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Jim Ratley and ACFE: Going Broad on Fraud

Five years post-Enron, corporate fraud and white-collar crime continue to make headlines. Jim Ratley of the Association of Certified Fraud Examiners checks in to talk about corporate fraud and effective investigations.

By Scott Berinato

=text>scandals, it was practically impossible to get somebody prosecuted, and if you did, it was generally a plea bargain. I'm familiar with one case in California where a woman stole over $10 million and served less than 11 months in jail. Often, fraud was swept under the carpet.

So in one sense, the effect of those scandals has been positive?

Fraud's not as hidden anymore, and I hope it stays this way. It has given corporate security an avenue to pursue. In the past, they've contacted local law enforcement or federal bureaus and they got no response to a fraud case. And that's still a problem, I don't mean to say it's no longer an issue, but less so. Also, you are sometimes still restricted to civil prosecution, which can be useless because the

perpetrator doesn't have any money. People don't steal money to save it. They steal it to replace money

they've already spent.

Is it necessary for CFEs to think like a thief to understand the crime?

Where we run into a problem as fraud examiners is that it's very hard not to judge someone by your

own standards. If you're driving down the highway, anyone driving slower than you is an old fogey and

anyone driving faster is an idiot. So we tend to want to judge people by our own standards, and you

can't do that with a fraud perpetrator. I've been involved in cases where the only reasonable outcome of

the person's actions were they were going to be caught. We had a case where a young lady, 23 years

old, had a lapping scheme, where someone would pay their bill and she'd steal the money, and then

when the next person paid their bill, she'd put part of that money to the first person's account. This

lady made less than $20,000 a year, and in six months she stole over $200,000. Now theoretically, if

she had stayed there the rest of her life and continued to lap those accounts, she'd be all right. But

that's not going to happen, so the only way it could go undetected is if she could replace that

$200,000. But she couldn't do that because in that six months, she paid cash to have her house

remodeled, she bought a dog for $1,000, she had some cosmetic surgery for $3,500 and she bought

an $80,000 sports car.

That's a lot of red flags.

Well when management called us and described the situation their first question was, Do you think we

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