Bribery and Corruption Casebook E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 763

Veröffentlichungsjahr: 2012

Beschreibung

Real case studies on bribery and corruption written by expert fraud examiners Bribery and Corruption Casebook: The View from Under the Table is a one-of-a-kind collection of actual cases written by the fraud examiners who investigated them. These stories were hand-selected from hundreds of submissions and together form a comprehensive, enlightening and entertaining picture of the many types of bribery and corruption cases in varied industries throughout the world. * Each case outlines how the bribe or corruption was engineered, how it was investigated, and how perpetrators were brought to justice * Written for fraud investigators, auditors, compliance officers, and corporate lawyers * Reflects the recent crackdown on bribery and prosecution of cases under the Foreign Corrupt Practices Act (FCPA) * Also by Dr. Joseph T. Wells: Fraud Casebook, Principles of Fraud Examination, and Computer Fraud Casebook This book reveals the dangers of bribery and corruption and the measures that can be taken to prevent it from happening in the first place.

Leseprobe

Contents

Cover

Title Page

Copyright

Dedication

Preface

Chapter 1: The Hot-Tub Highwaymen

Building an Empire

Swimming Trips

More Tips, Lips & Sips

Court Date

Going Back for Seconds

About the Author

Chapter 2: Trouble Brewing

A Little Paranoia Isn’t Such a Bad Thing

Investigating Accountants and Beyond

The Jig Is Up

Show Me the Money

About the Authors

Chapter 3: In the State’s Interest

Less than Arm’s Length?

The “Hip Pocket” Concept

Italian Food and Interviews

The Outcome of the Investigation

About the Author

Chapter 4: Odd Bedfellows

A Pillar of the Community

Prosecution Is Onboard

The Gambling Bond

Pine Wood Audit

About the Author

Chapter 5: When Bribery Becomes a Way of Doing Business

The Merger

In the Media

Kickoff Interviews and Analyses

A Slow Process

A Different Kind of Interview

About the Author

Chapter 6: Kickbacks for Comic Books

A Close Team

Interviewing Made Easy

The Case Becomes Mine

The Diamond Pyramid

The Paper Freeway

The Interview

Presenting a Final Case

About the Author

Chapter 7: Interrupted Production

The End of the Beginning

Mordida (Bite) por Favor

Let the Fun Begin

What’s an FCPA?

Accounting Magic or Not?

Make It Happen

Slings and Arrows

Where’s the Mole?

Pearls Before Swine

Finale

About the Author

Chapter 8: High-Plains Grifter

State Grant Program

CAO Consultant

Open for Business

A Simple Scam

Limits of the Investigation

About the Authors

Notes

Chapter 9: Getting a Free Ride

The City

Trouble at the Department of Transportation

The Scam Exposed

A New Case

Tailing the Suspect

The Benefits of Cooperation

About the Author

Chapter 10: Conflicting Interests, Conflicting Cultures

A Forced Partnership

Multicultural Ethics

The Sheik

Reviewing the Records

Scratching an Itch

Opposing Interviews

Going Their Separate Ways

Analysis in Retrospect…

The “Corporate Answer”

About the Author

Note

Chapter 11: But We Thought He Was Saving Us Millions

A Cautious Start

The Interview Strategy

Uncovering the Corrupt Partners

The Final Cost

About the Author

Chapter 12: The Construction of a Fraud

Bonfield Homes

Launch Reports

The Opportunity

Inconsistencies in the Reports

Suspicious Lumber Invoices

Interviews

Good Guys Sometimes Finish Last

About the Author

Chapter 13: The Summer Bribe

A Beleaguered City

Tackling the Problem Premises

The Bribe

The Allegation

The Investigation

The Solution

About the Author

Chapter 14: Brazen Bank Manager

Nasdall Bank

Suspicious Lifestyle

Documentation Review and Interviews

Identifying Helen’s Methods

Staff Kickbacks

The Arthur Williams Connection

Admissions

About the Author

Chapter 15: In Bed with the Tax Man

Early Warning Signs

Fieldwork

The Audit Becomes an Investigation

Suspicious Behavior

The Flamboyant Tax Assessor

Client Anxiety

About the Author

Chapter 16: High-Rise Rollers

The Allegation

The Plan

The Winners

The Losers

The Director

The Deputy

About the Author

Chapter 17: Decorum Across the International Date Line

Special Materials Build Special Relationships

The First in a Series

Learning the Culture

Getting My Feet Wet

Reading the Body Language

Busting the Bid Rig

Spreading the Word

Meeting Marty

Motivation

About the Author

Chapter 18: The Kickback Mine

Taking a Gamble

The Cold Shoulder

The Benefits of Cooperation

About the Author

Chapter 19: A Sweet Deal

Inspiring Company History

Open Communication and Odd Phone Calls

The Insider’s Deal

Small but Significant Outcome

About the Author

Chapter 20: Da’ Money

A Quick Review

Developing an Investigation

From the Plant to the Corner Office

Computer Forensic Review

Sometimes It Really Is That Easy

And Other Times It’s Not

Complete Candor

The Obstacle to a Confession

About the Author

Chapter 21: The Seemingly Upstanding Citizen

Weeks Earlier

Getting the Ball Rolling

Following the Money Trail

Bringing the Investigation to the Suspects’ Doorsteps

Figuring Out the Jigsaw Puzzle

Awaiting Justice

About the Author

Chapter 22: Big Dangers from a Small Vendor

Naritomo

The New Kid

Vendor Audit

Double-Cross

Complete Turnaround

About the Author

Chapter 23: A Drop in the Ocean

Puzzling Payments

Records Review

Black-Cash Operations

Logistics, Customs and Parallel-Import Schemes

Kickbacks to Customers

Culture of Corruption

About the Author

Chapter 24: The Professor and the Deputy

Setting the Scene

Breakthrough Turned Disaster

Preliminary Interview

The Intermediary

Paradeplatz, Zurich

The Bearded Man

The Lucky Break

Off to Barcelona

Attempted Extortion

Laudrup Flees

Fingers in the Cookie Jar

About the Author

Chapter 25: Calling for Kickbacks

Too Close for Comfort

The Direct Approach

Launching a Full Investigation

It’s All in the Phone Calls

Showdown in the Conference Room

The Grand Total

About the Author

Chapter 26: Going Green in Mexico

The Salesman

Unknown Exposure

The Secret Hiding in the Books

Assumed Kickbacks

Conflicting Evidence

About the Author

Chapter 27: A Wolf in Sheep’s Clothing

Credit Spikes

Expanding the Team

Delivering the Bad News

About the Author

Chapter 28: Dances with Fraud

Friend of the Tribe

Meet the Tribe

School Visit

Unsubstantiated Violations

Accepting Defeat

About the Author

Chapter 29: The Corrupt Public Servant

Initial Searches

Second Round of Searches

Custodial Interviews

The Full Story

The Finishing Touches

Favorable Judgments

About the Author

Chapter 30: Romance, Jewels and Kickbacks: All in a Day’s Work

Out in the Field

Interviews and Invoices

Unable to Stop

About the Author

Chapter 31: Power Corrupts and Absolute Power Corrupts Absolutely

In the Slammer

A Diamond in the Rough

All Clear

You Have the Right to Remain Silent

Anything You Say or Do Can Be Used Against You

You Have the Right to Speak to an Attorney

If You Cannot Afford an Attorney, One Will Be Appointed for You

Follow the Money

Justice Is Blind

About the Author

Chapter 32: For Love or Money?

Sandy’s Special Customer

Caribou Title

Private Lenders

Shared Collateral

State of Fraud

Conspirator or Victim?

Save It for a Rainy Day

The Hope of Civil Recovery

About the Author

Chapter 33: Ethical Governance: A Mandate for Outsourcing

Opportunities in Outsourcing

The Things You Can Learn over Coffee

Process Evaluation

Happy Outcome

Returning to Rhodo

Investigating When the Suspect Knows

My Team’s Turn

Breaking the Bad News

About the Author

Chapter 34: Friends and Lovers in High Places

Training for Corruption

Trying to Keep It Quiet

Start Sorting

Too Close and Personal

Excessive Compensation Packages

Justice for All

About the Author

Chapter 35: Kickbacks on Demand

The Anonymous Informant

Keeping It Quiet

Time to Get Tough

The Confession

The Second Confession

A Cooperative Supplier

Recovery

About the Author

Chapter 36: High-Flying Ambition

Smith Williamson

The Last Person We Suspected

Unannounced Audit

Interviewing Made Easy

About the Author

Chapter 37: The Cleaner Who Swept His Way to the Top

The Reno Reach

The Whistleblower

The Big Picture

Search Warrants

The Sixteen Suspects

About the Author

Chapter 38: Sorry, This Fraud Has Been Disconnected

NyTel USA

The DCC Project

How It’s Supposed to Work

Dan’s Way

Getting Involved

Building Blocks

Referral to the FBI

About the Author

Chapter 39: Bid Rigging and Kickbacks Under the Bridge

Regional Transportation District

FBI Investigation

An Eye-Opening Trial

Post-Trial Recovery

About the Author

Index

Copyright © 2012 by Association of Certified Fraud Examiners. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

ISBN 978-1-118-24878-2 (book); 978-1-118-28263-2 (ebk); 978-1-118-28339-4 (ebk); 978-1-118-28710-1 (ebk)

To Kathleen Hymes, a shining example of honesty in sharp contrast to the corrupt individuals in these pages

Preface

Corruption is not a new development for humankind. As long as there have been recorded accounts of human history, there have been stories of deceptive self-dealing and betrayal for personal gain. We need to look no further than the Roman Empire for countless examples of corruption, bribery, political dishonesty and discarded alliances. The civilization that helped establish a blueprint for modern democratic governments also created a model for just about every corruption scheme imaginable.

Take the account of Emperor Nero’s rise to power as an example. He gained the title of emperor amid rumors that his mother, Agrippina, poisoned her own husband and Nero’s stepfather, then-emperor Claudius, so her son could ascend to the throne. Nero was still a teenager at the time, and Agrippina believed she would be able to direct the course of the empire by manipulating her son. However, when Nero began asserting his own power and eschewing his mother’s influence, Agrippina turned her hopes to her stepson Britannicus. As the birth son of Claudius (although he was younger than Nero), Britannicus could challenge Nero for the throne — a threat the emperor took seriously.

As the story goes, Nero first poisoned the 15-year-old Britannicus to assert himself as Rome’s rightful leader and then arranged for his mother to be killed. After these shocking crimes, he embarked on a spree of executions to eliminate senate members he did not trust and anyone else he considered a political threat. And there we have the framework for a leader to corruptly consolidate and establish his power.

Modern corruption has become slightly more subtle and, luckily, we see fewer outright assassinations these days, but that comfort does nothing to reduce the damage that this fraud still causes. Black’s Law Dictionary defines corruption as “depravity, perversion, or taint; an impairment of integrity, virtue, or moral principle; esp., the impairment of a public official’s duties by bribery.” Corruption can include conflicts of interest, bribery, economic extortion and illegal gratuities. It is everywhere — an insidious, communicative disease that plagues private industry, public service and the political process. It destroys trust, bottom lines, careers and even lives. As the cases in this collection demonstrate, no one is immune to corruption. Try as we might to implement controls and procedures to prevent ourselves and our employers or businesses from becoming victims, cunning criminals make it their goal to circumvent our hurdles in pursuit of their own self-interest.

Most people have heard of Rod Blagojevich. You might think of President Barack Obama when you hear his name, or you might simply picture that trademark Blago hair. Either way, in the past few years he has become a poster boy for corruption. In 2008, when then-Senator Obama was elected to the presidency, he left a vacant U.S. Senate seat up for grabs in Illinois. As governor of Illinois, Rod Blagojevich had the authority to appoint someone to fill the vacant senate seat, but he abused his gubernatorial power and solicited bribes and other favors from parties who had an interest in the seat. As part of the investigation into Blagojevich’s suspected corruption, the FBI wiretapped his phone. Perhaps the most infamous sound bite to come from those recordings was the one where he described his position as “f___ing golden” and said he wouldn’t give the appointment away “for f___ing nothing.” The recorded evidence turned out to be the most damning against Blagojevich, and he was eventually found guilty of 17 out of 20 criminal charges, including bribery and attempted extortion. He was sentenced to 14 years in prison.

Corruption is not confined to the political circus. Public and private companies often suffer losses, both financial and reputational, from the corrupt actions of owners, executives and staff members. The primary anti-corruption legislation in the United States is the Foreign Corrupt Practices Act (FCPA), a law that Congress enacted in 1977. The FCPA makes it illegal for U.S. companies or individuals acting anywhere in the world to directly or indirectly offer or pay anything of value to foreign officials to obtain or retain business. In addition to U.S. citizens and enterprises, the FCPA also applies to foreign companies that have securities registered in the United States or file reports with the Securities and Exchange Commission, and to foreign individuals and companies that take any action to promote a corrupt payment while in the United States.

Remember the Siemens bribery scandal in 2008? The German engineering firm was undergoing scrutiny in the United States and Europe based on claims that staff and managers paid bribes to foreign officials in various countries to secure lucrative contracts. The amounts were staggering; for example, according to a Frontline article called “At Siemens, Bribery Was Just a Line Item,” one single accounting employee at Siemens claimed to oversee an annual “bribery budget” of $40 to $50 million. That is just one staff member at a company that employed thousands. The company faced FCPA charges in the United States and eventually reached a settlement agreement that included paying $800 million in fines. At the same time Siemens settled another case, this one in Europe, for hundreds of millions of dollars as well. In total, Siemens paid $1.6 billion to settle corruption charges around the world.

In 2010, news emerged of another multimillion-dollar international corruption scheme. Six oil and gas companies (Transocean Inc., Tidewater Marine International Inc., Pride International Inc., Noble Corporation, Shell Nigeria Exploration and Production and Global Santa Fe Corporation) and one shipping company (Panalpina) were accused of bribing officials in various countries for the ability to import equipment into the countries without paying the necessary taxes and fees. This case was also settled and the companies collectively agreed to pay $236 million in fines.

According to the ACFE’s 2010 Report to the Nations on Occupational Fraud and Abuse, corruption cases accounted for 32.8 percent fraud cases during the reporting period, and the median loss per case was $250,000. To prevent and detect corruption schemes, it helps to be aware of the common red flags associated with such frauds. In 45.6 percent of corruption cases in the Report to the Nations, the perpetrators displayed unusually close ties with a vendor or customer. The second most common behavioral red flag was living beyond their means, as seen in 42 percent of cases. Clearly, corruption is a costly fraud, and knowing what warning signs to watch for might help business owners prevent future cases.

In this book, you will read corruption cases from around the globe, large and small, punished and unpunished. We have changed the names of people, places and companies to maintain the anonymity of those involved, but the facts of the cases are genuine. These are real corruption cases, investigated by members of the ACFE. All profits from this book will be donated to the ACFE Scholarship Foundation in the hope that future fraud fighters will receive the education they need to carry the torch into the next generation.

Publishing a book is a collaborative effort, and this one was no exception. The members of the ACFE who submitted case studies to this project deserve the lion’s share of recognition for all their hard work. It was a pleasure collaborating with these professionals who are out in trenches every day. Without their efforts, this book would not be in your hands right now. In addition, we would like to thank ACFE editors Laura Telford and Diane Calmes for providing invaluable editing assistance. Stacey Rivera and Natasha Andrews-Noel at John Wiley & Sons are consummate professionals and made the sometimes-tumultuous publishing process run seamlessly.

Bribery and corruption are among the oldest and most primitive fraud schemes that humans commit. People have been acting corruptly for centuries, and they don’t appear to be slowing down. “It’s just the cost of doing business in foreign countries.” This weak excuse is commonly offered by corporate officers facing charges of violating the FPCA. However, committing fraud should never be a cost of doing business. The greater awareness we, as a community, can bring to this issue, the greater our power will be to combat it. Whether you are a practitioner, educator or simply a concerned citizen, we hope this book will motivate you to continue the fight.

Dr. Joseph T. Wells, CFE, CPA Laura Hymes, CFE Austin, Texas April 2012

CHAPTER 1

The Hot-Tub Highwaymen

TED WENDLING

As companions, William Lassiter and Larry Evans appeared to be an unlikely pair. An urbane, college-educated entrepreneur, Lassiter had carved out a lucrative niche in the domestic snow-removal market by patenting a durable, carbide snowplow blade guard that extended the blade’s cutting edge, thereby increasing its life span. In contrast, Evans was a high-school dropout, a crude, overweight, uncultured laborer who liked to hunt and fish. Evans’ grooming habits included a weekly toilette that he conducted in the privacy of his dingy office at the Ohio Department of Transportation (ODOT) in which he would cut his fingernails and toenails, leaving the yellowed clippings strewn under his desk.

Dissimilar as Lassiter and Evans were, fortune had cast them into an economic symbiosis that made them fast friends: Evans, the equipment superintendent at ODOT’s Cleveland district office, awarded millions of dollars in business to the Lassiter Blade Company. In turn, Lassiter treated Evans to all-expenses-paid trips to Las Vegas and spent thousands of dollars on fishing excursions aboard “Captain Larry’s” private Lake Erie charter fishing boat, the Walleye Warrior.

As the men bobbed together in Lassiter’s hot tub on a warm summer night, surrounded by other ODOT vendors and dancers from Lips & Sips, a Cleveland strip club, they toasted to their mutual success. Lassiter’s summertime soirees, dubbed “Fat Man Soup” parties by some of the dancers, were blue-collar bacchanalias that included other people who were feeding off of ODOT’s largesse: Craig Horford, a germaphobic information technology whiz whose climate-control company had a lock on all of the ODOT district office’s HVAC work; Dennis Pfister, the ODOT facilities manager who managed Horford’s contract and worked down the hall from Evans; and Jennifer Moore, a young Lips & Sips dancer who had clawed her way into Pfister’s wallet by duping him into believing that he had sired her four-year-old daughter. As Pfister often boasted to his ODOT colleagues, not bad for a 63-year-old.

Missing on this evening was Fred Waxman, another ODOT vendor who had helped furnish an apartment for Moore and had picked up bar tabs for Pfister all over northeast Ohio in exchange for hundreds of thousands of dollars in unbid ODOT garage-door contracts. Waxman had been invited but had been unable to attend. Also missing was Evans’ top purchasing official, Rick Rogers, who was working his own side deals with the Lassiter Blade Company and some of Evans’ other vendors.

“Where’s Dennis?” Lassiter asked Evans.

“I think he’s in the house with Ruby,” Evans responded. Lassiter, a divorced father who had left his wife for a stripper and now shared custody of their two daughters, had learned long ago that Evans and Pfister were a matched pair. But as fond as he was of Evans, he considered Pfister to be untrustworthy and a lecherous boor. Lassiter stalked into the house, quickly found the missing couple and escorted them outside. Sliding back into the hot tub, Lassiter hissed into Evans’ ear: “They were in my daughter’s bedroom!”