Last week I spent three days in the Atlanta area providing training for the Georgia CPA Society. One of the topics I presented was an in-depth session on internal investigations, called Books, Crooks & Rooks: Internal Corporate Fraud Investigations.
Here are a few pointers for companies attempting to do internal investigations:
- Create an investigative policy that helps determine when to do a full-blown investigation.
- Assemble a team of competent professionals, and appoint a captain for the ship. The team should include an experienced fraud examiner, corporate security, a management representative, outside consultants for specialties such as computer forensics, and legal counsel.
- Establish a game plan. What is the scope of the investigation? What is our budget? Who does what?
- Follow good procedures. Maintain the chain of custody of evidence, keep information confidential, and keep track of important dates in the investigation.
- Remember that the results of your investigation may someday end up in a court room. Document your findings accordingly.
Richard Scrushy, founder and former CEO of HealthSouth Corp., has been convicted of paying $500,000 in [tag]bribes[/tag] to receive a spot on a state board that approves hospital construction projects. The guilty verdicts on six charges included [tag]bribery[/tag], [tag]conspiracy[/tag], and [tag]mail fraud[/tag]. The maximum sentence is 20 years in [tag]prison[/tag], but sentencing won’t happen until at least fall.
The failed defense strategy included comparing Scrushy to civil rights leaders such as Rosa Parks, who suffered injustice.
This conviction follows an acquittal for Scrushy in the trial on allegations of [tag]accounting fraud[/tag]. Scrushy still faces a HealthSouth lawsuit against him related to the accounting [tag]fraud[/tag], a lawsuit filed by Scrushy against HealthSouth for wrongful termination, and civil charges filed against Scrushy by the SEC.
Here’s a related post about Richard Scrushy.
The News Leader
By Brad Zinn
WAYNESBORO – As the office manager at Central Virginia Rental since 1997, Lori M. Guyer took in money, balanced the books, made the deposits and handled the company credit cards. She also made off with more than $170,000 before her job was terminated in 2003.
As the undetected thefts and financial losses piled up, president and co-owner Danny Showalter was forced to shut down the company’s other store on Greenville Avenue in Staunton. “We just couldn’t put our hand on what was taking place,” Showalter said. Finally, a clue pointed directly to Guyer. “She issued a refund for a credit card from a closed account” at the Staunton location, he said. Continue reading
The justice department has been investigating Tenet Healthcare since late 2002, after questions were raised about the company’s Medicare revenue. The case started when questions came up about Medicare payments for outliers, a hospital’s sickest patients.
Outlier payments are bonuses paid to hospitals by Medicare, and are intended to compensate the hospitals for the unusually expensive care of these very sick patients. This type of payment was created in order to encourage hospitals to treat the sickest patients.
Tenet found a way to exploit Medicare’s system of complicated formulas. Most Medicare reimbursements are tied to diagnosis codes, but the outlier payments are calculated based upon the hospital’s chargemaster (a price list for treatments). Tenet found that if chargemaster prices were raised sharply, the hospital would automatically begin receiving increased payments. Continue reading
The federal judge in the KMPG accounting fraud case in New York ruled that federal prosecutors cannot pressure companies to stop paying legal fees for indicted employees. In doing so, the government would get an unfair advantage and violate due process for the indicted employees.
Companies such as KPMG, Enterasys, and HealthSouth have not paid legal fees for certain indicted executives after prosecutors told the companies that their payment of legal fees on behalf of those employees would signal non-cooperation.
A key document in this issue is a 2003 memo from former Deputy Attorney General Larry D. Thompson that advises U.S. attorneys to “scrutinize the authenticity of a corporation’s cooperation” when deciding whether or not to issue criminal charges against a corporation.
Defense lawyers have said that withholding legal fees is really pressure by the government to get defendants to plead guilty. A guilty plea would save the employee huge legal bills. Prosecutors deny trying to get employers to stop paying the legal bills, and the government is expected to appeal this ruling.
Massive frauds at companies such as Enron, Tyco, and WorldCom brought significant attention to the subject of fraud in public companies. The frauds became real as jobs were eliminated, investors lost millions of dollars, and families lost their savings.
Faith in the executives and financial statements of companies was rocked to the core. Regulations were implemented to help restore that faith and direct the business practices of companies. While the publicity and the regulations have altered the way companies do business, how significant is that effect and how long will the effect last?
The answer really lies in what the stakeholders of companies are willing to do about fraud. Will the shareholders and employees hold upper management to a higher standard than was necessary in the past? Or will they let executives run companies in a manner that is sometimes reckless, unchecked, and unaccountable? Continue reading
The city of Milwaukee hired the Los Angeles-based Police Assessment Resource Center to analyze police oversight in the city. The group determined that the Milwaukee Fire and Police Commission spends too much time on personnel issues, and almost no time on investigating complaints received.
Another problem cited is the appeals process for fired police officers, which includes a lengthy process during which fired officers still collect pay. The ability to collect a paycheck during the appeals process actually encourages fired officers to drag out the proceedings. According to the report, the practice of paying fired officers who are appealing does not happen anywhere else in the country.
The following changes were proposed in the report:
- Expanding the commission from 5 to 7 members
- Adding investigators
- Creating an independent monitor to review citizen complaints the come into the police department (Currently, the police department reviews these complaints without any outside involvement.)
The Milwaukee Police Accountability Coalition says that even if these changes are made, that the Milwaukee Fire and Police Commission will still not be a truly independent monitor for the police department. One of the founders of the group says that there will still be inadequate accountability, and the relationship of the police with the community will not be improved.
The Wisconsin Taxpayers Alliance has analyzed state and local taxes and U.S.Census data, and has determined that the state is sixth highest in taxes as a percentage of personal income. If measured per capita, Wisconsin ranks twelfth. And if only income, sales and property taxes are measured Wisconsin is third.
The taxes as a percentage of personal income included state and local revenue from property, income, gasoline, cigarette and retail sales taxes. State and local taxes in Wisconsin are 12.2% of personal income. The national average is 11%. And the numbers ranged from 12.7% for New York down to 8.9% for Alabama.
Efforts to put limits on taxes died in the legislature. What’s next, governor? (I’m sure he’s got some reason why we should be happy about this!)
A Fargo, North Dakota judged sentenced convicted murderer Dennis Gaede to life in prison without parole yesterday. Gaede was found guilty of killing Timothy Wicks, a Milwaukee-area drummer and house painter. After stealing his identity and moving to North Dakota, Gaede later killed and dismembered Wicks. Gaede was awaiting sentencing on a felony conviction when he stole the identity and moved out of state.
The headless and handless body of Wicks was found in 2002 near the Menominee River, which separates Wisconsin and Michigan. The head was found two weeks later, but the hands were never found. Continue reading
The Business Journal of Milwaukee
TRACY COENEN, 2002 Women of Influence Awards
Tracy Coenen continues to expand the reach of Sequence Inc. through consulting, writing, and speaking. In addition to running a successful forensic accounting practice, she regularly authors fraud-fighting articles for industry publications and presents anti-fraud training to organizations across the country. Tracy was recently appointed Adjunct Faculty for the Association of Certified Fraud Examiners.
Read the original Women of Influence article here.