The basics still count when it comes to catching frauds and tricksters
What is going on here? This was the reaction of the president and a number of board members of a Toronto-based not-for-profit organization operating a chain of retirement and nursing homes. Phone calls had been pouring in from prominent business people and philanthropists across Canada concerned about their director of fundraising.
Preliminary inquiries revealed the unfolding of a massive fraud being perpetrated by the director, who had been contracted six months earlier to raise funds for the construction of a new retirement and nursing home project. Outside counsel was consulted and investigators were called in immediately.
The probe that followed uncovered a sophisticated scheme, whereby the director had worked in “fundraising capacities” for numerous organizations for several years, living an extravagant lifestyle out of hotels and leasing vehicles at the expense of her employers and various individuals she came into contact, and in some cases developed personal relationships, with.
She spent hours researching “who’s who” directories for names of corporate directors and philanthropists to identify potential donors. She also pored over websites, brochures and pamphlets related to not-for-profit organizations, targeting those dealing primarily with seniors. She would then submit false pledge certificates, complete with forged signatures. Over six months, the so-called pledges totalled $6.5 million.
Remuneration by the employer was biweekly, and this fundraising director would submit expenses, a fabricated report of her fundraising activities for that period. Expense itemization included lavish hotel suites with extensive food and bar bills, frequent usage of hotel spas and salons, limousine services, hockey and football tickets and a variety of other items, all of which she said was for entertaining prospective donors.
When confronted by investigators, she maintained that all signed donor pledges were legitimate. When investigators requested meetings with some of the donors to thank them for their funding commitment, the fundraising director said she would arrange the meetings. But soon after she disappeared out of province. With the investigators’ assistance, police eventually located, arrested and charged her with several counts of fraud. She pleaded not guilty, but was convicted at trial and received a four-year prison sentence. A full restitution to her employer was ordered by the court.
Human resources professionals face many complex challenges, one of which is finding the proper balance between security and personal privacy. Instances such as the one above should remind employers that they cannot grow lax when it comes to protecting the organization. The fundamental measures include:
•A good solid policy and procedure manual, which should include a code of conduct, to be provided to each employee at orientation. The manual must be reviewed and updated regularly by HR management to ensure compliance at every level. Make sure all employees sign an acknowledgement each year that they have read the code of conduct in its entirety. A good time to do this is during the performance review.
•Be vigilant with proper employee screening, regardless of their level and the manner in which they were introduced to the company. Don’t skip over or relax on this procedure just because the individual appears to be a star candidate or was introduced to the company through connections.
•Involve the security department or outside corporate investigators to perform security screening. Make sure this function is handled by professionals who have the contacts to obtain confidential information that is necessary for proper clearance, which may not be accessible to HR practitioners. In the case of the director of fundraising, proper screening would have revealed that she had committed these same crimes with three previous employers and had bilked four seniors’ estates out of thousands of dollars.
•Establish a whistle-blowing hotline for employees to access if ever they are witness to, or have knowledge of, a co-worker engaging in unlawful activities within the corporation.
•Make sure an employee’s desktop and laptop computers or any other computing devices, such as personal digital assistants, belonging to the company are secured and quarantined in the event that employee is under suspicion or it is anticipated she will be dismissed with cause.
Robert Woodman is a certified fraud examiner and president and founder of Berkeley International Intelligence Inc., a Toronto-based business investigation company. He may be reached at (877 )386-1957 or at [email protected].
Preliminary inquiries revealed the unfolding of a massive fraud being perpetrated by the director, who had been contracted six months earlier to raise funds for the construction of a new retirement and nursing home project. Outside counsel was consulted and investigators were called in immediately.
The probe that followed uncovered a sophisticated scheme, whereby the director had worked in “fundraising capacities” for numerous organizations for several years, living an extravagant lifestyle out of hotels and leasing vehicles at the expense of her employers and various individuals she came into contact, and in some cases developed personal relationships, with.
She spent hours researching “who’s who” directories for names of corporate directors and philanthropists to identify potential donors. She also pored over websites, brochures and pamphlets related to not-for-profit organizations, targeting those dealing primarily with seniors. She would then submit false pledge certificates, complete with forged signatures. Over six months, the so-called pledges totalled $6.5 million.
Remuneration by the employer was biweekly, and this fundraising director would submit expenses, a fabricated report of her fundraising activities for that period. Expense itemization included lavish hotel suites with extensive food and bar bills, frequent usage of hotel spas and salons, limousine services, hockey and football tickets and a variety of other items, all of which she said was for entertaining prospective donors.
When confronted by investigators, she maintained that all signed donor pledges were legitimate. When investigators requested meetings with some of the donors to thank them for their funding commitment, the fundraising director said she would arrange the meetings. But soon after she disappeared out of province. With the investigators’ assistance, police eventually located, arrested and charged her with several counts of fraud. She pleaded not guilty, but was convicted at trial and received a four-year prison sentence. A full restitution to her employer was ordered by the court.
Human resources professionals face many complex challenges, one of which is finding the proper balance between security and personal privacy. Instances such as the one above should remind employers that they cannot grow lax when it comes to protecting the organization. The fundamental measures include:
•A good solid policy and procedure manual, which should include a code of conduct, to be provided to each employee at orientation. The manual must be reviewed and updated regularly by HR management to ensure compliance at every level. Make sure all employees sign an acknowledgement each year that they have read the code of conduct in its entirety. A good time to do this is during the performance review.
•Be vigilant with proper employee screening, regardless of their level and the manner in which they were introduced to the company. Don’t skip over or relax on this procedure just because the individual appears to be a star candidate or was introduced to the company through connections.
•Involve the security department or outside corporate investigators to perform security screening. Make sure this function is handled by professionals who have the contacts to obtain confidential information that is necessary for proper clearance, which may not be accessible to HR practitioners. In the case of the director of fundraising, proper screening would have revealed that she had committed these same crimes with three previous employers and had bilked four seniors’ estates out of thousands of dollars.
•Establish a whistle-blowing hotline for employees to access if ever they are witness to, or have knowledge of, a co-worker engaging in unlawful activities within the corporation.
•Make sure an employee’s desktop and laptop computers or any other computing devices, such as personal digital assistants, belonging to the company are secured and quarantined in the event that employee is under suspicion or it is anticipated she will be dismissed with cause.
Robert Woodman is a certified fraud examiner and president and founder of Berkeley International Intelligence Inc., a Toronto-based business investigation company. He may be reached at (877 )386-1957 or at [email protected].
