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Faces of Fraud: Cases and Lessons from a Life Fighting Fraudsters

ISBN: 978-1-118-00274-2
288 pages
January 2013
Faces of Fraud: Cases and Lessons from a Life Fighting Fraudsters (1118002741) cover image
The ultimate tool for understanding, investigating and preventing fraud

Fraud is an evil with a life of its own that leaves a financial, repetitional, and emotional toll on its victims. While monumental scandals, such as Enron, WorldCom, and Madoff's Ponzi scheme make the front pages, fraud is a daily occurrence impacting companies and individuals alike. Faces of Fraud reveals must-know characteristics of fraudsters and the skills needed to outwit them. Recognized Fraud Fighting Expert Martin Biegelman draws from his 40 years of experience fighting fraud to profile not only the key traits fraudsters share, but also the qualities fraud examiners must possess to be successful.

  • Each chapter contains stories from actual cases that the author investigated
  • Profiles the must-know characteristics of fraudsters and the skills you'll need to outwit them
  • Reveals the traits of accomplished fraud examiners
  • Explores the best practices in fraud detection, investigation and prevention to cultivate in order to maximize success
  • Written by fraud fighting expert Martin T. Biegelman

Although fraud will never be completely eradicated, there is much that can be done to reduce the number and size of frauds that take place in any organization. Boiling down the key lessons the author has culled from his long career, Faces of Fraud entertains and informs with stories from real cases the author investigated over his long career, and imparts useful tips you can start using right away in the fraud examination field.

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Preface xi

Acknowledgments xiii

CHAPTER 1

The Fraudster Mindset 1

A Silver-Tongued Devil 2

Sell the Sizzle, Not the Steak 3

Dr. Donald Cressey and the Fraud Triangle 5

Fraud Diamond 9

Fraud Theories 10

Fraudster Mindset 17

CHAPTER 2

A Short History of Fraud in America 23

Growth of Mail Fraud 24

Green Goods Swindles 24

Grifters 26

Baker Heirs’ Swindle 27

Golden Age of Fraud 28

Rise of Boiler Rooms and Bucket Shops 31

Other Frauds over the Years 32

Enactment of the Mail Fraud Statute 37

The Continuous Onslaught of Fraud 39

CHAPTER 3

Use Your Imagination 41

The Mob Stings Fraudsters 41

Making the Typewriter Talk 44

Where the Law of Gravity Doesn’t Apply 45

Welfare for the Deceased 51

The Value of Imagination 52

CHAPTER 4

Make Yourself Lucky 55

Fraudster Stupidity Is Your Friend 56

One Man’s Trash Is an Investigator’s Gold 57

Let Them Talk 58

Arson for Profit Case: Impeaching the Defense Expert 59

One Federal Agent’s Attention to Detail 62

Look and You Shall Find 63

Don’t Take No for an Answer 65

If You Don’t Ask, You Will Never Know 66

CHAPTER 5

Patience Is a Virtue 71

Stopping a Fraud Scheme 71

New York State of Fraud 78

Recommendations to Prevent Property Insurance Fraud 91

CHAPTER 6

Fraud Can Be Murder 95

Good Humor Ice Cream Scandal 97

Bad Ham and Bribes 102

Golden Needles Acupuncture 108

Blast from the Past 110

Security Guard Indignity 114

Next Time Dead 119

CHAPTER 7

Arrogance and Recidivism 121

If You Are Here, You Are Not As Smart As You Think

You Are 122

Arrogance Is Common 125

Arrogance and Recidivism Often Go Hand-in-Hand 126

Arrogance and Rebate Fraud 131

Making It a True Federal Case 133

Fraudsters Say and Do the Darndest Things 136

CHAPTER 8

Informants and Whistleblowers: The Good, the Bad, and the Ugly 141

Managing Confidential Informants 143

Informants Gone Bad 152

Falling in Love with an Informant 155

Nightmare Informants 156

A Rogue FBI Agent Strikes a Deal with Two Devils 157

Avoid a Failed Investigation 159

CHAPTER 9

A Tale of Deceitful Pitches and Vendor Kickbacks 161

History of American Chemical Industries 162

Description of the Fraud Scheme 163

Detection and Investigation 169

The Continuing Investigation 173

Prosecution 174

Special Circumstances 176

Fraud Prevention 177

CHAPTER 10

Cruise to Nowhere 179

Description of the Fraud Scheme 180

Detection 182

Investigation 183

Factoring of Credit Card Charges 186

Investigative Reporting 187

Execution of Search Warrant 187

Circularization 188

Undercover Trip 189

Prosecution 193

Special Circumstances 194

Fraud Prevention 194

Investigative Best Practices 195

CHAPTER 11

Who’s Who of Fraud: A Story of Vanity and Deception 197

The Making of a Fraudster 198

Fraud Scheme 199

Investigation 204

Prosecution 208

Special Circumstances and Additional Fraud 210

Postscript 211

CHAPTER 12

Kids and Coins: Scoundrels without a Conscience 213

Genesis of the Fraud 214

Description of the Fraud Scheme 216

Investigation 219

Prosecution 224

Special Circumstances 226

Fraud Prevention 227

CHAPTER 13

More Tips, Best Practices, and Lessons 231

Become a Subject Matter Expert 231

Documents, Documents, and More Documents 232

Remember the Boy Scout Motto 234

Why I Love Liars 235

Fraudsters Love Expense Report Fraud 236

San Francisco Metergate 239

Yellow Pages Invoice Scam 242

Best Laid Plans of Mice and Men Often Go Awry 244

CHAPTER 14

Power of Prosecution and Prevention 247

Fraud Prevention for Individuals 249

Fraud Prevention for Business Organizations 250

Fraudsters Are the Same Everywhere 253

Fraud Is the Golden Goose for Criminals 254

It’s Deja vu All Over Again 256

Sadly, Fraud Is Here to Stay 260

About the Author 263

Index 265

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Martin T. Biegelman, CFE, CCEP, has been fighting fraud and corruption for 40 years in various roles in law enforcement, consulting, and the corporate sector. He is currently the Executive Vice President of U.S. Operations for IPSA International, a global risk advisory firm. His extensive experience include conducting internal investigations on behalf of corporate management and boards, FCPA and anti-bribery compliance, litigation consulting, due diligence, and corporate compliance design and implementation. He previously served as the Director of Financial Integrity at Microsoft Corporation. This highly acclaimed fraud prevention and anti-corruption compliance program that he founded and led continues to be a model for other global companies. Mr. Biegelman is a sought-after speaker, prolific author, and the recipient of the prestigious Cressey Award bestowed by the Association of Certified Fraud Examiners for lifetime achievements in the detection and deterrence of fraud.

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Praise for Faces of Fraud: Cases and Lessons from a Life Fighting Fraudsters

“Martin has done it again. He has written another book with tons of great tips for anyone seeking to detect, investigate and prevent fraud or corruption. Martin has relied upon his exceptional 40-year career to write this interesting and informative compilation of lessons learned and best practices. The beauty of the book is that it provides one with the opportunity to experience some of what Martin has lived in fighting wrongdoing while working for the government and in the private sector. The take-away is practical guidance for dealing with possible fraud and corruption, no matter what the situation.”

—Karen A. Popp, Sidley Austin’s Global Co-Chair of the White Collar Group, and former New York federal prosecutor, Department of Justice official and Associate White House Counsel to President Clinton

“A compelling look into the minds and methods of fraudsters and those who chase them. Faces of Fraud reaffirms the adage that fraud schemes are limited only by the imagination. It also demonstrates that fraud investigators have kept pace with their quarry, relentlessly pursuing fraudsters who have made their schemes opaque and complex. Mr. Biegelman’s advice on preventing fraud and conducting fraud investigations is worth the price of admission.”

—Jan Lawrence Handzlik, Partner & Chair, Anti-Corruption and FCPA Practice Group, Venable LLP

“Martin Biegelman is the real deal; he’s been there, he’s done that. Based largely on his experiences as a federal agent, Faces of Fraud provides rare insight into the operation of major fraud rings from the perspective of the one who broke them up. It’s a fascinating, invaluable guide for those who either want to investigate fraud or who want to avoid becoming a victim.”

—Doug Behm, Attorney at Law and former federal prosecutor

“There is no one more qualified to write a book on the detection, investigation and the prosecution of fraud and fraudsters than Martin T. Biegelman. In his latest book the Faces of Fraud, Martin shares with the reader his many years of fraud fighting experience and the investigative techniques he used to bring hundreds of fraudsters to justice. His chapter on the use and control of confidential informants is unparalleled anywhere. His latest book is sure to become the definitive work on Fraud Fighting!”

—John E. McDermott, US Postal Inspector (retired), Corporate Compliance Investigator

“Because fraud has so many faces, those who fight it can never stand still. Knowledge is our greatest (and sometimes only) weapon. Regardless of whether you are a beginner or a seasoned anti-fraud professional, you can’t help but benefit from Martin’s candid analysis and discussion of the many cases he has investigated. I thoroughly enjoyed this this peek into his remarkable career and experiences.”

—John D. Gill, J.D., CFE, Vice President – Education, Association of Certified Fraud Examiners

“What a fascinating look into the mind of fraudsters! Martin has worked side by side with fraudsters for 40 years, the right side. His case studies are riveting. Anyone who intends to protect their fortune or help others protect their fortune will find Faces of Fraud worth a fortune.” 
—Roy Snell, CEO, Society of Corporate Compliance and Ethics

“Regardless of your profession, if you are intrigued by fraud, how it reveals itself, how it is detected, investigated and prosecuted, you must read this book. Every cleverly titled chapter pulls the reader into a world of intrigue, mystery, discovery, excitement and sometimes serious danger. The reader feels he is in the midst of the case, at the side of the investigator, boots-on-the-ground, witnessing real-life events unfold, as if for the very first time. The book doesn’t stop there.  It offers even more to its readers. It provides guidance on how best to investigate the many complex varieties of fraud. It describes processes and procedures to follow and provides tips and recommendations from investigative lessons learned. Simply put, Faces of Fraud is a book that has it all.” 

—Rebekah J. Poston, Partner, Squire Sanders LLP

Faces of Fraud contains a line that reads, ‘Remember to always use your imagination in the detection, investigation, and prevention of fraud and other crimes.’ Clearer words were never spoken about fighting fraud. That they come from the pen of Martin Biegelman is no surprise. Few fraud investigators possess the depth and breadth of investigative experience and analytical prowess that he does. It is a gift to the entire fraud-fighting profession that he has seen fit to put his 40 years of practical wisdom between the covers of this new must-read.”
—Peter Goldmann, CFE, President, White-Collar Crime 101/FraudAware

“Mr. Biegelman’s conversational tone belies his deep and insightful understanding of fraud and its prevention, detection, and investigation. With this latest highly readable book, he has surely cemented his place as one of the world’s foremost authorities on the topic of economic crime. Utica College is proud of its relationship with Mr. Biegelman, and our faculty and students are grateful for his ongoing support, expertise, and guidance as chair of the Economic Crime Institute’s Board of Advisors.”

—Todd S. Hutton, President, Utica College, Utica, New York

"Marty's latest book is a comprehensive guide on fraud detection, investigation and prevention with interesting fraud-fighting experiences designed to help readers spot, not only the red flags, but the earlier yellow flags of fraud."

—George A. Stamboulidis, Esq., Managing Partner of the New York office and co-head of the White Collar & Corporate Investigations Team, BakerHostetler LLP

Faces of Fraud is an excellent primer on the history and evolution of fraud. Mr. Biegelman provides detailed and valuable insights from his long and successful career investigating a wide variety of fraud schemes. Mr. Biegelman also discusses numerous investigative techniques that aided him in conducting his many successful investigations. Faces of Fraud includes numerous well told examples of investigations ranging from simple to complex and covering the gamut of fraud schemes including mail, wire and bank fraud, identity theft, coupon and rebate fraud, telemarketing boiler rooms, insurance, healthcare, and accounting fraud to name a few.”

—Peter Sullivan, Director, Global Security, Monsanto Company

“In Faces of Fraud, Martin Biegelman shares the highly innovative and successful investigative techniques that he used during an incredible forty year career investigating financial crimes. Anyone interested in the investigation and prevention of fraud will find Faces of Fraud an invaluable resource.”

—Patricia A. Pileggi, Partner, Schiff Hardin LLP

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