Tuesday, October 27, 2015

Signatures & Forgery

By Greg Wright
Certified Fraud Examiner
Certified Financial Planner™

Most criminals convicted of financial fraud are also convicted of forgery.  Sometimes a fraudster’s only conviction is for “forgery.”  When I see a document forgery conviction by itself without another charge, it tends to raise a number of questions. 

Financial crimes are often complex to audit and prove.  Many detectives tend to avoid them.  Prosecutors may secure a forgery conviction to avoid the cost and effort required to understand, and prove a complex case.  You may recall that the famed “Al Capone” was not convicted for bootlegging or racketeering.  Instead, he was convicted of tax evasion.   

By placing our signature on a document, we are implying our agreement with circumstances and information provided by that document.  A signature may be nothing more than an extension of your cursive handwriting, which may have changed over time to such an extent that today it has few, if any, recognizable letters.

Years ago, after joined a financial services organization, I was turned over to an “old timer” for training.  After passing the regulator’s exams, this elderly gentleman was to “show me the ropes” – training that was not part of the examinations I had just completed. 

He explained that there were many papers requiring customer signatures, and it was easy to overlook a form.  When you get back to the office, he explained, and turn in the customer check and paperwork to the backroom officer – a very stern older female would review it for completeness.  If you forgot to have him sign or initial a form in the right place, even if it seemed insignificant, you would be sent back to the customer to have it signed and dated.  Embarrassing for a newbie. 

He said not to worry and that it was easy to forge most signatures.  He proceeded to show me how to trace a signature by placing a document with an original signature on a plate glass window and the document to be forged on top.  The original was placed upside down, and the signature lines of the two documents were aligned.  He suggested the use of a pen with the same color ink.  He had a coffee cup filled with different color: both felt-tipped and ball-point pens for that purpose. 

The type of forging suggested by this old timer is categorized by document examiners as “transmitted light tracing.”

Traced forgeries are generally created by one of three methods: “transmitted light,” “carbon intermediate,” or “pressure indented image.”  Traced signatures are the most frequent type of signature forgery. “Tracing” often employes a broad-tipped instrument such as a felt-tip or even a fountain pen.  This wider ink line serves to hide inconsistencies better than a ballpoint pen.

Here are a few areas document examiners look for:

·        Since no two signatures from the same person are ever totally duplicated, total agreement between two or more questioned signatures is adequate proof of tracing.  Magnification and the use of a black light can help identify signature forgeries.
·        Pen lifts and hesitation marks happen when the pen stops at an unusual point in the writing.  This may take on the appearance of a small gap in the written line where it should not  be expected.
·        Because the creation of forged signatures are simply drawings, tremor lines may be evident when the pen is moving oh so slowly.  This can cause slight changes in direction take place in what should be a fluid-looking line.  The resultant line reflects the “shaking” pen.
·        Normally, when you sign your name, the speed and pressure of signature writing will vary.  However, because the fraudster’s pen is moving slowly rather than the dynamic movement of most genuine writings, the ink line remains constant in thickness.
·        Blunt starts and stops occur when the forger places the pen point in contact with the paper, and then starts writing.  When he is finished with the, he stops the pen and lifts the pen from the surface.  This may cause an blunt start or ending where the pen was placed.  At times this contact is held so long that if the pen ink will wet the paper and migrate slightly
·        Infrequently, most of us have made an error in our signature and we will let it stand, while others will simply “fix” the signature by correcting it.  These “fixes” are usually done without an attempt made on the part of the writer to mask or otherwise hide the correction.  These signature corrections are quite different than the patching that is frequently found in non-genuine signatures.  

Recently, a very successful local stockbroker was accused and fired because of forgery accuations.  He was not prosecuted.  Some industry insiders believe that he was fired because of other non specified reasons.  The employer could make the forgery stick and it caused him to lose his license.  However, he had been in the process of moving his block of business to a competing firm. 

If you suspect that a signature has been forged, seek out a qualified document examiner.  However, a black light (longwave ultraviolet light) can help identify differences in ink and some of the irregularities described above.  

Thursday, October 8, 2015

Fire Chief Guilty of Fraud

By Greg Wright
Certified Fraud Examiner
Certified Financial Planner™

Mark Watson Mug Shot
Almost from the start
Only eight months and one day after his appointment as Speedway Fire Chief, Mark Watson started depositing checks payable to the Speedway Fire Department into his personal bank account.  The account, “Mark Watson dba Speedway F.D.”, was established on Feb. 7, 2011, without the knowledge of the Town of Speedway.

Checks made payable to the Town were mailed in envelopes addressed to the town of Speedway Fire Department. According to town officials, Watson opened all mail addressed to the fire department. 

Over the next four years, until its discovery, Watson deposited $42,982.39 in checks intended for the Town of Speedway including payments for fire protection by the Indianapolis Motor Speedway. 

Funds from this account were not used to benefit the Town or its fire department.  Instead, Watson used the funds for personal purposes including the purchase of a Toyota pick-up truck, credit card payments, and cash withdrawals. 

Just a year after establishing the bank account
In 2012, Watson started using the Town of Speedway credit cards and to issue fraudulent invoices for items of personal use.  These unauthorized purchases included a firearm and holster, a television, two sets of tires, a snow blower, clothing, and lawn and garden items.  The value of these items were relatively minor compared to the diversion of checks payable to the town; but, eventually led to his downfall.  Sometimes it is the little things that lead to a fraudster’s downfall.

Fictitious vendor
Just last year, on August 13, 2014, Watson established a bogus company, “FireProf,” and opened a U.S. post office box in the name of “Mark Watson, FireProf.”    A few weeks later, he presented a purchase order to be paid to FireProf in the amount of $4,491.67 for SCBA repairs.  The voucher was submitted for payment, approved by the Speedway Town Council and a check was mailed to Watson’s post office box.  After Watson’s schemes had unraveled, the uncashed check was recovered. 

Cash Skimming
Firefighter testing fees totaling $3,160 were collected in 2013 by three Town Pension Board members and given to Watson for deposit.  Bank records indicated that these funds found their way into Watson’s personal account. 

In 2013 and 2014, firefighter clothing costing $2,872 was purchased with town funds by Watson.   He sold the clothing to firefighters and kept the cash.  Court records indicated that proceeds from the sale were not remitted to the Town of Speedway and ended up in Watson’s personal bank account.

Mark D. Watson 
Fire Chief Watson
Mr. Watson joined the Speedway Fire Department in 1991 and served in several ranking positions including interim fire chief.  On June 6, 2010, he was appointed Fire Chief. 

New Clerk-Treasurer
On Nov. 1st, 2013, Monty W. Combs, a Certified Fraud Examiner, became the Speedway Clerk-Treasurer.  He was new to Speedway government.  Combs told me that, while he had not socially interacted with Watson, he found him to be a likable individual.    However, it was the little inconsistencies that appeared to have unmasked Watson’s frauds.

Combs was reviewing a Sam’s Club invoice submitted by Watson for truck tires for Fire vehicle 204.  Combs was new to the job; but, he did not believe that there was a fire dept vehicle with the identification of “204.”  The vehicle described on the Sam’s Club invoice was a Silver 2011 GMC Yukon.  Mark Watson’s personal vehicle was a Silver 2011 GMC Yukon.  This caused Combs to dig further.

Monty Combs, CFE
Combs then questioned Watson about some purchase orders. One of those was a $4,491.67 P. O. dated Sept. 22, 2014, issued to FireProf for scuba gear repair. Combs noted that its address was a Post Office box – a red flag to many auditors. 

Combs told me that he spoke with a vendor requesting several years of purchase records attributed to a credit card issued to Watson.  He found several questionable purchases and called in the Indiana State Board of Accounts (SBOA) requesting an audit review.  Mark D. Watson resigned as Chief on Oct. 27, 2014. 

The SBOA audit began on Nov. 3, 2014.  A “Special Investigation Report of the Fire Department of the Town of Speedway” was filed on July 10, 2015.  The audit period was January 1, 2011, to December 31, 2014. 

Following a further investigation by the Indiana State Police, a Probable Cause Affidavit was filed in Marion County on Sept. 3, 2015, charging Mark Watson with Theft and Official Misconduct. 

Watson pleaded guilty and, as part of the plea agreement, he paid full restitution to the Town of Speedway and repaid the cost of the audit conducted by the State Board of Accounts.  Watson received a sentence of two years on probation. 

Almost one-third of the Speedway firefighters attended former Chief Watson’s sentencing hearing.  He had not been a popular fire chief, and they complained about his management style.  According to Speedway employees, they felt betrayed by Watson.  A copy of his mug shot was posted in the Speedway fire house located at 1410 N Lynhurst Dr. with the word “Thief” written below.

Watson apologized; but, did not offer an explanation for the theft.  Monty Combs, Speedway Clerk-Treasurer, who liked Watson personally, posted a sign in his office – “Trust is not an internal control.”  Combs is up for re-election this November.  The Certified Fraud Examiner is running unopposed. 

According to my research, half of the embezzlers that have gone undetected for long terms are governmental employees.  Too often small governmental units rely on trust and have inadequate internal controls including separation of duties.  Absent the talent and fraud examination training of someone like Mr. Combs, this fraud might have continued undiscovered for many years.