Caught with Hand in the Cookie Jar | Nonprofit Fraud Blog

Reposted from the This Week in Nonprofit Fraud Blog – August 4, 2014

A Multiple Offender
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Photo courtesy of Nagagym, licensed under the Creative Commons Attribution-Share Alike

July 28, 2014: After pleading guilty in May of this year to two separate and unrelated felony counts, Tina Kuehl has been sentenced today to over four years in prison. In the first case, as owner of a home health care company, Kuehl directed members of staff to submit hundreds of Medicare claims for services which were never performed. When staff members refused to alter the claim forms, Kuehl would alter them herself. The FBI noted that she had “no medical or health care education, training, or experience”, in fact, her prior experience was as a cosmetologist. In the second case, Kuehl altered check payee information on canceled checks to attempt to use the checks as proof that she made six “uncredited” loan payments to her bank to fend off foreclosure.

See more on this case at The St. Louis Business Journal & FBI

Lessons Learned

  • With so many people involved in preparing and submitting falsified reimbursement claims, including ones who refused to participate in the fraud, this case is a perfect example of where an anonymous hotline can uncover a pervasive fraud.
  • Once someone has shown a willingness to break the rules, you can expect them to break them frequently. Indeed, while running the healthcare scheme, Kuehl had no problem committing another separate fraud involving her foreclosed property.

Raffa Forensic Practice Tips:

  • If an employee has a history of fraudulent behavior, be wary as they pose an increased risk of committing a fraud again. Second chances are great, but at what cost?
  • Does your organization have an anonymous hotline for employees to report suspected fraud, waste, and abuse?

Caught with Her Hand in the Cookie Jar
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Photo courtesy of Polymath38, licensed under the Creative Commons Attribution-Share Alike

July 30, 2014: Cheryl Ann White was sentenced to three years in prison in connection with multiple frauds committed while she served as CEO of a nonprofit health center, Southeast Missouri Health Network, which was largely funded through federal and state grants. White falsified annual grant reports and up to 40 federal grant applications, including figures on the number of patients being treated by the health center. She used grant funds to perform repairs on the roof of a piece of personal property and purchase gifts for others, received kickbacks disguised as loans for assisting in a bid rigging scheme, concealed her ownership of a building and trailer sold to the organization, and issued company checks to employees who gave her cash back.  The Board of Directors for the organization is trying to save it, noting that White circumvented existing policies meant to prevent fraud; they have taken steps to strengthen internal controls and train staff.

See more on this case at The Houston Chronicle and The Southeast Missourian

Lessons Learned

  • Multiple employees were charged as co-conspirators in this case, since they knowingly accepted gifts bought with grant money, and one even helped conceal payments by cashing company checks for White. Fraud involving collusion is very difficult to detect, but can start with reviews of high-risk payments, such as checks written to employees outside the payroll process.
  • White provided insider information to a contractor on one deal and failed to disclose her ownership of a building and trailer purchased by the organization on another. These are clear conflicts of interest, thus making a competitive bidding process impossible.

Raffa Forensic Practice Tips:

  • Frauds by executives, especially those involving collusion, can usually only be detected with the oversight and involvement of a strong and accessible Board of Directors.
  • Does your Board have clear roles and responsibilities for financial oversight, and are they accessible to staff wishing to report possible fraud by upper management?
  • Does your organization both have a clear conflict of interest policy and perform due diligence on contractors and vendors when it comes to contract bidding?

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

 

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