An expert in global fraud protection, Frank Piantidosi has spent the past two decades on forensic investigations, uncovering illegal financial activity around the world.
He and his team at Deloitte were involved in commissions headed by former Federal Reserve chairman Paul Volcker that investigated Swiss banks and their holdings of the assets of Holocaust victims, and of the Iraqi oil for food program at the United Nations.
Transparency International-USA, an organization dedicated to fighting corruption, recently named Piantidosi to the board of directors of its American chapter.
A former auditor who earned his bachelor's degree from St. Anselm College in Manchester, N.H., and his master's degree from Northeastern University in Boston, he is a member of the American Institute of CPAs, the New York State Society of CPAs and the American Arbitration Association. In addition to audits and fraud, he has also worked in areas such as litigation consulting, mergers and acquisitions, divestitures, initial public offerings and debt restructurings.
Q: What role are you going to play at Transparency International?
A: I think I will bring a couple of different perspectives to the board. I'm a former auditor, which is near and dear to what Transparency International is trying to accomplish, and I've been a fraud investigator for many years. I went to my first board meeting and I was very impressed. There are some really smart, knowledgeable people with passion for this issue of corruption and fraud. Those of us who have worked abroad have seen that corruption is a way of life, especially in the developing world. We can help U.S. officials to level the playing field, to allow these countries to really develop and not let officials misdirect funds from sources like the World Bank.
Q: What are some of the challenges facing the accounting profession in terms of fraud detection?
A: Fraud detection has become more of an important issue around the world. Sarbanes-Oxley has changed the landscape. As auditors we have to be aware of the issue and in our audit planning to make sure we have the opportunity for [uncovering] fraud. Some of it arose from the corporate frauds that were in the public view in the early 2000s. Sarbanes-Oxley is taking hold in much of the developed world. This is something important to all auditors, not just U.S. auditors.
Q: Is awareness spreading to the developing world?
A: Slowly. There seems to be a reluctance to deal with issues like corruption. The OECD [Organization for Economic Cooperation and Development] is more aware of the issue and is putting pressure on these countries to be more aware, but it's a slow process and it's not going to happen overnight.
Q: Is forensic accounting becoming a more important part of the profession now?
A: It is a very important part of the business and has been for quite some time now. I've spent a lot of time going around the world making sure we have this capability. Foreign Corrupt Practices active investigations are the hottest area. The SEC is very focused on this. The Foreign Corrupt Practices Act was passed 30 years ago. We've had these laws on the books for quite a while. Because of some of these cases that popped up in the early 2000s, the SEC and the Justice Department have said we really have to crack down. The reach of the SEC and the Justice Department is pretty long now. We can have a team in place anywhere in the world in 36 hours. That's with locally trained people. We're not just sending a bunch of gringos.
Q: What are some instances where Deloitte has rooted out corruption with its forensic accounting?
A: Many of the investigations we do are confidential. But our involvement with the Siemens investigation in Germany has been disclosed. The oil for food program is another. When Chairman Volcker was asked to lead the investigation at the UN of the oil for food program, he retained our forensic group to help with that process. We were part of the fact gathering and information accumulation process on the oil for food program that existed in Iraq during the former regime. There was a report issued by Volcker on that investigation. One of our partners traveled to Iraq to gather information for the investigation.
Q: Do you think the standards are tough enough on companies to keep them disclosing information?
A: The regulations are pretty strong. They're stronger in the United States than in any other country in the world. There is clearly a deterrent. By and large, corporations in the United States are very diligent about how they address those regulations. There are always situations and individuals that will try to do things that are inappropriate. That's why this has become such a hot area for us and other firms to address. If you go back 15 or 20 years ago when we started doing this work, we were just bean counters. A lot of it emanated from the bankruptcies in the late '80s and early '90s. We had to find out what went wrong. We started doing investigations, and we started to realize that although we had good auditing and accounting skills, we didn't have the investigative background. That's when we started hiring former prosecutors, investigators, and assistant U.S. attorneys. That experience became essential for us to do a more complete job. Not only were the accountants and auditors involved, but also these individuals who do interrogation investigations. We're looking at huge amounts of data from disparate sources: different computer systems, different technologies. We didn't have the data collection and analysis skills. We added technologists to the team. It's now a three-legged stool that works together on these investigations. We can't do a complete investigation without the ability to extract information from the electronic databases that exist within companies. We work together in a collaborative way to get to the bottom of these investigations. Now the latest facet of this is the psychology of fraud. Our clients are asking us how to prevent some of these situations from happening. We're starting to include on these diverse teams some psychologists. We just rolled out the Deloitte Center for Forensic Accounting, trying to pull together some of the best minds in this part of the business, to be a think tank, to start discussing some of these specific issues.
Q: Do you find that you need to be able to trace cell phone calls and e-mail trails more and more?
A: It's that and interviewing people. It's amazing how people who hold information like that can open up like a cheap suitcase. I've been on investigations where it took two weeks. A lot of the people involved [in a crime] don't want to be involved in it. If you can get to them, you can open it up. Then you have to dig into the accounting records. It's amazing how quickly you can find out what happened if you have the right interrogation skills.
Q: How do you develop these interrogation skills?
A: Most of us who have not grown up in that business watch former prosecutors do it. We give courses in it all the time so our people can develop those skills. We bring in people who have had these skills for many years. There's nothing like a former FBI agent to do an interview. It's the same with assistant U.S. attorneys. Many of them have incredible interview skills. They get to the bottom of it in a careful, probing, thoughtful way. Then there is the interrogation of the information. You've got to extract a lot of this information from the accounting records. Today there's just so much data. Gigabytes of data are nothing in these investigations, and the ability to do e-discovery is really the front end of the investigation. Many times you want to extract data before you do interviews. We're making huge investments, creating facilities that can operate 24/7 with huge amounts of data. We have a facility in India. We had to procure fiber optic pipes that can transmit huge amounts of data between the U.S. and India. We have a huge data storage facility in Australia, so that we can send data to India to be processed and then we send it to Australia to be stored. We have a lab in Hyderabad, India, that is state of the art. You've got to have these labs all over the world and all over the country.
Q: What role can small firms play in this area?
A: The small firms can do well at it, but it's hard for the boutique firms to deal with these types of projects on a global basis. The issues are speed, global reach, and the amount of data.
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