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Medical Millionaire in the Making and Produce Profits
Episode 2221st August 2021 • Friday Fraudster • Kelly Paxton, Jo Erven, Robert Berry
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Millions can be made in medicine. Even if you must steal it. AND. The produce section is my favorite part of the grocery store. Fresh fruit smells so good. Except in this case where something definitely stinks.

Join is this week as we discuss The Medical Millionaire in the Making and Produce Profits.

Your Friday Fraudster hosts are passionate about ethics, fraud and good business practices.

Kelly is known as the Pink Collar Crime guru. If there is fraud, she can find it.

Jo is the Ethics Expert. She can identify and correct those stick organizational ethical issues.

Robert is a process guy. He looks at the controls to determine if you are performing actions to get your desired results.

Join Kelly Paxton, Jo Erven and Robert Berry on this weeks episode of the Friday Fraudster.

Find Kelly at https://kellypaxton.com/

Find Jo at https://www.auditconsultingeducation.com

Find Robert at www.thatauditguy.com

Wanna see us, watch the Friday Fraudster replay

https://youtu.be/o5Ml7UgceUo

Transcripts

Rob Berry:

Welcome to episode number 22 of the Friday froster. And today, we're talking about the medical millionaire in the making and the produce profits not produced profits produce profits. You'll get that when we get to the story, Joe and Kelly, how are you guys today? Awesome. Excellent. Excellent day. Very good. I see. People are joining us. And Thomas is here. And he says, When does Florida not have a moment? Now here's

Kelly Paxton:

how easy it's to be here.

Rob Berry:

There. Yeah, is here. And hell is dropping multiple emojis in the chat. And I think they are all COVID related because I see someone with a mask on someone with the temperature, someone with a question mark someone else with the temperature and then someone else with an exclamation mark. So you guys are really doing well because I didn't even have to say it. As you enter the room. Drop the emoji into the chat that signifies the mood that you are in. Right now. If you'd like Mr. Little emoji on the screen right now you can go to App fro g.net and get your own gear with him on there and some other people. And hell is starting us off on the right foot already. Hello says I am Florida, man. Alright, so you guys have seen the title of today's stories. But before we get to them, we're going to remind you Friday froster if you like us, tell all your friends to watch the replay here on LinkedIn or on YouTube. Or you can listen to us on your favorite podcasting platforms. Unless your favorite podcasting platform is Apple. That is correct. I have not set it up on Apple yet because it is a headache to do for me. Also, you can go to Friday frosted comm to see past episodes, and you can get CPE E's go to $7 cpe.com and you can get CPE so guess what? $7 I mean that. That's this kind of makes sense. Right? Okay. Now, before we jump into the stories, we want to talk about something that happened last week. We are so proud to have you guys as our listeners. Because last week, Joe said to us that if we donated money to a certain cause, that that money would be not doubled, but tripled, right?

Jo Erven:

Yep, you got it.

Rob Berry:

After the show. What happens though,

Jo Erven:

after the show, I almost got to $2,000 raised so my fundraising, I blew my goal of 1000 out of the water and you guys helped me get to 1956. So I just wanted to personally say thank you to everybody. I I was just astonished. So it was awesome. Thank you. Yay.

Rob Berry:

Thank you guys. That just shows the power of community. Right? We're all in this audit community together. audit fraud, risk, compliance, all of that good stuff. We're all in this community together and when we pull together we can do great things. Now, Trent

Jo Erven:

not nearly as catchy Trent that's too long, way too long.

Rob Berry:

That's right. Trent says that he just bought $6.99 cent CP. Oh, Heather says that is awesome. Yes, that is awesome. Trent says that's incredible. I love this place. When we work together, we can achieve great things. Alright guys, you saw the title. You saw the title, the medical millionaire in the making? And I'm sure you're probably wondering, what happened? Is there some guy who or girl who worked really hard but themselves through medical school, and after graduating medical school, maybe they invented something great. And because of that invention, they started a company. And because of that company, they're going to help the world and they became a millionaire. I'm sure that's what you're all thinking right?

Kelly Paxton:

What is this Elizabeth Holmes? Oh, wait, no, that did that. No, not that one. Well,

Rob Berry:

maybe not. What about the poop company that we talked about in episode one? Was it them? The crappy company. If you've not seen that episode, go check it out. Well Unfortunately, friends, that's not what happened. Now I'm sure you're all wondering, Well, what in the world did happen? A former accounting manager at the University of South Florida's University Medical Service Association, has admitted to defrauding the nonprofit of at least $12.8 million. And he filtered a vast majority of the money through an adult website. Now, his fraud came to light november of 2020, when the foundation notified the University of South Florida's internal audit department that well, he may have processed some fraudulent credit card charges. Here's where it gets really interesting, though, you guys according to a statement from the University of South Florida, the money was stolen. The know the money that was stolen was not from was from revenues generated by patient care, no state philanthropic grant or research monies were stolen. So they made it they made a distinction. They wanted us to know that no taxpayer funds or donated wounds were actually stolen. Or no, that really matters, honestly. So let's talk about this. There are a couple of things talk about. So he worked for what's called a direct support organization, in universities, when they want to go into money making ventures, they start with solid direct support organizations, because you know, universities and nonprofits and technically shouldn't make money. And what happens in the when you're in the medical field at universities, is a lot of universities have what are called faculty practice plans. Now all those are organized, structured activities within the academic medical center that provides services such as billing, collections, revenue distributions, financial services, and things like that for full time faculty. So what we're talking about is a sub unit, essentially a sub unit of the University, where they ran through the medical expenses for physicians and other administrative services. And apparently, this man was able to steal over $10 million from that. So how in the world did it happen? Huh? You guys ready for this one, because we've had some interesting things. But this one is crazy. According to the plea deal, starting around 2018, he recruited at least one woman, which was his future daughter in law to enlist or sign up for an adult website. He then began making donations to her using credit cards for the company. She kept up to 40% of the contributions and mailed him the remainder, less the amount needed to pay taxes, so they at least pay taxes right? They didn't. They weren't Al Capone. Now, there is some question as far as how much actually went through the adult website, because according to his plea deal, he laundered more than 1.3 million through the scheme, but there are other documents that the university has it says about 11 point 5 million. Alright, I'm gonna stop right here, Kelly, Joe, there's more. But Kelly, Joe, what do you guys think?

Kelly Paxton:

So does anyone remember? Ryan hubbs. He was a reagent and he did a whole story about porn and fraud. And basically, when he was doing investigations, all of a sudden, it was kind of like, oh, look what we found here. So I put one week story, and I'll put the other link story. But I'm just gonna say that like, no, they say that men steel for the three W's wine, women and wagers. Yeah, we

Jo Erven:

find women in wagers like that. Okay.

Kelly Paxton:

Yeah. Okay. But this is a lot of money. A lot. A lot of money. And hashtag men steal more. Yeah, no, this was no little one.

Jo Erven:

I think. I like that article that Kelly posted and sent because I didn't realize like, this is one of those flags. Right. We talked about gambling as a flag. Right. And he talks about I think it was in Ryan's article about what else behavior wise to look for. What does he call it? deviant behavior. And I love that term I got like, I would have to start using the word deviant in my ethics presentations. That's awesome. But like, even like The slightest bit of harassment or bullying or any of those behaviors, I thought was really interesting that he linked that to pornography use or adult, whatever, we're going to call it website

Kelly Paxton:

use. So yeah, really interesting.

Rob Berry:

But did we all miss the part where he enlisted the help of his daughter to be daughter in law?

Jo Erven:

I know I that obviously was weird. It kinda like you just get that creepy. creepy feeling this is it? This is like an 81. Right? Is that a technical term?

Rob Berry:

This is like achy, very icky. And Michelle was spot on with it to 1.3 verses 11. Well, you know, hold on to your hats because it gets even more confusing according to some of the articles because there is some question about how much actually went through the adult website. And, and according to the investigators, they're saying that he they processed 12.8 6 million in invalid charges, including 11 point 5 million through and around 22,000 transactions with the adult website from 2014 to 2020. So now they're saying maybe 11 point 5 million of 12 points 12.8 6 million, totaling 22,000. Transactions went through the adult website from 2014 to 2020. So in six years, 22,000 transactions, possibly $11 million, and no one like 22,000 transactions,

Jo Erven:

and no one noticed, so we'll get to that I'm sure because that's a huge part of this.

Kelly Paxton:

He spent 40 some $1,000 going to Disney, what do I say everyone who steals goes to Disney? Just Yeah. Oh my god, everyone who steals goes to Disney.

Jo Erven:

Maybe we need some data analytics trends on here on Disney visitors. Maybe we need to do some sort of correlation analysis or something.

Rob Berry:

So I think hell is got your new catchphrase for you, Joe. It's deviant and icky. Forget the big me we're going with deviant and icky. Okay, so So yeah, as if it weren't confusing enough in some of the articles and all of the federal court paperwork. One report claimed that he was responsible for an additional one and a half million of what they're calling suspicious charges. And they alleged that he that the roughly $3 million that did not go through the adult website, went to a limited liability corporation owned by his wife. And then it's been some or non business travel for his friends and family members, entertainment, rent for his family members and household improvements to his residence. Also, he spent some allegedly on wedding expenses. So this was a new wife gifts to family members, his automobile, and other miscellaneous personal expenses. So one thing I noticed, Kelly says a lot of times that when you see these frauds, it's because of divorce, alimony and child support. I guess in this instance, it may have been due to marriage.

Kelly Paxton:

Well, so this is a totally different starter or a story that was in the New York Times today about Brazilian Butt Lifts that my friend Abby Ellen, who wrote the book, do, which is excellent. She did a story about Brazilian Butt Lifts. And there is um, there is a a woman who stole $93,000 and she got about left for her wedding. So yeah, the stories just keep getting better. Yeah, like, I mean, if you're going to steal to feed your family, that's one thing but if you're going to steal for Brazilian butt lift, which apparently have like, it is the most dangerous type of plastic surgery they have said.

Rob Berry:

The Brazilian Butt Lift the bbl? Yeah, that's what they call it.

Jo Erven:

Kelly Can you just say it one more time cuz I just want to giggle every time.

Kelly Paxton:

We can't make this up. Like, honestly, I can tie any deviant behavior, like probably to some type of theft. It might not be embezzlement. But I don't imagine having a spouse who like if you're looking at your bank statements, like of course you can't do Yeah. Oh my god. Yeah. Yeah. Okay.

Rob Berry:

Now pozible brings up a good point or ask a good question. Did he meet the new wife? On the adult website? Yeah, no, he was too busy looking at pictures of his daughter.

Kelly Paxton:

The apple doesn't fall far from the tree has stepsons fiance like, like father like son or Like father like steps on baby.

Jo Erven:

And so I did look him up on LinkedIn and he has one connection. So I was like pulling in Kelly Did you did you find him like the accounting manager of No, I didn't us What is it University of South Florida, Florida. Um, so he's on LinkedIn one, but then I thought maybe I could find his son. So I like started snooping around just but there's a lot of with that last name, but I was like, oh, let's see if we can figure out what his son does in this whole scenario, because none of the articles mentioned him.

Rob Berry:

So Borneo said like really bbl. Karnail bbl?

Kelly Paxton:

Oh my god. Yeah. But it's a step son, so it's probably not his same last name.

Rob Berry:

True. Okay. All right. Yeah, that is true. Pogo says that a bbl can help you feed your family. This is the sad truth. How can a bbl help you float? Nevermind.

Kelly Paxton:

I'm not gonna go into social commentary, politics and social commentary. And on what what profession she's in? Wait, did you read that story by Abby? Ellen in the New York Times? I was gonna put a link to Abby's book in the Yeah, that book, by the way. You've read the book, haven't you, Joe? And yes. Is it a good? Yes. Yeah, in the chat. She's a great writer, and crazy topic, she writes on giving up Diet Coke, Brazilian Butt Lifts now

Rob Berry:

said that she did read that article. But you know what, it gets better, because apparently, he also allegedly purchased airline tickets and hotel and hospitality packages for individuals, including a female based in Canada, who I think she flew her down to Disney. And he will get we'll get to that. He also purchased gift cards in order to commit some of his fraud schemes. So he was redeeming some of the gift cards on the adult website.

Kelly Paxton:

Okay, so I have a quick question. You know, I worked at Nike, and we had corporate credit cards. And there were certain what Mr. C's that like you couldn't buy stuff from? Right. Um, I think that maybe University of South Florida might want to go and look and put my girlfriend calm is to one two block after this, like an after action report. I would love to see what the after action report is on this because it went on for how many years? My girl fund.com? Like, Block? Block? It's not hard.

Rob Berry:

Yeah, it's not it's like obvious. Yeah. Right. I mean, data analytics would have picked this one up quite quickly. Yeah, even if they didn't block the MCC codes, data analytics should have picked this up. But that MCC code should have been blocked, depending on how they finagle it because the company may have been able to work under a different MCC code, I've seen frauds where like, for example, people would still gift cards from gas stations. And, you know, you would have the MCC code for gift cards block, but it would show up as a gas station. And so it looked like a fuel purchase. So it could be that this company may have done some things so that they show up differently from the on a credit card statement. But But according to let's see, well, no. So the fraud went on for quite some time. But he began serving as an accounting manager at this organization in October of 2006. But by late 2015, he had control over the credit card authorization. And he managed the record keeping for the for the functions of the credit card function. So it's always like we say, segregation of duties.

Jo Erven:

Yeah, nobody was even looking so except him right. It seems like at least that's what they make it seem like

Kelly Paxton:

so and then it says, you know, they have to file a form 990. So they took in nearly 306 million in the fiscal year for 2020. And they're gonna say it wasn't material because if you take 12 million over Six years, 2 million a year, 2 million for 300 million on average, you know, not material. But I want to I say we pin it in our calendar for like next year to look at USS was form 990 and see what they put? Yep. Because they should be putting something in for this or even just their legal expenses. I mean, I've seen where you look at form 990s. And you see that legal expenses did because they had to hire a lawyer. So it'd be interesting to see their form 990s.

Rob Berry:

Oh, that's a very good point. Because, yeah, they had to hire lawyers. But then also, they had to do the investigation. And the internal audit department at the University of South Florida, according to some of the things I've read, did the investigation. So if I were them, I would charge back that direct support organization for my expenses associated with that. But you know, what, guys, so when they found out he was doing it, they terminated him in December of 2020, along with his immediate supervisor, and according to some articles, the internal auditor was fired, as well. And Melissa asked the question, in the article mentioned that the internal auditor was fired. Yeah.

Kelly Paxton:

So this also goes to like, you know, when I go out on the road, or do a zoom, some people are kind of like, Well, you know, it's not gonna happen on my watch. Or if it does happen, I had nothing to do with it. The buck stops eventually, somewhere. So if you're that manager or your that even see, I've seen a lot of a lot I've, I know of like at least five CEOs, they've had an embezzlement, they had nothing to do with it. It was proven they had nothing to do with it yet. Look at like it happened on your watch. So the buck has to stop somewhere. So these people are kind of like, well, it was just an underling? Well, you know, it has to stop somewhere. And I kind of think it shows a good message personally. It's like clean house

Rob Berry:

and houses. This was a separate company. I don't think it was on USF books. Not sure. Typically, the way it works, especially in Florida, I was a part of the Florida system as a chief auditor in the university there is you typically and this may have been done separately, because you can do in multiple ways. But usually, your direct support organizations roll up to the university's financial statements as a part of a component unit, usually, but they may have done it totally separate. But a lot of times they still roll up to the financial statements as a part of a component unit. So you could actually see that I might look that up because I'm curious now. And pozo says, Did they ever reconcile employee reimbursement reports and review credit card statements? Well, it sounds like he was in charge of the reconciliation to sounds like he was in charge of dispersing the credit cards, approving them approving the transactions and any reconciliation if there was one. One thing I'm curious about is though, why was the auditor fire?

Jo Erven:

Yeah, one of the articles said something about the internal audit nor the external audit, finding it in multiple audits of this group, right of whatever the What was it? I I'm my acronyms are all messed up. But so I mean, my was guessing because they didn't see it. And it's so blatantly obvious, or they weren't suggesting the right controls. I mean, who was the boss, the supervisor, you know, you got an accounting manager. You've got you've got to assume that maybe there was a controller over this. This piece, but you know, what, yeah, accountability.

Rob Berry:

I mean, whoever the boss was, they fired him or her to though, right? And house a scapegoat? Yeah, probably.

Jo Erven:

Yeah. But they made it made him look bad, right. So they're gonna they're going to get rid of anybody that that should have spoken offers, found it or seen it or, you know, but there probably should have been other scapegoats than the auditor.

Rob Berry:

Well, at the end of the day, he pleaded guilty. So we know that he did plead guilty. And I read somewhere that he went ahead and pleaded guilty, so that they wouldn't investigate anything else.

Jo Erven:

We've heard that before. Right. Kelly says that a lot. Yeah.

Kelly Paxton:

I didn't have time to look at like Pacer to see anything else. But maybe I'll be better next time, because there might be some stuff in Pacer. That might be interesting.

Rob Berry:

Yeah, well, and According to some sources, USF the University of South Florida stated that it would help us M A implement new control structures, including an upgraded financial reporting system to better safeguard against criminal activity. So the USF The university auditors are going to help that direct support organization to implement some good controls.

Jo Erven:

Yeah, where was you know, it's the same frustrating thing we talked about? Where was the proactiveness? on something like that? Why, you know, it seems like if he was able to steal this much, this is a fairly substantial organization that should have had this already. So, you know, again, hindsight, is, is gonna get us there. But that's reacting to all this bad stuff. Where's the proactive?

Kelly Paxton:

And also, this is healthcare. As I was on the phone yesterday, still dealing with my son's concussion from April, like, it's, I consider myself to be somewhat smart. Oh, my God, the medical chart, I reached out to the insurance company that's doing this 105 page report, my son fell and hit his head and had a concussion and got some staples in his head. 105 pages? Ridiculous. Wow. Yeah. And it's $10,000. So like, you know, this is health care. It's, it's insane.

Rob Berry:

Well, in the difficult part about this one is, so I'll tell you, I actually know quite a few of the auditors at USF. What happens in in higher education is when you set up these separate companies, you cannot want them to be able to run on their own. So even though you have some good auditors in the university's audit department, they're more than likely, very hands off with this direct support organization, which is why the direct support organization had an auditor of their own. And you you, you don't want to make it seem like the university is running all of those operations, which is why you separated it out. But now unfortunately, that audit department is going to have to step in and either a take it over or be helped train new staff as they come in. So want to keep somewhat of a separation or go all in when I was a chief auditor in higher education, I actually audited the direct support organizations, but not every university does. Some of them keep it separate. So it's unfortunate, because if they had leaned on that audit department there, they probably would have been able to pick up on some of this stuff. Because it sounds like they had one auditor for that entire, you know, operation.

Jo Erven:

Yeah, that makes more sense. Now, to me that it kept saying the auditor was also fired like it was singular, right. And we know that that the university itself has more.

Rob Berry:

Yeah, that's why I say that Papa last I just wanted to see who's gonna pick up on that next big question. But yeah, yeah. Alright, so you guys, we got a medical millionaire in the making. Well, maybe not anymore, right. He became a millionaire. But he didn't stay a millionaire long. And now he has a he does have a new residence that will not yet soon he will have a new residence. He may not like his new residence, but he has a new residence. So that's the medical millionaire in the making. And we are about halfway through today's show. Kelly, what's happening on great women in fraud.

Kelly Paxton:

So I just recorded a podcast this morning with Jay Rosen compliance affiliated monitors if you have any interest in monitor ships, which I never really paid attention to. But it's kind of cool work. That'll be dropping on Tuesday. And again, I'm David Weber's episode that dropped a week ago, where he proved that hashtag, women are better embezzlers or they embezzle more often. Um, you gotta listen to it because David's amazing. And you know, he helped catch one of insurrectionists. So check it out,

Rob Berry:

please. Alright, so that is great women in fraud, the podcast that is available on your favorite podcasting platforms, including apple. Joe, what's going on with the book club?

Jo Erven:

Well, Kelly, remember we told I think we teased it last week Kelly and I officially have our next book and movie club out there for September 15. I'll put the link in the comments, but we are going to be dissecting rework, which I am just fascinated by so Kelly was one that said we had to read the book, the cult of we I am this close to being done with it. And I'm now fascinated with this. I had already watched the documentary so we're going to do a little book and movie club on we work on September 15.

Rob Berry:

And now for a book and a Movie Club, which you also get CPE credit for how much is that? 20 bucks. Wow.

Jo Erven:

So it's no $7 CPE but you get to Yeah, both of us. And you get some really good slides and movie clips and just a lot of fun.

Rob Berry:

We know I'm thinking that the value probably goes up because I'm not there. Crazy. What about the fraud retreat?

Jo Erven:

fraud retreat still on we've had a couple more signups. So August 4, and fifth next year. Even if you can't budget for it this year, make sure you get it in that budget for next year. It will be cheap, early bird discount until at least through the end of this year. So check out fraud retreat calm and see if you can get it on your schedule. Join us 16 CPE for the fraud retreat in Denver at the Gaylord Rockies Convention Center. Beautiful place. You guys want to come to Denver next summer You do?

Rob Berry:

Yeah, you do. Yeah. Basically, if you live in Florida, hell, humidity. Nice little getaway. Absolutely. Now, some of you guys know that. I also have another podcast, the live show here on LinkedIn, it's about 10 to 30 minutes, we try to keep it very short. It's called audit bites. If you go to audit bites calm, you can well see the replay. And again, it's on your favorite podcasting platforms except apple. Next week, we're doing episode number three. I don't know why I keep saying we because it's just me. But, but next week, we will have episode number three. And the title of it is three reasons audit clients hate your reports, you'll want to tune in to this one because I'm going to take an actual report that I got off the internet and I'm going to cover up the people's names. I don't want to embarrass anyone. This is meant to be educational. But I'm going to take a real report that's out there from this year. And we're going to dissect it, I'm going to show you three reasons why clients hate your audit reports. The other thing I want to talk to you guys about is I am presenting at the 2021 Financial Services exchange seminar given by the EIA, September 27 and 28th it is in Washington, DC, but get this guys, I'm actually doing the opening keynote. I'm also doing a breakout session as well. But I'm doing the opening keynote. That's going to be fun and interesting. And next week, we'll be able to tell you who the emcee will be for the event because I think you're gonna like who the MC is. I can't tell you guys just yet. So that's a lot of stuff to pack in here. Before we get to our next story, which is produce profits. We're not producing profits, we have produce profits. Now I know you're probably wondering, What in the world is produce profits? Heather says that's cool. Yeah, it is cool. Heather. I'm so excited. I'm just I'm like a pointer sister right now. I'm so excited and I just can't hide it. Okay. So what are we talking about with produce profits? The Philadelphia wholesale produce market. That's what we're talking about. Now, this thing is no joke. It is 700,000 square feet. It is the largest refrigerated building in the world. And it serves the general public. It also serves restaurants, it serves businesses, it serves a lot of different other businesses. But it's been some fraud. The former president is charged with stealing $7.8 million. And he he got very creative with it. I will say out of all the stories we've covered, this is probably the most creative one. He's being charged for one year so far, right? He's being charged with one count of money laundering, conspiracy, one count of aggravated identity theft and four counts of tax evasion, two counts of wire fraud and one count of conspiracy to commit wire fraud. That's a whole lot of stuff. Oh, I've got to inhale and take a breath. Before we go. Before we go through some of his stuff. Um, so he was the former president and CEO of the produce market. They're saying that he will. He had control over every aspect of the market including the expenditure of funds, and he was required to report to the board of directors, but he was in charge of everything. They're saying that he defrauded the market using funds to pay 1.9 million in rent on his home in New Jersey. Joe Are you here, Joe with an E Apparently he lived in stone harbor. He also converted into cash $1.1 million in checks drawn on the markets bank account. And he used that money for his own benefit. And he calls so he calls $1.7 million in checks to be issued from the market's operating account to his friends, family and relatives. But he gets better.

Rob Berry:

He also calls the market to pay for his personal credit card expenditures, converting $320,000 in checks that were payable to the market and cashing them for his own benefit. And if it couldn't get any better apparently he allegedly skimmed $2.6 million in cash from the gate for the markets parking lot. And he used that money to pay employees under the table. So you know, like when you you know, you pay to park especially in the Philadelphia area, right, you pay to park no matter where you go there. He was $2.6 million from the gate there.

Rob Berry:

And then he used $180,000 loan to market from the market to wait, oh, no, wait a minute that when I'm confused by what they're saying. So anyway, Joe Kelly, let me just stop right there. That's a lot.

Jo Erven:

Did you at that it looks so funny about Kelly Nuys mines, as we both copied and pasted the exact same quote. So the one Kelly, just put in the comments is the one that was my favorite from this article. Because I feel like if auditor started looking for complexity, they're gonna find more fraud, they're gonna find that you know, those bad transactions and behavior. And that's why I'd like one of my ethical principles is simple wins, like the everyday ethicist chooses the simple process over the complex one. So that's the the one statement that I pulled out of there as well.

Kelly Paxton:

Well, and I worked a case, years ago that we wrapped in a bow, put it in a nice little box and gave it to the FBI. And the FBI couldn't even open the Excel file because they didn't have the most recent Excel, and they had a press release. And they're like, it was a really complex fraud. And I'm like, No, it wasn't money here goes to here goes to here. I mean, it was so basic. And like, I mean, I sent it to the CPA CFE that I did the case with. And I'm just like, it wasn't complex. And he just, yeah, so um, you know, I don't know if it really was complex. But you know what, both of these cases make me salivate for getting someone's bank account right now, because it used to be Christmas for me. For me, when I would see where people would spend their money. And I'm like, what, you extend it, they're like, it's kind of like a dopamine hit for me. So anyone want to send me like, you know, some ones charge cards, and I can go crazy and make pivot tables? Don't you guys like, have fun with that? Oh, yeah.

Rob Berry:

Yeah, absolutely. So wait, so let's go back for a minute. He spent 1.9 million in rent for his Wait a minute, didn't even say his mortgage. I just noticed that in rent for his home. $1.1 million in checks drawn on the markets bank account. And then 1.7 million to friends and relatives $320,000 to benefit him. They didn't say exactly what and then 2.6 million from the gate, the gate at the market parking lot. And he used it didn't say if he used all of that or just some of that to pay some market. Employees under the table? Oh, yeah, there's there's a while keeping a substantial portion for his own use. So that's a lot but they say that he he he conceal these expenditures in the books by directing that these payments be reflected as legitimate business expenditures, for example, he would notate some as maintenance expense, snow removal, insurance, legal fees and other false entries. So he was the CEO, but he controlled the books so maybe they didn't have a CFO or maybe he had control over the CFO.

Jo Erven:

Yeah, so I think Well, number one, we have to remember that I mean, this one in relation to the last story is more complex, you know, in a way because he at least did a bunch of different things in different ways. You know, when we get into his what getting of mail orders, right? Like I mean and how used basically blank checks or certified checks and or you know, cash to go get mail anyway, he did a lot of different things. So I think to us, it may not seem complex because we're fraud examiner's, and auditors and we know where to follow this stuff through, but he actually did do a lot of work. But I mean, look at how it was comment right after Kelly's quote, when they can't figure it out. They they do wire fraud, right, but look at I mean, Robert, you read off a list of charges, like I feel like this one of all the ones we've seen does have more to it?

Rob Berry:

Well, no, here's how complex it was. I couldn't even read off the list without stuttering, right? Because they, I mean, seriously. And I know, I'm not even poking fun of myself. This time. I'm being serious. It was just that complex. And you know, we talked about these press releases all the time, where they say it was complex, and it wasn't because also, they alleged that he committed aggravated identity theft by cashing checks at a currency exchange, using the name of an unwitting victim. Now, he also brought someone else in, but they're saying through that, that check cashing place. He laundered approximately $319,000 by purchasing money orders. But but it even got it got worse than that, because he had a second guy that worked at the check cashing place in on it with him. And he was a supervisor at United check cashing on South Broad Street in Philly, if you guys know where it is. And what he did was he encouraged this person to not to cash checks under $10,000 so that they could avoid having to file the currency transaction reports, the Ctr reports, because then they would have been able to record the identity of the person that was cashing the checks. So he had some checks that he used somebody else's name for. Then he had other instances, I'm assuming maybe they did use his name, but he wanted to keep it below the $10,000 threshold. So he alluded with the supervisors at this check cashing place.

Jo Erven:

And that supervisor had already been charged IRS error, something like he was already like, found guilty, I think, right. So interesting that I mean, obviously they knocked off the smaller person like this is just the person who colluded or the what's the what's the term I'm looking for? aided and abetted, I don't know.

Rob Berry:

conspirator.

Jo Erven:

Yeah, co conspirator. But on a smaller scale, so they got him out of the way. And now they got to figure out what to do with this guy. But yeah, I mean, this, this mentality spreads easier than people think. I mean, this is where you got to follow the trail. What makes me think of the McDonald's Monopoly game? Yeah, Rod. Because when you watch that documentary, McMillan's on Netflix right now, HBO, that was on HBO. You know, they talked about FBI talks about how they thought it was like eight people, then it turned into 53 people and like, so I think, you know, a tip, if we're going to jump into a tip is like, follow the trail to where these people go and what they're doing with their money, too, because I think this is the first one where I'm like, Oh, you know, you got to, it's like, third party vendors, like audits, right? You got to look at where they're spending that money and who else was in on it, and what did they do to break the law? So this guy stopped filing reports. So it just was interesting how it spread in this one to me because that we haven't seen one really, as much like that. I know, farmer broker one, but we couldn't really figure out what the broker was getting out of it. So the first one where it's kind of I don't know to parties follow the

Rob Berry:

follow the line? Well, Megan says while most of my investigations are dealing with relatively simple cases, he has had some creative payroll and AP ones. Now, pozo says that 1.9 million in rent that makes no sense, he did not use his stolen money wisely. Why didn't they just buy a place? And when you pose Oh, I'm sorry with you. Now. Postal also says that some of these frauds can be prevented if companies outsource accounting puzzle, you willing to take up the accounting for some of these companies that might be a second business. And Kelly is in the chat saying no one does anything for free. But how gets the comment of the day? He's too smart to be a Florida man. I think you might be right now they're also saying though, that on some occasions, he directed the people at United check cashing to convert the proceeds into check to convert the check proceeds into separate money orders, which he used to pay his monthly rent. Hmm, so yeah, this is just

Jo Erven:

Yeah. It was amazing how many things he did in ways he did it. I think we have had one guy that probably wasn't a Florida man either. That we we called like, the smart For I can't remember which story that was, but I was like, This guy was really smart. I don't know if I feel that way about this one. But there was a lot going on.

Rob Berry:

Yeah, he had a lot going on and houses rent versus own no assets to see. That's a very good point. Good point. Now, they said,

Jo Erven:

Why do you care if you're throwing your money away? If it's not your money anyway? If it's stolen money, who cares? Like but

Rob Berry:

here's the one thing I always wonder, though, seriously, once you get to a certain amount of money that you've stolen, why does no one go to a country with no extradition laws to the US and live out the rest of their lives? I've always wondered that.

Kelly Paxton:

Oh, I don't know.

Rob Berry:

I mean, you know. So they also alleged that he willfully attempted to evade federal income tax over several years, by failing to report more than two point million dollars in income tax for years 2014. Through 2017, he failed to report as income, the proceeds of his fraud on the market, got that as well as a car allowance. Now that one doesn't make sense, and pension allowance and consulting income he received from the market. And that one doesn't make sense, because it seems like it would have come out of his check as an employee. Unless, I mean, it says consulting, So was he the CEO for the market? And then he turned around and charged him to be a consultant as well as a 99. employee. He had so much going on. Yeah.

Jo Erven:

Yeah, but why, But to your point, like, I don't know about the consulting one, but the car allowance, and the other things, those should be paycheck on his paycheck, right? Again, but he's the CEO, so he probably just paid himself under the table for those things. So that's what happens when you have all the control.

Rob Berry:

You probably use the proceeds from the parking garage to pay himself under the table to probably

Jo Erven:

think pozo hit it with this one. Well, I think she was saying greed is why people don't flee. They just think they can stay a lot of people think they could get away with it. You know, I think this guy probably have a little bit of the smartest guy in the room mentality. You know, he was doing so many different things. He thought he was gonna get away with it.

Rob Berry:

Well, and that's kind of what House said you do it because you don't think you will ever be caught ever. No need to flee the country if you believe that.

Jo Erven:

Well, they think they're untethered.

Kelly Paxton:

So his watch The Sopranos does this stop? seem a little soprano ish. No, it does. watched The Sopranos. Oh,

Rob Berry:

what did Sopranos was based in where? New Jersey? jersey? It was jersey. Okay. I was thinking, you know,

Kelly Paxton:

they had

Rob Berry:

technicals other places. Oh, yeah, definitely 100%, because I'm still just looking back at what this guy allegedly did. So from the parking garage, he, I guess took cash and then pay people under the table so that they wouldn't have to pay taxes. He got a check cashing place to get in on the scheme with him and have them redirect checks that were in the organization's name to him, as well as divert cash that should have been going to the organization to him. They actually he actually convinced them to break the law to break Financial Services Law, federal law by not filing currency transaction reports, which then got to kick check cashing place in trouble. He paid for rent on his home to the tune of $1.9 million. And where he lived in stone harbor is a really nice neighborhood in Jersey. I mean, it's on the Jersey Shore, I believe. Yeah, it is. So high real estate. He What else? He gave money to friends and family. He was was supposed to report to the board, but I guess he did. But he actually had transactions in the accounting records changed to look like legitimate transactions. So I guess when they came through, they showed up as something else, if they were coming directly from the bank, so we had them changed in whatever their accounting system was. That's

Jo Erven:

but he also gave funds to person with tragic health problems that he had learned through the news stories through news stories random and he also gave 350,000 to charities of local organizations, including string bands. So you know, he just thought he was doing the right thing

Rob Berry:

here Robin Hood.

Jo Erven:

Yeah, he's Robin Hood. He didn't it didn't really matter all those other things. Yeah. Well, wait,

Rob Berry:

could you really be Robin Hood if you stole from the rich and then made yourself Rich and then gave to the

Jo Erven:

Yeah, I think that's well, okay. It does, Robin it does anyway. No.

Kelly Paxton:

I just looked up the house that shows his address on fast people. Um, it's only worth $254,000 it is not nice at all.

Jo Erven:

Oh, at the house, he's renting.

Kelly Paxton:

Well, this is the house that shows him for his New Jersey. And I pulled it up from fast people. I mean, it's not you know, I said, I was expecting a little bit nicer the house of a house.

Jo Erven:

I love Kelly the investigator. Well, I'm just looking up some website like doing her little investigative

Kelly Paxton:

mind. I love it. Well, maybe it's, I'm gonna have to look at some other of their pieces of property that they show because this is crazy. This isn't a nice house. He wouldn't pay. Yeah, I gotta find I need a mansion. At least for that amount of rent. I want a mansion.

Rob Berry:

Yeah. And a nice car. You know, you gotta have like a Bugatti or something. You

Jo Erven:

know, I was afraid of that parking lot on it.

Kelly Paxton:

Yeah, absolutely. So yeah. Interesting. I think his wife's name is Michelle.

Unknown:

Um,

Rob Berry:

I don't know. Do you know his Social Media Minute?

Jo Erven:

Um, the people stock our LinkedIn is after we talk about them after we've searched their LinkedIn. Yeah. Oh, my

Kelly Paxton:

God. Did we?

Jo Erven:

Did we tell our audience that that happened that one day?

Rob Berry:

I can't remember I did not. But yeah, we we had somebody after one show. We looked at someone's LinkedIn. And they checked out all three of us because we checked out him on LinkedIn. So yeah,

Jo Erven:

watch the story that we were talking about him

Rob Berry:

I bet probably did. Now houses, you can't do a complex fraud without accomplices. And the landlord might have been on the take, which that's very true. The landlord may have been on the tape How?

Kelly Paxton:

Money Laundering?

Rob Berry:

Oh, you know what, yeah, that's true. But houses, Bernie Madoff was quite benevolent. But here's what I thought, oh, in all seriousness, that may have been his New Jersey home. And then a lot of times, people who have a lot of money in Jersey, they all have a home, kind of in Jersey, and then another home, that's their summer home on the Jersey Shore. So the $1.9 million home that he was renting may have actually been just the summer home and the Jersey Shore. Didn't know that much about New Jersey. You know, the bad part about this one for me is the Philly market, actually is a really good market is one of the biggest in the world. And they serve a lot of small businesses and in in user in end user, consumers, customers, the general public, they have a lot of really good food there. And there are a lot of really good people that work there. And this tarnish. tarnish is a really good organization. It really is. I don't know if you guys have ever been to it or seen it, but it is it is a fascinating building. It is huge. And everything under the sun is it. It reminds me on a much larger scale of the market in Seattle. You know, yeah. Yeah. Yeah. Reminds me of that. But on a much larger scale. And it's, it's a lot cleaner, because it's newer, but it's a really good place.

Jo Erven:

wants to know, if you watch the replay of his episode,

Rob Berry:

I don't know. pozo? I can't tell. I wish I could tell. Because I'm wondering now if he actually did but yeah, he he he stopped us like we stopped him. turnabout is fair play. What do you guys think about this episode? And I'm wondering to the audience Now, is this the most crazy one we've had so far, because we've had some really crazy ones. But I think by far, this one is probably the most complex. And possibly the craziest with these other craziest to me being the wire card. Because that one was just, it wasn't as complex. It wasn't complex at all. But the fact that they brought in private investigators to try and dig up dirt on these people and they tried to attack the journalists at the Financial Times for just simply reporting the truth. And, you know, the fact that it was what was how many billions of dollars was it that was missing billion with a B 1.2 billion Yeah, billion dollars. Yeah, yeah. Yeah,

Jo Erven:

I think they're just totally different scales, right. like these ones still kind of feel like embezzlement scale versus white collar crime. Although, I don't know Kelly, what is the line there? educate us on Is it $1 or Is it that position?

Kelly Paxton:

Right? It's because I know position. So we're level of position. And so, um, but it's also the offense. So then the other thing on this is, um, he probably started with one little thing and got away with it. And you know, our appetites never get smaller, they only get bigger. And so it's like, well, I got away with this. So now I'm, I need to do this. And so they might just start with one paycheck or one expense report. And then it's like, oh, that was easy. No one caught that.

Jo Erven:

Yeah, it's like, he's a CEO. So you think white collar crime, but he probably started as a low level embezzler? And then yeah, we got up to the white collar, Collar Crime crime level, obviously, in the millions. But

Rob Berry:

yeah. interest. Yeah. And I think all of these things tend to have the same theme. One person with too much control. Regardless of level, this one just happened to be the CEO. But we've seen some where it's been a clerks with too much control. And then we had the one with the school where it was the nun who had too much control. Yeah. nuns on the run.

Jo Erven:

Well, yeah, and it's like a nice to today that you picked, I feel like they should have known better. They're big enough organizations. You know, that that even? I don't know, just you. Some of them. We talked about, you know, we

Kelly Paxton:

don't want a victim shame. You know, they

Jo Erven:

don't know any better. It's small companies, nonprofits. But these two I just feel like don't have as much of an excuse.

Rob Berry:

Yeah, and that's the surprising piece, but also the disappointing piece. Yeah. Agree. Yeah. All right, guys. You're fun. Thanks. This has been another episode of the Friday froster Episode Number 22. To be exact. If you like what you're hearing here, spread the word. tell all your friends that are in fraud, risk management clients internal audit, tell everyone you know, tell them they can watch the replay here on LinkedIn, they can watch the replay on YouTube, they can go to Friday, frosta.com or $7 cpe.com to get their CPE E's. We want to thank you guys for making donations for Joe. We want to remind you about Joe's book club, Kelly's podcast, the fraud, fraud retreat that's coming up. And anything goes that you see us because if you see us, you know it's going to be good. You're going to have a good time. Hey, Joe, Kelly, anything else you guys want to say?

Jo Erven:

No. Have a great weekend, everybody. We'll see you next.

Kelly Paxton:

Next week. Very good. Stay good.