Investigative Techniques for the
general Practitioner?
Erik H. Lindquist, CFE
Presenter
National Society of Accountants
Fall Webinar Series
September 17, 2009
What are you looking at?
• Before looking for data, know your case
• Two approaches
– Finding the fraud
– Looking for the conversion/cash
• Systems and Processes in Place
• Personnel
• Defined time frames
Know the Case
•
•
•
•
•
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What is the predication?
Cash/Inventory/Intellectual Property
Available Data is Clean? Missing?
Internal Controls and Weaknesses
What is missing—how could it be ‘converted’
Background checks on targets and inner circle.
Establish a preliminary assessment
• Personnel File
• CV and Co-worker interviews
• Workspace observations and lifestyle ($$)
reviews
Conversion Searches
Performed for two reasons:
(1) to determine the extent of embezzlement
(2) to gather evidence that can be used in
interrogations to obtain a confession
5
Conversion Searches
Information can be gleaned from:
(1) federal, state, and local agencies and other
organizations
(2) private sources of information
(3) online sources of information
(4) using the net worth method of analyzing
spending information
6
Conversion Searches
Public Records
Government
Federal
State
Local
7
Private Sources
Utility Records
Previous
Acquaintances
Trash Cover
Credit Agencies
Financial Institutions
Online Databases
Subscription
Per-search Fee
Free
Internet Searches
Google
AltaVista
Etc.
Government Sources of Information
Federal Services
Department of Defense
– maintains records on all military personnel, both
active and inactive
Department of Justice
– enforcing federal criminal and civil laws
Bureau of Prisons
– operates the system of federal prisons, correctional
institutions, and community treatment facilities
8
Government Sources of Information
Federal Services
Internal Revenue Service
 enforces all internal revenue laws (except those
dealing with alcohol, firearms, tobacco, and
explosives)
Secret Service
 responsible for protecting the president of the
United States and other federal dignitaries
Central Intelligence Agency
 investigates security matters outside the United
States
9
Government Sources of Information
Federal Services
Postal Service
– responsibility for U.S. mail and for protecting citizens
from loss through theft that involves the mail system
– Postal inspectors can be very helpful in investigations
of employee fraud, investment scams, or
management frauds
Social Security Administration
– has information about individuals’ Social Security
numbers
10
Government Sources of Information
State Services
State Attorney General
– enforces all state civil and criminal laws, in
cooperation with local law enforcement agencies
Bureau of Prisons
– maintains the network of state prisons and
administers state corrections departments for
each state
– OTIS
11
Government Sources of Information
State Services
Secretary of State
– maintains all types of records relating to
businesses and Uniform Commercial Code (UCC)
filings
Department of Motor Vehicles
– Maintains driver’s license records
Department of Vital Statistics
– maintains birth records
12
Government Sources of Information
State Services
Department of Business Regulation
– maintains licensing information about various
professionals
13
Government Sources of Information
Local Services
County Clerk
– maintains numerous records on local citizens,
including voter registration records and marriage
licenses
County Land Office and Tax Assessor’s Office
– contain real estate records for land located in the
county
County Sheriff and Other Officers
14
Government Sources of Information
Local Services
Local Courts
– maintain records on past law violators, including
pretrial information like personal history,
employment history, personal and physical
information, prior charges, divorces and property
settlement agreements, personal injury lawsuits,
financial claims and litigation, fraud claims and coconspirators, bankruptcies, wills, and probates
15
Government Sources of Information
Local Services
Permit Departments
– supply information on fire permits (hazardous
chemicals), health permits (pollutants), elevator
permits, and building permits
16
Private Sources of Information
• Utility records (gas, electric, water, garbage, and
sewer
• Private Acquaintances
• “Trashing”
• Shredded documents
• Original files on computers
**Be sure you have the legal rights to gather and
use the information
17
Private Sources of Information
Credit reporting companies maintain:
• Consumer information, such as addresses,
ages, family members, and incomes
• Account information, such as payment
schedules, items purchased, and buying habits
• Marketing information, such as customer
breakdowns by age, sex, and income levels
• Information on current and former employees
18
Online Databases
Examples:
 Accurint
 AutoTrackXP
 Black Book Online
 ChoicePoint
 EBSCO Publishing
 PublicData
 Public Record Finder
 SEC’s EDGAR Database
 Web Detective
19
Internet Search
Examples:
Google, Altavista, Zabasearch and Yahoo!
20
Internet Search
Searching Methods
• Search by phrase
• Minus search terms
• Domain restrictions
21
Internet Search
Google Search Tools:
• Google Groups
• Cached results
• Google News
• Google Images
• Google Earth
• Google Public Records – new as of April 28,
2009
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Data Bases-Where Do You Start?
• Janitorial Purchases example…
• Simple sorts lead to complex analysis
– Benfords Law
– Matasos Matrix
Data Analysis – Matasos Matrix
One way to view the results of multiple
indicators is to use a chart called a Matasos
matrix:
100221 Direct Corp.
1
0%
70%
Sequential
Bid
Security
Number
0%
0%
523332 Satyoo
2
0%
68%
0%
100%
351223 Danicorp
1
0%
72%
0%
0%
387543 Under Inc.
3
0%
70%
100%
100%
Contract
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Winning
Vendor
Number
of Red
Flags
Lost Bids
Brand
Names
Last
Bidder
Winner
Benford’s Law
What do these do for us?
• What data would be best suited to Benford?
• What data would work best with Matasos?
What Now…
• No one approach will be the silver bullet
• Be creative – where could the breadcrumbs
be?
• If you are tempted to go after data without
proper authority – DON’T
• Build the case with the detail available and
use deposition and interrogatories to drill
further
For More
Information
Erik H. Lindquist, CFE
Lindquist & Associates, LLC
lindquist@fraudmedic.com
517-281-6551
Resources:
Association of Certified Fraud Examiners
www.acfe.com
Fraud Examination W. Steve Albrecht et al
Third Edition
Fraud Casebook – Lessons from the Bad Side of
Business
edited by Joseph T. Wells, CFE, CPA
About ConnectEd:
Sally Brassé
NSA Director of Education
Programs
800-966-6679 Ext 1307
sbrasse@NSACCT.org
Genet Sesse
National Society of
Accountants
800-966-6679 Ext 1312
gsesse@NSACCT.org