Chuck Gallagher - Business Ethics and Fraud Prevention Expert

The Ethics of Change - A Letter To President Elect Barack Obama

chuck@chuckgallagher.com — Thu, 06 Nov 2008 14:01:00 GMT

Today - the day after the election - we, as Americans, have seen yet another historic moment in a life that has seen many. Those of us with some age have seen the end of wars and the beginning of others; we have seen space travel and a man on the moon; we have seen technology change everything about our daily lives; and we have seen a man rise up and break barriers that once were thought to be iron clad. Mr. President Elect - your election may be historic for African-Americans, but, more important, it is historic for all Americans as we see through you a change of attitude and focus - we see hope in your eyes.

With the above said, Mr. President Elect, I must caution, in the midst of celebration, that we not lose sight of what got you there and what your task at hand is. President Elect Obama - we must restore a sense of ethics to this great nation and make choices - tough choices at times - based on sound ethical and moral principles that have guided us for so long.

I, of all people, have no right to lecture you on ethics or change - after all, you are our new President elect. But, like you, I know a thing or two about adversity and obstacles. As a former convicted felon (not something I am proud of) now professional speaker, I have risen above my poor choices from the past and become a voice for CHOICE and ETHICS. Regardless of the choices made, we can moving forward make better choices that will bring about positive results.

You said, "it's been a long time coming, but tonight, because of what we did on this date in this election at this defining moment change has come to America." Your statement is true...we have turned for too long away from choices that empower people to achieve greatness and focused on what's wrong and how we exercise our muscle to the detriment of others.

You, Mr. President Elect, are aware of the challenges ahead. Your words reveal it, "For even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime -- two wars, a planet in peril, the worst financial crisis in a century." You know, as do we all, that the only way to succeed is to do so by making choices founded on the ethical foundation of our forefathers as they founded this great Nation.

I speak on ethics today, founded on the lessons I learned from not living an ethical life. Perhaps, as a Nation, we have not made the best choices - or even ethical choices. The challenges ahead are significant and you, yes you - Mr. President Elect - will be tempted beyond belief, after all you are the most powerful man in the world. Don't lose your sense of ethics, sir. Remember your promise! "But I will always be honest with you about the challenges we face. I will listen to you, especially when we disagree. And, above all, I will ask you to join in the work of remaking this nation, the only way it's been done in America for 221 years -- block by block, brick by brick, calloused hand by calloused hand."

Regardless of who authored these next comments you delivered - and delivered well - they form a promise of an ethical foundation for your Presidency.

"So let us summon a new spirit of patriotism, of responsibility, where each of us resolves to pitch in and work harder and look after not only ourselves but each other.

Let us remember that, if this financial crisis taught us anything, it's that we cannot have a thriving Wall Street while Main Street suffers.

In this country, we rise or fall as one nation, as one people. Let's resist the temptation to fall back on the same partisanship and pettiness and immaturity that has poisoned our politics for so long."

Mr. President Elect - we need that foundation that you have stated so well - a foundation of hope and promise and belief that as American's we can be proud of who we are and what we stand for - that we can be proud to call ourselves American's here and around the world. You have given us that hope and for that we say - Thank you!

Regardless of political belief, I think we are witnessing the dawn of an new age for America. We will succeed or fail based on the choices we make moving forward. If our choices are based on fear, ego and power, we may find that we will be no better than we have been and perhaps even worse. Those choices and not based on sound ethical principles. On the other hand, if we make choices that foster freedom, opportunity and a spirit of selfless cooperation we might see the dawn of the "Age of Aquarius."

Let me end with your words...

"America, we have come so far. We have seen so much. But there is so much more to do. So tonight, let us ask ourselves -- if our children should live to see the next century; if my daughters should be so lucky to live as long as Ann Nixon Cooper, what change will they see? What progress will we have made?

This is our chance to answer that call. This is our moment."

Chuck Gallagher is a business ethics and choices speaker. He shares with audiences world wide the life lessons learned and helps empower people to move past their self-imposed limitations and take charge of their life. His new book: Take Charge - 23 Steps That Turn Negative Consequences into Positive Results is scheduled to be released in the Spring of 2009.

Banking Embezzlement! What Motivated Rebecca Dawn Long to Commit Fraud?

chuck@chuckgallagher.com — Thu, 06 Nov 2008 13:59:00 GMT

As I prepare to write this entry, I must start out by saying that I know exactly what Rebecca Dawn Long is going through here in 2008. I went through the same thing in 1990 and I know how painful the process can be. I, too, (not proud of this) embezzled money and had to expose myself - to my family, friends and the community I lived in - as a liar and a thief. The experience was humbling, terribly painful, and a turning point in my life. So, for those who read - my motivation is not in any way to tear down Ms. Long, but rather to explore - for the benefit of those who read - what motivates someone to commit a fraud and subsequently destroy a life (at least for a time).

First, let's define fraud: "A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment."

According to the US Attorney's office, Ms. Long, between December 2004 and September 2008, devised and executed a scheme to obtain money from The Peoples Bank of Ewing by establishing a line of credit under a fictitious name. After establishing the false credit line, Long allegedly withdrew $487,685.23.

The indictment also charges that Long created and faxed a fraudulent loan document to an office of The Peoples Bank for the purposes of disguising the fact that she had embezzled over $487,000 from that financial institution.

Assuming the indictment is true - that meets the definition of fraud. The broader question is motivation!

THE FRAUD TRIANGLE: Fraud arises when three elements exist simultaneously: (1) need or unsharable financial pressures; (2) Opportunity or perceived opportunity; and (3) Rationalization or the ability to convince yourself that what is wrong is right.

NEED: Need generally comes from an (a) excessive lifestyle; (b) gambling or drugs (in the case of men -perhaps women); (c) debt, poor credit, financial losses; or (d) pressure to succeed from family - job - peers or company. In my case, the need arose from (a) and (c) - too great a lifestyle and too much debt. For those who may know - in Rebecca's case which was the motivating factor?

OPPORTUNITY: Here's a fact - "Potential fraudsters who think they will get caught rarely commit crimes. Therefore, for those of us who have been catagorized as "fraudsters" - the opportunity most likely was poor or insufficient internal controls. Now I doubt that the bank will admit to their role in the fraud scheme, but insufficient internal controls creates "opportunity." More important was what loophole did Rebecca choose to effect the crime she is charged with?

RATIONALIZATION: In order to break past the ethical boundaries of right and wrong, most fraudsters justify their questionable conduct as something other than fraud. Here are some examples of what might be used as rationalization: (1) I was only borrowing the money, I intended to pay it back; (2) I work hard and they don't pay me enough here, so this is just what I deserve; (3) It's no big deal, everybody does it; and (4) I have no choice, it either I do this or I lose my house, etc.

QUESTION: While the above data is general, the question is what motivated Ms. Long to take the actions she took. She is innocent until proven guilty, however, in my experience, the US Attorney's office does not indict someone unless they feel they will secure a conviction. What was Ms. Long's need? What loophole in bank procedures did she take advantage of in order to access that sum of money? What was Ms. Long's rationalization?

COMMENTS ARE WELCOME...might I suggest however, that we focus on the issue and allow Ms. Long and her family the opportunity to heal. No personal attacks will be approved.

Use Ethical Sense - Save Your Non-Profit or Association's Assets from Theft or Neglect

chuck@chuckgallagher.com — Thu, 06 Nov 2008 13:58:00 GMT

As a business ethics speaker, I am witnessing what appears to be an increase in the number of frauds - mostly financial - that seems to be creeping into most organizations - whether for profit or not for profit. This is not unexpected as hard economic times create desperate actions. One thing for sure, whether you are a non-profit organization, church or association, you're assets are just a vulnerable as any other organizations. The only difference I see is that in touch times it is often more difficult to grow your assets since you rely on contributions (in large part).

I read an article written for the Chicago Tribune that was outstanding. The author was Pamela Dittmer McKuen and she should be commended for a job well done. A link to the full article is here. For purposes of this writing I am quoting several parts of her work:

Be professional. Board meetings are not social events. Attorney Lara Anderson stated, "You are the board member of a corporation, and there are formalities you have to go through and laws you have to follow."

Board members have a legal responsibility, called fiduciary duty, to act in good faith, make informed decisions and avoid conflicts of interest, she said.

Make a money plan. Attorney Gabriella Comstock advises associations to adopt a formal financial policy that tells how money will be handled and invested. You might include such requirements as a yearly audit, two signatures on every check, and that reserve money over a certain amount will be put into a certificate of deposit.

Such a policy "leaves a paper trail that shows you were trying to act responsibly," she said. "It gives insight as to your thought process and shows you didn't act on a whim."

Be involved. Every board member needs to know how the money flows, not just to avoid embezzlement but to ensure sound financial decisions, said Comstock.

Audit the books. Many experts advise yearly financial audits, and some declarations require them. It's also good to conduct an audit after developer turnover or changing management companies.

Get bids. The law doesn't say you have to bid your contracts for goods and services, but you'll make better decisions if you do. Study the bids—the comparisons will be enlightening, said Anderson.

"If one bid is way up and another is way down, find out why," she said. "Maybe one is a licensed contractor and the other is not. Maybe one has been in business for 30 years and another is just starting out and running a business out of his garage."

Know your manager. By law, managers cannot have prior convictions for forgery, embezzlement or similar offenses. They can't co-mingle your money with that of other associations they manage. But it's up to you to check. If you're hiring a manager, interview several, follow up with their references, and ask what financial controls they have in place, said Anderson.

Spread the responsibility. Accounting tasks should be shared between management and the board, said Majewski.

"Make sure whoever is issuing checks and reconciling bank statements are different people," he said. "Whoever is receiving cash and posting receivables should be two different people."

Learn to recognize red flags. Majewski offered several: serially numbered documents that are missing, lots of cash transactions, photocopies rather than originals, second-party endorsed checks, duplicate payments to vendors, vaguely worded invoices and lavish personal spending by someone responsible for your money.

"Ask questions," he said. "Don't stop until you get an answer that satisfies you."

The advice offered here is priceless. The potential for loss can be staggering and devastating for a small organization. As an example an acquaintance of my disclosed to me that someone he knew had taken most all the funds from a youth soccer league and spent it on lifestyle maintenance. As he asked the question I knew that he wanted to know more than just to satisfy his curiousity. Turns out the theif was his son-in-law. Scared, he didn't know what to do.

No doubt the scenario I just described is going on in hundreds, if not thousands, of cases around the country. I state the above to serve as a warning...take precautions and know that lack of trust is the first step to eliminating opportunity and opportunity is one of the foundations for fraud.

You can stop fraud by removing the fuel that feeds it.

By the way, if your organizations assets have been misappropriated, feel free to comment on how the misappropriation took place. Your comment may save others. You can help.

Ethics? Not a Chance! Rosa Abreu Sentenced to 70 Months In Prison for 9/11 Opportunity Thefts

chuck@chuckgallagher.com — Thu, 06 Nov 2008 13:56:00 GMT

On September 11, 2001 our nation faced a terrible tragedy. We were attacked from outside our borders. Unfortunately anytime there is a disaster, some will find the opportunity too great and step outside the bounds of reason and commit fraud. Such is the case for a former employee of the New York City Medical Examiner's office who was recently sentenced to 70 months for theft. Not only was a serious crime committed, but there was an intentional disregard for any semblance of ethical behavior.

According to the US Attorney's news release:

The Office of the Chief Medical Examiner (OCME) developed an acute need for computer services following the September 11th attacks, when it was assigned the task of identifying victims through the forensic analysis of body parts and other evidence collected at Ground Zero. Many of the OCME’s September 11th-related expenses were reimbursed by FEMA, which provided more than $46 million to OCME in 2002 and 2003.

ABREU was the OCME’s Director of Records and worked as a primary assistant to NATARANJA R. VENKATARAM, the OCME’s Director of Management Information Systems (“MIS”) and ABREU’s co-defendant.

Between 1999 and 2005, VENKATARAM steered more than $13 million in OCME contracts and purchase orders to three companies run by co-conspirator MUHAMMAD NASEH by advising NASEH how much to bid on OCME contracts and arranging for NASEH's three companies to submit purportedly independent “competing” bids. In the vast majority of cases, NASEH's companies were paid in full under the OCME contracts but did less work than reported, or no work. Instead, NASEH's companies would transfer funds to other companies, as directed by VENKATARAM, in exchange for a fee. In other cases, NASEH wrote checks according to VENKATARAM's directions, or provided VENKATARAM with signed but otherwise blank checks from the NASEH companies for VENKATARAM to use as he saw fit. ABREU helped VENKATARAM launder the proceeds of this scheme through shell companies that ABREU established and maintained. At VENKATARAM’s direction, millions of dollars in funds paid by OCME to NASEH's companies were used for VENKATARAM’s and ABREU's personal benefit.

It is reported that ABREU was VENKATARAM's girlfriend.

The question may be asked, what happened? Fraud requires three components. For lack of a better way to put it, fraud is a bit like baking - a cake for example. A cake requires the right ingredients. If any one is missing, then you can't accomplish the bakers task. If you leave out eggs, for example, the cake will be undesirable. Well, in fraud, the three critical components are: (1) need (or perceived need); (2) opportunity and (3) rationalization.

Now, I can't begin to speak to the issues of need or rationalization, but the obvious is that due to the events of 9/11 "opportunity" came knocking at their door. A substantial inflow of cash - $46 million to be exact - is enough to tempt anyone. Mind you just because there is a large sum of money, previously unavailable, does not mean that everyone will respond to the potential temptation. But, I will say, after studying people and white collar crime, it is likely that any thing out of the ordinary - especially in mass quantity, will bring out the devil in many.

My guess...and let me be clear, it is only a guess...is that those involved felt that they were under pressure, under paid and could not resist the temptation for taking what they rationalized should be theirs. Now...IF YOU KNOW ANY REPORTED ON HERE...your comments are welcome - as I may be wrong.

VENKATARAM pleaded guilty on October 30, 2007 to one count of conspiracy, one count of embezzlement and misapplication of funds from OCME, and fourteen counts of money laundering. He was sentenced on July 11, 2008 to 15 years in prison and ordered to pay restitution and forfeiture in the amount of $2,970,072.

One thing is a fact, EVERY CHOICE HAS A CONSEQUENCE! That I know as I have been where these men are going and know that my poor choices got me a prison sentence as well.

I was once told, "You made a serious mistake, but YOU are not a mistake!" I took those words to heart and after paying my debt to society, I turned my life around such that today I speak nationwide about Choices and Consequences. Perhaps these men can learn and use their talents for productive use once free.

Lying = Prison! Detroit Mayor Kwame Kilpatrick Sentenced to Prison

chuck@chuckgallagher.com — Thu, 06 Nov 2008 13:53:00 GMT

Dethroned - that's what I'd call it when you go from the top of the city's food chain to serving time in prison. Judgemental? I think not. I've been there and I know. Every choice has a consequence and lying is a choice that brings nothing but pain. I served time in federal prison for theft and lying. Martha Stewart served time in federal prison for lying. Now it seems that Kwame Kilpatrick will, too, serve time for his role in covering up an affair.

Calling him "arrogant and defiant," a Wayne County Circuit Judge on Tuesday sentenced former Detroit Mayor Kwame Kilpatrick to four months in jail with no early release under the terms of a plea deal. This reported by CNN.

From my former blog - Detroit Mayor Kwame Kilpatrick and his chief of staff, Christine Beatty five years ago were having an affair. The lies and deception that followed cost the City of Detroit more than $9 million dollars, and cost former police officers their career.

Now the two are accused of lying under oath - Perjury, Obstruction of Justice and Misconduct in Office. If you recall, perjury is what Martha Stewart was convicted of and served time in prison for. Now these two are facing the same issue.

According to CNN -

Kilpatrick pleaded guilty last month to two felony obstruction of justice charges stemming from his efforts to cover up an extramarital affair. He also pleaded no contest to charges of assaulting a police officer attempting to serve a subpoena on a Kilpatrick friend in that case.

Kilpatrick resigned from office last month after pleading guilty to charges resulting from a sex scandal.

He was accused of blocking a criminal investigation into his office and firing a police deputy to cover up an extramarital affair and other possible illicit activities.

How did this all come about? It appears that the allegations of the affair were made public in a whistle blower trial for two former officers of the city. While “perjury” is generally used in a criminal case, this may be the first time that the Wayne County prosecutor’s office has used perjury from statements made in a civil case.

“In January, the Free Press reported that in an analysis of nearly 14,000 text messages on Beatty’s city-issued pager it found some from 2002 and 2003 that indicated she and the mayor were having an affair.”

Prompted by the judge to recount his wrongdoing last month, Kilpatrick admitted, "I lied under oath in the case of Gary Brown and Harold Nelthrope versus the city of Detroit. ... I did so with the intent to mislead the court and the jury and to impede and obstruct the fair administration of justice."

Kilpatrick had faced eight felony counts. As part of a plea agreement, six counts related to misconduct in office were dropped, and a perjury count was changed to a second obstruction of justice charge.

But, every choice has a consequence. As a business ethics speaker (www.chuckgallagher.com), I share that sentiment with audiences nation wide. You can run but you cannot hide - from the truth. It is said that you reap what you sow. Most of the people who find themselves facing consequences they did not anticipate - assume that if they are not caught or can cover up the truth - what is hidden will stay that way forever. That is further from the truth. Funny, but “truth” has a way of sneaking to the surface.

In this case the truth will either set you free or be the catalyst for a prison sentence - Kilpatrick has found the later to be the case.

YOUR COMMENTS ARE WELCOME!

Duke University Business Ethics Quiz - Not Half Bad...says Business Ethics Speaker Chuck Gallagher

chuck@chuckgallagher.com — Thu, 06 Nov 2008 13:51:00 GMT

Not a week goes by without someone raising the question, at one of my seminars or presentations on business ethics, about a useful survey or tool to gauge ethical choices. Nearly every time that question is raised, someone responds with the comment: "There's not such thing as business ethics."

Seems to me that is a easy cop out for ignoring ethical behavior. The fact is, businesses are made up of people, without them there would be no organization. People make ethical choices and if your company is founded with folks who have a desire to make good decisions based on a moral sense of duty and obligation, well...you have an ethical organization.

In any event, I found a useful tool that might be of help to those who are regular readers of my blog. A survey was designed by the Kenan Institute for Ethics at Duke University. I found the survey simple and useful. The name of the survey: MEASURE UP!

Here's what's said in part on their web site:

This assessment tool has been developed and refined over a five year period by Duke researchers. In advisory partnerships, a longer version of this questionnaire is typically given to all the members of an organization or department. Based on the results and additional focus groups and interviews, the Kenan Institute for Ethics then provides recommendations to the organization’s leadership about ways to strengthen their ethical culture.

This 23-question version has been adapted for individual use. Based upon your responses, the assessment will provide a snapshot of what your organization does well and identify some roadblocks that may be hindering performance.

In agreeing to take this assessment, you will also be contributing to ongoing research about organizational ethics and culture at the Institute. This study has been reviewed and approved by Duke University’s Institutional Review Board. Your responses are completely anonymous.

Now the ethical thing to do was ask permission to feature this survey or assessment on this site. I did so via an e-mail request. The response from Duke University:

We'd be delighted for you to mention Measure Up as well as provide a link on your blog. The tool is for public use, and we feel the more people who are aware of it (and, then, hopefully a bit more cognizant of ethics), the better.

As a business ethics speaker, one thing I agree with is the importance of spreading the word about the benefit of ethical choices. Every choice has a consequence! As most readers know...I have lived both the negative consequences of unethical choices and the positive results of ethical choices. The positive results are much better.

Here's the link to the survey: Duke Ethics Survey

Your comments are welcome!

Texas Ranks High in Governmental Ethics Says the Better Government Association

chuck@chuckgallagher.com — Thu, 06 Nov 2008 13:50:00 GMT

As an ethics speaker, I have the opportunity to travel the country and meet citizens of all the states in our great nation. Amazing what you can find when you just take the time to ask questions. People are in many cases better connected than our leaders might think.

When it comes to Texas, as a recent resident of that great state, I can say that, overall, there is a feeling of positive prosperity. Texans expect government to be responsive to them and, for the most part, it seems that it is working.

The report just issued came from the Better Government Assoication. Founded in 1923, the Better Government Association is an independent, non-partisan government watchdog. Their mission is to combat waste, fraud, and corruption in government by conducting investigative research and litigation to expose problems; researching policy solutions promoting transparency and accountability in government; and using internship programs to train the next generation of investigators and public interest lawyers.

Texas ranked 7th among all fifty states overall. By issue area Texas ranked 17th in open records laws; 4th in whistleblower laws; 36th in campaign finance laws; 22nd in open meetings laws; and 3rd in conflict of interest laws. Despite its number 7 overall ranking, Texas achieved a modest 60% overall score.

“Texas should be congratulated that it beat out forty-three other states” said Stewart, “however, there is clearly a lot of room for improvement. If you look at the percentage score, Texas received 60%, the equivalent of a D letter grade, hardly a cause for celebration.”

The 2nd edition of the BGA-Alper Integrity Index relies on data compiled through 2007. Most of the data was collected by the BGA and the BGA created the scoring system for four of the five laws. The BGA relied on the work of the Center for Public Integrity in regard to conflict of interest laws.

Generally the BGA reviewed the relevant laws in all fifty states and created a scoring system for each law that ran on a 0 to 2 scale with half point increments or a 0 to 4 scale on whole point increments. The better the law the higher the score. For the BGA better was usually defined as lower limits, more transparency and higher penalties. The BGA scored areas of each type of law that were common across all fifty states.

The BGA-Alper Integrity Index is the only tool that attempts to measure the performance of all fifty states across a number of good government laws. As with any analytical tool, it can’t measure every variable that impact on government integrity. However, laws are generally the reference point against which ethical behavior is measured. By rating the quality of the laws we reviewed it at least gives an indication of how important ethics are to each state.

“We hope that legislators and leaders in Texas will use the Integrity Index as a tool to spur reform and upgrade their laws in regard to transparency, accountability and limits. Better yet, we hope Texas comes up with a tough new standard that then becomes the measure against which other states will be judged” said Stewart.

7th out of 50 isn't bad, but a "D" rating gives pause to reflect. Obviously, there is substantial room for improvement in the realm of governmental ethics.

A full copy of the BGA-Alper Integrity Index is available for free on the BGA’s website at http://www.bettergov.org/.

Twenty Million Dollar Mortgage Fraud Scheme - Osmond Decoteau Indicted Faces Prison - Business Ethics Speaker Chuck Gallagher Comments...

chuck@chuckgallagher.com — Mon, 27 Oct 2008 18:50:00 GMT

Well over a year ago, I along with others were writing profusely about mortgage fraud and the severe lack of business ethics that seemed rampant in the industry. It almost seemed like "money for nothing" and the house was free. Now, as we approach the time for our general election, things could not be worse. There is no doubt that this will be a disaster for the GOP when the election results come in.

October 23, 2008, an indictment was handed down in Brooklyn federal court charging OSMOND DECOTEAU with wire fraud for masterminding a scheme to defraud mortgage lenders and banks of more than $20 million in connection with the sale of several properties located in Brooklyn and Florida.

According to the indictment: DECOTEAU recruited straw purchasers for properties located in Brooklyn and Florida, and ensured that their mortgage applications would be approved by lenders by fraudulently misrepresenting the purchasers’ financial condition. Subsequently, at the closings on these properties, DECOTEAU presented phony payoff letters which indicated that three companies he controlled were the loan servicers for the properties. The closing attorneys then issued payoff checks to the DECOTEAU-controlled entities, instead of the actual loan servicers for the holders of the pre-existing mortgages. To conceal the fraud, DECOTEAU caused monthly payments to be made on the underlying mortgages so that those mortgages would not be declared delinquent. As a result of the defendant’s scheme, between April 2005 and January 2007, multiple fraudulent closings occurred resulting in a fraud exceeding $20 million, and each of the properties is now encumbered by two first-lien mortgages.

Mortgage Fraud has been rampant. It will take years for the majority of the crimes to be uncovered. No doubt Decoteau, if found guilty, is just one of thousands who will prosecuted for taking advantage of a system without substantial controls.

“In May of this year we announced the formation of a task force comprised of federal, state, and local law-enforcement agents and investigators to address the burgeoning problem of mortgage fraud,” stated United States Attorney Campbell. “This prosecution is one example of the results of that cooperative initiative, which includes the investigation and prosecution of mortgage fraud that has harmed investors, lenders, and homeowners across the country.” FBI Assistant Director-in-Charge Mershon stated, “Combating mortgage fraud is a priority because mortgage lending and the housing market have a significant overall effect on the nation’s economy. The FBI is committed to investigating and prosecuting criminals who exploit vulnerabilities and devise new methods or schemes to defraud.”

As a business ethics and white collar crime speaker, I understand first hand the effects of the choices we make. I served time in federal prison for poor choices I made 25 years ago and the consequences still follow to this day. If it takes three components to create a fraud: (1) need; (2) opportunity and (3) rationalization...then Decoteau had plenty of opportunity considering the lax state of oversight when it came to mortgages in the past five to eight years.

If you know Decoteau...perhaps you'll comment on his motivation.

Your comments are welcome...

Business Ethics Gone Bad - CANNON FAMILY MEDICINE, INC. Pleads Guilty to Health Care Fraud

chuck@chuckgallagher.com — Mon, 27 Oct 2008 18:49:00 GMT

A Kannapolis physician assistant Faces Up to Ten Years in federal prison - what for? Is the need to achieve wealth or increase material possessions so great that it is worth one's freedom? That is the very real question that I had to face when some 13 years ago I took my first steps into federal prison. Now another will take those steps soon.

CHRISTOPHER J. CAGGIANO, president of CANNON FAMILY MEDICINE, INC.- Kannapolis, North Carolina - plead guilty to four counts of health care fraud.

In July 2006, the N.C. Medical Board suspended Caggiano’s license to work as a physician assistant for two years. But the suspension was to be stayed on Jan. 1, 2007, and Caggiano was to remain on probation for the duration of the suspension. Caggiano was accused of ordering unnecessary tests for some patients and billing patients’ insurance companies for tests not performed. At the time, Caggiano said the allegations were untrue and blamed any misunderstandings on disgruntled former employees. The complaint investigated by the medical board also alleged that the physician assistant violated professional standards by allowing patients to refer to him as “Dr. Caggiano.”

The charges against CANNON FAMILY MEDICINE, INC. allege that the practice submitted false claims to private health insurance companies as well as false claims to Medicare, Medicaid, and federal employee health programs.

Each health care fraud count carries a maximum possible penalty of ten (10) years imprisonment, a fine of up to $250,000, and up to three years supervised release. The medical practice and CAGGIANO, a physician assistant, will be sentenced on February 11, 2009.

QUESTION: What motivated Caggiano's behavior? Do you suppose that Caggiano, who will be sentenced to federal prison, will learn and use his prison experience to help others? As a business ethics and white collar crime speaker, I know that prison does not have to be a dead end. Every choice has a consequence this is just another example.

Your comments are welcome!

Stephen Lee Turpin Guilty of Ponzi Scheme. No Business Ethics Here!

chuck@chuckgallagher.com — Mon, 27 Oct 2008 18:48:00 GMT

Every choice has a consequence. As a business ethics and white collar crime speaker, I address groups every day who elect to be reminded about this fact. In this case, Stephen Lee Turpin, of Pearland, Texas has been sentenced to the statutory maximum penalty for his involvement in multiple “Ponzi” schemes which resulted in over $2 million in losses to several individuals.

Turpin, 53, was sentenced to 60 months in federal prison, the statutory maximum penalty, for conspiring to commit wire fraud and mail fraud. Turpin was convicted in May 2007 after pleading guilty to the charge.

In the scam resulting in the highest loss to an individual investor, Turpin, 53, convinced a Pearland woman to open a bank account in Zurich, Switzerland, and to then transfer $1 million from that account to a bank account for the supposed purpose of participating in a “high-yield European bond trading opportunity.” There was no such investment opportunity and Turpin netted $800,000 of the $1 million, which he used to purchase two houses and to support an extravagant lifestyle.

In addition to the $1 million loss in the “European bond trading” scam, between March 2003 and March 2005, Turpin convinced several other individuals to invest sums totaling over $1 million in various other fictitious enterprises, including entities allegedly engaged in entertainment promotion, the sale of novelty items at music venues, the construction of donut shops and the sale of flashlights in China. Turpin was able to continue obtaining investors in these wide-ranging fictitious enterprises by obtaining funds from new investors and providing a portion of those funds to prior investors with the representation that they were profits from their investment. Turpin was not in fact engaged in any legitimate business opportunities and was simply scamming those he approached with these “investment” opportunities. Turpin executed his “Ponzi” scheme between [dates] and targeted investors in the Houston area.

The question for this blog is what motivated the behavior? While I am not proud of it, I, too, was guilty of a ponzi scheme. For a fraud to exist there must be three components: (1) need; (2) opportunity and (3) rationalization. In my case, "need' existed due to too much debt. I was over extended and underfunded. Perhaps, in retrospect, the need started from something much deeper. My guess that this is likewise true in Turpin's case.

In addition to the prison term, United States District Judge Vanessa Gilmore ordered Turpin to pay over $2.1 million in restitution to the victims of his fraudulent schemes. Lastly, Judge Gilmore ordered Turpin to forfeit several assets purchased with fraudulently obtained proceeds, including two houses and a 2003 BMW Z-4 Roadster. The United States Marshals Office is in the process of liquidating those assets for purposes of making those funds available to the victims.

Turpin, who has been in custody since April 2007, will remain in custody to serve his sentence.

For those who were duped by Turpin, perhaps you'd be kind enough to share how he convinced you to participate in his scam. Likewise, if you know Turpin, perhaps you'd share something about his background.