Fraud Examiner: 'Interviewing is Not a Simple Yes or No Answer'

MEMBER PROFILE

Kenneth Springer, CFE, Founder and President
Corporate Resolutions Inc. 

Author Kenneth Springer, CFE, is the founder and president of Corporate Resolutions Inc., a specialized firm that gathers intelligence and offers a variety of investigative services that helps its clients make informed business decisions. When conducting an investigation, “use your investigative skills to follow the evidence,” Springer said. “Interviewing is not a simple yes or no conversation; there are skills required to make sure the person feels comfortable in order to elicit the most honest and complete information.”

How did you become passionate about fighting fraud? 
While in college, I spoke with a family friend who was in the FBI. I became very interested and pursued it.

What steps led you from the FBI to starting your own company?
Although I enjoyed the FBI and the people I worked with, I had an opportunity to leave and get involved in managing a small investigations firm that conducted background checks and investigations for private firms. Four years later, I was running the company and decided I wanted to start my own business. I put together a business plan, got a Small Business Administration (SBA) loan and started Corporate Resolutions Inc. in August 1991.

What is one of the biggest lessons you have learned since becoming a CFE?
When investigating a fraud, you cannot necessarily rely on all of the facts as initially presented by the client since they may have their own agenda. You need to be open-minded and not have a preconceived notion as to how the fraud may have happened and by whom. Use your investigative skills to follow the evidence.

I know this because a long time ago a client led me to believe that a certain employee had committed the fraud we were investigating. It turned out that the client was actually responsible. The client was eventually arrested by the FBI.

What is a memorable case or project that you have worked on — one that made you feel especially proud?
In one instance, investors backed a company that sold hardware (desktops) and during a surprise audit, found $5 million dollars missing. After two months of having forensic accountants try to figure out the fraud, we were brought in to conduct interviews and gathering facts. We quickly learned that while the auditors were there, the CFO abruptly resigned and left town (in our business we call that a clue).

We immediately began fact gathering on the previous CFO and learned he had formed a similar-sounding entity within the company, yet the CEO was unaware of it or why it was formed. He also changed company procedure so that he was the one who opened all of the company mail.

To perpetrate his scheme, he would buy 100 computers, pay for them and then return 50. When the computer company sent a refund check, he was able to take the check and deposit it into the account he had fraudulently formed — which was located at the same branch where the company did their banking. Thus, it did not raise any red flags within the company. The FBI is still looking for him.

While putting together the fidelity bond claim for the insurance company, we did a background check on the previous CFO. He was not a CPA as he had claimed and the three references he provided did not check out.

What activities or hobbies do you like to do outside of work?
Spending time with family and golfing.

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

Exit Interviews: An Overlooked Tool in the Anti-Fraud Toolbox

GUEST BLOGGER

Andi McNeal, CFE, CPA
ACFE Director of Research

Julia, an accounts payable clerk, gave her manager two weeks’ notice that she was leaving to take a new job. On the surface, there was no dramatic “I quit” moment or signs that Julia was leaving on anything other than a positive note. During her exit interview, an HR representative had Julia sign some forms, went over the termination of her benefits and asked Julia a few cursory questions. When questioned about her reasons for leaving, Julia stated that she’d been offered a position at another company that paid more — which was true. But what Julia didn’t reveal — simply because she was never asked — is that the reason she began looking for another job was that she was deeply disturbed by a pattern of dishonest behavior displayed by the company’s controller. As she left the organization, so did management’s chance to glean, and act on, the information Julia held. Instead, the company’s controller was able to continue his dishonesty undetected — to the tune of embezzling more than $275,000 from the organization.

Many organizations conduct exit interviews as a matter of company policy. Far fewer use these interviews as a formal element of their anti-fraud programs, leaving them vulnerable to missing candid and crucial information about ethical issues and blind spots, and even the warning signs of potential or existing fraud. Like employee surveys and a reporting hotline, exit interviews provide an opportunity for employees to give (sometimes brutally honest) feedback as they are departing the company. And management should want that feedback — especially from individuals who have seen what the company has to offer and choose to move on.

Although the perceived risk of retaliation should be diminished for employees who are leaving, some individuals might have concerns about negative professional references for future jobs or other forms of retribution. Consequently, the exit interview should be conducted in a way that makes clear the value management places on hearing what the exiting employee has to say. Rather than the employee’s supervisor, the party conducting the exit interview should generally be someone from the HR department or ethics team; some organizations even outsource exit interviews to a third-party provider to add a layer of independence and foster the individual’s comfort in the process.

During exit interviews, the interviewer should ask departing employees questions like:

  • Why are you leaving the company?
  • Why did you begin looking for another job (if applicable)?
  • Did you feel you were adequately trained and equipped to do your job well?
  • Did you receive adequate training regarding the company’s compliance, ethics and anti-fraud policies?
  • How would you describe the organization’s culture?
  • Did your coworkers, supervisors and management adhere to the company’s compliance, ethics and anti-fraud policies?
  • Did you know how to report concerns about fraud, dishonesty or other misconduct?
  • Were you comfortable talking to your direct supervisor about ethical concerns or issues?
  • Do you have any unresolved ethical concerns or issues related to the position you are leaving?
  • Do you have knowledge about any unresolved ethical issues in general?
  • Do you have knowledge of any potential fraud that occurred during your time with the company?

If someone seems reluctant to provide information or if the interviewer suspects the individual is holding back, a different line of questioning — such as “Would you recommend this company to a friend as a place to work?” or “If you could change anything about your position here or the company overall, what would it be?” — might help reframe the conversation and open the lines of communication. The interviewer should also follow up on any responses that indicate potential ethical issues or signs that the individual has knowledge of misconduct with additional questions. Additionally, the interviewer should be trained in what to do with the information provided by the exiting employee, including when and to whom to escalate any issues noted for further investigation.

And yes, disgruntled employees might use an exit interview to complain about personal issues or grumble about specific coworkers. But those same employees might be dissatisfied because their legitimate concerns were overlooked during their employment. Much like the tips received through a helpline, it’s better to have employees providing their honest thoughts — even if management has to sort through them to find the real red flags to follow — than to have employees keep quiet and not have the flags waved at all. And disgruntled employees can be a source of valuable insight into issues of organizational or department culture that should be noted and potentially explored.

When conducted effectively, exit interviews can provide management with a wealth of knowledge to help assess the culture of specific departments and the organization as a whole, as well as to uncover issues that might otherwise have been missed. If only Julia’s employer had known to use her exit interview for this purpose, the company might have been able to uncover the controller’s scheme much sooner.