Transcript Guy Ficco Presentation

A view of Fiduciary/Corporate
Crime from an IRS Perspective
Guy Ficco
Supervisory Special Agent
May 22, 2012
Introduction to IRS
Criminal Investigation
CI’s Mission
In support of the overall IRS Mission,
Criminal Investigation serves the
American public by investigating
potential criminal violations of the
Internal Revenue Code and related
financial crimes in a manner that fosters
confidence in the tax system and
compliance with the law.
Fiduciary Fraud Definition
• Illegal practices committed by financial
institutions and professionals that constitute a
breach of trust between the financial agent
and the client. Fiduciary fraud occurs
when a fiduciary acts in his or her own self
interest to the detriment of the client.
Corporate Fraud Definition
Corporate fraud encompasses violations of the
Internal Revenue Code and related statutes,
committed by large, public or private
corporations and their senior executives.
Civil vs Criminal
• What activities elevate activity from civil
to criminal?
Civil vs Criminal
• More than just mistakes or oversights
• Intent to commit a crime/enrich one self
• Commit acts in his or her own self interest to
the detriment of company/entity
What to Look For
• Lying
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To IRS Auditors
To Analysts/Investors
To Counter-Parties
To Others at Company
To Creditors/Rating Agencies
To Lawyers
To SEC
What to Look For
• Concealment
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Key documents
Key terms of deal
Oral side agreements
Backdating to prior
reporting periods
– Destruction of evidence/Obstruction of
justice
What to Look For
• Things that Are Too Good to Be True
– Sudden end-of-quarter large transactions
– Convenient dollar amounts
– Outside normal approval process
– Customer from unusual geographic area
– Sudden corporate reorganizations
– Deals with no apparent business purpose
– End-of-quarter movement of reserves
What to Look For
• What Went Into Executives’
Pockets?
– Bonuses/Stock Options
– Theft and Self-dealing
– The Corporate ATM: Loans for Personal
Items, Loan Forgiveness
– Exorbitant Expenses Paid by Company
– Insider Trading
Fraud Investigations
Conducted By CI
• Individual Tax Evasion
– Self-Dealing
• Skimming
• Diversion
• Loans
• Options
• Embezzlement
• Offshore Schemes
• Special Purpose Entities
Fraud Investigations
Conducted By CI
• Corporate Tax Evasion
– False Invoicing
– Basis Shifting
– Inflated Revenues
• Payroll Tax
– Ghost Employees
– Trust Fund Taxes
Additional Guidance on
Corporate Fraud Investigations
Corporate Fraud, as defined by CI, includes
acts of lying, falsification, deceit, fabrication,
concealment or destruction of records for the
purpose of:
• Falsifying tax returns, financial statements or
reports to regulatory agencies, investors or
markets to manipulate the value of stock or
facilitate financial fraud.
Unauthorized Compensation
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Unapproved payments
Incentives tied to false financial statements
Stock transactions
Loans
Forgiveness of debt
Payment of personal expenses with corporate
funds
The Subjects of Corporate Fraud
Investigations
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The Corporation
Chief Executive / Financial Officers
Corporate Executives
Board Members
Managers
Controllers
Corporate Attorneys
Auditors or Accountants
Types of Corporate Fraud
Investigations
• Financial Statement Fraud
• Obstruction of Justice
Common Examples of Financial
Statement Fraud
• Excessive and abusive use of SPEs
and unconsolidated entities
• Revenue recognition schemes
• Expense fraud schemes
• Reserve schemes
• Related party transactions
Obstruction of Justice
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Shredding documents
Erasing computer files
Creating or altering documents
Witness tampering
Case Examples
Jeffrey Grous -Hartford, CT
• Embezzled more than $5.3 million from his
employer
• Charged with wire fraud, mail fraud, tax
evasion and filing a false tax return
• Submitted false invoices to company for
consulting services
• Submitted false AMEX expenses
Kenneth McKay - Williston, VT
• embezzled over $5 million from his
employer, Willis Management
• Sentenced to 70 months on charges of
tax evasion, money laundering and wire
fraud
George Tannous- Los Angeles
• Former IRS Revenue Agent
• Investment Fraud Scheme- Stole over $8
million from over 200 victims.
• Investments were with start up companies
• Sentenced to 33 months in jail and
restitution to victims
Roy Johnson Jr.- Alabama
• Former Alabama two-year college
system Chancellor
• Plead guilty to bribery, kickback scheme
with contractors who worked for
Alabama Post Secondary Education
System
• Sentenced to 78 months in Jail
Maurice Campbell Jr.- Alabama
• Former state director of a college consortium
of business development centers
• Convicted at trial of conspiracy, fraud and
money laundering- over $7 million in fraud
• Sentenced to 188 months- pay back $5.9
million in restitution
Sources of Investigations
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Whistleblowers
IRS Audits
Audits by other government agencies
US Attorney’s Offices
Media coverage
Ongoing criminal investigations
Program and Emphasis Areas for IRS
Criminal Investigation
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Abusive Return Preparer Enforcement
Abusive Tax Schemes
Bankruptcy Fraud
Corporate Fraud
Employment Tax Enforcement
Financial Institution Fraud
Gaming
Program and Emphasis Areas for IRS
Criminal Investigations
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Healthcare Fraud
Identity Fraud
Insurance Fraud
International Investigations
Money Laundering and Bank Secrecy Act
(BSA) violations
• Mortgage and Real Estate Fraud
• Narcotics related offenses
Program and Emphasis Areas for IRS
Criminal Investigation
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Non-filer Enforcement
Public Corruption Crimes
Questionable Refund Program (QRP)
General Fraud- Catch All
Global Reach
• Expanded Global Footprint
• Voluntary Disclosure - UBS
CI Attaché Offices
London
Ottawa
Mexico City
Panama
City
Frankfurt
Beijing
Bridgetown
Bogotá
Sydney
IRS-CI INTERNATIONAL POSTS OF DUTY
CONCLUSION
Guy Ficco, Supervisory Special Agent
Washington DC Field Office
[email protected]
(703) 647-5502