Featured Article

They stole food from the mouths of babes

Please sign in to save this to your favorites.
Written by: Catherine Cole, CFE
Date: January 1, 2013
Read Time: 12 mins
Fraud Investigation and Examination Fraud Schemes
Two employees of a U.S. government-funded relief project in Liberia, Africa, were convicted of diverting US$1.9 million in food and tools from thousands of hungry and needy families. The author describes her fraud examination work on the case and provides tips on working in Africa.

Liberia in the early 2000s: This West African nation — recovering from the rule of Charles Taylor and a brutal 14-year civil war — was under a transitional government. Displaced people were returning to their battered communities. Clinics, schools, wells, latrines, bridges and roads needed repair. Good jobs were scarce. At the end of 2003, unemployment and illiteracy stood at more than 75 percent. This fragile context bred a "grab what you can" mentality to survive and support extended family members.

In 2005, the U.S. Agency for International Development (USAID) funded more than $2 million in food commodities to a large international humanitarian organization — for a Community Resettlement and Rehabilitation Program in Liberia. The grant provided vital nutrition — legumes, vegetable oil, grains — in return for beneficiary labor on desperately needed post-war infrastructure projects.

At the end of the two-year grant, the national director and head of programs received an anonymous text message reporting that employees had diverted food and tools from hungry and needy families. Eventually, two Liberian defendants —salaried managers of the program — were accused and convicted of a US$1.9 million fraud in a country that had a real per capita GDP in 2009 of $128. 

The fraudsters stole food from the most vulnerable of the vulnerable — many of whom were young, frightened mothers with babies in impoverished, rural areas.

At the time I was director of financial and strategic planning for the humanitarian organization. The organization sent me to Liberia — primarily because of my West African audit background — in February and August of 2008 to review a previous internal audit and gather additional information. My division's responsibility was to respond to U.S. authorities, calculate and report final losses and ultimately repay USAID.

In this article, I describe my fraud examination and tips on investigating amidst the challenging conditions in African countries.

Humanitarian aid is a multibillion-dollar industry providing basic economic, health, infrastructure and food security to those in need. Many of the countries that receive this aid have contextually challenging business environments. For example, Transparency International's 2005 Corruption Perceptions Index ranked Liberia, West Africa, 137 out of 158 countries for levels of corruption. Conducting a successful fraud examination requires a basic understanding of the unique environmental and cultural issues on the ground.

FRAUDSTERS FALSIFIED DOCUMENTATION WELL

We knew from the internal audit that in the midst of an incredibly tough operating environment, management-level employees had committed occupational fraud by diverting food intended for hungry Liberians and covering it up by directing subordinates to falsify corresponding documents. The fraudsters then sold this food on local markets for personal gain.

The "distributions" appeared legitimate to those monitoring the project because of fraudulently signed waybills and falsified beneficiary receipt documentation. The audit process could only verify that 9 percent of the commodities had been distributed to the intended beneficiaries. Many of the corresponding infrastructure projects remained incomplete.

With the possibility that up to 91 percent of the food intended for hungry people was diverted (though the audit couldn't confirm this), we conducted additional probes, including a contractually required review from a supervising organization on the ground in Liberia. By the time we discovered the magnitude of the fraud, the grant was completed; most employees had fulfilled their terms of service, and we weren't able to reach them.

It was difficult for us to uncover additional details and determine final losses. Because the fraudsters falsified documentation so well, we had to reconstruct events from staff's and beneficiaries' oral reports. Closing "feedback loops" (that is, discovering who received what food and tools and how it was distributed) with staff and beneficiaries in Liberia required extremely complicated travel. Many intended beneficiaries lived in remote areas, and it took days of traveling washed-out roads to reach just a few. (See photo at left.) Unlike organizations in Western society, these people didn't have a ready way to connect to let us know their customer experiences.

We had to carefully consider the motivations of both beneficiaries and former staff. Beneficiaries may have been motivated to inflate losses so they could receive more food. Staff may have been under other pressures or threats that outsiders couldn't easily detect or understand.

Conducting fraud examinations in Africa poses cultural challenges. Africans' notion of time often is different from Westerners. (For example, one former Burkinabe colleague was unsure of his birth date, so he was never able to report his accurate age.) All the intended Liberian beneficiaries lived in remote villages without standard working hours, calendars or electricity. Seasons are limited to "dry" and "rainy." To complicate matters further, we were interviewing beneficiaries about events that took place years earlier.

Tribal alliances are another potential complication. In Western society, nepotism is addressed through human resources' departments, general hiring practices and policy. Alliances might be more pervasive, yet subtle, in many African societies. In Liberia, employees alleged both the head of the local operation and the fraudsters were members of the Vai tribe.

As news of the potential fraud spread, we had difficulties securing all original documentation. Remaining documentation had been moved and placed in an unsecured, temporary, unlit storage unit in front of the main office building. We had to dig for days through red-dust-covered commodity documentation in hot, uncomfortable conditions.

During our examination of falsified beneficiary receipt documentation we had to discern between true town names, false "ghost" towns and those with varying spellings — a common characteristic among traditional African-named communities. We originally thought four towns were fictitious, but then we discovered their actual names by visiting them and verifying food distributions.

Those without experience on the continent should be cautious. Expatriate staff who were asking too many probing questions in other African cases sometimes would find fresh animal parts placed on their desks as warnings during fraud probes. As an American woman, I often felt unwelcome in previous audits.

SUGGESTIONS FOR MANAGING POTENTIAL BARRIERS

I supported the local operation through its contractually required review by briefing senior management, obtaining physical copies of much of the documentation (commodity waybills, contracts, internal and external distribution reports, etc.), and finding legitimate communities previously identified as "ghost" towns, all of which reduced our financial liability to the donor. Afterwards, I arranged for additional key documents to be shipped and securely stored in the U.S., calculated and reported final losses to the donor and authorities, provided ongoing briefings to senior management and various departments such as legal and media, and provided information to a U.S. Attorney's Office. I learned many lessons from this fraud examination and previous audits in Morocco, Sierra Leone, Burkina Faso, Malawi, Ethiopia, Rwanda, Sudan (before the establishment of South Sudan), Kenya and Ghana.

Lesson No. 1: Cultural issues can be significant
I found it difficult to close "feedback loops" because most of the potential interviewees were in remote areas. If you ever find yourself in the midst of a fraud examination in an African country, children will most likely gather around to get a look at you when you first reach the interview site. Don't ignore them; ask them to sing a song, and you can clap and smile while you listen. You'll begin to build a rapport with them and their parents.

Seek the permission of the village chief or leader before you conduct any interviews. Be patient; it once took me three hours to find the leader during an investigation in Ghana. (If the chief doesn't give you permission, leave the village.)

Demonstrate respect to the chief by shaking hands (lightly — most Africans consider a firm handshake insulting) and taking the time to engage in culturally appropriate introductions. Tell him about your family and ask about his. You may be asked to share a meal with him and others.

Don't wear your watch, and don't check the time on your cell phone or rush the process in any way. Most rural Africans (indeed, most non-Western countries) don't appreciate the Western notion of time. Rushing through the process can be insulting.

I didn't face this in the Liberia examination, but I've often had to hurdle the language barrier. Of course, oral reports become more complicated when interviewers don't speak the local language or dialect. In some African countries, people living in remote areas may only speak an indigenous language understood by a very few people. Obviously, you'll have to find the best translator you can.

One trick I used in rural Ethiopia was to call out to the ever-present crowd around me to ask for someone who speaks English. Often, someone's niece or grandchild would volunteer. This may reduce dependence on an assigned translator who actually might not totally understand the unique village dialect or have a motivation other than uncovering the full truth.

If you assume any authority over interviewees or volunteer translators, you'll decrease your chances of receiving authentic answers.

To build rapport, share bottled sodas with interviewees, which most perceive as a gracious gesture and great treat. Sitting in a circle under a tree, drinking sodas, creates an open and casual environment in which intimidated beneficiaries might open up and report vital information. Hot tea may be more culturally appropriate in the Sahel region, particularly in Sudan and eastern Chad.

Share pictures of your children or nieces and nephews. You'll bond with people who greatly value motherhood and fatherhood.

If possible, find someone to take copious notes for you so you can look interviewees in the eye and build rapport. Ask permission before using a tape recorder or camera because some cultures have unfavorable superstitions about some electronic equipment. (However, cellphones are now prolific in many developing countries.)

Lesson No. 2: Senior management and technical support is vital
I had technical support from my organization for this fraud examination. Although I was familiar with government commodity grants, I still needed a logistician in the Liberian case to ensure I understood the intricacies of the government commodity grant.

Seek experienced colleagues who can help you unravel possible sensitive tribal and family alliances. It's unrealistic to think you can decipher these influences in a two-week assignment.

Lesson No. 3: Practice caution
Of course, this type of remote travel requires a sturdy vehicle and a knowledgeable, local, trustworthy driver, or your examination efforts will be limited. You have to depend on your driver because you can't dial 911, and cellphone access may be limited, at best.

Here are more cautionary tips:
  • Before you travel, take a safety course for international travelers in developing countries. 
  • Constantly inform a trusted colleague of your locations, and check in often. 
  • Buy evacuation, kidnap and rescue insurance. 
  • Register at your local embassy.
  • Wear your seatbelt (even though it's discouraged in many African cultures).
  • Take a daily prophylactic antibiotic to give you the freedom to eat and drink locally. 

Lesson No. 4: Record GPS coordinates because village names can be confusing
Discretely recording GPS coordinates on a handheld device (not a cellphone) allowed me and others to revisit these remote areas and verify locations regardless of reported names. At the end of each trip, our Geographic Information Systems specialist back home would download the coordinates into a map for evidentiary support.

Lesson No. 5: Illiterate beneficiaries complicate financial documentation reconciliation
You might have to be flexible in reconciling financial documentation among those who are illiterate. For example, one humanitarian group — when auditing a rural Moroccan agricultural women's project — documented livestock inventory by displaying posters with large pictures of goats, chickens and cows with tallies underneath that showed inventory levels.

Lesson No. 6: Gender matters
Female investigators may be an organization's best resource when societies don't allow outside men to interview women. I was able to approach other women who then welcomed me into their homes. I was free to join local groups of women for discussions, and they permitted me to collect photographic evidence of their inventory documentation systems.

Lesson No. 7: No replacement for on-the-ground research
Because fraud examiners in developing countries can't always rely on formal verification methods such as interviews and testimonies, they must get their hands dirty and visually inspect sites that contain evidence. In the Liberian case, food wasn't stored in a warehouse structure. We didn't have any inventory documentation, and there were no contracts between the local office and any transportation vendors, which were needed to move food from local warehouses to distribution sites.

However, early staff reports and signed waybills supported the rumor that food had been delivered to a warehouse in Medina, Liberia. Also, a trucking company repeatedly reported that it delivered commodities to that warehouse. But when we physically inspected the warehouse we found no evidence of stored food and realized it wasn't large enough to hold these commodities. It actually was a staff residence with only a small room for storing hand tools. We never discovered where the fraudsters delivered and distributed the diverted food.

RESOLUTION OF LIBERIAN CASE

As soon as we released our internal audit report, the USAID Office of Inspector General (OIG) began its investigation. After the OIG submitted my work to the U.S. Attorney's Office, the logistician and I gave testimony.

Ultimately, a U.S. jury convicted Joe O. Bondo and Morris B. Fahnbulleh, both of Monrovia, Liberia, in November 2010 of conspiracy to defraud the U.S., mail and wire fraud, and false claims, according to a U.S. Department of Justice (DOJ) release. Bondo also was convicted of two counts of witness tampering. They were each sentenced to 12 years in a U.S. prison for defrauding USAID of roughly US$1.9 million.

"As a result of the defendants' conduct, thousands of families never received the food or reconstruction assistance intended," according to the DOJ release. The local office in Liberia was closed, and the humanitarian aid organization repaid $1.9 million to USAID.

In the end, the organization expended extensive resources to examine the fraud and work with authorities. Because these intended, vulnerable Liberian beneficiaries weren't able to complain or report suspected fraud directly to funding entities, I went beyond official staff reports to interview those who were supposed to receive aid. I then was able to relay valuable information throughout the organization, reduce our financial liability to USAID, calculate and report final loses to the organization and authorities, and develop lessons learned.

PREVENTION OF HUMANITARIAN FRAUD

Despite difficult conditions, local leadership should close feedback loops via regular travel in the field. They can alert management to problems before they become prolific by monitoring program implementation and periodically interviewing intended beneficiaries throughout a grant period.

Beneficiaries should know what they're supposed to receive and who to notify if there's a problem. Program leaders can communicate to beneficiaries via local media to make announcements, signage at distribution or service sites and making themselves available. They can receive feedback through community-based groups and "crowdsourcing" (in this case, soliciting views via text messages). Even the most rural beneficiaries have access to mobile phones, so program leaders should distribute their work mobile numbers.

A strong anti-fraud corporate culture and tone from the top, good risk assessment, compliance and policies, and consistent training all help an organization ensure that third-party donated services actually reach the people they're intended to reach.

When a humanitarian organization views beneficiaries not just as receivers of commodities but empowered partners and providers of critical information it can pinpoint conditions that can lead to occupational fraud and abuse.

Catherine Cole, CFE, is senior administrator – community services for the Brazos Valley Community Action Agency in College Station, Texas. Previously, she was director of financial and strategic planning for the international programs group of World Vision. 
 
The Association of Certified Fraud Examiners assumes sole copyright of any article published on www.Fraud-Magazine.com or ACFE.com. Permission of the publisher is required before an article can be copied or reproduced. 
Ad

Begin Your Free 30-Day Trial

Unlock full access to Fraud Magazine and explore in-depth articles on the latest trends in fraud prevention and detection.

Learn More Already a member? Sign In

You May Also Like