TEKnopolis has asked Mr. Gabriel Cuauhtli, a professional fraud investigator, and expert witness to prepare a series of articles calling attention to the threat of fraud against your business. This introductory article raises awareness of the threat your company faces from financial fraud. Mr. Cuauhtli has appeared as an expert witness in financial fraud cases as far away as Hong Kong. He can be reached for comment via email at [email protected]

Am I a Target for fraud?

by Gabriel Cuauhtli

Everyone who owns a business is vulnerable to financial fraud regardless of the size of the business. Fraud continues to escalate at an unprecedented rate with virtually no risk of being caught, convicted or to actually serve time if sentenced. It is also very simple and there are numerous ways by which a malefactor can succeed in defrauding a business or corporation and since it is not a violent crime, the fear of being caught is minimum.

Last year out of 1474 arrests, 122 people were actually convicted and only 26 of them served time in Jail. When a person is convicted of this type of felony it is customary that the judge will order the individual to serve time at a later date. They would usually give them 30 days to prepare for prison, as opposed to remain in custody after the sentencing like on violent crimes.

There was a particular situation when the lady actually called the prison to inform them that she was unable to serve time then, that she would go to prison when she takes care of all her businesses. She was never arrested again and she fled the country. Another did not attend the prison to serve her time as ordered and was subsequently arrested on another offense. When asked about it, she simply stated that they never gave her the address nor was she given directions. When the Warden needs to make room available for new inmates, he will dismiss the individuals who do not really pose a threat to society, and those ones would be the financial criminals.

While they are not labeled as a threat to society, the fraud causes an average increase of $500.00 a year per household just to absorb the losses that the corporations suffer. Eventually the consumer is paying the price. The FBI and the Secret Service do no have the resources to pursue cases under $25,000.00 in Texas. Los Angeles’ minimum exposure is $500,000.00 to justify FBI intervention, and they run about three years behind in their case load.

The District Attorney is required to pursue all cases regardless of the amount but they are not very successful in their endeavors. The percentages in which the District Attorney has failed to prosecute crooks with exposure under $100,000.00 is very disappointing.

Not only is the success rate low, but even if an individual has been convicted, it is almost impossible to obtain restitution. Last year the courts ordered restitution in excess of $771,000,000.00 and only $37,000,000.00 was actually paid as ordered.

This leads us to the question of what is the likelihood that your company will fall victim to financial fraud and what is the monetary exposure? A survey indicates that more than one half of large companies have been victim to fraud and 25 % have lost at least $1,000,000.00.

A company does not have to spend hundreds of dollars in security features, but rather use common sense in the implementation of their hiring practices and the way in which the finances are handled. Common sense and fraud awareness is a very good combination to prevent losses. In subsequent articles, I will cite various examples as to how fraud developed and how it should have been prevented.