Friday, September 18, 2015

Fraud News - Nonprofit Official Admits Theft of Millions

Director/ Treasurer of Non-Profits Admits to Stealing over $2 Million

Fabricated Documents to Conceal Fraudulent Transfers of Money from the American Registry of Pathology over a Four Year Period

Greenbelt, Maryland – Michael Parry, age 58, of Windermere, Florida pleaded guilty today to wire fraud and money laundering.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Kevin Perkins of the Federal Bureau of Investigation; and Frank Robey, Director of the U.S. Army Criminal Investigation Command's Major Procurement Fraud Unit.
According to his plea agreement, in 1998 Parry was hired by the American Registry of Pathology (ARP) as its director of operations, and was promoted to executive director in 2014, a role he had been acting in since October 2011.  The ARP is a non-profit organization that supports pathology services in the armed forces, and also engaged in non-governmental work, including the funding of fellowships and research studies in pathology. ARP has administrative offices in Rockville, Maryland and Camden, Delaware.
The International Registry of Pathology (IRP) is a non-profit organization that promotes the study of pathology on an international scale, by supporting pathologists and pathology students in less-developed countries.  Parry served as treasurer of IRP.  By October 2011, Parry was in control of IRP bank accounts.
From February 17, 2010 to April 21, 2014, Parry directed the payment of money from an ARP account to an IRP account by wire transfers.  Parry falsely described the wire transfers as related to medical studies, research grants or other activities normally funded by ARP.  Parry fabricated documents including: falsified invoices from a legitimate ARP vendor related to medical research studies; emails from himself to others purporting to memorialize conversations in which Parry sought and was granted approval for funding fictional research fellowships; and wire transfer documents purportedly showing that payments were made directly from ARP’s accounts to legitimate ARP vendors or educational institutions.
 Parry then transferred funds from the IRP account to a personal account he controlled.  The total loss to ARP as a result of the fraud scheme was $2,199,504.09.  Parry has agreed to the entry of an order to pay restitution in this amount.
Parry faces a maximum sentence of 20 years in prison for wire fraud and 10 years in prison for money laundering.   U.S. District Judge Peter J. Messitte has scheduled sentencing for December 18, 2015 at 9:30 a.m.
United States Attorney Rod J. Rosenstein commended the FBI and Army CID for their work in the investigation.  Mr. Rosenstein thanked Assistant U.S. Attorneys Joseph R. Baldwin and David L. Salem, who are prosecuting the case.

Sunday, July 12, 2015

Opportunity Opens the Door - Ex-Deputy Charged with Stealing over $200,000.

Fraud stories always intrigue me as a Certified Fraud Examiner and former Director of Internal Audit for local government.  The article in the Metro Section of the Washington Post on July 10, 2015 caught my eye. As I read the story I was not surprised to find the element of opportunity allowed this fraud to happen. It covered the same fraud scenarios and red flags that auditors and anti-fraud professionals see every day. The fraud spanned 3 years and the characteristics that allowed this to happen have been repeated over and over. The first control weakness was inadequate segregation of duties. The person in charge of the asset forfeiture program was given "unchecked authority". The suspect (in charge of the program) had access to money, seized vehicles and other assets. The individual took over the program in 2006 and began embezzling in 2010 and it continued until 2013. He deposited the money directly into his own bank account (what was he thinking)? The suspect was "well liked" in the agency and received a meritorious service award in 2011. Have you ever heard of a fraudster who was not a model employee and well liked by fellow workers? A check of his history found that he filed for bankruptcy ten years earlier. Statements by supervisors were "probably one of the last people I would have thought would steal". Red flags started in 2012 when money from narcotics seizures were missing from the escrow account.   In order to hide the fraud the suspect used a lapping scheme. 

When will business and government heed the warning signs and pay attention to the three pillars of the fraud triangle - motivation, opportunity and rationalization?

Do you have a fraud story to share that shows a breakdown in internal controls? Share them with us.

Jim Kaplan CIA CFE
AuditNet® founder


Friday, June 19, 2015

Keyword Analytics for Detecting Fraud and FCPA Compliance

There has been much research done in the area of auditors using data analytics to uncover fraud and non-compliance however it is not a standard practice. We have to ask the question why? E&Y and the FBI have received a great deal of media coverage for the list of 3,000 keywords and phrases they developed however all we see listed are bits and pieces of their list. Wouldn't it benefit auditors to have the list of keywords and phrases made available to run textual analytics against company emails and unstructured data? Of course it would but that list is not available to auditors either as a service to the profession or even for purchase. 

AuditNet® conducted a Keyword Analytics Survey in 2014 that more than 600 auditors responded to. Many of those auditors shared keywords and phrases and we created a comprehensive list of close to 3,000 words and phrases that is now being made available as a service to the profession. For details visit In addition AuditNet® and their partners have video training and tools including Excel macros and other add ins that make the process intuitive. 

For data analytics training and recordings visit or