Forensic Accounting Today

To Catch a Thief: Recovering Assets After an Embezzlement

Lately, primarily due to its amazing ease of use, I've been relying heavily on Twitter to direct my audience to topics pertaining to forensic accounting. In this blog post, I want to emphasize one of my recent Tweets which points my Twitter followers to a concise and well-written article on the subject of fraud/internal investigations. The author, G. Michael Bellinger, Esq, in an article in Risk Management, offers great advice and insight that's applicable to forensic accountants and financial investigators. In summary, Bellinger offers a four-step approach to gathering evidence and recovering assets after an embezzlement:

1. Immediately launch an internal investigation

2. Retain outside experts to conduct the investigation

3. Make it a goal to obtain a confession using proper, legal interrogation techniques

4. Develop a program for restitution.

Read the entire article

Economic Slump is Breeding Ground for Embezzlement

Source: Recordnet.com

STOCKTON, CA - Thick binders on the shelf in prosecutor Stephen Taylor's office tell stories of betrayed trust in columns and rows of accounting ledgers followed by snippets of narratives spelling out corporate theft. On one page, there's a copy of a check written to pay a Stockton charity's bill that was doctored and fraudulently cashed at a bank. Another page is a letter from an employer asking for the maximum punishment for a bookkeeper who stole for years.

These documents are the smoking guns of embezzlement. Taylor, a San Joaquin County deputy district attorney, recently filed charges in four high-profile cases locally. Two came within one week. More are to come, he said. Taylor's boss, San Joaquin County District Attorney James Willett, on Friday announced the creation of a so-called Major Fraud and Real Estate unit to prosecute complex fraud, embezzlement, identity theft and real estate fraud. Taylor and another attorney in the prosecutor's office will staff the unit. "My concern is they are hollowing out these businesses and leaving them as empty husks," said Taylor, whose main concern is that embezzlers cost jobs. "They're just like parasites or a form of cancer."

Like Taylor, those who investigate and study financial fraud say the free-falling economy is directly tied to a recent spike in embezzlement cases. And there are some simple steps employers can take to safeguard themselves and keep employees honest, they say.

Read the entire article

Georgia Company Charged in $25M Ponzi Scheme

Source: The Atlanta Journal-Constitution

An Alpharetta-based financial firm has been charged by the Securities and Exchange Commission with operating a Ponzi scheme worth at least $25 million. According to the SEC, CRE Capital and its president, James G. Ossie, 48, wooed investors to a currency trading program last year by guaranteeing returns of 10 percent every 30 days, or a 120 percent annual rate. Some clients were promised 20 percent monthly gains, the SEC said. The Associated Press reported that Ossie lives in Dawsonville. The SEC said Thursday that the company’s trading has lost $12 million and that returns were paid with funds taken from later investors.

The SEC has obtained an emergency federal court order freezing the program’s assets and appointing a receiver to take over control of the company. The SEC’s investigation is ongoing. “The SEC’s emergency action in this case will protect investors from further harm,” said Katherine S. Addleman, director of the SEC’s Atlanta regional office. “We also want to remind investors to be skeptical of promoters promising exorbitant returns. Such claims should be red flags to investors.”

The scope pales in comparison to the massive, $50 billion Ponzi scheme allegedly orchestrated by New York money manager Bernard Madoff. Bill Leonard, an attorney for CRE and Ossie, said that Ossie “maintains that he acted with good faith at all times and intended to act with integrity for his clients.” He said that Ossie and CRE have been “cooperating fully” with the SEC, opening all records for review. The SEC said at least 120 investors signed up for the program. The agency did not name the investors, though it did say that CRE Capital and Ossie required that investors be business entities, not individuals.

CRE and Ossie told investors the trading program carried little risk because the company had created a large “defensive” reserve fund that would be able to cover the monthly returns. The SEC also has charged CRE and Ossie with falsely claiming that the program was audited by an outside accounting firm. The agency also says that CRE and Ossie told investors that the company planned on making a $100 million stock offering this year. According to the Georgia secretary of state, CRE Capital registered with the state in March 2007 and has offices on Mansell Road in Alpharetta. A news release issued last October announced that CRE had selected a California company to provide its customer relationship management software. The news release described CRE as a “distinctive, high-end private investment company offering a progressive and low-risk, high-yield opportunities to investors.”

$60,000 Missing: Church Bookkeeper Arrested on Theft Charges

Source: The Atlanta Journal-Constitution

The bookkeeper at a Cherokee County (Georgia) church was arrested Tuesday for allegedly stealing $60,000 from the church. Cherokee sheriff’s Sgt. Jay Baker said authorities believe Susan Brooms, 40, funneled the money from Sixes Presbyterian Church to pay her personal expenses. “Investigators suspect Brooms had been taking money from the church account since 2004,” Baker said. Brooms is being held without bond, charged with felony theft by taking and two counts of forgery. While searching her home for financial records, detectives found a small amount of cocaine in her husband’s belongings, Baker said. James Brooms, 52, was charged with cocaine possession and was released after posting a $12,055 bond.

Georgia Man Pleads Guilty to $13 Million Fraud Scheme

Source: Atlanta Journal-Constitution and Associated Press

A Georgia businessman has admitted taking part in a scheme to defraud a California construction company of nearly $13 million. Edgar J. Beaudreault of Alpharetta pleaded guilty to conspiracy to commit wire fraud. Federal prosecutors say the 60-year-old Beaudreault and two others conspired to defraud Cornell Corrections of California Inc., which operates private corrections facilities. In 2003, Cornell was hired to build a prison in Canon City, Colo., and the $13 million purchase price was to be place in escrow until completion. Cornell was induced to transfer the money to an Atlanta account, and most of it was then diverted to other accounts. Beadudreault could receive up to 20 years in prison and fined $250,000 at sentencing on March 18.

Hilton Head Embezzlement, Missing Couple Case: An Update

Today's ajc.com includes the following update regarding my 4/23/08 post entitled, "$2.1M Embezzlement...Possible Murder...Then Suicide."

Hilton Head Island, S.C. — An accountant who was the last person to see a missing couple alive bought drop cloths large enough to be body bags and turned off his cell phone for 12 hours after meeting with his wealthy clients nine months ago, police said Wednesday.

Authorities also revealed the contents of accountant Dennis Gerwing’s suicide note, yet another piece of evidence that suggests he played a role in the couple’s disappearance. Read the entire story.

Atlanta-Area Pastor Charged With Stealing Again...$70,000 This Time

Source: ajc.com

A Decatur pastor arrested on forgery charges in Smyrna Friday pleaded guilty in DeKalb County last month to unrelated theft charges under the first offender statute.

Maurice Joseph Easley, 37, was given five years probation, ordered to pay $4,000 in restitution and complete 150 hours of community service for theft by taking. The case was settled on Nov. 6.

Now the pastor of Sanctuary Church of the Living God in Scottdale is accused of funneling nearly $70,000 from a Smyrna apartment complex where he worked to his church’s checking account. Police say he took money from resident rent payments, security deposits and other fees from September 2007 to March 2008 while he was employed as a property manager at Mission Galleria Apartments.

The missing money was discovered when the apartment complex conducted an audit early this year, Smyrna police spokesman Lt. Tony Leonard said. In addition to eight counts of forgery, Easley faces two theft by taking counts, which are also felonies.

He is free on $75,000 bond. He did not return a reporter’s phone call on Tuesday.

Over $80,000 Embezzled by County Clerk in Georgia

Source: ajc.com

Danielsville, Ga. — A former Madison County deputy clerk has been arrested and charged with stealing more than $80,000 in county funds.

The Georgia Bureau of Investigation arrested Melinda Watson Spence on Friday on one count of felony theft by taking.

Jim Fullington, special agent in charge of the GBI’s Athens office, said, “Right now, the audit indicated approximately $86,000 was missing, and we feel comfortable that we have enough evidence to show she was involved in at least $80,000 of the missing funds.”

He said the 40-year-old Spence over time was able to embezzle the money without being noticed.

Atlanta Embezzler Gets Four Years

Bookkeeper headed to prison

According to an article in the 8/28/08 Atlanta Journal & Constitution,  "A Luthersville woman will serve four years in prison for embezzling nearly $200,000 from an Atlanta engineering company, Fulton County District Attorney Paul Howard said Wednesday.

Gwendolyn Cummings, 48, a former bookkeeper and office manager for BAA Mechanical Engineers, began stealing from the company in April 2004 after convincing her boss that she could save the company money by handling the payroll herself instead of outsourcing it, Howard said.

She set up a business checking account and began paying herself an inflated salary and sending herself duplicate payments, embezzling a total of $198,269, Howard said in a statement. The scheme unraveled in December 2005 when the company tried to pay Christmas bonuses and found the account was overdrawn.

Cummings is to serve four years of a 20-year sentence. Cummings, who is free on bond, is to be taken into custody on Sept,. 15."

$2.1M Embezzlement...Possible Murder...Then Suicide

Here's another example of alleged fraud in the workplace. According to a 4/23/08 article in The Atlanta Journal-Constitution online newspaper,

"An accountant who killed himself after police questioned him in the disappearance of two wealthy clients had embezzled $2.1 million from the couple and seven companies, his former employer said. An audit ordered by The Club Group found that chief financial officer Dennis Gerwing took money from its clients for four years, depositing it into a hidden checking account, the management company said Tuesday. Gerwing committed suicide March 11 after investigators questioned him about the disappearance of John and Elizabeth Calvert, who split their time between a yacht on Hilton Head Island and a home in Atlanta. The couple were last seen in early March, and searches of the resort island, its harbor and in Georgia have been fruitless. Police have said Gerwing, 54, was the last person to see the Calverts." Read the full article

While an extreme example, this situation should be a serious reminder of how vulnerable organizations can be to misappropriation of cash and other assets. For tips on how to deter/prevent workplace fraud...read the "How to Nab the Rogues: 10 Fraud Tips" article in CFO.com.