The Banality of Fraud: Detecting Fraud from Even the Most Modest Employees

GUEST BLOGGER

Jeffrey Windham, J.D., CFE

Forensic Strategic Solutions

Birmingham, Ala.

When the loan manager of a locally-owned and operated Alabama bank left her job in May of 2012, none of her coworkers knew that within eight months, she would be found guilty of computer fraud and sentenced to six months in federal prison. However, she knew the mess that she was leaving behind.

The manager did not lead an extravagant lifestyle. A mother of two teenagers from a small Alabama suburb, she didn’t seem to have any of the outward signs of a potential fraudster. However, as our investigation progressed, we uncovered massive credit card debt—debt that she was paying off with fraudulent loans from her employer. 

According to our investigation, the employee fraudulently increased her home equity line of credit 69 times between Oct. 11, 2011 and April 27, 2012. She also increased her personal line of credit 11 times between Jan. 13, 2009 and Feb. 25, 2010. In total, she obtained $274,775 in unauthorized equity and credit line increases from the bank. As a trusted loan manager, the fraudster had access to reports that detailed all active loans, including her fraudulent loans. Therefore, she was able to alter the reports and thus conceal her illegal activity from her supervisor.

In spite of her intentional and ongoing scheme, the employee continued to make minimum monthly payments on her fraudulent loans. Of course, with every increase in credit, her minimum payment also increased until it was over $4,000 a month. After leaving in May 2012 to take a position at another local bank, the loan manager could not recall the amount of her minimum payment and had to call to receive the information.

Her high monthly payment astounded her former coworker who then took the alarming information to her supervisor.

Of course, this meant trouble for the fraudster. After reporting the fraud to the FBI, the bank chose to expedite the investigation process and hired our financial investigation consulting firm, Forensic Strategic Solutions. In this case, we were able to bring the evidence to authorities by November of 2012— just four months after the fraud was reported.

In March 2013, the inconspicuous former loan manager was sentenced to six months in federal prison for computer fraud and was ordered to pay $308,554 in restitution.

White-collar crime is not always obvious – especially when it is being committed by an employee who, by all accounts, appears to be a straight arrow. Due to one anomaly, a once-trusted employee - because of her financial woes and ill-conceived solutions - is now a convicted white-collar criminal and banned from ever returning to the banking profession per agreement with the FDIC.

Jeff Windham is an attorney and CFE with Forensic Strategic Solutions. Read his full bio. Forensic Strategic Solutions, Inc. is a national financial investigation firm that combines fraud examination with investigative financial consulting services in order to illustrate and present complex financial data in courts of law and other forums. For more information, visit Forensicstrategic.com.