HISTORY BEHIND THE FRAUD CASE

Father and son were targets of an arsonforprofit investigation. The father was gambling at a casino at the time an incendiary fire destroyed his business. Data analysis of the primary business bank account detected a large deposit, which was significantly larger than any prior deposits associated with the business. Using firstin, firstout (FIFO) analysis, the recent deposit was matched with funds used to pay a casino, other financial institutions, and a construction company. A second round of subpoenas was served to the source of the large deposit and the entities that received the checks associated with the deposit. It revealed, among other things, that the large deposit was partially used for payment of construction charges in arrears. Another round of subpoenas was serviced to all of the financial institutions in the small town to locate and obtain both the father and son's personal checking accounts. Documents received from the subpoenas revealed payments for gambling debts to several casinos, a host of delinquencies on mortgages owed individually by the father, mortgages owed individually by the son, and vendors that supplied the business as well as a contractor building a commercial structure. This resulted in a fourth round of subpoenas to casinos, mortgage companies, and vendors. Of particular note, the subpoena to the contractor discovered that the proceeds of the commercial loan were not used for new construction, as requested in the credit application. In total, the loan proceeds eventually went through a total of five financial institutions and were a challenge to simplify the sources and uses of loan proceeds during expert testimony.

Father and son were convicted of arson and over 30 fraud counts, including loan application fraud, check kiting, and scheme to defraud a bank. The judge sentenced both to 10 years in prison.

BACKGROUND

As discussed in the overview of the serial cases, Greg Larsen owned and operated Larsen Convenience Store (case 1) and Tonya Larsen was the office manager for Anderson Internal Medicine (AIM) (cases 2 to 4). Often, the spouse of a fraudster is oblivious to (and innocent of) the alleged fraud(s) being examined. In other instances, the husband and wife are conspirators. Part of a fraud examination involving husband and wife is, among other things, to determine the facts between husband and wife. From cases 1 to 4 we found that Greg's cash flow problems financially impacted his wife, and vice versa.

Recall that the fraud examination of the income tax returns and personal financial statements in case 1 found that Greg Larsen (DBA Larsen Convenience) had significant cash flow problems: The company's balance in its checking account significantly decreased, the company's credit card balance significantly increased, Greg laid off employees, and all of his vendors made him sign promissory notes and put all of his future shipments during the final two months on cash on delivery (COD) terms. In addition, the income tax returns show that Tonya's salary significantly decreased in 2015 (she had been terminated by her former employer and was unemployed for six months before joining AIM).

In Case 4, you examined documents processed by AIM's bank between September 1, 2015, and February 29, 2016. Through Excel Pivot data analytics, you identified red flags that required additional examination that were posted by the bank in late December 2015. Of particular note, you detected a check dated December 30, 2015, for $36,000.00 that was deposited into the AIM checking account. The $36,000.00 check was made payable to Cash and drawn on Greg Larsen's account at Waleska Bank (Waleska, Georgia). A review of all other deposits showed cash deposits that totaled less than $2,000. Larsen Convenience Store burnt down two days later.1

SUMMARY REQUIREMENTS

After conferring with the attorney for Southern Appalachian Insurance

Company, you prepared and he edited wording for subpoenas to the Bank of Lawrenceville and Waleska Bank to find out more information concerning the $36,000.00 check. Note: these subpoenas are not provided. Raymond T.

Boone, CFE, a special agent with the insurance company's Special

Investigative Unit (SIU), subsequently interviews John Grayson, the Senior Vice President and Branch Manager for Waleska Bank in Ball Ground, Georgia.

1. Review the documents returned with the subpoenas and the interview of John

Grayson in Chapter 7, section 75, Anderson Internal Medicine and Larsen

Convenience (Husband/Wife Loan Fraud and Conspiracy).

2. Write up the fraud examination analysis for an addendum to the original fraud examination reports for both Larsen Convenience Store and Anderson Internal Medicine that discusses the results of your review. Be sure to include condition(material error or fraud discovered), criteria (description in the type of material error or fraud and scope of analysis), cause, and effect.

3. Prepare an audiovisual (e.g., flowchart) that shows the flow of money from inception through final checks.

The results of your assignment will be used as an addendum to the original report, schedule(s), and possibly a courtroom audiovisual.