Fraud Friday:Cross-country road trip, Guns N’ Roses show and phantom dinner guests turn up in Cal State San Marcos audit

Auditors and fraud investigators are the (too often) unsung heroes of organizations. They take fragmentary, incomplete evidence and through painstaking hours of analysis and investigation, develop and report on a vast array of improper acts. Their reports, when acted upon, serve both a detective and preventive purpose against fraudulent activity.

Last week, the excellent professional audit staff at the California State University Office of the Chancellor released a comprehensive investigative report detailing what can only be called an egregious misuse of public funds. It was heartening to see that the report generated a significant amount of media attention. From the San Diego Union-Tribune:

A former Cal State San Marcos dean submitted dozens of fraudulent hospitality claims, filed duplicate expense reports and made up dinner guests to collect improper reimbursements, a long-awaited investigation released Thursday concludes.

On one day he attended an NFL game and watched a Guns ‘N Roses concert, calling it college business, the report said.

In total, Michael Schroder racked up at least $41,000 worth of unallowable expenses between July 2017 and June 2019, investigators at the California State University Chancellor’s Office said.

His dismissal by the university was announced late Wednesday.

“We investigated allegations that the dean of extended learning at California State University, San Marcos inappropriately used his expense account for personal meals and events, claimed business expenses for meals with individuals with whom he never met and spent excessively on international travel,” the report states.

“We substantiated all of the allegations.”

The 28-page investigative findings lay out a sweeping breach of Schroder’s fiduciary duty to safeguard and steward public funding. But the CSU report also limited its review to the former dean, who was not alone in spending university money on lavish meals, personal drivers and five-star resorts.

The San Diego Union-Tribune reported last year that former President Karen Haynes and several other senior administrators also stayed at foreign hotels costing as much as $760 per night, hired chauffeur-driven limousines and used school resources for expensive dinners and fine wines.

The Chancellor’s Office declined to answer questions Thursday about why spending by other Cal State San Marcos administrators was excluded from its eight-month investigation — or whether Chancellor Timothy White would seek to recover any of the allegedly misspent funds.

Cal State San Marcos spokeswoman Margaret Chantung said in a statement that the campus’ own investigation had included a review of one year’s worth of spending by Haynes and other administrators.

“The scope of the (Cal State San Marcos) internal review included all reimbursements from vice presidents and presidents during the 2018-19 fiscal year,” she wrote. “While we discovered instances of travel spending that fell outside CSU policy, we did not find any evidence of fraud.”

She also said school officials have not decided whether to try and recoup any funds from Schroder — or others — or whether the university would refer the case to criminal prosecutors.

“We will be reviewing all of our options,” she said.

Schroder has declined to respond to multiple requests for interviews about his travel expenses.

https://www.sandiegouniontribune.com/news/watchdog/story/2020-02-13/cross-country-road-trip-guns-n-roses-show-and-phantom-dinner-guests-courtesy-of-cal-state-san-marcos?fbclid=IwAR1PjI_rkPzVbYed0Cas-VLWgfGekncrV5IpbAC-RDgsdcWKQ24ZJCDj7a0

Link to investigative Report: https://www2.calstate.edu/csu-system/transparency-accountability/audit-reports/Documents/special-investigation/2019/19203SpecialInvestigationSanMarcos.pdf?fbclid=IwAR1qYMTQWCBWrbSIwgIyOqJkbzR6QaKMwxNiAd-Nns035YO7orsljfCw_m0

Fraud Friday: “Inception” Bank Fraud, Cryptocurrency Vanishes, College Admissions Fraud

Greetings from the hazy heat of Summer here in the American Middle West. While it came late after a very wet Spring, it’s finally arrived in all its ridiculously humid glory. Fireflies are cool, though…anyway, one thing that never took a break was fraud, so here we go…


Bank manager hid employee’s fraud to hide his own $500,000 fraud, police say

A senior manager at the Commonwealth Bank, who stole almost half a million dollars, failed to report a member of his team for fraudulently transferring an alleged $64,000 to her personal account, lest his own fraud be discovered, police allege.

Lee Zaragoza, a self-described ‘results driven’ senior manager in the bank’s payment operations unit, is accused of funding a gambling habit by redirecting $463,240 from the bank into his own personal account between 2013 and 2018.” – Sydney Morning Herald

I love it – “results driven.” Yeah, the only result from you being a first-class asshole, Mr. Zaragoza, is that YOU’RE now going to jail, along with your fellow embezzling senior manager. It’s like the movie “Inception,” where everything is a crazily-related M.C. Escher-esque house of mirrors. This kind of situation actually happens more than one might think, particularly in organizations without a strong sense of ethics or a poor or dishonest managerial culture.


Where’d Your Bitcoin Go, Bro?

Losses from the theft of cryptocurrencies from exchanges and fraud-related activities surged in the first quarter of the year to $1.2 billion, or 70 percent of the level for all of 2018, cybersecurity firm CipherTrace said on Tuesday.” – Reuters

Shocking – shocking, I tell you: A bunch of criminal hackers invent a virtual form of money, and then use their superior technical skills to use that invention as an efficient method for separating the stupid from their cash.

Two years ago, I was getting yelled at online for being skeptical about the Bitcoin Bubble. Anyone who questioned the safety and security of blockchain-based cryptocurrencies was shouted down and branded a Luddite, and those without a blind self-interest in profiting from a bunch of suckers got badgered into silence. Well, the separation of idiots from their funds appears to be continuing apace…


Long before college admissions scandal, universities saw signs of fraud on campus

More than a year before the college admissions scandal investigation began, Georgetown University “discovered irregularities” in the athletic credentials of two tennis recruits, initiated a secret investigation and eventually forced coach Gordon Ernst to resign, court records show. University officials say those two athletic recruits were denied admission.

But none of Ernst’s conduct would become public until he was arrested in March on charges he accepted $2.7 million in bribes between 2012 and 2018. He has pleaded not guilty to racketeering conspiracy.” – LA Times

Once again, I’m surprised that anyone was surprised by this scandal. It’s been clear for several decades to anyone willing to see and hear that these sorts of schemes have been going on for a long time. Well, hopefully someone will have plenty of time on their hands to “get educated” about the issues from inside a correctional institution.

That’s all for now. Have a great weekend, and be on the lookout for some exciting format and layout changes arriving soon!

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