Insurance Fraud for Terminally Ill Patients Could Have Been Prevented

While many companies face fraud from the inside (their own employees), individuals may have to fight fraud from outside sources, like companies seeking to take money from the elderly or those who cannot protect themselves.

A Rhode Island estate planning attorney and his employee recently pled guilty to obtaining millions of dollars in death benefits and investments using the names of terminally ill individuals.  They not only stole the identity of terminally ill patients to receive profits from insurance policies and bonds, but they also visited facilities for terminally ill patients and contacted their family members in order to sell them small life insurance policies.

They then used the patients’ personal information to falsely obtain more than 200 variable annuities that would pay out upon the owner’s death, all done without the patients’ knowledge or consent.

There are several ways that fraud against an individual, especially one who is gravely ill, could have been prevented:

  1. Have trusted family members or an independent third party, such as a trustee involved in the financial aspects of the terminally ill individual.
  2. Research the company that you are investing with.
  3. Research the investment or investment strategy.
  4. Don’t give personal information out before you have done your research.
  5. Don’t be pressured to make a quick decision, take your time.
  6. Regularly check the credit history of a terminally ill individual to see if any accounts have been opened recently without their knowledge.

Source: http://www.stopfraud.gov/iso/opa/stopfraud/RI-1211191.html

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Lack of Checks and Balances Create Opportunities for Fraud

By Tricia Cook, CFE

An Indiana business man recently pled guilty to fraud, acknowledging that he abused his position as board chairman and head of the audit committee at an Iowa-based manufacturer of equipment for all-terrain vehicles and golf carts.

Between 2009 and his resignation in 2010,  he convinced the company to give him control of more than $507,000 after promising he would use it for a plan to take the company private through a stock buyback. In reality, he used the money to pay for his personal credit card bills and mortgage payments on one of his two homes.

To cover up the scheme, the executive lied to the board and the company’s auditor and created phony bank and brokerage account statements. He also signed a false statement filed with the SEC.

Red Flags

There were red flags about this scenario that should have raised concern prior to the fraud discovery. Paying attention to certain details like a change in lifestyle, an unwillingness to take vacation or to change roles might be clues that one of your employees may be deceiving you.  Take a close second look to make sure everything is in order, especially if any of these conditions exist within your company:

  • Red Flag 1: His position as board chairman and head of the audit committee goes contrary to the concept of always having proper checks and balances between departments.  By giving someone this much control, the board and audit committee opened themselves to risk.  The executive should not have been the head decision maker in addition to having control over the funds and the audit function.
  • Red Flag 2: The board gave him control of more than $507,000 after promising he would use it for a plan to take the company private through a stock buyback, but it seems that was the end of the story. The board should have required a plan and a way to track the money.  Additionally, there should have been some type of reporting to check on his progress each month.
  • Red Flag 3: He created phony bank and brokerage account statements to cover up his fraud, but if there had been a segregation of duties, it could have been prevented. With someone else in charge of opening the bank and brokerage statements and then reconciling them, this executive would not have had the access to create false documents.

If you have concerns over your company’s internal controls and would like a free copy of the Fraud Check Up, please contact me at tcook@pbtk.com.

Source: http://www.ibj.com/indiana-businessman-admits-guilt-in-2-fraud-plots/PARAMS/article/37571

Stockbroker Sentenced In Fraud Case

From Forbes.com:

Lori Zoval, 47, South Lake Tahoe, CA, was a licensed securities broker.  Unfortunately, it appears that Zoval believed that not only was she licensed to sell stocks but that she was also licensed to steal.

Over $439,000

On July 06, 2010, a federal grand jury indicted Zoval with wire fraud. Prosecutors alleged that Zoval  reaped over $439,000 from a couple for whom she managed investments, and that she used the stolen funds for her personal benefit at casinos, restaurants, nail salons, as well as to pay for travel, gas, groceries, and other personal expenses. As with most of these rip-offs, Zoval simply fabricated documents to conceal her crimes – going so far as to engage in forgery and to secure notarizations. If convicted of the charges, she faced a maximum statutory penalty of 20 years in prison and a $250,000 fine for each violation.

Continue reading at Forbes.com.

Fraud Awareness Week Casts Spotlight on White Collar Crime

Full service CPA firm Piercy Bowler Taylor & Kern (PBTK) is an official supporter of International Fraud Awareness Week (Nov. 11-17) and will promote anti-fraud awareness and education to the firm’s employees and clients. Organizations around the world lose an estimated five percent of their annual revenues to fraud, according to a study conducted by the Association of Certified Fraud Examiners (ACFE).

As an official supporter of Fraud Awareness Week, PBTK joins hundreds of organizations who have partnered with the ACFE, the world’s largest anti-fraud organization and premier provider of anti-fraud training and education, in a commitment to proactively fight fraud and help safeguard business and investments from this growing problem.

During Fraud Awareness Week, PBTK will post articles on its website and forensic accounting blog, send newsletters with fraud information, and distribute fraud facts to local media.

ACFE President and CEO James D. Ratley, CFE, said that the support of organizations around the world helps make Fraud Week an effective tool in raising anti-fraud awareness.

“While fraud prevention and detection is a year-round endeavor, International Fraud Awareness Week provides a great opportunity to spotlight this serious problem and stress the importance of anti-fraud training and education,” Ratley said. “Businesses and organizations who are involved in this campaign show an understanding that spreading awareness is key in combating the worldwide fraud threat.”

Mike Rosten, Principal and Director of Litigation Support for PBTK wants to make sure the accountants and CPAs at the firm understand that every company is at risk for occupational fraud, even governments and non-profits.

“Fraud schemes are extremely costly for companies – according to the ACFE, the median loss is $140,000, and more than one-fifth of the fraud involves losses of at least $1 million,” says Rosten.  “An ounce of prevention through internal controls, hotlines and setting the proper tone from the top can create a pound of protection for any organization.”

In its 2012 Report to the Nations on Occupational Fraud & Abuse, the ACFE found that:

 

  • Schemes can continue for months or even years before they are detected. The frauds in the study lasted a median of 18 months before being caught.

 

  • Occupational fraud is a global problem. Though some findings differ slightly from region to region, most of the trends in fraud schemes, perpetrator characteristics and anti-fraud controls are similar regardless of where the fraud occurred.

 

  • Small businesses are especially vulnerable to occupational fraud. These organizations are typically lacking in anti-fraud controls compared to their larger counterparts, which makes them particularly vulnerable to fraud.

 

  • Tips are key in detecting fraud. Occupational frauds are much more likely to be detected by tip than by any other means. This finding reinforces the need for promoting awareness to foster an informed workforce.

For more information about increasing awareness and reducing the risk of fraud during International Fraud Awareness Week, visit www.FraudWeek.com.

The 2012 Report to the Nations is available for download online at the ACFE’s web site: ACFE.com/RTTN.  The Report is in PDF format.

About Piercy Bowler Taylor & Kern

Piercy Bowler Taylor & Kern is a full-service accounting and business advisory firm that provides accounting and auditing, tax, consulting, valuation and litigation support services. Founded locally in 1990, the firm specializes in the casino gaming and leisure time industries, governmental and not-for-profit organizations, real estate development and construction industries and the legal and general business communities. Now with offices in Sandy, Utah and Las Vegas, PBTK is one of the few independent accounting firms that do SEC audits. For more information on PBTK, visit pbtk.com or call 702.384.1120.

About the Association of Certified Fraud Examiners The ACFE is the world’s largest anti-fraud organization and premier provider of anti-fraud training and education. Together with nearly 65,000 members in over 150 countries, the ACFE is reducing the incidence of fraud and providing the training and resources to fight fraud more effectively. For more information about the ACFE, visit www.ACFE.com.

Which Countries Have the Most Credit Card Fraud?

Debit and credit card fraud is more common than ever but in some countries, like the United States, the problem is much more prolific.

One recent survey finds that 27% of cardholders (debit, credit and prepaid) around the world have experienced fraud in the past five years. Rates of fraud vary across countries but in Mexico and the United States are more prone to fraud with 44% and 42% of respondents there saying they’ve experienced card fraud.

Continue reading the full article from Forbes Magazine.