The Association of Certified Fraud Examiners featured fraud experts discussing how to find evidence of fraud at its 23rd Annual ACFE Fraud Conference & Exposition in Orlando on Monday.
Among them was John Tonsick, CPA, CFE, a principal at Fraud Solutions, who did magic tricks in addition to giving advice on how to handle fraud cases. He told the story of a payroll employee who embezzled about $2.25 million from her company. He met with her and her husband at Denny’s, where she at first said nothing, then admitted to stealing part of the money when her husband convinced her to come clean. But Tonsick kept finding more and more missing funds and encouraged the woman to tell him about them.
He advises company executives not to get too emotional when dealing with a thieving employee. “A lot of companies are totally unprepared and make a mess of things,” he noted.
He recommended that companies not fire an employee right away, but instead suspend them and hire a fraud expert to find out where the money went. The company still has some leverage over the employee in that situation, especially if the employee is still being paid. Instead of calling in law enforcement right away, Tonsick noted that companies stand a better chance of recovering a greater part of the funds if they get a fraud examiner to assist in the investigation first. They can always call in law enforcement later to make the arrest.
Angela Clancy, a senior manager at PPB Advisory, and Jay Dawdy, president of Gryphon Investigation, described some of their notable cases. “Schemes are rarely solitary endeavors,” Dawdy noted. There are usually several people involved in creating fictitious revenues, he added.
Clancy talked about her experience at Grant Thornton in the wake of the Parmalat accounting scandal. She advised auditors to look at the original bank statements and receipts, not the ones in a company’s accounting system that a fraudster could have doctored. The Italian dairy company's accounting problems only came to light after it was required under Italian law to rotate auditing firms every nine years.
“Madoff’s sin wasn’t greed, but pride,” she told the audience. “Madoff found it easier to live with himself as a liar than to live with himself as a failure.”
The ACFE featured a Fraud Museum in its exhibit hall featuring Madoff’s cigar box, which he gave as a gift to trusting clients, along with other fraud mementos such as Enron stock certificates. Another award winner was Joseph Ford of Bank of the West, who won ACFE’s Cressey Award for a lifetime of achievement in the detection and deterrence of fraud.