HOOKED ON FRAUD: ANNUAL CONFERENCE SPEAKERS RECALL THE CASES THAT SPARKED THEIR CAREERS IN FRAUD INVESTIGATION
Research Editor, Association of Certified Fraud Examiners
Many of the fraud-fighting heroes who will come together this June in Nashville, Tennessee, for the ACFE Global Fraud Conference are at the top of their careers. But fraud fighters aren’t just born with a sixth sense for schemes. Even heroes must learn what it takes to combat fraud. We talked to a few of this year’s conference speakers about the early cases that left an impression on them and taught them the essentials of fighting fraud. Through these cases they developed persistence, had their lives changed and learned the importance of counting cattle in West Texas.
Never Mind the Road Blocks
For Tom Caulfield, CFE, chief operating officer of Procurement Integrity Consulting Services, the case that left a memorable impression on him wasn’t his first, but rather the one that showed him not everyone will be as cooperative or as gung ho about pursuing a case as you’d like. As Caulfield, who has more than 38 years of government and fraud-fighting experience relates, “Persistence and tenacity were keys to this case. CFEs need to balance their desire to find out the truth with sound investigative techniques and being obsessed with obtaining a conviction.”
In 1997, Caulfield was the deputy chief of investigation for the U.S. National Reconnaissance Office of the Inspector General (OIG), when he worked on a case concerning proprietary information of a government contractor. The thief used a lunch date with former co-workers to steal data from his old company. While waiting for his colleagues in an empty office, he discovered that the company never deleted his computer password. So he helped himself to the government contracting and engineering information to bolster his job marketability.
But the staff of the government program with whom the victim company was doing business weren’t all that interested in the data theft allegations — they did not want any bad attention. Frustrated, the victim company turned to the OIG for help, and Caulfield and his team pursued the case as a violation of the Procurement Integrity Act.
“The government program people showed no concern with the government engineering data being stolen as they claimed they would have shared it with anyone requesting it, including the company the subject went to work for. As for the stolen government contracting data, the program people again felt it had no value for future competitive advantages,” Caulfield said. “Throughout the investigation the government program people continuously created road blocks for the investigation. They went on record with the subject’s legal counsel and told them the government engineering data was not stolen as they would have provided it to anyone who wanted it.” While the information might have technically been available to someone who legitimately requested it through the Freedom of Information Act, Caulfield points out that the information was not requested — it was taken without consent.
Eventually, the thief was convicted, but not for stealing the information. He was convicted for submitting false claims to the government. During the investigation, Caulfield and his team came across receipts and records that showed that the subject had masked a trip to a job interview by telling his employer that the government had requested that he travel from Texas to Virginia and then submitting the travel expenses to the government contractor who in turn included the expenses in its cost reimbursement to the government.
Caulfield credits the victim organization for seeing the case through to the end. “The investigation was a partnership and could not have been successful without them,” he said. “They were being pressured by the government program people to discontinue the complaint. They stood strong with us knowing they could have lost contracting opportunities with the government program department.”
Fraud is Everywhere…and it’s Personal
Since starting her career in the mid-1990s, health care compliance consultant Jacqueline Bloink, CFE, says she has seen all sorts of health care fraud, including up-coding schemes, unbundling schemes, provider-ID misuse, fake credentials, billing for services never rendered, overbilling, keeping overpayments from Medicare and Medicaid, and doctor shopping for pain medication. Bloink said, “So many schemes, too many to list!”
Bloink’s first brush with fraud happened early on as a medical practice administrator. One of the physicians in the practice shared with her that his ex-wife had been caught stealing from the practice. The ex-wife had been keeping cash co-pays and then adjusting the books accordingly. This showed her just how commonplace fraud is. It was also an ACFE Report to the Nations stat come to life. “Fraud happens in good companies…and in good families. It is so interesting to read the Report to the Nations to look at the statistics on who — age, gender, financial status — is involved in fraudulent schemes,” she said.
While Bloink would go on to investigate health care fraud in all its iterations, the biggest fraud case she worked on was also the largest False Claims Act case in Arizona history. Bloink uncovered the fraud in just her first five months on the job as an internal auditor for a hospital network in Arizona. As she prepared for her audit, she researched all the appropriate regulations and guidelines. When she conducted the audit, she found billing disparities for patients enrolled in federal government programs such as Medicare and Medicaid. She reviewed the previous auditor’s report and found that it too had problems. Bloink soon learned just how personal fraud investigating can get. “Retaliation toward me started the very afternoon after my final audit results were turned in,” she said.
Ultimately, the health network had to pay $35 million in fines for engaging in fraudulent billing and concealing its obligations. Even though Bloink has been heralded for her role as a whistleblower in the case, it hasn’t been easy. “Fraud is very emotional … It is not just financial — it ruins many lives. My life was changed forever by the case.”
But Bloink is staying vigilant against fraud despite the challenges. “I told Tucson in an open letter to the community that I would not go underground, but continue to fight health care fraud,” she said.“The case showed me just how pervasive health care fraud is. Many professionals in health care know fraud is occurring but feel it is okay because the reimbursement is low, or they justify it for a million other reasons. Providers and CEOs don’t think they will get caught, or that co-workers won’t turn them in. And many times, they are right.”
“It Was Like a Salsa Commercial”
Being a fraud investigator often requires stepping out of your element and entering an environment you never imagined you’d visit. The good investigator adapts and embraces the experience, as David P. Weber, J.D., CFE, did when his job as special counsel for enforcement for the U.S. Office of the Comptroller of the Currency (OCC) took him to Lubbock, Texas, to investigate bank frauds involving cattle and cotton. “Now cattle and cotton fraud might not sound exciting today, but I was a nice Jewish lawyer from New York City,” he said. “It was like a salsa commercial. Cattle fraud! It was awesome.”
The one-time national park ranger and current academic director at the Smith School of Business at the University of Maryland, College Park, learned that steer can be used as bank collateral. “Responsible bank officers always need to count their cattle. Even today, almost 20 years later, I remember how to count those cattle.”
Learning ways that cattle can be miscounted and grades of cotton can be falsified prepared him for future cases that required him to stay on top of complex frauds. “The fact that cattle could get lost, cotton mote could be so easily misgraded and auditors so often fooled taught me that fraud was so much more sophisticated than I first thought,” he said. “It was not just false documents and forensics. It made me realize that examining, accounting and auditing professionals really did need to be professionally skeptical because collateral could go missing, everybody lied and things were just not as they appeared.” As Weber stresses, creative thinking is necessary in his line of work. “The accounting industry and regulators need people capable of imagining and brainstorming the unthinkable to catch this type of fraud.”
Weber’s early days sleuthing bank fraud in the arid landscapes and ferocious winds of West Texas also gave him an essential cultural education. “These cases in West Texas, and later in Arkansas, were where I learned that it made people uncomfortable [when I was] wearing a Brooks Brother’s suit [while] interviewing people in our Lubbock or Little Rock field offices. It taught me that a folksy and friendly demeanor would get more cooperation from witnesses, and even suspects, than what you see on TV, or often at times in real life on the east coast. I still use that folksy demeanor today, both in teaching and in my private practice cases.”
Another thing that Weber tries to impart in his work today? Getting his students interested in fraud examination careers. “I try to point all my students to careers in public service, particularly at the financial regulatory agencies,” he said “There are all kinds of frauds in business, and we need smart, quality people to investigate them.”
As these certified fraud examiners have demonstrated from their long careers in the field, there is often much more to investigating fraud than just knowing certain techniques or being able to read a financial statement. Fraud investigative work takes stamina, a fighting spirit and an open mind to learn something new.