ITS 4450 - Fraud Risk Assessment Tools and Investigation


Chapter 9, Conversion Investigation Methods

This lesson presents material from chapter 9. Objectives important to this lesson:

  1. Why we investigate conversion
  2. Using public records
  3. Using the Internet
  4. Calculating net worth
Concepts:
Chapter 9

The chapter opens with a story about another huge fraud, this time committed by the founder of a grocery/pharmacy chain. The point of the story is his pattern of continued spending and continued stealing to support more spending. The author suggests that constant extravagance may be the only sure sign of a fraud that is designed to produce a minimal paper trail. This takes us to the chapter's topic, looking for the conversion of stolen money or financial instruments into assets owned by the thief.

The text begins the lesson by telling us we may search for converted assets to show the scale of fraud, and to establish a level of spending that exceeds the official income claimed by an embezzler. (Embezzling usually means stealing money or financial instruments, but it can mean the theft of other assets as well.)

Searching for information often begins with searching for identifying information on people. The text recommends several federal entities for such searches:

  • Department of Defense - you can search for military records, but have to search each branch individually
  • Department of Justice, Federal Bureau of Prisons, Secret Service - typically, these databases can only be searched by law enforcement officers
  • Social Security Administration - useful for records on live and dead persons
  • U.S. Postal Service - useful when investigating mail fraud

The text recommends similar state and county resources, extending the search into clerks' records about marriages and property ownership. Of course, this requires searching in venue that holds records for your subject, which may mean guessing about counties.

A nice set of "public" databases appears on pages 267 and 268. I put quotation marks in the last sentence because most of these databases require registration and fees to access their data.

For searches you can conduct without paying fees, the text offers some advice about searching more effectively with Google and other search engines.

  • put quotation marks around words when you want to search for phrases (like names) that must appear together; this will reduce the number of hits on only one word in the phrase
  • use a minus sign followed by a word or phrase you want to exclude from your searches
  • search the Internet Archive when you want material that may have been removed from current sites

As we have discussed, determining the net worth (assets - expenses and liabilities = net worth) gives us a starting point to show that a person is living beyond their means. When they are living far beyond their means, we should be suspicious of undeclared income. The basic logic is to find out how much the person earns, how much they spend, and where the difference is coming from if expenses are much higher than earnings. An amateur criminal will often confess to their offense when confronted with the math behind this investigation. On page 270, the text presents an example accounting of the changes in net worth over three years for a perpetrator discussed in chapter 2.

For a more recent example of a documented fraud, I offer this promotional clip for an HBO special:


Assignments

  1. Continue the reading assignments for the course.
  2. Complete the assignments and class discussion made in this module.