BOB LINDQUIST FORENSIC LESSONS LEARNED #2

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Forensic and investigative accountants must study human conduct.  In an honest environment, behavior is for the most part predictable, but in a questionable business environment subject of a live investigation, the forensic accountant must be most focused on the nuances of conduct, whether business or personal that is not in the normal course.  The nuances tend to reflect sensitivity to a subject that must be investigated as a solid lead.

The following extracts come from a case example is presented in more detail at

                             lindquistforensics.com

‘Selected Cases’          ‘1990s’            ‘IBM, Poughkeepsie, New York’

Roger was Too Busy to Chat!
Hi-tech products have a relatively short shelf life and this requires procedures to properly dismantle parts that are used, discontinued or deemed to be surplus.  However, the risk is that the dismantled parts could be diverted for sale on grey markets.

A department in this Hi-tech company had selected various vendors through the bid process to contract the necessary services.  All the agreements required the vendors to share their sale proceeds from recycled parts and to not sell parts scheduled for scrap.  However, field investigators had confirmed the movement of the company’s scrap in the grey market and our mandate was to determine if any person or group of persons within this department was involved. 

There was also one other factor.  General Counsel advised that their Internal Audit group had concluded their review of this department just two weeks earlier with all findings satisfactory…and he wanted them to work with us.  That was fine and to his credit, the Director of Internal Audit was most positive and very helpful and especially anxious to learn, if their findings were incorrect, how they went wrong.

At the start of the investigation, the General Counsel met with department management and staff to introduce us and to advise of our joint investigation with the Director of Internal Audit.  He sought their cooperation and as expected the employees expressed many concerns with such questions as ‘Does management believe someone in this department has engaged in any misconduct or criminal activity?’ and ‘Assuming I cooperate, will I be guaranteed employment?’

 

 

 

It was time to start work and after the introduction it made most sense for the Director and me to meet with the head of the department, Roger. After the usual preliminaries, the interview started, but within a few minutes Roger focused the conversation onto the stress from his sick wife, and then he had to excuse himself to attend a meeting.  Now think about this, if Roger had been honest he would have given us all the time we required.  After all, these allegations were not new; they had been ‘dogging’ his department for some time.  We could have provided Roger with instant relief. 

In the normal course, that is, an honest environment, Roger would have fully engaged us until we had had enough for the day.  But point is, Roger’s conduct was not in the normal course of business.  Our suspicions were only intensified, now we just had to establish the trail of evidence.  That story is for another day.

The Director of Internal Audit also discovered the answer to his question: a lack of professional skepticism, a skill often difficult to practice when working as an employee within any organization.
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