ACC 423. 4-4 Case Study An Unholy Trinity

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Nov 24, 2024

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1 An Unholy Trinity Harriet Creyer 4-4 Case Study: An Unholy Trinity Southern New Hampshire University ACC 423 Detection/Prevention Fraud Financial Statements

2 An Unholy Trinity An Unholy Trinity: Three Ways Employees Embezzle Cash What schemes were committed by each fraudster? • Albert Miano Miano was a supervisor and a long-term employee in a painting department and embezzled $1,057,000.00 and created “phony invoices for painting contractors who didn’t exist, forged the approval of a Vice President, and deposited the proceeds into his own bank account” (Wells, n.d). There are several red flags that were missed during this case; he was submitting falsified invoices to shell company which had ‘contactors’ who didn’t exist, he had also forged signatures from the Vice President to allow authorisation. This fraud could have been prevented with internal controls with would have allowed policies and procedures in place to ensure all invoices go through various channels, a segregation of duties and potentially a tip line. Someone would have seen the increased lavish lifestyle and would of potentially reported it. For this case I believe there were 2 parts of the fraud triangle that came into play with this, Opportunity, and Financial Pressure. The opportunity he says that the invoices weren’t being checked or reviewed for the payment to be authorized, as for the financial pressure, Miano saw that he could gain considerable money which would allow him to give him a lifestyle that he wouldn’t have necessarily had previously. • Bill Guardo Guardo was a “branch manager of a consuming loan finance company” (Wells, n.d), he stole approximately $22,000 during a cash larceny scheme that consisted of Theft of deposits. He “ he had been stealing money from the deposits he took to the bank on a daily basis” (Wells, n.d). It’s not clear within the report what Guardo did with the extra funds. It wasn’t until a fake idea of an internal audit that made Guardo panic and

3 An Unholy Trinity therefore resign. The red flags from this case would have been the lack of funds within the banking deposits and possibly the increase lifestyle that Guardo started to live. There would have been several internal controls that could have prevented this, 1 of these would have been segregation of duties, allowing 1 person to prepare the deposits and another person to double check would of but a stop to this before it started. Also, another prevention method would have been regular internal audits, knowing that internal audits would have been a regular thing would have again prevented this before it started. As for the fraud triangle I think there could be aspects of the triangle; Guardo saw an opportunity of the lack of controls and allowed himself to adjust the deposits. It is unsure if he was suffering from financial pressure or if it was done out of greed. • Brian Lee Dr. Lee was a “top-notch plastic surgeon….. took quiet pride in his beautification efforts, which included nose jobs, liposuction, face lifts, and breast enhancements. Lee worked for a large physician-owned clinic in the southwestern U.S. ” (Wells, n.d). Dr. Lee embezzled “several hundred thousand dollars” (Wells, n.d) by skimming customer payments that had not been recorded by the clinic. He was able to skim the customers by telling them to pay him directly without going through the clinic. Skimming from unrecorded sales is an extremely difficult fraud to detect. One of the biggest red flags from this case that the differences between the number of customers coming through Dr. Lee’s room and the surgical log, and the number of recorded clients. An internal control that may have prevented this fraud is having regular audits of the hospital's surgery logs to the cash receipts journal. Lack of internal controls gave Lee the opportunity to commit fraud. The motivating factor in this case admitted by Lee was pure

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4 An Unholy Trinity greed (Wells, n.d.). Finally, the rationalization and opportunity for this crime would most likely center around his ego and the thought that he wouldn’t get caught • Bruce Livingstone Livingstone started his fraudulent crime stint by creating fraudulent expense reimbursement after requesting to be reimbursed by the medical college after a personal trip. “ The situation came to light when the bogus travel expense voucher landed on the desk of that very same senior female auditor for approval.” (Wells, n.d). Livingstone was also caught selling the dental tools to the students at the medical college from the back door and keeping the funds obtained for himself. Some of the red flags for this scheme were the inconsistencies of the expenses from Livingstone and who actual went with him. The inventory scheme he ran with the dental tools were not discussed in detail within this report. Some of the ways this could have been prevented was internal controls and checks to ensure that the expense reports were actually checked rather than just signed for. The inventory scheme could have been prevented id an internal audit of inventory was done; it would have shown discrepencies within the inventory logged and the physical inventory. Like with the last cases the opportunity from the fraud triangle was there, Livingstone saw the opportunity to hide taking his girlfriend of work trips knowing that the expense reports were only signed and not reviewed. Rationalization that the dental tools wouldn’t have been missed allowed him to take the financial. Gain and sell them. • Cheryl Brown Brown was Bruce Livingstone’s assistant at the medical college, and she was part of a billing scheme. She had set up a shell company and billed the college invoices to pay the shell company and allowing her to fraudulently claim “$63,000” (Wells, n.d).

5 An Unholy Trinity Some of the red flags from Brown’s case was the number of invoices going to a PO Box, The lack of professionalism from the invoicing with either lack of information or the number of items. One of the ways this could have been prevented was the need for internal controls and vendor checks, if the vendors had been checked after say 2/3 recurring invoices then someone would have noticed the problems sooner. The biggest part of the fraud triangle within this case was financial pressure, Brown had admitted that her and her husband were drug addicts, and they needed the money to help fund their addiction.

6 An Unholy Trinity References Wells, J. T. (n.d.). [PDF] an unholy trinity: The Three Ways Employees Embezzle cash - free download PDF . [PDF] An Unholy Trinity: The Three Ways Employees Embezzle Cash - Free Download PDF. Retrieved January 29, 2023, from https://nanopdf.com/download/an-unholy-trinity-the-three-ways- employees-embezzle-cash_pdf

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