In pursuit of justice

In the Justice for Fraud Victims Project, college students obtain valuable real-world experience in the field of forensic accounting while aiding victims of fraud. Members of law enforcement and academia collaborate with Certified Fraud Examiners to get justice for victims of suspected financial fraud. In this article, the authors provide a real-world example of how the project has helped fraud victims while detailing the benefits and challenges associated with adopting the JFVP at U.S. colleges and universities.

In 2011, two Spokane, Washington, charities became the victims of a volunteer tax accountant and bookkeeper who swindled the groups out of $24,000 while serving as treasurer. He volunteered his professional accounting services with a Catholic charity that helps the sick, injured and disabled in the U.S. and around the world, and with a nonprofit that assists those with vision or hearing impairments. Members of each group served for many years with little rotation of duties or positions and few internal controls in place. Over time the accountant earned the trust of the members of each nonprofit while leading a double life.

Seen as a kind, soft-spoken, but stalwart community member, he’d been married for more than 27 years, had three children and ran a small accounting practice as a sole proprietor. As other practitioners retired, he acquired their accounting practices and seemed to have a steady stream of clients. Those who volunteered with him didn’t notice any significant behavioral red flags, with the exception of the occasional complaint about being overworked.

One day in April 2009, the Catholic charity learned that the group’s bank account was overdrawn. The group intended to have the books audited two months before, but the accountant was too busy with tax season, so they let it go. At the same time, the president of the nonprofit discovered that a donation check given to a student had bounced. Each victim organization received copies of their respective bank records and quickly realized that the accountant had withdrawn funds and written checks to the U.S. Postal Service and to unknown people.

Both nonprofits contacted the police. Spokane Police Detective Stacey Carr realized that the cases shared an alleged suspect. The detective referred them to the Justice for Fraud Victims Project (JFVP), a collaboration among law enforcement, Certified Fraud Examiners (CFEs) and academia to combat fraud perpetrated against vulnerable victims — older adults, developmentally disabled, children in foster care, small businesses and nonprofit organizations. Students in the JFVP get hands-on experience by working under the supervision of anti-fraud professionals to examine allegations of fraud and financial crimes.

Working under the umbrella of the JFVP, Gonzaga University (GU) students and their CFE mentor, Lenore Romney, found that between November 2008 and April 2009, the crooked accountant used $6,000 of the Catholic charity’s funds and $18,000 of the nonprofit’s money to withdraw cash, purchase money orders at U.S. post offices, and issue checks to an employee of a spa and to an attorney. When confronted, the accountant told police that the spa employee was extorting him with pictures of his extramarital activities and that he paid an attorney for services related to her child custody battle. The accountant pleaded guilty to two counts of first-degree theft in 2011 and was remanded to pay restitution in the amount of the theft — $24,000. His wife, who filed for divorce during the investigation, sold their family home to repay both nonprofits in full. (See “Man stole $24k from 2 Spokane charities,” The Spokesman-Review, July 5, 2011.)

The Association of Certified Fraud Examiners’ (ACFE) Occupational Fraud 2024: A Report to The Nations shows that 32% of the cases reported by CFEs resulted from a lack of internal controls, which is common at small volunteer-based nonprofit organizations. This case of financial fraud is just one example of the vital work the JFVP provides to victims of suspected financial fraud in cases lacking forensic investigative resources. The authors will dive into how the project got its start, the vital services it provides to fraud victims, and the key benefits and challenges associated with adopting the JFVP at U.S. colleges and universities. They’ll also outline how CFEs can get involved in the JFVP and give back to their local communities.

How it all began

A simple question from K. Jill Bolton, assistant U.S. attorney in the Eastern District of Washington in 2009, led to a collaboration among law enforcement, academia and CFEs to combat occupational fraud. She simply asked, “Can you help?” Bolton was referring to additional assistance she drastically needed in the fight against fraud in the Inland Northwest. Bolton was attending a backyard barbecue at the home of Sara Melendy-Kern, assistant professor of accounting at GU. Gary Weber, professor of accounting and director of accounting programs at GU, also in attendance, responded to Bolton with a resounding “yes” and quickly offered Bolton the assistance of GU students. The trio then began brainstorming, and Bolton shared the idea of forming the fledgling group with Spokane County Deputy Prosecuting Attorney Shane Smith, who joined the effort. Smith contacted Detective Carr, who notified Marie Rice, president of the Spokane Chapter of the ACFE.

In January, the first 12-student JFVP class worked with four CFEs to investigate four cases of alleged asset misappropriation. Students interviewed alleged victims, documenting the investigative process and interacting with professionals.

In August 2009, the six met for the first time to discuss how GU students could help fight fraud in the region. After weighing possible options, selected GU students in a lab class worked on fraud cases referred by Carr. The group determined that the cases selected should involve alleged victims who can’t afford financial forensic or forensic accounting services and are frequent targets of fraud, such as nonprofits, small businesses and vulnerable individuals. These criteria aided GU’s mission “to be men and women for and with others,” reduced infringement upon CFEs’ practices and ensured that the cases aided those most in need. Professor Melendy-Kern oversaw the students’ instruction, and local CFEs recruited from the Spokane Chapter of the ACFE supervised them. Cases of substantiated fraud were turned over to Prosecuting Attorney Smith or Assistant U.S. Attorney Bolton, as appropriate. In true ACFE form, the six-member team harnessed the power of academics, law enforcement, prosecuting attorneys and fraud examiners throughout the process to form the JFVP.

In January 2010, the first 12-student JFVP class worked with four CFEs to investigate four cases of alleged asset misappropriation. Students interviewed alleged victims, documenting the investigative process and interacting with professionals. Law enforcement officials increased the number of cases closed. Most importantly, in the first five semesters of the program, GU students and their CFE mentors made a difference in the community by substantiating $514,148 in fraud losses. (See “Gonzaga Students Investigate With Police,” KHQ.com, May 20, 2010.)

Expanding the reach of the JFVP

Because of their work with the JFVP, Kern and Weber were awarded the AAA Mark Chain Award for Innovation in Accounting Education, and the ACFE named Marie Rice the 2010 Achievement in Community Outreach and Service honoree. Their recognition increased the JFVP’s notoriety. Word among academics spread about the benefits of the project, and seven colleges and universities across the U.S. adopted the JFVP. [See “JFVP schools” at the end of this article for a full list of colleges and universities that participate in the program.] The opportunities for service learning, community engagement and improved technical skills that the students would acquire excited faculty at the schools. David Glodstein, director of the master’s program in forensic accounting at the State University of New York at Old Westbury, was looking for a service-learning opportunity that would bring the case studies students read to life when he learned about the JFVP through the American Accounting Association.

The JFVP provides benefits to the affiliate schools, students, law enforcement agencies and alleged victims. Accreditation agencies encourage schools to offer students service and experiential-learning opportunities, like the JFVP, to increase student recruitment and engagement. Through the JFVP, students acquire skills related to information-seeking interviews, evidence examination, data analysis, report writing and presentation. Along the way, many also describe increased professional skepticism that helps them improve their anti-fraud mindset. Law enforcement likewise benefits from the JFVP by receiving assistance with financial crimes cases. Alleged victims receive the benefit of having their cases investigated.

Despite these benefits and Glodstein’s enthusiasm and commitment to bringing the JFVP to his institution, he encountered challenges. The JFVP has high barriers to entry that can be difficult to manage. Of the schools that considered adopting or that implemented the JFVP early on, only four were able to maintain the project. The remaining schools either faced difficulty obtaining buy-in from their administration or were unable to secure the necessary resources to begin the JFVP. Some experienced resource constraints later on. For example, one school was unable to solicit sufficient student interest, but others were unable to devote the necessary time to maintain the relationships with law enforcement and the CFE community. Some experienced turnover within their faculty or their JFVP partners. To address these issues, the authors conducted a study, sponsored by the ACFE Research Institute, to develop a best practices guide for the JFVP using thematic analyses of responses from former and current JFVP participants. (See “Implementing a ‘Real-World’ Fraud Investigation Class: The Justice for Fraud Victims Project,” by Sara M. Kern and Gary J. Weber, Issues in Accounting Education, Aug. 1, 2016.)

How the JFVP helps fraud victims

The JFVP helps fraud victims who are most in need protect and ideally recover their financial assets. Fraud victims who want to work with the JFVP should always begin by contacting their local law enforcement authorities. If the agency is near a JFVP affiliate school, the case may be referred to the school, or the agency may have JFVP students as interns. Some schools accept cases directly from alleged victims; other schools receive cases directly from law enforcement. JFVP schools select cases based on several criteria, including the victim’s ability to pay for financial forensic services, the type of victim (nonprofits, small businesses, the elderly), the complexity of the case, and whether any conflicts of interest exist between the JFVP affiliate school, CFE mentor, students, alleged victim or alleged perpetrators.

After a case is either accepted by a JFVP school or assigned to the JFVP students, the faculty or law enforcement agency meets with the victim to determine which records are necessary to complete the examination and to collect information. Victims explain what they found and why they believe fraud occurred. They’ll be interviewed and spend a significant amount of time looking for and producing information. Once evidence is obtained, students inventory the records to ensure they’re thorough and complete and contain reliable evidence relevant to the allegations.

Students investigate the allegations under the guidance of their instructor and supervision of their CFE mentor. In many cases, the investigation may last more than one semester as the students examine and analyze the evidence. Victims often have multiple contacts from their law enforcement partners, as well as the JFVP faculty to ensure the case proceeds smoothly. Before the case is returned to or referred to law enforcement, victims will meet with the investigation team to learn the results of the process.

Benefits and risks of the JFVP

Through surveys of JFVP faculty, students, CFE mentors and law enforcement, we learned that those who participate in the JFVP experience the highs and lows of the investigative process and its intricacies, but also express frustrations with the distinct challenges faced in the JFVP. Specifically, the quality of the collaboration among JFVP partners affects the investigative process. JFVP participants viewed the experience positively when the collaboration went well, but the investigative process became strained when the collaboration and communication weren’t effective. Many students are new to these relationships, having limited interactions in a project-based environment, so their responses often included strong emotional phrases. It was either “very good” or “very bad.” Faculty, CFE mentors and student participants all agreed, however, that the JFVP offers a unique experience that provides many benefits for students and the community. Students also explained that they liked working with professionals and relished the opportunity to engage in hands-on learning, and they felt compelled to help the alleged victim. However, JFVP participants also uniformly described the resource constraints and challenges they faced due to lack of administrative support, faculty expertise or tools to make the processes efficient (hardware and software, scanners, etc.), law enforcement turnover and reassignment, and insufficient number and availability of CFE mentors.

Specifically, administration at JFVP sponsoring schools is often concerned about the professional liability that faculty and students incur through the JFVP. The JFVP includes the investigation of active cases, and investigators must follow the chain of custody of evidence and may be called upon to testify. Key issues inherent in adopting the JFVP include the storage of digital or physical evidence within a college or university, the required confidentiality and appropriate background checks for students, the potential for faculty instructing the JFVP to be called upon to testify, and the use of professional procedures and documents, such as conflict-of-interest checks and client engagement letters. JFVP schools that allow case evidence to be collected by faculty and stored on campus may face digital and physical data security requirements, as well as future data destruction requirements. Additionally, JFVP schools may face legal liability should faculty, CFE mentors or students disclose information about the cases before they have been completely closed. JFVP schools may also face professional liability if students, faculty or CFE mentors don’t perform due professional care while conducting their investigation or if they falter during case testimony.

For these reasons, schools have adopted three versions of the JFVP model, driven by the school’s willingness to incur the related risk. In the “Robust Service” version, JFVP schools employ a variation of the original JFVP model introduced at GU in 2010. JFVP schools may elect to incur the full burden of the data security, legal liability and professional liability risks associated with running the JFVP. The “Blended Risk” JFVP model provides a hybrid version of the JFVP in which either the data security or professional liability risks are transferred to a law enforcement agency. In the Blended Risk version of the JFVP, evidence from cases may either be housed at a law enforcement agency, or law enforcement officers may supervise students on the school’s campus. Finally, in the “Partnered Protection” version of the JFVP, students intern or extern at law enforcement agencies, and schools don’t incur any risk. Schools that engage in the JFVP may choose to shift risks and resulting liabilities to third parties or law enforcement agencies. Each version of the JFVP aligns with the risk tolerance of the JFVP school.

CFEs give back

Regardless of the version of the JFVP model the schools adopt, students who participate in the project often pursue the CFE credential, and some become involved in chapters of the ACFE. The JFVP creates a platform for CFEs and local ACFE chapters to recruit future anti-fraud professionals and to provide mentorship to the students working on cases. Schools also rely on and partner with ACFE chapters for case supervisors and additional support for cases, which leads to engagement with school faculty and opportunities for on-campus recruitment and guest speaking. Networking opportunities at JFVP events and conferences further allow CFEs to share knowledge, discuss best practices and build professional relationships with future anti-fraud professionals. [See “How to get involved” at the end of this article.]

CFEs can also give back to their local community by providing resources and assistance to small businesses, nonprofit entities and financially abused victims in cases lacking law enforcement resources to pursue perpetrators. The JFVP fosters collaboration among law enforcement agencies, students, fraud examiners and other stakeholders, providing opportunities for CFEs to grow their personal network and offer their expertise to other professionals.

David Glodstein, DBA, CFE, CPA, is director of the master’s program in forensic accounting at the State University of New York at Old Westbury. Contact him at glodsteind@oldwestbury.edu.

Marie Rice, Ph.D., CFE, CIA, is director of the Center for Anti-fraud Resources and Examination Services (CARES) and assistant professor of accounting at Siena College. Contact her at mrice@siena.edu.

JFVP schools

Colleges and universities that participate in the Justice for Fraud Victims Project (JFVP) can be found throughout the U.S. Here’s the current roster of schools that participate in the JFVP.

• Gonzaga University, Spokane, Washington
• University of Alaska-Anchorage, Anchorage, Alaska
• Marquette University, Milwaukee, Wisconsin
• SUNY Old Westbury, Old Westbury, New York
• University of Maryland, College Park, Maryland
• Central Connecticut State University, New Britain, Connecticut
• Siena College, Loudonville, New York

How to get involved

Want to get involved with the JFVP? Your local chapter may have opportunities and resources available for a JFVP. Many JFVP schools also need Certified Fraud Examiners (CFEs) to help supervise cases and act as expert witnesses. You can serve as a case supervisor, mentor or guest speaker.

You’ll need to be qualified in each jurisdiction in which you supervise cases or provide expert witness services. Some jurisdictions now require in-person testimonial appearances.

The JFVP established a charity to connect CFEs with JFVP schools and to help affiliate schools mitigate the risks they face in adopting and implementing the project. To reduce the obstacles for schools to participate in the JFVP, donate online at www.jfvp.org or by mail: Justice for Fraud Victims Project, Inc., 595 Loudon Rd., Suite 106, Latham, NY 12110.