Not all fraudsters are created equal. While some are cunning and clever, many are inept and just plain dumb. What better way to end the book than to celebrate the ones who didn’t get away with it?
Survival of the Most Fraudulent
It’s not uncommon to glamorize fraudsters. They are often clever, charming and cunning. Their schemes are frequently brilliant and breathtakingly bold. Even the words “con artists,” used to describe them, bestow a degree of respect and admiration for their accomplishments, immoral and illegal though they may be.
Not all fraudsters, however, are deserving of our reluctant praise. For every Frank Abagnale, the master of fraud and false identity portrayed in the film Catch Me If You Can by actor Leonardo DiCaprio, there are myriad examples of bungling, clumsy and downright stupid fraudsters. In fact, the inept ones are more common than the inspired schemers. Nonetheless, they do evoke a certain response from fraud investigators — comic relief.
One of the dimmest big-time fraudsters was a woman named Melanie (her name disguised for client confidentiality reasons). She was the bookkeeper for an Ontario-based mid-sized manufacturing company. Soon after she was hired in the late 1990s, her employer experienced a decline in sales. As a result, it laid off as many staff as it could. Melanie was the only person in the accounting department, apart from the chief financial officer, who survived the terminations.
By the early 2000s, the company’s fortunes had reversed. Although sales and profits were stronger than ever, the owner of the privately held business was nervous that another downturn could happen at any time. For that reason, he tried to maintain as small a staff as possible.
Over the years Melanie had proven to be a hardworking, competent employee. She was well liked and trusted. The CFO, who had been with the company for more than 30 years, was nearing retirement and battling serious health issues. His energy for the job was dwindling and he increasingly relied on Melanie to handle certain responsibilities on her own. Whereas previously, he had to sign off on all invoices over a certain amount, he now trusted Melanie to be the sole signatory on all but six-figure ones. That’s when his bookkeeper decided to upgrade her lifestyle.
Melanie was not a happy person. Recently divorced, the 43-year-old had to move in with her widowed mother when she learned her ex-husband had left her financially destitute after he lost their savings in a failed high-risk investment opportunity. Lonely and bitter, she decided that life owed her a payback. Her workload contributed to her misery; it had become overwhelmingly onerous, thanks to the extra burden imposed by the reduced contribution of the often-absent CFO.
She rationalized that she deserved to be paid more — a lot more — but knew a raise of any significance was unlikely. So, she began a scheme that, to her delight, was simple to put in place and worked incredibly well. She created a fictitious supplier and had it invoice her company for large amounts that came in below the threshold requiring the CFO’s approval.
In the following 10 months she stole close to $1 million. Although the money would have easily allowed her to move out of her mother’s house, she chose not to. Her plan was to build up as much in her bank account as possible and then move to Brazil, which has no extradition treaty with Canada and where she had a close friend.
That part of her thinking was the only bright spot in her scheming.
It hadn’t crossed her mind that her ruse might be detected during the company’s annual audit. Nor had she made it difficult for even the most inexperienced accountant to notice something didn’t seem right. She called the supplier she created “Melanie Holdings.” The checks were sent to her mother’s home. Melanie endorsed them at her bank, where she had opened a business account for Melanie Holdings in her own name. To make it even easier for the auditors, she retained the cancelled checks in a file marked “Melanie Holdings” in her office. “I thought it would be funny when they noticed I was gone and found the file,” she later told a forensic accountant, who had been retained to quantify how much she had taken and to look for any other schemes she might have concocted (there were none).
The forensic accountant prepared a report on his findings, which was given to the police. They found the evidence compelling and issued a warrant for her arrest. The police arrived at her home to serve the warrant and found her having dinner with her mother. When she opened the door and saw the uniformed officers Melanie turned to her mother and said, in a quiet voice, “Mom, I’ve been a bad girl. But I only took a little money from my company. I guess we are going to have to skip dessert tonight.”
Instead of moving to Brazil, Melanie went to jail.
Just a Few Little Mistakes
While the bookkeeper’s scam was woefully devoid of any admirable subterfuge, there have been countless scams that make her deceptive skills look ingenious in comparison.
In June 2000, 49-year-old Kevin Jackson of Hyde Park, Utah, was arrested after trying to cash a $100-million Federal Reserve bearer bond issued in 1934. In court papers, Jackson later claimed he was given the bond by an intermediary of an unnamed Philippine general. The notes, Jackson said, had been issued to European nations during the Second World War to boost their economies.
Unfortunately for Jackson, prosecutors pointed out that the Federal Reserve never issued any note in a denomination greater than $1 million.
While Jackson at least aimed high, a British man, 25-year-old Jonathan Hambly, only tried to get a £400 bogus check cashed. In April 2008, Hambly presented the forgery at a local check-cashing outlet. He told the cashier that the check, which had been written by his former landlord, was a security deposit refund.
The cashier asked for all his information, including his address, which he willingly provided before she informed him that she couldn’t cash the check. “Why not?” Hambly asked. “Because Midland Bank doesn’t exist,” she said, and hadn’t since 1999 when it had been taken over by HSBC.
Hambly bolted but was later arrested when police easily tracked him down at his home. In court his lawyer “pleaded for leniency after explaining his client drank six cans of lager before trying to scam the instant cash shop,” the Daily Mail reported. He was fined £60 and ordered to carry out 120 hours of community work.
Equally inept, if not more so, was 44-year-old Clifton Wright. In May 2009, Wright was arrested in front of the FBI building in Monroe, La. He had concocted a somewhat ambitious scheme to defraud a company in Minnesota that sold refurbished cellphones. Wright ordered 50 phones and gave the Monroe FBI office in Louisiana as the shipping address. He sent the company a forged $2,359.45 cashier’s check drawn from a Chase Bank account. His plan was to flag down the company’s delivery van in front of the FBI office and convince the driver, by showing documentation from the supplier, to give him the phones rather than wasting time going through the bureau’s strict security procedures.
The only problem? On the forged check he had misspelled “cashier” as “cahier.”
The company smelled a con and contacted the FBI in Monroe, which waited until it saw a man wave down a delivery van, at which point they arrested Wright. Not only was he charged with the scam, it was discovered he was a fugitive from justice, for a similar scheme, in another state.
While Hambly and Wright enacted fairly common and non-violent schemes, Ronald Evano and his wife, Mary, came up with an inaner, and far more dangerous, ruse — dangerous to their own health, that is.
For several years leading up to their arrest in 2005, the Massachusetts couple dined in restaurants, hotels and grocery stores throughout the northeastern U.S. Their con was to sprinkle shards of glass into their meals. The two would then go to a hospital for treatment and subsequently file a suit against the establishment where they had eaten. They once extorted a $45,000 payment directly from a restaurant.
The painful scam netted them more than $200,000 from insurance companies. The two 49-year-olds also failed to pay more than $100,000 in hospital bills.
In court, Evano asked for leniency, explaining to the judge that he and his wife, who are both members of the minority Roma community, needed the money to pay for dowries and other costs associated with the marriages of their children, as required by their culture.
He was sentenced to five years in prison while his wife received a four-year term. They were also ordered to pay $340,000 in restitution.
No Law School Will Accept Them Now
Insurance scams are often lamebrained, perhaps because the perpetrators assume no one will ever investigate their claims. This was possibly the thinking of two British backpackers, both recent law graduates no less, who decided to have an insurance company help pay for their nine-month globetrotting trip, which concluded in Brazil in July 2009.
On the eve of their return to England, Shanti Andrews and Rebecca Turner, both then 23, told police in Rio de Janeiro that during a long bus journey several days earlier they had been robbed of cash, a camera, an iPod, a phone and suitcases, valuing about £1,000. They reported the crime, they said, because they planned to make an insurance claim upon their return home.
It’s possible they thought the Rio police wouldn’t care about one more tourist robbery in a country where such an occurrence is commonplace. If so, they were terribly wrong.
The police knew travel insurance fraud was prevalent and that most frauds were reported just before the fraudster was set to return home. (According to website allbusiness.com, in 2008 there were 4,300 cases of travel insurance fraud in the UK with claims totaling £5 million. That figure is dwarfed by the £400 million worth of claims that were upheld.)
Suspicious of the women’s demeanor, and their failure to report the theft until several days after its occurrence, the police escorted them back to their hostel where the stolen items were easily found.
Turner and Andrews were arrested and spent six days in a rat-infested jail before being released on bail. A month later they pleaded guilty to insurance fraud and were sentenced to 16 months community service. That conviction was overturned by Brazil’s high court in December 2009 when it ruled the police search had been illegal.
The Law Society Gazette estimates at least a thousand people in the U.S. fake their death every year (see Faked Death Leaves Body of Evidence). In December 2005, one of those Americans was 36-year-old Kimberly Du of Des Moines, Iowa. Was there a life-and-death reason that caused her to create a false obituary that looked as if it had been published in the Des Moines Register? And was there such a monumental reason that inspired her to send a letter to a judge — purportedly signed by her mother — that informed the court her daughter had died in a car crash? Not really. In fact, not at all.
Du just wanted to get out of having to pay a few traffic tickets and decided that faking her death was the best way to accomplish her goal. She didn’t factor in, however, that she might continue to accrue the source of her problem. In January 2006, she was given another traffic ticket, which led to the police discovering her fake death.
In an instant, her legal problems escalated from a simple misdemeanor — failing to pay her traffic fines — to a class D felony for forgery in relation to her scheme that carried a possible sentence of up to five years in prison. When her case was settled in 2006 Du was fined $500 and placed on probation for two years.
How dumb can some fraudsters get? According to Ed Scarborough of the Virginia Lottery department, they don’t get much thicker than the man who claimed to have a winning jackpot ticket in 1998.
He arrived at lottery headquarters with a payout slip — which simply lists the winning numbers and which anyone can get from a lotto retailer — and presented it as a winning ticket, Scarborough said. “This man, however, convinced a couple of his buddies that they were going to hop in a car, drive to Richmond, and pick up a couple of million.”
The final example of not-so-bright fraudsters is more than likely an urban legend, but it is so much fun it’s worth retelling.
In the 1990s, police in a town in Pennsylvania supposedly put a colander on an accused con man’s head and attached it to a photocopy machine. They told him it was a lie detector. A message stating, “he’s lying,” was placed in the copier. Every time the police thought the man wasn’t answering a question truthfully, they pressed the button. Eventually the man confessed his guilt.
If only it were that easy. If only all the scammers we have to deal with were rank amateurs and not pros. Alas, they’re not, which means we will have to keep looking for the right buttons to push when investigating the fraudsters who truly are artists (at least sometimes).
From Uncovering Fraud: True Stories About Fraud, Fraudsters & How They Got Caught by David Malamed, edited by Paul McLaughlin. This column was first published in August 2011.