Communicate Embezzlement Investigation Findings to Law Enforcement Effectively
By Leah Wietholter, MBA, CFE, PI
When I first began working in the private sector in forensic accounting, other investigators would emphasize that our job was to investigate the financial crime and then give it to law enforcement with a “bow on top.” In my search to find out exactly what they meant, I did what I always do—hands-on research. Beginning my career with the FBI definitely provided insight into what Federal prosecutors were looking for, but I didn’t know what the local agencies wanted from private sector investigators. One thing I knew for sure was that the better we served law enforcement by making our findings simple and straightforward, the greater likelihood our client’s case would be pursued and the subject would be charged. So I decided to volunteer at our local police department in the financial crimes unit to see what results were really needed.
Focus on cash, not accounting methods or entries.
One of the first cases I assisted the police department with was an embezzlement from a large company in which the internal audit team prepared the findings for the detective. I don’t want to pick on internal auditors, but it was a complete mess. The evidence consisted of sheets and sheets of accounting records and journal entries. As experts, we often forget that others don’t know what we know, and while the reports were clear to internal auditors, accounting reports, journal entries, and general ledgers do not communicate well to detectives. If you want to speak a financial crime detective’s language, focus on cash. Where do you find such evidence? Bank statements, credit card statements, and payroll reports are the best sources.
Understand the elements of the crime charged and the authority of the agency and prosecutors.
Federal law enforcement works with a United States Attorney’s office to prosecute federal crimes. State and local law enforcement work with their Attorney General and District Attorney, respectively, to prosecute state crimes. Understanding the elements of the crimes the relevant law enforcement agency works will help you when considering the evidence for your case.
As an example, one of my cases involved a bookkeeper stealing by paying herself through a payroll check and also direct deposit.
Federal v. State:
Federal law enforcement, the FBI, was interested, and ultimately prosecuted this case, because since the fraud used unauthorized direct deposit payments, and the subject’s bank processed the transactions outside of the state in which the subject lived, they were able to charge wire fraud. Local law enforcement could have also worked this case under the state charge of embezzlement.
Knowing the case could be prosecuted federally, I focused on identifying clear evidence to support the ultimate wire fraud charges. As a private investigator and fraud examiner, I am not responsible for the charges, and I don’t specify the crime as such in my report. I just make sure when planning that I consider what law enforcement will be looking at to pursue such charges.
Explain why the missing cash is a problem and who benefited.
Fraud in the simplest form involves intent and benefit by the subject of the investigation. A subject intends to deprive someone of property, money, or something of value through deceptive means and, in doing so, the subject benefits. The primary goal of a private investigator or fraud examiner is to gather facts and calculate the benefit portion of the fraud equation. Along the way, and as a secondary focus, a fraud investigator may uncover evidence supporting the intention of the subject that could be helpful to law enforcement.
In calculating the benefit to the subject, keep in mind that law enforcement does not know your business or the client’s business as well as you do. It is helpful to think of your calculation within the context of comparing “what happened” to “what should have happened.” Then, when explaining the total benefit the subject received from the fraud, you will have the context to explain why the subject should not have benefited in such a way.
In the payroll case mentioned, since the direct deposits were the duplicate, unauthorized payments that directly benefited the subject at the expense of my client, I focused on communicating:
Cash movement and benefit: I created a list of the direct deposit payments from the actual company bank statements and connected it to the payroll reports to verify that the payments were paid by the company to the subject’s bank account.
Information needed for Federal charges: The direct deposits were ACH payments that were transferred from the local bank to the out-of-state payroll provider to the subject’s bank account in another state.
Intent and “what happened”: The accounting system user logs listed the direct deposit payments as paid and then subsequently deleted in the system, supporting the notion that the transfers were intentional.
“What should have happened”: I included copies of the employment agreement and time sheets and the calculation of what the subject should have been paid based on these documents.
Group your findings.
When you are communicating findings in a report, group the calculated loss to the victim—or benefit to the subject—by scheme, method, or client concern. The goal is that the losses calculated in each category can be easily added together to result in the overall loss. You want to make sure that your various categories do not include amounts or calculations that overlap which would then result in double counting or inflating your total loss amount.
Another benefit in grouping findings in this way is that law enforcement can easily identify and quantify the areas for which they can charge the subject.
In our payroll fraud case example, if this subject had additionally inflated her time on her payroll checks, we would include a section detailing the direct deposit over payments and in a separate section detail the loss from the inflated time.
The payroll fraud case example resulted in a loss to the client of $131,000. The subject was charged federally and pled guilty to wire fraud. She was sentenced to six months in prison and restitution of $116,000.
If you’re interested in learning more about presenting findings to law enforcement, check out my webinar video below! If you would like on of our Data Sleuth experts to help you organize and present findings to law enforcement, contact Megan Brown at services@workmanforensics.com.