Faces of Fraud: Cases and Lessons from a Life Fighting Fraudsters

Praise for Faces of Fraud "Martin has done it again. He has written another book with tons of great tips for anyone seeking to detect, investigate, and prevent fraud or corruption. Martin has relied upon his exceptional 40–year career to write this interesting and informative compilation of lessons learned and best practices. The beauty of the book is that it provides one with the opportunity to experience some of what Martin has lived in fighting wrongdoing while working for the government and in the private sector. The take–away is practical guidance for dealing with possible fraud and corruption, no matter what the situation." — Karen A. Popp , Sidley Austin′s Global Co–Chair of the White Collar Group and former New York federal prosecutor, Department of Justice official, and Associate White House Counsel to President Clinton "A compelling look into the minds and methods of fraudsters and those who chase them. Faces of Fraud reaffirms the adage that fraud schemes are limited only by the imagination. It also demonstrates that fraud investigators have kept pace with their quarry, relentlessly pursuing fraudsters who have made their schemes opaque and complex. Mr. Biegelman′s advice on preventing fraud and conducting fraud investigations is worth the price of admission." — Jan Lawrence Handzlik , Partner & Chair, Anti–Corruption and FCPA Practice Group, Venable LLP "Martin Biegelman is the real deal; he′s been there, he′s done that. Based largely on his experiences as a federal agent, Faces of Fraud provides rare insight into the operation of major fraud rings from the perspective of the one who broke them up. It′s a fascinating, invaluable guide for those who either want to investigate fraud or who want to avoid becoming a victim." — Doug Behm , Attorney at Law and former federal prosecutor "There is no one more qualified to write a book on the detection, investigation, and the prosecution of fraud and fraudsters than Martin T. Biegelman. In his latest book, Faces of Fraud , Martin shares with the reader his many years of fraud–fighting experience and the investigative techniques he used to bring hundreds of fraudsters to justice. His chapter on the use and control of confidential informants is unparalleled anywhere. His latest book is sure to become the definitive work on fraud fighting!" — John E. McDermott , U.S. Postal Inspector (retired), Corporate Compliance Investigator "What a fascinating look into the mind of fraudsters! Martin has worked side by side with fraudsters for 40 years—the right side. His case studies are riveting. Anyone who intends to protect their fortune or help others protect their fortune will find Faces of Fraud worth a fortune." — Roy Snell , CEO, Society of Corporate Compliance and Ethics "Regardless of your profession, if you are intrigued by fraud, how it reveals itself, how it is detected, investigated, and prosecuted, you must read this book. Every cleverly titled chapter pulls the reader into a world of intrigue, mystery, discovery, excitement, and sometimes serious danger. The reader feels he or she is in the midst of the case, at the side of the investigator, boots–on–the–ground, witnessing real–life events unfold, as if for the very first time. Simply put, Faces of Fraud is a book that has it all." — Rebekah J. Poston , Partner, Squire Sanders LLP

Preface xi Acknowledgments xiii CHAPTER 1 The Fraudster Mindset 1 A Silver–Tongued Devil 2 Sell the Sizzle, Not the Steak 3 Dr. Donald Cressey and the Fraud Triangle 5 Fraud Diamond 9 Fraud Theories 10 Fraudster Mindset 17 CHAPTER 2 A Short History of Fraud in America 23 Growth of Mail Fraud 24 Green Goods Swindles 24 Grifters 26 Baker Heirs’ Swindle 27 Golden Age of Fraud 28 Rise of Boiler Rooms and Bucket Shops 31 Other Frauds over the Years 32 Enactment of the Mail Fraud Statute 37 The Continuous Onslaught of Fraud 39 CHAPTER 3 Use Your Imagination 41 The Mob Stings Fraudsters 41 Making the Typewriter Talk 44 Where the Law of Gravity Doesn’t Apply 45 Welfare for the Deceased 51 The Value of Imagination 52 CHAPTER 4 Make Yourself Lucky 55 Fraudster Stupidity Is Your Friend 56 One Man’s Trash Is an Investigator’s Gold 57 Let Them Talk 58 Arson for Profit Case: Impeaching the Defense Expert 59 One Federal Agent’s Attention to Detail 62 Look and You Shall Find 63 Don’t Take No for an Answer 65 If You Don’t Ask, You Will Never Know 66 CHAPTER 5 Patience Is a Virtue 71 Stopping a Fraud Scheme 71 New York State of Fraud 78 Recommendations to Prevent Property Insurance Fraud 91 CHAPTER 6 Fraud Can Be Murder 95 Good Humor Ice Cream Scandal 97 Bad Ham and Bribes 102 Golden Needles Acupuncture 108 Blast from the Past 110 Security Guard Indignity 114 Next Time Dead 119 CHAPTER 7 Arrogance and Recidivism 121 If You Are Here, You Are Not As Smart As You Think You Are 122 Arrogance Is Common 125 Arrogance and Recidivism Often Go Hand–in–Hand 126 Arrogance and Rebate Fraud 131 Making It a True Federal Case 133 Fraudsters Say and Do the Darndest Things 136 CHAPTER 8 Informants and Whistleblowers: The Good, the Bad, and the Ugly 141 Managing Confidential Informants 143 Informants Gone Bad 152 Falling in Love with an Informant 155 Nightmare Informants 156 A Rogue FBI Agent Strikes a Deal with Two Devils 157 Avoid a Failed Investigation 159 CHAPTER 9 A Tale of Deceitful Pitches and Vendor Kickbacks 161 History of American Chemical Industries 162 Description of the Fraud Scheme 163 Detection and Investigation 169 The Continuing Investigation 173 Prosecution 174 Special Circumstances 176 Fraud Prevention 177 CHAPTER 10 Cruise to Nowhere 179 Description of the Fraud Scheme 180 Detection 182 Investigation 183 Factoring of Credit Card Charges 186 Investigative Reporting 187 Execution of Search Warrant 187 Circularization 188 Undercover Trip 189 Prosecution 193 Special Circumstances 194 Fraud Prevention 194 Investigative Best Practices 195 CHAPTER 11 Who’s Who of Fraud: A Story of Vanity and Deception 197 The Making of a Fraudster 198 Fraud Scheme 199 Investigation 204 Prosecution 208 Special Circumstances and Additional Fraud 210 Postscript 211 CHAPTER 12 Kids and Coins: Scoundrels without a Conscience 213 Genesis of the Fraud 214 Description of the Fraud Scheme 216 Investigation 219 Prosecution 224 Special Circumstances 226 Fraud Prevention 227 CHAPTER 13 More Tips, Best Practices, and Lessons 231 Become a Subject Matter Expert 231 Documents, Documents, and More Documents 232 Remember the Boy Scout Motto 234 Why I Love Liars 235 Fraudsters Love Expense Report Fraud 236 San Francisco Metergate 239 Yellow Pages Invoice Scam 242 Best Laid Plans of Mice and Men Often Go Awry 244 CHAPTER 14 Power of Prosecution and Prevention 247 Fraud Prevention for Individuals 249 Fraud Prevention for Business Organizations 250 Fraudsters Are the Same Everywhere 253 Fraud Is the Golden Goose for Criminals 254 It’s Deja vu All Over Again 256 Sadly, Fraud Is Here to Stay 260 About the Author 263 Index 265

Martin T. Biegelman , CFE, CCEP, has been fighting fraud and corruption for 40 years in various roles in law enforcement, consulting, and the corporate sector. He is currently the Executive Vice President of U.S. Operations for IPSA International, a global risk advisory firm. His extensive experience include conducting internal investigations on behalf of corporate management and boards, FCPA and anti–bribery compliance, litigation consulting, due diligence, and corporate compliance design and implementation. He previously served as the Director of Financial Integrity at Microsoft Corporation. This highly acclaimed fraud prevention and anti–corruption compliance program that he founded and led continues to be a model for other global companies. Mr. Biegelman is a sought–after speaker, prolific author, and the recipient of the prestigious Cressey Award bestowed by the Association of Certified Fraud Examiners for lifetime achievements in the detection and deterrence of fraud.