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.

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Meanwhile, Hodgson was discovering that Jackson had allegedly committed fraud in the Army. The letters of recommendation he had provided to Spherion and The Rosen Group used the names of real military personnel but contained uncharacteristic language and misspellings; the letters were possibly forged. Con artists know that the value of reference letters is not their content but rather their mere existence. What's more, military references are "really hard, sometimes impossible to check up on," says the executive at another Baltimore area temp firm. Also, a source familiar with his case says that Jackson, in interviews, would smile and mention that he just got back from Iraqa statement that caused interviewers to trust him more.

The Rosen Group itself hadn't picked up on the inconsistencies in the reference letters. But then again, as far as Wendy Rosen could tell, neither had Spherion. Something was building inside Rosen. The alleged fraud at the Salvation Army aggravated her. So did the fact that Spherion hadn't refunded her placement fee. Adding to that, her bank wasn't helping recoup costs on the Lexus. She was dealing with insurance companies. Her staff was still shaken by the ordeal. She was still trying to run a business.

As stressors piled up, Wendy Rosen fixed on restitution. In October, she would seek it with a vengeance.


koletar, the author, says that there are three ways to steal money: by force, by stealth or by trust. Fraud is theft by trust, and in many ways it is the most profane kind of theft. Our instincts train us to believe that people are inherently good; fraud uses that belief against us. What's more, in a small office like Rosen's, everyone tends to share a passion for the cause for which they work. A grifter will happily espouse the business's ideology in order to gain still more trust. Jackson likely exploited two more facts that apparently resonated with Wendy Rosen: He was in the military, and he is black. Explaining the case earlier this year, Rosen said, "When you find someone who is African-American, who is professional and well-spoken and on your side, you are so ecstatic...and the fact that he has a military background. You just didn't want to believe anything else."

Eventually, every victim of fraud says that. Indeed, it is this very fact of refusing to believe anything else that enables the crime. In fraud, the prey is an unwitting and complicit partner to the predator, letting its guard down, allowing the predator to inflict deep wounds. The most obvious ones are material damages. The less obviousbut perhaps more lastingwounds are psychological. The psychologist Leon Festinger called it "cognitive dissonance"—when we have one notion in our head ("I am a successful entrepreneur") warring with an incongruent notion ("I allowed an employee to steal from me").

Fraud forces victims to confront their own bad decisions.

This creates deep psychological tension. Festinger's theory continues: Once we're in that unbalanced place, we enter a "drive state"similar to hunger or thirst—under which we will act with survivalist instincts to eliminate the dissonance.

Many people, ashamed by their poor judgment and feeling violated, simply suppress the event that created the dissonance. But a few people react the way Wendy Rosen didby venting. At first, Rosen directed her outrage at "the system," by which she means the banking and checking infrastructure, which is focused on efficiency and cost-cutting rather than customer protection. Automation has mostly robbed the system of human intuition. Rosen also questions why bank statements come on "cheap white paper" instead of watermarked heavy-bond paper, which, while more expensive for banks, is more secure for the client. And most of all, Rosen was ired by her bank's reaction to having to deal with a small business's problems at all. Rosen's bank, she said in February, "wasn't interested in recovering the costs."

But blaming the system wasn't getting Wendy Rosen the restitutionfinancial or moralthat she felt she deserved.


In october 2003, rosen truly entered her drive state, approaching restitution with a remarkable combination of planning and ferocity.

According to Spherion, in October, after Chuck Geser had called and "belligerently yelled" at a Spherion recruiter, Rosen threatened to sue Spherionfirst for $160,000, then for $175,000and also informed the company of her negotiations with her bank, and suggested that Spherion join her in suing the bank.

Spherion's lawyers phoned and e-mailed Rosen's lawyers and said, essentially, to knock it off: "We will not be intimidated into paying your client the substantial sum of money she seeks prior to having had the opportunity to investigate and evaluate the claims."

The next day, Spherion claims that Rosen sent an e-mail to her own lawyer, Laurie Bortz, and copied Spherion as well. The e-mail read in part: "One week and we'll let the dogs out."

Rosen copied Spherion and her bank on all of her correspondence relating to the fraud. She let them see e-mails about planned nightly news-inducing picketing campaigns and copies of a drafted letter to a local TV reporter offering up her story.

Within three weeks, the bank settled. (As part of the settlement, Rosen can't name the bank). Spherion did not. Spherion says that Rosen then requested a $60,000 settlement from the agency in lieu of her filing a lawsuit. Spherion again refused to accede.

Rosen kept pressing. Harder even. She targeted specific publications, including CSO, with an e-mail that offered up her story. David Callahan, an editor at Baltimore SmartCEO, says although he did not receive the e-mail, he had heard about the story elsewhere. He claims he approached Rosen (Spherion contends that Rosen approached Callahan), and in June 2004 published "Attack of the Serial Embezzler." The SmartCEO piece didn't mention Spherion's name. Spherion nevertheless took umbrage at the article. (On Page 52 of the issue, Spherion had taken out a quarter-page ad. Callahan says the company has since pulled its advertising.)

At the beginning of July, Rosen's campaign reached its zenith. According to Spherion, over the course of two days Rosen sent a series of demanding messages to the company and also e-mailed her claims about the case to other area businesses. Spherion claims that Rosen e-mailed the following to the CEO of a Baltimore-area Spherion competitor: "I bet [the SmartCEO article] can really help you obtain new clients that were once with the competition. Please spread the word!" A week after that, Spherion claims that Rosen called Spherion and "verbally berated" an administrative assistant. She also called and pretended to be a client phoning in a job order; when she got someone on the phone, she demanded money, without which she would continue her e-mail campaign.

Finally, Spherion had had enough. On July 9, Spherion sued Wendy Rosen.Spherion v. The Rosen GroupSpherion's sweeping lawsuit, from which all of the company's aforementioned claims were taken, lists five counts against Rosen and her company, including two counts of racketeering and one count of defamation. The racketeering counts seek treble damages plus attorneys' fees.

Spherion's assistant general counsel, Steven Lewengrub, and Spherion's outside firm, Seyfarth Shaw, declined to comment for this article. Lewengrub directed CSO to the complaint, which contends, for example, that the Salvation Army didn't even learn of the fraud until Feb. 12, 2003, the day after Spherion interviewed Jackson. Spherion also claims that there's no evidence that Jackson committed fraud while employed by Spherion, and that he was indicted and jailed when employed by The Rosen Group.

Spherion's complaint twice mentions that Jackson told police that he simply walked into The Rosen Group's office and took the checks. Toby Bishop, president and CEO of the Association of Certified Fraud Examiners, says that under recent changes to the Uniform Commercial Code, if a company hasn't sufficiently secured its blank check stock, the company will bear some responsibility for its losses.

Spherion also claims that there are at least four false or misleading statements in the SmartCEO article.

Wendy Rosen counters: She claims that not only did the Salvation Army discover the fraud before Jackson's Spherion interview on Feb. 11, but also that the Salvation Army told her that he was fired for poor performance on Jan. 29. Even a simple phone call would have alerted Spherion to the fact that Jackson was, as Rosen says the Salvation Army told her, "not eligible for rehire."

Rosen also claims that the alleged fraud began while Jackson was a Spherion temp.

Rosen says that her check stock was locked in the controller's office. When that door was tampered with, Rosen says she hired a locksmith to fix the door, and also asked an employee to call the police and fill out a report, but the last step was never done.

Rosen says the SmartCEO article can't contain misleading statements about Spherion because it never mentions the company by name.

Laurie Bortz, Rosen's attorney, declined to comment except to say that she will likely file a motion to dismiss the suit.

Game Over

Facing multiple charges of continuing theft, Rahiem Jackson avoided prosecution for more than a year, playing the judicial system as if he built it. Knowing that even a little confusion always causes white-collar cases to be delayed in the overrun Baltimore city courts, Jackson would show up late for hearings, unprepared, without a lawyer. He got his trial rescheduled three times. Facing a judge's final trial date, Jackson failed to show up at all. He was in jail in another jurisdiction, facing accusations of more fraud that occurred after he left The Rosen Group, and while he was dodging prosecution in Baltimore.

He used the same MOgetting placed at small companies using temp firmsbut one recruiting agency, which asked not to be named, did turn him away last February, offering a glimpse into how this saga could have been avoided. The agency verified with a phone call that at least one degree listed on Jackson's résumé was false. His résumé said Jackson last worked at American Craft—the name of one of Rosen's websites—before he shipped off to Iraq, and that American Craft was out of business when he returned from duty. An executive did a Google search and found that American Craft was still in business. So the executive called and got an astonished Wendy Rosen on the other end.

On Sept. 21, Jackson was scheduled to appear in court on The Rosen Group and Salvation Army frauds. Regardless, his game is already over. Jackson appeared in court Aug. 17 on the charges stemming from the incidents after he left The Rosen Group. He waived his right to a trial by entering a nonguilty statement of facts. The judge was in no mood. Guilty. Concurrent sentences: Theft, 18 months. Uttering false documents, five years. According to one person in court that day, Jackson was not smiling.

It should have been a righteous moment for Wendy Rosen. But instead, all Rosen felt was anger. The charges stemming from The Rosen Group fraud were still pending. Plus, Rosen was hemorrhaging tens of thousands of dollars in billable hours fending off the Spherion lawsuit. "It's not about money," Rosen says, seemingly still in her drive state. "It's about a system that makes people want to just cut their losses and walk away. Until everyone is doing their job, until everyone is accountable, fraud will continue to harm businesses. My intent is to spend money to make sure this doesn't happen to others.

"It's not over yet," Rosen says. "That's all I can really tell you."


Copyright © 2004 IDG Communications, Inc.

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