How to Conduct Yourself as a Fraud Examiner in Qui Tam Cases

GUEST BLOGGER

Courtney Babin
ACFE Communications Coordinator

Fraud examiners play a vital role in qui tam lawsuits. According to Whistleblowers.org, "any persons or entities with evidence of fraud against federal programs or contracts may file a qui tam lawsuit.’" The person(s) that bring forward the lawsuit are called “relators,” or are most commonly referred to as whistleblowers. A relator is someone that has worked inside a company and has knowledge that fraudulent activity is being committed. Typically, the relator has tried to get the issue resolved in-house, but for whatever reason has obtained outside counsel. This counsel helps the relator file a lawsuit in the federal court system on behalf of the government. Once the relator’s counsel contacts the government and informs them of the lawsuit, the government then decides whether or not to intervene.

In qui tam cases, having a subject matter expert on your case is crucial; this is the role of the Certified Fraud Examiner (CFE). An expert can make or break the case. “I’ve met experts that have knowledge (or credentials), per se, but they don’t know what they are doing or how to communicate,” said Eileen Leslie, CFE, CPA, Financial Analyst at Forensic Strategic Solutions. “A seasoned Certified Fraud Examiner, especially one focused on forensic accounting, has the education and experience needed to be able to detect and understand an unlimited amount of fraudulent scenarios. But that’s only the beginning.” Leslie shared this and other lessons recently in a Fraud Talk podcast interview, "The Role of a Fraud Examiner in Qui Tam Cases."

She goes on to explain that the CFE is there to first and foremost calculate the single damages. Single damages are the losses sustained as a result of fraud.  “It’s my job to obtain a thorough understanding of the issues to perform an unbiased analysis of the facts and make sure all necessary parties understand my damages calculations and findings,” said Leslie. It is important to calculate damages properly because the government uses that number in their negotiations (the government is allowed to go for three times the amount of the single damages).

Another important role of the fraud examiner is to make the case extremely understandable. “To truly be effective you must have the ability to articulate your findings to people of all understanding and interest levels,” said Leslie. “My personal belief is that as an expert you conduct yourself in an expert manner. I want to conduct myself in having full knowledge of the issues. I want to be unbiased. I want to look at just the facts.”

As a fraud examiner and expert in this matter, you need to prepare your case in a way that convinces the government to intervene. When a case is brought before an attorney, keep in mind that this attorney may have never been exposed to the law or rule that is being violated. It’s important to explain the case easily so that they can process the case appropriately. You can assist them by:

• Knowing the rule or regulation that has been violated.
• Providing a printed copy of the rule to the government.
• Articulating the violation from the relator in a manner that is understandable by judges and juries.
• In a binder, supplying supporting back-up documentation in a structured manner.
• Preparing a visual PowerPoint presentation with diagrams and graphs.

Above all, said Leslie, “Please be responsible. Be real in your expectations of what you can do. Find somebody that has the experience to be able to guide you appropriately so that you are gaining a full understanding of the issues at hand. Be credible, go by the facts, be responsible and make sure that [everything is] right.”

To hear Leslie’s full podcast interview, visit ACFE.com/podcast. 

The Cost of Integrity: A Whistleblower's Vindication

FROM THE PRESIDENT AND CEO

Through the years, I've met scores of whistleblowers — the ACFE likes to call them sentinels — and all of them have suffered. Many have lost their jobs, relationships and health. But I don't think I've known of a sentinel who's paid the cost of integrity more than James Holzrichter.

Back in the 1980s, Holzrichter — then an eager young analyst and systems auditor for Northrop (later Northrop Grumman) — brought to his supervisor some problems of materials acquisition and management.

"What I most especially did not know at that time [of the meeting with the supervisor] and would not even begin to grasp until some time later (and only when it was too late) was that I had just crossed what was probably the single mfalost significant invisible and irreversible line in this entire journey," Holzrichter wrote in his 2011 book, with Patrick A. Horton, Ph.D., A Just Cause: A True Story of Courage, Hope, & the Integrity of the American Dream.

"At that moment, the nightmare that was to become my life and that of my longsuffering family had been set in stone," he wrote. "It was not that I had just officially pronounced finding problems with procedures and possibly a few rogue employees: I had discovered the first visible signs to institutionally intentional and pervasive practices that if fully known and verifiable by the right parties, could threaten the very existence of the company itself."

Holzrichter eventually discovered alleged overcharging of the government and selling of defective equipment to the tune of millions of dollars.

He and another Northrop whistleblower filed a qui tam suit under the U.S. False Claims Act. The aerospace community blackballed him, so he had to deliver the Chicago Tribune newspaper and clean toilets for a living. Holzrichter and his family would live in a homeless shelter and later subsidized housing. Someone would actually try to kill Holzrichter, his oldest son and his oldest daughter. Not death threats but attempts.

Yet, Holzrichter wouldn't relent. Finally on March 1, 2005, 17 years after the qui tam filing, Northrop Grumman settled with the U.S. government for $134 million.

Holzrichter has said that he's far from a perfect man. But early in his life he took to heart his dad's words: "When is it ever wrong to do the right thing?" Those words propelled and sustained him through almost 20 years of suffering. During the 26th Annual ACFE Global Fraud Conference in June we presented Holzrichter with the 2015 Cliff Robertson Sentinel Award "For Choosing Truth Over Self." Well deserved.

For more details about Holzrichter's harrowing account, read his recent interview on Fraud-Magazine.com.