Fraud and embezzlement have become even more visible following the corporate scandals after the turn of the century.
And, as scrutiny of these crimes increases, local investigators said they even seem to be increasing. But, as these crimes grow more numerous and sophisticated, there are some simple but effective ways to protect Tulsa businesses from loss.
Fraud in the Global Market
Fraud and embezzlement have always been part of the business world.
The numbers of fraud and embezzlement cases have been keeping pace with national trends over the past five years, officials at the Tulsa Police Department and the Tulsa County District Attorney’s office said.
Through the first 10 months of the year, 29 counts of fraud were filed with the Tulsa County District Attorneys Office. The D.A. filed 47 counts of possession of a counterfeit check, and 29 counts of either publishing, possessing or uttering a counterfeit bill were tried in the Tulsa district court.
“There is a tremendous amount of fraud going on,” said Scott Carter, president of the Tulsa chapter of the Association of Certified Fraud Examiners. “Job security is good for me right now.”
Small businesses are most vulnerable to fraud, the ACFE said, and the average scheme causes $127,500 in losses. Large companies suffer average losses of $97,000.
Investigating fraud is a slippery task.
These cases could be likened to guerilla warfare – the foe appears to be a friend, and usual suspect theories can leave companies vulnerable to an attack. Losses caused by perpetrators older than 60 are 27 times higher than losses caused by employees 25 and younger, said the ACFE.
“Unlike robbery where the guy is wearing a ski mask and has a gun, you don’t know who the fraud suspect is,” Carter said. “The fraud suspect looks like the person you’re sitting next to in church, the 40-year-old soccer mom.”
Sgt. Mark MacKenzie of the financial crimes unit of the Tulsa Police Department said he encounters the same problem in identifying fraud and embezzlement suspects. The reasons why suspects commit wrongdoing run the gamut, he said.
The suspects “legitimize what they’re doing in their own minds, so it could be anybody,” MacKenzie said. “There is a whole list of reasons why a person would do this. You may have gambling debts, a boyfriend who has a dope problem, you bought too many nice things – and you’re just trying to find a way out.”
Sneakier and Sneakier
Corporate financial crimes grow more sophisticated and difficult to investigate with the constant advent of new technology.
“Every time you think you’ve caught up to the way these criminals operate, they move on to something else,” Carter said. “There are new little twists that go on now in old schemes that these guys are able to pull off with new technology.”
“I worked a case years ago where a small town bank customer sent a $300 check to a pastor he knew in Uganda,” Carter said. “The check got intercepted in the mail, and that $300 check became an $86,000 check. It was chemically washed and altered except for the signature, and then it went to a company on the Baltic Sea. It was used to purchase cellular phones, which were then drop-shipped to an airport in Uganda.”
“We were able to recover some of the money,” Carter said, “but it’s shocking that a little check in rural Oklahoma can be altered thousands of miles away. Those are the sorts of things you’re dealing with today.”
Big Bad Web
“The Internet has been a brilliant new tool for the fraud guy, and it’s hard to stay up to speed on those trends,” Carter added.
Because fraud and embezzlement defy tradition, investigating fraud requires experience and continuing education, Carter said.
“Preventing fraud is a difficult task. You want to trust people, but you really have to look at everything with a professional skepticism anymore, and you must conduct due diligence.”
The best tool for preventing fraud and embezzlement is to set a tone at the top, Carter said.
“There has to be a code of ethics, and there has to be some controls in place. More than anything else, it has to be a culture inside a company that awards people for doing good.”
Cheryl Compton of the TPD financial crimes unit said giving one person too many responsibilities and imposing no checks and balances are the building blocks for incurring losses via embezzlement.
“The bosses who give sole control to one person to write checks, pay bills and receive mail essentially give sole control of the finances to that person,” Compton said.
“I worked with a law firm that just couldn’t understand how they got taken for $60,000. Well, you were signing the blank checks, she got all the mail, she bought all the supplies for the office – she did everything. You need checks and balances.”
MacKenzie likened preventing fraud and embezzlement to fortifying a home against burglars.
“You can take all the safeguards you want to take – you can have an alarm system, you can put up signs, you can have deadbolt locks. You may limit your loss, but if someone wants access to your house, they’re going to get in.”
“You just need to not create opportunities that will make it easy for them,” MacKenzie said. “By putting sole control in someone’s lap, you create that opportunity.”
Of the 129 counts of fraud filed with the DA’s office between 2001 and today, only 36 percent resulted in conviction.
The process of proving a fraud or embezzlement case to the DA’s office and obtaining an outcome in court often takes years, and that chances of recovering losses are slim, Compton said.
“There is not an easy, one-paragraph answer to this problem,” MacKenzie said. “Your point of compromise happens once you walk out the door. The bottom line is that you want to insulate yourself without being paranoid and thinking that everyone is out to victimize you.”
“Have more-than-average checks and balances. You can be a successful business and not be victimized,” MacKenzie said. ?