SPECIAL TO THE WEB
Robert Tie, CFE, CFP
Contributing Writer, Fraud Magazine
The elements of an occupational fraud were all in place: A trusted accountant — deep in debt —noticed a weakness in her highly profitable employer's internal controls. She and two outside accomplices fully exploited that deficiency. But the Orange County, Calif., District Attorney's Office made sure they didn't get away with it.
Life didn't seem fair to Cecile Nhung Campbell, CPA. She was desperate for cash, while her employer, Kia Motors America — where she routinely approved payment of six-figure invoices — was rolling in it.
But what if Cecile could be clever enough to filch some of that money, and Kia didn't notice? Wouldn't that mean she needed it — and therefore deserved it — more than Kia did?
POINT OF VIEW
It was the best of times … or the worst, depending on whom you asked.
In 2002, debt-ridden Cecile and her husband, attorney Mel Wayne Campbell, were at the end of their financial rope. Cecile worked in the accounting department at the Irvine, Calif., U.S. headquarters of Korean car maker Kia Motors; Mel was active in Orange County real estate. The professional couple was living beyond their means and had consumed two large home equity lines of credit (HELOC).
Kia, though, had never seen better days. Its U.S. sales had soared 47 percent in the prior year, propelling the firm toward the top rank of global auto manufacturers.
Part of Cecile's job was processing U.S. Customs Service invoices for import duty due on the cars Kia shipped from Korea to America's West Coast. When she approved an invoice, Kia's accounts payable department would send a check or wire transfer to the Customs Service bank account that was specified on the invoice. (The Customs Service is now the Bureau of Customs and Border Protection.)
Unfortunately for Kia, its risk management procedures hadn't kept pace with the company's rapid expansion. Cecile noticed that lately accounts payable had been minimally reviewing Customs Service invoices before paying them. She began to form a fraud scheme that could divert some of Kia's plentiful cash into her hands.
She shared the vague plan with her husband, and he asked to hear more. Cecile explained the perfunctory bill payment workflow at Kia. They brainstormed over a suitable billing scheme and weighed the odds of its success. Eventually they concluded that Kia's anti-fraud controls were weak enough to overcome. So they finalized their plan and prepared to act on it.
First, Cecile asked her younger brother, Long Ngoc Ho, to obtain a fictitious business name statement, which was necessary for opening a bank account under a name other than that of the depositor. Ho managed to acquire such a statement — for a nonexistent firm doing business as "U.S. Customs Service Detail." He then brought it to the Campbells' bank and opened an account there under that business name.
Cecile had chosen that name for the phony account because she was confident it would pass muster in Kia's accounts payable unit. Ho listed himself as an officer of the fake firm. The bank was eager to add a depositor, so it didn't ask any questions Ho couldn't plausibly answer. He then gave his sister the routing number and documentation for the new account. (Ultimately, Ho didn't participate any further in the scheme. He didn't benefit from it in any way — financially or otherwise.)
Next, Cecile made a photocopy of a valid U.S. Customs Services invoice that she'd recently approved and Kia had paid by check. Then she changed the invoice date to the current month, replaced the bank routing number with that of the phony account her brother had opened and made a fresh copy of the altered document. It looked just like an actual U.S. Customs Service invoice. Cecile then approved the phony bill, sent it to accounts payable and requested that it send the funds by wire transfer rather than by check. She rashly cast caution aside because she wanted to get the money quickly.
Read the full article at Fraud-Magazine.com.