The Business/Legal Investigator

August 11, 2009

In This Issue:

Assessing Fraud Risk
by David B. Watts, CLI, CFE
Computer Forensics
by Richard D. Connor, Jr.,Esq. CCE ACE


The summer is waning and it's time again to share more issues of potential concern with our business and attorney clients here in Southwest Florida. This time we present a combined E-newsletter, THE BUSINESS INVESTIGATOR with THE LEGAL INVESTIGATOR, to provide both business and attorney clients with a valuable tool to help thwart fraud before it happens. That is, assessing your fraud risk. Experts in the prevention and investigation of fraud all agree that having a plan in place to monitor employees and systems is the best defense against fraud. In other words, pay attention and look for the signs of fraud! In this issue, we offer some ways to do just that.

We also have the good fortune to include in this issue a Guest Article authored by Richard Connor of ESI Consulting and entitled "Computer Forensics." Be sure to scroll down and read his contribution to our E-newsletter. Mr. Connor is a Certified Computer Examiner and comes highly recommended by Kerry Farney, CLI, of Expo Confidential Services, Inc., Orlando, FL. Having worked on a number of investigations with Kerry over the past 20 years, I can state that there is no better investigator in The State of Florida and I respect his judgment!

Should you require a computer expert, call on ESI Consulting and Richard Connor of Winter Park. For investigations in The Orlando Area, call on Kerry Farney and Expo Confidential Services, Inc. (407) 648-5224. To be sure, we at Allied Business Solutions look forward to servicing your investigative needs here in Southwest Florida, as well.

David B. Watts, CLI, CFE

d/b/a of Interprobe Affiliates, Inc., a Florida Corporation
FL License No. A89-00394


by David B. Watts, CLI, CFE

How do you start assessing the risk of fraud?

The first step should be to sit down with your top level supervisory staff and take stock of your current policies, system and corporate culture. Take a good hard look and have a round-table discussion of your most vulnerable areas. It's up you you to make fraud assessment a genuine company concern. That first sit-down will also give you an idea of the attitude of your key people and their own views of ethical standards.

But where do you look for fraud?

The obvious beginning points are Accounts Payable, Purchasing and Information Technology, but those are just the starting place. In order to properly assess your risk you must put yourself in the place of one trying to defraud your company. Study the internal controls you have in place and look for ways to carry out a fraudulent scheme without risk of exposure.

What are the major ways to exploit a company's system?

1) Fraudulent reporting and over-statement of assets.

2) Embezzlement, theft of company assets or product.

3) Improper expenditures, such as expense account fraud.

4) Kick-back schemes with vendors.

Is it mainly employees that bear closer monitoring?

Obviously, you should not concentrate soley on employees. In many instances, and often by necessity, outsiders are involved in fraud schemes. Vendors, customers and service people can ally themselves with your employees and get over on your system. In short, anyone who has access has the means to commit a fraud.

But how do you know which ones to look at?

Identify those who handle or review accounting duties. Do several reconcile bank statements and make deposits or is that the purview of just one employee? You should be sure that each person in a financial function take one week's vacation every year with another covering in his/her absence. The problem is that the fewer involved in the financial area, and the less vacation time they take, the greater the risk for fraudulent activity. Spreading these duties over several employees cuts down on the opportunity for fraud to exist and provides opportunity for exposure. The same holds true for others in fiduciary capacities or positions where there is opportunity to commit acts against company interest.

What are some other types of fraud?

The list is never ending, as someone comes up with a new twist every day. Here are some headings to consider:

..Skimming and cash larceny schemes at cash register. False refunds or voided sales.
..Check tampering via forgery and alteration.
..Purchasing/billing schemes creating fictitious company.
..Payroll schemes "No show" employees and falsified overtime.
..Expense account schemes.
..Theft of inventory or equipment.
..Theft of proprietary information.
..Corruption such as bribery, bid-rigging, illegal gratuities.
..Undisclosed ownership in competitor business.
..Fraudulent financial reports.

What are some indicators that fraud might be present?

.. Sudden change in life-style, such as new car, expensive vacations and otherwise living above apparent means.
.. Addictions: drugs, liquor, gambling.
.. Alienation and change in attitude.
.. Passed over for promotion.
.. First to arrive, last to leave and refusing time off.
..Internal pressure to meet corporate goals.
.. Keeping up with the Joneses.
.. Feelings of being treated unfairly.
.. My favorite: "With their money, they won't miss it anyway!"
Again, the list goes on and on.


This has been a brief overview of assessing your fraud risk. A true and complete assessment goes much deeper and addresses specific areas to be studied in detail. Also, this article is not intended to convey the message that all employees cheat and steal. To the contrary: Where would we be without our employees? Employees are literally the life blood of any company. But as such, they also have the ability to do real damage when personal problems trump good judgment and when your guard is down. The real- life fact is that temptation can and does arise at any time and the best defense is awareness and a built-in system that works for you. Proper internal controls, together with a clear company policy stating that fraud is not tolerated, helps lessen the opportunity for fraud to creep into your company.

Trust....but verify! That is the balance required to keep fraud in check and still maintain good work relationships within your work environment.

Computer Forensics
by Richard D. Connor, Jr. Esq. CCE, ACE

Computer Forensics is generally defined as the identification, aquistion, examination, preservation and presentation of Electronically Stored information (ESI) using specialized analytical and investigative techniques. These special techniques constitute a "forensically sound" manner and are what separates your local IT depart-ment from a true computer forensic examination. A forensic computer examiner uses specialized methods, tools and systems designed to ensure that the results obtained are complete, accurate, verifiable, reproducible, and admissible in Court, if necessary.

A private investigator is often asked to gather information from various sources, then examine, analyze and interpret that information for his or her client. A forensic computer examiner does much the same thing with ESI. In addition to retrieving deleted files, we can examine, analyze and interpret all of the ESI on a device to reveal much of a user's activity, or even that a person did not engage in certain activity. Some examples: Did someone view a particular website, or picture, and when; Were files copied onto a usb drive or CD; Were certain emails or files sent or received; Was a file altered and when; Who accessed a bank account and how; Who was chatting or messaging and what did they say; Did someone delete certain files and when; Did someone access a computer or network; How and what did they do once inside?

Today's case-types that involve computers, mobile devices gps units, and other devices that utilize ESI, are, among others, tax fraud, insurance fraud, identity theft, child porn , drug cases, molestation cases, money laundering, theft, etc. The next time you handle a case that may involve Electronically Stored Information, consider consult-ing a forensic computer examiner who can advise you as to what devices may conatin relevant information, how to obtain access to those devices, what information they may contain, and how a professional examination may assist you and your client.


Richard D. Connor, Jr., is President of ESI Consulting, Inc., a Certified Computer Examiner and an AccessData Certified Examiner. His business is located in Winter Park, FL and he can be reached at: (407) 740-7163 or Email at: He trains paralegals, attorneys and IT staff, as well as consulting when special forensic examination is needed. An attorney himself, Mr. Connor understands the demands made upon and issues facing both law firms and businesses in today's complex and technologically driven society. His resume is too extensive to set forth herein, however, one can learn much more about Mr. Connor and Computer Forensics by visiting his website:

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