Fraud

Behold the creativity of cheaters.

Need to fabricate an excuse to bail on your meeting? There’s an app for that. Image courtesy of Adobe Stock.

I am continually amazed at the creativity of cheaters. A few examples in the news recently:

  • Restaurant offering receipts with menu items relabeled as office supplies
  • Generate disruptions to get out of a zoom meeting
  • Fake Covid test results

I mentioned these for the laughter value and more importantly for the educational value.

The stories are amusing. If you work in the finance area or are leading an organization, having an awareness of these schemes might help you recognize one if presented to you.

Your entertainment and anti-fraud training for the day:

(more…)
Jim Ulvog

Final thoughts on the tale of Silk Road. Part 9.

Cover of “American Kingpin” from Amazon. Used under fair use.

This is the 9th and final part of a discussion of Silk Road, as discussed in American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road, written by Nick Bilton. For the longer story, you may enjoy reading parts one, two, three, four, five, six, seven, and eight.

Other thoughts on the book

If you have previously been following the Silk Road story, you will enjoy the book. It reads like a good detective novel, except it is all true.

The book describes the mutual low opinion held of other federal agencies by the staff of most of the federal agencies that had a part in the investigation. This is not the first time I’ve read of those attitudes or heard of poor cooperation across agencies.

Lack of technical discussion

A couple of the reviews at Amazon indicate there is minimal technical detail in the book. That is absolutely the case.

(more…)

Jim Ulvog

The Silk Road perps. Where are they now? Part 8.

Image courtesy of Adobe Stock.

This is part 8 of a discussion of Silk Road, as described in American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road, written by Nick Bilton. To learn how these three individuals earned an extended stay in federal housing, you may enjoy reading parts one, two, three, four, five, six, and seven.

Update 10/9/18 – Location and status updated.

Current status:

In good ol’ Dragnet style, where are bad guys now?

Here is the info from the federal Bureau of Prisons website:

(more…)

Jim Ulvog

It didn’t end well for two of the feds investigating Silk Road. The tale of Silk Road, part 7.

The wages of corruption. Image courtesy of Adobe Stock.

Two of the feds working on the Silk Road investigation went rogue. That did not turn out well for them.

This is part 7 of a discussion of Silk Road, as described in, American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road, written by Nick Bilton. Check out parts one, two, three, four, five and six, if you wish.

Since the book was written, there have been more developments. I stumbled across the additional info after drafting this series of posts.

Let’s take a look at how things turned out for the two crooked federal agents.

What did the two feds do and what did they get for their trouble?

(more…)

Jim Ulvog

Where did one guy wind up by making moral decisions with no moral frame of reference other than himself? The tale of Silk Road, part 6.

Mr. Ulbrecht’s housing for the rest of his life (plus the next 40 years). Image courtesy of Adobe Stock.

How far did he go?

So as a result of running the drug bazaar called Silk Road, where did Ross Ulbricht wind up with his efforts to forcibly legalize drugs and simultaneously remove God from His throne and take over the throne for himself?

What did he get for his efforts? The feds claim he had tens of millions of dollars in his personal accounts.

(This is part 6 of a discussion of Silk Road, as described in, American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road, written by Nick Bilton. Check out parts one, two, three, four and five, if you wish.)

He ran a web site at which he knowingly sold to anyone who could pay:

  • pot,
  • coke,
  • heroin,
  • many varieties of synthetic drugs,
  • equipment & supplies to manufacture drugs,
  • automatic weapons,
  • grenades,
  • rocket launchers,
  • body parts, including but not limited to:
  • livers,
  • kidneys,
  • bone marrow,
  • deadly poisons,
  • counterfeit identification,
  • counterfeit currency,
  • keystroke loggers,
  • spoofing software,
  • sundry hacking tools, and
  • fake passports.

He also contracted for and paid for what he thought was the murder of five people who offended him.

(more…)

Jim Ulvog

The power of rationalization when you have no frame of reference other than your own opinion. The tale of Silk Road, part 5.

According to ‘Dread Pirate Roberts’, his ordering the execution of a renegade employee is morally the same as the U.S. President ordering one of the above wartime launches. Illustration courtesy of Adobe Stock.

This is the second of two posts describing the frightening power of rationalization on display in the story of Ross Ulbricht, also known as Dread Pirate Roberts, as he developed the Silk Road website where you could buy anything you wanted. The story is told in American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road, written by Nick Bilton. This is the fifth post in a series. You may enjoy reading parts one, two, and three.

You might want to read part four before diving into this wrap-up of the rationalization discussion.

How can body organs be okay?

Shall we extend this discussion into body organs?

I suppose there might be some way for informed consent to be given in a situation where a body organ is extracted and sold on the Dark Web. I can’t get my brain around it, but I suppose there might be some possible way to do so that would be consistent with libertarian concepts.

I have a real problem with thinking that organ providers in China gave informed consent.

Maybe I’m missing the boat or maybe just can’t stretch my brain far enough, but I don’t see how libertarian concepts can be used to justify the sale of either hand grenades, rocket launchers, or livers & kidneys. That seems to be a rationalization to do what you otherwise feel like doing.

There is even more rationalization in play.

How do beatings and torture fit in?

(more…)

Jim Ulvog

The power of rationalization when you have no frame of reference other than your own opinion. The tale of Silk Road, part 4

“fake grenade” by pat00139 is licensed under CC BY 2.0

The frightening power of rationalization is clearly on display in the story of Ross Ulbricht, also known as Dread Pirate Roberts, as he developed the Silk Road website where you could buy anything you wanted. The story is told in American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road, written by Nick Bilton. This is the fourth part of a series. You may enjoy reading parts one, two, and three.

How did Dread Pirate Roberts get to the point where he allowed the sale of every imaginable drug, various explosives, and a range of body parts on the site he created and ran? How did he get to the place of hiring and paying for five assassinations?

The book provides insight to the shifting rationalizations. Journey with me as we explore in-depth how rationalization played out in this situation.

(more…)

Jim Ulvog

How do you make moral decisions if you have no frame of reference other than your own opinion? The tale of Silk Road, part 3.

What Dread Pirate Roberts thought he paid for when he wired out a bunch of bitcoins. Not once, but five separate times. Image courtesy of Adobe Stock.

Let’s see where he ended up with this Be-Your-Own-God routine.

The feds busted one recipient of a pound of cocaine.  He was a moderator on the Silk Road site. The feds kept this guy under wraps.

Dread Pirate Roberts, who also went by DPR, concluded that this person, who worked for Silk Road, had absconded with the dope and dropped out of sight. The feds gained control over the guy’s computer.

(This is part 3 of a discussion of a book on Silk Road, American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road, written by Nick Bilton. Read parts 1 and 2. Since writing the initial draft of this series, I’ve added two more posts and another 700 words.)

An undercover fed pretending to be a big time drug dealer was in contact with DPR.  So during their conversations, DPR happened to complain that someone had ripped him off. This undercover cop offered to send some of his goons over to rough up the guy.  DPR agreed to have his correspondent get some of his guys over there to work over the double-crosser.

So Carl Force of the U.S. Drug Enforcement Agency and Shaun Bridges of the United States Secret Service pretended to torture this guy for DPR’s benefit by actually torturing the guy, taking pictures as they repeatedly dunked his involuntarily cooperating head in a bathtub full of water.

(more…)

Jim Ulvog

How do you make moral decisions if you have no frame of reference other than your own opinion? The tale of Silk Road, part 2.

Above organs were reportedly available for purchase at Silk Road. Image courtesy of Adobe Stock.

While developing Silk Road, Mr. Ulbricht had a girlfriend, whom I won’t name. She knew he was raising and selling dope on the website and broke up when he would not end his involvement with the site.

(This is part 2 of a discussion of a book on Silk Road, American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road, written by Nick Bilton. Part 1 here.)

His girlfriend came to a saving faith in Jesus Christ as her Lord and Savior later in the book, well after they broke up. (Based on a few ways that the description of her conversion and faith are described, I will make a wild guess the author of the book is not a believer).

At one point when they got back together for a while, his girlfriend persuaded him to attend worship at what appears to be a charismatic congregation that operated without a formal pastoral leadership structure.

After the worship she asked him what he thought about the morals that were discussed during the worship service.

(more…)

Jim Ulvog

How do you make moral decisions if you have no frame of reference other than your own opinion? The tale of Silk Road, part 1

On what basis do you decide which is the right path?   Image of “decisions” by Impact Hub is licensed under CC BY-SA 2.0

What is the relative moral ranking of people selling the following illegal products:

  • Marijuana
  • Cocaine
  • Heroin
  • Weapons
  • Explosives
  • Lethal poisons
  • Harvested body parts

Early in the growth of the Silk Road, which was a hidden place on the internet where you could buy anything you wanted, and I mean aaaaanything imaginable, a debate emerged about the outer limit of products that would be allowed on the site.

The website was set up and run by Ross Ulbricht. Ultimately the feds busted him, his senior staff, and another couple hundred people who worked for Silk Road or sold stuff there.

(more…)

Jim Ulvog

In case you hadn’t hear, those telephone calls claiming to be from the IRS demanding you immediately pay back taxes are a scam.

Wouldn't it be nice if the phone id actually was that accurate for every call? Image courtesy of Adobe Stock.
Wouldn’t it be nice if the caller ID was actually that accurate for every call? Image courtesy of Adobe Stock.

The most frequent scam in 2016 was the phone calls saying “This is the IRS and if you don’t pay your past due taxes this instant we will send someone to your house to arrest you right now.”

There are many things wrong with those calls.

As a starter, your first contact with the IRS will never be by phone. You will instead get a letter explaining what the IRS thinks you messed up.

(more…)

Jim Ulvog

Journalist returns call to scammer who claimed to be from the IRS. Entertainment and laughter follows.

Image courtesy of DollarPhotoClub.com
Image courtesy of DollarPhotoClub.com

Most people hang up on robocalls from charities. If there is a real person, I ask them to go into their spiel and then set the phone down, letting the caller waste a minute or two of their time.

William P. Barrett, writing at New To Seattle, actually takes those calls. He then dissects the charity’s financial statements showing the minimal amount of charity taking place in some organizations.

To the repeat offenders he awards the title of “America’s Stupidest Charities.”

You probably know scammers have a new scheme of falsely claiming to be from the IRS. Their spiel is you’re just about to be arrested for failing to pay back taxes, the police are on the way to your home, but you can avoid going to jail today by settling up right now by sending money on a prepaid debit card or wire transfer.

Mr. Barrett called back to the number provided in a robocall. The person answering spoke poor English and sounded like he was calling from a boiler room.

He describes the call in his post, Scammers invoking the IRS inundate Seattle.

How did that conversation go? Quite entertainingly.

(more…)

Jim Ulvog

Price cut on print books

I’ve dropped the prices for the print copies of my books available at Amazon, Barnes & Noble, and iTunes store.

Here is what you can find on-line:

tragedy-cover

 Tragedy of Fraud – Insider Trading Edition

Story of Scott London’s fall from regional audit partner at KPMG to prison inmate because of his insider trading.

(more…)

Jim Ulvog

Rationalization in action is frightening to see

It is scary to see the power of rationalization. We humans can exert great effort to persuade ourself that wrong is right. With enough effort, we can persuasively argue that wrong is a positive good, the noble alternative.

It is unsettling to me when I see a client deeply believe that tax or accounting fraud is perfectly legitimate and I am the one who is in the wrong to suggest otherwise.  Worrisome is a watching a friend who believes that hurtful or destructive or nasty or evil behavior is Godly. Even more upsetting is when I catch my brain in full rationalization mode.

No, I’m not about to give any examples from clients, friends, or my life.

Unfortunately, we have a sad public example of rationalization racing at full power (sad pun intended).

(Cross-post from my other blog, Attestation Update.)

Some background on Lance Armstrong’s massive doping schemes

Many public sources report that Lance Armstrong has been found to use performance enhancing drugs for a very long time. He won seven consecutive Tour de France races.

According to Wikipedia, in 2012 he received a life-time world ban on all competitive events in all sports. His seven wins were revoked. He was found to have engaged in sophisticated doping schemes for many years.

In 2013, he admitted massive doping in an interview with Oprah Winfrey. He admitted using a long and specific list of banned substances and did so in each of the 7 Tour de France races.

Rationalization on display

Having set the background, let’s look at an article in The Guardian:  Lance Armstrong: I would probably cheat again in similar circumstances. Thanks to Professor Mike Shaub (twitter @mikeshaub) for pointing out the article.

(more…)

Jim Ulvog

Is the cost of reducing fraud risk greater than the loss from a fraud incident?

I recently had the opportunity to visit with Sam Antar, convicted felon and former CFO of Crazy Eddie.

During our interview, Mr. Antar suggested a reason why businesses don’t put enough effort into fraud prevention and detection. He said the cost of deterring fraud may be more expensive than the consequences of fraud. Before I refine the concept, look at some costs he mentioned:

  • In the corporate world, particularly companies that have grown for a while, there needs to be a lot of systems put in place to deter and mitigate fraud risk.
  • There needs to be an audit committee and they need to have resources available to them. Translate that to they have authority to hire legal and accounting experts. They need training personally. This is expensive.
  • The audit committee, consisting of skilled and knowledgeable people, must have a direct line of contact to the Board of Directors. That is expensive in terms of time.
  • The Board of Directors has to have a substantial amount of financial skills. That is expensive in terms of time and dollars for training and dollars for their access to expert resources.
  • At some point in the growth curve, there needs to be a robust, skilled internal audit department. That could get quite expensive, if you look at it only in terms of cash outflows.

I would add to that the time involved to implement quality controls, policies, and procedures. Those will take a lot of time for the finance & accounting team. In turn, those procedures will take time for operational staff to follow. All of that translates into more staff.

That can get costly fast.

What is the cost of a fraud incident

(more…)

Jim Ulvog