IIA – ACFE Fraud Seminar November 13, 2013 Cutting Edge Tips in Today’s World of Fraud

1. IIA – ACFE Fraud SeminarNovember 13, 2013Cutting Edge Tips in Today’s World of Fraud Christopher J. Rosetti CPA, CFE, CFF, HSG Community Focus | Statewide Impact | National Network

2. Agenda Introduction Metadata Trendy Websites Questions 2

3. To Good to Be True My Twin 3

4. Why You Are Listening to Me Today

5. Cuba

6. WTC

7. WTC

8. WorldCom Contact Information

9. Where Else FBI Academy Morocco, Puerto Rice, Greece, etc. Gracie Mansion CNBC 9

10. Frank Knows Fraud

11. So Does Bruce

12. Fraud and People Fraud is perpetrated by people! Fraud is oftentimes limited by one’s imagination There is no right way or wrong way to Perpetrate a fraud Technology assists the fraudster Technology assists the investigator 12

13. Abbreviated History of Fraud

14. Gregor MacGregor

15. George C. Parker

16. Carlo ???

17. Grammy Award Winning Artists

18. Pride of the Yankees

19. Bernie Madoff

20. Technological Advances Checks Telephone Photocopiers Fax Machines Computers Accounting Software Internet Smart Phones 20

21. MacPuter 21

22. WHY DO YOU HAVE TO BE ACTIVELY AWARE OF FRAUD? Fraudsters and criminals are doing more information and knowledge sharing than the anti-fraud professionals that are tasked with finding them. You can not assume that because you were a DOS expert in the 90’s that your computer skills are still sufficient to catch a fraudster let alone identify their schemes. Fraud comes in many different shapes, sizes, and colors. If you are not actively aware, you may be sitting right next to fraud and not even know it.

23. IRS E-filing Started in the 1980s 78,000 returns filed the first year Went nationwide in 1990 Decreased filing errors Decreased IRS postage costs Increased audit efficiency Increased opportunity for fraud 23

24. Metadata Hidden information embedded in computer files but not generally visible in the ordinary display or printing of the document Digital DNA Keeps track of changes to documents, including Word, Excel, Power Point Reveals information about the creation, alteration and transmission of a document Types of Metadata (MAC, Document and Digital) Identifies times and dates of changes Deleted text 24

25. Examples of Metadata Stored in Documents Your name Your company’s name The name of your computer Names of previous authors Document revisions Hidden text of cells Comments BST Valuation and itigation Advisors 25

26. Properties

27. Document Illustration Metadata regarding the last 10 users of a document is captured and stored and is valuable when an individual denies ever seeing a particular smoking gun document. 27 BST Valuation & Litigation Advisors

28. True Story Metadata reveals Merck edited out negative test results from Vioxx drug study during 2007.

29. Email Example Plaintiff claimed she was discharged in retaliation for making a sexual harassment complaint. Defendant produced a memo, dated before her complaint that listed her on a list of employees to be let go in a planned seasonal layoff She contested the authenticity of the email with the memo. The memo’s Metadata confirmed its date of creation, prior to her complaint. 29

30. Another Email Example Terminated employee fabricated an email to suggest that a manager with whom she had a romantic relationship had made the decision to terminate her. Metadata exposed the terminated employee as the author of the document. 30

31. It's risky, of course---if we're caught, it could mean many hours of community service.

32. Williams v. Sprint/United Management Co. Terminated employees brought a class action suit Sought Excel spreadsheets with all Metadata intact, including embedded formulae Court Ruled the Metadata was discoverable 32

33. Extra Credit

34. What to Know About NFP Frauds NFP are more susceptible to fraud than other organizations 85% of all frauds involve asset misappropriation Cash is the most common asset misappropriated Cash is primarily misappropriated via: Purchasing Fraud Schemes Expense reimbursement schemes 34

35. Trend Setter

36. ACFE 2012 Report to the Nations • Asset misappropriation schemes • Most common—87% of cases • Least costly—median loss of $120,000 • Financial statement frauds • Least common—8% of cases • Most costly—median misstatement of $1 million • Corruption schemes • Just over one-third of cases • Median loss of $250,000

37. What They Do Create Shell Companies Create Fictitious Invoices Create Fictitious Websites Create Fake Telephone numbers Create Virtual Operators Create Fictitious Resumes 37

38. What to do? Listen to me! QuickBooks Edit function Review cancelled checks Review credit card statements Require credit card statements as documentation 38

39. THE INFORMATION & TOOLSONE STOP SHOPS

40. Book of the Month Club

41. Interesting Websites http://www.alibisnpaybacks.com/ www.falseexpenses.com www.alibinetwork.com www.paladindeception.com BST Valuation & Litigation Advisors

42. What They Offer Receipts on authentic thermal paper!!! A toll Free hotel telephone number confirming your checked in at the hotel Rescue calls to get you out of a meeting Virtual doctors offices Fake travel documents and confirmations Virtual employment Shopping service 42

43. Internet Alibi 43

44. Another Web Site’s Services Have alibis validated by live operators Choose between local or out of town alibis Call in sick service Escape a date Printable doctors services Virtual doctors services Virtual travel agency And prepare just about anything you can imagine!!! 44

45. Advertisements Politicians have spin doctors, celebrities have publicists, corporationshave lawyers and public relations departments, investment banks have analysts, now regular people have ALIBI NETWORK. Visit our E-Store to help us protect your interests. 45

46. More Services Call in Sick Service. Call In Sick Service provides clients with a cast-iron sickness alibis. We would call a place of your work for you and pretend to be your doctor /dentist or a spouse, etc. and tell your boss that you can’t come in. So you will not have to fake it on the phone! This is even useful for our clients who are self-employed – freelancers, business owners, etc. Escape-a-Date Service. You were looking forward to a perfect date when she suddenly told you she was married. Our service allows you to set-up a save me from my date phone call at a predetermined time. We will call you at the time you wish and if married dating is not something you are into, we will set the tone for an immediate getaway. 46

47. These People Mean Business • Your Problems: • You don’t have the resources (money, people, time) • You believe your auditors are the Special Forces of Forensic Accounting • You are very trusting • You believe that fraud could never occur because you have internal controls • These people are very convincing and/or confrontational • The Board is not familiar with their fiduciary responsibilities or the possibility of fraud • You don’t have the big guns 47

48. Shell Companies

49. Create Fake Website

50. Creating Fake Websites Choose a domain name (e.g., IAMAFRAUDSTER) Choose a web host (e.g., Go Daddy) Build your website Get more detailed info on www.ehow.com 50