Minkow’s Latest Chapter Marks a New Low

GUEST BLOGGER

Scott Patterson, CFE
ACFE Senior Media Specialist

Barry Minkow has been sentenced to prison for five years for committing fraud. Again. The former entrepreneurial whiz kid is no stranger to running afoul of the law, using financial trickery to make money under false pretenses. He did it during his reign as a teenage business owner with ZZZZ Best Carpet Cleaning in Southern California. Years later, after being “reformed” in prison, Minkow fell again when he lied about Lennar Corp. in investigative reports he produced through his Fraud Discovery Institute. His latest conviction, however, is not related to those noteworthy cases.

This time, it’s different.

This time, the victims of Minkow’s schemes welcomed him into their homes, into their family circles. They trusted Minkow with more than just money – they prayed and worshiped with him, following him as members of San Diego Community Bible Church. Minkow served as the church’s head pastor, claiming to have found redemption while in prison and becoming a self-avowed man of God. Through his new vocation, he also found another way to ingratiate himself to people who would willingly give him money for all sorts of important causes, such as a nonexistent hospital in Africa.

When all was said and done, according to prosecutors, Minkow had enriched himself to the tune of $1.6 million. Read more about this discouraging story on ABC News, or in one of the many other news articles covering Minkow’s latest fall from grace. 

Did I mention there is a movie in the works about him? The film is being created as a feature piece starring none other than Minkow (playing himself, naturally), along with other names from Hollywood including James Caan and Ving Rames. See the movie’s trailer – it appears to be a rather ambitious telling of Minkow’s story, and it will now need some major revisions, obviously. His latest conviction should see the tale take a winding, perhaps unexpected turn to reveal the falseness of Minkow’s redemption.

For some fraudsters, prison becomes a familiar place. In September 2012, The Fraud Examiner e-newsletter included a video feature “Hard Time for Fraud.” The video above showcases excerpts from interviews with several repeat offenders, Minkow among them (along with Kenneth Kemp, Steve Comisar and Barry Webne).

Minkow was interviewed in prison by ACFE founder and Chairman Dr. Joseph T. Wells, CFE, CPA, for “Cooking the Books: What Every Accountant Should Know About Fraud,” a video/workbook course published in 1991. At the time of the interview, Minkow was serving his first sentence for the ZZZZ Best scandal. In the video, Minkow explains that he had problems “being an egomaniac.” He discusses learning accountability in prison, and his plans for righting the wrongs he has committed “as long as I keep the ego out of it, can learn from my past mistakes, can be involved in helping future people (who) make my mistakes, and run perhaps some kind of entity where I could earn money legitimately, help society and pay back those people that I hurt…”

So much for that plan.

“The Wolf of Wall Street”: The Other Side of the Story

SPEAKER INTERVIEW

Gregory Coleman
Special Agent, Asset Forfeiture/Money Laundering Team, FBI

The Academy Award-nominated film “The Wolf of Wall Street” has garnered nearly as much controversy as it has critical acclaim. The film’s depiction of Stratton Oakmont founder Jordan Belfort’s outrageous lifestyle, fueled by sex, drugs and greed, makes for an entertaining – and wild – ride, but noticeably leaves out a key element in his scheme: the victims. This glamourized version of events has left many feeling as though Scorsese’s interpretation glorifies Belfort and excuses his actions, despite their devastating effect on numerous families and individuals.

Attendees at the 25th Annual ACFE Global Fraud Conference will have the opportunity to hear two other sides of Jordan Belfort’s story not depicted in the movie. FBI Special Agent Gregory Coleman, who led the investigation into money laundering that was Belfort’s eventual downfall, will share his account of events during Part One of a special two-part session. During Part Two, former U.S. Attorney Joel M. Cohen, who led the prosecution against Belfort, will share his viewpoint.

For those unfamiliar with the story, Belfort founded stock brokerage firm Stratton Oakmont, a boiler room, making millions off penny stocks in a pump and dump scheme. Convicted of money laundering and securities fraud in 2003, he received a four-year prison sentence (served 22 months) and was ordered to repay $110.4 million to a victim compensation fund.

We were able to catch up with Special Agent Coleman about his thoughts on Belfort and his hopes for his session:

What was your first impression upon meeting Jordan Belfort?

My first impression upon meeting Jordan Belfort was a mixture of curiosity, relief and anticipation. Curiosity because I had learned so much about him during the investigation but had never actually spoken to him face to face; relief that his day of reckoning had finally come; and anticipation of what the future would bring with the possibility of Belfort pleading guilty and cooperating. To me, Belfort represented a key that could unlock and uncover many more criminal conspiracies, and I was re-energized by the thought of going after the next wave of fraud participants.

What do you think is the biggest misconception about the Belfort case?

One of the biggest misconceptions about the Stratton Oakmont/Jordan Belfort case is that Belfort’s activities, or the activities of others like him, caused or contributed to the financial crisis that began in 2008. The recent financial crisis began at least six to seven years after the Belfort investigation, and prosecution had been fully adjudicated and was the result of conduct and financial transactions that bear no resemblance to the crimes undertaken by Belfort. In addition, although Belfort’s frauds caused more than $200 million in losses and were devastating on a personal level to many victim investors (it was one of the largest frauds of its kind at the time), the frauds were more “local” in nature and could probably never cause the type of financial meltdown that was experienced in the financial crisis.

What do you most hope attendees will take away from your session?

I hope the attendees take away a better understanding of the efforts that went into investigating and prosecuting the complex, multi-national, securities fraud and money laundering operation of Jordan Belfort, Daniel Porush and the other corrupt individuals at Stratton Oakmont. 

Read more about the educational sessions at the ACFE Global Fraud Conference on FraudConference.com.

Fighting ‘Public Enemy No. 1’ in Developing Countries

LETTER FROM THE PRESIDENT

What fraud is common to all nations? Corruption. Corruption schemes comprise one-third of fraud cases worldwide, as reported in the ACFE’s 2012 Report to the Nations on Occupational Fraud and Abuse — with a median loss of $250,000.

Corruption and bribery enrich strongmen but ravage citizens in many nations. This fraud, according to Dr. Peter Eigen, founder of Transparency International (TI) speaking at a TED Talk conference, perverts “economic policy-making … which is the main reason for the misery, for the poverty, for the conflicts, for the violence, for the desperation. …”

We’re honored to present Eigen, a singular fraud fighter, as a keynoter at the 25th Annual ACFE Global Fraud Conference, June 15-20 in San Antonio, Texas.

When he was working as a World Bank director in Africa in the early 1990s, systematic corruption was undermining all his projects. He says the members of the World Bank — including Germany, his home country — thought that foreign bribery was acceptable. “In Germany … it was even tax-deductible. No wonder that most of the most important international operators in Germany, but also in France and the U.K. and Scandinavia, everywhere, systematically bribed,” he says.

He began to speak out against common bribery practices, but the World Bank ordered him to cease and desist because he was “meddling in the internal affairs of our partner countries.” In 1993, Eigen convened a small group of colleagues in Berlin who agreed that corruption didn’t have to be the norm. They began TI — a global, nonpartisan nonprofit with chapters in more than 100 countries — that continues to help governments, businesses, civil societies and individuals fight the scourge of corruption.

You probably know TI because of its Corruption Perception Index, but the organization also works with leaders and citizens to create international anti-corruption conventions, disseminate publications, prosecute corrupt leaders, support national elections for tackling corruption and hold companies accountable. It has begun a global movement with one vision: “A world in which government, business, civil society and the daily lives of people are free of corruption.”

TI’s efforts appear to be bearing fruit. The World Bank recently declared corruption “the public enemy No. 1” in developing countries.

Come hear this inspiring man at the 25th Annual ACFE Global Fraud Conference. Check out all the speakers and sessions at FraudConference.com. 

The Insider’s Guide to Social Network Investigations

AUTHOR’S POST

Mandy Moody, CFE
ACFE Social Media Specialist

Tweetdeck. Statigram. Tumblr. Pinterest. These may all look like words that are missing a few crucial letters, but online, they are digital goldmines for investigators. These social networks are full of personal information, seemingly small details describing every day experiences and, essentially, bread crumbs that often lead examiners to case-breaking motives, deception or direct evidence pertaining to a fraud investigation.

If this all sounds overwhelming or out of your digital comfort zone, rest assured that Cynthia Hetherington, CFE, president of Hetherington Group, will not let you leave the upcoming 25th Annual ACFE Global Fraud Conference without the confidence to search for valuable information on a variety of social networks. Dubbed the “insider’s guide to social network investigations,” Hetherington’s Pre-Conference session, “Incorporating the New Social Media in Fraud Examinations” is full of resources, tools and search engines you can use to enhance, or even solve, your investigations.

You can look forward to walking away with knowing how to: 
•    Locate social media profiles of your target
•    Connect various accounts together
•    Understand the value of online posts and learn how to vet them

The four-hour Pre-Conference session also allows you to dig deeply into the latest online search engines and networks, and gives that extra time for questions and discussion. So, even if you can’t remember how to spell the names of social media networks like Statigram, Tumblr, OkCupid, Tweettunnel or Hootsuite, you will remember how to use them to aid in your next investigation.

Other Pre- and Post-Conference Sessions include:
•    Benford’s Law and Other Analytical Fraud Detection Techniques
•    Preparing for Civil Litigation in a Fraud Examination
•    Auditing/Investigating Fraud Seminar
•    Building a Culture of Fraud Prevention and Detection
•    Professional Interviewing Skills

You can find more details on Hetherington’s session and other Pre- and Post-Conference sessions at FraudConference.com. 

Student Scholarship Winner Receives Much More Than a Free Registration

MEMBER PROFILE

Kim Fleischmann, CFE, Senior Auditor - Global Internal Audit Services
Walmart

When Kim Fleischmann, a born and bred Oregonian, applied on a whim for a student scholarship to attend the ACFE Global Fraud Conference in 2012, she had no idea that she would leave the event with an auditor position with Walmart. “Without the scholarship and conference, I’m not sure when I would have realized what opportunities were available in the private sector,” said Fleischmann. “Ultimately, I believe I ended up where I’m at because of the connections made through the ACFE and my willingness to integrate my experiences into my new career.”

How did you become passionate about fighting fraud?

My passion for fighting fraud has steadily grown throughout my working career. During college, I processed background screenings for rental applications and discovered I loved digging up dirt that people thought they hid. A couple of years after graduating, I worked for a small international fishing company leading the accounts payable department. This was my first experience working for someone whose ethics I questioned. Throughout the next decade, I worked in various companies, good and bad, and continued to have experiences with individuals who walked the fine line between ethical and unethical behaviors. It was during this time that my frustration and passion grew as I continued to see the damage unethical decisions left behind.

How do you think receiving a scholarship to attend the ACFE Global Fraud Conference impacted your career?

Applying for the student scholarship to the ACFE Global Fraud Conference was something I did on a whim. I was close to completing my masters in Criminal Justice Administration, and I was not sure of my next step. The only thing I was sure of is that I wanted to fight fraud and corruption. While at the conference, I approached the Walmart Internal Audit booth in the Exhibit Hall to see what opportunities they had to offer. Before leaving the conference, I had completed an interview. I received a job offer within the month. Throughout my studies, I assumed I would end up in the public arena and never really considered the corporate world, despite having worked in that world for the previous decade. Without the scholarship and conference, I’m not sure when I would have realized what opportunities were available in the private sector.

What is one of the biggest lessons you have learned since becoming a CFE?

I remember someone once saying that fraud is sexy. In the last couple of years, especially since earning my CFE, I would agree with that statement. On the surface, fraud is sexy and fascinating, but it is after you look past the exciting façade and really look at it that you see the infectious and insidious nature that allows it to proliferate. I have discovered that when the CFE credential comes up in conversation most people are intrigued, but tend only to see the sexy side of fraud. Those that are truly passionate are the ones that look beyond the obvious and see the challenges faced in combating fraud and corruption.

What steps led you to your current position?

After one particularly boring day at work, I did some depressing calculations and realized I still had 30 years left before retiring. That, combined with the fact that I never truly loved any job since graduating, prompted me to reassess how I wanted to spend the rest of my working career. Law enforcement had always fascinated me, so I jumped head first into a criminal justice graduate program. It was there I realized how different I was from my classmates as years spent in business gave me a unique perspective. Throughout my studies, I made a conscious effort to grow and expand that perspective through classes, research and networking so that I stood out among my peers. Ultimately, I believe I ended up where I’m at because of the connections made through the ACFE and my willingness to integrate my experiences into my new career.

What is your current role and what does it entail?

As a Senior Auditor within Internal Audit, I am lucky to be a member of a small functional team specifically focused on anti-corruption and fraud prevention. Working with customers in ethics, compliance and legal, my team helps ensure that policies and controls are in place to discourage or detect unethical or fraudulent activity. Additionally, I have the opportunity to encourage and educate others on the risks of fraud within various areas of the company through work with the local ACFE chapter.

What is a memorable case or project that you have worked on? Feel free to alter details to protect confidential information.

My current project is by far one of the most challenging, and rewarding, that I have worked. Presently, my team is traveling the world to assist in reinforcing existing anti-corruption policies and controls. Throughout the project, I have had the privilege of learning the intricate workings of the world’s largest company.  Beyond that, I have seen firsthand the difficulties cultural and ethical difference present when operating in the global sphere.

What activities or hobbies do you like to do outside of work?

I like trying new things and going to places off the beaten track. While at home, I enjoy reading, cooking and enjoying the beauty of Northwest Arkansas. When on the road, I love trying local delicacies and cultural activities. 

To apply for a scholarship to attend the 25th Annual ACFE Global Fraud Conference, contact Lupe DeLeon, Member Services Manager, at LDeLeon@ACFE.com.