White Collar Criminal Essay

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Lifestyle Red Flags of Fraud Perpetrators

Introduction

As the Association of Certified Fraud Examiners (2010) points out, the average fraud perpetrator has—like David L. Miller—no prior fraud convictions. The offender is typically in the 30 to 45 years age range and is more likely to be male than female. Both of these characteristic profile traits fit Miller to a “t”. Moreover, four out of five fraud perpetrators are likely to work in the accounting department of an organization, again just like David L. Miller. And as the perpetrator ages so too does the level of fraud increase in terms of losses (Association of Certified Fraud Examiners, 2010)—again just like with the case of David L. Miller. This paper will analyze the case of David L. Miller and show why he fits the profile of a fraud perpetrator well and why companies tend not to press charges against people like him.

Analysis

The most common traits of fraud perpetrators were all evident in the person of David L. Miller: he was living beyond his apparent means and was committing fraud to pay off prior victims; he had never been charged with fraud; and he worked in accounting. He was also promoted to CFO, so was a high level executive and as Association of Certified Fraud Examiners (2010) notes it is the high level executive fraud perpetrators who cause the most damage to their organizations, as David did. He differed from the common fraud perpetrator, however, in that he was genuinely well-liked by his victims and his colleagues never suspected that such a person could be a fraud perpetrator. In fact, so well was he regarded, that he was even hired to work for a former colleague at a firm he had defrauded of more than one million dollars—on the condition that he receive counseling for embezzling. David’s willingness to confess and admit that he had a psychological addiction to fraud is another way in which he is different from other fraud perpetrators: he was willing to receive treatment and did so and has been fraud free. Most perpetrators are not so lucky. Still, it was David’s genuinely well-liked demeanor that allowed his fraud to go undetected—that and the fact that he would go about his fraud in ways that drew the least red flags—such as getting bosses to sign checks on their way out the door for holidays and destroying canceled checks and charging the amount to an expense account.
The elements of the Opportunity Triangle (commit, conceal, convert) present in Miller’s case that allowed him to circumvent controls when embezzling funds from Associated Communications consisted of the fact that he could get around the requirement for two signatures on checks by asking executives leaving on vacation to sign several checks “just in case” the company needed to disburse funds while the executive was away. He had the opportunity to do this and was able to conceal the crime by removing the canceled check from the bank reconciliation and destroying it. The stolen amount would then be charged…

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…investigating any red flags.

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Records should be submitted to an independent external auditor, as well. Auditing is one of the best ways to self-regulate and firms provide a degree of security for themselves when they focus on making sure the company “is not engaging in actions harmful to the interest of shareholders and is not engaged in unwarranted forms of self-dealing” (Friedrichs, 2009, p. 305). The board should also have a degree of independence from the company. Whenever the Board is lacking in independence, fraud can creep in as people become too familiar with one another and are more willing to look the other way when red flags crop up.

Conclusion

David L. Miller is but one example of a fraud perpetrator who manages to evade the law because he is never prosecuted. When companies fail to press charges or fail to report crimes like these to the authorities, they simply ensure that such crimes will continue to happen in the future. Failure to report is the problem that they suffer from through and through: they lack the internal controls for preventing fraud from occurring and they lack the audit team to catch bad reporting from lower down in the company. They do not report to law enforcement when a crime takes place and the keep the cycle of fraud going on. Companies should know that cases like David L. Miller do not stop until they are treated like David H. Miller and prosecuted. They also should know that red flags are something to pay attention….....

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