'A lot of social good comes out of this program’

by Tracy Kalytiak  |   

Imagine you own a business that's doing well. One of your employees takes care of the bookkeeping so you can concentrate on growing your company. You're so busy that it's been months since you've pulled up the balance for your business accounts.

UAA student Laura Knowles, Professor Soren Orley and Credit Union 1's Pat Berry are all involved in Justice for Fraud Victims Project. (Photo by Philip Hall/UAA)

UAA student Laura Knowles, Professor Soren Orley and Credit Union 1's Pat Berry are all involved in UAA's Justice for Fraud Victims Project, which, in four years, has revealed $1.4 million in frauds. (Photo by Philip Hall/University of Alaska Anchorage)

One day, you drive to Costco to buy paper towels and coffee. The cashier rings up your purchases, you swipe your company debit card...and the word "Declined" appears on the card reader. Thinking it must be a mistake, you swipe it a second time. Again, "Declined."

You leave the towels and coffee, rush outside and use your phone to check the work account's balance, which should be hovering around $50,000.

You feel the blood drain from your face when you see a negative balance.

What happened?

Unveiling the truth

UAA's Justice for Fraud Victims Project can help. JFVP students, faculty and industry mentors investigate fraud complaints referred by the Anchorage Police Department and others in the community. It has investigated 13 cases and identified $1,444,460 in alleged embezzlements since starting its work at UAA nearly four years ago.

"A lot of social good comes out of this program," said Soren Orley, the UAA College of Business & Public Policy professor who helped launch UAA's program after Dr. Sara Melendy of Gonzaga University developed JFVP's pilot program. Orley and Minnie Yen, also of CBPP, as well as Patrick Berry, vice president and chief audit executive for Credit Union 1, and other local certified fraud examiners, supervise the work of students involved in UAA's JFVP.

JFVP benefits law enforcement agencies with large caseloads and limited resources, allowing those agencies to take on cases that otherwise wouldn't be investigated, without increasing their costs.

"When you think you've had fraud committed against you, either as a business owner or on a personal level, you call the police and think they'll swoop in and do this big investigation, go out and arrest the perpetrators," Orley said. "That's not reality. What happens in reality is, they say, 'Show us. What evidence do you have?'"

Bilked victims often don't have the thousands of dollars necessary to pay a certified fraud examiner. These victims benefit because JFVP provides its confidential services without charge.

UAA accounting students benefit because they work with industry professionals on real cases, receive the opportunity to develop a unique skill set and gain real-world experience as white-collar crime investigators.

High-achieving undergraduates or graduate students are eligible to apply for the program. Once accepted, they must sign confidentiality agreements. Three students usually work on each case.

The process starts with JFVP students, faculty and mentors reviewing the police report or complaint from an organization. Anchorage Detective Michele Logan and the municipal district attorney give presentations related to embezzlement and then the students develop a victim questionnaire and document requests.

'More guts than glory'

Laura Knowles, a senior accounting student who will receive her bachelor's degree in May, was taking Orley's government accounting course last fall when he asked if she would like to participate in JFVP.

"Of course I was all about it," she said. "I didn't know what to expect; I knew very little about what they do, what goes on. All I knew was that it sounded very cool with the confidentiality agreement, you have to be invited. They get in a secret room that's locked, with our own computers that are Internet disabled. It's like a very secretive, cool club. But I think I can say me and all the other students walked in that first day not even knowing what a fraud examination was. We were lost, a little unprepared."

The first few weeks, the students received guidance from APD, talked to the municipality's district attorney about the rules of evidence. "Then you're handed the cases," she said. "We started with six students and we had two cases."

The students investigated an elder fraud involving a wealthy woman whose caretaker appeared to be embezzling from her.

"We got handed basically boxes and boxes of documents," she said. "There were many, many hours and late nights of just data entry, poring over these statements, and then really just trying to look for the patterns and look for the story the numbers were telling us. It's more guts than glory. Although this fraud stuff is really cool, actually digging into it is not all that exciting. It's that element of suspense and surprise that makes it interesting, because you don't know what the numbers are going to say at the end. They could say everything's legit here, or it isn't."

Upwards of a million dollars appears to have been embezzled in that elder fraud case, Knowles said.

"And that was not included in that total shown earlier," Orley pointed out, referring to the $1.4 million in embezzled funds UAA JFVP students have identified since the project began.

Previous life experience as a divorced mother of two helped, Knowles said.

"For example, I knew how mortgages worked," she said. "The coolest part for me about this project is that it brings a human element to accounting. It's not just a numbers game. It wasn't what I was expecting when I chose this as a career field. This is people's lives. I learned a lot about maintaining professional skepticism-that we trust people but we verify."

Knowles said the experience with JFVP empowered her.

"I'm interning at Afognak Native Corporation," she said. "I'm a shareholder there but I hope to stay there and maybe one day be in management. One of the ways this project has empowered me is that I'm no longer naïve. I have the skills to be able to see when something [wrong] is going on."

Looking toward prevention

"I've dealt with fraud for a long time and one interesting thing I've learned is that in embezzlement cases, the money goes someplace," said Credit Union 1's Berry, who mentors the students in JFVP.

Fraud investigation doesn't sound glamorous, Berry said, recounting an anecdote he heard from Anchorage Detective Michele Logan about police recruits.

"[She'd] say, 'Who wants to work drugs?' All these hands will go up. 'Who wants to work gangs?' All these hands will go up. 'Who wants to work fraud?' No hands go up," Berry said. "In fraud, it leads into street gangs. It leads into drugs."

Berry worked with police during the Israel Keyes and Joshua Wade investigations. Keyes was an admitted serial killer who murdered Anchorage barista Samantha Koenig in 2012. Wade, a suspected serial killer, pleaded guilty to the 2007 murder of nurse psychologist Mindy Schloss and admitted killing another woman, Della Brown.

"People who commit fraud leave a trail most of the time," Berry said.

Orley says victims want justice, which can come in a variety of forms.

"Some victims only want their money back," he said. "Some want the guy put in prison. Some just want to know what happened."

Who commits fraud?

A 2014 ACFE report contained the following statistics about people who embezzle:

• 87 percent were first-time offenders.

• Two-thirds were men.

• 55 percent worked alone.

• 52 percent were between 31-45 years old.

• 47 percent worked for the victims fewer than six years.

• 45 percent worked in accounting.

• 44 percent were living beyond their means.

• 42 percent were staff members and 36 percent were mid-level managers.

'We tried to figure out what happened'

One local organization approached JFVP for help late last year.

"We had a significant amount of fraud," said the head of that organization, who requested that her name and the organization's name not be published. "Money was gone, missing."

A report showed the organization had money, yet there wasn't any money in its bank accounts.

"We saw the figures on what the profits should be and it wasn't that," she said. "Then it just became a fact-finding mission where we tried to figure out what happened. Several people had access to funds in one manner or another. People were fired, but we weren't confident that fixed the problem. We're a nonprofit and didn't have the funds to do a fraud investigation, and even if we did, we didn't know what we'd do afterward. So we had come to the point we weren't going to do anything about this."

JFVP accepted the case and is now investigating it.

"We were thrilled," the woman said. "I've given them boxes of files, and at the first meeting, I was very impressed with the students' understanding of the business and their understanding of the issues."

Own a business or run a nonprofit? Here are some JFVP suggestions:

• Conduct a timely review of bank statements and accounting records.

• Authorize checks.

• Separate duties regarding mail receipts and bank reconciliations.

• Ensure that any employee handling QuickBooks or other bookkeeping tasks works at the level of "least privilege."

• Complete a secondary review of the office manager's time card.

• Develop and implement an ethics policy.

• Check the background of new employees.

The woman says her organization's brush with fraud has taught her that people write checks to themselves for expenses that aren't valid; they can record information incorrectly; they purchase things for the business that don't relate to the business.

"For example, if you're in a business that sells tennis shoes and you have purchases for a bunch of photos, or jackets, or trips to other states the business doesn't do operation in."

She's learned valuable lessons.

"Set up internal controls and review them to make sure they're happening as stated," she said. "Be sure there is more than one person involved whenever cash or money is being handled or coming in or out of the business and that there's a review of that process-not just check writing, anything that involves money. Purchases made with cash should have a corresponding invoice for what that money was used for. We now have third-party background checks and give regular reports to the board so they can see irregularities sooner rather than later. We have oversight and documentation."

Written by Tracy Kalytiak, UAA Office of University Advancement

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