Fuel Card Fraud Analysis

A real example of how an employee allegedly stole from the Colorado Department of Transportation.

Presenters

• • • • • Reza Akhavan—CDOT Regional Transportation Director for Region 6 (Denver) Sabrina Hicks—CDOT Employee Relations/Legal Agent Tim Martinez—Colorado Bureau of Investigations Agent Ralph Gagliardi—Colorado Bureau of Investigations Joe Morales—Denver Chief Deputy District Attorney

Background-Fuel Cards

• • • • • Fuel Cards are assigned to specific vehicles.

Each employee has a unique 4-Digit PIN number that they are required to enter at the fuel pump.

Employees were not required to reconcile fuel charges.

• • • Most employees did not keep receipts when making fuel purchases.

Fuel charges were monitored at a high-level, by comparing actual charges to budgeted amount.

CDOT Vehicles include all maintenance vehicles.

State Fleet Vehicles include all motor pool vehicles.

Separate accounts for State Fleet and CDOT vehicles.

Background--Region 6

• • • • Covers the greater Denver metro area.

Maintains 3,850 number of road miles.

Has approximately 247 number of Maintenance Workers.

Spends approximately $1,220,700 on fuel annually.

• • • • • •

How Region 6 Discovered The Fraud

June/July 2009

Region 6 received a new tandem/axel truck.

Maintenance employees contacted supervisor asking where the fuel card for the new vehicle was.

Supervisor knew the fuel card was already put into the vehicle, so Supervisor started checking the activity on the card.

Supervisor noted the card had approximately $8,000 worth of charges.

Supervisor cancelled the card and issued a new card to the vehicle.

• • •

How Region 6 Discovered The Fraud

July/August 2009

Following the incident, Supervisor started reviewing how fuel cards were working.

Supervisor noticed various abnormalities 1.

2.

Incorrect card associated with vehicle One card used to fuel multiple vehicles • 3.

People sharing PIN numbers Supervisors worked with employees to correct behavior.

• • • • • •

How Region 6 Discovered The Fraud

January 2010

State Fleet notified CDOT regarding one specific PIN being used for too many charges on a State Fleet Vehicle (non maintenance vehicle).

CDOT Fuel Card Administrator notified Regions of this issue.

Region 6 Supervisor started reviewing Region 6 Maintenance fuel purchases and noticed several transactions for purchases in excess of 100 gallons.

Region 6 Supervisor noticed a trend—only certain cards were being used for purchases in excess of 100 gallons.

Region 6 contacted CDOT Employee Relations/Legal.

•

CDOT Employee Relations/Legal

When Employee Relations/Legal (ER/L) was contacted by the Region, ER/L staff coordinated with the Region to form an initial plan of action. This included: • Contacting internal CDOT Audit • Contacting the CBI • Coordinating a meeting with Audit and CBI to present information and assign duties specific to ER/L, Audit, the Region, and CBI • Contacting upper CDOT management to advise of issue and need for investigation and continuing this as needed • Contacting CDOT Public Relations to provide a “heads up” regarding potential media concerns • Contacting the Office of the Attorney General regarding potential (and eventual) issue of employee participation in the commission of a crime.

Colorado Bureau of Investigation

CDOT Fuel Theft Investigating Case Agents Agent Tim Martinez, CFE

303-239-4211 [email protected]

Agent-in-Charge Ralph Gagliardi, CFE

303-239-4287 [email protected]

Colorado Bureau of Investigation

 February 10, 2010 - Colorado Bureau of Investigation (CBI) was contacted by the Colorado Department of Transportation (CDOT) regarding a diesel fuel theft.

 CDOT supervisor discovered “Suspicious fuel card purchases”  CDOT had multiple vehicles (fuel cards) being used including dump trucks and other equipment like a hand compactor.  CDOT had information (from gas station video) indicating suspect(s) were utilizing a white truck with an auxiliary fuel tank mounted on its bed – not a CDOT vehicle.

CDOT Provided Information to CBI

  Fuel card and procedural information.

Spreadsheets indicative of what CDOT had learned thus far relative to the fuel theft.  The spreadsheets included:  Dates, times, amounts, locations of purchase, equipment numbers the particular fuel card(s) were assigned to as well as their various CDOT Regions (i.e.

card or equipment assigned to Denver Metro area or other outlying regions.)

 Approximately $40,000 a month being lost in fraudulent fuel purchases – from approximately January 2009.

CDOT Provided Information to CBI

 CDOT spreadsheets used to indentify suspects (very helpful).  They allowed investigators to know:  When / where  Patterns of suspect(s)  Amounts purchased  Collect surveillance video from other fuel purchases

Partnerships Developed

 Partnerships needed to be made in order to be successful in apprehending those responsible. 

CDOT

Auditors, state fleet, administration 

Wright Express

Fuel credit card issuer – Had real time data  District Attorney’s Office - Denver DA’s Office Find the right judicial district that could prosecute and assist with the investigation

March 1, 2010 – Pretext traffic stop of suspect vehicle

Utilizing patterns of the suspect(s) from spreadsheets, CBI surveilled one such “Frequent stop” and identified a white flatbed truck with external fuel tanks. Denver PD assisted with a PRETEXT Traffic Stop.

Pretext Traffic Stop Identified:

J. Asuncion Aguirre-Barron Fernando Ibarra-Gonzalez,

Residence of J. Asuncion Aguirre-Barron & Fernando Ibarra-Gonzalez

Raleigh Street – Westminster CO

Surveillance of Suspects

 CBI surveilled the suspects and developed their routine in an attempt to identify the CDOT link.

 Suspects purchase thousands of gallons of diesel fuel at numerous metro area gas stations. Start fuel purchases at 10am and end at around 10pm - on most week days.

 Suspects(s) off loaded fuel at multiple locations and into multiple semi trucks parked at truck stops.

March 4, 2010 – Suspects purchasing and offloading fuel

CDOT Fuel Card

Example

Surveillance captures credit card used March 8, 2010 – Surveillance captures Blue hand written numbers noted on card Blank / White Credit Card

Typical CDOT card!

Video of Suspect utilizing credit card

Surveillance led to CDOT Employee

Jaime Perez

Brewer Street in Northglenn March 8, 2010 – Surveillance leads to CDOT employee meeting with suspect

Surveillance of CDOT Employee

March 12, 2010 – Suspects meet CDOT employee with credit card in hand. Reverside side of typical CDOT Card

Compilation Video

Arrest & Search Warrants

 March 25, 2010 CBI, Denver District Attorney’s Investigator and ICE Agents execute several arrest & search warrants for suspects, their respective residences and vehicles.  Evidence collected in the search warrants included:  White credit cards (blank)  PIN #’s – related to CDOT fuel cards  Cash  Receipts – related to diesel fuel purchases with Wright Express credit cards  Credit Card Skimmer  Computers

Seized during Search Warrant

Search Warrant

Criminal Charges

Suspects charged with crimes including:  Colorado Organized Crime Control Act (COCCA)  Theft  Conspiracy  Embezzlement of Public Property  Computer Crime  Unauthorized Use of Financial Transaction Device

Video of Interview of CDOT Suspect

Questions ?

Agent Tim Martinez

303-239-4211 [email protected]

Agent-in-Charge Ralph Gagliardi

303-239-4287 [email protected]

Denver District Attorney

Mr. Morales

Total Dollar Loss

• In the end, one CDOT employee and two outside individuals are charged with stealing approximately $451,816 in the course of one year (March 2009-March 2010).

• Luckily, CDOT recovered all but $1,000 from the State’s insurance policy.

Improved Internal Controls

• • • • • Implement improved Wright Express Platform that will offer better reporting capabilities of fuel purchases.

Implement 6-Digit PIN numbers instead of 4-Digit PIN numbers.

Limit the number of employees with a PIN number.

Implement “guest PIN’s” if employee needs to take a car on a limited basis.

Region 6 has piloted a process for reconciling fuel charges. This process will be rolled out to include all CDOT fuel purchases.

Fuel Reconciliation

• • • • • TM I’s keep a fuel log of all fuel purchased during the week. Receipts are stapled to this log.

TM III’s review the log to determine if all receipts are included and if purchases seem reasonable.

On a monthly basis, TM-III’s receive report out of Wright Express with all fuel purchases made by their staff during the month.

TM III’s reconcile report to the fuel logs. Documentation kept for 6 months.

If the reports reconcile, the TM III sends an email to the LTC Ops stating the review has been completed and no issues were noted.

Fuel Reconciliation--Continued

• • If reports do not reconcile, TM III investigates further LTC Ops selects a random sample of transactions and verifies the reconciliation occurred and reviews supporting documentation.

• LTC Ops notifies Maintenance Superintendent that the reconciliation has been completed.

Other Fuel Fraud Schemes



ID Theft & Credit Card Fraud

 Obtain credit card numbers for fuel purchases 

Armenian and Cuban Groups

 Highly sophisticated  Hidden auxiliary fuel tanks in ¾ ton trucks  Awareness for  Law Enforcement and 

Financial Fraud Groups

Vehicles and Equipment Used

Vehicles and Equipment Used

Hidden Fuel Tank 500 gallons

Vehicles and Equipment Used

Hidden switch for fuel tank pump.

Vehicles and Equipment Used

500 Gallon fuel tank hidden under tarp.