Furthering the Mission: 18th Annual ACFE Fraud Conference & Exhibition

During the week of July 15-20, there was one perfect place to learn the latest in cutting-edge, anti-fraud information from some of the best practitioners in the business: the 18th Annual ACFE Fraud Conference & Exhibition in Orlando, Fla.

The mission of the Association of Certified Fraud Examiners is to reduce the incidence of fraud and white-collar crime and to assist the Membership in its detection and deterrence. Every keynote, track session, and meeting were geared to helping fulfill that mission as more than 2,000 anti-fraud professionals gathered to recharge and learn the latest skills and practical tips.

FIVE KEYNOTERS, 11 TRACKS 

During one general session, attendees heard from Sen. Paul Sarbanes and the Hon. Michael Oxley about the gestation and implications of the historic U.S. Sarbanes-Oxley Act – five years after its signing. They then answered pre-submitted questions from the attendees.

Another keynoter, Chris Swecker, director of corporate security for Bank of America and former FBI employee of 24 years, spoke about the ways the private-sector fraud examiner can deal with post-9/11 conditions.

James T. Reese, Ph.D., a former FBI criminal-personality profiler for 25 years, motivated attendees with a hilarious and inspiring talk about handling stress in everyday life. In another general session, four experts discussed the future of the anti-fraud profession: Martin T. Biegelman, CFE, ACFE Fellow, director of the financial integrity unit at Microsoft; Robert McCoy, CFE, manager of corporate security for High Point Safety and Insurance Management Corporation; Marc Sherman, CFE, managing director of Huron Consulting; and Kim C. Wood, CFE, manager of investigations at The Dow Chemical Company. Jonathan E. Turner, CFE, CII, of Wilson & Turner Investigative Consultants, was the moderator.

In the last general session, Kevin Barnes, a convicted fraudster, discussed his personal experiences leading up to and following his conviction for mortgage loan fraud.

Participants learned from more than 60 speakers in 11 tracks, ranging from “Emerging Trends, Current Issues & International Incidents” and “Using Technology in the Detection and Commission of Fraud,” to “The Devil You Know: Risk Management” and “Looking Under Rocks: Auditing for Fraud.”

THE CHAIRMAN REPORTS 

Joseph T. Wells, CFE, CPA, founder and Chairman of the ACFE, said during the opening general session that knowing the members, who have become his friends, has “become the greatest privilege of my professional life.”

Wells said that “history is a series of milestones. So it is with the ACFE and me.” For the first 14 of the Association’s 19 years, “I was the chairman of the board and the chief executive officer. We reached a milestone when I booted myself upstairs to do writing and research,” he said.

“Another milestone is the continued success of the ACFE’s higher education initiative,” Wells said. “Recognizing the sad fact that accounting students get inadequate education in fraud, we started the initiative in 2002. At the time, there were only 19 colleges out of 900 [in the United States] that offered anti-fraud courses to their students. So we made an offer to universities that was hard to refuse. If they would agree to offer a fraud course, we would furnish them all of the resources they needed, free, with no strings attached.

“To say that this program has been a success is an understatement,” Wells said. “Now, a third of the U.S. accounting programs are either offering a fraud course or plan to do so in the immediate future. We expect that within five years, a college that doesn’t offer a fraud course will be the exception and not the rule. Recognizing the worldwide nature of our organization with members in 125 countries, we have extended the higher education program globally. Colleges in Canada, Europe, Asia, South America, Africa, and the Pacific Rim will now be able to participate. The higher education initiative is a tremendous credit to the ACFE, and to you, the members.”

Wells said that in the autumn of his career, he has pledged not to work so hard. “I have cut way down on traveling. … I’m spending most of my time at my 15-acre farm, writing and taking care of my small stable of animals. Although I am supposedly semi-retired, as long as I am physically and mentally able, I will be here with the people that mean so much to me in my life: all of you. Thanks for what you have done.”

PRESIDENT JAMES D. RATLEY, CFE, REITERATES AND EXPANDS GOALS 

“As many of you know, I have been with the Association since its inception, and I have been a part of the management team that has helped mold it into one of the finest professional organizations in the world,” said ACFE President James D. Ratley, CFE, during the opening general session. “I have advocated three principal goals, which I set forth last year.”

Ratley’s first goal is to accelerate the ACFE’s global expansion. “About 80 percent of our members are currently located in the United States, about 10 percent are in Canada, and the remainder are scattered around the earth,” Ratley said. He has authorized the budgeting of additional resources to expand membership initially in English-speaking countries, where there are no language barriers. “We have just opened a full-time office in the United Kingdom, headed up by Mr. Tim Harvey, previously with the Economic Crime Department for the City of London Police,” Ratley said. “In the future, we will grow into the major European nations, including France, Germany, Spain, and Italy. Two years ago, we established ACFE Japan, which is showing great promise. And in the Pacific Rim, we are already making significant inroads. None of this will be accomplished quickly, but because fraud is increasingly a global problem, I am committed to the ACFE providing global solutions.”

Ratley’s second goal is to provide more and diverse methods of training for Certified Fraud Examiners. “When we began nearly two decades ago, your educational choices were limited to seminars, conferences, and self-study courses,” he said. “We will always offer these staples, but with continually updated content so that you can stay on the cutting edge of anti-fraud knowledge. In addition, we will develop more Web-based training that will be both cost effective and convenient.

“And in the fall of last year, we rolled out a completely redesigned Web site and back-end system in which we have invested a half-million dollars. It provides you greater access to fraud-related information at no additional cost and will make it easier for you to update your membership data including your continuing professional education,” he said.

Ratley said the ACFE is closing the international waiver at the end of this year. “Until now, the only way to become certified outside the United States, Canada and the United Kingdom was to apply for a waiver through experience,” he said. “But by December, we will have an international exam that covers the 125 countries we serve and being ‘grandfathered’ as a CFE will no longer be an option.”

Ratley’s third goal is to increase the recognition of CFEs by employers and by the public. “We have made significant strides in the last several years. The CFE designation is now accepted for hiring and promotional purposes by major federal, state and local law enforcement agencies such as the FBI, the GAO, the Department of Defense, the Royal Canadian Mounted Police and many others in the private sector,” he said. “According to our latest salary survey conducted this year, the average CFE makes $18,000 more a year than a non-certified counterpart. But we will not rest on our laurels. I will continue to push for well-deserved recognition of CFEs, not only in the United States, but worldwide.”

CRESSEY, SENTINEL & ACFE MEMBER AWARDS 

Ros Wright, chairman of the United Kingdom’s Fraud Advisory Panel, received the 2007 Cressey Award. She was formerly the director of the UK’s Serious Fraud Office from 1997 to April of 2003.

She is an independent director of the UK’s Office of Fair Trading and the Department of Trade and Industry and chair of the Supervisory Committee of the European Anti-Fraud Office, an agency of the European Commission.

Wright is a barrister and a Master of the Bench of Middle Temple and has been called to the Bar of Northern Ireland. Formerly, she was general counsel and an executive director for 10 years at the Securities and Futures Authority, one of the principal UK financial services regulators.

The UK Fraud Advisory Panel raises public awareness to the dangers of fraud, identifies new trends in financial crimes, and provides safeguarding methods to business and the public.

“I have been involved in the investigation, regulation and prosecution of financial fraud and misconduct in the UK for something approaching 25 years,” Wright said. “In that time, I have seen fashions in these crimes come and go, but the essential lesson is that the basic features remain pretty much the same: dishonesty is the key and the ways these offenses are committed vary according to the ways that legitimate business practices are moving since financial criminals are adept at adopting and benefiting from the latest developments in technology and using them for their own ends.

“You who are working to prevent and investigate fraud here today know only too well the wrinkles and the crooked devices that financial criminals use to make their money. You are only too aware of the nature of the enemy we are up against. It is by discussing with your colleagues here at this wonderful conference the latest methods at your disposal to counter fraudsters, to get ahead of them and to frustrate their designs that we will assist in winning the battle,” Wright said. “Cooperation and the sharing of knowledge and experience can help enormously by disseminating the lessons learned in our own cases. There is no justification for keeping expert information in this field to ourselves, unless it is the fear that too much information out there can actually aid the crooks,” she said.

The Cressey Award, established in 1989, is bestowed annually for a lifetime of achievement in the detection and deterrence of fraud. The award, the ACFE’s highest honor, is named for Dr. Donald R. Cressey (1919-1987), one of the world’s foremost experts on fraud and a founding father of the ACFE.

William Sanjour received the 2007 Cliff Robertson Sentinel Award for revealing deception and inequities for decades in the U.S. Environmental Protection Agency (EPA).

In the late 1960s, Sanjour became involved in environmental issues as a consultant to the EPA. Several years later, as branch chief in the newly established Hazardous Waste Management Division, he supervised studies of hazardous waste damages and treatment technologies. His efforts led to the passage of the Resource Conservation and Recovery Act of 1976 (RCRA).

What began as an effort to do his job by developing regulations for the treatment, storage, and disposal of hazardous waste became a long, drawn-out battle with the EPA, multiple presidential administrations, and several government agencies, as he fought to make the RCRA work in the true spirit of the legislation. Until his retirement in 2001, Sanjour faced retaliation, reassignments, demotions, and legal showdowns – all the while stubbornly continuing his government service and assisting grassroots environmentalists. (Read Sanjour’s interview.)

The ACFE also presented these seven member awards:
• Certified Fraud Examiner of the Year, Philip C. Levi, CFE, CPA, CME, FCA, CA•IFA
• Educator of the Year, William J. Kresse, J.D., M.S., CFE, CPA
• Walker Award (highest annual score on the CFE Examination), Carlos A. Torres Rivera, CFE, CPA
• Outstanding Achievement in Outreach/Community Service, Joseph R. Dervaes, CFE, ACFE Fellow, CIA
• Chapter of the Year, Philadelphia, accepted by Carol A. Cagno, CFE, chapter vice president
• Chapter Newsletter of the Year, Vancouver Chapter, accepted by Colin G. Parcher, CFE, chapter president
• The Hubbard Award (best 2006 Fraud Magazine article), Tracy L. Coenen, CFE, CPA, MBA, for her article, “Financial Statement Fraud in the Katrina Aftermath: A Whirlwind of Opportunities,” from the Jan./Feb. 2006 issue

PRIVATE-SECTOR EXAMINERS DEALING WITH POST-911 CONDITIONS 

Chris Swecker knows the public sector. Prior to joining Bank of America in 2006 as corporate security director, he served 24 years with the FBI, most recently as executive assistant director in charge of nine FBI divisions. In the opening general session, he spoke about the ways the private-sector fraud examiner can deal with post-9/11 conditions.

Swecker said that the public-sector resources, strategies, and efforts in the financial crimes and money laundering arenas post-9/11 are characterized and influenced by these drivers: 1) limited resources in the face of a dramatic increase in financial crimes and money laundering; 2) globalization and the Internet, which have dispersed and increased financial crime threats; 3) inconsistent coordination in many financial crimes areas, especially identity theft and Internet-perpetrated crimes, which fragments and “stove-pipes” the overall law enforcement effort; and 4) many criminals who commit fraud, especially identity theft, and never are prosecuted.

These drivers affect “auditors/risk professionals/fraud investigators in the private sector by shifting the burden of impacting the crime problems to the private sector,” Swecker said. “As everyone knows, there is a great deal of duplication and overlap in federal and state investigations in all areas – not just financial crimes – but it is becoming more pronounced in financial crimes. This has always been a source of frustration to me as a street agent all the way up to my last position as acting executive assistant director,” he said.

“So, what is the collective vision to meet these challenges for an organization of fraud examiners as we go forward?” Swecker asked. “From my perspective the vision should include an emphasis on prevention, strong partnerships with law enforcement agencies in aligning your respective interests and roles, leading the way with advanced fraud detection technology and analytics, and finally a strong training and awareness of current trends and patterns with terrorist financing indicators always in mind.”

Swecker said that “whether you are an auditor, risk manager, accountant, fraud investigator, etc – you are indeed on the front lines. You all protect our most critical asset, the integrity of our economic system. … Fraud examiners really are the guardians that are in the best position to ensure that history does not repeat itself. …”

DESPITE CONTROVERSIES, SOX IS DOING ITS JOB, SAY SARBANES & OXLEY 

Sen. Paul Sarbanes and the Hon. Michael Oxley are retired from the U.S. Congress, but they still are vigorous proponents of the well-known corrective legislation that bears their names.

“We felt that [Sarbanes-Oxley] strengthens the statutory infrastructure that was set out in the legislation of the 1930s to address problems of that author’s legislation that he could not have anticipated,” said Sarbanes during his joint general session with Oxley. “I think we’re in the continuing process of restoring honest, transparent, ethical business practices. … Frankly, I don’t think we can do any less because the integrity of the capital markets and, therefore, the confidence of investors in those capital markets … are at stake,” Sarbanes said.

“We’ve changed from a nation of savers to a nation of investors,” Oxley said. “When I came to Congress in 1981, 36 percent of American households owned stock. It’s now 54 percent. … They have a piece of the action. The guy who’s working on the line at Cooper Tire and Rubber Company in Findlay, Ohio, is a stock owner.”

Both Sarbanes and Oxley said that SOX was written to protect the average investor and his or her retirement savings, and not big business or institutional investors.

They responded to criticisms of SOX, especially Section 404, which says that a public company must have a system of internal controls that the management reports on, and that the system shall be attested to by auditors. Small businesses have protested the compliance costs would be prohibitive.

“The SEC and the Public Company Accounting Oversight Board have just recently moved towards making 404 less expensive and easier to work with,” Oxley said. “Chris Cox, the chairman of the SEC, understands that we need to make this work better – that the pendulum needs to swing back. … [that] one size doesn’t fit all and that smaller companies can be treated differently.”

Sarbanes, quoting a Wall Street Journal op-ed piece by former Fed Chairman Paul Voelker and former SEC Chairman Arthur Levitt, said that the upfront costs are often high because many companies have lacked adequate internal controls. “But I think there’s some legitimacy about cost concerns. No one wants needless regulation,” Sarbanes said. “The SEC and the PCAOB … came out with a new auditing standard 5, and they’ve given small companies under an $80 million cap a deferral. … They are offering the prospect of getting [the small companies] into compliance at a lesser cost.”

Critics also have said that the tough regulations are driving international companies to invest in other countries. “There’s some [corporation] movement elsewhere in the world but that trend began long before this legislation came along,” Sarbanes said. “In 2005, the five largest IPOs were done abroad. People say, ‘Look, they’re not coming to [the] New York [Stock Exchange].’ But three of them were Chinese state-owned companies that were privatized. … And two were French state-involved companies that were privatized,” he said. “I still think we gain a competitive advantage not disadvantage from having high standards.”

“A lot of people predicted that when we passed SOX that … other countries would enact lesser standards [to attract companies],” Oxley said. “In fact, quite the opposite is true. Virtually every industrialized country has adopted similar provisions of the Sarbanes-Oxley Act.”

NOTABLE QUOTES 

Sen. Paul Sarbanes:
“I’m glad to be here with my namesake. People in Mike Oxley’s Congressional district were wondering why he changed his first name to Sarbanes. And people in Maryland are wondering why I have a hyphenated last name.”

Hon. Michael Oxley:
“I got a package in my Congressional office before I retired from a CFO of a Midwestern company … containing two white tube socks and a note asking, ‘Would you please sign these so I can give to my staff who are working on SOX compliance?’ Now, I’ve signed a lot of things, but it’s the first time I’ve signed sweat socks!”

Chris Swecker:
“Regulators have high expectations that private-sector industries will identify any terrorist financing nexus to the crime which is like ‘finding a needle in a stack of needles.’ But at the same time the government shares very little information that would provide the necessary focus in the areas where terrorist financing is most prevalent.”

‘SISTERS’ REUNITE AT EACH ANNUAL CONFERENCE 

They look like sisters, talk like sisters, and act like sisters. They aren’t related but feel like they could be. “Sometimes you can pick your own sister!” says Ronni Weatherford, CFE. “People often mistake us as sisters,” says Jere Batten, CFE, CPA.

Ronni and Jere are proof that lasting friendships are often made through the ACFE. They met in Austin at a seminar about eight years ago and immediately became long-lost pals. Since then, they’ve attended five annual conferences together.

“We share a room and we see the sights together,” says Jere. They attend classes and catch up with their lives over meals and breaks. They’ve also taken vacations together and their family members – and pets – have become friends.

Jere is president of Batten Accountancy Inc. in San Diego, Calif., and Ronni is senior corporate investigations liaison at American National Property & Casualty Co. in Springfield, Mo. They often share fraud examination tips and principles. But most of all, they share their lives. Because that’s what close sisters do.

James T. Reese, Ph.D.:
“How do you make an impact? You can either stay bitter or you can get better. I can tell you much time you have left. You’ve got between now and dead! What do you plan to do with it? You can sit around complaining … or you can get up in the morning and say ‘I’ve got places to go.’ … Stop blaming other people for where you haven’t been or where you’re going … My wife woke me up the other day at 3 a.m. and I said, “What, Sweetie?” (That’s what I call her when she wakes me up at 3 a.m.) ‘Would you like to know the exact moment of your death?’ And I said, ‘No. Why?’ And she said, ‘Never mind.’ I didn’t sleep well that night! I don’t know what the future holds for me, but I’m going to enjoy it. … I want to get excited about this thing called life!”

Kevin Barnes:
“[Mortgage] misrepresentation cost me my freedom, integrity, and trust. To me, integrity is doing the right thing when no one else is around. And that’s the biggest problem we have within the banking industry. … We all know what a SAR form is – a Suspicious Activity Form that’s filed with the FBI by a banking institution. … in 2005, 4,225 were filed on mortgages. In 2005, 21,994. That’s a 525 percent increase in mortgage fraud.”

COMPANIES SERVE AS CONFERENCE SPONSORS 

Protiviti was the conference Platinum Sponsor and sponsored the ACFE Fraud Museum and attendee bags. Deloitte, and Corporate Research and Investigations Ltd. (CRI) were the Gold Sponsors. Deloitte Financial Advisory Services LLP sponsored the new ACFE Career Fair and Welcome Reception. CRI sponsored refreshment bags and lanyards. EthicsLine, DeticaNetReveal, and Fraud Magazine were the Silver Sponsors.

Protiviti is a leading provider of independent risk consulting and internal audit services. The company provides consulting and advisory services to help clients identify, assess, measure, and manage financial, operational, and technology-related risks encountered in their industries. The firm assists in the implementation of the processes and controls to enable their continued monitoring. Protiviti also offers a full spectrum of internal audit services to assist management and directors with their internal audit functions including full outsourcing, co-sourcing, technology and tool implementation, and quality assessment and readiness reviews. Protiviti, which has more than 50 locations in the Americas, Asia-Pacific, and Europe, is a wholly owned subsidiary of Robert Half International Inc. Founded in 1948, Robert Half International is a member of the S&P 500 index. (www.protiviti.com)

The forensics services professionals of Deloitte Financial Advisory Services LLP help reconstruct accounting and business records and provide the detailed analysis necessary to uncover essential facts and insights. They help their clients understand and analyze events or issues, prepare to deal with them, and develop methodologies and strategies that help clients handle difficult circumstances. With decades of dispute consulting experience and through thousands of cases, its Dispute Services practice has a solid track record of helping counsel with challenging financial and economic issues in complex litigation and other business dispute cases. Deloitte provides financial insight and clarity to counsel during all stages of a business dispute, from case theory development and discovery to expert witness testimony.

Corporate Research and Investigations (pvt) Ltd. is a company that operates in different areas of the world with its head office in Islamabad, Pakistan. CRI was established in the beginning of 2001 as Pakistan’s foremost professional investigation company, and has experienced rapid growth over the last few years. Apart from the head office, the company has a developed and well-connected network of operatives in all strategic and remote areas of the world and also succeeded in building top-knitted affiliations across the globe as well. Its affiliated offices and strategic partners in Europe, the Middle East, Asia, and other neighboring countries are responsible for various corporate researches and other allied investigative services.

CRI’s unique mission is to erase false covers and help clients see through micro-bacterial businesses and economic crimes. Its approach is to bring customers the latest tools and ideas in sensing and control to help them operate more efficiently and smarter. Its high-quality investigative products strive to meet and exceed the need to raise productivity and improve quality at our customers’ businesses around the world. (www.cri.com.pk)

EthicsLine is the official hotline of the ACFE. EthicsLine is operated by The Network, the premier provider of ethics hotlines for nearly 25 years. The firm utilizes award-winning technology to deliver services like confidential hotlines to thousands of clients including nearly half of the Fortune 500. EthicsLine’s comprehensive hotline services include 24/7 hotline operations in more than 150 languages, secure Web and telephone reporting of issues, ethics-related communications campaigns, and user-friendly case management systems. (www.EthicsLine.com)

Fraud is a growing menace for institutions worldwide. Fraudsters are becoming more organized and sophisticated and have become adept at distorting information to operate underneath the radar of traditional fraud detection approaches. The groundbreaking Detica NetReveal solution provides a complete, integrated product suite that: reduces financial losses by improving the early detection and prevention of criminal behavior; improves operational efficiency by reducing the number of unnecessary investigations; enables continuous improvement of fraud detection and prevention capabilities; and improves regulatory compliance and helps protect organizational reputation.

Detica is a specialist business and technology consultancy focused on turning complex information into relevant and actionable intelligence. Much of its work is in the information-intensive areas of fraud containment, security, risk management, and regulatory compliance. (www.detica.com)

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