Grace Under Pressure: Bouncing Back from a Career Setback

GUEST BLOGGER

Kathy Lavinder, CFE
Owner and Executive Director of Security & Investigative Placement Consultants

An investigator with a boutique professional services firm contacted me recently. Her employer was having financial difficulties. That was something she knew, but what she didn’t expect was that her job would be eliminated. Her work evaluations had been top-notch, but she was the most recent hire. She never saw it coming, so it was a tough blow.

After a day or two to absorb the shock, this investigator did what I recommend anyone in that situation do. She updated her résumé to reflect recent work experience and training. She emailed several people, including her former supervisor at the boutique, to ask if they would serve as references. Then she turned her attention to LinkedIn. She began expanding her network by sending out invitations to connect, with special attention given to recruiters and talent acquisition specialists at employers in her home town. She quickly joined several new LinkedIn groups that focused on her areas of expertise and interest. Then she updated her profile page to make it crystal clear the kind of work she has done and the kind of role she could handle.  

Professional lives, like personal lives, can veer off course sometimes. As this young professional demonstrated, it’s vitally important to begin with an unemotional and clear-eyed assessment of the situation. Discuss the particulars of your situation with several people you trust, who know you well and who you know will be discreet. Find the right perspective – determine if this is a minor setback or something truly serious. If you conclude it’s a minor event, then look for ways to learn from it and move on.  

If the development falls squarely into the serious category, such as a job loss, you’ll need to develop a thoughtful and appropriate response. An adverse event outside of your control, such as a bankruptcy filing by your employer, is an example of something you can’t impact. But you can respond and you can even be prepared for this kind of event. Keep your résumé up-to-date, periodically check job boards and passively use indeed.com to push relevant job announcements your way. In a career crisis, however, don’t do anything hasty because storms – even big ones – blow over, and your career may be none the worse for it.  

If you’re in the middle, or even the periphery, of an adverse event, it becomes something you cannot ignore. As a fraud prevention, investigation, or mitigation specialist it can be problematic if the issue involves some failure on your part – perhaps it was an oversight or a misjudgment. Whatever the matter, your actions and judgments will surely come under the microscope.

Keep doing your job to the best of your ability, while taking ownership of your mistake or shortcoming. Be a professional who exhibits grace under pressure. This response may provide you with an opportunity to redeem yourself even if you had direct involvement in the adverse event. After all, to err is human, to forgive divine. If you can demonstrate how you’ve learned from your mistake or misstep, you may be able to redeem yourself. By communicating that you’ve gained new self-awareness and have serious intentions to correct deficiencies or make amends, you may qualify for a second chance.  

On the other hand, a catastrophically bad judgment call and/or an integrity lapse are two things in the fraud prevention arena that are usually career killers. Keep that stark reality in mind as you go about your work.  

If your career emergency truly is critical and calls for action, contact your fraud sector peers, as well as former colleagues and recruiters, to alert them to your newly launched job search. Communicate that you’re ready for your next career challenge. Do not go into great detail about your situation at this point. Always keep in mind how important discretion is in the anti-fraud arena. You’ll have to be proactive to find your next job since it’s a competitive market, but there are always opportunities available.

Find more career advice from experts like Kathy in the ACFE's online Career Center.

Investigating a Contemptible Fraud

LETTER FROM THE PRESIDENT

I've seen all kinds of fraud. Some are mind-numbing. Others are intriguing or preposterous. But only a few are truly contemptible. The cover story in this month's Fraud Magazine tells of a fraud that endangered the lives of the poorest of the poor while generating millions for the fraudsters.

On May 13, 2013, Ranbaxy USA Inc., a subsidiary of Ranbaxy Laboratories Limited, pleaded guilty to seven federal criminal counts of selling adulterated drugs with intent to defraud, failing to report that its drugs didn't meet specifications and making intentionally false statements to the government. Ranbaxy, in the largest drug safety settlement to date with a generic drug manufacturer, agreed to pay $500 million in fines, forfeitures and penalties.

Dinesh Thakur, a former research executive with Ranbaxy, blew the whistle on the company after his boss found that it had provided false data to the World Health Organization. Thakur, then a new employee, investigated and discovered a company culture that not only tolerated fraud but also apparently celebrated and encouraged it among its employees. His boss reported Thakur's results to the board, and he then later resigned in protest. Thakur also resigned after Ranbaxy falsely accused him of breaking company rules.

Thakur eventually took his discoveries to the U.S. Food and Drug Administration and endured almost nine years of aiding governmental investigative agencies before Ranbaxy finally pleaded guilty.

"It certainly was cathartic to stand in the Federal Court in the District of Maryland in May of last year to hear the company plead guilty to seven counts of felony," Thakur says in the cover interview article. "I felt the weight of this case removed from my shoulders. It was a victory not just for me and my legal team, but the hundreds of millions of patients worldwide who were subjected to adulterated medicines by this company in the most unethical manner. More importantly, this case sent a strong message to manufacturers of medicines that you cannot hide from the long arm of the law just because you are a foreign entity."

For "Choosing Truth Over Self," the ACFE honored Thakur with its Sentinel Award at the recent 25th Annual ACFE Global Fraud Conference.

I know that we'll see many more contemptible frauds. But thanks to Thakur, and the diligent investigators who investigated Ranbaxy's systemic crimes, we'll see a bit less fraud that ravages the defenseless. 

Shaping the Public’s Image of Nonprofits

GUEST BLOGGER

Jacob Parks, J.D., CFE
ACFE Research Specialist

I recently had the privilege of attending a roundtable discussion on “Fraud on Charities: Analysis and Prevention,” hosted by the National Center on Philanthropy and the Law (NCPL). One of the prominent issues we discussed was the effect of the media’s portrayal of fraud at nonprofit organizations — no doubt influenced by the preceding release of the Center for Investigative Reporting and the Tampa Bay Times’ story on “America’s Worst Charities.” The series of articles and reports detailed unethical and fraudulent practices occurring at nonprofits that were often receiving millions of dollars in donations.

Many nonprofits depend on income from donations or agency budgets, and so the public awareness of a fraud against a particular nonprofit can seriously threaten those sources of funds. Several attendees of the NCPL roundtable lamented the reality that while nonprofit organizations provide so many valuable services to the general public welfare, some of the most popular news stories surrounding this sector are related to fraud and abuse. This situation is harmful to the entire nonprofit sector because it can create cynicism amongst donors and taxpayers, resulting in lower public funding overall.

For better or worse, the public holds nonprofits to a higher standard than other private organizations. When a for-profit organization is defrauded, the perceived victims are typically the owners and members of the particular company. In contrast, frauds against nonprofits are seen as crimes against the entire public. The fraud risk, therefore, is different for nonprofits because a fraud scandal can cause indirect losses from decreased donations or funding.

Anti-fraud professionals often note internal controls weaknesses in nonprofits (as seen in the chart below, based on data from the 2014 Report to the Nations). There are several reasons for this, including the desire of nonprofit leaders to reduce non-program costs. Additionally, the leaders, employees, volunteers, and members of nonprofits might be more prone to assume that they can trust each other, given that the organizational mission is to serve the public’s interest. However, trust is an inadequate control; even people who otherwise seem to be upright citizens might commit fraud under certain circumstances.

Fraud examiners who work for nonprofits or who have them as clients need to be able to recognize the common fraud schemes to which such organizations are susceptible. Additionally, they should be able to help nonprofits set up proper controls to prevent frauds that pose the greatest risk. The ACFE’s upcoming online self-study, Fraud Against Nonprofit Organizations, covers such schemes and prevention measures. 

While the negative press that nonprofits receive for poor anti-fraud efforts might be disproportionate to their successes, these organizations can still be proactive in stopping fraud at their organizations. Having a fraud prevention program designed to face the unique risks in nonprofits will not only prevent or mitigate losses at a specific organization, but will also help to improve the image of the entire sector.

Hunting the Big Cats of Fraud

SPECIAL TO THE WEB

Robert Tie, CFE, CFP

Part 1 of 2: HealthSouth Corp.

In the economic crime jungle, is one predator more rapacious than all others? If so, who is king of the fraud beasts?

Consider this. A staggering $1 million was the median loss for the 133 financial statement fraud cases tallied in the ACFE's 2014 Report to the Nations on Occupational Fraud and Abuse. A far smaller amount — $145,000 — was the median loss for all 1,483 fraud cases the Report covered.

Clearly, the executive who falsifies financial statements is king of the fraud beasts. Alton Sizemore, CFE, CPA, knows the species well and has hunted down several of its members. Sizemore, a former FBI special agent, is owner of Alton Sizemore and Associates and a consultant with Forensic Strategic Solutions — a national financial investigation firm with offices in Alabama and North Carolina. Over a career spanning more than 30 years — 25 of them with the FBI — he has investigated numerous financial statement frauds.

By interviewing the executives who committed those crimes he learned to recognize and understand their fraud motives, opportunities and rationalizations. Sizemore also became proficient in trend and ratio analysis of financial statements to detect potential signs of falsification. And by observing those entries most frequently falsified, he developed a strong sense of those supporting documents to scrutinize. This article, in two parts, discusses these investigative principles and techniques in relation to two major financial statement frauds.

Sizemore managed the 2003 FBI investigation of a $2.9 billion financial statement fraud at HealthSouth Corporation in Birmingham, Alabama. That probe led to the first prosecution of a CEO and a CFO under the Sarbanes-Oxley Act (SOX) of 2002 for fraudulently misstating information on financial statements they had certified were accurate. The second case is currently in federal criminal court in Manhattan and concerns the alleged $250 million financial statement fraud at the now-defunct law firm Dewey & LeBoeuf LLP. It will be discussed in part 2.

HEALTHSOUTH CORPORATION

In an earlier Fraud Magazine Special to the Web Sizemore described the case, the culprits and the investigative techniques the FBI used to uncover documentary evidence of this fraud.

HealthSouth's book-cooking scheme persisted for 17 years before its discovery led to the prosecution and conviction of the 21 senior managers who conspired to perpetrate and hide it. How could the auditors not detect such a massive fraud? Through their repeated failure to look behind the financial statements to see whether they were accurate.

"For example," Sizemore says, "the company's balance sheet showed $300 million was in clearing between one bank and another. But the money didn't exist. The auditors never found out, though. They neglected to check again later to see if that money actually had cleared."

At HealthSouth, the fraudsters' motivation for misstating the financials was to keep stockholders from learning about slumping profits. Their opportunity was the external auditors' ongoing failure to stand up to the HealthSouth CFO who intimidated them. And their rationalization was that eventually the company would generate enough actual profit to make up for the phony revenue planted in the current financials. That fantasy never materialized, though, and the whole scheme unraveled when persistent shareholder pressure led to an investigation.

Both the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) went after the fraudsters at HealthSouth. Its then-CFO William Owens pleaded guilty and agreed to cooperate with investigators in exchange for a lighter sentence. He wore a tiny recording device in his necktie when he met with CEO Richard Scrushy, whom he had told the FBI was the leader of the fraud.

Read more about the HealthSouth investigation in the full Special to the Web article on Fraud-Magazine.com.

A Money Launderer's Contrasts and His Need to 'Amend the Damage'

LIVE FROM THE ACFE GLOBAL FRAUD CONFERENCE

Dick Carozza, CFE
Editor, Fraud Magazine

Humberto Aguilar’s life* has been a study of polarizing contrasts. He told conference attendees at Wednesday’s general session that after graduating from the University of Florida Law school in 1978, he wanted “to be the best criminal lawyer” he could be. Yet, shortly after beginning his law practice he began laundering money for his drug-dealer clients. He was in the running for a state judgeship, but, in 1990, he was indicted on 27 counts of racketeering, money laundering and other charges for assisting his clients. “I went to prison because I committed a crime,” but he also said, “I never considered myself a criminal.” He was a peace-loving attorney who never stole from his clients, but he shot two hit men in a defensive gunfight — wounding one and killing another.

Aguilar, the son of Cuban refugees, said defending others was “the most rewarding and enjoyable thing I’ve ever done in my life.” However, those others — 1980s Miami drug runners — soon became his buddies. “One of my clients came to me and said, ‘look, I’ve got a problem.’ ” The problem was that the client had storage containers packed with $100 bills that he couldn’t spend.

Aguilar didn’t know how to launder money, but soon his Miami attorney friends tutored him in the finer points of washing bucks. He first went to Panama to set up shell corporations and foster “relationships” with private bankers by slipping them envelopes of $5,000, $8,000, $10,000, $15,000. He recalls one banker admiring his $25,000 Rolex diamond bezel watch. So, Aguiliar slipped it off his wrist and gave it to his new banker “friend.” “Now he’s in cahoots with me,” Aguilar said. “If I go down, he goes down. … I’ve got someone in the system who’s allowing me to put the money in.”

Aguilar then would send boxes of his clients’ cash in sailboats and ships headed to Panama to pick up drugs. He or a trusted rep would be on the dock to retrieve the money and deliver it to the banks. He then would move the money around the globe to other banks in Jersey (not that state next to New York but the island off Normandy, France), Guernsey, the Isle of Mann, Lichtenstein, Luxembourg and — of course Switzerland. Poof — sparkling, shiny cash that drug dealers could now spend like water in Miami investments.

For a few years, Aguilar and his attorney partners were enjoying the high life. He had eight cars, multiple houses, clothes, jewelry — the usual over-the-top excess. “But, I was too young to know what I was doing,” he said. “I tell people that there should be a law that if you’re under 30 you’re not allowed to make $1 million. Because you don’t appreciate it. You say after the first million, eh, I can make another one. And when money has no value to you, and it doesn’t, you get to the point where you ask someone, ‘Do you want to get lunch in Paris?’ Now that sounds so stupid now, but I did that.”

He said he eventually became the shark with an entourage of attached parasite feeders. After the birth of his twins, the money-laundering life didn’t make much sense. “The stress was starting to get to me,” he said. So he applied for a Florida judgeship, and his name — along with two others — was sent to the governor. A story made the Miami Herald and, apparently, some client — who didn’t want the exposure Judge Aguilar might give him — sent some hitmen to his home one night to ambush him as he drove up his driveway. Aguilar ducked behind his porch and began spraying bullets; he caught one assailant in the knee and sent another to his grave.

After that, Aguilar hightailed it to New York, but the feds eventually arrested him for his many felonies. He jumped his $3 million bond, packed up his family, changed his name to David Omar Ocampo Andrade and settled into two apartments in Spain. Eventually, the money ran out and he sent his wife and kids back to the states. Aguilar laid low working minimum-wage jobs and communicating with his wife through coded messages. That meager life also ended one day when Interpol caught up with him.

He spent 29 months in a hellhole Spanish prison while he fought extradition. He lost his fight, was shipped back to the U.S., was convicted and spent 77 months in a federal prison. After he got out, he worked his way up the management ladder at a hotel and then began working at a nonprofit, Suits for Success, which counsels released felons on job searches and provides them with interview clothes.

He now writes for the Money Laundering Bulletin and Complinet.com, speaks to law enforcement groups and — contrast of all contrasts — assists in money-laundering investigations of worldwide terrorist organizations.   

“Was it worth it?” he asks. “No. Was it fun? Yes!” Despite the toll on his family, his mental health and the years spent in prison, he still enjoyed the riches — for a while. “I never considered myself a criminal. I really haven’t,” he said. “I’ve never hurt anybody, and at the end of the day I’m trying to do everything possible to somehow amend the damage I’ve done to society.”

*The ACFE doesn’t compensate convicted fraudsters.