Company

Fraud Investigations

Unraveling a Complex Embezzlement Case

A customer complaint provided the first indication that something was amiss at a car dealership in California.

The customer had contacted corporate headquarters to complain about the dealership's manager. He claimed that the manager had agreed to pay him $2,500 for his trade-in on a new car purchase, but she had never done so.

The company launched an internal investigation and quickly determined that the customer's assertion was valid: the manager had apparently pocketed the money allocated for the trade-in.

Was this a single case of poor judgment or something else? To answer that question, investigators decided to conduct a more comprehensive review of the dealership's records before confronting the manager.

During what proved to be a lengthy and difficult investigation, they uncovered evidence that the manager had been defrauding the company and its customers for at least a year. They estimated she had stolen more than $60,000.

The Challenge
The manager had gone to great lengths to stay undetected. In addition to creating a maze of fraudulent transactions to hide her activities, she had also destroyed an unknown amount of paperwork.

As a result, corporate investigators were not confident that they had accounted for the full extent of the fraud. Furthermore, prosecutors realized that the volume and complexity of the transactions would make it difficult to demonstrate convincingly that they constituted a deliberate attempt to defraud.

The Solution
The company sought the assistance of Dr. Richard Easton, a consultant specializing in the investigation of insurance, medical, and other fraud cases.

When corporate investigators presented him with six boxes of documents, Dr. Easton immediately turned to i2 Analyst's Notebook to help him make sense of the information. Having worked with the software since its initial release, he knew it was well-suited to the task.

Embezzlement Chart Visit the download center for a free copy of ChartReader and to download the Car Dealership Embezzlement Chart.

Using Analyst's Notebook Dr. Easton was able to clearly identify patterns and instances of fraud despite the manager's best efforts to cover her tracks. In some cases, she created fictitious transactions using personal information from unwitting friends and family members. These transactions existed only on paper and allowed her to siphon funds from the dealership. In other cases she exploited legitimate transactions, diverting money intended for the dealership or for customers to her personal account.

Dr. Easton recalls, "The complexity of the fraudulent financial transactions in this case was due to the deliberate compartmentalization of separate financial exchanges. By separating the related financial events, which independently appear legitimate, the larger fraudulent transactions were effectively concealed."

Working in cooperation with the dealership's Chief Financial Officer and two corporate lawyers, Dr. Easton established that the manager had diverted roughly $225,000 to her personal accounts over the course of 15 months. He was also able to create timelines in Analyst's Notebook which clearly illustrated how the fraud was perpetrated. These were used to clarify the case for corporate investigators, prosecutors, and the judge.

The Result
The evidence uncovered by Dr. Easton and documented in timeline charts proved instrumental to the prosecution's case. The manager was convicted in criminal court of fraud and embezzlement for her theft of more than $200,000 from the dealership. In a subsequent civil trial, she was ordered to make restitution to the dealership for the full extent of the theft. The evidence uncovered by Dr. Easton and documented in timeline charts proved instrumental to the prosecution's case. The manager was convicted in criminal court of fraud and embezzlement for her theft of more than $200,000 from the dealership. In a subsequent civil trial, she was ordered to make restitution to the dealership for the full extent of the theft.

Without the assistance of Dr. Easton, the prosecution would have vastly underestimated the extent of the fraud and sought insufficient damages. In addition, prosecutors believe that the timelines he created were instrumental in obtaining a guilty plea. They were shared with the Defense Counsel just prior to the settlement.

Shortly after the case was resolved, Dr. Easton received an email from the dealership's corporate counsel. The attorney thanked him for his efforts, including the Analyst's Notebook timeline charts, "which provided more clarity in the case than we had been able to muster in a year and a half." The outside Criminal Counsel agreed, writing "I certainly will call you if we can use your help on any other cases. Your chart was incredibly helpful."

Dr. Easton readily shares credit for this accomplishment: "Analyst's Notebook took this case from a collection of confusing and separate events to linked chronological events that clearly demonstrated the intent to defraud and resulted in civil and criminal convictions."