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:
Why we investigate conversion
Using public records
Using the Internet
Calculating net worth
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
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
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:
Continue the reading assignments for the course.
Complete the assignments and class discussion made in