A few large prosecutor offices have fraud examiners on staff; here’s a rundown of what expertise and assistance these professionals can bring to organized credit card fraud, embezzlement, and contraband forfeiture cases—among others.
One of the largest embezzlement cases in Galveston County came to me after only three months on the job as the fraud examiner for the Galveston County Criminal District Attorney’s Office. After grand jury subpoenas were served for more than 20 different bank, credit card, and home utility accounts, it was determined to be a typical embezzlement case. The difference with this one was the magnitude of theft.
Bookkeeper Janice Doe stole over $900,000 from her workplace, where she was employed for over 21 years. (Because it’s an actual ongoing case, we’ve used a pseudonym for the defendant.) Doe was in charge of paying the company’s bills and had full access to the checking accounts. Her scheme was to write checks to herself for random amounts, in addition to the normal paychecks she wrote as part of her job duties. Additionally, she would send checks from the company’s account to pay for her personal expenditures, sometimes signing with her own name and sometimes forging her manager’s signature. The banks and credit card companies stored data dating back only seven years, so we aren’t sure the full magnitude of how much she actually embezzled—it could have been more.
Cases with magnitude similar to Janice Doe’s take a lot of investigative work by a fraud examiner. It is a time-consuming, painstaking pro-cess of making spreadsheets filled with all the bank and credit card information and deciphering these documents to show the fraud. Many prosecutors do not like accounting or working with numbers, which is why some offices in the state, including my own in Galveston, have full-time fraud examiners on staff. My hope for this article is to explain what a fraud examiner does, how one can help in certain types of criminal cases, and how Texas prosecutors can utilize their services in seeking justice for victims of fraud and theft.
Fraud examiners’ role
Fraud examiners are investigators who specialize in the financial arena of personal and business records. We must know how to trace funds from start to finish throughout the process of payments, deposits, and check writing. Through our studies and experience, we know how to find anything fraud-related in someone’s bank records, and for that reason, we can help in almost any case that involves money or bank accounts. For example, in a murder trial a fraud examiner may locate any investments the victim might have in her name.
Fraud examiners usually have backgrounds in accounting. I earned my Bachelor’s degree in Business Administration from Eastern Illinois University, and while there, I learned about forensic accounting and fraud examination. These career paths interested me because they include an investigative type of accounting instead of everyday business accounting, and I ended up earning a Master’s degree in business administration with a specialization in forensic accounting and fraud examination from Southern New Hampshire University. I worked for a local financial institution in various positions (bank teller, internal auditor, and branch security administrator), each one preparing me for my current job as a fraud examiner.
A certification is not required to work as a fraud examiner, but there is the option to become a certified fraud examiner (CFE) through the Association of Certified Fraud Examiners (ACFE). This certification covers four areas: investigation, law, fraud prevention and deterrence, and financial transactions and fraud schemes. The CFE is a 500-question exam taken online, and you must meet certain educational requirements and work experience to take the test. Once you pass it, a CFE must complete 20 hours of Continuing Professional Education (CPE) courses per year, much like lawyers must receive ongoing CLE to keep their licenses. This certification and the requirement of the CPE courses will show a jury, when a fraud examiner testifies as an expert witness, that the examiner has the requisite expertise and education and is up to date on the latest ways to uncover fraud.
My role in Galveston
Within the last four years, our office added the fraud examiner position due to the increase in fraud cases. I work primarily with the Major Fraud prosecutor, Robert Buss, on cases involving misapplication of fiduciary property, contract fraud, game room investigations, organized credit card fraud, and counterfeiting check schemes. My caseload in Galveston County right now is about 15 to 20 open investigations with another 15 to 20 indicted cases.
A fraud case goes through an extensive investigation before it is taken to indictment because of all the paper and tracing involved. Once it has been indicted, the majority of the work is complete and all discovery documents are turned over to the defense attorney, though I do some minor work after indictment to make sure the case is ready for trial. I also work on cases for the Public Integrity Division, though this caseload is generally smaller due to the nature of crimes that fall into this category.
Most of the cases I have seen so far are embezzlement and organized credit card fraud. For example, we are seeing a lot of criminals who know the algorithm of how credit card numbers are generated. These people make lists of card numbers, which they then check by calling the merchant’s 800-number, entering the stolen credit card number, and verifying that the credit card number is authorized and active. Once they have determined which card numbers actually work, they make up laminates with the verified numbers already printed on them, and those are in turn are laminated onto reloadable gift cards whose numbers have been scraped off. The magnetic strip is deactivated, and these criminals then use the cards at stores that will manually enter the card numbers to buy products.
These type of cases are usually investigated after one person is caught on a traffic stop or arrest warrant in possession of supplies to make these fraudulent credit cards and a list of card numbers. With these types of cases, my main job is preparing the grand jury subpoenas to get information from credit card companies to determine the cards’ real owners. Once the statements have been received, I review them for transactions that had some connection to Galveston County. Most of the time, these card numbers belong to people all over the country who may not be aware that their credit cards are being used fraudulently. Once we identify the victims, we can then look at the case as a potential fraudulent possession of identifying information case. These types of cases are more about finding out to whom card numbers belong so we can send subpoenas to them.
Another area I am involved in is contraband forfeiture cases. When there is a theft involving money, I determine how much of that money can be seized from the defendant’s bank accounts. If someone has a large sum of money in his accounts and he embezzled from an employer, one way to seize the funds is if the defendant was depositing the money into his bank account. Most of the time, when working on contraband forfeiture cases, I make changes to the documentation for the criminal case to help the contraband forfeiture prosecutor on his civil hearing. (Because I am not a lawyer, I cannot speak on how cases are handled civilly; I just assist in showing that the stolen money was deposited into certain accounts so it can be seized.) In the Janice Doe case, Ms. Doe was writing herself checks. I was able to determine, through reviewing her bank records, that she deposited these checks into her bank accounts. (When we completed a search warrant of her house, we also executed a search warrant on her bank accounts.) I traced each check and made a spreadsheet on how much money from each fraudulent check went into each account and could thus determine how much money to seize.
With the Janice Doe investigation and others similar to this case, we begin by getting credit reports, sending subpoenas, and performing data entry of the bank statements. With the majority of my cases, I start by running a credit report on the victim (or target) to get a listing of all credit accounts they have, both open and closed. The credit report might also help me find her bank accounts.
Once I receive the credit report, I send out grand jury subpoenas to all credit accounts that were open or opened during the timeframe of the embezzlement. The most important thing we request are the statements, copies of checks and deposits into bank accounts, and copies of all payments on credit accounts. Once all these items are received, we input all the transactions on the statements into a spreadsheet, including notations of to whom the checks were written, what was included in deposits, and where payments on credit accounts came from. This evidence showed the amount of checks Ms. Doe was writing to her creditors and, with the help of the victims, we were able to determine how many fraudulent checks she wrote.
Do you need a fraud examiner?
Determining when an office needs a full-time fraud examiner compared to contracting with someone on a temporary basis requires asking a few questions. How many fraud cases does your office handle in a year? How busy are your prosecutors? Does a local police department have a specialized financial crime section? (They’re uncommon except in bigger cities.) Answering these questions will help you decide if hiring a fraud examiner is worth your while.
Fraud cases are tedious and involve a large amount of paperwork. If the prosecutors’ caseload is lighter, hiring a fraud examiner on a contract basis, rather than hiring one full-time, may be a better choice as the examiner can fill in when the number of cases overwhelms the office. If the office has a large caseload per prosecutor, the fraud cases may not get all the attention needed to get to the full extent of the crimes.
I spoke to one of the prosecutors in our office about the average caseload. He said his court has one of the lighter dockets in the county, and he currently has 80–90 cases total (not just fraud cases). Fraud examiners spend most of their time inputting data into spreadsheets, which could take days or even weeks depending on the size of the case. When an examiner is inputting this information, it is usually the only task they work on at that time. Prosecutors usually don’t have this kind of time available to handle the investigation of fraud cases. In my Janice Doe case, I spent a good four months working only on this case, to investigate it and take it to grand jury. Also note that the prosecutor who tries the case would not be able to enter any data into a spreadsheet because prosecutors are not allowed to be witnesses to confirm evidence. This is where police departments could help prosecutors on the financial information, though it is rare to find a detective who will make spreadsheets for a financial crimes case. The fraud examiner typically would enter the information into the spreadsheet and then be the witness during the trial to explain the information to the jury.
You might also review the fraud cases your office has prosecuted to see if there could have possibly been a stronger charge had there been a dedicated fraud examiner assigned to the case. If so, it might be worthwhile to hire one for future cases.
I asked one of the chief prosecutors in our office why she didn’t like financial cases, and the answer I got from her was, “I don’t like math.” Many people don’t care for math and numbers, and I am going to guess that many prosecutors are among them. Accounting is not an area that everyone understands, and in financial crimes, accounting is a big part of the investigation. Some cases could involve getting into businesses financial statements and tracing where funds were moved. If a prosecutor doesn’t enjoy math or accounting, it will be a very difficult case to handle or understand—he or she might not even see that a crime was committed. In this instance, it is important to have a fraud examiner assist in the investigation.
Finding your own fraud examiner
If you have determined that a fraud examiner would be helpful on a contract basis (rather than full-time) or if you want to try someone on a contract basis first to see how he or she might help, there is a website to assist. The Association of Certified Fraud Examiners doesn’t directly connect clients with fraud examiners, but there is a webpage that lists all CFEs: www.acfe.com/findacfe. You can search for one in your area and then contact that person.
I am available for any questions regarding my position as a fraud examiner; just call me at 409/766-2414 or by email at Jeremy [email protected]