In 2009, a Middle Eastern country uncovered preliminary indications of a massive financial fraud involving several key financial markets and major financial institutions around the world, including one of the largest brokerage companies in the Middle East. After evaluating a select circle of established international investigative firms, the government’s justice department asked Hillard Heintze to take the case.
The Hillard Heintze Solution
Over an accelerated 30-day period – a highly abbreviated schedule, especially given the need to conduct forensic accounting and analysis of nearly three terabytes of unstructured data – the Hillard Heintze criminal investigative team uncovered evidence that (1) proved a crime had been committed; (2) showed how the criminal acts had been carried out; and (3) identified the specific criminal activity and responsibilities of each person associated with this case. The unusually complex Ponzi-related scheme involved potential fraud losses of more than US$200 million that, over many years, consisted of complicated undetected methods of misusing and misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets and underreporting liabilities sometimes with the cooperation of regulatory officials. The crimes included money laundering, bank fraud, accounting fraud, embezzlement, rogue trading and the likely abuse of regulatory oversight responsibilities and powers.
Impact on the Client
The information and evidence provided in the Hillard Heintze final case report allowed the government’s prosecutors to begin criminal proceedings against the individuals responsible. At the same time, Hillard Heintze’s findings permitted the government and financial institutions impacted by the losses to (1) mount an aggressive campaign to track and recover the diverted assets, and (2) begin immediately establishing a more robust set of controls and critical process improvements necessary to reduce the likelihood of this scheme recurring in the future.
Unplugged: The Project Manager’s Perspective
“Typically with these types of crimes – particularly highly intricate, very complex schemes such as this one – the persons who concocted them are either highly intelligent process specialists or deeply embedded in the organization they are defrauding. Or both. The good news is that there are very, very few major financial crimes whose internal mechanics – ‘who did what when and how’ – can’t be systematically revealed with the right care, approach, team and skills. And patience. What made this case an exceptional one is that we were able to do this in 30 days (not 300) – in a major capital city in the Middle East, working in a foreign language and examining huge quantities of digital evidence.”
ACTION WEDNESDAY: Key Take-Aways
1. Time Matters. Be Prepared to Make It Count: For any case potentially involving fraud, embezzlement and theft, time can play a crucial role. Assets can disappear as can evidence, making it harder to uncover the facts and recover funds or valuable inventory. Be prepared to move quickly – by engaging the right investigative team, expediting authorizations, setting high but achievable expectations, allocating appropriate funding, and ensuring that in-house roadblocks and resistance are quickly countered and removed.
2. Understand Your Desired Outcomes. And Design an Investigative Strategy that Delivers Them: Know your goals – and adjust your strategy accordingly. Is your primary objective to uncover the truth and prevent the exploitation of larger, more damaging vulnerabilities in your operations? Or is to recover funds and other assets? What about justice – and making sure perpetrators are convicted and sentenced appropriately? What about setting precedents and the message this sends – positively or negatively to others who are in a position to influence your risk, threat and vulnerability environment? Sometimes these priorities conflict. And sometimes they are mutually supporting.
(What’s it like on the front line supporting the firm’s clients? What are the challenges the firm’s experts help senior business executives, general counsel, board members and other decision-makers address? Welcome to ACTION WEDNESDAY. Every Wednesday, the Front Line Blog publishes a new case study.)