I had traveled here, to Washington, D.C, to present a paper I had written approximately two years ago. The subject of the paper was fraud and profiling the perpetrators of fraud. Nineteen employees of the government were to attend this presentation, which included fifteen FBI agents, the Director of the FBI, Louis Freeh, and three assistant U.S. Attorneys. Janet Reno could not be present at the presentation, although she had wanted to be, since she was involved in a drug trafficking case in California. It was about 8:30 AM and the presentation was to begin around 9 AM.
The class attendees started to filter into the classroom throughout the next half-hour. As each one walked in, they picked up a name tag and wrote their name on it. At approximately 9 AM, every seat was full, except for one, and I began my presentation.
"Good morning. I am Nick Brignola, CFE, and I’d like to thank you Mr. Freeh as well as Ms. Reno, although she could not attend today, for inviting me here to speak to this group about fraud and how to profile fraud perpetrators."
The class, a mixture of all races, sat attentive, and listened eagerly to what I was saying. It was refreshing to see interest in this subject, since I was a full time Professor and many times, my students looked as if they were half asleep at the beginning of class. I am the Professor that most of the students do not want when they choose their accounting courses. I’m known for being a stickler on the exams.
" According to the Report to the Nation on Occupational Fraud and Abuse, fraud within the United States costs businesses more than $400 billion annually. This encompasses everything from pilferage to sophisticated investment swindlers. As we sit here today, we must concentrate our efforts on formulating a plan as to who might commit fraud within an organization. Just like you FBI agents do with serial killers, we have to determine a profile of who might commit fraud within an organization. We must become more effective and efficient in using our resources that we have here at our disposal, and we must assist the companies of America with safeguarding their assets."
Mr. Freeh, raised his hand at that point in time, and looked puzzled. "You mean that it costs our businesses that much every year in fraud ?"
"Yes. Fraud and abuse costs employers an average of $9 a day per employee. Street crimes only cost the U.S. $4 billion annually. This is a very important situation in our world today, and one which we must discuss in depth. We will look at the typical perpetrator, what you can look for in firms when you are looking for fraud, and I will also speak to you about someone who may be committing fraud today as we speak. If you have any questions during my presentation, feel free to ask them. I will answer them to the best of my ability."
"First, I will discuss some of the general characteristics you might find in a profile of someone likely to commit fraud within an organization:
"That’s a very good question John, and it brings me to my next point. The organizations that fraudulent activities occur within are very similar, regarding what they have or what they lack.. It’s almost like victimology, which is part of criminal profiling. This method entails developing a complete history of the victim, including lifestyle, personality traits, employment, etc. This narrows the offender type dramatically, and assists the investigators in limiting the field of suspects in a particular case. I have done the same type of system with fraud, in that I have developed a profile for you and your partners as to the types of organizations that fraud occurs within. The organization is the victim in this example. Profiling will allow you, the attorney or the agent, to know a great deal about the type company you may be dealing with and how this fraud may occur within their organization. They are as follows:" [I threw a slide onto the overhead projector that contained the following information:]
"Although there have been multitudes of fraud committed during the past ten years, with men such as Barry Minkow, Michael Milken, and Ivan Boesky leading the way, fraud is increasing within the United States. These frauds have not increased awareness within most businesses in America. Awareness and education are the key to defeating fraud within today’s organizations."
The group seemed impressed with my summation. I had one area left to cover. Who could be a modern day example of fraud. I was not about to accuse anyone, but I did want to use the characteristics I had stated earlier as a guideline for presenting to you a likely perpetrator. This information that follows is not to be taken, in any way, as an accusation. It is for use only as an example, and that’s it." My face was beading sweat, as I did not want the attorneys or FBI agents to run out on the information I was about to present and arrest anyone, or begin an investigation. It was only an example, and I wanted them to begin to think like a fraud examiner thinks.
"The man I speak to you about is Larry Ellison, President and CEO of Oracle Corporation, the world’s largest vendor of database software and information management services . Ellison has been described as a charming and outrageous man that is obsessed with dethroning Bill Gates, Microsoft’s CEO." I looked out at the class and they were studiously recording every word that rolled off of my tongue.
"Ellison has grandiose ideas about the way things will look in the future pertaining to the next generation of the computer age. He feels easy-to-use network computers will allow people onto the Internet for a cheaper price, somewhere around $500. Ellison’s ultimate goal is to have Oracle software inside of every one of those computers. Microsoft software runs 85% of the computers in the world today and Ellison wants that piece of the pie Ellison has been divorced three times and has built a house that is "classier than Bill Gates", according to Newsweek. This $40 million palace is equal in price to Gates’ new home in Washington. Oracle’s obsession with Bill Gates pervades every part of his life, and it is rare that he completes a paragraph without some reference to the evil empire in Redmond, WA.
Oracle’s revenues have more than doubled within the past two years, jumping from $2 billion in 1994 to more than $4 billion in fiscal year 1996. Profits have also more than doubled, going from $283 million in 1994 to $602 million in 1996. This may be a firm you want to watch for fraud. This is just an example though. These may be possible indicators of fraud occurring within a corporation. I know nothing about any fraud occurring at Oracle Corporation."
There were no further questions and I finished with my presentation. "Thank you for coming today. I hope you learned a lot today regarding fraud, as well as what to be aware of out there. Use the skill sets you already have and apply them to investigating fraud. You will be successful. Thank you and have a great day."
After the completion of my presentation, Mr. Freeh thanked me and invited me back to his house for dinner. I declined the invitation, taking a raincheck for another day.
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