FRAUD ON CAMPUS

FRAUD ON CAMPUSFRAUD ON CAMPUS

John F. Riley, C.P.M.John F. Riley, C.P.M.

Fraud?Fraud?

• We are being robbed right now!• Prove it!• Prove we are not!

ExtentExtent

• Hard to estimate for Higher Education.• We do not want to talk about it.

– Want our students to think tuition well spent.– Want our legislators to appropriate more.– Want our sponsors to fund more research.– Want our alumni to keep us in the will.

Occupational Fraud 2012Occupational Fraud 2012

• 5% of revenues, or $3.5 trillion.• 64% committed by employees.

– Employee $ 60,000– Manager $180,000– Executive $573,000


• 77% of all frauds in six departments:– Accounting– Operations– Sales– Executive, Upper Management– Customer Service– Purchasing


• 43.3% of all frauds identified through a tip.

Higher EducationHigher Education

• No real data.• But, lots of under appreciated people. • Significant opportunities.• Complex systems.• Open access.• A reluctance to prosecute.• Or even announce what we find.

StoriesStories

Fax MachinesFax Machines

• Call from local chain store.• Gave refund on a fax machine. • But funny feeling about it.• Got employee’s name.• Looked at Limited Value Purchase Orders.• Seventeen fax machines.• Called department to inventory.

K-MartK-Mart

• Call from local K-Mart.• “Why won’t you people pay your PO?”• PO Number not one of ours.• “It must be yours, it’s got Sparky on it.”

PiratesPirates

• Call from department.• Received a box of two toner cartridges.• Invoice of $640.• Already used them.• Stores price for two was $110.• Refused to pay, and sent two from Stores.

Thirteenth FloorThirteenth Floor

• Department called and said to check a specific person’s travel reimbursement.

• Looked fine.• Receipts all there.• Just to make sure, called hotel.• Only have four floors.• Receipt was for Room 1313.

InvoiceInvoice

• I-Pages.• American Internet Directories.• Just two of many.

Cashier’s CheckCashier’s Check

• Bookstore received an order for books.• To be shipped to Nigeria.• $8,700 total.• Credit Card number.• Not a valid number.• Customer provided another Credit Card.• Also not valid.

Cashier’s CheckCashier’s Check

• Bookstore still trying to help the customer.• Asked for a Cashier’s Check.• Received it the next morning via FedEx.• No watermark.• Called issuing Bank of America.• Counterfeit.• Told the customer his order was cancelled.

Audit HackerAudit Hacker

• Purchasing Card Audit.• Auditor given system access.• Noticed cursor moving on its own.• Audit had disabled all virus protection.• Immediately notified bank.• No problems.

HackerHacker

• An intrusion at a major university resulted in access to all purchasing card records, and all travel reimbursement requests, with SSAN’s.

• Reissue 1,000 purchasing cards.

PropertyProperty

• Dear Person in Department,• Where is the $7,590 electric cart you

bought in January?• And the $40,606 video camera control box

signed out from State Surplus?• I don’t know is not good enough.

Purchasing CardPurchasing Card

• Dear Cardholder, please explain:– Roomateacess.com, $39.99– Service Arizona, $222.67– Victoria Secret, $125.05

• On a Sponsored Account.


• “The Service Arizona was, I regret to say, intentional. The other two were a mistake as I grabbed the wrong card. My Dean understands that it was a mistake, and only asks that it be paid back.”

• “Can you deduct this over my next 6 paychecks?”


• “I’m sorry about this and can only hope that it be handled quietly, and to the benefit of all parties.”

• Do you think we agreed to 6 payments?• Or handled it quietly?


• Immediately ratted her out to Dean, Business Manager, Internal Audit, HR, General Counsel.

• Complete audit of all $14,780 transactions.• $1,131 were fraudulent.• $1,131 was recovered,• Just before employee fired.

Purchasing Card, Part 2Purchasing Card, Part 2

• Administrative Assistant conspired with faculty member to submit fake computer invoices to Foundation for reimbursement.

• Some $17,000.• Also had a Purchasing Card.• Total spend was $1,308.• Asked to produce all receipts.


• Failed to produce receipts.• Probably because had other things to

worry about.• We deducted $1,308 from her last

paycheck.• Prosecuted both.• Judgment against both.


• End of the story?• Hardly.• Asked what we were doing to prevent this,

and tighten up on Purchasing Card program.

• How would the Purchasing Card program prevent someone from sending fake invoices to the Foundation.

StoresStores

• Most batteries are sold in December.• Most flashlights are sold in October.

• How to sell to ASU:– Doughnuts.– Hot dogs.

CashCash

• Always trying to balance receipts to register to inventory.

• Noticed that ran low on ice at the bar.• Person would bring in ice from another

machine.• Slipped a bottle of liquor from the package

store into the ice.• Sold over the bar, and the money

pocketed.

CashCash

• One bottle missing from package store was not noticeable.

• Money kept from drinks sold not rung through register.

• Each bartender had locked cabinet.• Empty bottles tracked.

CashCash

• Unannounced cash count of petty cash. • Contained neatly written IOU.• Person fired.

CashCash

• Unannounced cash count at a Copy Center.

• $1,100 in the safe.• In $20’s.• Proposed termination.• Hurt back the day before, out on Worker’s

Comp.

CashCash

• Went to a hearing.• Administrative judge did not want to hear

about the $1,100, or the timing.• Continued the person on Worker’s Comp.• No longer worked for us.

No Experience RequiredNo Experience Required

• Friend will only hire inexperienced bartenders.

• Because experienced ones know how to steal.

• One day, no choice.• Thought something wrong.• Could not figure it out.

No Experience RequiredNo Experience Required

• Looked for counting system.• Could not find one.• So, asked an investigator to review.• Sat there for a week as customer.• Reported that he also had a funny feeling,

but could not see the problem.• Rings up everything in one of the two

registers.

MoonlightingMoonlighting

• Payment to an individual to maintain computers.

• Also an employee.• Did a solicitation.• Employee won.• Same hours as regular job?

Mall VendorsMall Vendors

• Local copy center booth on the mall.• Introduced self as Prof Johnson.• Do you give rebates on course packs?• Sure.

VendingVending

• Gumball type candy machines.• Arizona Charities.• No contract.• And no such entity.• Confiscated.

Lots of Experience RequiredLots of Experience Required

• Wanted a marketer.• Highly qualified person who had worked at

a radio station.• Unfortunately, the station had closed, so

now here looking for work.• Total fabrication.• Fired when discovered.

Theft from LockersTheft from Lockers

• Woman stole credit cards from gym lockers.

• Nothing special about that.• Then approached students and said was

investigating the theft.• And needed to know the account access

numbers.

Purchasing AdventurePurchasing Adventure

• College did an RFP.• To select next standard server.• Sent e-mail saying that if firm kept their

local rep, they would not get the business.• Award announced.• Call from local rep to complain.


• Local rep could have grounds for a suit.• Met with College staff.• Advised to immediately write to all firms.• Advised to retain an attorney.


• College then came back with specs.• We did solicitation.• College wanted to make multiple award.• So they could steer business to favorite.• When this did not work, College asked if

could buy from State contract.• Sure.

Another Purchasing AdventureAnother Purchasing Adventure

• On data conversion job, we did a solicitation.

• Winning firm later released by College.• College decided could do the job

themselves.• Then hired three consultants.• This was not working either.


• Sent us a letter to say a firm was a sub-contractor in a State contract.

• We issued PO.• Firm fired three consultants.• One of whom ratted on them.• Big audit.


• Over spent $80,000. • Resignation in lieu of termination.• Referred to County Prosecutor.• Not enough to prosecute, but could sue.• Senior administration asked to prove no

one else doing this.• New approval policy for IT projects.

Profile of a FraudsterProfile of a Fraudster

• Male.• Intelligent – Challenged by “secure”

systems, bored with job routine.• Egotistical – Scornful of “obvious” control

flaws, “dumb” managers.• Inquisitive – would take pride in finding a

computer vulnerability.

Profile of a FraudsterProfile of a Fraudster

• A rule breaker – Takes short cuts, self-justifies breaking rules.

• A hard worker – first to arrive, last to leave, few vacations.

• Under personal stress.• Greedy or has a financial need.• Disgruntled, underappreciated.• A big spender.

Classic DefensesClassic Defenses

• Set the tone.• Deny opportunity – separation of duties.• Establish controls.• Audit.• Reward vigilance.• Be skeptical.

Web ResourcesWeb Resources

• http://www.consumer.gov• http://www.idtheftcenter.org• http://www.usps.com• http://www.bbbonline.com• http://www.consumerworld.org• http://www.fraud.org• http://www.sec.gov• http://www.acua.org

http://www.consumer.gov/

http://www.idtheftcenter.org/

http://www.usps.com/

http://www.bbbonline.com/

http://www.consumerworld.org/

http://www.fraud.org/

http://www.sec.gov/

http://www.acua.org/

Perfect ScamPerfect Scam

• Want something that does not leave an audit trail.

• Want cash.• Less likely to be reported.• Not too much jail time if caught.


• Get blue work shirt and pants.• Embroider “Bob”.• Make up receipt forms.• Go to department.• Tell them you are picking up computers.• Get staff person to sign the receipt.• Give them the copy.


• Sell the computers on e-Bay.• Only slightly below market.• Make sure you use an escrow account.• After all, you don’t want to get ripped off.


• Person in department only has their own name on the receipt.

• They might not even report it.

ThanksThanks

• Have fun!

• [email protected]

mailto:[email protected]

Documents

FRAUD ON CAMPUS