Categories: Forensic Accounting

On behalf of a major global transportation company, White Collar Forensic performed an internal investigation of the suspected theft of equipment.  The investigation included in-depth background investigations of suspect employees, the acquisition and analysis of over 4 million emails and electronically stored evidence, imaging and analysis of computer hard drives, witness and admission-seeking interviews, forensic accounting and loss quantification analyses, and preparation of a detailed investigative report in support of a fidelity insurance proof of loss. The matter also entailed the making of a criminal referral to the U.S. Attorney's Office and Federal Bureau of Investigation and the joint performance of a root cause analysis together with an ad hoc team assembled by the chief compliance officer to identify internal control gaps for remediation. The investigation documented the theft of nearly $7 million of equipment, led to a successful criminal referral and an insurance claim which was paid at its maximum face value.

A publicly traded consumer products company was suspected of having inflated its revenues by relaxing its return policy to the point where many of its sales looked more like consignment goods than actual sales where it would be permissible to record them as such.   The investigation included collecting and analyzing millions of internal communications, accounting records, shipping invoices, bills of lading, delivery manifests, returns, rebates and other documentation of sales and the movement of finished goods inventory to its distributors.  The investigation and forensic accounting work performed provided outside counsel with sufficient information to demonstrate that the allegations of channel stuffing were unfounded and the SEC closed its investigation with no action.

The South Korean subsidiary of a global aerospace and industrial supplies company requested an investigation of their general manager who was suspected of expense fraud, undisclosed conflicts of interest and bribery of public officials. The investigation revealed that the executive used on of his direct reports as a proxy to misuse the company’s purchasing card to pay for Karaoke, gentlemen’s clubs and other forms of entertainment for himself, other employees and local government officials in violation of the firm’s code of conduct and possibly the U.S. Foreign Corrupt Practices Act (FCPA). In addition, the investigation revealed that the general manager had implemented a mortgage lending program for employees in which the company provided private mortgages for key executives. This alone would have been cause to fire the executive but it was subsequently learned that the borrowers had no knowledge of the mortgage loans attributed to them. Instead, the proceeds of this unsanctioned mortgage loan program went directly to the general manager. The investigation led to the dismissal of the GM and enabled the company to implement a series of improvements to their internal controls.

A global services provider was alleged to have made improper payments in multiple Latin American countries in exchange for the award of government contracts. These payments were alleged to have been made through a series of business intermediaries and other vendors in an effort to disguise them as legitimate business expenses. WCF personnel oversaw a retroactive review of vendor disbursements in each country and also devised, implemented and administered a review of payment requisitions prior to any payments being made a going forward basis. This payment requisition review team also identified numerous internal control shortcomings which they were able to share with the finance team enabling them to make timely remedial actions. After several months of performing this vital payment requisition review function, the team successfully transitioned the process to a full-time team in each country. This work, together with several other work streams, enabled the company and outside counsel to successfully negotiate settlements with the DOJ, SEC and several foreign government agencies.

A WCF professional oversaw a private bank’s investigation of the embezzlement of $66 million from a bank customer who had corrupted and conspired with the private bank’s general manager. This customer ultimately was able to open numerous private banking accounts that included substantial lines of credit secured by fraudulent collateral, drew down all of the lines of credit to their maximum and then defaulted. The investigation included an extensive review and analysis of numerous private banking accounts, millions of dollars of foreign transfers to related parties and individuals, including public officials, background investigations of the beneficiaries of those transactions and surveillance of the general manager’s residences once it had been determined that he was attempting to flee the jurisdiction. The culmination of these forensic accounting analyses was a criminal referral to the FBI and a successful insurance claim against the bank’s fidelity policy enabling them to recover most of their losses.

On behalf of a medical equipment manufacturer and their counsel, a WCF executive oversaw a forensic accounting investigation of an elaborate fraudulent scheme in which two company executives based in Europe improperly entered into leasing agreements of medical equipment in which they provided 100% financing of medical facilities that were constructed to house the medical equipment and 2 different versions of the leasing agreement. The English language version submitted to corporate headquarters approval contained the company’s standard terms and conditions whereas the foreign language version of those agreements contained very generous terms that favored the customer leaving the company with little to no recourse or collateral in the event of a default. These fraudulent lease agreements caused the company to incur a huge amount of defaults and a loss of over $50 million. The resulting investigation and forensic analysis revealed that the two employees had entered into side agreements with these customers in which they received kickbacks with the understanding that the customers would receive the medical equipment and facility and then default knowing that the company had no recourse. The investigation included intensive data analytics and forensic accounting, dozens of data visualization charts and graphs showing improper relationship and money flows and enabled the company to recover $56 million of their $60 million loss in an insurance claim.

In connection with a Securities Investor Protection Corporation liquidation matter, a WCF executive oversaw the analysis and disposition of assets belonging to the broker dealer and its executives who were involved in insider trading and a series of pump and dump schemes. The team used data analytics to analyze over 10 million outbound phone calls in an effort to identify assets recoverable to the trustee who could then return assets to victims. The phone records analysis revealed that hundreds of calls were placed to banks, law and accounting firms located in several offshore, money laundering safe haven countries enabling the investigative team to identify financial institutions where some of the proceeds of the fraud had been transferred. This effort enabled the trustee to pursue the repatriation of those assets through Mutual Legal Assistance Treaty requests and letters rogatory procedures.

Counsel for a U.S. based gaming company requested assistance in reviewing expense records and other documentation of the company’s third party lobbyist in an Asian country following allegations that certain public officials may have received improper payments in exchange for their support of pending litigation legalizing casino gaming. The review enabled the company and its counsel to respond to public inquiries about these purported payments and determine whether they should move forward with their plans to expand into the country in question.

A publicly traded solid waste company realized that they had been defrauded by one of their employees. The employee had been brought in to head up a specialized division of the company specializing in agricultural waste from farming operations. Unbeknownst to the company, this individual had several companies set up in his name which he mischaracterized as important business partners in the company’s pursuit of agricultural waste customers. The entities received sales commissions and broker fees and also were used to divert revenues away from the company in favor of the employee. In some instances, the expenses associated with the agricultural waste disposal were borne by the company and the bulk of the proceeds of the business were diverted to one or more of the employee’s businesses. The investigation revealed that the employee was in fact the owner of the businesses, secured a confession from him and his ongoing cooperation including the voluntary production of his personal and business banking records which enabled the quantification of the loss. This calculation was then used to enter into a settlement agreement between the parties in which the former employee agreed to pay back the money he had improperly diverted away from the company.

A major private equity firm with a fund that included numerous parcels of commercial real estate in its investment portfolio was defrauded by its fund manager. The manager was charged with the operations and maintenance of the various properties including the receipt of rent, improvements, tax payments and maintenance. The employee mischaracterized several million dollars of personal expenses as business expenses instead using company funds to pay for his lavish lifestyle that included several homes, luxury travel and a collection of ultra-expensive luxury vehicles such as Lamborghinis and Ferraris. The investigation was able to separate the legitimate property management expenses from the personal living expenses that were being misidentified as business-related.