Investigative Journalist Discovers Passion Playing "Gumshoe"

MEMBER PROFILE

Natalie St. John
Investigative and Visual Journalist
EO Media Group

Natalie St. John’s career has morphed from teaching and freelance reporting to an unconventional field within fraud detection — investigative journalism. Since becoming an ACFE member in 2015, St. John has discovered a passion for playing “gumshoe” (detective) and is preparing to take her CFE Exam. Her desire for justice and truth has led her on adventures like researching puppy mills and investigating landslides. When faced with the difficult task of investigating stories, St. John has become strategic. “I make it my business to know what records exist, who keeps them, how to write smart requests and where to find elusive information,” St. John said. “Surprisingly often, the truth is buried in an old dusty box that no one else wanted to deal with.”

Where were you born and raised?
I spent my childhood in Colorado and California, and my adult life in Texas and the Pacific Northwest. I’ve also lived in Mexico and China.

What steps led you to your current position?
I started out wanting to be a photojournalist, but worked as a teacher for about a decade. When I was laid off in 2009, I decided to pursue my original goal. After freelancing for about a year, I was hired at a regional daily paper.  

Though I still regularly work as a photographer, I discovered a real passion for playing “gumshoe.” Three years ago I moved to a smaller weekly paper because I wanted to have time to learn how to conduct investigations and write deeply researched stories.  

What does your role as an investigative journalist entail?
Finding potential stories involves intuition, vigilance and tips from trusted sources. In the planning phase, I give a lot of thought to ethical and practical considerations. I ask subject area experts what they know, try to develop a working theory and come up with a strategy for testing it. 

The investigative phase is fascinating, rewarding and often extremely difficult. The truth is often buried in mind-numbing datasets or hard-to-find documents, and I usually need to interview people who don’t want to talk to me.  

I love it when my projects require creative problem-solving and old-fashioned detective work. A story about puppy mills involved using a reverse directory to cross-reference online puppy ads with county inspection reports, then staking out suspected breeding facilities from adjacent properties. I also recently found myself digging through a landslide in search of pieces of trash that I could use to determine whether illegal dumping played a role in the slide. 

What are some of the most challenging aspects of being involved in investigative journalism?
I live in an economically challenged rural area, so fraud — in all its myriad forms — is rife. However, much of it falls below the threshold for scrutiny by state agencies or prosecution under the law. Smaller-scale frauds are often more difficult to detect and more difficult to address in any meaningful way. For example, a local woman who systematically misappropriated funds through a fake receipt scheme at her city job was ultimately only charged with a couple of counts because the county justice system simply couldn’t afford to investigate or try her for all of her alleged crimes.

Another example is that the state only requires nonprofits to give detailed financial reports if they earn more than a certain amount. Smaller nonprofits operate on an honor system, virtually without oversight. It may not be a big deal to the state of Washington if a so-called charity can’t account for $4,000. But if it was a low-income grandma’s hard-earned savings that got lost, you can bet it’s a very big deal to her.

What are the most important skills you have learned throughout your investigative career?
I don’t have the magic power of subpoena, so I’ve become something of a public records ninja. I make it my business to know what records exist, who keeps them, how to write smart requests and where to find elusive information. Surprisingly often, the truth is buried in an old dusty box that no one else wanted to deal with.  

I’ve also learned how to work effectively with law enforcement and legal professionals. Crime reporters can’t pander to cops and lawyers, but they should work with respect for their unique motivations, professional “codes” and concerns.  

I have learned to how to find good stories hidden in data, and make them accessible, compelling and relevant through the power of narrative.  
Interviewing is truly an art. I really respect great interviewers and I strive to keep getting better at it.

What activities or hobbies do you like to do outside of work?  
I am a proud volunteer EMT and wildland firefighter with my local fire department. It’s challenging, fun and occasionally scary while providing me a wonderful way to see my community from an entirely different perspective. I also have a special place in my heart for unsolved disappearances and homicides, so I spend some of my own time researching a couple of local cold cases. 

Read Natalie's full profile in the Career Center on ACFE.com.

The Netherlands: Tackling Corruption at Home, Challenged Abroad

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GUEST BLOGGER

Cathalijne van der Plas
Associate partner at Höcker Advocaten and colleague of ICC FraudNet

Last year, Transparency International released its Corruption Perceptions Index (CPI) 2015, which evaluates the level of endemic corruption in countries across the globe. The Netherlands secured a spot on the CPI as the fifth least corrupt country in the world, moving up from the eighth ranking in 2014 to follow only Denmark, Finland, Sweden and New Zealand in the organization’s annual report.

While the Netherlands’ move toward less corruption signals the country is doing something right when it comes to keeping corruption at a minimum, the CPI’s analysis only covers the public-sector corruption that takes place within a country’s national borders. Its figures do not include corruption by residents of the Netherlands abroad.

The Effect of Out-of-Court Settlements on Perception
It is likely that out-of-court settlements keep a lot of information about alleged corruption out of the public domain. These settlements rarely lead to prosecution of the natural persons responsible for the corrupt actions.

Well-known cases of Dutch companies involved in bribery abroad are SBM Offshore and Ballast Nedam, which both were finalized with out-of-court settlements. Furthermore, in February of 2016, the Dutch Public Prosecution Service entered into another out-of-court settlement with Russian telecom company VimpelCom, headquartered in the Netherlands. It was part of a joint settlement with the U.S. Department of Justice (DOJ), in which VimpelCom and its subsidiary paid $397.6 million to the DOJ and the U.S. Securities and Exchange Commission in fines for bribes paid to a government official of Uzbekistan to win bids for Uzbek telecom providers. More recently, there has been an investigation into the involvement of Shell in corruption in Nigeria.

Improving Enforcement
This highlights what Transparency International in 2015 discovered — that the level of enforcement by the Netherlands abroad can be seen as “limited enforcement.”

In the December 2012 release of its “Phase 3 Report on Implementing the OECD Anti-Bribery Convention in the Netherlands,” the Organisation for Economic Co-operation and Development (OECD) expressed its concerns about the efforts of the Netherlands regarding the active investigation and prosecution of corruption by Dutchmen or Dutch companies abroad.

In its “Follow-up to the Phase 3 Report & Recommendations,” released in May 2015, the OECD noted that the Netherlands has demonstrated significant progress with regard to enforcement, fully implementing 11 out of 22 recommendations and partially implementing six others. Only five of its recommendations were not implemented.

Between the period of December 2012 and May 2015, the Netherlands opened seven new foreign bribery investigations, bringing the total number to 16. Ten of these are ongoing investigations and four have been closed. The remaining two investigations, the cases of the Dutch companies SBM Offshore and Ballast Nedam referenced above, were finalized with sanctions imposed on the defendants through out-of-court settlements. SBM Offshore agreed to a $40 million fine and a $200 million disgorgement for payments in Equatorial Guinea, Angola and Brazil. Ballast Nedam agreed to pay €17.5 million and, in the context of the same case, KPMG Accountants NV agreed to pay a €3.5 million fine and €3.5 million in confiscation for bribery related accounting misconduct.

Nevertheless, the OECD is also aware of 24 other foreign bribery allegations that do not appear to have been investigated.

Changes to the Criminal Code
On January 1, 2015, relevant amendments to the Dutch Criminal Code entered into force. The amendments simplify and harmonize the offences for foreign bribery, including removing the distinction between bribery to induce a violation of official duty and bribery to receive a benefit within the official’s duty. The amendments also increase the maximum sanctions for foreign bribery. Furthermore, the Netherlands has improved the regime of criminal liability of legal persons. However, the Netherlands has not amended its legislation since Phase 3 to increase protections for foreign bribery-related whistleblowing in the public and private sectors.

Enforcement Leads to Improvement
Although the Netherlands is perceived as one of the least corrupt countries in the world, there is room for improvement in its efforts of enforcement against corruption abroad. Stimulating active enforcement will deter from corrupt actions, although the tendency to settle out of court might reduce this effect.

Cathalijne van der Plas is an associate partner at Höcker Advocaten and colleague of ICC FraudNet, an international network of independent lawyers who are leading civil asset-recovery specialists in their respective jurisdictions. Recognized by Chambers Global as the world’s leading asset recovery legal network, FraudNet’s membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. 

German Company Loses $44 Million to One Business Email Compromise Scam

GUEST BLOGGER

Ron Cresswell, J.D., CFE
ACFE Research Specialist

As discussed in a recent Fraud Examiner article, the FBI has issued several warnings recently about business email compromise (BEC) scams. In a traditional BEC scam, a fraudster uses a fake email from a high-level executive to trick an employee into wiring funds to the fraudster. According to the FBI, there has been a dramatic increase in BEC-related losses since January 2015. This month brings more troubling news.

The BEC Attack on Leoni AG
In one of the costliest BEC scams yet, the German company Leoni AG announced that it lost more than $44 million to fraudsters. Leoni AG is the largest supplier of electrical wires and cables in Europe. The company has more than 76,000 employees in 32 countries, including Romania, which is where the fraud began.

According to reports, the fraudsters used cloned emails to target a chief financial officer (CFO) working in the company’s factory in Bistrita, Romania. The CFO received an email asking her to wire $44 million to a specific bank account. The email appeared to be from one of the company’s executives in Germany who frequently requested wire transfers by email. Because the request followed the company’s usual procedure, the CFO approved the wire transfer.

The scam seems simple, but it required a significant amount of advance work by the fraudsters. Although details are still sketchy, the fraudsters probably used social engineering and phishing emails to gather crucial information about the company. That information included the company’s internal procedures for requesting and approving wire transfers. For example, Leoni AG has four factories in Romania, but only the one in Bistrita was authorized to make wire transfers. With this information, probably gathered through months of network surveillance, the fraudsters were able to craft a simple but effective BEC scam.

Romanian authorities are still investigating the theft, which was reported by Leoni AG in August. The identities of the fraudsters are unknown, but there are reports that the money was wired to a bank in the Czech Republic.

Could It Have Been Prevented?
Could Leoni AG have prevented the theft? That’s unclear based on current information. However, the following measures might have stopped it:

  • Two-step verification procedure. The fraud probably would have been discovered if the CFO called the company’s German headquarters to confirm the wire transfer request. Many companies require that kind of two-step verification procedure for wire transfers.
  • Employee education. The theft also might have been prevented if the CFO knew enough about BEC scams to be suspicious of the $44 million request. That is why companies should educate their employees about BEC scams and other common frauds.

Conclusion
Fraud professionals should continue to follow news of the Leoni AG case, which is still in the early stages of investigation. It’s the story of a sophisticated, multinational company that lost $44 million through a relatively simple BEC scam. As more information comes out, the Leoni AG case may provide some valuable lessons.