Elderly Fraud Case

Hey everybody. I wanted to talk through today the very first forensic accounting case that I ever worked on. I feel like sometimes people don't really know or understand what forensic accounting accounting even is and how that's different from what your regular CPA would do that you could go to to get your tax return done or your bookkeeping done. We'll start at the beginning of the story here. I was working for a CPA firm. We did everything for clients: tax returns, payroll, bookkeeping, you name it. Just a full one-stop shop for clients. We received a forensic accounting case. And that forensic accounting case kind of got pushed to the side for a little while.

Where this case came from, this case, a family suspected that something was going on with someone's finances and they took it to local law enforcement. and local law enforcement unfortunately was not able to make heads or tails of what was happening, if anything at all was happening. And they gave it back to the family, and let the family know that there it would be in their best interest, if they could afford it, to go to a local CPA firm and get an accountant to look at the numbers and see if they can figure something out.

I'll back up a little bit further there. at the time this CPA firm, nobody had a forensic accounting certification of any sort. And what was happening a little bit in the background is it was involving an elderly woman and it was believed that money had disappeared somehow, but no one could really put their finger on how the money disappeared, where the money disappeared to, how much actually disappeared. They couldn't really get to the bottom of what that was. So now what did that look like coming to that CPA firm? It was a stack of papers. Pretty big stack of papers. And that stack stack of papers was mostly just bank statements from a couple of years, maybe two or three years worth of various bank statements. Mostly just one account, but there may have been another account or two mixed in there as well.

What kind of sparked a red flag is this woman had Alzheimer's and dementia. She was living on her own at the time and her mortgage was paid off. So, she had minimal bills to pay and she had about $250,000 saved up for one day when she would maybe need to be put in a home or something like that. And it got to the point where she needed to be put in a home. Her brother stepped in to put her in a home and the money was gone. There was no more money and she had that money like a year or two ago and the money was just gone. So, it sparked a lot of red flags with, well, where did the money go? Someone must have taken it. It must have gone somewhere, which is how it wound up with law enforcement. They were not sure where to start digging, where to look, what to what to find. They kicked it to back to the family who eventually brought it to the CPA firm that I worked for and it sat in a corner for a little while.

I started getting phone calls from the family asking what's happening. And I offered to look at the case and see what I could find. I was not certified at the time. Now, granted, you don't have to be certified in forensic accounting to do forensic accounting, but that certification does help you know what exactly you're doing. It helps you know what to write up in that report. It helps you just be faster and better at the process to help make that report also a little more airtight if it does wind up going to court or getting kicked to law enforcement, whatever the case may be. So in this case, I had taken a forensic accounting class in college. Thought it was a lot of fun. Really loved it. And so the idea of taking on a case was super exciting for me.

I offered to look at the case. Within a couple of hours, I had it all up in written up in an Excel spreadsheet, like kind of typed up. I had traced some things together, figured out some common themes that were happening like big cash withdrawals. There were transfers to accounts. When I looked back at the very first set of bank statements that were given to me, it was very consistent with where the what money was being spent where very minimal money was being spent. And then all of a sudden there was an uptick and hundreds and hundreds of dollars were being spent at places like Target and going out to eat at all these restaurants, things like that. So in my mind, those were also red flags.

What that looked like for me is getting everything into an Excel spreadsheet, kind of categorizing it from there, transfers that were going to and from certain accounts, any cash withdrawals as well, and then kind of categorizing anything else that just looked off and then coming up with what is that total amount. So, I will say within a few hours, I was able to see the big picture, but it definitely took a couple days, at least a couple days of me working on it full-time to actually make sure a I didn't miss anything. Just following the trends to make sure there wasn't something missed to make sure that my logic was correct as well with what I was thinking and where things were going and to get it all officially written up in an official report that could be taken given to the family and let the family decide what they want to do with it from there.

Unfortunately what was happening in this case it was the daughter that was taking money from mom with mom not knowing because she had Alzheimer's and dementia and within about 2 years all the money was gone. It was spent. There was no way that family was going to get that money back because it was spent on things that could not be sold off to get money back. If that makes sense. So, it's not like the $250,000 were put into a new house and then the house could be sold for to recoup some of that cash. That cash was spent mostly on items, which unfortunately in a lot of fraud cases that is what happens when someone is taking money. In any case, most of the time it is spent on things where you cannot recoup that full amount back. And even if you can recoup some of it back, you most likely will never recoup all of it.

I've heard of cases and stories where people steal money from the businesses that they work for, family members, you name it. And with that money, maybe they have a gambling problem. So, you'll definitely never see that money back or sometimes in certain cases, they will spend that money to send their kids to private school or to college. So, you'll definitely not get that money back either. Or they spend it on frivolous things. Maybe they buy a brand new car and we all know how fast the value of a car the second you drive it off the lot goes down. So, you won't get back everything that was taken from you. Which kind of makes people hesitate to even bring cases to forensic accountants and law enforcement if they won't actually get their money back. Some of you might be thinking, well, what's the point anyway? Part of the point is to get a little bit of justice.

So, no, if someone stole $10,000 from you, you may not get the full $10,000 back. You may, if you're lucky, get half. Whether that half is from selling off things that they bought or that half maybe you have an insurance policy that can step in and help. Now, in the case with this individual having Alzheimer's and dementia, there is no insurance policy that's going to step in and reimburse her for some of the money that was taken. But if you are a business with business insurance and an employee steals money, there's a good chance you may have some type of policy or coverage that will give you some money back. Now, they still won't most likely give you every penny back that was taken, but at least they can give you something back that you can then put towards fees that you might need, whether they're forensic accountant fees, lawyer fees, whatever it might be to prosecute.

Same thing with prosecuting. A lot of people don't want to prosecute partly because it's that mindset of what's the point? What is the outcome of that going to be? If I prosecute, I won't get all my money back anyway. I'll spend all these fees on lawyers for what? They may get some jail time. They may just get kind of let off with community service, good behavior kind of thing. But it really depends on the threshold of how much they took. There's a lot of things that go into whether or not you should or shouldn't prosecute, whether that's a family member stealing money or an employee stealing money. And it also depends situation by situation. So there's so many factors that go into that. Do you have the extra cash saved to prosecute to do all these things? Maybe your best bet instead is to invest that money with the forensic accountant. Get the information. How did they steal the money? Where did it go? What's the total loss? And then any money you have left over, have that forensic accountant help you design ways for this to never happen again.

Hopefully, if you're an individual, you won't need a lot of controls put into place once you learn what happened. But a business, if somebody stole money from your accounts payable system, they maybe made a fake vendor, were writing checks to that vendor, you need a new system put in place. Same thing with payroll. someone is running fake payroll out of your payroll system and that's how they stole your money, you need a new system put in place with the proper checks and balances and controls to make sure that never happens to you again. Lots of weighing pros and cons and I kind of got off the tangent I was trying to go down here which is the case that I worked on.

So when I finish up the report, so I will also take one step back and say that at the time, not only was I not certified in forensic accounting, I was not a CPA either. I was just an accountant doing bookkeeping and payroll and tax returns and working on a couple of audits here and there. But I knew that I knew that I could do it, if that makes sense, based on the class that I took, and the interest that I had. So, I was willing to take on the case and at least give it a try. Now, of course, anything that I did, I gave to another accountant to have them be a second set of eyes to make sure that I either didn't miss anything or that my logic was kind of tracking with what I was doing.

Now I am certified in forensic accountant accounting and I am a CPA as well. So, I say all that to say the certifications don't necessarily mean you're going to know what you're doing. So, if I had had my CPA license, that would not have made me any more qualified to work on that case than what I was. Now, my CFE license that I do have, that does make me more qualified to work on that case than what I was at the time. And at the time I was working for a CPA firm that had a couple of CPAs. None of them wanted to touch the case because they did not have the college class I had. I was fresh out of college just taking that class not too long ago. So I had an idea of what I needed to do, where I needed to look, how I needed to pull that report together. But a general CPA does not have that. And I know I've kind of beat that up in other videos and in some LinkedIn posts as well. So, just know that the title CPA does not mean they are the expert in everything and can work on your forensic accounting case because in this case that did not happen. I was not a CPA. The CPAs didn't want it, couldn't handle it, so they handed it to me.

I got the report written up, given gave it back to the family. Because of the dollar amount threshold that this was, the family decided that they wanted to prosecute. They handed it back to law enforcement. They were able to take out charges against the daughter who fled the state. Like, it was a whole a whole nightmare for that family. Of course, none of that is what I wanted the outcome to be. Like I would have loved to have been able to find the money hidden in some weird offshore account that no one really realized was there and say, "Hey, here's the money right here. Everybody's fine. Everything's fine."

But that was not the case. It ended very sadly. I'm not going to go too far down the rabbit hole of that because I want to keep these cases that I've worked on as confidential as possible while still bringing out some good information with what a forensic accounting case can look like.

What kind of evidence do you need to bring to a forensic accountant? One of the best things you can do is give that forensic accountant bank statements, credit card statements, things that are harder to alter. But I will say people can still alter them. So do not trust whatever is sitting in the drawer in the back corner because people can alter, print it out, alter maybe altered on the computer and then print it out altered. You never know. Your best bet is to log into the bank yourself and either save it as a PDF or print it out and then take that to the forensic accountant to have them start looking and start digging looking for some breadcrumbs from there.

That's basically what I had to go off of and that's one of the best ways to start looking because your accounting software system if you're a business and it's business related your accounting software system can easily be altered. Now, can we look through some kind of audit trail on something like QuickBooks Online? Absolutely. But it still kind of muddies the water. And I, me personally, I still want to see those bank statements coming directly from the bank for me to match things up in QuickBooks or whatever other software you're using because it is very easy to alter the actual accounting data itself with. I'm not even going to go down the rabbit hole with how you alter the accounting software itself, but those bank statements are the one of the most important pieces of evidence that you can bring. No matter what the case is, doesn't matter if it's business related, elderly fraud, divorce, doesn't matter. That is one of the best things that you can get and give to a forensic accountant.

I wanted to highlight this case for a lot of reasons. Number one, to give an example of what a forensic accounting case can look like. I'm sure there are a lot of people that didn't even think about elderly fraud as being a forensic accounting case. And I also wanted to highlight that law enforcement and CPAs sometimes are not the first person you want to go to when you realize or think that there might be a problem because they may not be able to help you. And they may just tell you, "Well, we don't know." And then that might be really easy to give up and say, "Well, if if the police couldn't figure it out, then who can?" A forensic accountant will have a better chance if it's financial related. A forensic accountant has a better chance of figuring that out for you. I'm not saying certain law enforcement members can't do it because they can. Same thing with generic CPAs. Not saying they all can't do it. Some of them can, but a majority of them cannot.

And I wouldn't want to take my case to somebody that may or may not be able to handle it and then get told we don't know and then I give up without even looking up a forensic accountant first. So forensic accountant first stop. Make sure they have credentials beyond a CPA license or that they have a history of working on cases in the past. That is also very helpful. So I'm going to stop here. I do have other cases I plan on doing a few more videos just specific to cases that either I've personally worked on or cases that I have read a lot about and heard about other people working on them. And hopefully that'll be helpful just to kind of clear the air of what does forensic accounting look like? What do you do when you think you have a case? What kind of cases are out there? What are some of the resolutions to these cases? So hopefully this was helpful and stay tuned for next blog post.