As fraud investigators, we are used to seeing complex frauds involving massive amounts of data, documentation and detail. However, not every fraud is so complex, and even the simplest cases can go undetected for a long time.
This article was inspired by a session from the 35th Annual ACFE Global Fraud Conference with speakers Julia Patterson, Roland Winter, CFE, and Ashu Sharma, CFE, depicting a relatively complex fraud and a simple one. Both cases resulted in major damage to many people. Here, we will examine a few cases of simple fraud and the extensive consequences each caused. It serves as a lesson that, even when confronted with modern techniques and technology, it is dangerous to allow traditional fraud prevention techniques to lapse.
Perpetrator name and position: Estella Sanchez, finance director, city of Surprise, Arizona, USA
Estimated time frame of theft: 2007 to 2014
Estimated amount stolen: USD 836,000
Methods of theft: 1.) Requested checks to increase the amount of petty cash on hand at the cashier’s desk and instead deposited the checks into her personal account. 2.) Stole checks from the daily deposits and altered the deposit records to conceal the stolen checks.
How the case was uncovered: An internal audit of the accounts payable department located some “red flags.” The auditor decided to conduct a surprise audit of the cashier’s desk.
Internal control deficiencies: Other employees witnessed Sanchez’s suspicious behavior deviating from two different cash-handling procedures but did not feel comfortable reporting it to Sanchez, who was their supervisor.
Outcomes of theft: 1.) Termination of employment. 2) Civil judgment in the amount of $835,837 USD. 3) Charged with 15 criminal counts. Pled guilty to one count of fraudulent schemes/artifices and one count of theft (other charges dismissed). Sentenced to one year in jail and at least five years of probation, 40 hours of community service and restitution in the amount of USD 836,000. 4.) Required to disclose criminal history to any new employers. Obtain written approval from the probation department before starting a new position, visiting a gaming or gambling establishment, accessing the internet, or using computer equipment. 5.) The city eliminated all petty cash accounts, reduced the amount of cash and number of cash-handling locations, and created an Internal Audit Committee.
Lessons learned: 1.) Employers should create hotlines or other methods of anonymous reporting and make sure the employees are knowledgeable of and comfortable using them. 2.) All allegations of deviation from cash-handling procedures should be investigated and all employees should be required to adhere to procedures.
Sources: The Republic, Maricopa County Criminal Courts, The Republic
Perpetrator name and position: Dawn Olson, owner of Rainforest Bookkeeping, Port Alberni, Vancouver Island, BC, Canada
Estimated time frame of theft: 2018 to 2020
Estimated amount stolen: CAD43,500 (USD 32,894)
Method of theft: Wrote 67 checks to herself valued between CAD 500–900 from at least three businesses whose financial records she reviewed and maintained.
How the case was uncovered: Unclear, but likely from a tip provided by one of the victims.
Internal control deficiencies: 1.) Companies did not pay close enough attention to the payments being drawn from their accounts. 2.) As the owner of her bookkeeping company, no one was required to monitor Olson’s actions.
Outcomes of theft: 1.) Pled guilty to three counts of fraud more than CAD 5000. Sentenced to three concurrent conditional sentences of nine months and repayment of at least CAD 53,500. 2.) Required to disclose to future clients that she has a history of fraud.
Lessons learned: Companies should review their accounting and bookkeeping records carefully and completely, potentially having multiple individuals review the records.
Sources: Victoria News, British Columbia Court Services Online
Perpetrator name and position: Thomas Upchurch, former executive director of the Jefferson County Housing Authority, Illinois, USA
Estimated time frame of theft: January 2015 to September 2020
Estimated amount stolen: more than USD 20,000
Method of theft: Linked the organization’s credit card to his personal Amazon account and charged 300 personal items to the card.
How the case was uncovered: Unclear, although other previous employees of the housing authority reported suspicious payments Upchurch may have received.
Internal control deficiencies: The perpetrator blocked others from reviewing the company’s spending records, and others apparently allowed this to happen.
Outcomes of theft: 1.) Termination of employment. 2.) Signed a plea agreement to plead guilty to one count of misdemeanor conversion of federal funds, rather than be convicted of any felony charges. Sentenced to 10 months incarceration, one year of supervised release and USD 20,150.26 in restitution.
Lessons learned: 1.) Multiple parties should review spending records, especially parties who are not also responsible for making charges on behalf of the organization. 2.) Suspicious behavior, including refusing to provide information about or access to relevant information, should be fully investigated as soon as it is observed.
Sources: Department of Justice, U.S. District Court Southern District of Illinois
Perpetrator name and position: Molson Romie, employee at North Slave Correctional Complex, Yellowknife, Northwest Territories, Canada
Estimated time frame of theft: January and February 2020
Estimated amount stolen: CAD 11,224 (USD 8,494)
Method of theft: The perpetrator obtained a check payable from the North Slave Correctional Complex's Inmate Trust Fund to a former inmate. This fund serves as a combined bank account for people while incarcerated. A group of employees altered the check amount and recipient name and electronically deposited the check 36 times into their personal checking accounts. Romie was accused of having been responsible for 16 deposits totaling CAD 11,224 into accounts belonging to two acquaintances.
How the case was uncovered: Tip to the Royal Canadian Mounted Police, which resulted in a joint investigation by partners from banks and government auditors.
Internal control deficiencies: 1.) A check was cut to a person who was no longer in the facility, rather than confirming that the proper person would be able to receive the check. 2.) Employees were able to intercept checks intended to go to other people. 3.) Records from the Inmate Trust Fund were not able to be reviewed quickly enough to detect the scheme from continuing.
Outcomes of theft: 1.) Termination of employment. 2.) Charged with 49 counts of forged checks, as well as one count of mischief by obstruction and breaching his bail conditions in an unrelated situation. 3.) Pleaded guilty to five counts of fraud less than CAD 5,000, one count of mischief by obstruction and breaching his bail conditions (the remaining charges were dropped). Sentenced to six months incarceration and one year of probation plus an unknown financial penalty.
Lessons learned: 1.) Ensure that any checks payable are received directly by the intended recipient.
Sources: Cabin Radio, Canadian Broadcasting Company, Cabin Radio
Perpetrator name and position: Hsin-Yu Tsai, former Commonwealth Bank customer service specialist, Sydney, New South Wales, Australia
Estimated time frame of theft: 2014-2015
Estimated amount stolen: AUD 3.5 million (USD 2.3 million )
Method of theft: Withdrew money from customer accounts for her own personal use.
How the case was uncovered: A bank customer noticed money was missing from his account and reported the missing money.
Internal control deficiencies: 1.) The bank did not review the customer service specialists’ activities. 2.) The bank likely did not have a way to track frequent or large withdrawals made by specialists.
Outcomes of theft: 1.) Termination of employment. 2.) Pleaded guilty to three counts of dishonestly obtaining financial advantage by deception and one count of using false documents to gain advantage by deception. Sentenced to three years and three months in prison, plus an unknown financial penalty.
Lessons learned: 1.) Those who have access to customer accounts should be supervised. Their computer activities should be tracked and examined periodically to ensure they are not accessing customer accounts inappropriately. 2.) Bank customers should carefully and regularly review their account transactions for errors.
Sources: Daily Mail, The Australian
Perpetrator name and position: Damini Shah, Office Manager of The Mulsanne Partnership
Estimated time frame of theft: November 2019 to October 2020
Estimated amount stolen: GBP 24,715.39 (USD 31,780)
Methods of theft: 1). Transferred money from the company’s bank account into her personal bank account. 2.) Paid personal credit card bills including Amazon purchases and a gym membership with funds from the company’s bank account. 3.) Paid herself three unapproved bonuses. 4.) Charged four personal Uber trips to the company’s credit card.
How the case was uncovered: A review of company accounts suggested that fraudulent transactions had been made.
Internal control deficiencies: The company’s credit card and account statements were not reviewed regularly or thoroughly enough to detect suspicious activities.
Outcomes of theft: Criminal charges that resulted in a sentence of 14 months imprisonment, 120 hours community service and GBP 650 in court costs.
Lessons learned: 1.) Bonuses paid to employees should all be tracked, reviewed and approved. 2.) Company credit card statements should be regularly reviewed and all transactions should be confirmed as legitimate.
Sources: City of London Police