Anatomy Of A Fraud

Most fraud victims clam up. In this check-tampering case, the victim-a small-business owner-decided to speak out. The resulting cautionary tale offers a rare, detailed look into the mechanics and psychology of fraud. And its aftermath.

By Scott Berinato

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"He was pretty cool," Geser later recounted. "He went into an empathy-sympathy mode. He said his grandmother or someone was sick and he needed the money. He said it was a few thousand dollars."

Geser told Jackson to go home, but that he was not fired. Experts say that was the right thing to do. When you have both evidence and a suspect, you want to keep him close, not have him flee. Having kept his job for the moment, fraud experts say, Jackson probably felt that maybe Wendy Rosen, whom he knew liked him, would show compassion and offer some amicable solution.

Jackson may have been at ease; Rosen recalls being "terrified." A whole series of checks were missing.

The Three Pieces of Fraud

A con artist requires three elements to commit fraud: opportunity, motivation and rationalization. First, he must have the chance to steal money and, second, a reason to steal it (usually involving profit or revenge). The third element is the unique part of fraud: He needs an explanation for himself as to why it's OK that he's doing it—an unappreciative boss, for example, or sometimes merely a big company that "won't miss the money."

Rahiem Jackson had ample opportunity to commit fraud: He was a bookkeeper. His motivation may have been profit, albeit tinged with altruism—a sick relative who needed money for hospital care. That also may have served as the rationalization: As long as you use some of the money to help someone who's sick, it's OK.

Because those who commit fraud usually do it by abusing a position of trust, it might seem impossible to stop fraud without becoming paranoid. But Joseph Koletar, fraud expert and author of Fraud Exposed: What You Don't Know Could Cost Your Company Millions, says that's not the case.

"The good news is that most antifraud controls are, at base level, just simple, good business practices," he claims. For example, clear segregation of duties (so that the only person handling bank statements is the one who's supposed to) not only reduces the risk of fraud but also increases efficiency in the company by not having tasks repeated or, worse, ignored. Accounting controls, such as having duplicates of financial statements mailed to your home or to a separate location, also double as part of a good disaster recovery plan, should one's office suffer catastrophic damages. "Antifraud controls are not like barbed wire, which has no use except keeping people out," says Koletar. "Good antifraud makes you a better business in general."