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Oklahoma Embezzlement Case. Kelly Baker Sue Bordeaux Oklahoma State Department of Health. Embezzlement. Presentation Goals. Describe the case Circumstances What to expect Problems Solutions. Not So Happy Days. Let’s Meet Richie. Trusted employee 17 yrs Loved by staff

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oklahoma embezzlement case

Oklahoma Embezzlement Case

Kelly Baker

Sue Bordeaux

Oklahoma State Department of Health

presentation goals

Embezzlement

Presentation Goals
  • Describe the case
    • Circumstances
    • What to expect
  • Problems
  • Solutions
let s meet richie
Let’s Meet Richie
  • Trusted employee 17 yrs
  • Loved by staff
  • Front Desk Supervisor
    • Provide system access
    • Receipt fees
    • Daily deposits
    • $ to Accounting Services
    • Bad checks/refunds
  • Little oversight
hindsight december 2005
Hindsight: December 2005
  • Richie requested mtg with Registrar
  • Admitted to taking work documents home
    • Catching work up
  • Divorce pending
    • Wife took documents
  • Legal Div negotiated return of documents
  • LWOP 1 wk
lingering questions
Lingering Questions
  • Returned documents odd assortment
    • Dates of the documents
    • Types of documents
  • Envelope’s appearance bulged beyond what contents were returned
    • Question: what was missing?
  • Upon return, Richie checked to verify he still had access to safe
  • Brief Audit review
    • No internal controls
    • Would we be able to find anything?
new management
New Management
  • Previous Registrar retires Jan 1, 2006
  • New Registrar begins
february 24 2006
February 24, 2006
  • AG approached Commissioner at Capitol
    • Investigating potential wrong-doing
    • Commissioner remembered previous offense
  • Richie immediately put on Adm Leave
    • Richie was off that day
      • Can’t change records
march 2 2006
March 2, 2006
  • Sue’s Birthday
february 24 20061
February 24, 2006
  • Sue’s Birthday
  • 2:00 AG/FBI arrive
february 24 20062
February 24, 2006
  • Sue’s Birthday
  • 2:00 AG/FBI arrive
initial questions raised
Initial Questions raised
  • More Questions than Answers
    • $25,000
    • Refunds/Voids
    • Summer ’05
    • NO SPECIFIC ALLEGATIONS MADE
immediate actions
Immediate Actions
  • Remove door separating front desk from main office
  • Camera
    • Not working over “Richie’s” desk
    • Agency backup footage
      • Not available due to server crash
    • System no search capability
  • We checked our retirement dates
talking to the staff
Talking to the Staff
  • Staff questions
    • “Richie’s” well-being
  • Explained “Richie” on leave
    • Couldn’t discuss specifics why
    • Couldn’t suggest any wrongdoing
  • Began changing procedures
    • Not how “Richie” did it
    • Can’t wait til “Richie” comes back
staff search for richie
Staff Search for “Richie”
  • Called his home
    • Richie wasn’t returning calls
  • Went to his house
    • Richie wasn’t answering his door
follow up by authorities
Follow-up by Authorities
  • They couldn’t share specific concerns
    • Criminal chgs not used for employment actions
  • >$25,000
  • Several years
  • Funeral Homes
  • Wanted to inventory “Richie’s” desk
    • No subpoena
  • Staff interviews
now what
Now What?
  • Left to follow logic
    • Had to do own investigation
  • Pulled applications May-July ’05
  • Set aside “Richie’s” hard drive for imaging by FBI
  • Pulled copies of receipting system complete with internal flags
  • Copies of deposited checks
  • Electronic door logs
  • Couldn’t inventory desk
    • Secured - pending subpoena
unpleasant discoveries
Unpleasant Discoveries
  • No formal documentation of policies/procedures
  • All informal, word-of-mouth
    • What policies were there - not in practice
  • Staff and Supervisor passwords were shared openly among Front Desk staff
  • Several days no deposits made
unpleasant discoveries1
Unpleasant Discoveries
  • Applications were incompletely documented
    • Date of transaction
    • What fees were due
    • What fees were paid
    • Form of payment
    • Which clerk worked the application
    • Was a cert issued
    • Inappropriate IDs
follow up by authorities1
Follow-up by Authorities
  • Beginning to realize the complicated business that is VR
    • Needed our help to prove the case
  • Share more specific information
    • Specific dates of interest identified
    • Specific receipts issued
april 6
April 6
  • “Richie” Leave with pay 2 1/2 months
    • Exoneration
    • Resignation
    • Termination
  • Money seen hanging out the back of “Richie’s” desk
desk inventory
Desk inventory
  • ~$6,000 Undeposited checks
  • Returned checks
  • Minimal cash
  • Credit reports
  • Gambling paraphernalia
  • Delinquent bills/Cutoff notices
  • PO Box application
april 7
April 7
  • Richie dismissed
new leads from desk
New Leads from Desk
  • Compare check issue dates vs deposit dates
  • 1,600 cases of internal flags indicating system manipulation since 2001
    • Changes of check to cash
  • Comparison of T&E to deposit errors
  • Reconciled specific days (Applications to deposits)
  • Late checks group-deposited - “Court Clerk”
lapping schemes
Lapping Schemes
  • Hold a check back
    • Don’t receipt it
  • Add check back to deposit - later date
    • Remove amount of check in cash
    • Maintain roughly correct overall balance
      • Check/cash will be off
  • “Court Clerk” Receipts
    • Richie deposited checks held too long
deposit lag sample
Deposit Lag - Sample

300+ days: (11) $9,325

100-199 days: (29) $19,845

30-99 days: (76) $45,965

20-29 days: (58) $27,360

15-19 days: (61) $27,405

8-14 days: (434) $195,760

Total $625,660

oct 19 gj indictments issued
Oct 19-GJ Indictments Issued
  • 18 counts
  • ~$133,373
  • 2001 $37,378.00
  • 2002 $ 3,385.00
  • 2003 $ 3,805.00
  • 2004 $39,160.00
  • 2005 $49,645.00
18 counts
18 counts
  • Oct 00 – knowingly, willfully, fraudulently and feloniously misappropriate or prevent, interfere with and prohibit from presentation for deposit
  • Nov 00
  • Dec 00
  • Oct 02
  • Nov 02
  • Dec 02
  • Jan 03
  • Feb 03
  • Mar 03
  • Apr 03
  • May 03
  • June 03
  • July 03

Penality: Not less than one (1) year nor more than Twenty (20) years imprisonment in the State Penitentiary and a fine not to exceed five hundred dollars ($500.00)

oct 19 media inquiries
Oct 19-Media inquiries
  • Open Record requests
    • Dates of employment
    • Job title
    • Salary
    • Letter of Termination
grand jury
Grand Jury
  • Time Constraint
    • Near the end of 18 month term
    • GJ heard previous related testimony from AG in order to issue subpoenas
    • If process not completed, then start over with newly seated Grand Jury
grand jury testimony
Grand Jury Testimony
  • Sept 21, 06 (7 months)
  • Judge issued Gag Order on individual testimonies
    • AG
    • FBI
    • OSDH (VR and Audit)
    • Wife
    • “Richie”
public statements
Public Statements
  • Be prepared (AG, GJ, editorials)
  • Often emphasize negative
    • In general
    • Historical events
  • Time factor
    • Delay from initial event to conclusion
    • Not always reflective of current state
grand jury statement nov 06
Grand Jury Statement - Nov 06

“The fact that a third grand jury has conducted yet another investigation … underscores the fact that it is time for … the Oklahoma State Dept of Health to clean…[it’s] own house rather than rely on law enforcement to reveal criminal conduct being carried out on a routine basis.

grand jury statement
Grand Jury Statement

“In each of the … investigations, the culprits were long time employees … who held positions long enough to realize vulnerability within their systems and the glaring fact that there were few safeguards in place to assure accountability.

court proceedings
Court Proceedings
  • Preliminary Hearing
    • Delayed multiple times
    • Ultimately waived
  • Plea recommendation
    • 5-yr deferred sentence for felony conviction
    • Supervised probation
    • 200 hours of community service
    • Pay full restitution $139,077.75
    • $3,600 Fines and Court costs
  • Sentenced June 5, 2007
    • 16 months from beginning to end
public record
Public Record
  • After 5 yrs, public court records will be wiped
  • Still be on OSBI
    • Could be completely expunged
      • Clean record for 10 yrs
      • Pardon by Governor
  • Criminal history not available to review for licensing, hiring, etc.
problems
Problems
  • Inadequate segregation of duties
    • Single Person
      • Control of cash funds
      • Prepare/change receipts
      • Prepare/change deposit
      • Refunds
      • Prepare/issue system passwords
      • System override codes (flags)
problems1
Problems
  • Lack of Oversight
    • No routine audits
    • No routine comparison of receipts/drawer/apps
  • Confused Priorities
    • Balance Customer Service vs Accountability
      • Don’t be so tight you can’t do business
      • Don’t be so relaxed you’re fiscally irresponsible
problems2
Problems
  • Implementing Segregation of Duties
    • Staffing
      • Had limited number staff trained on front desk
      • Many no longer issue certificates
        • Supervisors: override approval
        • Lead Cashier: reconcile, refund/voids
        • “Richie”
    • Rely on Back office/Amendment staff to cover
      • Put them behind
recommendations
Recommendations
  • Conduct routine audits to validate policies and procedures
    • Appropriate & Adequate vs. In Use
  • Separate functions
    • Receipting
    • Issuance
    • Daily Reconciliation
    • Refunds/Voids
recommendations1
Recommendations
  • Assure audit logs are included in receipting system
    • Who changed whatwhen
    • What was the specific change
  • Get away from Access and into SQL
    • Back-end security
recommendations2
Recommendations
  • Maintain professional distance
  • Urge staff to report concerns
    • Investigate all concerns
    • Formal/informal
  • Document Policies/Procedures
    • Historical record
    • Personal accountability
policies and procedures
Policies and Procedures
  • DETAIL, DETAIL, DETAIL
    • Certificate issuance
    • Receipting system use
    • Receipting process
    • Application reconciliation
    • Discrepancy review
    • Required Reports
policies and procedures1
Policies and Procedures
  • Continued
    • Cash drawers
    • Access to safe
    • Spot audits by supervisor
    • Password abuse
background checks
Background Checks
  • Not a perfect solution
  • “Richie” not have criminal history when he was hired
    • Will not have a public criminal history after 5 yrs
  • Reliable
    • Potential Liability to Company to admit
    • Can’t confirm if not pursued legally
in the long run
In the Long Run
  • Cannot stop everyone all the time
    • No foolproof solution
    • Stop doing business
  • Goal:
    • Catch any problems ASAP
    • Identify who did what when
communicating with peers
Communicating with Peers
  • Active Investigation
    • Couldn’t share internal information due to public record
      • Picked up by Media
      • Used by Defense
slide48

A Long Story Short

If you can’t be a good example- then you’ll just have to be a horrible warning

Catherine Aird

contact information
Contact Information

Sue Bordeaux

SueB@health.ok.gov

(405) 271-8552

Kelly Baker

KellyB@health.ok.gov

(405) 271-6217

Oklahoma State Department of Health

Vital Records Division

1000 NE 10th Street, Room 114

Oklahoma City, OK 73117