Hello, we’re back after a bit of a hiatus that included a couple of home remodeling projects that were, shall we say, challenging. All I can say is try to pay your contractors & vendors with a credit card whenever possible – disputing a charge can be a project-saver.
It’s also been a quite busy time in the fraud world. Seems like we’re particularly rich in employee embezzlement stories this quarter. Most of these stories are well, let’s face it: boring. Myrna the kindly, trusted bookkeeper for local business figures out that nobody but her is watching the main checking account for the septic tank cleaning business she’s worked at for years, and next thing you know she’s in Vegas at the high-roller slots and buying the entire Vera Bradley flowered-purse line on QVC.
Of course, Myrna eventually gets caught when the business owner can’t make payroll, gets suspicious, and hires a forensic accountant to figure out where all his money’s gone. Myrna tearfully pleads guilty, does some time in County lockup, and has to figure out a new way to pay for her Branson trips. Business owner keeps telling anyone that will listen that he still can’t understand how he got ripped off “because I only hire trustworthy people.” Lather, rinse, repeat.
It’s no revelation to anyone in the fraud field that there is still an extraordinary amount of denial in the business community about due diligence in hiring and implementing and maintaining robust preventive and detective internal controls against employee embezzlement. In my experience, owners and managers unconsciously divide people into “trustworthy” and “suspicious” categories with little more evidence than their own unconscious bias, brought to life by Fox News and their buddy who owns a bail bonds business. The research is clear – due diligence in pre-employment screening helps reduce the incidence of hiring career criminals, but there are many pitfalls – stay tuned for an upcoming two-part series on this blog about ways to minimize the likelihood of hiring every business owner’s nightmare – the serial embezzler.
I’m A Pepper, You’re a Pepper, We’re All Convicted…
PROVIDENCE, RI – A national sales executive for Dr. Pepper/Seven Up, Inc., a subsidiary of Dr. Pepper Snapple Group (Dr. Pepper), today pleaded guilty to charges that he submitted more than $1.7 million dollars worth of fraudulent invoices to Dr. Pepper through a promotions and marketing company he formed in his wife’s name. – USDOJ Press Release
As a reminder, if there’s anyone you know who MIGHT have, say, laundered Russian money through a series of inflated value real-estate transactions & then failed to declare the resulting income on their tax return…
“Wire fraud is punishable by statutory penalties of up to 20 years imprisonment and a fine of $250,000. Filing a false tax return is punishable by statutory penalties of up to 3 years imprisonment and a $100,000 fine.”
When the Hunter Becomes the Hunted
“A former state fraud investigator was sentenced Friday to two years in federal prison for bank fraud and money laundering.
What is interesting about this otherwise fairly conventional confirmation fraud/social engineering scheme is the fact that it appears that the perpetrator was also HIMSELF a victim of a Nigerian 419 scam, which is kind of mind-boggling, considering Mr. Knigge is a (now former) professional fraud investigator:
“Knigge wired $30,000 of the fraudulently obtained money to people overseas, including $9,500 to Nigeria, which constituted money laundering.
“You were perfectly armed not to get caught in such a scheme,” U.S. District Court Chief Judge Jeffrey Viken told Knigge during his sentencing in Rapid City on Friday. Before retiring, Knigge worked for 32 years at the South Dakota Department of Revenue, where he was an auditor and fraud investigator.”
Judge Viken: “Dude, how did you screw this up? You’re supposed to be a pro! I’m sentencing you to prison because you were dumb and got caught!”
The Cryptocurrency Bubble Loses Some Air
NEWSFLASH: An anonymous method of transferring value has been…gasp…utilized by bad people to do bad things.
In a recent LinkedIn post, Chris McCall referenced crypto-fraud expert Greg Hays’ recent excellent article to drop some very revealing data points about crypto in general, and Bitcoin specifically:
- 1,526 cryptocurrencies (coins & tokens)
- 170 new initial coin offerings this year
- $434 billion market cap for all cryptocurrencies
- 5,000 cryptocurrency investment frauds
- 1 SEC receiver appointed
- $150 billion market cap
- 40% of Bitcoins are owned by 1,000 people
- 17% to 23% estimate of all Bitcoins mined that have been lost
- 70% of Bitcoin trading is in China
- 30% of Koreans own Bitcoins
- 98% of trading addresses have less than $100 invested
- 58% of purchasers are under age 34
- 20% of Bitcoin purchases are with debt
- 802 total investors in the US have reported Bitcoin income to the IRS $172 million in hacks at prices at the time of theft
- 1 hour to process a Bitcoin transaction
- $28 transaction fee when most accounts have less than $100
Others are even more direct. Paul Ford at Bloomberg Businessweek ain’t having it, so to speak:
“On the days when Bitcoin crashes, a holiday atmosphere takes over in my corners of the internet. People tweet screengrabs of Reddit fights. It’s always good fun to watch strangers grieve as their digital nonsense nickels melt into slag.”
“That all of this adds up to money is ridiculous, and we should probably mock it more than we do”
It’s a good read, and worth your time, even if you are a true believer (Full Disclosure: I’m not).
Food Recommendation: The Z-Man sandwich from Joe’s Kansas City BBQ. I live a mile from one of the 13 places Anthony Bourdain says you must eat before you die. Life is good.
Until next time…Rock, Chalk, Jayhawk – Go KU!