Reposted from the This Week in Nonprofit Fraud Blog – June 23, 2014
June 17, 2014: Carol Libby pleaded guilty to embezzling $440,000 over a seven-year period while serving as the Chief Financial Officer of Crisis Ministries – a homeless shelter and a soup kitchen. Libby forged unauthorized checks to actual Crisis Ministries’ vendors but instead of paying those vendors, she deposited the checks into several of her own bank accounts. She was caught when the fraud department of one of the banks notified Crisis Ministries about the unauthorized check activity. Libby faces a sentence of up to 20 years in prison, a $250,000 fine, three years of supervised release and a $100 fine for the felony charge.
See more on this case at Post and Courier
- Commonly used existing vendors can be used to carry out fraud since they are normal operating checks and therefore would not raise the same red flags as a check to an unknown vendor.
Raffa Forensic Practice Tips
- Continuously monitoring vendor activity over time can help you identify unexpected spikes in activity that might indicate this type of embezzlement scheme.
- Does your organization conduct regular reviews of overall vendor activity to check for reasonableness?
Faking Invoices for Paying Personal Debt
Photo courtesy of: Jerrye and Roy Klotz
June 18, 2014: Christa Ann McClure, was sentenced to two years probation and a fine of $1,000 for stealing federal grant money while serving as the Executive Director of Housing Montana, a nonprofit which provided low-income housing assistance. McClure used federal money and organizational funds to purchase a personal laptop, and to pay for personal debt and personal travel. She also charged participating homeowners fees for free tools provided under a federal grant, and $750 for a fake “technical assistance warranty”. The IRS is separately pursuing McClure for delinquent payroll tax issues.
See more on this case at The Billings-Gazette
- As if it weren’t bad enough that McClure was stealing federal grant funds intended for the housing assistance, she actually directly stole from the homeowners themselves! The “off-books” payments that McClure received from these homeowners are very similar to an extortion scheme.
- Housing Montana is fortunate that it appears that the IRS is pursuing McClure personally instead of the organization for a failure to submit payroll taxes; penalties and interest assessed on delinquent payroll taxes can be enormous.
Raffa Forensic Practice Tips
- Off-books schemes are very difficult for an organization to detect; often, the only way that an organization becomes aware is through a knowing or unknowing “tip” from a customer or vendor.
- Does your organization follow up with surveys or inquiries with customers and vendors to increase the odds of receiving a tip to uncover off-books activity?
- Does your organization use a payroll processing company, or do you have a procedure for verifying that all payroll taxes have been submitted to the IRS as required?
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: