Episode 77: Embezzlement from a Financial Institution | 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 embezzlement from financial institutions.
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 in 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. 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 embezzlements from a financial institution.
Welcome to The Investigation Game podcast. Today I'm joined by Chris Ekimoff and Jessica Yohe. And we are going to be talking about investigations that involve financial institutions. And once again, we're focused on case stories. And without further ado, I'm going to let Chris take it away.
Chris Ekimoff:
Financial institutions mean a lot of things to a lot of people. And this case really has to do with a subset of financial institutions, credit unions. And without getting into too much detail about what signifies a credit union from others, it's usually a group-based financial institution that will be membership-based around a type of employee or individual. You'll see credit unions around certain employers or certain public service workers, things like that. They've got different rules. You could get a lot of good nighttime reading in reading about the rules about credit unions, but that's what folks like us on this podcast are for.
I want to talk a little bit about a case I had two years ago relating to an allegation of a CEO of credit union in the greater Mid-Atlantic area. Things have been going well at the credit union for a long period of time, but this is really the Watergate Deep Throat financial institution circumstance that I had always dreamed of as being a fraud fighter or a CFE in my career. I'd started with a 8:00 AM phone call on a Saturday morning from someone who literally used a voice box to change the tone of their voice on the phone call. They made some allegations around the CEO and his conduct. The allegations themselves are not as wild and cool as the circumstance.
But with many of these smaller membership-owned organizations or financial institutions, the incentives for executives can be tied to performance. Both performance individually and performance of the credit union. So the allegations we received early with that smokey voice on a Saturday morning related to the CEO allegedly moving the needle in terms of the specific five elements of his evaluation that led to his bonus. And as I'm sure the CFEs and CPAs on this recording can attest, it's often interesting to look at when an individual magically has one more loan service than they need to qualify for that next level of bonus or one more meeting to help develop business that'll get them into that next tier of payout.
So not only did we start with that smokey phone call on a Saturday morning, we also found out that the credit union was looking to move its headquarters from one region of the Mid-Atlantic to another. And in looking at real estate options over an 18-month period, had engaged with a broker who fortunately or unfortunately was a nephew of the CEO himself. This is where we started to get into the gory details of how this all came apart. And one of the interesting issues here is this is the first time I've dealt with what I'll call a reluctant witness, in terms of we ended up identifying that individual who made the report originally on that Saturday morning, but they were dealing with that back and forth feeling about, "I think I know that something's wrong, but also I know as soon as I raise my hand, nothing will be the same again for me, for the CEO, for the credit union generally." And so we had to be very cautious with how we approached this investigation.
So the credit union has a board of directors, the board actually hired us through an external law firm to do this investigation, away from the rest of the board so that the business of the credit union wasn't moving. The membership didn't find out about the investigation. Although, and a lot of it was not personal. We weren't conducting a significant number of interviews, we were really just looking at the hard facts. And that's how we thought we could avoid the issues with dealing with personalities and misconceptions around the evidence and things like that as the investigation's ongoing. Jessica and Leah, I know both of you could probably think of points in your career where you wish that the client didn't know what they knew now, because you're going to get a fuller picture as you get more information about the investigation. So that's why we took that tact.
And really it came down to evaluating the performance of the credit union against the metrics that the CEO was judged for. And what we found is that one of the elements, one of the five elements that moved the most in the CEO's evaluation was the number of new... Excuse me. The amount of new value that came into the credit union through new loans. So credit union loans are often personal property loans, automobiles, vehicles, recreational equipment. It can sometimes go to housing and mortgages, although that's less common with a credit union than others. So you do have some real assets here that should be moving in terms of where the loan performance is going and what the loan value is over time.
And we were seeing that there were a significant number of loans opened and processed and serviced right before the quarter cutoff for the CEO. And then we would see that those loans would not move forward to the next quarter. They were, in our opinion, fabricated. They did not have real property as collateral for those loans. And we saw this as the CEO juking his stats, for lack of a better phrase, making those criteria move up. Now, the documentation was there. If you said, "Show me the last 15 loans that were issued," there would be paperwork there, but they weren't tied to any assets. They weren't vetted to the same degree that other loans were.
And the CEO argued, and after being presented with this fax from the board, we were independent of that. So we provided a report to the board. The CEO really argued that he was here for growth. That's why he was brought in a couple of years prior. And so although the loans weren't perfect from a paperwork perspective, it was a part of his strategy and maybe his internal rationale or reasoning when we talk about the fraud triangle, for why it was okay to have those numbers be a little bit higher. I was not present for those conversations. We issued our report and moved on from there.
The second element was related to that valuation or that real estate transaction. Now, I'm not an appraiser, I'm not evaluator. I don't know if either of you practice in that kind of valuation space as it relates to real assets versus valuing a business. Leah, I know you do a bunch. This was a really an understanding of reasonableness, and the standard of if you hired the average real estate broker, real estate agent, would you come to the same result in terms of location or within a reasonable range of difference on price? And so we really did a lot of that qualitative investigation because none of us are real estate specialists. I'm sure anyone who's bought or sold a house recently has their own feelings about how accurate the market might be.
We looked at the conversations between the organization internally about the transaction and with that third party, with that real estate agent to look for any what we call site agreements or other types of organizational contracts that would make us have a couple of questions. And really, we didn't see a lot that made us worried about the price that they paid, the site that they selected, the commission to the real estate agent, was actually about half of what the actual market rate was. So one could argue that because they were related, the credit union was getting a better deal than if they went to independent real estate agent.
So the one issue that we reported there and that the board agreed with was that disclosure should have been forthcoming prior to this transaction being closed and that, "Hey guys, this is my nephew. He's been doing real estate in the Mid-Atlantic for 30 years. He's really great. If you have questions about it, let me know. If you're not comfortable about it, we'll move on too. I just think we can get a good deal here." From the transaction real estate perspective, I don't think there were any "Findings" of fraud or need of investigation. It was much more just understanding the reasonableness of the transaction.
But the CEO ended up having his contract renewed after all of these loans came about at the end of the marking period for his own personal evaluation. So it was an interesting development. I was all excited to be sleeping in a car with a tuna salad sandwich watching some location right after we got this mysterious phone call. But it turned out to be a paperwork exercise, but not an uninteresting one.
Leah Wietholter:
I do have a few follow-up questions. When this employee called, one, how did you end up with the call? And two, what types of allegations was the employee making or did... What type of information was he letting you know about?
Chris Ekimoff:
The firm that I worked with had an ongoing relationship with this credit union for other accounting and advisory services. So the call actually came into the chair of the board, and those allegations were around the CEO, I think the phrase financial statement fraud was what's thrown about, which... I just saw both of your eyes light up. That's why we get out of bed in the morning. And so that was routed to me in terms of the allegations that came up. And then there was a discussion about a related party with the real estate transaction.
Leah Wietholter:
And then as far as these loans, the CEO said it was a paperwork issue, but were they real loans? Were they real customers?
Chris Ekimoff:
We never got to the level of having a solid feeling about every single loan that was added. Some of them, you can't just pick a 10-day period and say they're all fake, but the documentation was significantly less for end-of-the-quarter type loans than it was for prior. And that might be just, "Hey guys, can you sign this before the 31st? We'll figure out all the paperwork later." The issue is when we saw loan numbers dropping off the servicing and collections in the following quarter, that's when we start to have questions about, "Okay, what substantiated this loan? Are we writing it off? And then should that bonus be adjusted? Because those last 11 loans didn't really count," if you would, or in the subsequent quarters, maybe they were all... The paperwork was sent in just a week late, and there was an actual Oldsmobile that was bought with financing from the credit union.
A lot of times too, and Jessica, I'm sure you experienced this as well, is that our clients don't... I like to use the phrase, and I hope this gets trademarked after it comes out on the podcast, you don't want to spend a dollar to chase a dime. If there are these small issues, could I go out and start driving around the Mid-Atlantic area all the way from Pennsylvania down to Georgia to find these automobiles? Sure. Is that worth a client's money in an investigation? Maybe. But in this case it was not. So we just provided our general summary findings about the validity of the loans and what our questions were for that. Many of them, I'm sure, were actual loans being made by this multiple five digit, thousands, tens of thousands of member credit union. But I'm sure some of them probably needed a little bit more scrutiny as well.
Leah Wietholter:
I know whenever there's a new fraud investigator, sometimes having somebody call about a case like this one you discussed, Chris, it's like, "Where do we start? Where's the issue? How do we start?" And so something you said was that you compared what was part of... The compensation structure of the CEO to what would've influenced, how could he have benefited based on the way his compensation structure was set up? And so to me, that's a comparative analysis. How could he have benefited, and then how did he benefit? And then comparing that information. Is that a fair assessment of what you had said?
Chris Ekimoff:
It is, and it's really a classic case. It's easy for any layperson out there to understand that if there's the opportunity for personal enrichment, someone will be motivated to fudge the numbers or take that opportunity. But I'd caution it just having that be the only way that you think about these things, because there's... A lot of elements matter to individuals much more than or equal to money. Folks could be out there trying to keep a good reputation, and that might motivate them, even if the financial implications for them personally are less. And it sounds strange, but they may want to be the guy at the golf club that has all the stories, and there could be a reason that they're manipulating financials to seem better, worse, or indifferent so that they can tell a better story. That matters to folks.Social standing or respect in their social groups matter almost as much, if not more than the financial side of it.
So yes, 100% always try to find out who's benefiting and how could they change things to benefit themselves. But don't limit yourself to just that feeling. And this CEO, and I'm sure both of you have dealt with executives too, they have that polish and they have an answer. Executives are in that role because they're good leaders, good communicators, and in some cases have decent politicians. Being able to have the facts that underlie, "Again, we're seeing you guys do 15 loans a week, and then the last week of the quarter you're doing 35 every quarter. That seems strange." Those kind of questions and getting those answers is important, but also evaluating the veracity of those answers and the method in which they're being communicated. For these folks who are usually trained in communications and do public television spots and other things like that, it's important to evaluate.
Leah Wietholter:
Yeah, absolutely. I know I had a guy steal over $3 million. This is our case of the man cave story, $3 million so that he could have all of these crazy race cars and firearms and all these things. And he never raced a race car and he never shot a firearm. But he just liked being the person that everybody came and hung out at his man cave. So many motivations. So many motivations.
Chris Ekimoff:
I'll tell a quick story on the back of that. We performed an investigation in a manufacturing plant last year where we had identified an issue with their accounting system that was never reported. And the company was worried that someone was using that issue to enrich themselves. And this individual, not to get too far into it, was married to someone who worked for a third party vendor of the business. So we're like, "Oh my God, she's stealing. We've got her." And we sat her down and said, "Okay, explain it to us." And she goes, "Listen, I've got emails where I told them about this problem for three straight months. Nobody will listen to me. So I just didn't say anything anymore." And that accounting issue grew from a couple dollars to tens of thousands to hundreds of thousands. And she goes, "I just didn't care. I was tired of being disrespected." No personal enrichment for her. Was much more of a culture issue with that business. There's a lot of motivations out there, race cars and firearms not withstanding, sometimes it's respect and being heard as well.
Leah Wietholter:
Great story. Thanks, Chris. All right, Jessica, you're up.
Jessica Yohe:
All right. I've got two here. One is super short, but it's actually personal and I figured I wanted to mention it just because being a CFE and an accountant, I am very particular with my finances. So anyone who may be not as particular as I am, I just wanted to give this heads up. So I'll tell this story first. Actually, a few months back, we had to get our roof repaired for.. A limb went straight through it. It was just wild.
Leah Wietholter:
Oh my gosh.
Jessica Yohe:
Yeah. All of that aside, everything worked out really nicely. The people that came to repair the roof were highly recommended to us. They did a great job. They were really nice people. So we wrote them a check. Also, I don't know how many people write checks anymore these days that are not businesses, but we did that. So we wrote them a check. As far as checks go, especially with smaller or local businesses, you expect them to clear within a pretty quick turnaround just because smaller businesses like to have that cash in the bank. So I expected within a week at least to see this clear. So about a week later, I checked our account and it had cleared. The weird thing was, and I'm just going to use round numbers here, not to disclose exactly what I paid for this roof repair.
Leah Wietholter:
Of course.
Jessica Yohe:
But let's just say we were paying them $500. We wrote the check for $500. So I go and look at our bank account and the check cleared for $600. And so I click on the detail of it and you see the check copy, there's the check image copy right there. It clearly states... Also, for younger viewers who have not had to write checks, you can see the amount and you have to write it out too. So you can clearly see and prove out exactly what the amount was. But it cleared for a hundred dollars more than what the check was actually written for.
And so it just blew my mind a little bit that that happens, that there were no checks or balances in place. And I don't know the financial institution that this company used when they went to deposit this check, I don't know if they just input the wrong number, what it was. But I called our bank and said, "By the way, this amount is a hundred dollars higher than it's supposed to be." And the response was, "Oh, we'll just notify our backroom and get it charged back to you." Which I was like, "That's it? You don't want to verify me."
So I just wanted to tell that story just for those who maybe don't check their bank accounts that often. I really didn't know that that was possible. And to me, it got me thinking about, "Okay, what kind of controls would be in place for those depositing at a financial institution, any reconciliations between them, whatever it may be?" I was not given those details from my bank, even though I would... I was trying to poke and prod a little bit to see what was going on. But I just wanted to throw that story out there because that was a more personal one that I had no idea could happen, frankly.
Leah Wietholter:
Yeah, there was a case not too long ago that... I didn't work it, but that people were using either mobile deposit or deposit at ATMs and they would inflate the amount that was deposited and then basically turned it into a check kiting scheme. So before the bank could catch that dollar amount, they would make sure to replace it and just started running an entire check kiting scheme by using mobile deposits and ATM deposits, because there's a little bit of a lag. Yeah, that totally makes sense that it would happen. But you think this is the bank, this is not supposed to happen at the bank.
Jessica Yohe:
Exactly. Call me a bit naive for my personal finances at that point because I was like, "No way this bank is going to let this happen." But it did. And I can totally see the check kiting scheme that's able to come to fruition at that point. Also seems exhausting if you're having to keep up with all the dollar amounts and everything.
Leah Wietholter:
That's what I've said about every check kiting scheme. This is just too much work. Just go get a regular job.
Jessica Yohe:
Exactly.
Leah Wietholter:
You know it's a house of cards that's going to come falling down anyway, so it's just really not worth it to me.
Jessica Yohe:
Right. Yeah, that was a bit wild. I'll move on to the case that I was working where it was credit card charges that were inappropriate to a company. And I've said that before, I'll say it again, company credit cards give me a little bit of heartburn, but I do get a lot of those and I go through all the transactions, and a lot of times it's hard to get full support for those transactions. But one of the things that happened on this case is initially there was a change in credit card number and we thought it was because of an expiration and maybe the credit card company just sent, or the financial institution just sent a different card number. But luckily the company knew about it and was able to still track it.
But the other thing we found out was we had to go directly to the financial institution to get the credit card statements because they weren't on the company's property at that point after this person had left the company and they couldn't find them, they had no record of them. So they went directly to the financial institution to get them and started looking through them. But the first thing caught their eye, they said, "This isn't our address." The credit card statement was now not going to the company's address. It was going to what we thought was this person's address. Although it wasn't the right city, this person worked remotely as well. So COVID thank you very much, we're all working remotely now.
But this person was working remotely in a different city from the company and this location was about 50 miles from the city that the company was located in. And so I just did a quick search on Google Maps to see what this was, and it turned out to be a huge warehouse. I'm not really sure why they were going there. I was not involved in the details of what was going on at that location or whatever came of it. The weird part was though the company had a great relationship with their financial institution and had someone basically on speed dial with any of their issues, getting these statements was super easy, that kind of stuff.
But this financial institution actually required a letter, formal letter on letterhead signed by the owner to change any type of address to change any credit card holder to make any type of change in that way. And so the company said, "We don't have any record of it. How is this changed?" They called the financial institution and their contact and said, "How is this changed?" And they had a letter on company letterhead signed by, maybe not the owner, but someone that looked like the owner. Chris, you mentioned some really cool voice-changing whatever it was, but this wasn't quite that, but someone had trace paper or something or really good at copying a signature and submitted it that way.
And so it easily got through all their checks and balances for what the financial institution needed. If you have a contact that close with a financial institution, and I do this with some of my clients or even some people at work, I just pick up the phone and call and say, "Hey, just wanted to check in with you about this one thing" so that if I hear it in their voice, "What are you talking about?" I know that this is not necessarily right or something's a little funny here, or we can investigate this further. But that just wasn't done. And so it was not a good situation because there were a lot of charges on that card after that address was changed that were huge that the company ended up paying.
Leah Wietholter:
Was it confirmed that it was one of the company's employees or was it more of a online cyber scam?
Jessica Yohe:
No, it was the company's employee, former employee at this point, because they went back to all their records of when it was submitted and by whom. And that's how we were able to prove out that this person submitted this.
Leah Wietholter:
Yeah. Wow. Interesting.
Chris Ekimoff:
I think that brings up a good point too, Jessica, is that what gets measured is what matters is a constant thing we talk about from a financial strategy perspective. But here it's really where is the spotlight? And the spotlight might not be on, did we get a credit card statement this month? Who cares? If you've got 11 credit cards at your company, you might get one statement that mashes them all together based on your business account. So it can be hard to understand if you're not receiving all of the content from others. It's tough. We talked on a previous episode how there's a lot of data that comes out and it's hard to track it all without an expensive or a meaningful system. But I love the pick up the phone and call. I identify as an old millennial, Jessica, I don't know how you identify. I'm a huge-
Jessica Yohe:
Definitely old millennial.
Chris Ekimoff:
I'm a huge phone call guy, which blows my texting friends' minds. Both because it's nice to talk to people and we can talk about that in the lifestyle podcast following this episode, but also because you're able to tell all of those other things from that conversation. You can email someone directly and be like, "Hey, is this cool?" And if they're in the middle of 350 emails, they might just go "Yep," and send it back. Where if you make them focus their attention for 20 seconds, you can get to a lot more information about was there supposed to be a change? Was there a bigger issue? Or "Yes, Jessica, please stop calling me every time this change happens. It's true. So leave me alone." Keep making that call. It's important.
Jessica Yohe:
I'd much rather have the "Will you stop now?" Versus "Oh my gosh, oh no, something happened."
Chris Ekimoff:
Yeah, letting those things through. Yeah.
Jessica Yohe:
Yeah, exactly. Everything nowadays too pushes you to go paperless. I think I was signing up for... I don't know, I was looking at discounts or something on car insurance the other day and they said, "Oh well if you go paperless, you get this discount." There is now incentive to go paperless on a lot of things. So you may not even think about what should I be getting in the mail at this point. And so at that point you just shift gears to think, "Okay, I need to make sure I go online and see who has access," or check the transactions online rather than expecting to get something, open the envelope and go through the credit card statement by hand.
Chris Ekimoff:
One quick question for the members of this episode, do either of you also immediately scan in all of your paper mail and then shred it like I do? Or am I just a psychopath?
Leah Wietholter:
I don't do that personally because I have so much on the business side, but yes, I do that on the business side for sure.
Jessica Yohe:
I definitely... When we said old millennial and identifies as an old millennial, I may be even older than that. I still have paper copies of-
Chris Ekimoff:
A lot of paper files around?
Jessica Yohe:
Yes, I do. I have a whole accordion thing where I've... Yeah, it's to that point.
Leah Wietholter:
Yeah, I can't do the paper thing, but I'll have somebody scan stuff in. I'm with you on that one, Chris.
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.
I love that Jessica set me up unknowingly for my embezzlement from a financial institution. This was when I was still working in public accounting and we had started a forensic accounting division with myself and my boss. That's how big the division was. And so we got... One of the partners of the firm got a call that they had an issue with one of their loan officers and they were pretty sure that she was stealing money from the bank. The way they discovered this was that they started calling some people on their past-due report that they would get, their loan past-due report. So they started calling and found out from one of her clients that this client didn't have a loan that was on the past-due report.
So we discovered that from the moment... We mentioned on another podcast episode that having repeat offenders, I have always been convinced that this lady was a repeat offender because we could trace back when she started stealing to when she started at the bank and she had worked at a bank before that. Just to start stealing right off the bat, it just makes me think she had to have been stealing beforehand and to understand this. So around the same time that she was hired and she started her scheme, they had changed systems. Anytime there's a system conversion, huge risk, red flags. A lot of the things I'm going to talk about listeners and even the two of you may say, "How in the world was that possible?" They just didn't fully understand their system conversion. And this would've been back in 2010, probably. The conversion would've happened pre-2010, because I think we went back five to seven years.
So where they had gone from microfilm and microfiche to digital, this is how far back this was. And plus it was a small local bank. Anyway, so she asked customers... She had her own book of business as a loan officer and a lot of her customers were doctors and dentists. So they would often need a line of credit or they would need an equipment loan or something like that. That was her bread and butter for this bank. And she brought a bunch of these clients with her as well. They would open and... Common for entrepreneurs and doctors and dentists and things like that, opening, creating lots of LLCs and companies to do.. Maybe it's a doctor that also has a lab that also has all these other things.
So they would need to... If they took out a new loan, it may not be in the dental practice, it might be in some other related business. And then you're going to need a checking account for that. And then you're going to need a loan for that. And so every time, if they were opening up a new business or whatever, you just had more accounts. Then whenever they would pay off the loan, a lot of times they would just need to close out the loan and then close out the account. So she was hijacking and taking over those accounts as they were saying that they were closing them. And then because she had all of their personal information and she knew what documentation was required, she would then complete the loan documents for them and then she would open a new loan and then have it funneled to these accounts that she had taken over.
And she would even open a new account. And then the accounts that... She had at least one that she had taken over at the very, very beginning. And she would actually, if she advanced loan funds from a line of credit, she'd advance it to that customer's fake account. They didn't know this loan existed or that the account existed. She would advance the funds there and then she would transfer from this fake account to an account that she had hijacked a long time ago. And then from there she would transfer money to herself, to her husband's account, to her son's account. And they didn't know they had some of these accounts, by the way. She would transfer it to all of these different accounts, or she would take it out as cashier's checks. She would say, "Oh, this client," which was a client known to the bank, these are still customers of the bank. "Oh, this customer needs a cashier's check for this amount." And they would cut her a cashier's check because she was so great on this client and customer service.
This happened over five to seven years is what we looked at, and the loss exceeded $3.5 million. The majority of... Basically was running this big check kiter Ponzi scheme within the bank. She would go on vacation, but she would take her computer on vacation because you've got to keep this going, talking about check kiting being exhausting. She had to keep these loans paid. And so as they would show up on the past-due report, then she would make sure she made a payment from the corresponding bank account that was named similarly. Where it got really confusing and just tricky was when there was a legitimate line of credit. And she also did this with bank accounts. There were legitimate accounts and then she would increase the line of credit, or she would advance funds on the line of credit that already existed. So the dollar amount was... It was this commingled, part of it is legitimate that the customer needs to pay back, in part was her. So that got pretty complicated in just identifying what these customers actually owned.
But I remember at the beginning of the case, the client kept saying, "There's no way that she has been manipulating all of this without some sort of master spreadsheet." But then once we realized that she was actually using... And there wasn't one. But we realized that she was using the past-due report as her tracking mechanism. Because she had so many loans outstanding. And then she would even pay them off over time and she'd pay them off with other loan funds. So because we were investigating this for the bank, I remember they just said, "Here, we're just going to give you access to our system." They didn't even print out reports, they just said, "We're just going to give you access to our system. This is the way it works. Put this together."
This investigation took me about three months and I had a couple other individuals helping me. Anyway, 3.5 million. She spent... I remember that... And so I referred this case to federal law enforcement because it's a bank of federally insured funds. By referring it to the bank, they were able... Everybody always wants to know what she spent the money on. And this lady spent the money, there was at least $350,000 spent at a local jeweler. So they seized over $350,000 worth of jewelry when FBI went to search her house. She lived... This is pre-2010, so it's a pretty old case, but her house, she had purchased a house with her husband and they'd lived there a long time, but it was worth $80,000 back then. She wasn't even living extravagantly that way.
But if you opened her closet, there were three to $5,000 suits in her closet. They would roll out the red carpet for her at Saks. She loved to shop and then she would buy super expensive gifts for people at the bank, for her coworkers and stuff. And so people just thought she was super generous. And now her immediate assistant did not think she was as kind as everyone else did because, you know, so many times-
Chris Ekimoff:
Give me that past-due report, right?
Leah Wietholter:
So many times the person running this scheme, they're under a lot of stress and so they're not very nice to the people who are closest to them. But anyway, so she ended up going to prison, she basically confessed to all of it once federal law enforcement got involved. And I remember I sat down to just go through, because there were a few loans that it was a little tricky to tell, is this legitimate or not? Because it didn't fit some of the really clear patterns. And I just remember thinking, "Wow, there is absolutely no remorse from this lady. Absolutely none." I've interviewed so many people who have stolen money and a lot of times I'm like, "Oh, they're sad they got caught" or whatever. But there was just like no emotion from this at all.
But that was definitely my largest embezzlement from a financial institution. The reason we were involved, not only with the criminal charges and things like that, but our report was used for the bank to file for insurance money, so to be reimbursed and insurance paid up to whatever dollar amount was part of their policy.
Chris Ekimoff:
I'm honing in on some of the... It's a relatively complex scheme, but it's really baked into a lot of the things that I'm sure Jessica, you see as well as I do, relying on the legitimacy of existing customers is so much easier than a lot of Donald Ducks and Goofies out there. It can be hard to create a new bank customer when Dr. Smith already does a million and a half of credit with the bank. What's another half million dollars? And as long as she can manipulate that relationship from a compliance and a paperwork perspective, not a lot has changed. No system flags have gone up from the bank's perspective. Wealthy client with 11 accounts opened 12th account is not the red flag for investigation. Or even as you said, Leah, the existence of prior accounts that were somewhat dormant or maybe moving towards a close being reopened again, I'm sure all of us could point to personal situations. Roofing costs, notwithstanding Jessica, we can have a podcast on roofing costs later, as we just had ours replaced.
But those types of things really help the scheme get off the ground. If she were to go and try to open up a million and a half line of credit at some nobody for the first time, that's where a lot of questions would get asked. So seeing how... Even though this was that long-running game of whack-a-mole for her, it started out with a relative ease related to some of the other schemes that we've seen in our careers.
Leah Wietholter:
And especially because she was recruited, for lack of a better word... She was hired because she had this great book of business. So when she would take these loan files to the loan committee, they're like, "Oh yeah, Dr...." Like you said, "Dr. So-and-So wants another loan? Awesome. He's a great customer. Yeah, let's keep this going." And so it just added fuel to her fire.
Jessica Yohe:
So I wonder, because some of these good customers, the bank was probably so happy about getting an extra loan, they're going to then show up on the, oh, past-due loan balances. And so then you start to think, "Are they not as great a customer as we thought? Or why do they have past-due balances?" But from the whole story, I've got two questions that you may or may not have answers to, but it just makes me curious if she's got all these nice clothes and all this expensive jewelry, maybe her house wasn't what she focused on, but even her husband would, I would think, question, "How are you paying for all this? I know what you make. I know what I make. And it doesn't add up to that much in clothing or jewelry." But I also realize I'm a very skeptical person.
Chris Ekimoff:
That's why we do what we do, right, Jessica?
Jessica Yohe:
Exactly. That goes along with my bank account reviewing as well. But my other thought or question is really if she's increasing some of the line of credit for these existing customers and that balance is growing, are they not reviewing statements? Are they getting these and just not thinking about it? And I realize that that's most likely the answer, they're not really reviewing it. They just make the payment. Even those auto drafts or sweep accounts or whatever is probably just going towards it for a set amount. But to me, that's one of the things that I really like to talk to my clients about too, is "You really need to watch where your money's going and how much is out there, how much you're in debt for," whatever it is, because things can be easily manipulated like that. It's wild.
Leah Wietholter:
And actually, you just reminded me how your story set me up for this one that I totally skipped this detail. She would change the address information on these different loans and bank accounts to where they would say, "Hold. Do not mail." And so that's how she could also control what information the customers were getting, or it would say, "Hold. So-and-so will deliver to client." And so that's how she could control that information.
Jessica Yohe:
Well, there you go. Either not going or going to the wrong spot.
Chris Ekimoff:
Do we have a sense of how she explained her wealth, Leah?
Leah Wietholter:
Nobody really questioned it. They just knew she was a really successful loan officer, and so I think they explained that away. And I don't remember her husband having a very professional job. I think it was pretty... It was just... I don't know, just like a common job, maybe blue collar job. And maybe he didn't even work for a little bit, but nobody really questioned it because she was so successful. That's just how they pictured her.
Chris Ekimoff:
The one answer I get from businesses who are gobsmacked at the fact that they missed John or Susie's embezzlement because they always thought they were so wealthy, is that it's family money. Someone in the family or they're heirs to the Vanderbilts, or some ridiculous story that just money comes out of nowhere. I'm always like, "Whose family? And when can I go to the reunion?" Because your collection of Bentley's is impressive, and I'd love to see the rest of the family. I'm always very skeptical when I hear that, "Oh, don't worry about him. He's got a lot of family money." The only Ferrari at the manufacturing plant is always something I want to take a look at.
Leah Wietholter:
Yeah. And I think too, because she spent the majority of it on clothes and jewelry. If you showed me an awesome... I remember I had a client that we flagged a transaction because there was a $90,000 ring purchase and it was in a divorce case. And so I'm like, "Hey, I just want to ask you about this transaction." And she said, "Oh yeah, that's my ring. And she showed me her ring." I would've never dreamed that was $90,000 ring. I feel like with jewelry and clothes, unless somebody says something about the name brand or something, I don't even think I would notice. I also don't pay attention to those things. But as I remember, the CEO of the bank saying "I would've never known that was a three to $5,000 suit, that would just never cross my mind."
Chris Ekimoff:
Hidden in plain sight.
Leah Wietholter:
Yeah, exactly. Anyway. Once again, Chris, Jessica, this has been such a fun conversation and I appreciate your time. If you would just let our listeners know, and Chris we'll start with you, how to connect with you.
Chris Ekimoff:
I'm very active on LinkedIn. I'm also a huge loser with a professional Twitter and Instagram account. All of my socials are @EkimoffCPA. And if you're interested in hearing more podcast content, there aren't enough podcasts in the world. Right, Leah? If you're interested in hearing more podcast content, I run through the Practising Law Institute, my own podcast with my co-host Kurt Wolfe. He's a practicing securities law attorney, and we are podcast called Insecurities. We talk about accounting, fraud, securities, litigation enforcement issues from the SEC, you name it. You can check us out wherever you listen or go to pli.edu/podcast/insecurities.
Leah Wietholter:
Awesome. Thank you so much, Chris. And then Jessica, how can our listeners connect with you?
Jessica Yohe:
Yeah, absolutely. LinkedIn is probably one of the best places to connect with me and also just old school, an email is totally fine, jyohe@bps.cpa.
Leah Wietholter:
Perfect. And we'll make sure to link to all of those things in the show notes. Once again, thank you both for your time. I really appreciate it.
Chris Ekimoff:
Thanks so much.
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.