The Latest Technological Solutions to Fraud Investigations

Angela Clancy, PPB Advisory

Jay Dawdy, Gryphon Investigations

The Latest Technological Solutions to

Fraud Investigations

Angela Clancy, RGL Forensics


Case Study Introduction

BILLY HAYS

OWNER PROBLEM…

DECREASE IN

PROFIT

MARGINS

JOE CORPORATION

Regional Coffee

Roaster



Joe Corp’s History of Fraud

1995: Employees stole whole coffee beans.

2000: Delivery drivers stole cash payments on their routes.

2001: Purchasers stole computers.

2005: Sixteen-wheeler delivery truck stolen.



State of the Art Security System

Jay Dawdy

Investigator



Introducing the Accountants

SANDY SUGAR

LUKE SMITH

AKA

“COOL”

I took a look and it

appears to be due

to an increase in

IT and repair

costs, which have

cut into the

margins.

Repair costs keep

increasing

because old

equipment needs

constant repairs

and we haven’t

invested in new

plant equipment in

many years.



Trigger Point - Surveillance Cameras

Location: Corporate Office

Time: 00:20:40

Date: 04.12.2010



The Investigation Begins

Jay Dawdy

Investigator

Angela Clancy

Forensic Accountant



Identification of Potential Suspects



Obtain a Mirror Image of the Computer Drives



Ascertaining the Data for Analysis



Analysis of Data Files



Cool’s E-Mail Meta Data



Social Networking Analysis



Visualizing of Cool’s E-Mails



Distinguishing Between Internal and External E-Mails



Demo: Visualizing the E-Mail Flow



Emails Between Cool and Brown



Brown’s Email Data



Demo: Visualizing the E-Mail Flow



Extracting the Relevant Data



Review of Instant Messages

AIM Instant Chat Between

Smith and Brown



Status of the Investigation

Who is ghost rider?

Background check of vendors?

Exile?

Who is Wild Bill?



Identifying the Owner of an E-Mail Account

NO REGISTRATION INFORMATION



Background Check of Exile Industries



Bankruptcy Fillings

Exile Industries

Declared Bankruptcy

3 years ago

Owner: William Panetta

WILD BILL!



Background Check of William Panetta



Background Check of William Panetta

DMV Search



Connecting the Dots

Exile Owner: William Panetta

= Wild Bill

Exile Vendor

Fraud Scheme?



Red Flag Vendors with a PO Box

Vendor: Exile Industries

Changed from a physical address

to a PO Box in 2007

Lsmith was the user who made the

change



Change in Invoice Sequence




Step One: Step Two:

New Column

Step Three:




Generated 5 Red Flags




Unusual Change in

Sequence

5 Digit Code to a 6

Digit Code



Purchase Order Approval



Assessing User Patterns

Every other PO

User has multiple

Users updating the

system



Exile Industries

Increase in Purchases each Year



Interviews



Receiving Department Interview

Brian Jones

Head of the Receiving Dept

Instead of the parts

being received through

the receiving

department, as was the

normal process, Jane

Brown would notify us

that she had received

the parts directly.…

She always provided

us with FedEx receipts,

which we entered into

our system.



Verification of Deliveries



Verification of Deliveries: Red Flag



Other Interviews

No knowledge of recent

purchases from Exile

Rumor of Jane and Cool

being romantically

involved



The Jig Is Up, But

How Much? Where is the Money?

Exile Industries

Declared Bankruptcy

3 years ago

Jane Brown and Cool

were responsible for

processing all the Exile

Industries invoices



Interview with Wild Bill

WILLIAM PANETTA

AKA “WILD BILL”



Wild Bill Describes What Happened

Before Exile Went into Bankruptcy

I can give you more

business but you have to

kick back 20%...

and you can raise your

prices by 20%




Before Exile Went into Bankruptcy

Exile

Invoice

$10,000

As a result of

this scheme I

get more sales

– this might

save my

business

As a result of

this scheme I

get 20% cash

for each

invoice from

Exile

$2,000 Kickback




After Exile Went into Bankruptcy

I know you’re bankrupt

but we can continue this

scheme…




After Exile went into Bankruptcy

Fictitious

Invoice

$10,000

Cool Processed the

Payment

$7,000

kickback



Quantifying the Loss

TOTAL LOSS = $4,400,000



Brown & Cool Refused Interview



Negotiating a Deal

My clients will

settle for $500,000

and a good word

with the

prosecutors.

NO

DEAL!

I’ll have them

prosecuted

AND

I’ll find that

money.

THE LAWYER BILLY HAYS



Criminal Prosecution

GUILTY



Civil Litigation / Judgment



Asset Recovery



Traditional Asset Searches

• Real Property

• Corporate Affiliations/ Assets

• Motor Vehicles

• Boats

• Aircraft

• Securities Holdings

• Other Assets



Investigation: Surveillance



Enduring the Process of

Receiving Paper Documents



The Optical Character Recognition (OCR) Process



The Optical Character Recognition (OCR) Process

Ensure Accurate OCR

Process



Converting the Bank Statements

into an Excel Format



Data in a Useable Format



Demo: Analyzing the Bank Statements



Identification of Potential Assets

Analysis the coding of wire transfers to find additional

Bank Accounts



Visit to the Marina

They took off and moved it

down South…. somewhere

in the Caribbean …. the

name of the boat,

“Giovanna.” A beautiful 50

footer.



Asset Recovery in Tortola: Yacht



Assets Recovered

$900K TORTOLA BANK ACCOUNTS

$1M YACHT

$750K U.S. BANK ACCOUNTS

$2.65M RECOVERED



Contact Information

Jay Dawdy

Gryphon Investigations

914-730-9027

Email: [email protected]

www.gryphoninvestigations.com

Angela Clancy

PPB Advisory, Australia

+61 3 9269 4123

Email: [email protected]

www.ppbadvisory.com.au

mailto:[email protected]

http://www.gryphoninvestigations.com/

http://www.ppbadvisory.com.au/