Read the article, "Federal Grand Jury Indicts Former LegacyTexas Bank Employee for Embezzlement" by clicking the link below.
https://www.justice.gov/usao-ndtx/pr/federal-grand-jury-indicts-former-legacytexas-bank-employee-embezzlement
Download and read the indictment also.The indictment discusses a lapping scheme, lappingis an asset misappropriations fraudschemeand is one of the most common methods of concealing receivables skimming.Lappingis the fraudster's version of "robbing Peter to pay Paul". It is the extraction of money from one account to cover shortages in another account.
After you have read both, answer the following questions:
- Based upon what you have read in your textbook about internal controls, what internal control procedures did Susann Nelson violate?
- What could have her employer, LegacyTexas Bank could have done to prevent the fraud?
INDICTMENT The Grand Jury charges: Introduction 1. Between 1999 and 2015, the defendant, Susana Nelson, was an employee of LegacyTexas Bank in Richardson, Texas, within the Dallas Division of the Northern District of Texas. Starting sometime in 20% and continuing until 2t] 15, Susann Nelson was the central vault manager where she maintained control over the amount of-cash in the LegacyTexas Bank's vault on a daily basis, including ordering cash from the Federal Reserve Bank and other nancial instimtions and documenting the receipt of cash into the bank's books and records. 2. A lapping scheme is a fraudulent accounting practice that hides stolen cash by overlapping successive receivables of cash. A lapping scheme begins when someone steals money that was generated by a transaction, such as a receipt of cash into the bank's vault. Each time money is wrongtlly taken from the bank in furtherance of the scheme, the money is offset using cash from a successive transaction. 3. Starting at least as early as January new, the exact date being mum to the Grand Jury, and continuing until on or about February It], Ztll 5, Susana Nelson IndictmentPage l engaged in a lapping scheme at legaeyTesas Bank. Nelson embezzled cash from cash deposits from the Federal Reserve Bank and made false entries in the hooks and records of the bank in order to conceal the embezzled cash. Count One Bank Theft, Emhezzlement, or Misapplication [Violation of 13 U.S.C. 656] 4. The allegations in' paragraphs 1 through 3 of this Indictment are realleged and incorporated as though {full}.r set forth in this paragraph. 5. Starting at least as earl}.F as Januaryr 201i}, and continuing until on or about February 10, 2015, in the Dallas Division of the Northern District of Texas, the defendant, Susann Nelson, being an ofcer, director, agent, or employee of, or connected in a capacity;r with, LegacyTexas Bank, a nancial institution with its deposits insured by the Federal Deposit Insurance Corporation, with intent to injure and deaud LegacyTesas Bank, vvillrlly misapplied, or embezzled, abstracted, orpurloined a sum of mane}r exceeding $1,000 of the moneys, funds, or credits of LegacyTexas Bank, in that the defendant engaged in a lapping scheme in which successive cash purchases were misapplied to prior cash purchases in order to hide the embezzlement of money. All in violation of 18 U.S.C. 656. Count Two Fraud and False Statements in Bank Entries, Reports, and Transactions [Violation of 13 U.S.C. ill-[)5] 6. The allegations in paragraphs 1 through 5 of this Indictment are realleged and incorporated as though full}.r set forth in this paragraph. 1'. Starting at least as earl}.r as January,r 201i}, and continuing until in or about FebruaryF it}, 2015, in the Dallas Division of the Northern District of Texas, the defendant, Susann Nelson, being an employee of LegacyTexas Bank, a nancial instiuttion whose deposits were then insured by the Federal Deposit Insurance Corporation, with intent to defraud the bank and to deceive an ofcer, auditor, or examiner of the bank, knowinglyF made false entries in the books, reports, or statements of Legachexas Bank, in that the defendant, Susana Nelson, recorded the receipt of cash deposits from the Federal Reserve Bank on specic dates, when in truth and in fact as the defenth well knew, the cash deposits had been received by LegacyTexas Bank on earlier dates and the false enn-ies were made in furtherance of a lapping scheme whereby Nelson embezzled cash from Legachexas Bank. All in violation of 13 U.S.C. 1005. Case 3:1r-cr-00449-K Document 1 Filed OSIBGIH Page 4 of 6 Page": 4 ForfeinireNotice 2 .. . 2461c'13U.S.C. 9 Pursuant to 13 U.S.C. 981(a}(l){C), 13 U.S.C. 932{a)(2)(A), and 23 U.S.C. 2461(c), upon oonviction of the offense alleged in Count One or Count Two of the Indictment, the defendant, Snaann Nelson, shall forfeit to the United States any property, real or personal, which constinites or is derived from proceeds traceable to the respective offense, whether directly or indirectly, including the total proceeds derived item the offense (commonly referred to as a \"money judgment\"). Ease 3:1?-cr-DD449-K Document 1 Filed Uio? Page 5 of e Page": 5 Pursuant to 21 U.S.C. 353(1)), as incorporated by 13 H.512. 982(b}, if any propertyF subject to forfeiture, as a result of any,r act or omission of the defendant, cannot be located upon the exercise of due diligence; has been transferred or sold to; or dEPDGd ffil, a third person; has been placed beyond the jurisdiction of the Court; has been substantially diminished in value; or has been commingled Wi] other property,r which cannot be subdivided without difcult, it is the intent of the United States of America to seek forfeiture of an}r other property of the defendant up to the value of the property subject to forfeiture. A TRUE BILL
