This is just NUN sense…A Sister arrested for stealing $1.2 million. Isn’t that like a Biblical no no Sister Marie E. Thornton?

December 13, 2010

Sometimes the choices we make just don’t add up.   Take the case of Sister Marie E. Thornton, a former vice president of finance for Iona College and a nun.  Sister Thornton was recently arrested on charges of embezzling more than $1.2-million from the Roman Catholic college over the course of 10 years.

What?  Yep…that’s right.  Arrested for embezzlement.  According to published reports, Federal prosecutors collaborated with the Department of Education in bringing the charges, which were announced by the U.S. Attorney’s Office in Manhattan in a news release.

According to the news release, Sister Thornton allegedly diverted college funds for her own use by turning in false vendor invoices for reimbursement and submitting credit-card bills for personal expenses to the college.

Iona College, in a statement, disputed the size of the theft, calling the $1.2-million figure “significantly inaccurate.”  Sorry, but I have to ask, is this just another attempt at a cover up by the Catholic organization?  In my personal experience, rarely have I seen the US Attorney’s office dramatically inflate the size of a crime.  But this might just be a bunch of nun sense anyway…

The college, located in New Rochelle, N.Y., had previously disclosed that it had fired an unidentified employee for misappropriating approximately $80,000 a year over a decade. Another employee thought to have been involved in covering up the fraud was also fired.

Iona said that it had taken immediate action after discovering a year and a half ago that an employee had misappropriated funds, and that it had conducted a follow-up investigation and put preventive procedures in place. The college also said it had recovered most of the missing money but declined to comment further.

Sister Thornton served as Iona’s vice president for finance and administration for roughly a decade, and she previously was assistant to the president for five years, according to the college’s financial documents. She holds a doctorate in educational administration from Fordham University and previously spent time as a teacher, a principal, and a deputy school superintendent.

BEHAVIOR QUESTION

With credentials out the wazoo…what do you suppose would motivate Sister Thornton to take such actions?  And, how do you suppose she was able to rationalize her behavior?

If you know Sister Thornton – please comment and lets establish a dialogue related to my questions above.

YOUR COMMENTS ARE WELCOME!


University of Louisville Education Dean – Robert Felner – pleads Guilty to Financial Fraud

January 8, 2010

Robert Felner, hailed as a grant rainmaker, found himself drowning in a sea of his own doing.  Last week, through his Attorney, Robert Felner pled guilty in a case in which he and a colleague are accused of defrauding University of Louisville and another university out of $2.3 million.

Hailed at the outset by University administrators as a change agent, citing him as the driving force behind a spike in grant money at the school. School officials now know that Felner is, not only a thief, but was directly responsible for only a fraction of that windfall.

A federal grand jury in Louisville indicted Felner and his co-defendant, Thomas Schroeder of Port Byron, Ill., in October 2008, charging Felner with 10 counts of mail fraud, conspiracy to commit money laundering and income tax evasion. Schroeder was charged with conspiracy to commit money laundering, mail fraud and conspiracy to defraud the Internal Revenue Service.

Government prosecutors allege that over a seven-year period the men used the Illinois-based National Center for Public Education and Prevention Inc. they created to defraud University of Louisville and the University of Rhode Island, where Felner was involved in another research center he helped create.

The government alleges the men used the Illinois center, which lists Schroeder as president, to divert funds owed to the two universities, siphoning $2.3 million.

The money was deposited in several bank accounts, including one that Felner told federal officials he set up in Louisville in the Illinois center’s name.

UNFORTUNATE FALLOUT

While Colleges and Universities across the nation are working to make sure that “ethics” becomes a fundamental core part of a business education, it seems that on every turn headlines are showing the frailties of the human condition and that even well educated folks can succumb to temptation and do unethical things.  Unfortunately, this will be yet another example of ethics gone awry.

Every presentation I make to university students, from the University of Florida to University of South Dakota, to Long Island University to Baylor, I begin with the following statement:  EVERY CHOICE HAS A CONSEQUENCE.

Felner and Schroeder are now living the consequences of their choices.  If there is a bright spot, hopefully the students at these universities will gain a better perspective on the effect of choices and consequences.  Perhaps, just perhaps, the students, being exposed to the media attention, will connect the dots and take the ethical high road when exposed to temptation.

YOUR COMMENTS ARE WELCOME


Madoff Ponzi Scheme – Fraud Prevention Expert Chuck Gallagher Comments – Stay Out of the PIT

December 19, 2008

Splashed all over the media in every form one can imagine is the news of the massive Ponzi scheme that Bernard Madoff was able to perpetrate over the scope of decades.  A staggering $50 billion is being reported and the numbers seem to always rise as first estimates (for some reason) seem to be conservative.  Perhaps it’s just we don’t want to believe it can be that bad!

madoff

From the Wall Street Journal to Bloomberg to Time – all are reporting about what happen and now asking how?  Of course, it is becoming a field day for lawyers (trying to protect their client’s interests) as well as politicians (attempting to fix lax regulatory blame).  And the reporters – well they have questions (as they should).

How could it have happened?  How could we have known?  And, most importantly – how could it have been prevented?

Those are all good questions.  But the best question is – how best to find the answer?

In order to unravel this massive financial and legal mess one needs to understand the components and pattern of fraud in order to prevent it in the future.

Fraud consists of three primary components: (1) Need; (2) Opportunity and (3) Rationalization.  All three must exist for a fraud of this magnitude to take place, live and grow over time.   Without doubt…all three existed with Madoff.  The trouble is we may not know the exact details of “why” for some time to come – if ever.

However, the most important of the three is the OPPORTUNITY SEGMENT.  Without “opportunity” the three legged stool wouldn’t support the weight of the fraud or crime.  That’s where falling into the PIT comes in. Of course, the question is – what is the PIT and what does it stand for?

The OPPORTUNITY segment of the fraud goes like this:  The fraudster (Madoff) makes a PROMISE (P) to an unsuspecting investor, creating an ILLUSION (I) – generally something the investor truly desires – which is supported by TRUST (T) – most of the time something the fraudster already has with the unsuspecting investor.  That is the “PIT” and once one falls in it, it becomes easier for others to join.  In Madoff’s case the PIT had become so large that the slippery slope in was easy and the company impressive.  My guess is that folks wanted in.

O.K. – great, so there’s a PIT.  But the real question is how to avoid the trap?

I must say that there is no shortage of people from all walks of life who are easily, quickly and willing to call Madoff all manner of names and express outrage.  The fact is – getting caught in the PIT is easy and simple.  Avoidiance is unnatural for most. Think about it, most frauds take place with people you know and/or trust.  Trust is the key factor.  So how does one avoid the PIT?

Simple Avoidance Steps:

(1) Understand – especially in a down economy when temptation for financial performance is on the rise – anything this is proposed which seems too good to be true – isn’t.

(2) Know what you’re investing in.  If you don’t understand the investment or it is an area that is foreign (in other words you could easily be manipulated) avoid the investment.

(3) Check out the investment through reliable means.  In other words approach the investment with a healthy skepticism.  Trust no one completely and due your due diligence.

Fraudsters abuse the trust others have in them in order to effect their fraud.  I did and so did Madoff.


For more information about my programs and consulting on business ethics and fraud prevention, contact me at www.chuckgallagher.com or call me at 828.244.1400.  My commitment to my clients: To evaluate and identify areas for fraud and help weed them out.  Fraud can be prevented!


Use Ethical Sense – Save Your Non-Profit or Association’s Assets from Theft or Neglect

November 1, 2008

As a business ethics speaker, I am witnessing what appears to be an increase in the number of frauds – mostly financial – that seems to be creeping into most organizations – whether for profit or not for profit.  This is not unexpected as hard economic times create desperate actions.  One thing for sure, whether you are a non-profit organization, church or association, you’re assets are just a vulnerable as any other organizations.  The only difference I see is that in touch times it is often more difficult to grow your assets since you rely on contributions (in large part).

I read an article written for the Chicago Tribune that was outstanding.  The author was

Be professional. Board meetings are not social events.  Attorney Lara Anderson stated, “You are the board member of a corporation, and there are formalities you have to go through and laws you have to follow.”

Board members have a legal responsibility, called fiduciary duty, to act in good faith, make informed decisions and avoid conflicts of interest, she said.

Make a money plan. Attorney Gabriella Comstock advises associations to adopt a formal financial policy that tells how money will be handled and invested. You might include such requirements as a yearly audit, two signatures on every check, and that reserve money over a certain amount will be put into a certificate of deposit.

Such a policy “leaves a paper trail that shows you were trying to act responsibly,” she said. “It gives insight as to your thought process and shows you didn’t act on a whim.”

Be involved. Every board member needs to know how the money flows, not just to avoid embezzlement but to ensure sound financial decisions, said Comstock.

Audit the books. Many experts advise yearly financial audits, and some declarations require them. It’s also good to conduct an audit after developer turnover or changing management companies.

Get bids. The law doesn’t say you have to bid your contracts for goods and services, but you’ll make better decisions if you do. Study the bids—the comparisons will be enlightening, said Anderson.

“If one bid is way up and another is way down, find out why,” she said. “Maybe one is a licensed contractor and the other is not. Maybe one has been in business for 30 years and another is just starting out and running a business out of his garage.”

Know your manager. By law, managers cannot have prior convictions for forgery, embezzlement or similar offenses. They can’t co-mingle your money with that of other associations they manage. But it’s up to you to check. If you’re hiring a manager, interview several, follow up with their references, and ask what financial controls they have in place, said Anderson.

Spread the responsibility. Accounting tasks should be shared between management and the board, said Majewski.

“Make sure whoever is issuing checks and reconciling bank statements are different people,” he said. “Whoever is receiving cash and posting receivables should be two different people.”

Learn to recognize red flags. Majewski offered several: serially numbered documents that are missing, lots of cash transactions, photocopies rather than originals, second-party endorsed checks, duplicate payments to vendors, vaguely worded invoices and lavish personal spending by someone responsible for your money.

“Ask questions,” he said. “Don’t stop until you get an answer that satisfies you.”

The advice offered here is priceless.  The potential for loss can be staggering and devastating for a small organization.  As an example an acquaintance of my disclosed to me that someone he knew had taken most all the funds from a youth soccer league and spent it on lifestyle maintenance.  As he asked the question I knew that he wanted to know more than just to satisfy his curiousity.  Turns out the theif was his son-in-law.  Scared, he didn’t know what to do.

No doubt the scenario I just described is going on in hundreds, if not thousands, of cases around the country.  I state the above to serve as a warning…take precautions and know that lack of trust is the first step to eliminating opportunity and opportunity is one of the foundations for fraud.

You can stop fraud by removing the fuel that feeds it.

By the way, if your organizations assets have been misappropriated, feel free to comment on how the misappropriation took place.  Your comment may save others.  You can help.


Ethics? Not a Chance! Rosa Abreu Sentenced to 70 Months In Prison for 9/11 Opportunity Thefts

November 1, 2008

On September 11, 2001 our nation faced a terrible tragedy.  We were attacked from outside our borders.  Unfortunately anytime there is a disaster, some will find the opportunity too great and step outside the bounds of reason and commit fraud.  Such is the case for a former employee of the New York City Medical Examiner’s office who was recently sentenced to 70 months for theft.  Not only was a serious crime committed, but there was an intentional disregard for any semblance of ethical behavior.

According to the US Attorney’s news release:

The Office of the Chief Medical Examiner (OCME) developed an acute need for computer services following the September 11th attacks, when it was assigned the task of identifying victims through the forensic analysis of body parts and other evidence collected at Ground Zero. Many of the OCME’s September 11th-related expenses were reimbursed by FEMA, which provided more than $46 million to OCME in 2002 and 2003.

ABREU was the OCME’s Director of Records and worked as a primary assistant to NATARANJA R. VENKATARAM, the OCME’s Director of Management Information Systems (“MIS”) and ABREU’s co-defendant.

Between 1999 and 2005, VENKATARAM steered more than $13 million in OCME contracts and purchase orders to three companies run by co-conspirator MUHAMMAD NASEH by advising NASEH how much to bid on OCME contracts and arranging for NASEH’s three companies to submit purportedly independent “competing” bids. In the vast majority of cases, NASEH’s companies were paid in full under the OCME contracts but did less work than reported, or no work. Instead, NASEH’s companies would transfer funds to other companies, as directed by VENKATARAM, in exchange for a fee. In other cases, NASEH wrote checks according to VENKATARAM’s directions, or provided VENKATARAM with signed but otherwise blank checks from the NASEH companies for VENKATARAM to use as he saw fit. ABREU helped VENKATARAM launder the proceeds of this scheme through shell companies that ABREU established and maintained. At VENKATARAM’s direction, millions of dollars in funds paid by OCME to NASEH’s companies were used for VENKATARAM’s and ABREU’s personal benefit.

It is reported that ABREU was VENKATARAM’s girlfriend.

The question may be asked, what happened?  Fraud requires three components.  For lack of a better way to put it, fraud is a bit like baking – a cake for example.  A cake requires the right ingredients.  If any one is missing, then you can’t accomplish the bakers task.  If you leave out eggs, for example, the cake will be undesirable.  Well, in fraud, the three critical components are: (1) need (or perceived need); (2) opportunity and (3) rationalization.

Now, I can’t begin to speak to the issues of need or rationalization, but the obvious is that due to the events of 9/11 “opportunity” came knocking at their door.  A substantial inflow of cash – $46 million to be exact – is enough to tempt anyone.  Mind you just because there is a large sum of money, previously unavailable, does not mean that everyone will respond to the potential temptation.  But, I will say, after studying people and white collar crime, it is likely that any thing out of the ordinary – especially in mass quantity, will bring out the devil in many.

My guess…and let me be clear, it is only a guess…is that those involved felt that they were under pressure, under paid and could not resist the temptation for taking what they rationalized should be theirs.  Now…IF YOU KNOW ANY REPORTED ON HERE…your comments are welcome – as I may be wrong.

VENKATARAM pleaded guilty on October 30, 2007 to one count of conspiracy, one count of embezzlement and misapplication of funds from OCME, and fourteen counts of money laundering. He was sentenced on July 11, 2008 to 15 years in prison and ordered to pay restitution and forfeiture in the amount of $2,970,072.

One thing is a fact, EVERY CHOICE HAS A CONSEQUENCE!  That I know as I have been where these men are going and know that my poor choices got me a prison sentence as well.

I was once told, “You made a serious mistake, but YOU are not a mistake!”  I took those words to heart and after paying my debt to society, I turned my life around such that today I speak nationwide about Choices and Consequences.  Perhaps these men can learn and use their talents for productive use once free.


Mortgage FRAUD – 12 Indicted in Houston, TX – FBI Hard At Work…

October 12, 2008

“Those who seek to take advantage of the American Dream of home ownership and those who prey upon others in these dire economic times will most certainly be held accountable,” United States Attorney Don DeGabrielle stated in his news release announcing the indictments.

Anthony Wayne Hawkins, 48, Brandon Alonzo Crenshaw, 27, Nehemiah Jamal Douglas, 28, Babette Jammer, 47, and David Vasser, 59, were indicted for their alleged involvement in a mail and wire fraud conspiracy which resulted in the defendants and their co-conspirators fraudulently obtaining more than $17 million in loan proceeds. The defendants and their co-conspirators are accused of recruiting individuals to purchase residential properties with the intent to deceive mortgage lenders concerning the borrower’s ability and incentive to repay the loans. Falsified documents were prepared and provided to the mortgage lenders, according to the indictment, to support loan applications.

No wonder we are facing the most significant financial crisis our nation (perhaps the world) has seen since the great depression. Daily announcement are being made about the indictment or conviction related to similar schemes.

“The FBI remains committed to continuing its efforts to vigorously address mortgage fraud and ensure that the strength and integrity of the nation’s financial sector are sustained,” Bland said. “Moreover, it is imperative that those who engage in this pernicious crime, and thereby undermine the economic vitality of our communities, are held fully accountable for their actions.”

“Mortgage fraud, like all financial crimes, threatens the overall health of our financial institutions and erodes the integrity of our tax system,” Clarke said. “Additionally, these types of crimes drive buyers into foreclosure, leave lenders burdened with bad loans and neighborhoods with abandoned and deteriorating properties. IRS Criminal Investigation is committed to working with its law enforcement partners to pursue individuals who commit these types of crimes.”

Question:

Other than premeditated blatant theft, how could those indicted become associated with such an outright fraud? More importantly, did any of them think that there was a chance of getting by with such a fraud. As a white collar crime and business ethics speaker, I understand that every choice has a consequence. It’s easy to see how someone could make a simple mistake that compounds and becomes a fraud with terrible consequences, but this seems noting more than blatant theft.

Perhaps I am missing something here. If you know these people and have any insight your comments are welcome.


Darren Reagan – Choices and Consequences That Include Prison! Comments by Business Ethics Speaker Chuck Gallagher

October 12, 2008

In June of 2008 Darren Reagan was convicted of theft of public money – a federal offense. On October 8th, 2008 he was sentenced to 12 months in federal prison. But this is not the end for Reagan, as he will face additional charges and a hearing in January 2009 for other alleged offenses.

As a business ethics speaker, I remind audiences around the nation that every choice has a consequence. More times than not, we might make simple (unethical or illegal) choices that seem innocent at the time, with the full intent on paying back. Reality is, however, you cannot escape the consequence of the choices made. I know and speak from experience, as it was thirteen years ago to the month that I took my first steps into federal prison for the choices that I made.

According to the US Attorneys Office:

Reagan, who is currently in federal custody, is also a defendant in the Dallas City Hall corruption investigation case, charged with conspiracy to commit extortion, two counts of extortion by public officials, one count of conspiracy to commit money laundering and four counts of tax evasion. That case is scheduled to go to trial in January 2009.

At trial, the jury found that from October 1, 2002, through September 1, 2007, Reagan knowingly stole approximately $45,000 in rental housing assistance payments from the Dallas Housing Authority (DHA) in connection with the rental of certain property to his mother-in-law, Leatha Kirven. Reagan falsely claimed to the DHA that he had no blood, marital, or other familiar relationship to Ms. Kirven, and as such, caused DHA to pay him housing assistant payments to which he was not entitled.

Mrs. Kirven testified in a videotaped deposition taken from her hospital room that she knew that when she signed up for the Section 8 housing assistance with Mr. Reagan, that she knew it was against the rules. She also testified that she told federal agents, when questioned by them two years ago, that she knew it was wrong.

Darren L. Reagan is also a defendant in the Dallas City Hall corruption investigation case, charged with conspiracy to commit extortion, two counts of extortion by public officials, one count of conspiracy to commit money laundering and four counts of tax evasion. That case is scheduled to go to trial in January 2009.

Politics and Ethics – A Question

Ethics is defined as the discipline dealing with what is good and bad and with moral duty and obligation. Now if that is generally true – that ethical choices are defined as those choices that deal with a moral duty and obligation, then the question is can ethics and politics truly go hand in hand?

Some would, of course, say yes. I’ve heard it said that ethical people are always ethical. However, from my experience personally and in observing the behavior of others, I am not sure that is true. I have come to believe that ethical or moral people can become so tempted that they make unethical or bad decisions. And, speaking from experience, the first decision although mentally difficult is the one that paves the way for more to follow.

So here me out and please, with your comments, answer this question! I submit that Darren Reagan started out being a good man. Like most of us, he likely had his flaws, but I bet there are those who would read this and vouch that Reagan was a good man. If that is so, then what happened that caused an otherwise good man to make choices that ended him up with a home in federal prison? Could it be that the power of politics proved to be too much temptation?

Those who have a connection to this case – your comments are welcome!