How To

How to Fraud-Proof Your Company

Fraud experts focus on ways to combat insidious insiders at the 19th Annual Association of Certified Fraud Examiners (ACFE) conference, and a convicted fraudster explains how he went down the wrong path

By Bill Brenner, Senior Editor

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In the event that happened, she suggested, Kuhse could be her deputy bond trader for the state's general fund.

In the downward spiral that followed, her friend won the office, Kuhse started working for the office and the next thing he knew he was paying her kickbacks for special treatment that had made him millions of dollars. His bloated commission rate, it turns out, violated the spirit of state law.

Eventually, his friend in the treasury office fired an underling, who in turn exposed the corruption to the FBI. After the Feds came knocking, Kuhse and his wife and children fled to Costa Rica and evaded the authorities for nearly three years. Eventually, his wife and kids left him and he decided to turn himself in.

After prison, he pulled his life back together and made a career out of telling his tale.

He warned his ACFE audience that people like him are everywhere in corporate America and that better detection is needed along with serious consequences for those who are caught. He also told people to watch for warning signs within themselves - including arrogance, an over-abundance of optimism and a compulsion for instant gratification.

He said the people he talked to in prison had the same basic flaws in their thinking, whether they were there for white-collar crime, drug dealing or murder.

"What I didn't realize at the time was how my thought process and poor decision making skills were similar to the stories we are reading on the front page of the newspaper and hearing about on radio and television today," he said, referring to recent cases of corruption in the banking system that have contributed to the current economic meltdown.

Ethics from the top down
During the panel discussion van Drunen moderated, experts emphasized that building ethics into the company culture takes a concerted daily effort that starts with company leadership.

"The tone at the top is critical," said Bank of America corporate security chief Chris Swecker, a former FBI man who investigated more than 400 fraud cases while at the bureau. "Enron shows what can go wrong when risk management is way down the ladder."

Swecker said the 400-plus cases he investigated had the same problem as Enron, and that companies cease to exist when the public trust is violated.

To prevent this from happening at Bank of America, he said everyone is required to have ethics training, building good conduct it into the psyche of every employee.