The Human Impact of Fraud

SPECIAL TO THE WEB

Annette Simmons-Brown, CFE

When you work in criminal justice, the endless examples of man's inhumanity might not desensitize you, but they certainly will acclimate you. The report that makes your jaw drop in week two can make you yawn at week 202. This is true for those who work on non-violent financial crimes or violent physical crimes. For the former, the shock-and-awe value of the case is usually driven by the dollar amount of the theft. However, it's easy to lose sight of the horrific damage that financial crime can inflict on individuals and businesses even when the loss doesn't reach Bernie Madoff proportions.

But then you meet these individuals face-to-face as part of the investigation of crimes, preparation for criminal trials, testimony in sentencing hearings and research for a restitution memorandum. Then victims' anguish becomes all too real — even for the most seasoned criminal justice professionals. Sometimes, hearing their stories and looking into their eyes is almost too painful to bear.

Here I highlight this impact of fraud beyond the statistics in these six financial-crime victims' stories from criminal prosecutions I assisted as a paralegal CFE.

We're all are aware of the sweeping damage that mortgage fraud has inflicted on the U.S. and global economies. My office, one of many worldwide, has dedicated significant energy to the prosecution of mortgage fraud. As part of that effort, I met with numerous individuals who suffered from fraudulent mortgage transactions. Though the lenders in these cases were identified as victims, these individuals suffered nonetheless.

A DYING HUSBAND'S WISH

Leticia Watkins lived in north Minneapolis — an area ravaged by real estate fraudsters of all stripes. She and her husband, both modest earners, had managed to cultivate a nest egg of about $100,000 by the time their children were grown. Watkins' husband fell terminally ill, and had a few serious talks with her. When I met with her, she said her husband told her, "Tish, if you're careful, this money will take care of you until Jesus comes for you, even if he's walking real slow."

After his death, Watkins decided to refinance her house's mortgage. She was referred to M.P., a corrupt mortgage broker who was part of the scourge of the north side. Instead of simply finding Watkins a good refinance vehicle, he quickly persuaded her to become a real estate "investor." She purchased four homes at inflated prices with kickbacks built in to each. These kickbacks included money from the purchase price, were more than M.P.'s normal fees, were undisclosed to the lender and would illegally go to M.P.; however, he promised to use these amounts to make the monthly mortgage payments. He told her that given how quickly housing prices were rising, she could sell within a year and make a profit of her own, or she could easily rent the homes to tenants and receive Section 8 housing assistance.

Well, M.P. didn't pay a dime of the monthly payments, none of the houses rented, the market started to tank and Leticia was left with four stiff monthly mortgage payments which quickly drained her nest egg.  When she met with us to prepare for her testimony in the criminal trial against M.P., she was living with her adult son and thought she'd have to do so for the rest of her life. She shook her head, and said more than once, "I let everyone down. I was so stupid. I let everyone down, especially my husband. He warned me. He warned me."

TRUCKER LOSES NEST EGG

Jerome Peters, like Watkins, was a hard worker of modest income. He was a long-distance trucker who also had carefully amassed a nest egg that he hoped would carry him and his wife through retirement. He too had the misfortune of meeting a mortgage fraudster who advertised for amateur real estate "investors" to buy properties, rent them out and sell at a profit in an endlessly rising market. Just as in Watkins' case, kickbacks were built into these purchase prices, the mortgage broker promised to make monthly payments and then broke that promise. Peters couldn't sell the houses, and his nest egg was drained as he and his wife fought off foreclosures. They lost their fight, and soon after went broke.

I met with Peters and the prosecutor to prepare for his testimony in the ensuing criminal trial. He was somber, remote and sat in his chair with his entire torso curved inward as if to protect himself. He had to confirm every detail of his previous statements and identify all the loan documents that spelled his financial doom. I remember what our office's investigator, another CFE, told me about his interview with Peters: "At the end I asked him if he had anything to add. He was quiet for a minute, and then said, ‘I . . . just . . . wish . . .  I'd never met this man.' And then he hung his head and sobbed." 

Read two more examples of the toll fraud can take on its victims on FraudMagazine.com.

For CFE, Crime-fighting Runs in the Family

MEMBER PROFILE

Ashley Koroluk, CFE
Investigative Financial Crime Analyst, Royal Canadian Mounted Police
Regina, Saskatchewan

Ashley Koroluk hails from a law enforcement family – yet, in her civilian member role, she brings an intense focus to detecting fraud and fighting white-collar crime. In this interview with the ACFE, Koroluk shares the challenges and responsibilities that come with her position, along with some words of wisdom for her colleagues in the anti-fraud profession.

What led you to this line of work?
Law enforcement is definitely in my blood. My father was a member of the RCMP for more than 33 years and continues to work with law enforcement as the Director of the Saskatchewan Witness Protection Program. My brother and fiancé are current RCMP members. I, however, was not interested in becoming a police officer. When the RCMP created this civilian member role, I knew it would be a perfect fit for my inquisitive nature while utilizing my business, financial and economic background. This position allows me to be part investigator, part intelligence analyst and part accountant. I also knew this would be a rewarding role where I could make a difference by helping others, specifically with preventing financial victimization and hopefully recovering proceeds of crime for victims. This role is the only one of its kind in Saskatchewan, which keeps me extremely busy, but allows me to work on new and interesting investigations, constantly keeping me challenged.
 
Which types of frauds are the most interesting to you?
I find fraudsters involved in corruption and large-scale investment fraud to be the most interesting because they are usually highly educated, well-respected and are purely motivated by greed and arrogance. For me, successful enforcement actions on these types are the most rewarding.

Believe it or not, I am passionate about every investigation because I have never worked on any that were the same. I learn something new each day and with every investigation. One investigation where I was particularly invested in was one that started out as a basic NSF (non-sufficient funds) check complaint. Through a tactical analysis I gathered enough information to formulate an indication that a fraud in progress was occurring. I gave presentations to upper management decision makers so they could get a taste and grasp of what my analysis showed and the magnitude of the fraud. This led to additional resources assisting me with further investigation, which in turn led to its development of one of the province’s highest priority projects and the first completely integrated organized crime investigation containing elements of fraud, drugs and proceeds of crime.
 
What do you think are some of the most important things for fraud examiners to keep in mind when working to prevent and detect fraud? Is there an element that requires the most focus for you?
Fraud examiners should be mindful that they are gathering evidence and reporting the facts, not expressing opinions. Two qualities that have really paid off for me in all of the investigations I have worked on, that are often overlooked or forgotten, are being creative and persistent. Financial crime investigations can be complex, take a lot of time, resources and money and at least in the law enforcement world, sometimes have to be sold to upper management and the prosecutors because they aren’t the “sexy” guns and drugs type of files.

 
What advice do you have for other fraud examiners who would follow in your footsteps?
Whether you are working for law enforcement in the criminal realm, or in any private or civil area, the following will assist you:

• Seek out a mentor – you will benefit immensely from their experiences and wisdom.
• Listen to and rely on your investigative intuition and trust your instincts.  
• The more investigative experience you gain, the more better equipped you’ll be to deal with fraud.
• Analytical skills are extremely important. Let all the data and the facts guide your analysis and conclusions to not only understand and formulate the big picture of what is going (or went on) but also the why and how things occurred as they did.
• Definitely get your ACFE certification and become involved with the local ACFE chapters and attend the ACFE conferences. This is a great way to meet others and build relationships with like-minded fraud fighters.

 Get more insight from Ashley by reading her full profile on ACFE.com.