Episode 99: Money Mules with Joan O’Dowd, CPA, CFF, 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 Government Contractor Fraud, Money Mules, and Data Analytics with Joan O’Dowd, CPA, CFF, CFE. In this episode, Justin and Joan discuss:
· A fraud committed by a government contractor.
· What are money mules?
· Using Data Analytics to take down a sex trafficking ring.
GUEST BIO
Joan O’Dowd is a former FBI forensic accountant and the owner of Fathom Forensic Accounting LLC, a CPA firm in the Atlanta area that focuses exclusively on forensic accounting. Joan specializes in fraud investigations, asset tracing, and fraud prevention. She is a member of the Fraud and Forensic Services Advisory Council for the Georgia Society of CPAs. Joan is a Certified Public Accountant (CPA), Certified in Financial Forensics (CFF), and a Certified Fraud Examiner (CFE).
Email: joan@fathomforensic.com
LinkedIn: Joan O’Dowd, CPA, CFF, CFE
RESOURCES MENTIONED IN TODAY’S EPISODE
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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 and 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. In today's episode of The Data Sleuth podcast, we'll discuss government contractor fraud, money mules, and data analytics with Joan O'Dowd. Joan is a former FBI Forensic Accountant and the owner of Fathom Forensics Accounting LLC, a CPA firm in the Atlanta area that focuses exclusively on forensic accounting. Joan specializes in fraud investigations, asset tracing and fraud prevention. She's a member of the Fraud and Forensic Services Advisory Council, the Georgia Society of CPAs. Joan is a certified public Accountant, certified in financial forensics, and a certified fraud examiner. Hi, Joan, thanks for joining me on today's episode.
Joan O'Dowd:
Thanks for inviting me, Justin. This is truly a joy and an honor for me.
Justin Burns:
Joan, we know you've spent most of your career investigating financial crimes while working for the government. You have experience working on investigations involving purchasing frauds by government contractors, investigating money mule rings, and using data analytics and subject interviews in your investigations. During today's conversation, I'm looking forward to having you talk to us about those specific areas and some case stories from your time investigating those types of things.
Joan O'Dowd:
Sounds good.
Justin Burns:
Let's start by talking about a case that you investigated while you were at the FBI involving government contractor fraud. Do you have any good cases that come to mind whenever we talk about government contractor fraud?
Joan O'Dowd:
Yeah. One of my most memorable cases involves a government contractor that was working on a contract with a federal agency. He was managing one of their business segments and was responsible for collecting revenue from the agency's customers and paying the agency's subcontractors and vendors related to this business segment. He was required by contract to submit an annual report to the agency's contracting officer, Larry, and in that report he was to outline the gross receipts from the customers. He was authorized to take 40% from those gross receipts as his payment, and he was required to pay all of the subcontractors and vendors from the remaining 60%. At the end of the year, he submitted the report outlining all of those steps and then showing the balance that would be due to the federal agency. Accompanying that report, Doug was required to make payment to the agency at that point.
Well, it didn't take long for Doug to see an opportunity to make a lot of money, and he began to underreport revenue and overstate the expenses on those reports that he made annually. He paid some hush money to Larry in order to accept the contracts without any questions asked, and they had a good thing going for quite some time. The thing I liked about this case is Doug didn't just spend the ill-gotten gains on travel and meals and entertainment, but he liked to invest in high-end collector cars and some real estate. Over the course of my investigation, I was able to trace funds that should have gone to the agency to assets that Doug purchased. And at the end of the day, because of my tracing, we were able to seize three Corvettes from the 1960s, three Ferraris, three oceanfront condos.
One of my favorite moments in this case came as I was analyzing one of Doug's checking accounts, and I started to notice that there were monthly recurring payments all in the same amount going to a marina in Florida. And I started to wonder, "Could Doug possibly have a boat?" So I reached out to the agents, talked with them about what I was thinking, and after a subpoena the marina confirmed that Doug did in fact have a boat there. I was able to trace some of the agency's money to the purchase of that boat and we seized what was a 38-foot racing boat.
Justin Burns:
I don't know much about boats, but that sounds like a pretty good sized boat.
Joan O'Dowd:
I didn't know much about cars or boats before that case, but I got really interested after that.
Justin Burns:
That's a great story. What does the process look like in an FBI investigation into a government contractor or some other sort of financial crime that you may be investigating?
Joan O'Dowd:
Yeah, I typically approached all of the cases, regardless of the underlying allegation or specific crime, in a very similar way from the beginning. As you know, Justin, bank accounts, bank statements, bank records provide the best evidence when conducting any sort of financial investigation. So when I came into a case, typically there were already some financial records already available. And so I would begin by going through those records just doing a real cursory review of what was there, and I would document those details in a financial evidence inventory log. This became my go-by. It was a way to list each account, the details of those accounts, and then that directed how I conducted the rest of my investigation. I typically would begin with checking accounts if those were available, because they have the most meaty transactions. I would schedule out a checking account in Excel, go through, review all the supporting documentation, the incoming deposits, deposit slips, checks, wires, and then all of the outgoing. So, looking at the sources of funds, the uses of funds.
Typically, especially with larger financial investigations, there's certain amounts of missing data and things that we have to circle back around and request. But I would get that all into Excel and then at that point start running pivot tables, sorts, filters. I always wanted to look at the key sources of funds. Where's the money going? And then, where did it come from? Once I had some of that information for one or more accounts, I would begin looking at tracing it between the accounts that I had. Can I identify where this money came from? And then back it up, maybe we need to subpoena another account to get some more records for another account, and then trace where did the money go? in a similar way. Do we need to subpoena another account to figure out where it went from there? And through that process, I was able to develop a pretty strong flow of funds for the significant money that was coming in and going out.
Justin Burns:
Perfect. Yeah, that's sort of the way we do investigations here, is you start with a checking account and you want to see where did money go? Where'd it come from? So you can start doing that tracing exercise and really just follow the money, see where it ends up.
Joan O'Dowd:
Exactly.
Justin Burns:
In your case, it ended up in cars and boats and really fun stuff to seize. You can't really seize a vacation from somebody.
Joan O'Dowd:
No, that's for sure.
Justin Burns:
That's a really good example of government contractor fraud and how you perform that tracing exercise. Another area that you've worked in that's really interesting and I find fascinating, is money muling rings. Can you give us just a broad overview of what is a money muling ring, what are the different moving pieces involved in a money muling ring?
Joan O'Dowd:
Yeah, absolutely. Initially, to begin with, a money mule is anyone who moves illicit money on behalf of someone else, and this can be knowingly or unknowingly. Money mules create a layer of distance between the fraudsters and the victims and obfuscate the flow of funds in a very tangled web. I think because it's so complicated, it might help just if I use one of my examples from a case that I worked, just to put some names with it. Edgar was a fraudster who identified victim companies, and the underlying scheme was a business email compromise scheme. So he would create fake domains with names that were very similar to companies that he was targeting, and he would send emails that appeared to come from one of the company's employees.
In this case, one of the victim companies was a construction company, Civic Construction Company. So he would send fake emails from the accounts receivable office saying, "Hey, we've changed our banking information. This is Civic Construction. For all future payments, please send them to this new account we have at Bank of America." But that account at Bank of America, in fact didn't belong to Civic, it actually belonged to Flora Fashions, which was a business owned by Connie. Months previously, Edgar had approached Connie with a business opportunity. "Give me access, give me your bank account information, and when you see incoming wires coming into your account, immediately send 50% of the amount that comes in to Good Golf LLC, and then send 45% to another company called Executive Fashion. Keep 5% of the money for yourself." And Edgar had similar relationships with the owners of Good Golf and Executive Fashion, and so forth. He essentially managed this large web of money mules and they would move money at his direction amongst themselves and eventually to accounts that he owned and controlled and had access to.
Justin Burns:
Okay. Those all sounded like money mules who knew they were involved in it, but you also mentioned people who just unknowingly become money mules. Can you talk to us about how that happens?
Joan O'Dowd:
Yeah, those are the especially tragic ones. Oftentimes, what we would call an unwitting money mule is someone who's motivated to help someone. This may be a typical romantic or other relationship. Oftentimes it's someone that the person has met online, maybe never met in person, and they develop some sort of relationship. And eventually, the bad actor will ask the unwitting mule to move money for them. Maybe it's something like, "My bank account's frozen right now," or "I don't have an account that's been open long enough for the bank to allow this kind of money to come in. Could you give me access to your account? Some money's going to come in. I just need you to send it on to these other businesses or individuals." And out of a willingness to help, that unwitting money mule is all of a sudden involved in illegal activity and laundering money.
Another way, in addition to any sort of relationship where it's a personal relationship, is bogus work-from-home schemes. These involve opportunities where maybe someone is approached via an unsolicited email or a social media message with a job opportunity that honestly seems too good to be true. They get hired to work processing money, and the employer will tell them, "Give me access to your bank account," or "Open additional accounts at other banks all in your own name. And your job is to receive money into the account and then send it on to the businesses or individuals that I tell you to. And your pay comes from keeping a certain percentage of the money that goes through." So these unwitting mules think they have a job processing money when essentially they're just a cog in a money mule network.
Justin Burns:
That's just awful. I know a lot of people are looking for work-from-home jobs right now, and that's something that you're just like, "Oh, well, that's easy enough to do. I just have to wait for money to hit and then move it along, and I get to keep a piece of it." Other than it just being too good to be true, what are some red flags people can look out for when getting approached by these work-from-home jobs?
Joan O'Dowd:
I think the absolute biggest red flag is, anytime someone asks you to move money on their behalf or to have access to your bank account or your banking information, that should be a huge red flag. Never move money for someone that you don't trust and know personally.
Justin Burns:
And then what's the impact that this can have on an individual, these muling rings? What kind of impact can that have on a community?
Joan O'Dowd:
Yeah, the impact is devastating. Unfortunately, once bad actors have successfully convinced you to give them your money, it is extremely difficult to get it back. If you remember the case I was telling you a few minutes ago about Edgar, over the course of my investigation, I uncovered dozens of victims, including schools, municipalities, businesses, and the combined loss at the time of my analysis was already over $50 million.
Justin Burns:
Goof. God. And that money just kind of trickles out along the way as it filters to Edgar, in this case. Different money mules taking their cuts and just filtering the money through different accounts.
Joan O'Dowd:
Exactly, and in this case it did involve some international flow of funds. Once money goes overseas, it's even more difficult to trace it, and then to be able to forfeit it for restitution is almost impossible.
Justin Burns:
Yeah, that's good advice to look out for if you're looking for work-from-home jobs. Be on the lookout for things that are too good to be true, and if an employer asks you to open a bank account for them or give them access to your bank account, don't do it. That's great advice, and that'll take us into our ad break.
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Justin Burns:
Okay, and we're back with Joan O'Dowd. Joan, do you have any case examples where data analytics and interviews with subjects, where those really came into play?
Joan O'Dowd:
Yeah. One of the cases that comes to mind involved a criminal enterprise that was involved in human trafficking and forced prostitution throughout California. Typically, as I mentioned before, started my investigation by looking at the bank accounts. Over the course of the investigation in this case, there were significant numbers of accounts. It ended up being approximately 35 accounts at nine different banks, and they were all in the name of the two ringleaders, Chuck and Debbie, and then several shell companies that they had formed in their name. So as I would typically do, I scheduled out all the accounts in Excel, started looking at the sources of funds, uses of funds, and as you would imagine in a case involving forced prostitution, there was a significant number of cash deposits.
As I started diving into those cash deposits, I wanted to learn more. So I pulled out all the cash deposits and put them in a table, and I noticed a few things. All of the cash deposits were in amounts of $9,500 or less, which was indicative of structuring. And as I started looking more at the deposit slips, I noticed that the handwriting styles on the deposit slips were vastly different. There were probably over a dozen different styles on accounts that only had one or two signers. So this piqued my interest. The other interesting thing about the deposit slips, the bank were many of the deposits occurred, would put a stamp on the deposit slip with the date and time that the deposit was made. I threw that information into my table as well. So I had the date, the time of the deposit, the amount of the deposit. And the deposit slips also indicated the branch where the deposits occurred.
Over the course of this analysis, there were 50 different branch locations spanning six different states. So I put that into a column as well. I thought that was really interesting information and I wanted to see how I could analyze it further. Once I had all the information into my Excel table, I started to sort by account and then the date and time of the deposit. I noticed that there were many deposits that were going into a same account on a same day at roughly the same time, at branches that were geographically separated in a way that would be impossible for the same person to be making those deposits. So as we worked through the investigation and I shared that with the agents, we ended up subpoenaing the bank for some still footage. And through that, we were able to identify additional victims because the victims were being instructed to make the cash deposits on behalf of the ringleaders.
Justin Burns:
So, data analytics helped bring down a multi-state sex trafficking ring.
Joan O'Dowd:
That's absolutely right.
Justin Burns:
Data analytics is just amazing, isn't it?
Joan O'Dowd:
It is, for sure.
Justin Burns:
You talked about the victims are the ones making the deposits and you're getting all of this information, 50 different branches, six different states, tons and tons of people making the transactions. That's got to be a very challenging case to work when you're talking about so many different individuals. What sort of challenges did you run into with all of this?
Joan O'Dowd:
Yeah, that's so true. One of the biggest challenges I faced was more with uses of the funds. I identified a number of payments going to escrow and title companies, and this led me to subpoena the records from those companies. I learned that a significant portion of the funds were being used to purchase homes in the name of Chuck's sister, Yvette. It was a classic example of money laundering really, all this cash is being deposited into multiple accounts. There's transfers between the related accounts, and then there's wires going overseas and then wires coming back from offshore accounts. And that's where the challenge came in. I could see all the money movement in the related accounts, but as soon as the money went overseas, I didn't know what was happening over there. So because I was unable to make a clear connection between the money going and the money coming, we were not able to seize all of the homes that Yvette had purchased as a straw buyer.
Justin Burns:
Oh. That's disheartening. But through your investigation, we got started down this story because we were talking about interviews of subjects, and I guess victims too. Were you able to interview any of the people involved?
Joan O'Dowd:
Yes. I was involved in the interview with Yvette, and that was one of the biggest turning points in the case. During the course of the interview, she admitted that she did not know where the homes that she had purchased were located. And so that moment kind of set off a light bulb in my mind, because while I was analyzing the checking accounts, I would periodically see deposits of checks with the word "rent" somehow referenced in the memo. At the time I thought, "I don't know, maybe Chuck has some sort of legitimate rental business on the side and he's commingling funds." But during this interview with Yvette, I started to put the pieces together and I realized Chuck is using these properties that he's purchasing with prostitution money, and then renting them out to generate what appears to be legitimate rental income. So again, classic money laundering opportunity. This is that integration phase. The money comes in, it's shotgun out between related accounts, maybe it goes overseas, maybe it comes back in, and then it's invested in rental property that the revenue could, at face value, appear to be legitimate.
Justin Burns:
Yeah, that's just classic money laundering, cleaning it and then making it all look legit. Looking back at it, what are some things that you take away from that investigation?
Joan O'Dowd:
I think one of my biggest takeaways from that case in particular because it involved the international flow of funds, is just the importance of engaging our foreign partners early. This is primarily me speaking to anyone in law enforcement that may be listening. If you see money going overseas, reach out and collaborate with our foreign partners, law enforcement officers in other countries. And then for those that do this on the civilian side, when you see money laundering and money moving overseas, encourage clients to consider referring to law enforcement. They certainly have tools and techniques that can help.
Justin Burns:
Yeah, that's a key takeaway here, is the collaboration between partner agencies overseas. We've got some good relationships with other countries and their law enforcement and they'd be willing to help. I know we've got some other stories on the podcast about that collaboration between countries. So yeah, thank you for that, and thank you for sharing your stories with us today on the podcast. It's been great having you.
Joan O'Dowd:
Thank you. I have thoroughly enjoyed my time with you.
Justin Burns:
If any of our listeners want to get in touch with you to talk more about these cases, talk more about your work, how do they get in touch with you?
Joan O'Dowd:
Yeah, I would love that. Feel free to shoot me an email at Joan@fathomforensic.com or connect with me on LinkedIn.
Justin Burns:
All right. And we'll include links to connect with you in the show notes. Again, thank you so much for joining me.
Joan O'Dowd:
Wonderful. Thanks, Justin.
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.