Occupational fraud can be committed by any individual or group with the right rationale, motivation, and opportunity. These are stories about individuals who worked together to commit occupational fraud. Once you’ve read them, participate in an online quiz to test your knowledge. See how you rank against your fellow Chapman employees.
The Fraud Triangle
The fraud triangle is a framework used to explain the reasons behind an individual's decision to commit fraud. It consists of three components: opportunity, incentive (or pressure), and rationalization. Understanding these three elements helps organizations identify and mitigate the risk of fraud
- Opportunity refers to the circumstances that allow fraud to occur, such as weak internal controls.
- Incentive or pressure is the motivation behind the fraudulent act, often financial stress or personal gain.
- Rationalization is the mindset that justifies the fraudulent behavior, allowing the individual to reconcile their actions with their personal values.
As you read each story, think about how the fraud triangle elements—opportunity, incentive, and rationalization—are present in each case.
The Big Conn
Eric Conn, a once-prominent lawyer in Kentucky, orchestrated a massive fraud scheme that defrauded the Social Security Administration (SSA) of over $550 million. Conn collaborated with a network of corrupt doctors and a Social Security judge (David B. Daughtry) to file false disability claims, ensuring approvals for his clients and reaping substantial illegal profits. His actions not only exploited taxpayer-funded programs but also undermined the integrity of the disability benefits system.
Despite his initial success, Conn's fraudulent activities eventually caught up with him. After being indicted, he was placed under house arrest but managed to escape by cutting off his electronic monitoring device and fleeing to Honduras. His escape was short-lived, as he was captured by authorities and extradited back to the United States, where he faced additional charges for his escape and conspiracy to retaliate against an informant.
In the end, Conn was sentenced to 27 years in prison and ordered to pay over $72 million in restitution. His case serves as a stark reminder of the severe consequences of defrauding government programs and the lengths to which some individuals will go to evade justice. The impact of his crimes was felt deeply in the communities of Kentucky and West Virginia, where many people were affected by his fraudulent actions.
Seton Hall Law School employees allegedly stole nearly $1 million over several years
A Somerset County woman who was formerly assistant dean of Seton Hall Law School and her sister were among the three people who have pleaded guilty in federal court to defrauding the school of more than $1.3 million.
“Through an elaborate, years-long embezzlement scheme, these defendants violated their obligation to the students and exploited their role at this institution of higher learning to line their own pockets,"
U.S. Attorney Philip R. Sellinger said in a press release.
The fraudulent acts included:
- Teresina DeAlmeida, the former assistant dean, directed a school vendor to pay her sister, Silvia Cardoso, and her assistant, Rose Martins, as though they worked for the vendor, even though they did not perform any services.
- DeAlmeida and Martins caused the vendor to submit false invoices to the school to reimburse the amounts paid to Cardoso and Martins.
- From 2010 to 2022, DeAlmeida and Martins directed school vendors to order gift cards and prepaid debit cards for their personal use and submitted fraudulent invoices to the school.
- Martins opened a shell entity called CMS Content Management Specialist LLC and submitted fraudulent invoices totaling more than $208,000, which DeAlmeida approved.
- The conspirators used the school-issued credit card to make over $70,000 in unauthorized purchases, including women’s shoes, smart watches, and bed linens.
Monopoly Money
Once upon a time, in the bustling world of fast food and big prizes, there was a man named Jerry Jacobson. Jerry was the head of security for the company that managed the McDonald’s Monopoly game, a promotion that promised customers the chance to win big prizes like cash and cars. But Jerry had a secret. He had found a way to steal the most valuable game pieces and decided to create his own network of “winners.”
Jerry exploited a mistake by a foreign supplier who sent him tamper-proof seals, allowing him to open and reseal packages of winning McDonald's game pieces. To avoid detection by the auditor, he would open the packages in men's bathroom stalls at airports, replace the winning pieces with non-winning ones, and reseal them. With a supply of winning pieces, Jerry recruited friends and family to find people willing to pay tens of thousands of dollars upfront for the winning pieces, which were worth hundreds of thousands of dollars, including the $1 million grand prize.
The story took a dramatic turn when the FBI received an anonymous tip about the rigged game. Enter Doug Mathews, an enthusiastic FBI agent who took on the case with gusto. Through a series of undercover operations and interviews with the conspirators, Doug and his team slowly unraveled the web of deceit. The investigation revealed the lengths to which Jerry and his accomplices went to avoid detection, and the impact of their actions on the lives of many. In the end, justice was served, and the story was the basis of the documentary "McMillions."
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