Sunday, October 02, 2022

Fraud cases are the tip of the iceberg


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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Tony Boyd is the Chanticleer columnist. He has more than 35 years' experience as a finance journalist.Connect with Tony on Twitter. Email Tony at tony.boyd@a

The 10 most covertly powerful people in Australia in 2022

The big move this year is Accenture Australia asserting its presence by growing rapidly. AFR Magazine’s hotly anticipated Power issue is out on Friday, September 30.

The consulting firms were flying in 2021-22, a lack of qualified staff being the main constraint on growth. Demand was up from both public and private sector clients looking to digitise and decarbonise and for advice on adapting to a high inflation, low unemployment economy.

Supply was a different story. As of August, the five largest firms – Accenture, Deloitte, EY, KPMG and PwC – were on the hunt for 4000-plus recruits. This is up from about 3300 open positions at the start of 2022. The talent crisis is getting worse even though borders are open, with visa delays and competition from employers around the world for the types of skilled workers that find a home at consultancies.

The 10 most covertly powerful people in Australia in 2022

Those who wield the most influence across business and politics behind the scenes. AFR Magazine’s Power issue is out now.

The 10 most covertly powerful people in Australia in 2022

Those who wield the most influence across business and politics behind the scenes. 

AFR Magazine’s Power issue is out now.

Tom McIlroyPolitical reporter

1. Tim Gartrell

Anthony Albanese’s chief of staff | Last year: N/A

In his first speech to parliament more than 25 years ago, future prime minister Anthony Albanese thanked only four people. Along with his mum and his then partner, Albanese named-checked his Labor mentor Tom Uren and his campaign manager, Tim Gartrell.

Tim Gartrell during an address by Prime Minister Anthony Albanese to the National Press Club of Australia in Canberra, August 2022. Alex Ellinghausen

After stints as national secretary of Labor and leading Kevin Rudd’s successful 2007 campaign, Gartrell is once again Albanese’s right-hand man. He was instrumental in the campaign for same-sex marriage in Australia and has championed Indigenous recognition in the Constitution.

For a prime minister who values loyalty and commitment even more than most, Gartrell’s new job as chief of staff means he’s at the heart of the government and central to national decision-making.

Respected across the party, and by Liberals inside Parliament House, he brings savvy and modern campaign thinking to the job. Seeking a lower profile than previous holders of the office, Gartrell waits to be called on by Albanese in meetings but is in regular contact with the most senior members of the government.

What the panel says

He has very strong relationships with people like Penny Wong, Mark Butler, Katy Gallagher and across the senior leadership of the party. He’s trusted by Anthony. He brings his corporate experience, in terms of his managerial style, and I think he’s proven that he’s a very strong, influential person when it comes to Anthony and the broader Labor Party. Lidija Ivanovski

The fact that he was national secretary and has run campaigns means that you get someone who can act as the bridge between the party machine and politics. Those two working closely is a lot because of Tim. Dee Madigan

Former national secretary, long-standing close colleague and friend of Albo and highly influential. He is respected by the core elements which make up the Labor Party and a Labor Party campaign. He is close to all of the key decision-makers and significantly influential in terms of campaign and strategy. Stephen Smith

Prime Minister Anthony Albanese on the cover of the 2022 Power issue.  Louie Douvis

His background on the Recognise campaign is really useful going into the Voice. I think the last great chief of staff that sat in a prime minister’s office was Arthur Sinodinos; Tim is capable of being in Arthur’s league for Albanese. Ian Smith

2. Glyn Davis

Secretary, Department of the Prime Minister and Cabinet | Last year: N/A

Glyn Davis. Alex Ellinghausen

Named as the head of the public service in the days after Anthony Albanese’s election victory, the former university vice chancellor and head of Australia’s largest charitable foundation instantly became one of Canberra’s most powerful figures.

With an academic and public policy resume as long as his arm, Davis was part of the expert review of the capacity of the public service, led by former Telstra boss David Thodey. Its findings were largely ignored by the Morrison government.

Tasked with reform and the restoration of the public service brief of “frank and fearless advice” to government, Davis replaced Morrison ally Phil Gaetjens.

After a difficult decade for public servants working under a headstrong Coalition government, Davis will have to boost morale across the federal bureaucracy.

What the panel says

The Secretary of the Department of the Prime Minister and Cabinet is extraordinarily powerful. Glyn has extensive public sector experience with very broad public policy experience. I think he will prove to be a powerful and influential secretary. Julie Bishop

Anthony Albanese wants to surround himself with smart people and I think any senior public servant would love that appointment, because it kind of suggests that your independent advice matters again. Tony Mitchelmore

Covert power ultimately relies on someone else to exist, and I think Albo makes it possible for Glyn Davis to have that and fill that space. Lidija Ivanovski

Prime Minister Albanese clearly wants to effect public sector reform, and wants to put the public service back into a position of being able to give frank and fearless advice, which is an unambiguously good thing. Glyn, who is highly regarded, is going to be absolutely crucial in that process. Stephen Smith

3. Paul Erickson

National secretary, Australian Labor Party | Last year: N/A

Paul Erickson. Dominic Lorrimer

Erickson was the principal architect of Anthony Albanese’s May 21 election victory, and his power was delivered through a zero-sum game. A former campaign mastermind for unions and state governments, the respected and unflappable Erickson implemented a “no dickheads” policy at Labor’s campaign HQ.

Taking a victory lap at the National Press Club in Canberra, he argued the decline in support for the major parties was not a permanent feature of the political landscape and pledged to help Labor build on its victory by governing well and honouring its promises.

Considered very close to Albanese and senior Labor figures, Erickson is well known across Canberra and connected with business, the diplomatic corps and the press gallery.

What the panel says

He’s massively close to Albo. He has got everyone’s respect in the party; everyone listens to him. Dee Madigan

He obviously ran the campaign that won the federal election, but he also presided over the Batman byelection and Eden-Monaro campaign. That was the first test for Anthony. He was in charge for the Super Saturday byelections. He’s extremely pragmatic. He has very good relationships with key people in the media. He’s got very good relationships with caucus members. He also gets the research and these are hugely influential factors over the leaders’ decisions. Lidija Ivanovski

There was incredible discipline in Labor’s campaign and that discipline has to come from leadership. Nicola Wakefield Evans

I did not know him well when I started on the campaign but my respect, regard and admiration for him grew. He’s a very thoughtful and calming influence amid all the hurly burly. Stephen Smith

Just don’t call him before 9am. Dee Madigan

4. Steven Kennedy

Treasury secretary | Last year: 3

Steven Kennedy. Rohan Thomson

The day after the election, the former nurse and respected labour economist drove to Logan, Queensland, to brief his new boss, Jim Chalmers, on the state of the nation’s books – and ensure he kept his job.

Having studied the macroeconomic fallout from influenza pandemics, Kennedy has been a critical adviser to government throughout the pandemic. Despite two federal budgets and an economic update to parliament in just eight months, Kennedy used a speech in June to urge Labor to control “significant spending pressures” on disabilities and aged care, suggesting a crackdown on tax breaks worth billions of dollars to the wealthy and to companies.

Having led the Infrastructure Department before being tapped by Scott Morrison to run Treasury, Kennedy is widely respected and looks set to strengthen his power.

What the panel says

The first thing Steven Kennedy did the day after the election was get himself to Logan to bend at the knee of the new king. Lidija Ivanovski

Jim Chalmers has been close to Steven Kennedy, not just for the period of time that Jim’s been treasurer or Steven’s been the Secretary. So he is highly influential with Jim. Importantly, they get on very well. Stephen Smith

He goes back to the GFC response in Treasury, and is pretty straight down the middle and well regarded. You’ve got to face up to a budget repair. It hasn’t really been broached, but he’s put it on the agenda straight away. You can’t go along like the previous government did and see whatever comes out at the end. Michael Stutchbury

5. Don Farrell

Trade and tourism minister | Last year: N/A

Don Farrell. James Brickwood

A South Australian right-wing powerbroker, Farrell was Anthony Albanese’s pick for trade minister. He hails from the socially conservative SDA, or “Shoppies Union”, and held back Albo’s critics during tense times for the leader during the last term of parliament.

Farrell gave up his safe spot on the Labor Senate ticket in 2012, helping Penny Wong win re-election after a public repudiation and puzzlement at how a backroom union figure could be allowed to take the winnable ticket position from a high-profile cabinet minister.

Farrell re-entered parliament in 2016. Deriving his power from years cultivating and controlling the party’s factional leaders, Farrell appears to be enjoying the job, even promising to host his British counterpart at his family’s vineyard in a bid to improve trade ties.

What the panel says

Anyone who knows Don knows he controls so much. He’s known as The Godfather for a very good reason. He has a lot of control in the right but plays nicely with the left. Dee Madigan

He makes offers you can’t refuse. Julie Bishop

His appointment as trade minister goes to the point that fundamentally the trade unions still control the Labor Party. Michael Stutchbury

He’s got a significant power base. I mean, you look at [SA Premier] Peter Malinauskas; he’s there because of Don. You look at other people that have come into the parliament and there’d be quite a few who have spent time working for Don. Lidija Ivanovski

This is the most influential government cadre from South Australia we’ve seen since the days of Minchin, Vanstone and Downer. Ian Smith

6. Greg Combet

Chairman, Industry Super Australia | Last year: N/A

Greg Combet. Louie Douvis

A veteran of Labor’s turbulent Rudd-Gillard governments, Combet sits at the top of Australia’s $1 trillion industry super sector. A former ACTU boss and climate change minister, he is close to Anthony Albanese and is leading an election review that’s ostensibly about Labor’s 2022 campaign.

In reality, the task – shared with former WA assistant secretary Lenda Oshalem – is about getting Labor re-elected in three years. Combet jointly chairs the Industry Super board and its asset manager, IFM, and is a senior adviser to McKinsey & Co.

In 2020, Scott Morrison appointed Combet to the National COVID-19 Co-ordination Commission and he helped facilitate talks between union leaders and then IR minister Christian Porter. Already federal Labor has tapped Combet to lead a fund managers’ tour of Indonesia.

What the panel says

He’s doing the review into the ALP’s 2022 election, so that gives you some insight into his covert power. One thing this term is going to be about for the government, and for super funds, is making superannuation impenetrable after the kind of wave of regulatory tinkering we had with the previous government. He will be a voice behind the scenes. Lidija Ivanovski

He’s co-chairing the review into the campaign, which is all about re-election
for a second term. He is highly influential and Anthony listens to him. Stephen Smith

The industry super funds – of which Combet is the most recognisable face and really the leader of – is a force to be reckoned with in the halls of Australian capitalism. They’re incredibly powerful – a lot of it is behind-the-scenes sort of power. It’s within the party; it’s affecting where capital goes in the country, it’s just enormous. Michael Stutchbury

The influence of the collective volume of industry funds is strong. While they will make decisions in the best interest of their members, they will be open to any new category of investment. Jillian Broadbent

7. Sam Mostyn

President, Chief Executive Women | Last year: N/A

Sam Mostyn. Steve Baccon

Mostyn is one of the country’s most powerful corporate leaders and sustainability advisers. She has worked in big firms and non-profits, becoming a recognised expert in governance, leadership, policy and advocacy.

Having served at the top levels of Mirvac, Transurban, IAG, Optus and Citi, her power has extended to the AFL Commission, the Climate Council and the National Mental Health Commission. Mostyn follows in the footsteps of Ita Buttrose, Catherine Livingstone and Diane Smith-Gander as the boss of Chief Executive Women, harnessing the group’s power to get more women into leadership roles.

She’s an informal adviser to a range of teal MPs and to the federal government. Weeks after our panel met she was appointed by Albanese as chair of his Women’s Economic Equality Taskforce.

What the panel says

Sam Mostyn played an important role providing counsel to many of the teal independents from behind the scenes. It was a really important factor in the election, that shift from professional women who decided to change their votes. Anthony Reed

She’s really taken over Chief Executive Women and turned that into a political organisation. Michael Stutchbury

Sam’s done a huge amount of work with the NSW government on its recent budget in relation to its impact on women. She’s also very close to Albanese. She has elevated women’s economic issues – the cost of childcare and women’s work in the caring and service industries – from an economic position. It has completely shifted the rhetoric away from the shrill voices that we’ve had in the past, and she’s been very effective with her rational, consistent messaging. Nicola Wakefield Evans

She worked for Keating. If you subscribe to the Paul Keating theory of life, if you’re once on staff, you’re always on staff. She is well regarded and influential. Stephen Smith

8. Tim Reed & Jennifer Westacott

President and CEO, Business Council of Australia | Last year: N/A

Jennifer Westacott and Tim Reed. Louie Douvis

Reed has brought about a huge shift in energy policy as the new BCA president, shaking up the lobby group after replacing Grant King in the role two years ago.

Known for his strong communication skills and high-energy output, the former MYOB boss has worked in the US, Europe and Asia and is the co-managing director of private equity firm Potentia Capital and a director of Transurban.

As some members increasingly questioned the relevance of the BCA while Scott Morrison was waging a war on business, Reed has reinvigorated the organisation to become sought out in Canberra and in boardrooms.

With longtime chief executive Westacott, the BCA took centre stage alongside the ACTU at Labor’s September jobs summit, although there was some confusion afterwards as to what was agreed to.

What the panel says

You just can’t underestimate the significance of the shift of the BCA, both for the success of the teals, also probably the success of the Greens as well. They have shifted where business is thinking, opening the ground for Labor on climate. Tim was the key person driving that and it makes him pretty powerful. Anthony Reed

Tim Reed has totally changed the voice of the BCA, particularly on climate change. Jillian Broadbent

Scott Morrison muted the Business Council as much as he could. He regarded them as opportunists. He was the most unfriendly Liberal leader to big business I can recall. The BCA will be far more influential now, as Labor seeks to work for consensus. Ian Smith

Compared with the BCA’s relationship with the previous government, I think it’s fair to say the BCA is back in town. Julie Bishop

Albanese and Chalmers have focused on building their relationships with the BCA. When Albanese took his delegation to Indonesia just after he was elected, he took Matt Comyn and Rob Scott – at very short notice. Morrison probably could never have done that. Nicola Wakefield Evans

9. Jan Adams

Secretary, Department of Foreign Affairs and Trade | Last year: N/A

Jan Adams. Alex Ellinghausen

Penny Wong’s pick to lead the Department of Foreign Affairs and Trade, Adams is a seasoned diplomat and respected public service leader.

Australia’s former ambassador to China and Japan, she helped negotiate the Trans-Pacific Partnership and a free trade deal with Beijing. More recently she has been at the pointy edge of Canberra’s growing tensions with Beijing, advising the Coalition on how to push back against an expansionist and hostile Chinese Communist Party.

But part of Adams’ power predates this government: she was Australia’s ambassador for the environment and climate change, roles that coincided with Wong’s time in the climate change portfolio. Business and some of Australia’s key trading and security partners are sweating her decisions and advice.

What the panel says

Jan worked with Penny Wong in the Climate Change portfolio. There’s a long-standing, good working relationship there. In my view, Jan will prove to be a highly effective DFAT Secretary. Stephen Smith

I think Jan would have the most influential and the strongest relationship with Penny. She’s not someone who has been inherited. Lidija Ivanovski

She was lead negotiator for the Australia-China Free Trade Agreement and subsequently our ambassador in Beijing. She was essential to developing the economic relationship, she has lived through a lot of the ups and downs, and I believe she will be very important in managing the China relationship in the future. Julie Bishop

10. Cathy McGowan

Founder, Community Independents Project | Last year: N/A

Cathy McGowan. Josh Robenstone

Not many members of parliament become more powerful after they quit, but McGowan has found herself as the starting point of a movement.

Having famously defeated Liberal Sophie Mirabella in an upset 2013 win, she successfully passed the independent baton to Indi successor Helen Haines and then got to work mentoring and encouraging a new generation of community independents.

McGowan rewrote the playbook for local election campaigns, and she was a regular, if unofficial, adviser to teal independents running in 2022. Flush from that win, she’s working even harder, putting the two-party model further at risk.

Some of her former staff look set to shake up the Victorian state election in November. McGowan also appears on our cultural power list.

What the panel says

Cathy’s influence has been seismic in the sense that she was the influence, the inspiration, the motivator behind the independents. The teals have mentioned Cathy as being a driving force behind their decision to make the dramatic shift to enter politics. Julie Bishop

In terms of the community groups that sprang up in all of these electorates, Cathy was absolutely instrumental. She was the leader of the Voices Of movement. She would have spoken directly to and counselled every one of the candidates and given them the confidence to run, and provided a mentoring role throughout the campaign. She is an absolutely vital piece of the puzzle. Anthony Reed

She wrote the book on how to beat major-party candidates. She listened to her community and delivered in the job. Cathy influenced so many of these independents to run following her model and path. I think she played an extraordinary role. Jillian Broadben