Fraud Expert Witness

Fraud is big business. Fraud experts estimate that businesses lose 5% of their annual revenues to fraud. Applying this percent to the real Gross Domestic Product of the United States in 2017 of $17 trillion yields an estimate of annual losses to fraud in the United States of $850 billion, an astonishing number.

Fraud Statistics

Here are the key findings of the 2018 Global Study on Occupational Fraud and Abuse prepared by the Association of Certified Fraud Examiners, the world’s largest anti-fraud organization. The study is based on an analysis of 2,690 cases of occupational fraud that were investigated between January 2016 and October 2017.

 
For the cases included in the study:

• Total losses to fraud – $7 billion.
• Median loss per case – $130,000.
  • Median loss for small businesses (<100 employees) – $200,000.
  • Median loss for large businesses (100+ employees) – $104,000.
  • Percent of cases with losses of more than $1 million – 22%.
  • Median loss per asset misappropriation scheme – $114,000.
    • 90% of cases.
  • Median loss per financial statement fraud scheme – $800,000.
    • 10% of cases.
  • Median loss when owners/executives were involved – $850,000.
    • 19% of cases.
  • Median losses are greater when there is collusion.
    • 1 fraudster – $74,000.
    • 2 fraudsters – $150,000.
    • 3+ fraudsters – $339,000.
  • Median losses are greater when fraudsters have more seniority.
    • < 5 years’ tenure – $100,000.
    • 5+ years’ tenure – $200,000.
• Median duration of a fraud scheme – 16 months.
• The most common method by which fraud was first detected – tips.
  • Tips – 40%.
    • Employees – 53%.
    • Customers – 21%.
    • Anonymous – 14%.
    • All other – 32%.
  • Internal audit – 15%.
  • Management review – 13%.
  • All other – 32%.
• Percent of fraudsters who displayed one or more behavioral red flags of fraud – 85%.
  • Living beyond means – 41%.
  • Financial difficulties – 29%.
  • Unusually close association with vendor/customer – 20%.
  • Control issues, unwilling to share duties – 15%.
• Most victims recover nothing.
  • Recovered nothing – 53%.
  • Partial recovery – 32%.
  • Full recovery – 15%.

Trust an Experienced Certified Fraud Examiner

Thomas Neches earned his designation as a Certified Fraud Examiner (CFE – Association of Certified Fraud Examiners) in 1992. Since then, Mr. Neches has been retained in numerous fraud and fraud-related engagements. Mr. Neches has testified at trial in fraud-related cases more than a dozen time.

Mr. Neches’ largest fraud cases occurred when he retained as an accountant to the receiver appointed by the Securities & Exchange Commission, which had uncovered and shut down a Ponzi scheme using the façade of a bank. Mr. Neches’ assignment was to determine how to return what was left of $70 million stolen from 5,000 investors, mostly elderly, retired couples. Typical of Ponzi schemes, investors were offered substantial returns from fictional investments, in this case phony commodities arbitrage trading and gold mines. In fact, investors were paid “profits” using money collected from new participants, since there were no profits from actual investments. In this case, the duped investors fared far better than most victims of such scams: the receiver returned to victims on average 30 cents for every dollar invested.

Trial Testimony: Fraud

• Innovation Advisory Group, Inc. v. National Pacific Corporation, et al.
• Ik Nam You v. Chong Yol Kim
• Gunther-Wahl Productions, Inc. and Candy Wahl v. Mattel, Inc.
• Mulligan v. Landay, et al.
• Securities and Exchange Commission v. Elmas Trading Corporation
• NEI Direct, Inc. v. First USA Bank, et al.
• Autocourse, Inc. v. Caterham Cars, Ltd., et al.
• AKO Services, Inc.; Yuri Akopyan v. John K. Jones, Inc.; John K. Jones, M.D.
• R.H. III Preferred Tool & Die, Inc. v. Milutin Babic
• Quantum Cooking Concepts, Inc. v. LV Associates, Inc.
• Peter Reilly v. Inquest Technology, et al.
• Overland Corners, LLC v. Lisa A. Chan, et al.
• Victor Perez Leon v. Vicente del Rio