“He’s tough, arrogant and won’t talk to you,” the non-profit board member said. Rewind to months earlier and its treasurer began transferring money from an account he was trusted in overseeing, to that of a family member. His behavior was indeed arrogant. He seemed to get upset whenever challenged. His financial reports never showed copies or access to the organizations bank accounts. When questioned, he made reference to entries on spreadsheets – spreadsheets he provided. He blended in printouts of reports generated from the financial software, used to ostensibly show transparency.
The treasurer became defensive and evasive when asked to produce bank statements. Something wasn’t quite right in the opinion of one of the board members. Fortunately, the board member acted on the suspicion and reached out to an attorney they knew.
The average occupational fraud lingers for approximately 18 months before it’s detected. The average damage is around $125,000 or so. About one in five embezzlements attacks an organization for $1M or more. How are the frauds discovered? Often, by accident. Not necessarily by an internal audit or the control system in place. Simply by accident, such as an innocuous question or customer inquiry. In the case of our non-profit, it was the bristling responses given by the treasurer.
Of certain warning signs of a fraudster which may be known (living beyond their means, breaking rules, etc.), there is a unique group of dynamics one GA private investigator has put together. After studying a number of high-profile cases, the focus is narrowed on the organization and its operations, versus the fraudulent offender. Nothing earth shattering has been revealed but the investigator has seen some distinctive patterns. Ultimately, the investigator has watched one company after another become a victim – unnecessarily that is.
From the investigator’s viewpoint, the profound sadness is that certain victim companies have been approached about a pre-emptive examination of its processes. The companies of course dismissed any idea of bringing in an outsider. Internal controls are present, so they believe. Their long-time employees are highly trustworthy. In addition, they have a CPA. Behind the scenes may be an insurance policy of some sort.
One particular company was presented the opportunity for an assessment. They were perceived as a high risk, vulnerable to internal fraud. It was not a blanket marketing attempt but a sincere offer, based upon an observational workup done by the investigator. Naturally, the offer wasn’t accepted. Several months later, the company appeared on the local news…as a victim of internal fraud. The GA private investigator shook his head and let out a sigh. “If only”, he thought. It was not the only time this would occur. There would more, too many to count. While some say it’s his gospel, he believes it’s a subtle persuasion to be pro-active. Prevention is taught in personal health, so should it be in business. He’s not a hard sales person.
The attorney our non-profit contacted, listened to the concerns about the tough treasurer. The attorney had dealt with similar matters before. By chance, only a few days earlier the attorney had an unrelated phone call with the investigator. The investigator as a side note, mentioned his work with protecting organizations. Maybe it was a coincidental conversation but maybe fortuitous.
The attorney contacted the investigator. At first, it was to perform an audit of the non-profit’s bank statements. The investigator poured over every detail, calculated the loss and reported back to the attorney. It was clear, the non-profit’s money was transferred without authorization. It was the treasurer who executed it. Time was of the essence as our treasurer was feeling pressure and the non-profit would need to act. Something was different about this investigator. Others had done good work but lacked a specific skill. Often, forensic examiners simply presented their findings. While their efforts were expertly detailed, refined and clear, it was left to the organization to deal with. In the case of the non-profit, a different approach would be taken.
The specific skill sometimes lacking, is that of confrontation. Successful confrontation requires training and experience in interviewing the accused. The accused, especially those of an arrogant nature, can be extremely difficult. They are problematic anyway on a daily basis. But if they are in fact guilty of misconduct, it raises the tension. They threaten lawsuits, retaliation, or whatever might stick in an effort to push back on those who would dare question them. They are very clever and will not go down quietly. Their reputation alone is to their advantage – “bring it on,” they think.
The attorney contacts the investigator after reading his report. He requests the investigator perform a follow up service. One which involves interviewing the treasurer. The investigator meets with the attorney and board members. He lays out a plan which includes a specific set of tactics. The tactics are intended to gain the cooperation of the treasurer and obtain a statement of facts. Our board member remains doubtful and thinks – “our treasurer won’t admit to anything, no matter how overwhelming the evidence is.”
The treasurer appeared after a legal announcement of the board’s meeting. The treasurer was led to a back room where the investigator was waiting. The investigator was also a certified fraud examiner. After a brief introduction by the investigator, the treasurer knew his misdeeds had been discovered. Logic overtook and the treasurer’s arrogance was not on display. Further, the confession came quickly. Much quicker than those with less pride and smugness.
The speed of the confession was surprising to everyone. The skeptical board member and instinctive attorney were believers in the investigator’s service. The attorney’s response to the treasurer was firm. He had but only a few days to reimburse the board for the money he transferred out, plus other costs. The treasurer complied readily. All was made whole. A relative happy ending.
The attorney and GA Private Investigator would go on to partner in other related matters. The investigator still sighs when a company will not accept his offer for a prevention service. Business fraud is brutal but maybe an executive or board member somewhere will consider the gospel.