Reposted from the This Week in Nonprofit Fraud Blog – June 12, 2014
Ball State Gets Schooled on Investment Scheme
June 12, 2014: Seth Betts was sentenced to four years in federal prison for operating a fraudulent investment scheme that stole over $8 million from Ball State University. Ball State, a public university in Indiana, began its relationship with Betts in 2008 when Betts convinced a Ball State investments director to invest in the mortgage market. Betts claimed to receive the funds as a principal of the Betts and Gamble Investment firm, but in reality he “invested” the funds in his own luxury cars, house, and other personal uses. Ball State is working to recover assets lost from this fraudulent scheme, as well as reviewing its policies and controls regarding investment transactions.
See more on this case at The Star Press
- Reputability is crucial when choosing business partners, especially if they are expected to serve as fiduciaries for your organization’s money. Betts actually had an extensive history of arrests that should have been a major red flag for Ball State.
Raffa Forensic Practice Tips:
- Remember, fraud can come from anywhere. A fraudster is always someone you know and trust.
- Does your organization conduct due diligence for new business partners?
Harvesting for Himself
June 12, 2014: Hugh “Stan” Curtis pleaded guilty to tax evasion, mail fraud and money laundering. Curtis was the founder and sole officer of USA Harvest, a non-profit organization that collects excess food from restaurants and other food providers and distributes it to those in need. He stole $183,354 in cash and check donations for his personal use throughout 2005 to 2007. In addition, he used more than $350,000 in the charity’s funds to pay reimbursements of his personal travel, meal, and entertainment expenses. Since he never reported any of the money as income, he also failed to pay $270,000 in federal income tax. Curtis has agreed to repay the $183,354 in stolen donations and faces up to two years in prison.
See more on this case at Lex 18 News
- Organizations with only one officer have extremely inherent fraud risk. Hugh Curtis wielded a tremendous amount of power in the organization, which made it easy for him to find the opportunity to embezzle funds, especially through an expense reimbursement.
- Small cash donations are often at a high risk of theft in part because donors do not necessarily expect to receive any documentation in return. Curtis had sufficient control of the cash inflows to walk away with a large portion of it.
Raffa Forensic Practice Tips:
- No matter the size of your organization, be sure to have controls in place for separation of duties involving cash receipts and other high-risk operations.
- Does your organization require that expense reports are reviewed prior to reimbursement?
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: