Fighting Fraud: How to Establish and Manage an Anti-Fraud Program

359 Pages·2007·5.27 MB·English

Fighting Fraud
Other Books Authored or Co-Authored
Information Systems Security Offi cer’s Guide: Establishing and Managing
an Information Protection Program: May 1998, ISBN 0-7506-9896-9; by Dr.
Gerald L. Kovacich; First Edition and July 2003, ISBN 0-7506-7656-6, Second
Edition; published by Butterworth-Heinemann (Czech translation of First Edition
also available).
I-Way Robbery: Crime on the Internet: May 1999, ISBN 0-7506-7029-0; co-
authored by Dr. Gerald L. Kovacich and William C. Boni; published by Butterworth-
Heinemann; Japanese translated version published by T. Aoyagi Offi ce Ltd, Japan:
February 2001, ISBN 4-89346-698-4.
High-Technology Crime Investigator’s Handbook: Working in the Global
Information Environment: First Edition, September 1999, ISBN 0-7506-7086-X;
co-authored by Dr. Gerald L. Kovacich and William C. Boni; July 2003, and Second
Edition; July 2006 ISBN 10: 0-7506-7929-8; ISBN 13: 9-780-7506-7929-9; co-authored
with Dr. Andy Jones and published by Butterworth-Heinemann.
Netspionage: The Global Threat to Information: September 2000,
ISBN 0-7506-7257-9; co-authored by Dr. Gerald L. Kovacich and William C. Boni;
published by Butterworth-Heinemann.
Information Assurance: Surviving in the Information Environment: First Edition,
September 2001, ISBN 1-85233-326-X; co-authored by Dr. Gerald L. Kovacich and
Dr. Andrew J. C. Blyth; published by Springer-Verlag Ltd (London); Second Edition,
ISBN 1-84628-266-7, published in March 2006.
Global Information Warfare: How Businesses, Governments, and Others
Achieve Global Objectives and Attain Competitive Advantages: June 2002,
ISBN 0-84931-114-4; co-authored by Dr. Andy Jones, Dr. Gerald L. Kovacich and
Perry Luzwick; published by Auerbach Publishers/CRC Press.
The Manager’s Handbook for Corporate Security: Establishing and Managing
a Successful Assets Protection Program: April 2003, ISBN 0-7506-7487-3;
co-authored by Dr. Gerald L. Kovacich and Edward P. Halibozek; published by
Butterworth-Heinemann.
Mergers & Acquisitions Security: Corporate Restructuring and Security Man-
agement: April 2005, ISBN 0-7506-7805-4; co-authored by Dr. Gerald L. Kovacich
and Edward P. Halibozek; published by Butterworth-Heinemann.
Security Metrics Management: How to Manage the Costs of an Assets Protection
Program: December 2005, ISBN 0-7506-7899-2; co-authored by Dr. Gerald
L. Kovacich and Edward P. Halibozek; published by Butterworth-Heinemann.
The Security Professional’s Handbook on Terrorism: Establishing and Manag-
ing a Corporate Anti-Terrorism Program: To be released in September 2007, ISBN
0-7506-8257-4; co-authored with Edward P. Halibozek and Dr. Andy Jones; pub-
lished by Butterworth Heinemann.
Fighting Fraud
How to Establish and Manage an
Anti-Fraud Program
Dr. Gerald L. Kovacich
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Library of Congress Cataloging-in-Publication Data
Kovacich, Gerald L.
Fighting fraud : how to establish and manage an anti-fraud program /
Gerald L. Kovacich.
p. cm.
Includes index.
ISBN 978-0-12-370868-7 (alk. paper)
1. Commercial crimes. 2. Commercial crimes — Investigation. 3. Fraud —
Prevention. 4. Fraud investigation. I. Title.
HV6769.K68 2008
658.4′73 — dc22
2007013397
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
ISBN 13: 978-0-12-370868-7
ISBN 10: 0-12-370868-0
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This book is dedicated to all those fraud fi ghters who combat defrauders and the
other miscreants who try to take something of value from others without their
permission and without providing the owners with just compensation.
This book is especially dedicated to those whistleblowers who have the guts to
stand up when a wrong has been committed!
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Quotation*
[T]he modern economic world centers on the controlling corporate
organization. . . . Executives of Enron, WorldCom, Tyco and others
became the focus of widely publicized criticism, even outrage. Joining
the language came the reference to corporate scandals. Avoided only
was mention of the compelling opportunity for enrichment that had
been accorded the managers of the modern corporate enterprise, and
this in a world that approves of self-enrichment as the basic reward for
economic merit . . .
. . . Great fi rms, particularly in energy and mass communications but
not so confi ned, came to dominate the news. In all cases, the situation
was the same, as was the result. Management was in full control. Own-
ership was irrelevant, some auditors were compliant. Stock options
added participant wealth and slightly concealed take. . . .
The least expected contribution to the adverse and even criminal activ-
ity was the corrupt accounting . . . This provided cover for the devious
actions that extended to outright theft. Individuals had long regarded
accounting as both competent and honest. . . .
The corporate scandals and especially the associated publicity have led
to discussion or appropriate regulation and some action — to positive
steps to insure accounting honesty and some proposed remedies, as
required, to counter management and lesser corporate fraud . . .
. . . Managers, not the owners of capital, are the effective power in the
modern enterprise. . . .
. . . So, as a very practical matter, power passed to the mentally quali-
fi ed, actively participating management, and it did so irrevocably. The
belief that ownership has a fi nal authority persisted, as it still
does . . .
. . . The basic fact of the twenty-fi rst century — a corporate system based
on the unrestrained power of self-enrichment.
* From John K. Galbraith’s book, The Economics of Innocent Fraud: Truth for Our
Time. Houghton Miffl in, Boston. 2004.
vii
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Table of Contents
Preface xix
Acknowledgments xxiii
Introduction and Premise xxvii
SECTION I: AN INTRODUCTION TO THE WONDERFUL
WORLD OF FRAUD 1
1 The New-Old Global Business Environment 3
Introduction 3
Globalization of Business — Benefi ts to Nation-States 5
Expansions of the Global Marketplace and their Areas
of Operations 6
Types of Corporations 7
Corporate Owners and Locations 7
Corporate Products 8
The High-Technology Factor 9
Nanotechnology 11
High-Technology Related Frauds and Other Crimes 14
Advent of the Superhighways 14
The Impact of Superhighways on Frauds and Other Crimes 15
A Short History of Crimes and Other Frauds Via the I-Way 17
Superhighway Frauds and Other Crimes to I-Way Robberies 18
I-Way Robbery — Its Prevalence 20
There Is No I-Way Patrol to Stop I-Way Robbers 21
Global Connectivity Via the I-Way = Global Exposure to
Attacks by Fraud-Threat Agents and Other Miscreants 21
Capabilities and Limitations of Law Enforcement 22
Challenges to Security Professionals and Others 23
Case Study 1 24
ix