{"id":17073,"date":"2008-05-31T06:00:23","date_gmt":"2008-05-31T11:00:23","guid":{"rendered":"http:\/\/www.sequenceinc.com\/fraudfiles\/?p=17073"},"modified":"2016-09-26T12:41:49","modified_gmt":"2016-09-26T17:41:49","slug":"anatomy-of-a-fraud-investigation-gone-wrong","status":"publish","type":"post","link":"https:\/\/www.sequenceinc.com\/fraudfiles\/anatomy-of-a-fraud-investigation-gone-wrong\/","title":{"rendered":"Anatomy of a Fraud Investigation Gone Wrong"},"content":{"rendered":"<p><img decoding=\"async\" class=\"lazyload alignright\" src=\"data:image\/svg+xml,%3Csvg%20xmlns%3D%27http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%27%20width%3D%27284%27%20height%3D%2775%27%20viewBox%3D%270%200%20284%2075%27%3E%3Crect%20width%3D%27284%27%20height%3D%2775%27%20fill-opacity%3D%220%22%2F%3E%3C%2Fsvg%3E\" data-orig-src=\"http:\/\/www.sequenceinc.com\/images\/logos\/whitecollarcf.gif\" alt=\"\" width=\"284\" height=\"75\" align=\"right\" border=\"0\" \/><em>Written by Tracy L. Coenen, CPA, CFF<\/em><\/p>\n<p><em><strong>White-Collar Crime Fighter <\/strong><\/em><\/p>\n<p>The following is all true \u2013 from a case that I worked on. Everything this company did is very common. However, this case is especially instructive by virtue of the incredible degree to which the company messed up the investigation \u2013 from day one\u2026<span id=\"more-715\"><\/span><\/p>\n<p><strong>Company: <\/strong>Small manufacturer.<br \/>\n<strong>Financials:<\/strong> Thin profit margins. Trying to rebuild after some hard times. Things look promising.<br \/>\n<strong>Suspect: <\/strong>Accounting manager.<br \/>\n<strong>Fraud:<\/strong> Garden variety theft of funds from the company.<br \/>\n<strong>Why the fraud happened: <\/strong>The accounting manager had complete autonomy over the accounting process,and was the sole keeper of the corporate bank account. No surprise there.<!--more--><\/p>\n<p><strong>MANAGEMENT\u2019S INVESTIGATIVE BLUNDERS\u2026<\/strong><\/p>\n<ul>\n<li><strong>Compromised computer evidence.<\/strong> They rifled through the suspect\u2019s computer files for evidence of fraud. By doing so, they changed things on the hard drive with every click. They should have called in a computer forensics expert to image the hard drive in order to have an exact, legally admissible copy of it.<\/li>\n<li><strong>Interviewed the perpetrator themselves and then fired him immediately. <\/strong>Interviewing with the goal of eliciting critical information and\/or a confession is best left to professionals. Key reason: While firing seems like the right thing to do, there is often reason to keep a suspected fraudster on for a while\u2014in the hope that he or she will create additional incriminating evidence with E-mails,other computer documents, statements to co-workers, etc.<\/li>\n<li><strong>Waited for the police to do something.<\/strong> Local police resources are largely focused on violent crimes and departments often don\u2019t want to \u2013 or simply cannot \u2013 get involved in financial crimes.<\/li>\n<li><strong>Created a mess of vital financial documentation.<\/strong> Because they didn\u2019t know where to begin an investigation,<br \/>\nmanagement had no idea how the guilty employee had concealed his theft in the accounting records. Management simply started tearing through the books, mixing them up and making the investigation harder in the long run.<\/li>\n<li><strong>Initiated the \u201cinvestigation\u201d with no strategy or planning.<\/strong> Key employees were not interviewed in a timely fashion. Had they been involved, no one would have known, since they had plenty of time to get rid of evidence or create phony alibis.<\/li>\n<li><strong>Company president headed up the investigation.<\/strong>Problems:\n<ul>\n<li>Senior managers aren\u2019t objective in most fraud cases, since, if they\u2019re not involved directly in the crime, they at least have a vested interest in minimizing damage to the company\u2019s reputation and therefore are prone to gloss over key evidence.<\/li>\n<li>Heads of companies are often too emotional because they feel \u201cviolated.\u201d<\/li>\n<li>This company\u2019s president had never been involved in a fraud investigation.<\/li>\n<li>He put the company in an even worse financial position by wasting time on the investigation.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong>\u2026AND A FEW THINGS THEY DID (SORT OF) RIGHT<\/strong><\/p>\n<ul>\n<li><strong>Utilized the \u201cTop Drawer\u201d method of investigation.<\/strong> They opened the top drawer of the suspect\u2019s desk and found lots of evidence regarding the crimes, including spreadsheets tracking the theft and other valuable evidence. However, the heart of a fraud investigation is document examination, including both paper and digital evidence\u2026 and it takes a seasoned expert to manage this process.<\/li>\n<li><strong>Eventually hired a fraud examiner to do a proper investigation.<\/strong> A little late, but better than never.<\/li>\n<\/ul>\n<p>White-Collar Crime Fighter sources:<br \/>\n<em>Tracy Coenen, CPA, CFE, Sequence Inc., Chicago-based fraud investigation and forensic accounting consultants, www.sequence-inc.com. Tracy is author of the new book, <a href=\"http:\/\/www.fraudessentials.com\">Essentials of Corporate Fraud<\/a> (Wiley). She can be reached at <a href=\"mailto:tracy@sequenceinc.com\">tracy@sequenceinc.com<\/a>.<\/em><\/p>\n<p><a href=\"http:\/\/www.wccfighter.com\/\">White-Collar Crime Fighter<\/a><br \/>\nMay 2008, Volume 10, No. 5 (<a href=\"http:\/\/www.sequenceinc.com\/images\/articles\/WCCF%2005-08F.pdf\">Full issue found here.<\/a>)<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Written by Tracy L. Coenen, CPA, CFF White-Collar Crime Fighter The following is all true \u2013 from a case that I worked on. Everything this company did is very common. However, this case is especially instructive by virtue of the [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[810],"tags":[],"class_list":["post-17073","post","type-post","status-publish","format-standard","hentry","category-financial-investigations"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p6Z0e-4rn","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/posts\/17073","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/comments?post=17073"}],"version-history":[{"count":0,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/posts\/17073\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/media?parent=17073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/categories?post=17073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/tags?post=17073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}