backs of the checks with the vendor names on the in-house versions of the invoices. Some of the mismatches were so obvious, it hurt. For example, the check that Aesop issued to "Redhill Publishing" in New York City was endorsed and deposited by "Redhill Antiquarian Books." The payee names on the checks were always close enough to the vendor's true names that they were less likely to notice the "slight" inaccuracy. In the end, vendors are far more concerned that the checks they deposit stay deposited -- and you can take an Aesop University check to the bank.

Discretion was not only the better part of valor; it was the only way to keep an investigation of a high-profile character from a famous institution from being prematurely publicized. Until we had more than one invoice for a fussy purple chair, Frank decided to inform only his boss and campus in-house attorney during these early stages.

My challenge was to have the vendors respond to my requests to mail and/or fax me copies of the authentic invoices without tipping our hand. Anyone who calls our main office number reaches a recording that announces, "You have reached the Aesop University Audit Department." I came up with a way to minimize the perceived stature of the audit department. I transformed my name from Ellen the Audit Manager into Poor Ellie the Temporary Bookkeeper. Sure, Mata Hari is a more exotic nom de guerre, but Ellie was easy to remember.

In the next issue: See if Ellen the Audit Manager's transformation into Poor Ellie the Temporary Bookkeeper pays off, Lawrence Fairbanks' short but eventful first interview, the second longer fruitful interview, lessons learned, recommendations, and much more.

Ellen A. Fischer, CFE, CIA, is the audit manager for a large U.S. university.  

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¹Names of all people, place, and things have been changed to protect the guilty and innocent.