Anatomy of a Fraud Investigation by Stephen Pedneault

Author:Stephen Pedneault
Language: eng
Format: epub, pdf
Publisher: John Wiley & Sons, Ltd.
Published: 2010-05-11T00:00:00+00:00

I shut down my laptop and turned my attention to the first box in the room. I emptied the contents on a long table and began sorting the records. The box contained bank statements for several bank accounts at the bank primarily used by the division. Based on the volume of transactions, I determined that at least one of the accounts was the division’s primary operating checking account. I started a pile for statements containing that account number, and segregated the other statements and information by account number, resulting in several growing piles on the table. Once I had sorted all the contents into piles, with one pile designated for nonspecific information, I re-sorted the operating statements into sequential order by month and year. I checked through the dates of each statement, and it appeared I had all the monthly statements as far back as the last fiscal year-end, which made sense since the division’s files should have been maintained by fiscal year.

Anxious to see if there was any activity relating to United Alliance within the operating account bank statements, I started scanning each month’s statement, starting with the earliest month. I scanned the deposits, checks, and electronic withdrawals, looking for any activity with United Alliance. I found nothing in the first month. I continued to the second month, and proceeded month after month until I had reached the end of the stack. There was nothing paid from the operating account to United Alliance during this fiscal year.

Still anxious to see if any payment had ever been made directly from the division’s operating account to United Alliance, I found another box that contained financial documents. I put the box contents on a separate table and sorted the contents. I found similar statements for the same bank accounts, but for the last fiscal year. I sorted the operating statements by calendar month, and started reviewing where I had left off, working backwards this time from the latest month to the earliest month. It wasn’t until I reached the eighth or ninth statement, which would be within the first few months of the last fiscal year, that I identified an electronic payment made to United Alliance on a statement. I knew a common method to process credit card payments was to have them withdrawn electronically from the bank account, and had a hunch that if I looked long enough I would find activity linking the United Alliance account to a bank account.

The payment was not a large payment, merely a few hundred dollars, not nearly the dollar level I had envisioned based on the information that had been provided by the informant. It was, nonetheless, a payment, and in order for me to link the United Alliance account to a bank account belonging to the division, I needed to find only one transaction. The next question I had was how the bank account could have balanced and reconciled within QuickBooks without the identified transaction on the bank statement.

I retrieved my laptop and booted it again, expecting to find one of two things.

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