Fraud cases are the tip of the iceberg
Companies wanting to avoid white-collar crime need to be more proactive and put in place preventive measures to ameliorate risks.
White-collar crime is back in the news thanks to the coroner’s inquiry into the death of financial fraudster Melissa Caddick and the trial of Helen Rosamond, who allegedly inflated tens of millions of dollars of invoices sent to National Australia Bank.
The cases have put the spotlight on fraud perpetrated on innocent victims such as the financial planning clients of Caddick, and fraud committed by people working at large companies.
Rosamond allegedly worked closely with Rosemary Rogers, NAB’s former chief of staff to CEOs Cameron Clyne and Andrew Thorburn. Rogers was sentenced to eight years in jail in 2019 for being an agent corruptly receiving a benefit.
White-collar crime is, more often than not, committed by gambling addicts. David Rowe
Rosamond was charged with false invoices totalling $15 million over four years. But over that period she submitted invoices to NAB totalling $35 million. Over a period of 12 years Rosamond’s company submitted invoices to NAB totalling $118 million.
The high-profile cases involving Caddick, Rosamond and Rogers could give the impression that police have financial crime under control.
But forensic accountants with more than 60 years of combined experience in this murky space say that convictions for fraud, especially inside jobs, are just the tip of the iceberg.
Brett Warfield, principal of Warfield &Associates, this week released a report analysing 102 fraud cases which resulted in convictions in the 10 years to August this year.
Forensic accountant Brett Warfield says fraudsters keeping using the same old techniques.
To be included in the research, the fraud had to be more than $1 million, resulted in a criminal conviction, and be perpetrated by an employee or employees.
Warfield says that after 30 years tracking white-collar criminals, he is staggered by how naive large public companies are about the techniques used by employees to steal money.
“I’ve seen the same thing, the same patterns happen over and over again,” he says. “For example, false invoicing is still being done in the millions of dollars in organisations, even though I have been reporting on that for decades.”
Warfield is amazed that senior people within organisations with the ability to sign off on significant invoices are often left to their own devices. He says those meant to be checking signatures and managing budgets have a tick-the-box mentality.
One of the most common crimes is electronic fund transfers, whereby finance staff transfer significant amounts out of company bank accounts and into their own accounts, or to people who are close to them.
“That is fundamentally flawed,” he says. “How is it possible for a finance clerk to change bank account details, and establish a credit in a system? Who is reviewing payment processes? It just shouldn’t happen.”
Track record of fraud
A good case study is Loretta Delianov, a former payroll officer at Anthony Pratt’s Visy. She stole $4.1 million over a six-year period. On 220 occasions she transferred amounts from Visy’s bank account to various accounts related to her.
She was diligent in creating fraudulent documentation for each unauthorised transaction, and used false names. She bought a Pie Face
franchise, invested in properties, made payments to relatives, and entertained friends.
What is interesting about the Delianov case is she committed two acts of fraud at previous employers. Visy clearly did not pay for a criminal record check. She was sentenced to six years in jail.
One of the most disturbing features of the Warfield report on fraud convictions over the past decade is that 39 had gambling addictions.
When it came to convicting these people, Warfield said prosecutors were able to go back to the pubs, clubs and casinos to find the exact amounts of stolen money pumped through poker machines, if this was the preferred punting method.
I know of several strong fraud matters that police have not prosecuted ... The investigations were done at [the corporate clients’] expense.
Warfield says the financial services sector was hit heavily by frauds, accounting for about $48 million of the $350 million stolen by the 102 people convicted.
He says risk assessment is weak in financial institutions.
“I did some work recently where I actually presented to a bank, and afterwards we were having a drink and the guys were telling me, ‘We just don’t really pay attention to employee fraud in the bank because the external fraud is so big’.”
Another forensic accountant with 30 years experience says the problem he has found is that serious fraud matters reported to police are not being investigated.
“We are compelled to report matters to the police under the Crimes Act, but there was no interest,” he says.
“I know of several strong fraud matters that police have not prosecuted. These were matters I have investigated on behalf of corporate clients. The investigations were done at their own expense.”
“This begs the question, and I hear it a lot from corporate clients, ‘Why is there so little traction from the police?’ I wonder if this is due to lack of police resources or lack of capability. I suspect it’s the latter.”
The accountant said he knew of a fraud case involving a young woman who stole about $450,000 using her company issued credit card on first class flights, luxury goods and groceries. She fled to the UK.
The police were told but did nothing. He says that, at the very least, the police should have issued a warrant for her arrest so that if she ever returns to Australia she will have to face the music.
Another example of someone getting away with fraud was a person who worked as an executive assistant to a member of the executive committee at the ASX. She was dismissed three years ago after rorting the expense system.
The ASX told Chanticleer in a statement the matter involved breaches of ASX policies regarding “financial conduct”.
“The former employee cooperated with ASX’s investigation, admitted to having breached the policies, and ASX concluded that termination was an appropriate course of action in view of the very small amounts involved,” an ASX spokesman said.
The ASX board of directors was informed of the “financial misconduct”, but not the police.
It is worth noting Caddick’s career as a fraudster started with forging cheques in the office of a Sydney fund manager. She was sacked without the police being told, and then went on to conduct larger frauds.
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