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