Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Cool Careers in Accounting Ep. 25 - Fraud Part 1: Unmasked: Perpetrators, Prey, and Red Flags with Kelly Richmond Pope
331 Plays9 days ago
Dr. Kelly Richmond Pope joins host Mike Potenza to unpack fraud’s ecosystem: the fraud triangle of pressure, opportunity, and rationalization, and the three perpetrator types—intentional, accidental, and righteous. They explore high-profile cases like Bernie Madoff and Enron, to the chilling Robert Courtney chemotherapy dilution scheme, along with everyday scams like receipt “shop listing.” Pope frames victims as innocent bystanders and organizational targets, warning how trust, weak controls, and new tech like deepfakes fuel risk. Join us for practical takeaways on how you can watch for red flags and strengthen controls to prevent fraud.
Earn CPE by listening to this podcast through a Becker Prime CPE subscription.
Listen to this episode through your Becker LMS platform to complete practice questions, pass the final exam, and earn CPE credit.
Already a Becker Prime CPE customer? Login here.
Have access to Becker CPE through your employer? Earn CPE credit for this podcast however you consume Becker CPE, either through your company’s LMS or via the Becker platform. Not sure where to log in? Check with your CPE admin.
Learn more about CPE Podcasts from Becker: https://www.becker.com/cpe/becker-podcasts
Recommended
Transcript
Introduction to Fraud and Dr. Kelly Richmond Pope
00:00:09
Speaker
everyone, Mike Potenza, and we are back for another Becker Accounting Podcast. And today's subject is all about fraud. And if you're going to talk about fraud, you know who you want to talk to?
00:00:21
Speaker
Dr. Kelly Richmond-Polpe. She is an author of a Copy of the book here, Fool Me Once. It's a fantastic book. I highly recommend it. And you may know Kelly from some other podcasts we had with her earlier in the year as well, but it's always great to have her back. So Kelly, welcome. And for those that may not know you, can you just give a brief introduction on yourself?
00:00:43
Speaker
Sure. Thanks for having me back, first of all. um For those that don't know, my name is Kelly Richmond-Pope, and um I am a proud CPA. I'm an accounting professor. I'm an entrepreneur.
00:00:58
Speaker
And right now, i' but I'm a podcast guest. So um i I love accounting. I've been teaching accounting for a super long time. And I am a proponent of saying that accounting is a life skill. So I'm excited to talk about one of my favorite topics, which is, I'd like to say the F word, which is fraud. And
The Journey of Writing 'Fool Me Once'
00:01:17
Speaker
so I'm i'm excited to be here.
00:01:20
Speaker
Thanks so much, Kelly. And I asked Kelly not to list all of her credentials and everything she does, because if she did, it would take up the entire podcast. All right. no So thanks. Thanks for the brief summary, Kelly. Okay. Now, before we get started on fraud, I just want to ask, you have this book on fraud. And before we dive into the details, what made you decide to actually write a book on fraud?
00:01:46
Speaker
Great question. um It's probably one of those things that you thought it was a good idea to do at the beginning and then you start doing it and you're like, oh, my God, what did I say I was going to do? um So right after i produced All the Queen's Horses, um which was a documentary about the largest municipal fraud, um it was really successful. You know, i'm not a I'm not a documentary filmmaker by training, but I learned how to do it.
00:02:11
Speaker
And um after it came out and was going to to the various film festivals and it won a few awards, people started saying, so are you going write a book? And was like, why? Like, do I need to? Like, I've done enough.
00:02:25
Speaker
I did this movie. It's doing well. Like, isn't that enough? And so um I sort of let it sit for a while. And while I was letting it sit, a couple of things happened. I did a TED Talk.
00:02:38
Speaker
And when I did that TED Talk and it started became getting popular, agents started reaching out to me because they said, you have an audience. So if you say something, if you write something, then you would have a market to sell it to. So I was like,
Understanding Fraud Perpetrators
00:02:55
Speaker
yeah, whatever. I'm not i'm not writing a book.
00:02:57
Speaker
And so then COVID happened. And so when the world shut down, I think everybody had a moment to just be um quiet. You were forced to be quiet.
00:03:08
Speaker
And during that time period, I said, you know, what should I do with this time? And I had so much content. So I had been doing on-camera interviews or voice interviews with whistleblowers, um offenders, um and victims of fraud for years.
00:03:28
Speaker
And so I said, OK, what would be a good format to do this or put all this information in? And I had done this documentary and people were still asking, are you to write a book? So I said, you know, I'm quiet. You know, the world is shut down. Let me write a book. So that's when I really sat down and said, OK, I have everything um here. So let me start talking. And so i i share that process because for me, I had to have something to say. in order to write a book. And so my editor at Harvard Business Review has reached out to me and said, you know where's your next book? Are you going to another book? And I'm like, no, because I don't have anything to say. So that's where it really started of just thinking about what voice did I want to have in the world? What value did I want to offer?
00:04:17
Speaker
um What thought
The Fraud Triangle and Rationalization
00:04:18
Speaker
leadership did I want to um add to the conversation? So that's where it started. OK, great. And just what does that title mean, Fool Me Once? So fool me once. um went So I'm a title person. i really um think that titles are important. How you name things are really important. So when you think about, even with my documentary, All the Queen's Horses, um I was really piggybacking off the nursery rhyme, All the King's Horses and All the King's Men couldn't put Humpty Dumpty back together again. So I wanted something that was um that was that would stick with people and they would know what it meant when they saw it. And so
00:04:55
Speaker
I had gone through a couple of different titles. One was um minding your business because it's sort of like, you know, mind your business, but, you know, it's sort of like a play on words. And then Fool Me Once i' just sort of stuck with me because it i was thinking not only about President Bush and saying the Fool Me Once sort of lining and and fumbling it. And um I just thought it would resonate with people. And you knew that it would be something sort of catchy and quirky. So that's where the title came from.
00:05:26
Speaker
Okay, great. So we're going to dive into fraud and the content in this book, but there's so much to cover. We can't even cover it in just one podcast, but what we can talk about two words, perpetrators and prey.
00:05:40
Speaker
So can you just define for me with respect to fraud, what's a perpetrator and what's prey? Sure. So what I wanted to think about when I was writing the book was what What contributions was i going to make? And so a lot of times when we talk about perpetrators, um we think about grouping them in this category altogether. And I was like, you know, everybody doesn't steal or engage in fraud for the same reasons.
00:06:05
Speaker
So what I really want to do is think about breaking this down um to try to understand that there are or help people understand that there's different types of perpetrators.
00:06:16
Speaker
So in my world and fool me once, I talk about that. There's three categories of perpetrators. There is intentional perpetrators, there's accidental perpetrators, and there's righteous perpetrators.
00:06:27
Speaker
And so but lot of times when I'm doing talks, and towards the end of the talk, I have this game that I created called the Fool Me Once game. And you play it, and it'll tell you what type of perpetrator would you be. I should have had you play it before we came here so we could find out what category that you would fit. But um I really wanted to advance this idea that all perpetrators are not the same.
00:06:49
Speaker
And so this idea came from really thinking about my documentary and thinking about the perpetrator in my documentary, who was Rita Cronwell. And Rita is what we call an intentional perpetrator, somebody that knows the insides of the organization and manipulates the controls to benefit themselves.
00:07:09
Speaker
And so podcasts are made out of them. Um, um Netflix shows or Hulu shows. i mean, if you think about it, you are a true crime junkie, if you sit and you watch Law and Order or any true crime, anything, it's probably about an intentional perpetrator because those stories are so wild and so sensationalized that you would never do it, you know, and you just you just can't get enough of it. so um So when we talk about perpetrators, I like to talk about them in their respective categories, intentional perpetrators,
00:07:43
Speaker
accidental perpetrators, and righteous perpetrators. Okay,
Impact of Fraud on Sectors and Prevention Measures
00:07:47
Speaker
that that makes sense. I want to take a moment and go through what each one is, how we understand each one, maybe give some real-world examples of each one.
00:07:55
Speaker
But before we do, if you could explain to me another concept you discuss in your book related to fraud is this fraud triangle. if you If you want to commit fraud, usually you need at least one, if not all three of the items of the fraud triangle to exist. So what exactly does that mean?
00:08:13
Speaker
So um the fraud triangle is um was developed by criminologist Donald Cressy. And what he said is most frauds can be understand understood by understanding these three indices, um rationalization, pressure,
00:08:32
Speaker
An opportunity. And so what I wanted to do is really expand upon this idea of how people rationalize fraud, because it's it's the rationalization part is where we really differ.
00:08:45
Speaker
Because if you are adulting in the world, you have pressure. And if you are adulting in the world, you have opportunity. But the way you rationalize things might be very, very different.
00:08:57
Speaker
For example, if you are at work and you decide, am I, maybe you don't have true downtime, but you're going to plan your eight-year-old's birthday party on during work hours. Technically, one might call that expense fraud.
00:09:10
Speaker
It could. i mean, because you're not, that's not what you were hired to do, but you might decide I'm going to print out some invitations. I'm going to use this time when I should be paying attention to the meeting that I'm in. I'm going to send out these emails. I'm to send out these e-vites. You might decide to do some of those things. And so there are these kind of fraudulent missteps that all of us do make all the time.
00:09:33
Speaker
But I think um I really wanted to expand on Cressy's work. Now, There are other people that have introduced the fraud diamond where they um add um other components to trying to understand and break down fraud cases.
00:09:50
Speaker
But the fraud triangle is really understanding fraud cases through opportunity, pressure, and rationalization. So like if you wanted to really take that and put it into into work, if you think about um my documentary, All the Queen's Horses, Rita Cronwell was the perpetrator.
00:10:06
Speaker
And her opportunity was she had access. She was the ex-city comptroller of the city of Dixon. So she had access to everything. When you think about, um...
00:10:18
Speaker
Her rationalization, well, that's where it gets interesting because you maybe her rationalization was, I've earned this. I brought all this goodwill to the town. I work very hard. I'm overworked. I'm underpaid. I'm going to take what's mine. I mean, these are just various rationalizations.
00:10:33
Speaker
And then the pressure. Well, the pressure for Rita, she was one of the number number one quarter horse breeders. in the world winning over 52 world championships so what crazy donald cressy offers us is an a system in order to understand these various fraud case fraud fraud cases what i wanted to do was really advance the idea of rationalization so that's why i broke down um perpetrators um prey and um
00:11:04
Speaker
whistle of whistleblowers are my prey. um and And in all the three categories that the book, um I really wanted to advance the thinking around rationalization because that's where the variability is.
00:11:16
Speaker
and Okay. So um your documentary, All the Queen's Horses, you were referring to Rita Crundwell, the city controller of Dixon, Illinois, she Illinois, and she embezzled over $50 million. dollars And she had all of these in up pressure, opportunity, rationalization. So she was the perpetrator.
00:11:36
Speaker
So you mentioned three types of perpetrators, intentional, accidental, and righteous. So Which type of perpetrator is easiest to start explaining what it is and giving some examples? Which is easiest? Wow. OK.
00:11:52
Speaker
So but the way I define it, when I think about the various categories, um Really, the largest category, um how I define it in my research, is accidental perpetrators.
00:12:04
Speaker
And what's interesting is most any of us could be an accidental perpetrator. Because if you think about the intentional perpetrator tends to be more like a con artist. And I say more like because they're not like sitting in a house trying to figure out how they're going to defraud. They tend to be this um super successful, maybe a little on the aggressive side person that doesn't think the rules apply to them and will bend or break the rules to benefit themselves. And so they um those are our
Justification and Consequences of Fraud
00:12:36
Speaker
intentional intentional perpetrators. We often don't. um
00:12:41
Speaker
agree with them or identify with them. But the accidental perpetrator category is really, really interesting. So when I'm going and I'm doing my talks, and I love when I have the opportunity to do this with large audiences, let's say audiences larger than 500, and i give them this survey.
00:12:56
Speaker
And then after the talk, I sort of analyze the um the out the the outcomes, which what I've noticed is professional audiences. So whether you are an accountant, a CPA, an auditor, financial planner, a lawyer, Someone that holds more of a professional type job tend to be accidental perpetrators. And who are they? Well, they are people...
00:13:19
Speaker
They don't seek to defraud an organization. Sometimes they just fall into the situation. For example, my boss asked me just to sign this document. And because I trust my boss, I signed the document. I didn't read it. I trust i trust my boss. I trust the process.
00:13:36
Speaker
And little do you know that that signature then loops you into a huge fraudulent scheme. And you didn't intend for that to happen, but you also didn't ask the correct questions that could have led to that.
00:13:51
Speaker
And so... I'll give you a personal example of a conversation that I overheard between two neighbors one day. And um one neighbor was talking to another neighbor. And the neighbor said, you know, I am thinking about starting a small van company.
00:14:06
Speaker
And if I park the van, umm I'm thinking about starting this company with a friend of mine. My friend lives in the city. And if I park in the city, my um the cost, the premium, the insurance premium is much higher than if we park in at my house. Now, because my partner is going to be the primary owner or own more equity in the business, it makes more sense for the van to stay there. We put that on the all of the insurance documents.
00:14:34
Speaker
But if we use my house, um and just say the van is here and it's actually not going to be here, it's going to be parked at my in the city, then we'll get a lower insurance premium.
00:14:45
Speaker
And so I'm using this example because it might sound very, very harmless, but the the neighbor's ability to agree to fraudulently list their address to get a lower insurance premium is sort of like an accidental perpetrator type situation.
00:15:03
Speaker
He's not thinking about it, but by doing that, he could find himself engaged in a huge, massive fraud if something were to go wrong. So a lot of times we find ourselves presented with those types of opportunities that could accidentally get us in a situation that we didn't intend to. And then the last category we talked about is um the rights perpetrator now what's interesting here is the righteous and the intentional are somewhat similar because
00:15:34
Speaker
The intentional perpetrator tends to be someone a little more senior in an organization. And a righteous perpetrator tends to be someone a little bit more senior in an organization too, because you have to have power and privilege in order to make some decisions where the, the reason why the righteous perpetrator has the righteous title with it is they will bend the rules to help someone outside of the organization.
00:15:59
Speaker
And so This category really um spoke to me when I was writing the book, because when I think about how my interest in fraud actually started, it really started for me um at a very, very early age. When I was in high school, my neighbor that lived behind me went to federal prison.
00:16:18
Speaker
And I thought this neighbor was, now you're probably thinking, what kind of neighborhood did you live in? it wasn't a bad neighborhood. good It was a good neighborhood. um But this he was a a bank executive. And um what he engaged in was what we call
Fraud Victims and Vulnerabilities
00:16:32
Speaker
today mortgage fraud. And this was in the 80s. And so what he did was he bent the rules in order to give loans to a friend to help their business. And again, he thought, I'm sure,
00:16:47
Speaker
This is harmless. You know, I'm helping a person. It'll all, his business will thrive. He'll be able to pay the loans back. Nothing will go wrong. Well, it ended up going wrong. So that righteous perpetrator category really spoke to me when I thought about all of my experiences, both personally and professionally with fraud. And that's how that came, that category came about.
00:17:09
Speaker
So the intentional and the righteous are, um you don't see them, I say, as much as you would an accidental perpetrator. So Long answer to a ah a straightforward question.
00:17:21
Speaker
All right. no No worries at all. I appreciate all of that context. So we have intentional perpetrators, accidental and righteous. Let's just talk for a moment about intentional perpetrators and maybe give some examples. So like a softball example, right? We have Bernie Madoff, multi-billion dollar Ponzi scheme. Is he the quintessential example of an intentional perpetrator?
00:17:44
Speaker
I think Bernie is. He's a great example because what Bernie was able to do was manipulate people. I mean, he, you know, when you think about their that Ponzi scheme, there were some aspects of when Madoff did have a successful business.
00:18:02
Speaker
You know, the whole thing wasn't a mess, but there was an aspect when people were investing, some people were making money, things were on the up and up. But that inability to accept defeat or admit failure, I think was that the problem that Madoff faced. But he's the quintessential um intentional perpetrator, because if you think about it, everybody that questioned him was almost wiped off the map. You would never question someone so powerful. And so He's a really good example because he embodies um the the persona of someone that's untouchable, someone that you would never question, someone that you just assume is doing the right thing all the time. and But that power allowed him to manipulate rules to benefit himself and tell a lie for a very long time.
00:18:55
Speaker
Okay, so we know that Bernie Madoff affected the lives of certain people that invested with him, and we'll talk about victims and prey in just a bit. But still talking about intentional perpetrators, I'd like to just briefly discuss two intentional perpetrators that affected just about everyone's life because it changed the way we live, right? We go back two and a half decades to Enron, WorldCom, a small number of people in previously Arthur Anderson, right? So they commit fraud related to financial statements, and it brings down basically the entire world, right? Stock markets, everything.
00:19:31
Speaker
How did they get away with this? Well, you know, i think they got away with it up until a certain point because there's a powerful word that we haven't talked about that sort of underlines all of this or is the foundation of everything, and that's trust. And so once you've built up enough trust and people have built up enough trust with you, you can say and do anything. And I think the Enron guys, the WorldCom guys, you know, they embodied that. And the people, there were a lot of people around them that were also winning. So they were benefiting from their lies. So, you know, you you you lied and then you protect yourself or surround yourself by people that also allow you to lie and keep it going. And I think that really represented sort of the Enron mafia, um I like to call them. But
00:20:25
Speaker
It's easy once you have that power and that ability to manipulate people. You can tell them anything. They're not going to check up. The red flags may may may wave right in their face. They're not going to pay attention to it because they trust you so much that you can do and say anything. And so I think that that's how they were able to perpetrate it, even though there were red flags. Now, the red flags, when you think about Enron, what's really interesting is I think the red flags around Enron um was a little bit more complicated than some of the other cases. You know, you have special purpose entities, off finance ba um transactions, like off balance sheet transactions, like all of those things are really complex um accounting and finance topics that the average investor is not paying attention and looking for. So I think that it was easier for them to, you
00:21:18
Speaker
to hide their fraud, perpetuate their fraud, because we don't often ask really detailed questions. Now I do, and indeed but you think about it, me asking a lot of questions in a meeting probably deems me as a troublemaker, you know, not an inquisitive accountant, but a troublemaker. And then that's not a good thing. So I think it was easy for them to get away with a lot because no one touched them. No one asked.
00:21:42
Speaker
Okay, so this, of course, leads to the passing of Sarbanes-Oxley and the formation of the PCAOB. And we're not going to dive into the weeds on these. But one of the things that I found really interesting in your book was how you brought up a modification to Sarbanes-Oxley that was passed back in 2019, where independent audits were no longer required for companies with less than $100 million dollars in revenue, and how that could potentially open the door to fraud in some of these smaller organizations. So have you seen a lot of this occurring since this modification to Sarbanes?
00:22:20
Speaker
um yes um I think, I think when you think about the the air quotes here, burden that Sarbanes-Oxley placed on air quotes, smaller organizations. Now, under $100 million dollars from my life seems like a pretty big company. I don't know to you, but you know but when you think about, there there was a lot of um requirements that that placed on on meet small businesses. And so you think about the when you go when you do away with um the the need for an audit,
00:22:55
Speaker
it allows people to say, you know I could probably say whatever I wanna say because I don't have this independent third party coming in and really saying anything. And I'm i'm watching a case right now, watching that play out right now um as we're watching um a small business in the distillery industry. I won't say the name yet, but I'm watching it unravel.
00:23:19
Speaker
And what you notice is this was a small private company. small under that 100 million, but a small private company that didn't issue audited financial statements to investors.
00:23:31
Speaker
So they had performance, but they never had that external audit firm come in and and opine on anything. And so now what you're seeing is an example of a smaller business who has overstated their revenues, who received loans, and now they defaulted on those loans because the the size of the business, the size of the revenue was inflated. And so, yes, so you see it more. And I think...
00:24:00
Speaker
We are in a time where we often think that we are overregulated, but those regulations are really there to not only um help businesses behave better, but really to prevent to protect investors. And I think we have to believe that.
00:24:15
Speaker
Okay. That makes a lot of sense. And one of the other things you talked about is your law and order and how, to a degree, Hollywood almost sensationalizes some of this fraud, or they at least ah you know make movies or TV shows about it and are gaining profits off of it. like I think about something you mentioned in your book, which I love the show. I was riveted. It was Netflix, Ozarks, right and Marty Byrd, and all the fraud that was committed there. Or You know, we have that movie with Leonardo DiCaprio, Catch Me If You Can, passing all the bad checks. And a lot of these are either based on real stories or, you know, are real stories. And we live through so much of this. And it's unfortunately the world that we live in where we sensationalize all of this.
00:24:57
Speaker
And some of these people think, oh it's victimless crimes. And you mentioned in your book how it's never a victimless crime. There's always somebody that's going to be held responsible for it. So what really hit me hard as I was going through your book are certain things like fraud. food and water and medicine and things that we take for granted. The government is protecting us. I could eat this food if they sell it in the store. I could drink the water. I could take this medicine. And then I almost fell off my chair when I read the case that you listed about Robert Courtney, the pharmacist, and what he was doing.
00:25:34
Speaker
Talk to me about what kind of person can do this. What was his story? And why was he acting the way that he did? Yeah. So the story that you talk about and just just to remind those that are listening, we're really talking about intentional perpetrators. And um we talked about Madoff being one. But guys, this guy here, um Dr. Robert Courtney, this will make you sick to your stomach. And let me tell you, I'm.
00:25:59
Speaker
So the way the story came was introduced to me is I had a healthcare forensic accountant who did a presentation in my class. Her name is Dr. Susan Hayes. She was amazing. And she talked about one of the stories. And she was talking about her career as a healthcare fraud fighter.
00:26:17
Speaker
And after she did the presentation in the course, she asked, have you ever heard of Dr. Robert Courtney? And I'm like, no tell me more. Dr. Robert Courtney was a compound pharmacist.
00:26:28
Speaker
So first, a lot of people might not know what a compound pharmacist is, because when you think about a pharmacist, you probably are thinking some about someone that might be at your local CVS or Walgreens, you know, giving out prescriptions. The compound pharmacist is the person that's actually making the drug and then sending it onward for you to get that drug at the um the the pharmacy.
00:26:49
Speaker
So anyhow, what Dr. Courtney was doing was diluting prescriptions and in order to increase his profit margin. So think that you are supposed to receive a certain amount of medication in your chemotherapy, and it's mainly saline solution, or it's only a small percentage. So whatever you had and was intended for one patient,
Exploring Accidental Fraud
00:27:15
Speaker
you stretched it to be um now be made for 10 patients. So you diluted that that treatment.
00:27:21
Speaker
And that's what he did. And if I can remember correctly, he manipulated I think over 98,000 prescriptions. And so people were dying because you think about it.
00:27:32
Speaker
If you have stage three cancer, let's say stage group three breast cancer, stage three prostate cancer, and you're not receiving your chemo, the only thing that is happening is your cancer is getting worse. Your tumors are growing.
00:27:46
Speaker
And so when a, let's say, a 65 year old um woman comes in stage three breast cancer, when that woman may pass away, no one is really thinking, oh, let me go investigate because that's odd. They maybe just think her cancer progressed. She was older. It's what happens.
00:28:07
Speaker
And so what's really eerie about what Dr. court and dr Courtney did in fraud, is he engage in fraud in an environment where no one really would question it.
00:28:21
Speaker
And so the way this fraud came about or came to light was there was an oncologist, a nurse, a nurse oncologist who started to notice that her patients were no longer showing the typical side effects that those that are going through cancer go through. Now,
00:28:40
Speaker
I'm going to ask you a question and I'm going to hopefully you answer it correctly. But when I say ask you, what are the typical side effects for somebody going through chemotherapy?
00:28:51
Speaker
What would you say? I'd say they probably lose hair. They're nauseous. They just you know feel terrible. Yeah. Perfect. Great answer.
00:29:02
Speaker
and so And so as much as we might say the side effects are very, very, there are some so some standard things that you expect to say. you When my father was battling with cancer, those are some of the things that he showed.
00:29:16
Speaker
Extreme fatigue, hair loss, nausea, you know pain, just feeling sort of just terrible. And so what this nurse noticed was her patients weren't showing those side effects.
00:29:28
Speaker
In fact, they weren't losing weight. They weren't showing nausea. And so what she, she started getting concerned and she talked to the doctor and said, you know, something seems off here. And the doctor responded by saying, everybody responds differently. And she was like, no, something's not right here. So she watched this a little bit longer. Finally, Mike, what this this nurse did is she took a bag of the chemotherapy drugs and took them home, sent them to the FDA for testing. That's how much it bothered her.
00:30:00
Speaker
and when she when And when she sent that um in, what came back was shocking. The results showed that there was no medication in those treatments. It was my mainly saline solution. And she was appalled.
00:30:13
Speaker
And so that's how the story came to light. But you when you really think about it, It's one of these frauds that you probably would never suspect because, you know, you wouldn't think that somebody would do something so egregious.
00:30:28
Speaker
When I was doing the research for the book, bob pharmacy doctors were rated as one of the most ethical professions on the planet. Compare that to sales carsmen sales sales professionals like car sales, and they think that they're not. But I digress. My point is, um Dr. Robert Courtney was one of the most... um I guess evil, if you will, intentional perpetrators that I talk about in the book.
00:30:55
Speaker
And what made this case even more touching or heart wrenching is not only did I interview victims of Robert Courtney, I also interviewed the FBI agent that investigated the case. And that and in this FBI agent, she um left the bureau, but she was also a pharmacist. And so she talked about doing the investigation um and and meeting Robert Courtney, as well as me talking to the victims. And this one woman I talked to, she was saying, you know,
00:31:29
Speaker
but What my mother experienced toward at the last year of her life, not receiving her treatment was was was awful. And to think that somebody would do this to make more money was just was just evil. So yeah, he also, he goes on the list of probably the worst people person I've ever read about that would be so, um so just so so evil, you know, and when you hear when you see ah these health care type fraud issues, they hit you differently because you realize it there. It's not a victimless crime. It's just not that way.
00:32:03
Speaker
Understood. And it is, it's just evil. It's heinous, like you said. And there were other examples in your book as well, you know, whether it's companies um that is transferring food they know is contained salmonella in it, or they're putting inferior quality products into baby food that babies are ingesting. It's just, it's just terrible. So, you know, we do appreciate shedding light on all of this and that, you know, hopefully that our laws will stop people from doing these things and that they should be punished for all of these bad actions. So that's our intentional perpetrator.
00:32:34
Speaker
Now, if we can move on to the accidental perpetrator, you have a really good example in your book that really relates to you about something that happened to you with the delivery. Can can you explain an accidental perpetrator and talk about that story?
00:32:48
Speaker
Yes. You know, again, I talk about accidental perpetrators being um the largest category. so I'll tell you how I almost became one. I did not become one.
00:32:59
Speaker
um But I had um ordered a handbag made in America. Go, go, go handbag. I was super excited
Modern Fraud Challenges and Technology Risks
00:33:06
Speaker
to get it. And it came on a Monday. Wonderful. Get the bag excited.
00:33:12
Speaker
And then on Wednesday, and I might be getting my days off. um Another bag came the exact same bag. And I was like, I only pay for one. What am I going to do?
00:33:24
Speaker
And so I happened to be on the front on the phone with a friend of mine when the second bag came. And I was like, oh my gosh, they sent me another bag. And she was like, girl, you know, you should sell that bag. I'm like,
00:33:36
Speaker
Are you kidding me? I can't do that. And um so I started to think, I wonder what others would do. So i asked about 10 people and said, if you got a second bag that you didn't ask for, didn't pay for, what would you do?
00:33:50
Speaker
And most of the people that I talked to said, I would sell it. I would give it as a gift, but I would not return it. And so I said, you know, that is not ethical. I can't do that.
00:34:00
Speaker
So I called the store. And I tell the store, I received a set the second bag that you sent. The store didn't have any recollection that they had shipped the second bag out.
00:34:12
Speaker
So I went back and I asked those 10 people and I told them rather, I told them that the bag, they didn't even know the bag left. And they all said, see, told you, you could have kept that bag. You could have sold that bag.
00:34:24
Speaker
You could have had like a thousand dollars in your park pocket. We could have gone out, but no, you had to, you had to tell the truth. And so, um What that told me is if I had engaged in what we call return fraud, I could have been an accidental perpetrator. And so you think about like you almost start this cycle of lies because say, for instance, I did say I never got the bag.
00:34:49
Speaker
And then the store says, well, we have record or delivery that the bag was delivered at this address. Do you not live at this address? And so am I going to lie and say I don't live there? So it just starts this cycle of just lie after lie after lie. But it's how an accidental perpetrator situation starts.
00:35:08
Speaker
It's typically not started by you. It's not initiated by you. And what I talk about in the book is it's defined by a mistake that somebody else makes. And it places you in a point of a decision that you have to make.
00:35:22
Speaker
Do I tell or do I accept? And if I tell, then, you know, I'm just going to bring forth what's going on. Or do I accept that someone else's mistake might benefit me, which could lead you into this whole accidental perpetrator category?
00:35:37
Speaker
So let's say I want to read Kelly's book, but I don't want to pay for it. So I go into the bookstore and I just say, you know what? I'm to slide this under my jacket. and I'm going to walk out and not pay for it. We know that's called shoplifting, right? I broke the law.
00:35:51
Speaker
But in your book, you mentioned another word that I never heard before called shop listing. What exactly is shop listing? Okay. So do you ever shop at Costco?
00:36:03
Speaker
Sure. Okay. And have you ever noticed when you shop at Costco, when you're leaving out Costco, you have to show them your receipt and then they market that they've seen the receipt. Okay. Now here's another question. i don't know if this has ever happened to you, but have you ever been in a parking lot and somebody asked you for your receipt?
00:36:24
Speaker
I actually have it. That has happened to me before. Really? Okay. so it might it So it might be Target, Costco, Walmart, somewhere that there's are where you can get appliances for a large amount of money. Yes?
00:36:36
Speaker
Okay. So what getting your receipt allows someone to do is go back in the store, get those items, put it in their cart, and then go to the return desk and say, I want to return all of these things. And they're going to say, sure. Do you want cash? Or do you want a credit card? Do you want a debit card do you want it on a store credit?
00:36:59
Speaker
it's easy and so you know you think about how that simple little internal control process that costco puts in place where they mark your receipt to show that it has been looked at allows you not for someone to reuse that receipt but shop listing says i can go and i'm going to take all the things that are listed on your receipt go put them in my part in my cart and then i can get money back from and you know what it works now No one listening. Do not do this.
00:37:28
Speaker
But it's very, very simple. Like it really is because we are such a trusting community. You know, it is it is rude for us to say, prove to me that you bought these things. It's really rude. And we don't we don't do that. We don't approach people that way. So. um Yeah, shop listing. Now, I have had people ask me for my receipt before too. And me being me, I, you know, I just sort of engage like, are you going to do with that receipt? Why do you need it? Why would you need my receipt if you
00:38:02
Speaker
What would you do? What would you do with it? start talking to the guy the people. and Oftentimes it's guy. And the guy will say, well, I need to return my TV and and I lost my receipt. And I see that you have a similar TV. So if I could just use your receipt, then I can return mine. And I'll say, where's your TV? I don't see a TV near you. I mean, like I just, I'm just being silly. But my point is these are these, um, scams that happen that we're not always aware of. Because if you think about it, if you're rushing out of Costco, who knows, it's a Saturday morning, you have to go run an errand. If somebody said, Hey, can I see a receipt for that? You might not be thinking, you might just say, here, take it. Why do you care? You're not going to return the items anyway.
00:38:42
Speaker
So what the scammer is, um, hoping that you will be is gullible and vulnerable. And you give that receipt up and you probably just put $500 in somebody's pocket.
00:38:53
Speaker
So it's easy. It's easy. Yeah, I get it. And I could even see besides someone intentionally coming and asking for the receipt, but they're probably looking around. Did the receipt blow out of a car, out of a bag? Did somebody drop it? And then that's like free money for them. So yeah, you really do have to
Conclusion and Call to Action
00:39:08
Speaker
be careful with receipts. Otherwise you're opening up somebody to give them the opportunity opportunity to commit this fraud. And again, there's never a victimless crime here. Someone somewhere is going to get harmed, whether it's a big store or you know ultimately taxpayers, for sure, without a doubt. Now, and just just to say, when it's happened to me, it's been um typically a male that has asked me not to profile that all men do this.
00:39:31
Speaker
No, but that's just been my experience. So I just wanted to add that little piece there. All right, now I know we're just kind of wrapping up this accidental perpetrator. And you know when something happens by accident and then it puts you in a position to kind of commit the fraud. And you know we saw like your handbag example, small scale, but I was just trying to come up with a a larger example. And I thought maybe you could just comment on this one. And this was about way back in 2010 with um BP, and there was that oil spill, Deepwater Horizon mobile offshore drilling unit exploded. Unfortunately, some people lost their lives. Oil was gushing into you know the Gulf of Mexico, and just bad things were happening. But then-
00:40:16
Speaker
they needed to report on what was happening. And instead of using due diligence, instead of following the rule of conservatism and really making sure they explain how the environment, how the comp computere community is affected, they kind of painted a more rosy picture than they should have. And then it turned out, you know, later on in time that, uh-oh,
00:40:41
Speaker
Our water is more polluted than we thought. Fish are dying. Tourism is down. Where do you take the people from BP that created this report and made it more rosy than it is? Is it intentional fraud? Is it considered accidental? How do we kind of marry this to your definitions of fraud?
00:41:00
Speaker
So I think with this one, you probably have a cast of characters. So I would say that the people that are more senior probably were more intentional perpetrators because they had access to more information and probably knew more of what was actually happening or what the the things that could have been prevented. They probably had more um more insight um the higher up you went.
00:41:24
Speaker
I would argue that they're... probably were some accidental perpetrators who received instructions to write the report, to say certain things, who might not have felt like they could have pushed back or said anything.
00:41:36
Speaker
And, you know, when you think about... um The reason why, you know, there's lots of factors. Perhaps you are the breadwinner of your family. Perhaps this is the best job in the area that you live in. Maybe you can't move. Maybe you can't relocate. Maybe you're caring for loved ones um in your community. Who knows? But there is something that limits your voice.
00:41:58
Speaker
And so um there's a study that i i cite that I cite in my talks. It's not in the book, but the title of the study is called Boiling the Frog. the immersion of C-suite financial executives into fraud.
00:42:11
Speaker
And it's a fascinating study, but the reason why I'm talking about it now is because it's all about accidental perpetrators. And so what this study does is it analyzes 13 financial executives who crossed the line. And what was interesting is they're all C-suite offenders and they had various roles, chief financial officer, chief accounting officer, director of finance, and even some Chief Operating Officers. And all of these folks were from companies that had annual revenue over $8 billion. dollars So these were large, large places that people worked in. And so when you read the paper, what they talk about is some of the reasons why people engaged in fraud, these accidental perpetrators and why they did it. And so sometimes people cite that it is peer executives, controllers from other units or CEOs or CFOs that caused them to engage in fraud. Sometimes they learn from um their former employers, whether they be public accounting firms or other companies that they worked in. Sometimes they talk about the ambiguity of accounting principles um that lead them to make some decisions and so some bad decisions.
00:43:23
Speaker
And so what's really interesting about these 13 people is none of them ever had a criminal background. um Most of them in that 13, nine of them, um sorry, most of them were CPAs at the time of the fraud.
00:43:36
Speaker
They represented eight different industries and six previously worked as external auditors. And so these are very seasoned and executives. But when you go through the study, they talk about the reasons, the rationalizations as to why they made their decisions.
00:43:52
Speaker
And so they um all talk about they might have received a suggestion to capitalize costs when they knew that they should have expensed them, but they felt like they couldn't say anything.
00:44:03
Speaker
So when you talk about the BP example, I think about that. I said it's like a cast of characters. I think the people that were more senior probably were intentional perpetrators that gave directives to people that were probably less. more junior to those senior execs who were accidental perpetrators. you probably had a ah group um of all of them, so of of intentional and accidental.
00:44:27
Speaker
All right. That makes sense. And I will read that study. That sounds very interesting. Now, I want to wrap up the perpetrators with a third type we haven't discussed yet, the righteous perpetrator. So I'm just curious, what are the qualities they possess? And can you explain ah another effect you mentioned in your book, the Robin Hood effect? Sure.
00:44:46
Speaker
So the righteous perpetrator, i mean, we we touched on it in our open, but this is a person who will break rules um to help someone outside the organization. And so typically this is a more senior executive type person because you have to have some type of seniority in an organization to break a rule. So they've moved up the corporate ladder a little bit further so they can so they can do this. And so um the Robin Hood effect says um it's ah it's a syndrome that says, I will rob from the rich to give to the poor. And if you think about that's what Robin Hood did and sort of justified his behavior Because the rich don't need to be any richer, but the rich need to help the poor. So I'm going to rob the rich to give to the poor. That's really the mindset of the acts of the righteous perpetrator.
00:45:32
Speaker
And um they're the interesting thing is when I was doing the interviews and i I developed this category for the righteous perpetrators, the type of empathy that you have for them is different.
00:45:46
Speaker
Because the intentional perpetrators, you sort of feel like, yeah, you did something wrong. You deserve it, whatever. The accidental perpetrators, you sort of feel bad for them because you feel like they couldn't stand up to authority and and they just sort of got looped into doing something wrong. But the righteous perpetrators, you sort of fall in the middle of your empathy for them. And so there is one person that I interviewed recently And her name is Kayla Ravello.
00:46:09
Speaker
And I haven't heard from Kayla in a while, but for for a period of time, we were talking a lot. And so Kayla was a top lawyer um in a New York law firm on Wall Street. I mean, big, big equity partner, making a lot of money.
00:46:26
Speaker
And what she did was engaged in fraud in order to help get her husband at a contract with her firm. And so her law firm was looking for um to to outsource their litigation support to a company that could do some of the paper collating and you know just some of the busy work that they needed to help to support their cases that they were working on. And so she encouraged her husband to start a company and apply for this role and she could help him. Now,
00:46:56
Speaker
That probably sounds more like a nepotism type of situation to those that are listening. And the company did not have an anti-nepotism policy. So is it odd for us to recommend a person for a job that we and we know the person and we think that they would be a good fit?
00:47:11
Speaker
Happens all the time. But what happened in this situation was Kayla's husband, or ex-husband rather, stopped doing the work of the jobs and was submitting invoices saying that the work had been completed.
00:47:26
Speaker
And because Kayla was the overseer of these vendors, she signed off on on his approval to get paid knowing that the work had not been done.
00:47:38
Speaker
And she also knew that her partners did not know that they had hired her husband's firm. So she put herself in this really interesting dilemma and she had to decide, do I tell my partners what I did or do I try to fix the situation with my husband by telling him to get the work done?
00:47:53
Speaker
And so Kayla's a really good example of this righteous perpetrator category because she really, her intentions were really to try to help her husband. She thought that she was gonna have the oversight of um nothing bad is gonna happen on my watch, but she got busy and she she took her eye off the off the ball.
00:48:14
Speaker
And while she took her eye off, her husband was engaged in some things that really led um led him and her astray. So um why I share this story with you is the times that Kayla has come to my classroom and shared this story with students.
00:48:32
Speaker
I have had students in tears, crying, listening to her story because they could empathize in a way that that just touched them because they realized how she found herself in this situation.
00:48:45
Speaker
They realized why she was in that situation and they knew she did something bad, but they really just wanted to help her. And so, It's interesting to see in a classroom, because you you know I'm a professor, to see when I talk about these various cases, whether it's an intentional perpetrator, an accidental perpetrator, or a righteous perpetrator, to almost watch the emotions of the students and how it changes. Because you know they're mad at the intentional perpetrators, they feel sorry for the accidentals, and they're pained you know by the righteous. So you know all of them, you know every story I try to put in a certain category,
00:49:24
Speaker
Okay. So let me ask you about these different types of perpetrators. how you you Just like you said, you try to put them in a category. Let's do maybe a speed round going to give you a couple of these perpetrators. You tell me where they fall in.
00:49:35
Speaker
So we mentioned Robinhood. What about this billionaire CEO of Vista Equity Partners, Robert Smith? He wanted to just pay down student loans for people, but there was fraud involved. How did that work?
00:49:47
Speaker
ahh So, yes. You know, so ah Mr. Smith, Robert Smith wanted to do something good, um but ended up doing something bad by having some them some fraud mixed into the scenario. um but But again, sometimes it's like we'll do something good, um but the way we get there can be um ah a bad way. And i know the next name you're going to um bring up, but I'll let you ask.
00:50:21
Speaker
um Elizabeth Holmes. Elizabeth Holmes, okay. One drop of blood, I'll tell answer every medical question you have. Okay, so here's the thing. and And someone's gonna send me an email saying that they don't agree with me. and and and But Elizabeth Holmes, at the beginning, I put her in the righteous perpetrator category. And I'm go tell you why.
00:50:40
Speaker
She, if she had been right, she would have revolutionized the whole healthcare care system. I mean, if you really think about what she just said, one drop of blood and you can answer every health situation that's possible, that would be, that would have been pretty phenomenal.
00:50:56
Speaker
So um I believe that she is in the righteous perpetrator category because she intended at the beginning to do wrong, to do good, to do good for society. She was very, um,
00:51:09
Speaker
um she got scared every time she had to give blood. She didn't like and didn't understand why it would require vials and vials and vials of blood. Big needles scare a lot of people. So she wanted to really fix that problem. And if she could have, boy, what where will we be today?
00:51:25
Speaker
So I put her in the rights to perpetrator category. I know some people probably like she's an intentional perpetrator, but no, I put her in the rights to perpetrator category. How about Volkswagen emission scandal where they knew that the engines, their new engines were not going to pass emission standards tests. So they put in defeat devices to make them appear cleaner than they really were because they didn't want thousands of people to lose their jobs. So they just kind of cheated on these emission tests. But the cars then were emitting 40 times what was legally allowed. Was that righteous or was that intentional?
00:51:59
Speaker
Intentional all day. Intentional all day. They knew exactly what they weren were doing. They didn't think it was harmful enough. Intentional all day. All right. So last one that I have here, um Elizabeth Rogers. She was an office assistant for basically a slumlord. And the slumlord was increasing the rents on these tenants, but not providing the services he was supposed to provide. So she embezzled some money and tried to redistribute it to the tenants. Where do we classify her?
00:52:29
Speaker
Elizabeth Rogers would be a righteous perpetrator because think about, think about what she did, what you just described. I mean, she was, she caused herself recognizing, i can't stand up to this boss of mine, but I can help these people over here.
00:52:43
Speaker
And so I'm just going to manipulate, create some books, tell them one thing, but do another to help these people. She would be a righteous perpetrator. She went to jail, but she would have righteous perpetrator.
00:52:53
Speaker
Remember, operative word is everyone we're talking about, they're still perpetrators. We're not saying that they didn't break the law. What we're really talking about is why did they break the law? Yeah, and their lives are changed. Definitely not for the better. That goes without saying. But it's funny. I remember reading that she said she would do it again. She really had this Robin Hood effect where she thought she was doing the right thing and she paid the consequences and didn't really second guess herself. So, so be it. So be it.
00:53:23
Speaker
I am when I had a conference in um Barbados, no, in Bermuda, and um I spent a day in a women's prison doing interviews and I interviewed three women that all would have been in this righteous perpetrator category. And every last one of them um did something, broke broke a law to help their families. Every last one of them.
00:53:51
Speaker
And ah every last one of them said they would do it again. And because they felt as though they needed to be that voice to help the community. So, you know, you do have people like that that will risk it all to to to give those um that don't have a voice a voice. And so it was interesting. Interesting day. It was so very similar to Orange is the New Black, except it was in Bermuda.
00:54:15
Speaker
Hmm. All right. So we mentioned how these fraud crimes are never victimless, right? Someone's left holding the bag, so to speak. So the question is, the people who suffer the consequences, we'll call them the victims or the prey.
00:54:30
Speaker
Are they the victims because it was their own fault? They were dumb, they were gullible, or maybe Bernie Madoff's you know investors were greedy. How do you define these victims and is it their fault?
00:54:43
Speaker
That's a really loaded question. A good one, though, because I think it's the reason why we um you don't see a lot of research around victims. um I think it's such a sensitive topic um because what you're saying is, why are you a victim?
00:54:59
Speaker
And um I think it depends. You know, the stories that. um I find the most, I'm just going to say scratching my head. Not going say dumb, but just scratching my head. You could scratch your head too, Mike, if you want to. But those stories, though head do you ever follow any of the rom-com scandals, the romance scandals, the romance scams where a woman, oftentimes a woman, oftentimes has met a gentleman online and ends up
00:55:31
Speaker
giving her life's fortune to a person that she has never seen before. And this person wipes her out completely. Have you ever, there's movies about it, Tindler, Swindler. There's all kinds of stories about these cases. Now, those kinds of stories, scratch my head on those because I don't understand how you are um are not paying attention to the red flags, but I do understand that the scammer often is, um,
00:56:00
Speaker
focusing on a pain that that victim has. So they might've suffered a loss or they they can tell that they need companionship. There's something that that that pulls, that they're screaming out that that scammer picks up on and then just um takes over their life. I just had a story um brought to me from a gentleman whose mom was a victim of a romance scam and lost half a million dollars of her of her retirement savings because, She was giving her money out of her retirement account to this person overseas that she had never met.
00:56:36
Speaker
Those stories always make me wonder how. Now, putting those aside, Oftentimes, I think victims um are really innocent bystanders. And I talk about innocent bystanders in the book as a category because when you are an innocent bystander, it's exactly what the terms are defined as.
00:56:56
Speaker
You don't know sometimes the danger that you're facing. it It's just sort of by the grace of God that things don't go wrong. Think about our food. We um don't necessarily know if our food is toxic or not. We trust that it's not.
00:57:11
Speaker
Or if you think about the the case that we talked about earlier with Robert Courtney, you go to the pharmacy to pick up your medication and you assume that your medication is what it says it is.
00:57:22
Speaker
You don't assume or even think that it's diluted, that it's not what it says it is or it's going to harm you. You don't even think that. When you get into an airplane, you don't assume that the safety checks have not been um checked, triple checked and quadruply checked. You don't think that. You don't think that that you are in um harm's way, but a lot of times we can be. So the innocent bystander category, I don't really even think we can protect ourselves from some of the harms.
00:57:52
Speaker
um That's a different category as well. But I do think that what's really important is that we always pay attention to the red flags. And in the age of AI and the age of deep fakes and the age of what the way you can use technology to really manipulate voices and things like that, it's going to be much harder. It is much harder. But we have to make sure we're paying attention to the red flag so we can protect ourselves.
00:58:17
Speaker
Yeah, absolutely. And, um you know, I consider you one of the smartest people I know. And you were telling me the story that, you know, you fell into the trap on StubHub, just trying to innocently buy a ticket. Right. So I'm sure that that was something very difficult for you to deal with.
00:58:33
Speaker
Yeah, it was. You know, you think about when it what happened. um I was going to the Bruno Mars concert. Don't know if you've ever seen Bruno in concert, but he was great. Anyhow, so my um cousin and I went to the Bruno Mars concert and we bought tickets.
00:58:46
Speaker
And here's the thing, Mike, the red flags. you I'm going to tell you two things that i did not pay attention to that should have. Great seats, low price. Those two things don't really go together.
00:58:58
Speaker
I didn't find a deal. They're really, let mean, think about the number of times you really find a deal in your life. Doesn't happen a lot, but great seats. I mean, almost like center, close to the stage, great seats for like a really, really, really low price. So I hit buy.
00:59:15
Speaker
Yeah, I scored two great cheap tickets. We got to the gate. We were at ah the United Center. We got to the gate, scanned the tickets. They were, you know, get that guy got the big X. Like these tickets don't exist.
00:59:27
Speaker
Devastated. But did I pay attention to the fact that cheap tickets, great seats. No, because that's what I wanted. you know and i And so and didn't pay attention to the red flags. And so when I go back, because I was scammed and I was mad. right it was like, how did this happen? So when we go back, we sort of backtracked. My cousin and i looked.
00:59:46
Speaker
The website. The website looked really homemade. And so it was like a dub website of a StubHub website. It wasn't the real StubHub website. When we looked at the um web address,
00:59:59
Speaker
it had It was like stub with like three B's or something, not spelled the right way. You're didn't pay attention to that because what I wanted was cheap tickets. So yeah, i got scammed. Yeah, I'm sorry to hear that that. It's a lesson learned for sure. And we we all have those, right? So yes, we're talking about now the victims of prey, right? We have the innocent bystanders. And in your book, you mentioned the organizational target. So you you gave a nice little background on innocent bystanders. And we could understand like the people that invested with Bernie Madoff, they should have seen some red flags, but they were generally innocent bystanders. Same thing with Theranos. Another one that I saw, another, we keep talking about documentaries, whether it's Netflix, Amazon, Paramount, whosoever making them, was the Fyre Festival back in 2017. Another great documentary, but
01:00:49
Speaker
It seems there that people invested a lot of money to have a great concert experience and then, uh-oh, concert never happens. Should they have seen some red flags or how could these people maybe have avoided that?
01:01:03
Speaker
They were more innocent bystander festival goers because you are so right. They did pay a lot of money. And I think that on the surface, it had all of the trappings of a high profile, um high quality, exclusive kind of experience. It looked like that.
01:01:22
Speaker
And only is it when only till they got there did they see everything fell apart and nothing existed. So in some of these situations, you really can't protect yourself. I think the fire festivals are really, really good one because there was nothing that they could do. You know,
01:01:37
Speaker
It's so easy to set up a great website with some beautiful pictures. You know, you can use some technology behind it to make to make the ticket processing um seem simple. And they they didn't know what hit them. You know, so that one's a little different because I don't know, um after because I've watched two of the documentaries just to see how different they were. And I really don't think that there were any good red flags that the ticket goers could have really seen in advance besides, you know, until they got there and the conditions were horrible when they did get there. But I don't think there's much that they could do. So they fall into that innocent bystander category, which is why we just need to do the right thing and be ethical in our actions. Because we, you know, you sometimes you just have to trust people. And that one was a bad one.
01:02:25
Speaker
Absolutely. Yeah. The name of that documentary was The Greatest Party That Never Happened. So it was another ah good one to watch. And and I appreciate you bringing up to the AI and the deep fakes. And we know the elderly are one of the biggest groups of prey and victims out there right now, especially where you have a grandparent who hears an AI fakes. fake voice of their grandchild saying, I'm in trouble. I need help. Please send money. What are they going to do? They're going to try to act on that. And you know we're talking all about movies. If you're an action movie buff and you're like Jonathan Statham, beekeeper about this exact situation, lot of violence, a lot of blowing up, but it's about you know duping the elderly and you know somebody doing something about it. So again, I always love to throw out all of the the movies because i'm a big movie buff and documentary buff. So All right. So enough about the um the innocent bystanders. Let's talk about the other type of victim, the organizational targets. What exactly is that? Yeah. You know, what i um when I was thinking about the book um and I was thinking about perpetrators, prey, and whistleblower, perpetrators, prey, whistleblower, and victims, I had to think about um categorizing the whistleblowers into their two categories. And so the, um,
01:03:41
Speaker
People that are just unknown, that they're yeah just sort of sitting ducks would be the bystanders. But the organizational targets are just just groups that just, um they call fraud to them.
01:03:54
Speaker
And so when I was thinking about this archetype system that i that I use in the book, it was all really coming from my documentary because Rita Cronwell was an intentional perpetrator.
01:04:07
Speaker
the residents The residents of Dixon were innocent bystanders because they were clueless or unknown to what was happening to them. But the city of Dixon represented an organizational target because Rita Cronwell knew that the city of Dixon had very poor and weak internal controls. She knew how to manipulate them. She knew all the insides. So that the the structure of Dixon, Illinois became an organizational target. And so when you think about what organizational targets are,
01:04:36
Speaker
they tend to be... um entities that have access to a lot of cash, like a governmental entity, a nonprofit, like somebody, a larger nonprofit, um and an entity that you often think has very few or very effective internal controls around them.
01:04:57
Speaker
And so if I asked you what was what would be an organization that you would think that has a high amount of cash, but probably lacks internal controls, You could probably name a few. You might even say a church or a condo association or a um booster club. You know, things that are volunteer in nature, um collect monies, but probably have very few or little internal controls. Those are organizational targets because they are breeding grounds for fraud. Even...
01:05:30
Speaker
for fraud even um like retirement communities um can be seen as a cluster as an organizational target because they um tend to be like an affinity group. you can If one person does it, the whole group might tend to do it. And so when you talk about the elderly, one of the reasons why the elderly are such great targets, and I hate to say it that way, but the reason why they are such great targets, they tend to have a lot of money.
01:05:57
Speaker
They tend to be very trusting. They tend to be not good with technology. And um if they they may not have a lot of familial oversight around them.
01:06:10
Speaker
So lower internal controls. So um yeah, so so I'd sort of talk about organizational targets and innocent bystanders sort of together because it really depends on if you are an individual or if you are sort of clustered in a community. If you're clustered in a community, I call you at an organizational target.
01:06:29
Speaker
Got it. So organizational targets could be a city, could be a company, could be a not-for-profit, right? You mentioned the church. You have a really poignant story in your book about a pastor of a church who gets a volunteer to basically handle the accounting in the books and how this person just steals from them, similar to Rita Crundwell. And it just it just breaks your heart. It really, really does break your heart.
01:06:52
Speaker
Yeah, and you know, um you talk about what happened at Good Shepherd Lutheran Church and the story of Pastor Suzanne. And what's really interesting about that case, and it's really the basis for how Red Flag Mania started, because we built the whole case around that true story. And what's interesting about Pastor Suzanne is you had a leader who had no financial training, no fiscal management, really true understanding.
01:07:18
Speaker
She was a pastor. She was not a fiscal manager. And she put her trust in one person. And that one person defrauded her, the church and everything. So it's a very common story. You know, very few little and little very few internal controls, lots of trust, very little oversight. And that's the recipe of fraud. If you wanted to put in a bowl and mix it up, you'd have fraud at the end.
01:07:43
Speaker
Yeah. And how how about as well for a recipe for fraud? Now, we have this dark web, right? Stealing identities. You mentioned in your book, ah site shadowcrew.com, where you could go and you know get identities. Hopefully, they shut that down. And COVID was happening and unemployment insurance and PPP fraud and um you know all of the economic insurance disaster loans that were happening. What are you seeing? Are there new controls on dark web and identity theft? or Or is it something we still have to really watch closely?
01:08:16
Speaker
Yeah, you know, this is a category where I feel like we all are like innocent bystanders, class sitting ducks. And one of the things that I do with my students is every year, and I haven't heard from him for this year's ah class, but every year Brett Johnson comes to my class and um he was the founder of Shadow Crew and he talks to the students about the dark web and whomever. will go on the dark web and show people, you know, this is your profile. He has made driver's license in class of people that look like a real document. And so he's showing people that it's how easy it is. And so it's just a matter of time, hopefully for none of us, if you're picked and you are cloned and your identity is stolen. But he shows us how easy it is and how some people are sitting all day working
01:09:06
Speaker
to become Kelly Pope or Mike Potenza and then go and opening credit and getting loans and doing all kinds of things. Very, very scary, but it's so common. And it's it's it's an area that most of us don't know about and don't think about, but very, very common.
01:09:25
Speaker
Yeah, it is definitely scary. And all of this fraud in general, from talking about the perpetrators to the prey. And we didn't even get into whistleblowers. We're going to to cover whistleblowers the next time you and I get together. There's just not enough hours in the day for each of these podcasts, that's for sure. So I just want to say again, Kelly, we've been talking about this for a long time. Your book is awesome. Your documentary is awesome. I really appreciate all the and insights that you gave. So hopefully we're going to be able to get together again and pick up where we left off and talk about whistleblowers.
01:09:56
Speaker
Absolutely. Whistleblowers. We could be here for hours talking about whistleblowers. Because here's the question I want everybody to think about when they listen to that next one. Would you be one? Would you ever be a whistleblower? So that's the question we'll talk about when we get together again.
01:10:08
Speaker
All right, thank you so much, Kelly. And thank you everyone out there for listening to this podcast with myself and with ah Dr. Kelly Richmond-Pope. It was really, really interesting to get her perspective and her insight into fraud and really watching out for the red flags to make sure that we don't fall victims as well.
01:10:26
Speaker
And I want to make sure that everyone out there is aware that you can earn CPE credits just for listening to this podcast. Just visit the link in the show notes to get your credit.
01:10:37
Speaker
And good news, if you're already a Prime CPE subscriber, you can earn CPE at no extra cost. Just log in to finalize your credits.
01:10:47
Speaker
Thank you, everyone. And I hope to see you in another future podcast with respect to cool careers in accounting. Have a great day.