Ethics Power Point Presentation|Finance – Accounting
PART I: FACTS OF THE CASE
From January 2009 until approximately September 2014, Robert Bandfield, a 72-year old U.S. citizen and resident of Belize, and Gregg R. Mulholland, a 47-year old dual U.S. and Canadian citizen, took part in three interrelated schemes. The first scheme was to persuade U.S. investors to purchase stock in a variety of thinly-traded (cannot be sold or exchanged for cash without a substantial change in price)
U.S. public companies through phony support of the stock, covering up their ownership interests in the companies, and deceitful handling of artificial price movements and trading volume in the stocks of those companies. The second scheme involved evading the payment of capital gains taxes and the IRS’s reporting requirements under the Foreign Account Tax Compliance Act (FATCA). The third scheme was to launder the phony proceeds from the stock controlling schemes to and from the United States utilizing debit cards and attorney escrow accounts. Mulholland controlled a group of individuals (the Mulholland Group) between 2010 and 2014. Through the above-mentioned schemes, Bandfield assisted his unethical clients, which included Mulholland and more than 100 others, to launder more than $250 million in fraudulent income. In order to complete those schemes, shell companies were created in Belize and the West Indies. Bandfields’ clients were able to evade reporting requirements to the IRS, because the income was concealed with those shell companies. The sole purpose was to cover up the ownership interest in the stock of those U.S. public companies.
PART II: APPLYING THE FRAUD TRIANGLE
The Fraud triangle is a framework designed to explain the reasoning behind a worker’s decision to commit workplace fraud. The three stages, categorized by the effect on the individual, can be summarized as pressure, opportunity and rationalization. The concept was introduced in the 1950s by American sociologist, Donald R. Cressey. In the case of Bandfield and Mulholland, the most obvious pressure was making more money, even if the means of making additional money was fraudulent and unethical. There is no evidence to support this assumption, but once the scheme was started and it involved over 100 co-conspirators, it could have been hard to put an end to the scheme if all parties involved did not agree to stop it. Bandfield’s unethical clients were benefitting from the scheme. This assumption could have possibly been a pressure to keep the scheme in motion. As far as opportunity is concerned, both Bandfield and Mulholland, as well as the other unethical clients, seized the opportunity to commit fraud. They all needed each other in order to make the elaborate scheme work. In fact, the scheme lasted over 5 years before it was uncovered. When it comes to rationale, there had to be something that helped them sleep at night. I believe it was that rationale that made the scheme last over 5 years.
PART III: THE MIND OF THE PERPETRATOR
If I could go into the minds of these men, I believe what drove them to commit this crime is greed and money. There could have been some forms of living above their means as well. I also believe they thought they would not get caught. Bandfield and Mulholland had been getting away with the scheme for over five years. They had pulled it off for so long that they got comfortable and greedy and complacent which could have caused them to make mistakes or take some time off which allowed someone else have the opportunity to discover what was going on. I also believe that Bandfield wanted to end the scheme, but it was so many people involved that it probably would have been hard to stop if everyone was not in agreeance to end the scheme. Additionally, I’m assuming that there were signals that were overlooked that could have prevented this entire scheme from occurring. Maybe Bandfield and Mulholland noticed changes within each other, which was not fortunate, as we see how things turned out. Both parties were willing participants in the schemes, but I’m sure some persuading by whichever party played a major role in the outcome. Imagine if either one of the perpetrator was honest and trustworthy. In a perfect world, none of this would have occurred.
PART IV: NEED FOR ADDITIONAL CONTROLS
“According to the ACFE, because fraud inherently involves efforts of concealment, many cases will never be detected.” (Tilly, 2015) However, if there were additional internal control measures that were implemented and enforced, there is a possibility that these schemes would not have happened. One control measure that could have affected was separation of duties. Basically, one employee should not be in a position to commit and then cover up fraudulent activities. The responsibilities should be divided between those who authorize and record the activity and those who have custody of the assets. The second control measure that could be implemented is the reconciliation of bank accounts and management review periodically of account reconciliations and bank statements. Separation of duties should also be implemented with this process because cash bookkeeping, bank reconciliation and check signer functions should be completed by one person. Additionally, bank reconciliations offer insight on the organization’s cash balance and it shows the complete accuracy of the data recorded in the cash ledger. Another thing that could possibly help with identifying fraud is the implementation of a fraud hotline or web-based portal that people can report fraudulent and suspicious behavior. This offers people the speak up when they see something is not going the way that it should go without anyone finding out who gave up the information or who leaked the information. There should also be a thorough verification process of accounts of different partnerships to prevent dealing with shell companies.
PART V: END STATE
As stated previously throughout this paper, this scheme lasted over five years. Both Bandsfield and Mulholland plead guilty to money laundering conspiracy. Bandfield’s plea focused on setting up those fraudulent shell companies and brokerage firms in Belize and the West Indies. He was sentenced to six to twelve years in prison. Mind you, this man is already over 70 years- old. He was also ordered to pay $1 million in restitution Mulholland on the other hand plead guilty to laundering over $250 million through over 40 U.S. publically-traded companies. He was sentenced to twelve years in prison. Unlike Bandfield, Mulholland had a previous incident of fraud which he had just settled a lawsuit for prior to the money laundering schemes with Bandfield. Perhaps the most heart-breaking consequence for Mulholland was that he would be separated from his children because of his actions. His children will suffer on his behalf. I’m sure he did not think about how this would affect his family prior to getting involved with those schemes either. In summary, both fraudsters got what they deserved for their actions. Hopefully their crimes and consequences from their crimes served as an example for others not to complete the same mistakes. Furthermore, this case should serve as an example for organizations to implement stricter internal control measures to ensure that these same types of schemes are prevent from happening within their organizations.
Bibliography Raymond, N. (2017, February 6). Business Insider. Retrieved from Two men get U.S. prison terms for $250 million stock fraud scheme: http://www.businessinsider.com/r-two-men-get-us-prison-terms-for-250-million-stock-fraud-scheme-2017-2?IR=T Tilly, B. (2015, January 30). Baker Tilly. Retrieved from Prevention of fraud through effective internal controls: http://www.bakertilly.com/insights/prevention-of-fraud-through-effective-internal-controls/ Unites States Department of Justice. (2017, February 6). Retrieved from Architect Of Offshore Fraud Haven And Orchestrator Of More Than 40 Pump And Dump Schemes Sentenced To 6 And 12 Years In Prison, Respectively, For Executing A $250 Million Money Laundering Scheme: https://www.justice.gov/usao-edny/pr/architect-offshore-fraud-haven-and-orchestrator-more-40-pump-and-dump-schemes-sentenced
