Episode 74: Cases Involving Criminal Defense | Chris Ekimoff & Jessica Yohe
This summer while at the ACFE Global Fraud Conference several speakers and friends of the podcast got together to play an escape room. Before and after the escape room adventure, Leah found herself engrossed in stories from investigators around the US and didn’t want the conversation to end. It was these valuable conversations that inspired the format for the next 6 episodes of the podcast. For the remainder of 2022, Leah is joined by investigators to share case stories from investigations worked in a variety of areas.
In this episode, Leah is joined by Chris Ekimoff, CPA/CFF, CFE and Jessica Yohe, CPA, CFE who discuss cases involving criminal defense.
Data Sleuth: Using Data in Forensic Accounting Engagements and Fraud Investigations by Leah Wietholter, CFE, PI, CPA
When Leah joined the financial investigation industry over 15 years ago, her goal was to work as many cases as possible, but getting those first few cases felt extremely challenging with questions like, “How do I get the casework without the experience? And how do I get the experience without the casework? And when I get the casework, will I know what to do?”
Based on her experience of working over 200 cases in her career, she wrote Data Sleuth® to help others facing this very problem. It is the book she needed so many years ago. In this book, she explains how to start a financial investigation from case planning, to finding best evidence, to incorporating non-financial evidence – like interviews and open source intelligence, and ultimately, how to put it altogether for clients or even law enforcement with step by step details and case examples. If you want to gain confidence in financial investigations to build your case experience, you need to read Leah’s book. Data Sleuth® is available on Amazon, Goodreads, or wherever you like to buy books!
Chris Ekimoff CPA/CFF, CFE
Chris Ekimoff, CPA/CFF, CFE is a Director in the Financial Investigations & Dispute Services practice of RSM US LLP and leads the firm’s practice in this practice area in the Southeast Region. Chris has significant experience providing litigation consulting and forensic accounting services—including as an expert witness on behalf of his clients—performing internal investigations, applying and evaluating financial reporting methods, responding to allegations of accounting and auditing malpractice, asset tracing engagements, and other complex financial and accounting issues. He is a co-host of the inSecurities Podcast from the Practicing Law Institute, and an Adjunct Professor at George Mason University. Chris also heads the FIDS Blockchain and Crypto Solutions Incubator at RSM.
LinkedIn: https://www.linkedin.com/in/ekimoffcpa/
Jessica Yohe CPA, CFE
Jessica Yohe has worked in public accounting since September 2016 after earning her Master of Accounting and Bachelor of business administration degrees from Kennesaw State University. She is a manager in Audit and Assurance and works closely with clients in the captive insurance, distribution, manufacturing and telecom industries providing audit and attestation services.
Jessica’s work with her clients ignited a passion for forensic accounting and white-collar fraud prevention. In 2019, she became a Certified Fraud Examiner and is now a resource to clients that want to prevent, detect or investigate fraud. Jessica focuses on helping companies mitigate fraud by putting internal controls and proactive strategies in place.
LinkedIn: https://www.linkedin.com/in/jessica-kaczor-yohe-cpa-cfe-8b734741/
Connect with Workman Forensics
Youtube: @WorkmanForensics
LinkedIn: @workmanforensics
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Transcript
Leah Wietholter:
Welcome to The Investigation Game Podcast. I'm your host, Leah Wietholter, CEO and founder of Workman Forensics in Tulsa, Oklahoma, and the author of Data Sleuth: Using Data and Forensic Accounting Engagements and Fraud Investigations. This summer, while at the ACFE Global Fraud Conference, several speakers and friends of the podcast and I got together to play an escape room. Before and after our escape room adventure, I found myself engrossed in stories from investigators around the US and I didn't want the conversation to end. It was these valuable conversations that inspired the format for the next series of Investigation Game Podcast episodes. So for the remainder of 2022, at least, I've invited investigators to join me in sharing case stories from investigations worked in a variety of areas.
In this episode, Chris Ekimoff, Jessica Yohe, and I discuss cases involving criminal defense. Chris Ekimoff is a CPA certified and financial forensics and certified fraud examiner. He's the director of Financial Investigations and Dispute Services practice of RSM US LLP, and leads the firm's practice in this area in the Southeast region. Chris has significant experience providing litigation consulting and forensic accounting services, including as an expert witness on behalf of his clients, performing internal investigations, applying and evaluating financial reporting methods, responding to allegations of accounting and auditing malpractice, asset tracing engagements, and other complex financial and accounting issues. He is a co-host of The inSecurities Podcast from the Practicing Law Institute and an adjunct professor at George Mason University. Chris also heads the Financial Investigations and Dispute Services Blockchain and Crypto Solutions Incubator at RSM.
Jessica Yohe is a CPA and a certified fraud examiner. She's worked in public accounting since September 2016, and after earning her master's of accounting and bachelor of Business Administration degrees from Kennesaw State University, she is a manager in audit and assurance and works closely with clients in the captive insurance distribution, manufacturing, and telecom industries, providing audit and attestation services. Jessica's work with her clients ignited a passion for forensic accounting and white collar fraud prevention. In 2019, she became a certified fraud examiner and is now a resource to clients that want to prevent, detect, or investigate fraud. Jessica focuses on helping companies mitigate fraud by putting internal controls and proactive strategies in place.
Welcome to The Investigation Game Podcast. I'm so excited to have Chris and Jessica with us here today. And today we are sharing case stories about criminal defense. So without much more introduction than that, Chris, I'm really curious to hear your case story.
Chris Ekimoff:
Yeah, it's a broad topic and oftentimes folks like Jessica and I are called into what we call the white collar space, and everyone is very impressed and interested with the color of everyone's collar. But outside of the pop culture representation of these private jet-using, penthouse-owning bankers and billionaires, white collar cases really span the gamut of criminal allegations. They could be everything from low-level street crime up to kind of those Wall Street-type issues. And I want to talk through a case that I worked on a couple of years ago that relates to a very unique segment of the legal and financial side of what we do in the government contracting space, so you wouldn't often think of a manufacturing plant or a jet production facility as a white collar criminal space, but some of the allegations that came about in this case really lean on that white collar mentality and get into some nuance.
So I was hired as a part of a team to help support the Chief Executive Officer, the CEO of a government contracting business that was actually facing a variety of allegations and charges that we would all call white collar. Not only were we looking at what I would call the standard fraud-related charges, but also violating the terms of a contract with the government, which I hope you guys and your listeners all know is a big no-no, but then also this unique government rule or law called the False Claims Act. And I am not an attorney, Jessica and Leah, I don't know if you guys represent yourselves as attorneys or not.
Leah Wietholter:
No.
Chris Ekimoff:
But the best way to summarize that is really just making incorrect statements intentionally to the government. So that's a whole other sticky wicket we could fill hundreds of podcast episodes with. I'm sure there's GovCon Podcasts out there calling that into question, but through those fraud charges, through that False Claims Act issue, not only could there be jail time or financial penalties involved with the conduct that was alleged, but also this individual could be called what's debarred, and that's related to their ability to do business with state, local, and federal governments. If you reach the EPLS list, the Excluded Parties List System, you may be named as a debarred party and good luck in getting any work from the government.
So this was a very high-stakes case for this individual because their business was the assembly, manufacturer, and delivery of aircraft for the Department of Defense. Had worked in the business for many decades, so Debarment was going to be the end of that career and potentially a huge financial and professional issue for this individual. The facts of the case relate to the strategic business choices that the CEO made related to delivering on that contract for the Department of Defense. The contract itself, and if either of you have read a government contract after the sign, is 10 billion pages of fine print. Some of that fine print actually relates to what should be done under the contract, and those specifications identified the parts at which this business could purchase, the parts that this business would manufacture on their own, the method of assembly to the right specifications, as you can imagine, an aircraft needs to be pretty exacting. And then the delivery of that aircraft to the Department of Defense.
So very straightforward, very focused on the details and how each of those pieces should go together. As the contract got off the ground, they signed it and started working on it. The business owner, the CEO, realized through some changes in the market that some of the products that they had signed up to manufacture themselves to then assemble for this aircraft and deliver could no longer be assembled or manufactured on their plant with their systems. There was a change in the market, and not to get into too much detail, it became economically unfeasible to continue to make those products in-house and then put them together with the rest of the puzzle of the aircraft and deliver it. So the business took it upon itself to go to a third party for a reasonable price that was also an approved vendor of the Department of Defense for other engagements and start sourcing those products from that third party.
They continued to manufacture, assemble, and deliver the parts appropriately for the rest of the contract and deliver those aircraft to the Department of Defense. Now, the CEO also took the extra step of notifying the government saying, "Hey guys, just so you know, when you see this bill down the road, this list of parts, you'll notice that parts one, two, and three have been purchased from a third party and not manufactured in-house. We think that's the best option where we want to deliver on this contract, we don't want to run over budget. Here's our representations." And months and months go by, aircraft are delivered, everyone pops champagne and is super happy until the government takes a second look.
They see that there has been this, in their words, gross violation of the intention and the delivery or the execution of that contract, and they bring all of these charges around fraudulent representations, around violations of the False Claims Act, and of potentially breaching that contract with the government, not only against the business, but to this individual whose career has been in the government contracting space. And so what the case work for CFEs, this is much more in a forensic accounting capacity than it is any investigative work, because we're disclosing the issue. There's no subterfuge here, there's no violation of trust or anything like that, was really to help them create a legal and an accounting argument for why the strategic business decision that the CEO made is justified under the terms of the contract.
So again, those government contracts are thousands of pages long. Hopefully everybody on this call and many of your listeners will focus on the spreadsheets and the numbers more than the words, that's what our attorney friends are for. So it was a really interesting dance between what are the legal terms and conditions of the contract, and then how do we marry up a financial analysis of the contemporaneous cost environment, the choices that were made, the fact that they still delivered parts to specification and on time with the contract, kind of a no harm, no foul argument? So lots and lots of spreadsheets, lots and lots of legalese. Without getting into too much detail, the government first came with a very strong defense about the strict terms and the strict liability of the contract. We really had to prove intent, which as both of you know is probably very difficult to do in most cases, even with this up ahead disclosure to get there.
But thankfully in the end, because the CFO had kept such diligent records of the contemporaneous pricing during this period of change in the market, we were able to show that yes, had this client stuck to the terms and conditions of the contract, it's a reasonable possibility they would've been significantly late and increasingly over budget because of these changes in the market. That did not lead to just kind of a walk away and withdrawal of charges, there was an out-of-court settlement related to that. Thankfully, the CEO was not debarred, the business continued to what I think performed good work on behalf of the US government under the terms of additional contracts from that date on. But having that first conversation with the CEO was really that scary part. Oftentimes, and many of your listeners, I'm sure know, the difference between civil and criminal issues can be egregious.
Civil can relate to a slap on the wrist and a fine, criminal charges for an individual can mean you don't see your kids graduate high school or attend your daughter's wedding because the government thinks that you did something inappropriate on this contract. So all of those things were discussed up front. Over the course of a few months, we were able to confirm the analysis that the business had put together, be representative of that business as an independent third party, and then help broker that settlement between the government and the individual. So not a traditional white collar case, you're not going to see that on the next episode of Billions, but it is one of those areas that we often get pulled in on because it is a contractual issue. There's no doubt the terms of the contract were not followed to the letter. And that's where we get into some of the good work that we can do together. So I was happy to bring that story up because it has a positive result as it relates to a white collar criminal issue.
Leah Wietholter:
All right. So yeah, this one's really interesting, Chris, because just kind of to clarify, did the government file both criminal and civil cases?
Chris Ekimoff:
Yes, and I'm not the expert on the Department of Defense law and how those regulations work. Because this is a registered government contracting business, they're subject to a higher level of scrutiny and regulation than the average Jane or John out there doing work. So there were charges brought in both venues. The civil court case really sat on the back of waiting to see how the criminal proceedings provided, which is common with dual-track cases like that.
Leah Wietholter:
And then, was the Department of Defense, did their investigative arm investigate this? Were they the investigative agency or was it FBI, OIG? Who was that?
Chris Ekimoff:
Yeah, so this all came from the Department of Justice. There was not an FBI investigation in terms of there being any wire taps or any of that fun stuff. The DOJ, for lack of a better term, is really the investigative arm of the federal government. And so obviously the FBI and a lot of those segments of the federal government fall under that purview. So we were dealing with Department of Justice lawyers who were representing the Department of Defense as their client, which is an interesting kind of government contracting nuance there.
Leah Wietholter:
Yeah, and then you mentioned the intent piece, because I mean, the fact that it was disclosed so early, did that really go to help your client? Because the government has the burden to prove intent on a lot of these charges as well, depending on specific charges. But anyway, so they've got that burden. So did that help your client with the intent piece?
Chris Ekimoff:
Yeah, very much so. And the fact that they chose another approved government contractor to source those materials from, really help. I have an interesting last name, many of us on this recording do too. If I somehow source these parts from Greg Ekimoff, my brother, the government's going to look a lot closer at that than there being a preferred business or preferred provider on other contracts here. So the fact that it was all above board is the easy part, the hard part was helping our client understand that, look, the government gets defrauded on a regular basis and they see the same fact pattern, but it's Chris and his brother scheming to make a worse piece of aircraft materials that's going into the aircraft and saving a little bit of money, on paper that might look exactly the same as the fact pattern than what happened here, so the government needs to kick the tires on this and ask the tough questions to get to the right answer.
Leah Wietholter:
Had the government calculated any type of loss for that criminal case?
Chris Ekimoff:
They had not when we started negotiating. I think the financial information sat well within the business we were working on behalf of. The government only had kind of the original contract and the payments that they had made. I'm not sure of how every government contracting or False Claims Act case works, but oftentimes the government will require the alleged party to provide their reasoning and what those differences are, and to get to that number if there is one. In this case, thankfully there wasn't, there may be a bit of back and forth between the two. But it usually is, "Hey, send us all your records about this and we'll tell you how much you owe us." And that can be a tough calculation to battle back front too.
Leah Wietholter:
Sure, sure. So the negotiations within this case, were there any hearings at all, like a change of plea hearing, or did it even get that far, or was it pretty much negotiated outside of the courtroom?
Chris Ekimoff:
There were a few, what are called logistical hearings, there wasn't any testimony provided on either side, this was all kind of dealt with outside of the courtroom, but we were looking down the barrel of a trial in a few months, which is what I think every party likes to avoid if we can get to an amicable settlement for all groups involved. So thankfully that did occur, but there weren't any kind of high stakes or Perry Mason moments yet in the courtroom for this case.
Leah Wietholter:
Yeah, cool. Well, that's super, super interesting and just really, I think, interesting because all of us on this call are CPA CFEs, so just an interesting application of forensic accounting and helping up a party in a case like this.
Chris Ekimoff:
Definitely.
Leah Wietholter:
Yeah. All right, Jessica, you're up.
Jessica Yohe:
Okay. So Chris kind of alluded to this, but white collar crime is something that's super flashy. You think of all the big cases and stuff like that, but most of what I do works with smaller businesses or individuals that have been hurt by some sort of fraud. So the one that I'm going to talk about today is kind of interesting because it relates to basically getting refunds on their tuition that was paid by their company. And I actually didn't know this about colleges, so I learned something new while I was going through this. But I was contacted by the owner of this company and they said one of their former employees, they think was stealing from them. And so I said, "Well, we're going to have to get a little bit more descriptive. I don't really know what you mean by just stealing." So this company had company credit cards that this person had access to, had one of them in their name, and also did all of the books, so was able to input those charges however they so chose.
And so my task was to go through a certain period, it was over a couple years worth of credit card charges. And the focus that the company wanted to take a look at was the college tuition charges. So this person would charge the company credit card with their tuition each year or quarter, and the company would just pay the card. And so from there, they even went so far as the company had a whole celebration once this person apparently or allegedly passed and got a master's degree and everything, and then they never really saw anything from it, they didn't see anything from the college. And so in looking at the, we had to go get statements from the college and look at the student statement, and we could see every single time a tuition was charged that there was a refund check issued. And so of course then you're like, "Well, did they just put it back on the credit card?"
So going towards that intent thing to bring charges was, "Okay. Well, who received the funds back?" And so we also had to get check copies from the college to prove out that they went to this person, they were paid directly to the student at that point. And so nothing came back, nothing was to the benefit of the company. And so the part that I kind of learned was if you drop all of your classes in college and you ask for a refund of the tuition payment, it doesn't go to who paid it, it goes to the student. So college students out there don't listen to this, don't know this.
Chris Ekimoff:
If you want to get into a fight with your parents at Thanksgiving, here's a good fact pattern to follow, right?
Jessica Yohe:
There you go. Yeah. I mean, it just kind of put me on edge because I had no idea that that was the case, but that was kind of interesting. And then of course there were plenty of charges on the credit card statements that we had to go through. And over a two-year period, there were just, not only is tuition super expensive and high, but additional charges was really interesting. And the hardest part about those additional charges is really to prove what they are and if the company was able to benefit or utilize them. So a lot of the charges were just generic Amazon or Audible, and so we couldn't really prove that out. But what was interesting to me was this person worked remotely and so there would be hotel charges for not where their company is located and not where they live, but all over. And they didn't travel.
So in a way we were able to prove intent by the fact that those would not have been for any company reasons. So what I thought was most interesting about this case overall was that when the company came to me about this, the owner said, "I don't think we'll be able to get any restitution, I don't think we'll be able to get any money back at this point, but I want to do this so that it's on this person's record and going forward, this doesn't happen to anyone else," which is a huge thing for me because repeat offenders are just, I can't even imagine how many people are repeat offenders at this point because most companies don't want the publicity or whatever it may be. So I commend this company for definitely wanting this, and they did bring criminal charges at this point. I didn't get the results of anything, but that was my big story that I'd like to share at this point.
Leah Wietholter:
Yeah. I mean, I have worked at least 200 cases involving some sort of financial investigation, and I don't think I've ever had a tuition refund case like that. I didn't even think about... I mean, if you had said something without all the details, I probably would've thought, "Oh yeah, that makes sense, you get your student loan payments and then they would give refunds," but I didn't think about the company paying that, and then the person doesn't even go to class. And then to celebrate it, I mean, that is committed. What was the period of time?
Jessica Yohe:
This was over, I think it was about a year and a half. And so this person would always, apparently from what the owner said, this person would say, "Oh, I have to study tonight, or I have to do this for my classes." And I mean, the company put on a whole celebration for the graduation and-
Leah Wietholter:
There was no degree.
Jessica Yohe:
No.
Chris Ekimoff:
Very brazen.
Leah Wietholter:
Yeah. Do you remember-
Jessica Yohe:
It was bold. It was definitely something I never really thought of.
Leah Wietholter:
Do you remember what the degree was supposed to be? Like, was it supposed to be on accounting or like-
Chris Ekimoff:
Criminal justice.
Leah Wietholter:
Yeah, something like that.
Jessica Yohe:
It was supposed to be like an HR-type degree. This person, the company started off really small, grew pretty quickly. This person was there through thick and thin throughout the whole thing and kind of moved up with the company. So there's, I think, an underlying aspect of trust at that point. But I do want to put just a little disclaimer that I really do not like company credit cards. It is such an easy way to just slide things through that as soon as I have a company or any of my clients say, "Oh yeah, that's on the company credit card." I'm like, "Oh no, I don't want to look at those charges."
Leah Wietholter:
Yes, definitely a vulnerability there. Yeah.
Chris Ekimoff:
Jessica, I think you hit on two key points there as well. The first is what you started out with, is that kind of dual role between this individual being reimbursed and the ability to at least have visibility into the books and records, if not the ability to manipulate them. So regardless of how good the ice cream cake was at the graduation celebration, we've got some issues right up front there. And then I think you hit the nail head too, with corporate credit cards. People out there are always amazed, that aren't in our line of work, that businesses aren't just tracking credit cards every day. And those systems are expensive and sometimes very hard to design in a way that'll be helpful to catch these things. If you're tasked with office supply purchase, obviously you go to Office Depot or you buy something off Amazon, that's going to get less questions than if you go to Home Depot, but maybe Home Depot has the best Clorox wipe deal.
So it's hard to draw those lines in an automated way to have that happen, so it can be kind of like smack your head, "Oh, why weren't they doing this?" But it's expensive and it's hard to do in a way that keeps the business going and also makes good sense for the business to look at. So I always like to have those conversations with clients, and I'm sure you do too, Jessica, about, "Listen, this happens a lot, this is not your fault per se. Let's make it stronger." And it sounds like that's what happened with this business.
Jessica Yohe:
Yeah, absolutely. The other thing is too, there were office supply charges on there, and it wasn't in this person's job description at all to make sure... They weren't even in the office, they worked remotely the whole time. So even if you could make an argument that, "Oh, well, I needed a few pens here and there at the house to help with my work situation or a printer," the amount of charges that we totaled were definitely more than a printer for sure.
Leah Wietholter:
Yeah. So as part of your investigation, did you look to see where these things were coded in QuickBooks where it just didn't make sense at all, so then that helped prove that something was being concealed or it provided some evidence to them?
Jessica Yohe:
Absolutely. So that was almost next step of what we kind of looked at in support for how management was figuring out what these were really supposed to be and where this person was, because they would sometimes travel to the city in which the company was holding events or trainings or whatever it may be. And so those were coded a certain way or had a memo line and description that read a certain way, that initially this started out with just the tuition, let's just quantify what that total tuition was to see what our impact is and what our loss is. And so in looking at all of the other charges, we said, "Maybe let's follow some of these to see if there's anything there." And so office supplies expense, maintenance expense, it stayed within the budgeted amounts so that management wasn't going to take too hard a look at it, but there were dues and subscriptions and Amazon charges or Audible charges were found in there. So that's absolutely just additional support for proving out that it was trying to be hidden and the intent behind it.
Leah Wietholter:
Right.
Chris Ekimoff:
We'll have to take a look at those Audible charges to see if any were purchasing spots on The Investigation Game. Jessica, we should take a look at that.
Leah Wietholter:
Yeah, right. That hasn't happened.
Chris Ekimoff:
That's right.
Leah Wietholter:
I would be aware if somebody... No. Yeah, that's great.
When I joined the financial investigation industry over 15 years ago, my goal was to work as many cases as possible, but getting those first few cases felt extremely challenging. For example, how do I get the casework without the experience? And then how do I get the experience without the casework? And when I get the casework, will I know what to do? So I wrote Data Sleuth: Using Data in Forensic Accounting Engagements and Fraud Investigations to solve this very problem. It is the book I needed so many years ago. In this book, I explain how to start a financial investigation from case planning to finding best evidence, to incorporating non-financial evidence like interviews and open-source intelligence. And ultimately, how to put it all together for your client or even law enforcement with step-by-step details and case examples. If you want to gain confidence in financial investigations to build your case experience, you need to read my book. Data Sleuth is available on Amazon, Goodreads, or wherever you like to buy books.
So my case story today is a little different, just it's about the use of forensic accounting in a drug case. So I had several... So Oklahoma has now approved medical marijuana, so we have legal medical marijuana. So I haven't heard as many of these types of cases that I'm about to explain more recently just because this has been legalized here, but there was a synthetic marijuana and it was known as K2, and it was a type of incense. And around here it was commonly sold at convenience stores and it was actually sold as incense, that's how everything was labeled. But then a lot of these convenience stores were also setting out papers to then wrap the incense in and then kids would smoke it. And it had caused a lot of deaths. And so absolutely they were charged and so forth.
And I wasn't involved in any part of that case, they were charged at trial as part of this process, and I had two of these cases, so I'm just going to blend them together as one. But in both of these cases, the businesses were seized, and these were federal cases, so the businesses were seized, DEA or Homeland Security worked them, and the businesses were seized. And then also just any assets, financial assets, financial accounts that could be seized were also seized as part of this until trial. And then there would be a money judgment calculated as part of their restitution and forfeiture and all of that process. So in both cases where I was retained, the government had provided a dollar amount. So one of the cases, it was testified before grand jury that the money judgment was about $1.3 million. And so then that would allow the government to keep all of these, or the majority of these assets that were seized. And originally it was $1.3 million.
Then after trial, the government went back to grand jury and testified that... Actually, I don't know that they went back to grand jury, but the next, whenever they decided they were going to file this money judgment and start talking to the client about what they were going to keep as part of forfeiture and restitution, that number jumped up over $2 million. And so, one of the things I like to do in criminal defense cases is look at what are the documents that the government has relied upon? And we have lots of law enforcement that listen to this too, so I'm trying to be careful about this, but I think it's good to know that this is a strategy of the other side especially. So I want to know, what did you base the first $1.3 on? And then I want to know what information changed between the $1.3 and the $2 million plus?
And so I'm going to start there because, and what happened was the $1.3, I could kind of see where it was coming from. And the $1.3 was shaky in and of itself, the documents that had been seized by the investigative agency, they don't typically do white collar investigations, so if we are going to calculate a money judgment or some sort of restitution on something, we want their whole point of sale system, we want all the receipts that they have, we want all of their bank accounts because then we can look at a trend of how much of this stuff were they selling and things like that. Unfortunately, actually, in both cases, the investigative agency didn't get complete records. And so they would have one month of records and then it would skip several months and then they'd have another month of records, and they never looked to complete that.
And so the money judgment in both scenarios were really based on this, like a month here, a month there, and then extrapolated over the entire relevant period that they were talking about. And so it's like, "Ah, that $1.3, that's not really substantiated. We can do that." But then I wanted to see why did it jump to over $2 million? And when I started looking there, there was actually no additional documentation that was obtained. And so we were able, obviously it's like, "Okay, definitely the $2 million is out of the picture, but then let's look at this $1.3." So I ended up recalculating, I mean, I'm all about just using the other side's evidence that they've gathered. So what can I actually know based off of this evidence to calculate this money judgment? And by using the evidence available and not just guessing on the other months, it was close to about between $500,000 and $600,000.
So the business and all of that, all those assets that were seized in addition to that were returned to the clients. And they still had to pay a money judgment. It's not my goal. I mean, definitely they made money off of these things, but I think that there was a common misconception, and especially in both of these cases that the government had, that these businesses were making a ton of money off of the synthetic marijuana. But if you think that, you need to find evidence to see if your suspicions are true or not. And so really in the government's case, I just kept thinking, "Yeah, this could be so much higher, but how am I going to extrapolate from three months of data? I mean, I can't do that over 18 months, 24 months."
And then the other case that one, kind of a similar deal with a lot of incomplete information, and actually I think there was even less in that and in that business. And so we ended up performing what we would do on a divorce case by just doing a lifestyle analysis and looking at what was this family that owned this convenience store living off of before they started selling this synthetic marijuana, and then what was it afterwards? And I believe their loss was well over a million dollars or the money judgment was well over a million dollars. But the lifestyle analysis could only show about maybe $150,000 of difference in the way they were living and the way the business was operating. And so in that case, that was also resolved outside of court. And that case may have been dropped or the money judgment piece or something, like they ended up negotiating something out of that.
So to me, I'm really passionate about this and today as we're talking, I'm on defense of another case that's not criminal, it's just a civil matter, but I just take a lot of responsibility for my work as an expert that I'm impacting...and I talk about this in the book, my recommendations to the attorney or to the court, impact real people's lives. And that's how I feel when I'm working on the defense as well, that if I was this defendant, I would want to make sure that this dollar amount was substantiated by the best evidence and that it can actually be proven and not just best guess.
Chris Ekimoff:
I'm interested, Leah, in talking a little bit about that mentality you have around the government's number. You based it on what information did they start with and then how did that change? And you jumped right into it, that second example, that family lifestyle analysis. What I always like to do when there's some wild number out there is just say, "Okay, let's try to do a sniff test here. How many units of this product would they have had to sell to make $2 million?"
Leah Wietholter:
Right.
Chris Ekimoff:
Okay, say 10,000 units a month, whatever the number is. Okay, they were ordering groups of 100 a week, so a hundred units times four weeks government is 400 units and they would not be making two. So there's a lot of ways to come at it. It's a little bit tongue in cheek, and I'm pretty sure your listeners will probably shake their heads at that kind of analysis, but I think that being able to represent the economic reality in whatever that is, and there's a way that, Leah, you could have done the calculation, it might have been $4 million, right?
Leah Wietholter:
Right.
Chris Ekimoff:
And then as an expert, I mean, are you hired by a client? Yes, but I like to tell everybody we're on the side of truth and justice here.
Leah Wietholter:
Exactly.
Chris Ekimoff:
If $4 million is the number, you turn to your client and say, "Hey guys, it's time to settle," right?
Leah Wietholter:
Right, right.
Chris Ekimoff:
"Think about how far you want to take this because it's not looking good for you." Those decisions are things that are important and really kind of stand up that CFE and CPA mentality and profession for us is that I'm not here to shade the numbers. Maybe I only have six months of data, I'm going to give you a range, I'm going to provide, "Here's what happens if these six months are flat, here's if we factor in some seasonality, and here's if we look at some depression in sales based on a new store opening up a mile away." Those types of things all play in and really not only get to probably the better answer, but give us so much more credibility when we're talking to the court, when we're talking to the other side or even our clients about thinking critically about it, so that's a great example.
Leah Wietholter:
Yeah, thank you.
Jessica Yohe:
I think also what you said about the extrapolation is really interesting. Being a CPA and a CFE, I'm also an auditor, so I have two hats that I have to wear of being an auditor, a risk assessment, and we have materiality. Fraud, absolutely not, right? No materiality at that point. So just taking an extrapolation and saying, "This is the number," is kind of wild to me that they said, "Yep, this is what we think." And there's no support for it. On audits, we have, "Okay, well this is probably our highest risk if we extrapolate something." And can get comfortable here or there or do further work that's necessary, but it's not an approach I would take in a situation like a fraud investigation or forensic accounting just because I think that's really interesting. But having to switch gears like that, depending on what you're working on, it can be difficult and you just have to take a step back and say, "Okay, what's my goal here?"
Leah Wietholter:
Yeah. And having started my career at the bureau, I know what was required in my cases. And then of course any cases that I've referred to law enforcement to this point now or whenever I've had these defense cases that I know, "Okay, if I was investigating this case, this is what I would require of myself, or this is what would've been required when I worked for the bureau." So that's what I'm looking for. Did they follow the way that we're supposed to work these cases when I was with the bureau or even I did some work for the IRS criminal division for a hot second, but so I knew the level of evidence that was required for that. And so that's what I'm really looking for in these cases. And then if that's not available, because I have had embezzlement cases where entire businesses have been literally picked up and moved, like all of the inventory moved down the street to another business, that really happened.
And so I calculated this estimate of inventory for the client because they wanted to know how much inventory had been stolen, but law enforcement told me, "We're not going to prosecute this piece." There were some other losses, "But we're not going to prosecute these pieces because these are estimates." So when I'm on the other side of law enforcement calculating an estimate, I'm like, "Wait a second guys, you wouldn't take this case over here because there's an estimate." So really trying to figure out how to get them to that best number based on best evidence and data.
Chris Ekimoff:
Yeah. And Leah, I think that brings up a good point too, is we've kind of been a little cavalier in dealing back and forth between the parties, but can you talk a little bit about what it's like to go back to the FBI and have that conversation about the validity of their calculation and how to go from the flippant way we've been talking about it to really get to a good result? I think that's an important piece.
Leah Wietholter:
Yeah. So in another episode of the podcast, I'll talk about a larger white collar case and how I handled that discussion, but in these more drug-related cases, I went with the criminal defense attorney, and met with the US attorney who was over forfeiture, and then also the investigative agent, like the agency and agent who is leading the investigation. And we just sat around a table and I ask questions. I don't go in and say that, "This is what I think." I just go in and start asking, "Okay, how did you get to this number? What did you base this on?" And then I take really great notes and then I go back and pull those same documents to see, "Can I recalculate what they did?" And a lot of times they're not going to, I have never had anybody slide their calculation over to me at this meeting.
It's more, "Conceptually, this is how we did this, see if you can recalculate it," type of thing. But I don't ever, I mean, because I do refer cases to the very same people, and so I want to make sure that I'm just asking questions and it is not an accusation at all, "Just explain to me how this works and what your mindset was and what information you had available." And usually that helps me determine that. And then also if you can get your hands on the grand jury information or the grand jury testimony, getting to those numbers, they've had to explain it in testimony, how they calculated it. And so then that's really helpful.
Chris Ekimoff:
Yeah. And I think too, like I said, we've been kidding around a bit. I don't believe that the agents or the calculation in that case was purposefully inflated. I think that they took a stand to provide the largest number based on the information they had. And those are important conversations to have, this isn't some caricature of law enforcement that you see on TV and some crooked cop movie, they're dealing with the information they have and they're trying to present the best case they can. And so we're here kind of as gatekeepers, if you will, to that information and how that should be represented in court, and then how that's going to impact the parties. So that's an important point, I think, to bring up here.
Leah Wietholter:
And it ultimately ends up getting negotiated by the attorneys outside of me, but just that conversation has led to, I mean later you could kind of see, "Oh, we didn't look at it from that perspective," which I think is good because a lot of my experiences with business owners and industry and in running my own business, and so how I look at this as a business owner is going to be different than how I look at this as an investigator that's never run a business. So anyway, super interesting. I'm sure we could just keep talking about this because it's super fascinating. But before we go, Chris, would you let people know how they can contact you if they want to connect?
Chris Ekimoff:
I would love to. So I am a huge loser with a professional Twitter and Instagram account. You can find me @EkimoffCPA. And I'm also blessed enough to co-host our own podcast with a friend of mine, Kurt Wolf, through the Practicing Law Institute, that's PLI. You can find us anywhere you listen, the podcast is called inSecurities, where we talk about securities fraud and insecurities enforcement actions. Going to the website is pli.edu/podcast/insecurities.
Leah Wietholter:
Yeah, thanks Chris. And I am going to have to have you back sometime to talk about securities because I don't know if you know this about Oklahoma, but we don't really have a lot of publicly treated companies in Oklahoma, so we don't do a lot of that...
Chris Ekimoff:
Blue Sky Law is out there in Oklahoma.
Leah Wietholter:
Yeah. So anyway, we'll have to have you come back to talk about that. And then Jessica, what's the best way for a listener to connect with you?
Jessica Yohe:
Yeah, so I don't have all of those things, but LinkedIn is probably the best way to connect with me and even just an email jyohe@bps.cpa.
Leah Wietholter:
All right, awesome. Well, thank you both so much for your time.
Chris Ekimoff:
Thank you.
Jessica Yohe:
Thank you.
Leah Wietholter:
Thank you for listening to The Investigation Game Podcast. If you enjoyed this episode, please leave us a review wherever you listen. The Investigation Game Podcast is a production of Workman Forensics in Tulsa, Oklahoma. To learn more about our investigation services and resources, please visit workmanforensics.com. If you have an investigation case story you'd like to share on a future episode, please email us at podcast@workmanforensics.com.