After reading Chapter 17 of your Forensic Accounting and Fraud Examination textbook, complete the following problems, which will help you apply your knowledge of personal fraud issues:
· Case 61 on page 538.
· Case 62 on page 539.
61. Anna and Jorge Peleo are in the middle of a bitter divorce. Anna’s attorney called Sam Blakely, a forensic accountant, because he suspected that Jorge was hiding assets from the divorce. Anna claimed that Jorge secretly owned a beach condominium on the Pacific coast of Costa Rica. He had frequently traveled there on business trips, and about a year ago, she received a mysterious call from a woman living in Costa Rica. The woman claimed that she was Jorge’s ex-girlfriend and that he had bought a condo for her to live in. The caller seemed very angry because Jorge had left her for another woman and had thrown her out of the condo.
The alleged ex-girlfriend left only her first name (Nora). She did mention the city where the condo was located, but it was a long Spanish name that Anna could not recall.
Anna’s attorney deposed Jorge and asked him many questions about the girlfriend and the condo. Jorge claimed it was all crazy talk, and he completely denied any knowledge of a condominium or girlfriend.
During the 20 years of marriage, Jorge worked as the vice president of marketing for a large machine parts company. Anna knew only that he was very highly paid, but she had never worked or paid much attention to their finances. Now she feels she is completely at his mercy in the divorce.
a. Explain how you think Sam Blakely would proceed with his investigation.
b. Assuming that there is a secret condo in Costa Rica, what do you think Sam’s chances are of discovering it?
62. One afternoon Gina Lowell received a call at work from her credit card company. The woman on the other end of the phone asked some questions.
“We are calling you because our fraud detection system has flagged your account for possible identity theft. We need to ask you only a few brief questions to protect your account.”
“Okay,” said Gina.
“We first need to make sure we are talking to the right person,” the woman said. “So
I’ll begin by verifying a recent transaction on your account. Our records indicate that last night at 7:45 P.M. you made a purchase for $213.95. Can you tell me the name of the store where you made this purchase?”
Gina immediately remembered the purchase. She had bought a wristwatch for her brother’s birthday.
“Yes,” Gina responded. “That was for a watch at the Beach Emporium.”
“Thank you,” the woman continued. “We’re going to have to cancel your card and issue a new one,” she said. “But first, we need to verify some other recent charges on your account.”
Gina listened with anticipation.
“Okay, we have three other charges to your card yesterday. First, there is a charge of $1,652.25 from Metzler’s Department store. We also have one for $1,850.15 at the Red Web Casino, and finally one for $736.94 from the Xeroa Company in Tucson, Arizona.
Listening to the woman list the other charges sent a shudder through Gina. It was hard to believe that someone had put those charges on her account. “I didn’t make any of those charges,” said Gina. “This is terrible.”
“Don’t worry” said the woman. “We have a very good fraud control program, and you won’t be responsible to pay a single penny of the fraudulent charges. We’ll only need you to sign a fraud affidavit. I’m sending it to you in the mail today. All you need to do is sign and return it, and that will be the end of the problem.”
Gina was greatly relieved.
“Okay,” the woman continued. “Before I send you your new card, I’ll need to verify some additional information. Can you please tell me your social security number and your mother’s maiden name?”
Gina quickly gave the woman the information.
“Thank you,” said the woman. “We’ll send you your new card in the mail tomorrow.”
Analyze and comment on the phone conversation described in this case in relation to identity theft.
After reading Chapter 18 of your Forensic Accounting and Fraud Examination textbook, complete the following problems, which will help you apply your knowledge of criminal financial activity:
· Case 51 on page 579.
· Case 52 on page 580.
51. Stewart Burger is a forensic accountant who works for a large Houston CPA firm. His specialty is the investigation of financial crimes and money laundering. He has extensive experience working with the FBI in the areas of narcotics interdiction, bank fraud schemes, organized crime, and international terrorism. Stewart was recently contacted by Maria Fuerte in the FBI’s counterterrorism unit in Houston. She told him that she was in the middle of an ongoing terrorist investigation and that she needed his immediate help.
“What kind of help do you need?” asked Stewart.
She smiled. “You know the drill. I can’t tell you anything unless you first join the team. If you do, we’ll have to reinstate your security clearance.”
Stewart knew the case would take a lot of time, and the FBI would pay him more with gratitude than with money. “I’m pretty busy these days. Can it wait a couple of weeks?”
Maria leaned over and whispered in his ear, “I understand that you have a daughter working inside the Loop?”
Stewart was a trained interrogator. Her body language and her eyes were warning him of something.
“That bad?” he asked.
She nodded imperceptibly. He immediately agreed to let her drive him to her office.
In the office, the paperwork had already been done, and within a few minutes Stewart was wearing a counterterrorism field agent badge. Maria’s supervisor called his office and told the partner in charge that he was assisting a “routine investigation” as a matter of national security.
“Okay, here’s what we have,” said Maria as she displayed photos of four men on her computer monitor. “These four men are loose in the city, and we know they are planning a bomb attack within the next 48 hours. I need you to help me find them.”
All four men appeared to be of U.S. descent and were wearing expensive business suits.
“We identified them through an informant,” she said. “They’re all executives in the Westwood Construction Development Company in Clear Lake.”
Stewart recognized the company’s name. It was one of the largest commercial developers in the area.
Maria continued. “We managed to get a sneak and peek warrant, and last night our agents went in and made copies of all their computer files and paper records. Our guys were out before daylight, and no one but us even knows we were there.”
She led him to a room in which there was a large conference table on which piles of documents and six computers were sitting. She explained that the computers were exact copies of the six computers in Westwood’s offices. “We also imaged and printed all of their paper documents too.”
“You’re fast,” said Stewart.
Maria laughed. “We sent in 14 of our best agents. They knew exactly what to do. Now you’ve got to hurry. We don’t have much time. We believe that Westwood has been funding the terrorist cell with bomb plans. We need some kind of evidence—any kind of evidence—to arrest these guys. We think we can stop the plot if we can.”
Stewart asked for 10 field auditors. She told them that she had anticipated his request and already had them checked in. They were waiting in another part of the building.
a. How should Stewart proceed with his investigation? How should he use the 10 field auditors? What areas should he focus on the most?
b. What types of leads might Stewart develop for follow-up by Maria?
52. Joey Nariz is a narcotics trafficker who has made a career of smuggling cocaine into the United States. Over the years, he has bought most of his supply from Colombia but more recently had begun to obtain it in Peru.
His base of operations in the United States is San Lauro, a small California town northwest of San Diego. He controls his southern operations through encrypted satellite phones and fax machines.
Working in a small town provides the perfect cover, but he enhances his secrecy by operating out of a large farm supply store that he had purchased when he first came to San Lauro. He deals with his distributors in other small towns in California, Nevada, and Arizona. He prefers small towns because the people are trusting, and small towns never possess any serious antinarcotics capabilities.
Joey never personally transports or handles any drugs. He reserves those tasks for a network of undocumented Mexicans who can earn more working for him in a single day than they can earn back home in several years. Most of them are otherwise honest people willing to break the law so they can send money home to their families.
His largest problem is managing the cash. He has learned the hard way that he must handle the cash himself. Despite having more than $90 million in cash stashed away in warehouses, he lives a very frugal life. He spends whenever he can, but he’s afraid to try to buy real estate or other large-ticket items with cash for fear of drawing attention to himself.
He decides, however, to travel to Miami and purchase a large house and boat. He packs the trunk of his car with cash and heads east. Once in Miami, he uses his contacts with local distributors to find a real estate agent who would be willing to work for cash. He instructs the agent to find him a large waterfront house for which the seller would accept an all-cash deal. He ends up paying $14 million for an $8 million house, but he’s very happy with the property. The seller had no mortgage, so they were able to make the deal quietly in an attorney’s office. They told the attorney that they were relatives and that the payment had already been made “out of closing,” which meant the closing involved only some paperwork and no money.
Joey used the same method to purchase a $3 million yacht for which he paid $4 million. He then sold it for $2.5 million. The sale yielded a check net of commissions from the yacht broker. He deposited it into a bank account that he had opened with only $500 in cash and a check for $5,000 from his San Lauro bank account. When he opened the bank account, he told the bank representative that he was from San Lauro, California, and in the farm supply business. He even provided the bank a letter of introduction from his San Lauro bank.
a. Is Joey’s money-laundering scheme likely to work?
b. Is the bank likely to report the deposit of the payment for the yacht by filing a currency transaction report or a suspicious activity report?
c. Is law enforcement likely to discover his purchase of the house or boat for cash?
d. How would a forensic accountant go about investigating Joey for drug trafficking and money laundering if given subpoena power? Would the investigation discover the under-the-table house and yacht purchases?