Internal/workplace investigations

1. Internal
Investigations
Institute of Internal Auditors
Palm Beach County Chapter
June 15, 2012

3. History of the Company
• October, 2001—Great Southern
Detective Agency
– Criminal Defense
• State/ Federal court
– Family Law
• Surveillance

4. • September 2003
– Wendy joins the
firm
– Civil/personal injury
• October 2005
– Consultant, policies
and procedures
• May 2006
– New name, new
focus, new staff
• June 2009
– Certifications (CLI,
FRP)

5. Who We Are
• Certified Paralegal (CP®)
• Certified Fraud Examiners (CFE®)
• Certified Criminal Defense Investigator (CCDI)
• Certified Legal Investigator (CLI)
• Bi-lingual
• Federal, State and Former LEO
• Forensic accountants
• Certified technical forensic experts

6. What We Do
• Since 2001
– Located over 1000 people
– Conducted over 5000 interviews
– Uncovered millions of dollars in assets
– Verified credentials for executives, managers and
experts
– Performed detailed “due diligence” for
corporations and financial institutions

7. What We Do
• Harassment/Discrimination claims
• Fraud and theft/embezzlement cases
• Background investigations
• Due diligence investigations
• Drug cases
• Net worth determinations

8. The (Workplace) Commandments
• You shall not lie (on your application)
• You shall not steal (from the jobsite)
• You shall not kill (or assault a co-worker)
• You shall not covet (your employer’s goods)
• You shall not blaspheme (or make inappropriate
comments to an employee)

9. Some Common Schemes
• ‘Skimming’ and theft of cash
• Billing (‘shell’ companies, vendor ‘refunds’)
• Payroll (falsified hours, ‘ghost’ employees,
commission schemes)
• Misuse of company assets* (vehicles, supplies,
computers)
• Theft of inventory

10. Some Common Problems
• Drinking or using drugs (driving, operating
equipment)
• Improper relationships*
• Jokes, comments, e-mails
• Disparate policy enforcement (‘inadvertent’
discrimination)
• Ignoring ‘danger’ signals (threats, aggression,
escalation)

11. How We Can Help
• ‘Internal’ investigations team
• Interviews, forensic analysis
• Locate stolen property or money
• Verify use of company assets
• Identify dealers and abusers
• Protect the workplace
• Policy review and development

12. Attorneys and Investigators
• Attorneys performing investigative interviews?
• Costs, qualifications
• Potential conflicts
• Gathering information versus conducting depositions
• Confidential vs. privileged (work product)
• Oversight and coordination
• Subsequent litigation; preparing for the lawsuit
• Finally, what’s in a name?

13. Managing Employee
Investigations
Reginald “Reggie” Montgomery, CLI, CPP, CFE, CP

14. Backgrounds
• All new employees
• If not all, then Sales, Purchasing, Transportation, Financial
& all Upper Management positions
• Criminal (Statewide if available and previous residential
locations)
• Motor Vehicle (on all employees who operate vehicles,
SEMI-ANNUAL).
• Credit (obtain signed release authorization during
application process)
• Employment
• Education

15. Backgrounds - Optional
• Civil Litigation
• Database
• References
(neighbors, friends)

16. Computer Theft
• Electronic data and hardware

17. Espionage
Counter Espionage Sweeps (electronic counter-
surveillance, de-bugging)
– To do it right is expensive
• Board Meetings
• R & D Meetings
• Sales Meetings
• Planning Meetings

18. Case Study #1: Hewlett Packard
• CEO orders an investigation into information “leaks”
from the BOD to the press
• Private investigators utilize “pretexting” to obtain
personal identifiers and call information
• Telephone records identify board member as source
of information provided to journalist
• HP prosecuted by state and federal authorities for
use of pretexting; data brokers and investigators
criminally charged

19. Hewlett Packard
• Issue: How an outside investigator can screw up your
case
• The investigation became the focus of attention
• The original wrongdoing (violation of ethical and
fiduciary obligations) overlooked by the media and
authorities
• Legislation introduced to criminalize pretexting

20. Fraud
• White Collar
– Embezzlement
– Phony vendor schemes
– Skimming’ and theft of cash
– Billing (‘shell’ companies, vendor ‘refunds’)
– Payroll (falsified hours, ‘ghost’ employees,
commission schemes)

21. Fraud
• Blue Collar
– Misuse of company assets* (vehicles, supplies,
computers)
– Theft of inventory
• Other fraud indicators
– Issues with harassment, inappropriate behavior,
viewing pornography may indicate disregard for
company policies,possible inclination for fraud
schemes

22. Harassment
• Get everything in writing
• Put in personnel files
• Competent Investigator to conduct interviews or
polygraphs (voluntary)
• Employment backgrounds
(previous history of harassment?)

23. Loss Prevention
• NEGLIGENCE SUITS
• Surveys
• Recommendations
• FORESEEABILITY

24. Misconduct
• Company policy violations
– Written
– Reviewed by outside counsel
• Employee separations
– Security concerns
– IT coordination
– HR documentation

25. Labor Disputes
• Coordinate Physical Security
• Coordinate transportation of employees on and off
site
• Protect employees and facility
• Get qualified expert in field that knows how to
cooperate with both parties (if possible) in non-
confrontational manner!
• Video/film (confer with qualified labor counsel)

26. Polygraph
• Know when to and when not to
• Employee notification
• Qualified expert to conduct polygraph

27. Surveillance
• Worker’s Compensation Fraud
• Theft
• Harassment
• Violence
• Absenteeism
• Justification for termination needs proof!
• “Manned” and “unmanned” video

28. Undercover Operation
• Very dangerous, must be handled properly
• Usually requested to resolve theft, drug usage
• White or Blue Collar, operative must be smart and
report only to Investigator. Findings to be reported
confidentially and daily.
• Provides collateral information re: policy violations,
management issues, undisclosed liabilities
• Coordination with law enforcement in cases involving
contraband

29. Violence (see Harassment)
• Get everything in writing
• Put documents in personnel files
• Competent Investigator to conduct interviews or
polygraphs (voluntary)
• Employment backgrounds
(previous history of harassment or violence)

30. Workers’ Compensation
• Review reports
(accident and medical)
• Conduct surveillance

31. Employee Theft
• Verify initial report
• Attempt to quantify losses
• Initiate appropriate techniques for apprehension
• Report findings
• Make recommendations and initiate corrective
controls

32. Case Study #2: Asset
Misappropriation
• Employee utilizes company vehicle for personal
business
• Surveillance to establish daily and “after hours”
activities
• Research to identify business entities at various
locations
• Covert contacts to confirm personal business
enterprise
• Documenting for submission to corporate counsel

33. Resources for
Employee Investigations
• Voice Print Identification
• Statement Content Analysis
• Law Enforcement
• Countermeasures
• Covert Cameras
• Net Worth Analysis

34. Resources for Employee
Investigations
• Profiling
• Polygraph and Interview
• Forensic Accountants
• Computer Forensics
• Due Diligence

35. Resources for
Employee Investigations
• Surveillance
• Undercover Operatives
• Civil Litigation (plaintiff and defense)
• Contingency Planning
• Facility security cameras and access control
• News and media reports
• Confidential informants

36. Resources for Employee
Investigations
• The List of Resources for Employee
Investigations is only limited to the
Investigator’s imagination, corporate
policy, local, state, and federal laws

37. • Endless waiting, increasing anxiety
• Facts of surveillance:
– Patience, patience, and more patience
– Minimal intake of fluids
– Staying focused and in “alert” mode
– Blending in
– Physical discomfort (heat/cold, cramped quarters, thirst,
hunger)
– Sense of humor required

38. Case Study #4: The Investment
• Viatical settlements passed as an investment
opportunity
• Terminally ill patients have life insurance policies with
significant death benefits
• Patients “sell” the policy and assign the benefits to a
third party “broker” in exchange for a portion of the
death benefit
• Tens of millions invested by pension funds

39. • Patients receive immediate cash to pay for “quality of
life” support, medications, or travel
• Broker then sells “shares” of the policy to
investors/groups
• Investors collect a share of death benefits when the
patient/policyholder dies
• Monies collected from investors used to purchase
insurance policies from terminally ill patients
• Policies reviewed by medical personnel to confirm
diagnoses and life expectancy
• Returns of 40% “guaranteed”

40. Issues to discuss
• You are on the audit committee of a state pension
fund tasked with performing due diligence
• What are the elements that should be reviewed and
verified before making a significant institutional
investment?
• What items would you ask to see from the broker?
• What processes would you utilize to verify
information provided?

41. Behind the Curtain in Oz
• $110M taken in by FinFed/ABS
• Only $6M in policies actually purchased
• Only one nurse to review medical policies
• Two lawyers “certified” that procedures were
established and followed, and that they personally
reviewed the files
• Shares were determined to be securities; brokers not
registered/licensed to sell securities
• Patients were living beyond initial life expectancies

42. Behind the Curtain in Oz
• Fraudulent insurance policies uncovered
• No institutional investor conducted more than cursory
examination before investing millions
• Millions spent on lavish lifestyles: homes, cars, jets,
travel
• Initial investors paid “returns” from proceeds from
new investors (Ponzi)
• “Hey, it’s the 90’s!”

43. Behind the Curtain in Oz
• Outcome: Federal prosecution of all participants
• Sentences of 5 to 50 years
• Lawyers disbarred
• Investors large and small lost millions
• Pension funds threatened with insolvency
• The largest Ponzi scheme in Southern District of
Florida at that time
• All for want of a quality audit and appropriate due
diligence

44. And, finally…Thank You!
• Mark J. Murnan, CLI, CFE
• mark@completelegalinv.com
• 561-687-8381
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• Make it a great weekend!