Episode 79: Best Evidence: Credit Card Statements with Leah Wietholter
At the heart of all successful forensic accounting engagements or fraud investigations is the reliance and analysis of evidence. Best circumstantial evidence in a financial investigation are sources of information or data that are furthest removed from the influence of a subject. If you want to ensure that you uncover facts resulting in defensible investigative analyses in your cases, you are in the right place. In this six-part series, Leah Wietholter reviews the most common best evidence data sources in order of reliability by exchanging seats from host to guest to thoroughly discuss this topic with guest host, Bethany Pigott.
Leah Wietholter, MBA, CFE, PI, CPA is the CEO and founder of Workman Forensics headquartered in Tulsa, Oklahoma. With career aspirations at 12 years old of becoming an investigator, Leah worked for the FBI while completing her accounting undergraduate degree and masters in business administration. After working in public accounting for over two years as a staff tax accountant and forensic accountant, Leah opened Workman Forensics - a firm dedicated to forensic accounting and fraud investigations. Since starting the firm in 2010, Leah has worked over 150 cases providing data-focused solutions resulting in settlements and testifying in both state and federal courts. Read her full bio on the Workman Forensics team page.
The information in today's podcast is just a glimpse of what's inside Leah's book—Data Sleuth: Using Data in Forensic Accounting Engagements and Fraud Investigations. Available on Amazon!
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Transcript:
Leah Wietholter:
Hi. I'm Leah Wietholter, your CEO and founder of Workman Forensics in Tulsa, Oklahoma. And this is the Data Sleuth podcast. At the heart of all successful forensic accounting engagements or fraud investigations is the analysis of evidence. Best circumstantial evidence in a financial investigation are those sources of information or data that are furthest removed from the influence of a subject. In this six part series, I'm going to review the most common best evidence data sources in order of reliability by exchanging seats. I'm going to go from host to guest so we can thoroughly discuss this topic with our guest host, Bethany Pigott. If you want to ensure that you uncover facts resulting in defensible investigative analyses in your cases, you are in the right place.
Bethany Pigott:
Welcome to the Data Sleuth podcast. I'm your host, Bethany Pigott. And I'm joined once again by Leah. Today we're going to talk about credit card statements in this episode. So Leah, what are the types of engagements or investigations that benefit from using credit card statements as evidence?
Leah Wietholter:
Yeah. It's going to be any type of investigation where credit cards could have been used. So it could be that someone's personal credit card is being paid through the organization. It could be that the organization has credit cards or purchasing cards. But we're going to want to make sure that we get that underlying credit card statement information, and that's critical in investigations, because again, we're going to use best evidence.
Bethany Pigott:
What types of information can someone utilize when they're looking at these credit card statement transactions?
Leah Wietholter:
The first step is going to be putting all of that information into a spreadsheet. Now you can download this sometimes from an online credit card. Sometimes it's limited how far back you can go, and a lot of times we're usually looking at three to five years worth of credit card statements or of everything. So you might be able to download some of that, but if you can't, then you're going to need to use, and again, we use MoneyThumb, so we're going to be importing from PDFs into a spreadsheet to create our database of credit card transactions. And some of my favorite things that I just think create great data points within credit card data are the transaction date versus the posted date. So on a bank statement, the dates are the dates that the items cleared the bank, it's not necessarily when it happened.
On a credit card, we get to see when the transaction actually occurred, when that card was swiped, but then also when it was posted to the account. So I really like knowing when the transaction date was used. That lets us use formulas in our spreadsheets to then do analytics about what days the credit cards were being used. I also love that credit card statements typically have location and a lot of them are starting to categorize the transactions as well. I don't want to rely on that, but I like gathering that information. And then of course, we just want to see where were these charges made so that we can start categorizing them in our buckets of benefiting the company or organization, benefiting the subject or unknown.
Bethany Pigott:
Can you tell our listeners why they should look at credit card transactions separate from bank statements?
Leah Wietholter:
Right. So your bank statements are where we start because that tells us where all the cash of the organization went. It's just a really good hub. If you think of a spider web, it's the center of that web and then we can trace it out. The credit card statements, we can see the payments on the bank statements, but we don't know what charges were on that credit card to result in the credit card payment. So we can't just say, oh, there's a credit card payment, it's all bad, put it in the bucket, put it in that bucket. No, we need to go and we need to look to see what were the contents of what were the charges behind that payment.
And I like to think of credit card statements as if you're an accountant, as a sub-ledger. So you've got your general ledger that might be pretty high level, your sub-ledger is going to give you details about an account. And that's what a credit card transactions do. So if you're doing any of our analyses that we recommend in the book, like our sourcing use or our IDF, we analyze bank statements and then we analyze credit card transactions. If you combine them, you're going to end up double counting because that payment was already on the bank statement. So you want to analyze those separately.
Bethany Pigott:
Can you use both bank transactions and credit card transactions in your analysis? Is that helpful?
Leah Wietholter:
Yes. One thing we want to do is compare. We've looked at our bank statements, we see that there's credit card payments, so I want to compare the credit card payments, that total, the number of payments to the known credit cards, because the bank statements are going to show the payments that were made, but that corresponding credit card statement is also going to show the same amount of a payment. So I can start matching those up. If I have more payments on my bank statement than I have on these credit card statements, either I don't have all the credit card statements or perhaps there are other cards or other accounts that I don't have, or it could indicate, depending on where I got the credit card statements and bank statements, it could indicate that maybe one or both have been altered. So that's just a detail, because those things should tie out. Like we talked about in the bank statement podcast, there's two sides to these transactions, so we're going to see the payment posted to the credit card statement and then also the payment posted to the bank statement, and those should tie out.
Another thing I really like to do too, just with the bank statement side of this is to look at what are the number of credit card payments I make in a month? And I'm going to get a little bit ahead of the outline here, but the reason I want to do that is I had a case, it was a partnership and there were four partners, and they had a bookkeeper that was actually one of the partner's wives or a brother's wife or something like that. And so very closely related. And let's say that they were all Chase credit cards. Each partner had a credit card, so we should have had four payments. And they were separate, they weren't four users on one credit card. What we noticed was that whenever we looked at how many credit card payments were being made in a month, there were five Chase credit card payments being made in a month. And that helped. So then once we compared those payments to see what tied out, what didn't, then we knew we were missing an account.
And that bookkeeper, the sister-in-law to the owner, she knew that they all had Chase credit cards, and so then she just got a Chase credit card, ran up a bunch of personal expenses and then just paid it from their bank account.
Bethany Pigott:
Wow. Yeah. Okay. So when you're looking at these credit card statements, this data, are there certain analysis that you always make sure that you perform?
Leah Wietholter:
First thing, we always summarize by payee and then research the payee. And we might assign categories. I don't love assigning categories unless it's just necessary to understand what we're looking at, because what if I assigned the wrong category to the payee? So I just like to look at payees. I talk about this in the book as our sourcing use analysis. So we run this on every credit card, or sometimes if it's all the same type of account, like all business accounts, we'll do a source of use for all of them. So we're definitely going to look at that. And again, the goal is to get this to the point where we can categorize these transactions by who benefited, the organization, the subject, or we don't know. A couple things that I like to look at on credit card charges, that's the most common, but then the other ones to consider, since we've got those transaction dates and locations, I think it's really nice to compare a vacation calendar, or look at did these charges happen on the weekend and we are a Monday through Friday, nine to five kind of business?
I also like to look at is somebody submitting an expense reimbursement request, but they actually put it on the company credit card? That's a good thing to look for. I also like to do a pivot table. And we do ours in IDEA. But I like to do a pivot table looking at maybe days of the week, so summarize by payee, and then look at the charges by month or days of the week, or even do a count instead of a sum. Look at how many meals per month are being paid for. I remember there was this one case I had that this guy was basically feeding his family on the company's credit card, because I mean, he would have four or five meals paid for, well, I think that he actually did have three meals a day on his credit card, multiple days a week including some weekends.
So that's what I'm looking at for those credit card charges. But the first thing we do is just look for the payee. I was actually looking at one just yesterday where we had summarized by payee, and I could tell just by scrolling, and this was supposed to be a business credit card and all of it was traveling meals. It was property management, so very few were related to that. So just by summarizing, I don't even have to do other fancy stuff. These people, there was nothing that they needed to travel as much as they were. And so we can start putting that into that benefiting the subject bucket.
Bethany Pigott:
All right. Thank you so much, Leah. And we're going to come back after this short break talking about how we obtain credit card statements. So make sure that you join us.
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All right, welcome back. So Leah, as we wrap up this episode, can you just go into talking about how we obtain credit card statements?
Leah Wietholter:
Sure. I like to talk about this based on the client's access. A lot of times we set up our case planning based on the subject's access, what did the subject have access? So when we're finding information, we're reliant on the client's access. Our client, if our client has access to the credit card statements and to the accounts, they can often just go online, download the statements, download Excel spreadsheets of the statements. Something that has actually been surprising over the years, I've been doing this 16 years, but especially whenever I started working with forensics, I was interacting more with the business owners that suspected embezzlement, and it was so surprising how many calls we would get that would say, "Yeah, I think my bookkeeper or my controller is stealing from me, but I don't have access to anything. I don't have access to the credit card statements or the bank statements."
When you're the business owner, you have the right to get that information from your bookkeeper or controller. They may not want to give it to you, but they also don't own the business. Getting that access from them in a kind and slightly clever way at the beginning where their guard's not up, but if you can get that access before you let them go, that is really, really helpful. You can go to these banks and give them documentation that you own these businesses and so forth, but it's going to be a lot easier if you can just cleverly work with the person that has control to regain access to your accounts. And just note that if you decide that you're going to fire this individual, their first step is going to be to hire an attorney, which they should. That is their right, they absolutely should. But just know that once you fire them, your access to asking them questions, and getting information and getting access is going to be cut off. So you want to try to take care of that before you let them go.
Now, let's talk about if the client is an owner, but they don't have access to any of the credit card accounts, and this could apply to bank statements to you, this is most common in partnership disputes or shareholder disputes. You've got someone who's running the business, and typically my client is the investor, and so my client put in the money, somebody else has sweat equity or maybe invested as well, but they're running the day-to-day. There's this rationalization that these managers have that is, I'm doing all the work. All they did was put in their money. So then it gives them some sort of right to the funds, or they should be able to travel or have these expenses. So in those situations, the manager is typically on the bank account.
So when you're dealing with that, it's best to just hire an attorney up front. You don't have to file a lawsuit. But your attorney can work with the other side, send a demand letter, and then usually the other party will hire an attorney and you start just trying to exchange information, so bank statements or credit card statements. For some reason right now we have a bunch of partnership disputes, and so this has been the process. I just want to point out that if you're relying on the other party to send you the bank statements or the credit card statements, you are going to want to really use caution when you're processing those statements. You need to make sure that the number of transactions listed on the statement are the number of transactions you've processed, because they're going to be incentivized. They're going to touch these things first, and so they can edit them. You're not getting them directly from the bank. Of course, if it is a concern and gets to that point, your attorney may need to file a lawsuit and then you can subpoena any of this information.
In trust situations, a lot of times the beneficiary in our cases we're working, the beneficiary doesn't have access to the account statements, and so they're going to need to request this information from the trustee. It's either going to be requested and denied, and then you're going to need to go hire an attorney to then file a lawsuit and move down that, but you can subpoena this information. But any information that you don't have access to, that you don't necessarily have a clear right to because you're not the owner, you're going to have to work with an attorney to subpoena that information. And if you're part of a divorce, you're going to have to request that information from the other side as well or subpoena the information. Mainly because a lot of times in divorce situations, the accounts you don't have access to are only in your spouse's name, and so while you still might be entitled to the funds, you're not going to be able to go to the bank and say, give me this information.
Bethany Pigott:
So much of what I'm hearing you talk about is the variety of ways these situations could really go wrong and you can misstep in the order in which you proceed to access this information. And so I'm so thankful, and I hope our listeners are hearing all these various options that you're giving them. And just from your experience, where to go first, what to do first, where you're going to look for this, it's all just super helpful. Do you have any other examples? You've given a few as we've talked, but any other examples that you want to give as we close this out about how to use credit card statements and where they've been helpful to you in your investigations?
Leah Wietholter:
Sure. Yeah. So I had an office administrator who was charging personal expenses to the credit card, and this individual was allowed to travel, and I mean, it wasn't unusual for this person to travel to different sites for the organization, and potentially work weekends and go to conferences and things like that. And the reason I bring this up is because it's not always super clear cut. It's not always going to be a business that's nine to five where you can really box that in. And so on this one, we had to use additional evidence. They had a copy of her calendar, and so we were able to get that calendar and compare that if she was on vacation and we see credit card charges from her card at the same time, and this is a repeated pattern over time, then we knew to start putting that in the bucket that benefited her. So that's one way we did that.
If they knew that an event had been paid for by the company and so there was no reason for her to use a credit card, but then she's got all these other credit card expenses, then we could start doing that. So we use transaction dates and locations to really help us on those instances. Not to mention, if we could tell that it was for multiple people and she was supposed to be traveling by herself, or sometimes this is also where social media will come into play. Again, we're going through this series in the order of reliability, so I started with bank statements. This is our second one about credit card statements. I haven't even mentioned starting with social media. We use social media for context. So this is where social media can come into play. If they've posted about some vacation and I also have credit card charges during that same time in the same location, that's going to help me build that case.
Bethany Pigott:
Well, thanks, Leah, so much for joining us today on your show, Data Sleuth podcast. That's all we have for today, so we hope you join us next time as we continue this series on best evidence.
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 in Tulsa, Oklahoma. To learn more about our investigation, services and resources, please visit workmanforensics.com. You can purchase your copy of Data Sleuth using data in forensic accounting engagements and fraud investigations on Amazon, Good Reads, or wherever you like to purchase books.