How did you become passionate about fighting fraud?
In my first job after graduating from college in the mid-80s I took a position with an audit bureau of a major metropolis. The division I was assigned to mostly conducted audits of vendors who had contracts or service agreements to lease properties, concessions or franchise rights owned by the city. The contracts generally spelled out the terms of a revenue share agreement requiring the vendor to pay the city some percentage of its gross receipts. Our roles as auditors was to ensure that vendors complied with contract terms, but more importantly, remitted the correct revenue or percentage of gross receipts.
As I began my auditing career doing these types of audits, I quickly learned the games that vendors play in underreporting their revenues and ultimately their fees to the city. The vendors were aware that the risk of being audited was low so they were more inclined to underreport their numbers and pay less.
In one particular case, the city leased land to a parking vendor near a ferry so commuters could park their cars and take a ferry across the river to work. The agreement with the city required the vendor to pay a percentage of the fee collected for each car parking in the lot every day. We decided that we would spend a week doing surveillance of the lot and count the number of cars entering the lot each day. Then we would reconcile our actual count to what the vendor reported on the statement he submitted with his payment. Suffice to say the underreporting of parked cars was egregious and the underpayment to the city was significant.
After several other contract audits over the next year or so revealed similar results, I became interested in fraud and the drivers that cause people to commit fraud. I quickly learned to spot red flags or fraud indicators, and from these early experiences learned how to evaluate what they mean and their impact. It was around this time that I learned about a relatively new credential, the Certified Fraud Examiner (CFE), and I became one.
What is one of the biggest lessons you have learned since becoming a CFE?
Sometimes the biggest fraud schemes are the simplest ones. Never take anything for granted and never underestimate the bad guys because their livelihood depends on you being asleep at the wheel. Also, don’t discount evidence, even if it appears remote or does not appear to have a connection to your investigation.
What steps led you to your current position?
I have progressed my career at The New York Times from a staff auditor to chief audit executive. I achieved this mostly through hard work, sound judgment and developing excellent working relationships with management. Helping management understand that internal audit is not the “bad guy” in the organization, but a resource that can help ensure controls remain effective and can add value, has enhanced my career. We have experienced a high rate of management requesting our services for assistance with fraud-related inquiries and general operations and controls work.
What is your current role and what does it entail?
As the chief audit executive, I am responsible for a team of seven financial and IT auditors. I report to the CFO, CEO and audit committee. My main role is to review and evaluate the effectiveness of the company’s control environment across all lines of business and revenue streams. Every audit we conduct, whether an audit of a new digital revenue stream or the accounts payable and vendor payment process, always includes a review for fraud. We do this through data analytics that are developed and analyzed specifically for that audit. I am responsible, along with general counsel, for evaluating and investigating all calls that come into our hotline. We spend a significant amount of time annually auditing vendor contracts and new and developing system implementation projects. We also are responsible for assisting management with its SOX efforts and for assisting our external auditors in various interim and year-end testing procedures.
What is a memorable case or project that you have worked on; one that made you feel especially proud?
I was doing an audit of a small golfing business — a driving range — owned by my company, many years ago. The manager of the range was accepting payments for gift certificates so people could give the gift of golf lessons or driving range time. The audit was going fine and I didn’t suspect anything unusual until I was standing next to the cashier one day and a customer came in and wanted to cash in his gift certificate for lessons. The manager accepted the gift certificate and scheduled a series of lessons for the customer with a golf pro.
I asked the manager a simple question — how do you recognize the revenue from the gift certificates and where is the deferred revenue account that houses all the gift certificate payments (prepayments)? His response made no sense and my antenna went up. As I started to probe this and interview other staff members and customers, I learned that the manager was taking the money from the gift certificates and never ringing them up on the register. But he was giving the customers a gift certificate for the value of the payment.
The reason I take pride in this is that this operation was reviewed annually by management of the golf operation and they did not make the connection to the gift certificate fraud. Sometimes being in the right place at the right time is a useful tool for the fraud examiner, as it was in this case, where I witnessed the exchange between the customer and the manager.
How has earning the CFE credential benefited your career?
The fact that I am recognized as a fraud expert always gets me invited to the table on any discussions related to allegations of malfeasance. As such, management always looks to us for guidance, counsel and advice on all matters involving any type of allegation or investigation.
What activities or hobbies do you like to do outside of work?
I am a big sports fan, so everything sports. I enjoy bike riding, reading and tinkering. If there is something broken in the house, I am determined to fix it before my wife farms it out to a professional. I am also pretty handy and I always have a weekend project to do at home. I also assist friends and relatives with projects, from small plumbing and electrical jobs to major work like building decks.
ACFE membership is open to individuals of all job functions, industries and levels of experience who are interested in the prevention, detection and deterrence of fraud. If you want to level up your anti-fraud career, we can help.