Reposted from the This Week in Nonprofit Fraud Blog – February 3, 2014
Not So Disadvantaged
Photo courtesy of Roberto Verzo
February 3, 2014: Romeo Cruz was ordered to pay over $110 million in restitution and serve 33 months in prison in conjunction with a massive federal contract eligibility fraud. Cruz, a Filipino-American, was president and owner of several large construction companies, all run out of the business in his home in West Haven, Connecticut.
He admitted that the businesses existed solely as a front to allow other businesses to qualify for Disadvantaged Business Enterprise set-aside contracts. As a Filipino-American business owner, Cruz qualified for these construction contracts, and obtained millions of dollars of contracts which were passed through to several Pennsylvania construction companies. Cruz is the third executive convicted in this fraud, which lasted for more than 15 years and involved more than $130 million in improperly awarded contracts.
See more on this case at GMA News
- A large number of employees at the ineligible construction firms were aware of the fraud and helped perpetrate it. Personnel used Cruz’s company signature stamps, business cards, and letterhead to give the impression that Cruz’s company was much larger than it was.
- Employees went so far as to use magnetic decals with Cruz’s company logo to cover their own box truck logos.
Raffa Forensic Practice Tips:
- With so many employees aware of this fraud, all it would have taken is one person willing to stand up and say what they knew for the fraud to have been caught much earlier.
- Does your organization have an anonymous tip line and a formal whistleblower policy?
Didn’t He Think of the Children?
January 28, 2014: David Marshall pled guilty to stealing hundreds of thousands of dollars from the Eastern Region of Pop Warner Little Scholars, Inc., a pee-wee football organization. Marshall was the volunteer regional director, and was responsible for handling the organization’s finances. He improperly withdrew money which he used to pay off personal debts, and used a Pop Warner credit card to purchase personal goods and services. As part of his plea bargain, Marshall agreed to pay restitution to the victims, in an amount which will be determined when he is sentenced in June.
See more on this case at FBI Newark
- It’s not just employees that are fraud risks. David Marshall performed work for Pop Warner solely on a volunteer basis, but walked away with a large sum of embezzled funds.
Raffa Forensic Practice Tips:
- It is important to consider the specific fraud risks associated with individual positions, whether for employees or volunteers. Anyone who has access to your organization’s assets poses a threat.
- Does your organization have a background check policy for volunteers as well as employees?
DON’T BE THE NEXT VICTIM OF FRAUD!
The Raffa Forensic Accounting Services Practice offers a wide variety of fraud prevention and detection services including Fraud Risk Assessments, Background and Workplace Investigations, Fraud and Internal Investigations, Transactional Due Diligence Investigations, Anti-Fraud Consulting and Training, and Computer Forensic Analysis.
For more information on the Raffa Forensic Accounting Services Practice please visit us at www.raffa.com/ProfessionalServices/Forensic/ and the Nonprofit Fraud Prevention Institute at www.raffa.com/Fraud.
You can also contact the following Raffa professionals with any questions or if your organization needs assistance in fraud prevention:
Lawrence J. Hoffman, CPA/CFF, CVA, CFE, Senior Partner: Lhoffman@raffa.com
Leslie C. Kirsch, CFE, Manager: Lkirsch@raffa.com