Reformed Former White Collar Criminal Offers Excellent Insights Into Preventing Fraud

Auditors, controllers and other financial staff at organizations looking to prevent and detect embezzlement and other fraud would do well to read material appearing on websites and blogs published by reformed white collar criminals. These folks often successfully evaded detection for many years until they were caught, and therefore are "experts" in helping other entities avoid being victimized.

One excellent example is the website and blog of Sam Antar. Antar is the former CFO of defunct electronics retailer Crazy Eddie who helped mastermind one of the largest securities frauds of its time.  A reformed former fraudster (as he calls himself), Antar now writes prolifically on the subject of financial controls and fraud detection. He is a major proponent of Sarbanes-Oxley, and publicly opposes efforts to scale it back.

Antar argues that to effectively combat white collar crime we require:

• Prevention - Strong internal controls reviewed by competent and independent external auditors. Strong internal controls are barriers to crime for criminals. Internal controls help businesses operate more efficiently and effectively too.
• Power - Legislation like Sarbanes Oxley and standards issued by the Public Company Accounting Oversight Board (PCAOB) and the American Institute of Certified Public Accountants (AICPA).
• Professionalism - A better educated, skilled, trained, experienced and independent accounting profession. All efforts at prevention, any legislation, and any standards issued will not be fully effective unless the accounting profession addresses its educational issues.
• Prosecution - Aggressive prosecution of white collar criminals. Such criminals must know that they will be prosecuted for their actions.
• Prison - Strong punishment and accountability for those convicted of white collar crimes. Such criminals must be held fully accountable for their actions.

Final Article in 3-Part Newsletter Series on Embezzlement Prevention and Detection

The final article in the 3-part series by Stephen Linker of the New Jersey-based forensic accounting firm of RosenfarbWinters focuses on methods of detecting whether embezzlement is occurring or has occurred.

The article identifies three steps central to the detection process (which may differ based on factors such as the type of business):

• Identify embezzlement exposures
• Look for symptoms of embezzlement in the exposure areas
• Consider pressures and motivations to commit embezzlement (this last step might be combined with one of the other two steps).

The article goes on to explore each of the above steps in further detail.

Finally, the article discusses the importance of effective "internal controls," which it considers perhaps the most important deterrent to embezzlement.

Read the full article here.

Union Officials Indicted on Federal Embezzlement Charges

The U.S. Attorney for the District of Minnesota recently announced that three former union officials were indicted by a federal grand jury on embezzlement charges. The three had used their financial positions at the union to embezzle union funds for personal use.

See the full release here.

Former Patterson-UTI Energy CFO Sentenced to 25 Years Imprisonment for $77 Million Embezzlement

We've followed the ongoing saga of Jonathan D. Nelson, the former CFO of Patterson-UTI Energy who embezzled more than $77 million from the company.

The District Attorney for the Northern District of Texas announced on October 10, 2006 that Nelson was sentenced to a prison term of 25 years after pleading guilty.

Nelson's perpetrated his embezzlement using forged checks, bogus invoices and other schemes.

See the full release here.

Former Bank manager sentenced for embezzlement

Samuel Scherch, a former assistant vice president at Fifth Third Bank, pleaded guilty recently to one count of embezzlement and one count of filing a false income tax return. He must repay $1.5 million to the bank and $500,000 to the IRS.

See the further details here.

Iowa Woman Accused of Embezzling Over $600,000

An Iowa woman has been charged with stealing more than $629,000 from Title Services Corporation by allegedly transferring money from the business's trust account to three personal bank accounts.

See the news report here.

Former Attorney Arrested for Alleged Embezzlement

Steven Krell, 58,  an attorney who formerly managed trust accounts was arrested recently on charges that he embezzled nearly $1.4 million from two clients, including a woman, 90, who suffered from dementia. If convicted, he faces more than six years in state prison.

See further details here.

Kentucky District Attorney Obtains Guilty Plea on Bank Embezzlement

The United States Attorney for the Eastern District of Kentucky announced recently that a Florida man had pleaded guilty to embezzling over $42,000 from two Kentucky banks where he had been an employee.

See the full release here.

3 Florida Men Plead Guilty to $35 Million Embezzlement

The United States Attorney for the Southern District of Florida announced that three defendants, William Scott Deloach, Maria Garcia, and Rosario Licata, have pleaded guilty to charges that they engaged in a long-term scheme to embezzle over $35 million from their former employer, PBSJ Corp.  PBSJ is an employee-owned national engineering and construction firm that provides a myriad of services in transportation, environmental, civil engineering, and construction management.

According to documents filed with the court during the plea hearing, from 1992 to March 2005, defendants Deloach, Garcia, and Licata, formerly senior financial executives at PBSJ, embezzled millions of dollars from the company via schemes involving the issuance of millions of dollars in unauthorized checks or transfers written on PBSJ accounts.

See the full release here.

Defendants to Plead Guilty in $6.4 Million Nestle Embezzlement Case

Two Pennsylvania men, Henry Machinski and Vincent Marchese, will each plead guilty to four felony charges in connection with embezzling $6.4 million from food giant Nestle USA. The U.S. Attorney said the plea agreement calls for the defendants to serve five to six years in prison.

Prosecutors said Machinski, then a sales manager for Nestle USA, created false invoices from an "A&P" grocery store and sent them to Nestle in Glendale, Calif. Marchese, who had no connection to the real A&P grocery chain, deposited the payments from Nestle in a bank account he set up in the name of "AP," according to prosecutors. The scheme netted $6.4 million between September 2001 through June 2005, when Nestle's auditors discovered it.

Marchese's lawyer said his client had a gambling problem that led him to commit the crime.

See the full story here.