Episode 103: Interviewing the Fraudster with Kelly Todd, CPA, ABV, CFF, CFE & Lindsay Gill, CFE
In this season of The Data Sleuth Podcast, titled "From Numbers to Narratives," guest host Justin Burns, tackles topics including FBI Investigations, Anti-Money Laundering, Family Fraud, IRS Investigations, and more. In each episode, Justin is joined by an industry expert to help tell the story behind the numbers and explore the latest in fraud detection and prevention.
In today’s episode we discuss embezzlement cases with Kelly Todd, CPA, ABV, CFF, CFE and Lindsay Gill, CFE. In this episode, Justin, Kelly, and Lindsay discuss:
· Interviewing subjects as a team.
· Why the setup of the interview space matters.
· An investigation into a skimming and credit card scheme, and the creative way the business owner got the subject out of the office during the investigation.
· The story of a fictitious revenue case.
GUEST BIO
Kelly Todd is the President of Forensic Strategic Solutions, LLC and the member in charge of investigations. Ms. Todd has a broad range of forensic experience including financial and white-collar investigations, fraudulent financial reporting, accountants’ malpractice, and the calculation of economic damages in a broad range of personal and corporate disputes. She has extensive experience conducting interviews and has secured numerous confessions.
Lindsay Gill is the Director of Investigations at Forensic Strategic Solutions, LLC. Ms. Gill has a breadth of experience in data analytics, computer forensics, internal investigations, anti-fraud programs and controls, fraud vulnerability assessments, and investigative financial consulting. She has experience with the latest interview techniques and has secured numerous confessions.
Email: kelly@forensicstrategic.com lindsay@forensicstrategic.com
LinkedIn: Kelly Todd Lindsay Gill
RESOURCES MENTIONED IN TODAY’S EPISODE
To learn more about the Data Sleuth® Dashboard for professionals, visit: datasleuths.com/pro
Order your copy of Leah’s book, Data Sleuth: Using Data in Forensic Accounting and Fraud Investigations today on Amazon!
CONNECT WITH WORKMAN FORENSICS
YouTube: @WorkmanForensics
Facebook: @wforensics
Twitter: @wforensics
Instagram: @wforensics
LinkedIn: @workmanforensics
CONNECT WITH JUSTIN BURNS, CPA, CFE
LinkedIn: Justin Burns, CPA, CFE
Transcript:
Leah Wietholter:
Hi, I'm Leah Wietholter, and this is the Data Sleuth Podcast. In this season of the Data Sleuth Podcast, From Numbers to Narratives, our host, Justin Burns, the director of operations for Workman Forensics, discusses a broad range of forensic accounting cases from embezzlement to money laundering, fraud against family members and so much more. In each episode, he's joined by an industry expert to help tell the story behind the numbers.
Justin Burns:
Thank you, Leah. I'm Justin Burns, and I'll be your host for this season of the Data Sleuth Podcast, From Numbers to Narratives. Together with some amazing guests, we'll take you beyond the spreadsheets and into the human side of fraud investigations. Let's dive in to today's episode. On today's episode of the Data Sleuth Podcast. We'll be speaking with not one but two guests. We'll be speaking with Kelly Todd and Lindsay Gill from Forensic Strategic Solutions about interviewing subjects in forensic accounting investigations. These two work as a team, and they've interviewed multiple subjects together as a team. And they'll be talking to us about that dynamic when it comes to interviewing subjects. They both have a broad range of forensic experience, including financial and white-collar investigations, fraudulent financial reporting, accountants’ malpractice, and the calculation of economic damages. Kelly Todd is the president of Forensic Strategic Solutions, and Lindsay Gill is the director of investigations. Now, let's hop right into the episode and speak with both of them because they've got some great stories to tell us.
Justin Burns.
Hi Kelly and Lindsay. Thank you guys both for joining me for today's episode. We've got a bit of a different setup today for people who are watching or listening. We have not one but two guests. The reason for this is because the two of you work together as a team. You guys work on forensic accounting investigations together, and I'm looking forward to hearing some of the stories that you two have from your cases. You both work for Forensic Strategic Solutions in the Birmingham, Alabama office. You work with all sorts of sectors: professional services, insurance companies, banks, accounting firms, government agencies, and corporate stakeholder disputes. I know you guys have some amazing stories from your investigations, and I can't wait to hear 'em. So, I don't want to waste any more time. Let's just jump right in. First, I know you do all sorts of work, like I just mentioned for a variety of clients, but I want to talk to you specifically about interviewing subjects in your cases and how that process works. Can you share a story and go into the interviewing process when there's two of you involved?
Kelly Todd:
Yeah, absolutely. So, I'm going to take those in a little bit of a reverse order. One, like you said, Lindsay and I have worked - it's been over 20 years on investigations together - and we both worked with different people. But we have over the 20 years have worked on many, many investigations together. Investigations usually start from big picture and then work their way into the perpetrator. And I think one of the reasons that Lindsay and I work so well together is we both have different strengths. Lindsay's very detail oriented. I'm very big picture. So, when it comes to interviewing, well, when it comes to the whole investigative process, we play so well off of each other because of the big picture detail and then the contrast with the detail and interviewing is no different. And what's so great about it is that we play off of each other so well.
Interviews, and you'll hear this as we tell a couple of stories, but sometimes you come to these odd moments in an interview. And one of us, we might get burrowed down in the details. And having a second person there, especially that you've worked with and have rapport with, can be so helpful to kind of pull that back out and reroute the interview and that type of thing. But anyway, so beyond that point, just focusing on an interview in general. Before we get into a story, there's really four things to think about, and we'll kind of talk about those as we go through these interviews. But that's the baseline. Building rapport with the subject. Silence is actually golden. And then just being open and having open communication and open body language and that sort of thing. But the story we want to start with is the story of Judy.
And Judy is probably the not probably, she is absolutely the quickest confession that we've ever gotten. And it was like in 10 minutes, absolutely mind blowing. And this was a little bit of an unusual situation because like I mentioned with an investigation, you usually start big picture and then work your way in. And along the route you talk to or you have conduct a lot of interviews, information seeking interviews, and then you work your way to the confession seeking interview. In this case, we didn't have that option. We got to interview Judy once we got one bite at the apple with her. We did our information seeking interview at the same time that we did our confession seeking interview. And so, the way it was set up was important. Building the rapport with her was important because we'd never even met Judy before we interviewed her. But I'll let Lindsay get into the detail of the story. Lindsay, if you want to kind of…
Lindsay Gill:
Yeah, so let me set up a little bit about the story of Judy. We were contacted by a private investigator on behalf of a dermatologist. And how this really all started is the dermatologist and the nurses and employees in her office had noticed that money was going missing from their purses. And so, this dermatologist said, you know what? I'm going to get to the bottom of this. She contacts a former FBI agent who was now working as a private investigator. And so, she contacts the investigator, comes in, does lots of interviews, and this theme starts arriving. Everybody's talking about Judy. Judy is the bookkeeper at the dermatology practice. And not necessarily about Judy taking money from the purses, but there's something that's just not right about Judy. And so, the private investigator recommends that the dermatologist engage someone like our firm, a forensic accountant to come in and do some work.
And one of the themes that keeps coming out about Judy is that Judy's constantly in our office working on her 10 key. It's funny, we don't hear often about a 10 key anymore. Everybody generally talking about working on their computer, but the adding machine is going off regularly in office. And it just started to trigger some warnings. So, the private investigator reaches out to us and says, Hey, can you do some work? We become engaged. And with any investigation, that first phase is we've got to get records. Well, the dermatologist is a very gracious individual. She has a close relationship with this bookkeeper, and so she decides so that we can conduct our work in this covert manner. She's going to send Judy, she, the dermatologist, is going to send Judy on an all expenses two-week paid cruise.
You heard me. So, there's some concerns about this bookkeeper, and the doctor says, you know what? I'm going to send you on vacation. I'm going to pay for it.
Justin Burns:
We need her out of the office.
Lindsay Gill:
Exactly.
Justin Burns:
So out of the dermatologist's own pocket.
Lindsay Gill:
Out of the doctor's pocket. So, the doctor sends Judy on the cruise, and in that time, so this is two weeks cruise, so we've got two weeks to get our work done. And as it's a dermatology practice, we knew we needed to get straight to the jugular, the information we needed. So, we very quickly made a request. We got a backup of their QuickBooks file, which is where they were keeping all their financials at the doctor's office. So, we got the patient transaction detail from their patient management system. And then we got copies of all the bank statements, canceled checks, and deposit detail. We didn't just get copies of the deposit slips, but we've got copies of all the items that were deposited. So now we undertake the task of building this massive database to reconcile all of these records: bank statement deposits, the patient management system, and then QuickBooks. Trying to put all these pieces of the puzzle together to say, what's going on? Why is Judy on her adding machine? And why that was so important is as with many doctor's offices, the front desk is that first line that any patient interacts with. They're the ones that are collecting copays in any same day services. Most doctors' offices are accepting insurance payments at a dermatology practice. There are tons of procedures and products that are not covered by insurance, and so they are cash pay at the date of service. So, your front desk is the first line of interaction with your patients and their payments.
Justin Burns:
And you're saying cash pay, like actual physical cash, not with a card or a check?
Lindsay Gill:
It's both. It's both. Both. But with a lot of dermatology practices, we found this to be true with this doctor and some other dermatology practices that we've seen. It's a lot of green paper money cash that is coming into this doctor's office. When patients get injections, when they're buying product that's not covered by insurance. And because these are big things, a lot of people save up money to be able to have these services, and so they're paying in cash. And so this practice, how they handled it, patient comes in, they pay at the front desk. The front desk is responsible for entering it into the system, and then at the end of the day, closing out the system and preparing the deposit slip. So these front desk individuals, they run their closeout report from the system. At the end of the day, the two individuals that sit there, they count up the money, they collected both the cash, the checks, and the credit card slips to total it out.
They make sure they reconcile to the system, they're checking each other. And then at the end of that, they write up the deposit slip and they're using a two-part carbon receipt book or deposit book. And so, at the end of the day, they list out the exact amount of cash they're including in the deposit and list every check individually that they collected. They both look at it. Make sure it agrees. They take the top copy of that deposit slip, the cash and the checks, and they put it in a bank bag, and then they drop that in the safe in the bookkeeper's office. The copy that remains in the book, which is the yellow copy in this instance, stays in the book, and they keep that at the front desk. Well, as we're going through our work and asking for information, they said, oh, by the way, we have these deposit slip books, the yellow copy, the carbon copy. And we say, can you to us by the way? They do. So that's one more piece of evidence that we've now got. Now we're working fast and furious building the database and reconciling. What we find is that every time there's cash recorded in the patient management system, there was cash included on the deposit slip prepared by the front desk. All the checks for that day are there. All the cash for that day, but that's not the deposit slip that clears the bank.
What we see clearing the bank is a summarized deposit slip. Remember I told you the front desk individually listed every check and put the lump sum of the cash. Well, now we're seeing a deposit slip that just says see list or see copy. It's got a single amount written on it and there's no cash, and there's no cash-in ticket included with the bank statement detail.
Justin Burns:
So, she's just holding onto all that for herself.
Lindsay Gill:
Someone is holding onto the cash. It's never making it to the bank. Now, we've talked with a few people at the doctor's office. But as Kelly said, we didn't have the opportunity to talk with the bookkeeper because remember, she's on her paid cruise.
Justin Burns:
She's on a cruise.
Lindsay Gill:
She’s on her cruise. So we've now built out, we've worked through all of the supporting information that we had, and we noticed that every time there's cash on the front desk deposit slip, that deposit slip doesn't make it to the bank. And there's a replacement deposit slip. And in those instances where there's a replacement deposit slip, we also noticed that the checks are commingled from various days. Where traditionally it's all the checks that were received today in the accounting system or deposited on the same day. The other thing that we noticed is we also noticed that there are multiple payments to American Express that clear the bank account every month. So, we ask the doctor for a copy of all the American Express statements for the practice. We also asked for her personal one. Well, we noticed there are some payments to American Express that don't post to the doctor's account or to the practice's account.
Now, the doctor was having to make multiple payments on her account for the practice every month because she was buying a lot of her products through American Express. And she would hit her limit, pay down the account, and then make more charges. So, in this instance, this is one of those red flags that we talk about that just because you see something that doesn't look right, doesn't mean it's a problem. So, the fact that we saw multiple payments to American Express in a single month was a flag for us. Some of those posted to the practice and the doctor's account. But there are a few that were unaccounted for. So now we've built up these binders of evidence that have all the support for these cash payments that were received in the system, added to a deposit slip by the front desk, but never make it to the bank. And then the other set of information we have is payments to American Express that never post to the practice’s account, nor post to the doctor's account. So now we're prepared to go and do some interviews.
Kelly Todd:
So Judy's now back from her cruise.
Justin Burns:
Nice and tanned. Yeah, so beating up the drinks packages for two weeks.
Lindsay Gill:
She lived it up for two weeks. No doubt.
Justin Burns:
I mean, if you got to get fired, send me on a cruise. That's a good start. That's a good severance. She didn't know it was her severance at the time.
Kelly Todd:
Absolutely
Justin Burns:
Pretty nice.
Kelly Todd:
No, Judy was completely clueless of what was going on. And in fact, I think the important thing is she had no idea that Lindsay and I existed.
She knew about, of course, what was going on with the private investigator and those things before she went off on her cruise. But when she got back, what the story was told to her was that the doctor hired a couple of accountants. Here we are, me and Lindsay, to help out with some internal controls. And so, we scheduled an interview with Judy. Now, the really important thing is because we'd never talked to her, and we had - like Lindsay described - these binders. I mean, I don't know, 10 binders, huge binders full of evidence. All the supporting evidence of all of the transactions. All the deposits that she had taken money from. But we needed to have her explain to us how things were supposed to work, even though we knew what happened. We needed to get her on record as how things were supposed to work.
So we scheduled an interview with her, And we started out, And I'll tell you, number one, the reason we got a confession from her was because of the way we set the interview up and the rapport that we built with her. So the interview was basically, I guess Lindsay, it was probably about a total of two hours, but the first hour, hour and a half was really that information seeking part. And we did not interview her in the doctor's office. We actually booked a room, a conference room at a hotel. So that we could be away and private and all of those things. But the way we set it up and the way we sat down with her, we were asking questions that would lead any bookkeeper to believe that we were pursuing policies and procedures and understanding how controls worked. And all of those sorts of things. And we just chatted with her. And this goes back to one of the interview things I pointed out in the beginning is just open conversation, open dialogue, and that's the way we treated it.
Justin Burns:
Yeah. So you mentioned just how you had the room set up and all that. So set the stage for us. How did you have it set up in a way that it's a hotel conference room, but she still feels comfortable enough to talk to you? Just how did you go about getting it set up?
Kelly Todd:
Yeah, as you can imagine, no hotel conference room is very warm, inviting, right? Very cold. And it had a large kind of very sterile conference room. Big chairs, bunch of chairs, and there was just the three of us. But Lindsay and I work very hard to set up and to plan for our interviews. And that includes, you don't always have the perfect situation. You don't always have the perfect room set up. But the way we position ourselves at the end of the table so that there's, Lindsay had the table between her and Judy because Lindsay's avidly taking notes on her computer. But I sit at the end of the table, kind of pulled back from the table. So that there's nothing between me and the subject that we're interviewing. But the general setup of the room. The beautiful thing was, remember, we had all of these binders of our evidence, but we didn't want Judy to know that that existed because remember, Judy thinks that we've just shown up on the scene.
Justin Burns:
You don't want her to walk in and see them all already.
Kelly Todd:
Exactly. So we had them all on a luggage cart back in a little alcove. So when you walked into the room, if she just walked to the table, she would never see them. And so, we had them tucked away so she couldn't see them. And it's important to understand as well, just in the interview situation, especially in a confession seeking interview, we never want the subject to feel like they've been entrapped. So, the way we didn't want the table between Judy and the door. We didn't want either one of us between Judy and the door. We wanted Judy to always feel like she could get up and walk out of the room, which she could. So, other than that, there wasn't a whole lot that we could do about that room. But going back to the way we're dressed, we knew that it was going to be a casual office situation.
So, we went dressed similar to how we would've expected Judy to dress and that type of thing, so that we're not, one, overbearing, but more importantly so that we can build that rapport. So that she can feel comfortable with us. And I think the other important element leading up to getting to the hotel room or to the hotel itself, was we took separate cars. So that, because Judy said, oh, you want me to ride with you? We're like, no, no, no, no. We need to go ahead. We're going to go to lunch. We'll meet you in about 45 minutes. Again, because we didn't want her to feel entrapped and without a way to get out of there. So we took separate cars. But anyway, we get into the room, we sit down, and we just start talking. And literally, as I like to put it, we were three girls chatting about accounting.
That's it. And just very open. She became very comfortable with us. Shared with us very openly how she did her work, how things were supposed to flow. But the important element was that we confirmed in that part of the interview that if we saw see list or see check on the deposit slip where all of the checks were combined instead of detailed that she was the one that actually did that deposit slip. And so, I don't know, Lindsay, we probably confirmed that with her. I'm surprised she didn't think it was strange. Because we probably said now, now let me make sure I understand. When I see, see list or see check on the deposit slip, you created that deposit slip, right? She said, oh, yeah, yeah, I did that. Yeah.
Lindsay Gill:
So as we were going through getting the lay of the land, how the office worked, who did what was the responsibilities, she had already told us that it was the front desk responsibility to prepare those deposit slip. So we just casually said, well, do you ever prepare a deposit slip? Thinking she's going to say, no, that's not my job. She says, oh, absolutely yes. Well, how do we know when you do it versus when the front desk does it? And so she straight up confirms that when we see these see list, see copy, see check, whatever it is that she does those, and she attaches a copy of her adding machine tape to the back of that so that we know what makes up that summary. So she stepped right into what we needed her to answer for us.
Kelly Todd:
So we eventually, I don't know, about an hour and a half in came to a natural breaking point, probably a good time for a break. Lindsay and Judy get up and leave the room. I take the opportunity to pull the binders out of the corner and put them all over the table. And now we're switching to the confession seeking part of the interview. Judy comes back in, sits down. Again, we're still three girls talking about accounting, but we flip it pretty quickly. And it was at that point that I said to her, I said, Judy, well actually we've been doing a little bit of work over the last couple of weeks. And we've got a couple of questions. And so open the binder and say something to the effect of, now let me confirm. Let me make sure that I understand. So when we see deposit slips that say see list or see check, that's you, right? Yeah. Yeah, that's me. Okay. Well, Judy, can you explain for me, and we're just flipping pages, why every single time I see list or see check, there's never any cash included with the deposit. Silence. And she comes up with something. Well, but look, and here's more. And just keep flipping and flipping and flipping. And then she just sits there and I said, Judy, can you explain it to us? Silence.
And finally she says, I know this doesn't look good. Okay, Judy, if it doesn't look good, how does it look? Well, it looks like I stole the money. Oh, well, Judy, did you steal the money? Yes, I stole the money. And then from there, she just spilled it. She told us everything. She gave us her bank statements. She allowed Lindsay right there on the spot to log into her bank account and download her statements.
Lindsay Gill:
Downloaded her American Express card statement. We went through all of it right there. But like Kelly said, the first time, she was quiet. That silence is golden. We just sat there.
Justin Burns:
Just let the wheels turn.
Lindsay Gill:
And it really took about from the time we swapped from an information gathering interview to a confession seeking interview, there was about 10 minutes of us going through evidence and asking her before she said, I stole the money.
Kelly Todd:
But it goes back to the rapport, and she probably would have never given it to us that quickly had she not trusted us and felt comfortable with us. So, it's so critical in an interview.
Justin Burns:
Yeah, I mean, without that rapport building, she could have, like I said, she had every right to just get up and leave. Like, nah, I'm not talking to you guys. Get up and leave. Or say, no, I'm going to go and I'm going to talk to a lawyer or something like that. And then you're not getting your evidence then. But building that up to her where she's already told you this is how it works. And then when you show her, well, I found that sometimes it doesn't work that way.
Kelly Todd:
You just made a great point that she could have gotten up and left. She could have said, I'm going to leave. I want to talk to my lawyer. And most of the time, the subjects that we interview in a confession seeking interview say those things. But the amazing thing is, again, silence is important. Okay, well, you can leave if you want. And then we ask another question. And then they start talking. They never get up and leave. They never call their lawyer. The bottom line is that people inherently want to help. Even the worst of the worst want to help. It's one of the tricks to detecting deception is most people want to tell the truth. It's when they don't tell the truth that they start the tells in that type of thing. But yeah, Judy fell right in it.
Justin Burns:
Yeah. So I mean, you're talking about what you said 10 huge binders worth of information. What sort of timeframe did this cover? Was this years and years?
Lindsay Gill:
It was several years, and it had gone back to within months of her starting with the practice, and obviously we're limited to what the bank has records for. I think we may have done, what, four years, Kelly? Five years? Do you recall? It had probably been going on long before then, but we were limited to what the records the bank had available for us, because getting that deposit detail was critical in being able to see everything that came into the patient management system actually made it to the bank as long as it was a check. And so if we didn't have that detail from the bank, we couldn't go beyond that.
Justin Burns:
What was the total dollar amount between the theft of cash and the credit card?
Lindsay Gill:
I don't remember, Kelly. I want to say it was over 500. Everybody, once we finish a case, it goes out of our bank. I want to say that the cash was close to $500,000, and there was probably about another 150 to $200,000 on payments to her credit card on top of that.
Justin Burns:
Yeah, that's pretty significant. Was this handled through a civil settlement or was she turned over to authorities? How'd that go?
Kelly Todd:
Judy served about five years in prison.
Justin Burns:
Oh, okay.
Kelly Todd:
Yep. Yeah. Lindsay, you want to fill in?
Lindsay Gill:
The day after we got Judy's confession, we went and presented our findings to local law enforcement. We shared with them all of our evidence, her signed written confession. One of the things that we do after we get a confession in an interview is I sit down with the individual and write up their confession. And so we had a confession signed by both Judy and myself, and Kelly had witnessed it. We turned that over to law enforcement with all of our evidence, and they pursued a case against her, and they were incredibly successful. They were able to get, I think she pled out after her attorney was made aware of all the evidence and documentation that we had and served five years.
Kelly Todd:
Well, and there's something else in there that was really critical. So, she did plea, but not before she tried to say that we entrapped her and that we failed to read her rights. And as CFEs in a lawful investigation, as long as we are not working at the direction of law enforcement, we don't have to read anybody their rights. And the other good news is that provided that we're in a jurisdiction with one-party consent, we record our interviews and we had to produce our interview to law enforcement. And so then it was ultimately turned over to the prosecutor. And they were able to prove, because we say it, we set the stage during the interview and say things like, yes, you can get up and leave anytime. Or we might describe the room and that she could get up and walk out right then.
Lindsay Gill:
The door is right there. It's just right behind me. You’re free to leave at any time. All of that was recorded and it was golden for the prosecutor because there was nothing for her to hide behind at that point.
Justin Burns:
Yeah, and I mean, that all goes back to just how you set the stage, just how you set the room up, not placing yourselves between her and the door, not placing the table between her and the door. I mean, just she can get up and go as she pleased.
Lindsay Gill:
And the fact that we were aware that it needed to be verbally communicated in that recording. That we say the things that set the stage for somebody that can’t physically be in the room, that can't see what we see. And so being descriptive in the setting and how we're all positioned was really important. And like Kelly said, verbally saying, you're free to leave at anytime. If you want to call your attorney, you can call them. All of that is there. It's an audio cue. And we were protected in that way.
Justin Burns:
Man. I just keep going back to the cruise, like great. The story's got so many great pieces in it, and I'm just like, I mean, they sent her on a cruise to get her out of the office. There's so many other ways to do it, but wow, okay.
Lindsay Gill:
She was like a family member to the doctor. She was like a second grandmother, or I guess a third grandmother to the doctor's children. And they had traveled together before. So it felt like a natural gift. I don't know that I'm making that choice to send somebody on a paid vacation that had potentially stolen money from me, but it was a natural thing for her to do that wouldn't raise any flag or concern with Judy.
Justin Burns:
Yeah,
Lindsay Gill:
She's generous.
Justin Burns:
Alright, so yeah, very. I think that's a good spot to take an ad break. Everybody just recouped from that story.
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Justin Burns:
All right, we're back from break with Kelly and Lindsay. Before the ad break, we heard stories about one of their investigations at a dermatology clinic where the perpetrator was sent on a two-week long cruise to allow Kelly and Lindsay to do their work before they ultimately interviewed the perpetrator. The interview process is something I'm very interested with you guys. We heard all about the setup of the room, having all the details ready to go for that ultimate confession, building the rapport leading up to the perpetrator, ultimately confessing. I'd love to hear another story from one of your investigations, and especially one that has to do with the interview process.
Kelly Todd:
So I think one that is probably a great bookend to the Judy story, because this one is a little bit more traditional, the investigation process was a little bit more traditional. We had all of the admission, excuse me, the information gathering interviews that took place and started big picture, 30,000 foot with financial statements and trying to identify what was going on. And that was the story of Jennifer. And Jennifer was a bookkeeper. Bookkeepers, I don't know, you got to be careful. Watch out for those bookkeepers. But Jennifer was a bookkeeper at a professional services firm, and Lindsay, you want to get us into this one?
Lindsay Gill:
Absolutely. So we were contacted by the CFO of this professional services firm, and they were set up that with different departments within the press professional services firm. And they had a concern that they had a line of credit that was growing and growing. And they had traditionally gotten the line of credit to help them through the first couple of months of the year. They would pay out profits at the end of the year. So they needed some cash to get going at the beginning of each year. Well, it got to the point where they weren't able to pay off that line of credit. That it just kept growing and growing and growing. And it was a little concerning. And so they brought us in and said, Hey, can you help us figure out what's going on? So our first pass was let's just do some high-level analytics. Let's look at some financial statements and just run some of those financial metrics and see if we can target in on a specific area. And we see that they have this massive growing accounts receivables. And so we start asking some questions. I think we had, Kelly, correct me if I'm wrong here, direct conversations with the board at this time.
Kelly Todd:
Yeah, the board had hired us, and we were in total communication with them. And we did these analytics and went to them and said, Hey, tell us about this growing receivable that you got. And they looked at us and they said, what receivable?
Justin Burns:
Whoa.
Kelly Todd:
Yeah. And I said, well, don't you see the financial statements on a monthly basis? And they said, no. Like, oh, really? I mean, you don't see the financial statements. No. Okay. So what do you see on a regular basis? Well, we see some metrics that the CFO gives us on a monthly basis, but we don't ever see the financial statements. So you can imagine how this problem grew and nobody caught it.
Lindsay Gill:
We have this conversation and the board's like, no, we know nothing about this. So we dig a little bit deeper into this receivable and we see that the receivable is solely from this one single department. And so we start doing interviews of the different individuals at this professional services firm. And so what's interesting is this one department operated independently of everything else. They had a corporate accounting department, but this one department had its own controller. So we had a controller for the big corporate professional services firm. But then this individual department had its own bookkeepers, controllers, all those things. So we start conducting information gathering interviews, how do you function? What do you do? What systems do you have? And as we go through these interviews, we learn from both corporate accounting and from the department's accounting that all of their systems are independent of corporate accounting. So they are doing their own stuff and reporting up to corporate accounting. They're doing their own receipt of payment. They're doing their own deposits. And then they report that up. The system that they were using wasn't even integrated with corporate accounting. They were relying upon - get this - an email communication from the bookkeeper in the department to the corporate bookkeeper to get that information entered into their system.
Terrible idea, terrible idea. So we get this understanding of what's happening, how these things flow. And so again, we're now to the, we conducted these interviews, got an understanding in it. Some of these people we interviewed two and three times just to really get an understanding of how things work. So now just like in all our investigations, we're now requesting information and data. And so we begin saying, okay, we need access to the corporate systems. We need access to the department systems. We need bank statements for both corporate and for the department. And so, we start doing our work. Analyzing this information, seeing if we can figure out what's going on. But remember I also said that the department is reporting up to corporate accounting via email. So we made a request from IT at the corporate level. And I dunno that we disclosed that to the department.
I think that was kind of kept quiet. We said, Hey, we need all of the email communication from this department. And so thankfully they had great retention policies and we were able to get all of the sent, received, deleted all of the emails from the department's employee. And so, we start digging through those and sure enough, we can see the emails where the department is reporting up to corporate accounting. Well, as we learned in our interviews, there's the bookkeeper of the department. But there are clerks that work under her. So as payments are received in from their customers they're split up, I think it was alphabetically. So this clerk had customers A through F, and then we had G through whatever. So we had a couple of different people doing it. So as the clerks would receive payments and post payments to the system and then report it up to their bookkeeper, we also had those emails. And so what we find is we find that the clerks are doing their work, they report up the bookkeeper for the department, then reports up to the clerk or to the corporate accounting.
But the bookkeeper isn't reporting exactly what her clerks are reporting to her. She's making changes. And so what we can see, because we've got all the clerk's emails and all the bookkeeper's emails, and we've got the bank statements and we've done all this work. The clerks report that they see receive a hundred thousand dollars, or we'll say they received a thousand dollars from customers, they report that via email to the bookkeeper. The bookkeeper opens the file edits, adds a zero, and then sends it up to corporate accounting saying, Hey, guess what? We got $10,000. And then report that. But there's only a thousand dollars and she's doing this in seconds, so there's no analysis going on. She gets an email, makes the edit and sends it up. So as we're doing our work, we're like, how do we get a whole, and it was always a zero shift.
So if it was a thousand dollars, it goes to 10. If it's $2,000, it goes to 20. It was always that round dollar shift. Again, all of those things that are red flags for us that on its face, you go, something's not right here. Now we're going, okay. And so there is this fictitious number that's being run up the chain and reported up. And so this is where that receivable starts to grow. Corporate accounting is expecting to receive $10,000 from this department. Well, there was only a thousand dollars. There wasn't 10, there was only $2,000. There's not 20. And so that's getting reported up. And so we work our way through all the supporting documentation from the department systems, the department bank statements, their billing records, all of the information on the department side. We've now built up this stack of evidence. And remember we told you, we had already interviewed the clerks, we had interviewed the bookkeeper, we had interviewed the controller for corporate accounting. We had interviewed the bookkeeper in corporate accounting, the CFO in corporate accounting. So we'd all done these information gathering interviews. Well, now we've got evidence. We've tested everything they've told us, and now we've got evidence. So Kelly?
Kelly Todd:
Well, so what Lindsay failed to mention is that in all of those, when you're trying to understand how the processes and the procedures work, you're just trying to understand. Well, I mentioned already we record our interviews when jurisdictionally we can. And we went back when we figured out what had happened, and I'll let Lindsay tell that part of the story. But we went back and listened to all of our, not all of the information gathering interviews, but many of them, especially the ones that we had with Jennifer. And lo and behold, the girl told us how she was perpetrating her scheme in that interview, but it just never, it didn't make sense at the time. Now, she wasn't blatant about like, oh, I'm doing this thing. She said something like, well, I suppose that somebody could, I don't - over report or add a zero or something like that. I have a whole new perspective on listening a little more closely in an information gathering interview.
Lindsay Gill:
Yeah, so we were asking questions.
Justin Burns:
Somebody could, I'm not going to say who could, but somebody could. I don’t know.
Lindsay Gill:
Exactly. We were asking the questions is how can this receivable grow and not be supported? And why are these questions, how does nobody know what's going on here? Is there a way it could be done in a less than honest, ethical way? And she just was like, well, I guess. And so as we're doing all of our work, and I failed to tell you earlier is how we found this thing. So, I'm going through, we're building the database. I'm going through the emails, okay, this is what came in this day. This is what the clerks reported, this is what Jennifer reported up to corporate accounting. And Kelly's on vacation. She's out of town. And I'm going through and I'm going from clerk to Jennifer, Jennifer to corporate clerk, to, I mean, just watching the trail. And all of a sudden I see the change and I'm like, oh my gosh. And so I go through a few more. So I call Kelly, and Kelly is
Kelly Todd:
Like Lindsay said, sorry to interrupt you, but I was on my way to a family wedding. My family is in the car. Okay? So, I'm driving Lindsay calls, I answer speaker. And it's important because this is a small circle because my family happens to know some people that were involved in the investigation that we were conducting, but they didn't know. Nobody knows anything. But Lindsay calls, and Lindsay, you're on speaker, but was, she says it was Jen! It was Jen! It was Jen! And I'm like, because what's important is that we really thought it was somebody else at this point. And so when she calls and is just ecstatic, I'm like, what are you talking about? Yes, it was Jennifer who committed this.
Lindsay Gill:
So once we get through that point, we go back and listen to those information seeking interviews and realize that Jennifer has told us how she would have done it if she were doing it. And it's exactly what she did. We now build up all that evidence, and it's now time to go and interview Jennifer. Because what we still can't see, because this is fictitious revenue, this is what, we've got fictitious revenue here. We're not skimming, we're not embezzling. It is just the fictitious revenue scheme. So what's important to know, remember I told you earlier that this company paid out all the profits at the end of the year, which is the whole reason they had the line of credit to begin with because they need cash at the beginning of the year. Well, what's important to know is that that profit is based on this revenue number, and each department bonuses off of their own revenues. So what we learn is Jennifer isn't receiving bonuses. She doesn't generate the revenue. She just reports on it.
Justin Burns:
So why? Is she doing this at the direction of someone? Is there somebody else involved?
Lindsay Gill:
So this is what we don't know at this point. So now we know we've got to interview Jennifer, but we know Jennifer. Jennifer didn't bonus, but her boss and a few others in her department did. Her boss was a revenue generating individual. It wasn't like he was the controller of the department. He was the revenue generator, he and some others from the department. So now we know that he's the one that stood and did benefit from this fictitious revenue. So now we've got to interview Jennifer, but we also know that we don't really want to do this when her boss is around. Because one, I mean, he knows the whole company knew, I think, or at least the board. I think some of the departments knew the work that we're doing. We had been around, they had seen us doing our work, but we now know that he benefited from what she did. And so we need to conduct an interview where he's not around. And Kelly, I'm going to let you pick it up here. You do a much better part of telling this part of the story.
Kelly Todd:
And I don't remember if he went on vacation. It wasn't cruise.
Lindsay Gill:
He was out of country.
Kelly Todd:
Yeah, it was something, but he was gone. And that was critical. So, similar situation to Judy, cold conference room set up. We set it up the same way. So there we were at the table. I was at the end. Lindsay was sitting directly across from Jennifer and typing away. It's a little scary with Lindsay because she is, first of all, sorry, this is an aside, but Lindsay is the greatest note taker in an interview situation. She sits there with her computer and literally just watches the person and types away, and she gets it all. It's fabulous. And this is going back to how we play off each other, because I am the worst note taker in the world. I cannot take a note. If I start to take notes, I get distracted. I forget where we are, all the things. But anyway, so we sit down with Jennifer. And here's the thing, because we had already interviewed her numerous times, it now is a situation to where it was a little untenable.
It was a little, why are we interviewing her again? So now, even though we have built rapport with her before, it's a situation to where we still need to make her feel comfortable because it was, like I said, a little bit more obvious that this was a little more serious than all the other interviews. But our interview with her lasted about three and a half hours. It was painful. It was going through - we like binders, we like binders of evidence. We were going through our binders of evidence. She would not give it up. And finally we got to a place, and it was one of those situations to where it was like, whoa, wait a minute. When she finally confessed, it was like she just gave in. It wasn't a situation to where silence was golden and all of that. It was, we just got her to a point and out of nowhere, she gave it up to us that she had actually been overcharging revenue and adding the zeros and all the things. And Lindsay, and I - I wish I had a video of it - because I think both of us were like, whoa, whoa, wait a minute, really? Are you sure you won't want to admit to that?
Lindsay Gill:
Yeah, it worked. One of those where you're like, are you going to take it back? Are you for real? Did we really get her to admit to it because we had been working so hard, and every time we showed her a piece of evidence, she would have an excuse. Oh, well, this is why I would change it. Or they brought me the stuff and they didn't know. And even though we had a 30-second difference in the email from the clerk to her and her to corporate accounting, she had an excuse every time. I mean, we worked so hard. That may have been one of the hardest interviews we've ever worked in. So, when she finally said, yeah, I did it, we're like, whoa, are you sure? Because again, we want to make sure that these confessions are admissible and that we get everything from her. And we had been working a very long time. And so then it was, okay, now let's roll back through and let's baby step through this and get her to fully tell us the story of what, how. And then how did you benefit from it?
Justin Burns:
Yeah, why?
Kelly Todd:
She never gave that up. We don't know. And she was interviewed. We did that interview. Then she actually agreed, because of course, her first thing was, well, I'm going to get fired. You're going tell my superiors and I'm going to get fired. And she ended up agreeing to work with us, and she worked with Lindsay privately for a couple of weeks after that confession, helping walk Lindsay through exactly what she was doing. There was a convoluted system that needed to be untangled to really determine what the losses were. And there was, to kind of give a little context, the loss appeared to be, or the overstatement appeared to be about $5 million. And we had identified two and a half million dollars. And so, we needed Jennifer to help us with the remaining two and a half. They worked together for some time, but even during that period, there were others - lawyers - who interviewed her. She still never gave it up. We interviewed her again, she still never gave it up. It is a mystery to this day. I mean, why would you do that?
Lindsay Gill:
All she ever said to us was, she was under an intense amount of pressure for their department to perform. And she said her superior were always like, we need more. We need more. We need more. Well, our communication to her was, you're not a revenue producer. You just report these other people. These people telling you we need more, we need more, we need more, were the revenue producers, the revenue generators. And she just said, I felt so much pressure to report more because they said we need more, that I just did it. And she opened up during the interview, she opened up her bank accounts to me, just like with Judy, Jennifer logged onto her bank accounts, downloaded her statements, and walked through and said, as you can see right here, I have another account. Let's go open and look at that one. And she gave me all of her information. She willingly sat down and worked through for weeks untangling the mess that had been created to help write the books. But amongst everything, we couldn't find any evidence in her bank accounts of how she benefited, the lifestyle she lived didn't indicate that she had benefited in any way. The professional services firms brought in their lawyers who interviewed her, and they couldn't get it from her. And it was just from her, the pressure to do her job.
Justin Burns:
I mean, what about interviews with the people who were benefiting? I mean, how did that go?
Lindsay Gill:
So we've talked a little bit about how we dress and how we set up interviews for different people. So Jennifer was a bookkeeper. Jennifer wore jeans and graphic tees to work every day. I mean, that's the environment that she lived in. And so, while we didn't go show up to the interviews with her and jeans and graphic tees, we were much more business casual when we were interviewing her. Her boss, who was the revenue generator who stood to benefit from this, was a very smartly dressed gentleman, three-piece suit, custom-made. I mean, he was a high dollar guy. And so we did interview him. And so we set up that interview very, very differently. I mean, Kelly and I are in our power suits, and we're doing all of the things for that interview, and he was also a very influential man in the community, and so we brought some other people in to interview him with us on that one. Actually, I think I stepped out of that interview, Kelly, I think you handled that one with someone else in our firm at the time. I'll let you share.
Kelly Todd:
Yeah, I mean, it was really, we know you always want to have the situation to where you're most likely to get what you want out of the interview, getting a confession. And with her boss, like Lindsay said, he was incredibly influential and very powerful. And so we did not do that alone. Actually, the founder of our firm, Ralph Summerford, did that one. Ralph wore his power suit and went toe to toe, but again, got nowhere. Absolutely got nowhere. Nowhere.
Lindsay Gill:
He didn't direct it. He had no knowledge of it, didn't know he was benefiting from anything inappropriate. And again, remember, nobody's getting financial reporting. So while the board wasn't getting financial reporting, this department wasn't either. So they didn't know.
Kelly Todd:
But they sure did enjoy their big bonuses.
Justin Burns:
Yeah.
Kelly Todd:
Yep.
Justin Burns:
Wow. Wow. That is very, very rare instance of somebody committing fraud and not benefiting from it at all. There was no reason for her to do that.
Lindsay Gill:
It was probably the first time ever. I know. The first time I've ever encountered that.
Justin Burns:
I haven't seen it. I mean, yeah, there's no reason for it.
Kelly Todd:
And we used all the tactics with her from the perspective of we're two women. We've been in your position bookkeepers, and we know that the pressure can be bad, and all of the things, it did not work. And maybe it didn't work because there wasn't anything. But I'll go to my grave believing that there was something, but we couldn't get there.
Justin Burns:
Yeah. I mean, I have a hard time believing that there's zero connection, but wow. Yeah, that's another great story. Thank you guys so much for spending time with us. I really enjoyed hearing from you guys. I know our listeners will too. So, thank you.
Lindsay Gill:
Thanks for having us.
Kelly Todd:
Thank you.
Leah Wietholter:
Thank you for listening to the Data Sleuth podcast. If you enjoyed this episode, please leave us a review wherever you listen. The Data Sleuth Podcast is a production of Workman Forensics. To learn more about our investigation services and resources, please visit workmanforensics.com