Forensic and Investigation Accounting 4Th - PDF

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					Forensic Accounting &
Seafood Investigations




  “THE PAPER CHASE”
       Special Agent Sara M. Block, NOAA-OLE, United States
            OBJECTIVES
• Discuss the role of forensic accounting
  within seafood investigations and a
  forensic accountant’s skills

• Discuss the importance of computer
  forensic accounting evidence

• Gain an understanding of how
  accounting and business records
  flow with the movement of illegal
  product, “The Paper Chase”
What is “Forensic Accounting”?

“The use of intelligence-gathering
techniques and accounting/business
skills to develop information and
opinion for use by attorneys involved
in … litigation and give trial
testimony if called upon.”


 (D. Larry Crumbley, Lester E. Heitger, G. Stevenson Smith , Forensic and
 Investigative Accounting, 3rd edition (CCH 2007), p 13-1.)
         Forensic Accountant’s Skills

     Ability to identify fraudulent schemes
     Identification of financial issues
     Knowledge of investigative techniques
     Knowledge of evidence
     Interpretation of financial information
     Presentation of findings
     Investigative mentality to prove intent
     Interviewing skills
(D. Larry Crumbley, Lester E. Heitger, G. Stevenson Smith , Forensic and Investigative
Accounting, 3rd edition (CCH 2007), p 13-2.)
 What is “Computer Forensics”?



“the analysis of electronic data and
  residual data for the purposes of its
  recover, legal preservation,
  authentication, reconstruction, and
  presentation to solve or aid in
  solving technology-based crimes.”
 (D. Larry Crumbley, Lester E. Heitger, G. Stevenson Smith , Forensic and
  Investigative Accounting, 3rd edition (CCH 2007), p 13-2.)
      Where to find electronic evidence-



                     thumb drive                      external drive
                                   work OR personal
cellular telephone
                                      computer




                      networked          pager         digital camera
    PDA               computer
  Business
TRANSACTION
   occurs



  Business
DOCUMENT
  prepared



    Entry
 recorded in
 JOURNAL


    Entry
  posted to
  LEDGER
     SOURCE DOCUMENTS
Printed or written forms that are
generated when a business enters
into a business transaction
•   Sales ticket
•   Seller’s invoice
•   Cash register tape listing sales for the day
•   Bank deposit slip
•   Customer’s checks, received for payment
•   Bill of Lading
•   Government required form for purchases from fishing
    vessel/imports
------------------------------------------------------




               What documents exist to this point?


                       Import Documents


               •Grand Jury Subpoena to broker
               •Search Warrant
                                             •Pick Up and Delivery
                                             Order - Broker

                                             •Trucking
                                             records




                     Freezer Warehouse Records

•Receiving Reports                       •Release Order Requests
     Downstream Purchasers




               Documents

 Lot History               Transfer/Release
                            Order Request


ACCOUNTING          RECORDS
  CONTAINER INSPECTION
                          CONTAINER
                           NUMBER




These numbers are also
  found on the Bills of
 Lading and should be
        verified




                          SEAL NUMBER
Physical Inspection/Sampling
                                       TAKE SAMPLES IF
                                         NECESSARY
   CONTAINERS MAY INCLUDE
DIFFERENT PRODUCT. FIND WHAT
     YOU’RE INTERESTED IN




             SEND SEAFOOD SAMPLES TO
                FORENSIC LAB FOR ID
INTERVIEWS



             SAMPLES




             TEST RESULTS
Putting it all in a
  Spreadsheet
Proving that the Subject had “Knowledge
 and Intent” is the difference between a
        Felony and Misdemeanor
            Finding “Knowledge” evidence
           should always be your goal when
            searching documents, e-mails,
            computer files or when you are
               conducting interviews !


Illegal Product in Codes   Falsely Labeled Fish to   Knowledge e -mails
       = Knowledge            Disguise = Intent        can hurt them
             CASE EXAMPLE


Fulton Market, New York, New York, United States
FULTON FISH MARKET, NEW YORK
                         Fish Tickets


Stapled to Fish Boxes
-Front label indicates
destination.
-Back lists fisherman,
species and quantity
Fish Tickets
                     Fulton Market Queuing Sheet



-Shipping Co. name                                 What it tells us:
and license plate
                                                   Date and time truck
recorded by New
                                                   queued up for market
York Dept. of
                                                   delivery. From order
Business Services
                                                   number can retrieve
                                                   the Shipper’s Manifest
                                                   from NY DBS.
                      Shipper’s Manifest



-Truck driver is                           What it tells us:
required to present
to Department of                           How many boxes went
Business Services                          to the dealers listed
at Fulton Market
               Market Fish Tickets


                                     What it tells us:
Receipt from
dealer to                            Corresponds to
fisherman                            fish box tickets,
addressing                           trucker’s
money owed                           manifest, and
                                     subsequent
                                     checks/payment,
                                     and future sales
                     Sales Tickets, 3-Ply/Carbon Copy


Document sales to                                       What it tells us:
individuals. Three
                                                        Actual weight and
ply so every party
                                                        price. Species may
receives a copy -
                                                        be mislabled.
dealer, salesman,
                                                        Should correspond
consumer
                                                        to weekly
                                                        statements,
                                                        checks/payment
                                                        received,
                                                        accounting records,
                                                        subsequent sales by
                                                        the buyer
                  Sales Receipt


                                  What it tells us:
Documents
actual exchange                   Should correspond
of goods and                      to a check,
payment.                          trucking manifests,
                                  Sales Invoice, and
                                  subsequent sales of
                                  product
                 Sales Invoice



Document lists                   What it tells us:
items sold by
dealer                           True weight,
                                 species, price,
                                 date of delivery
                     Weekly Statement



Document used to                        What it tells us:
bill customers for                      True species, weight,
the week’s                              price of the actual
purchases                               product, and date of
                                        delivery
PRESENTATION FOR PROSECUTOR

•PERTINENT INVESTIGATIVE INFORMATION

•EASY TO UNDERSTAND SUMMARY

•VARIOUS FORMATS
    SPREADSHEET SUMMARY
    BAR CHARTS
    PIE CHARTS
    GRAPHIC FLOW CHART
Spreadsheet Example
Positive Investigative Results
            Where

  Forensic Accounting
         Skills
        Were Utilized
Smuggling of Undersized Lobster Tails
      Lobster
       Meat
Labeled as “Carne Cacho,” or
Lobster Head Meat
Nicaraguan law prohibits the
export of lobster tail meat
beginning in June 2000
Markings on the Master Boxes


                       Codes




The 135 cases of lobster tails are suspiciously marked as 6-9 ounce
“J” or 10 oz “H”
Nicaraguan Law is minimum 5 oz tail / 13.5 cm
Therefore all lobster tails weighing 2 oz, 3 oz, or 4 oz are illegal.
Crab Smuggling Investigation
                  Russian Sentenced to Seven Years in Prison for
                    Smuggling Crabs from Russia into the U.S.




     In July 2000, two Russian fishing vessels conducted an unlawful transshipment of
crabs within the United States’ EEZ off of Alaska, offloaded the crabs in Canada and
then traveled to Seattle, Washington.
    NOAA OLE SA Samuels obtained an administrative search warrant for the vessels
in Seattle, WA and the warrant was executed by NOAA OLE and multiple federal
agencies. The evidence from the search warrant led OLE agents to the discovery of a
multi-million dollar smuggling operation, managed via satellite telephone and
electronic communication by Alexei Kozlov (a Russian citizen who lived in Seattle,
WA), in which over 6,600,000 pounds of crabs, valued over $30,000,000.00, were
illegally harvested in Russia and then smuggled into the United States and Japan.
    NOAA OLE agents worked in partnership with their Russian counterparts on the
joint-investigation and in July 2005, Alexei Kozlov was convicted of multiple
violations in Russia (illegal harvest of crabs, smuggling, bribery, organized crime, tax
evasion and money laundering) and was sentenced to serve seven years in Russian
prison – in addition to the two years he had already served in Russian custody while
awaiting trial.
The McNabb Lobster Investigation
                  B.
Deceptive Codes



         A.
 Example of Investigative Issues/Problems that
   Law Enforcement Encounters in the Illegal
             Trade of Lobster Tails

Falsely Labeled Exporting
and Importing Documents
(includes the use of deceptive
lobster size classification
codes, changing country of
origin “on paper”, and
incorrect species
identification).
Conspirators Often Utilized Codes to Mislabel
Undersized Tails to Thwart Law Enforcement
     Investigation Reveals the Distribution of McNab’s Lobster in U.S.
                                                                                                      CARIBBEAN CLIPPER
                                                                                                      David Henson Mcnab
                                                                                                          DOB 1/17/52


                                                                                      Horizon Seafood                         SEAMERICA
                                                                                    Abner J. Schoenwetter                   Robert Blandford
                                                                                        DOB 2/14/46                           DOB 4/22/45
                                                                                 Honduran Wife (Maria Ebanks)                 589-40-6630



                                                                                                         American Ex-Im
                                                                                                         Diane H. Huang
                                                                                                          DOB 4/11/65
                                                                                                          418-31-1319




    T & W Seafood                 Carlos Seafood                  ABU Fisheries              B & R Freezers             Christion Salvenson               Q & F, Inc.             Texas Pack, Inc.              T & W Seafood
 Diane Huidan Huang               Carlos Berdeal             Francisco "Peck" Bastida         Cold Storage                 Cold Storage                 (Cold Storage)             Port Isabel, TX           Diane Huidan Huang
     DOB 4/11/65                  Lillian Berdeal                 DOB 10/28/48               Seacaucus, NJ                   Mobile, AL               Bayou La Batre, AL                                         DOB 4/11/65
     418-31-1319                     Miami, FL                      Miami, FL                                                                                                                                    418-31-1319



        aka                              22,000 lbs            Flamingo Seafood                 NVN, Inc.                     27,880 lbs, 417 bags       Unknown Disposition of     Unknown Disposition of
                                      Seized by NMFS                                                                         Seamerica pays freight        Remaining Lobster          Remaining Lobster
    SeaDeli, Inc                                                 Jorge J. Pujol                Cold Storage
                                           2/4/99                                                                               c/o Amer Ex-Im             4,438 lbs, 70 bags         4,438 lbs, 70 bags
  Dan Qin, Director                                               DOB 5/22/54                 Seacaucus, NJ
                                                                                                                                    7/23/98                     6/18/98                    6/18/98
                                                               Processes for ABU

                                    20,040 lbs, 304 bags                                                                     Unknown Disposition of        2,126 lbs, 33 bags        15,580 lbs, 312 bags
                                  Seamerica pays freight                                                                       Remaining Lobster        storage for Amer Ex-Im      "customer Seamerica"
American Export-Import                                                   30,000 lbs             11,419 lbs, 168 bags
                                  Signed for by C. Berdeal                                                                     4,438 lbs, 70 bags       Amer Ex-Im paid freight     Seamerica paid freight
                                                                      Seized by NMFS           Seamerica pays freight
  Parent Company                          12/30/98                                                                                  6/18/98                     5/5-6/98                   9/27/97
                                                                           2/4/99                     8/13/98
  NY, CA, NJ based
Raymond & Jane Chao
                                   Unknown Disposition of
                                     Remaining Lobster                                                                                                                                  Unknown Disposition of
                                                                    33,169 lbs, 459 bags       Unknown Disposition of
                                     4,438 lbs, 70 bags                                                                                                                                   Remaining Lobster
                                                                    ABU pays freight to          Remaining Lobster
           30,000 lbs                     6/18/98                                                                                                                                            50, 077 lbs
                                                                     Flamingo Seafood            4,438 lbs, 70 bags
        Seized by NMFS                                                                                                                                                                         9/27/97
                                                                          12/30/98                    6/18/98
             2/4/99

                                                                   Unknown Disposition of       30,392 lbs, 490 bags
           11,350 lbs                                                Remaining Lobster         Seamerica paid freight
      Seamerica pays freight                                         4,438 lbs, 70 bags               9/27/97
       9 vats, marked "A"                                                 6/18/98
             12/9/98


                                                                                                   Unknown Disposition of
         Unknown Disposition of                                                                      Remaining Lobster
           Remaining Lobster                                                                            50, 077 lbs
              27,750 lbs                                                                                  9/27/97
               12/9/98

        4,764 lbs, 71 bags
        4 vats marked "A"
    to Amer Ex-Im c/o Seadeli
             11/16/98

     Unknown Disposition of
       Remaining Lobster
       4,438 lbs, 70 bags
            6/18/98
McNab’s Money Laundering Scheme




                             Source: IRS
                  International Investigation Revealed:

- McNab’s Freighter Made 40 Voyages to Alabama that Contained Illegal Lobster

- McNab and U.S. Conspirators Smuggled 1.6 Million pounds of Illegal Lobster

- The Unprocessed Lobster Sent to U.S. was Never Reported to Honduran Officials

- The Value of the Illegal Lobster Exceeded $ 17.6 Million (U.S. Dollars)

- McNab and the U.S. Importer were Involved In a Money Laundering Scheme

-The Defendants Had Knowledge that the Shipments Contained Undersized
 Lobster Tails and Profited from Their Sale
       Defendant’s Criminal Sentences:
                                     Robert Blandford:

                                      • 97 Months Jail
                                      • $ 15,000 Fine

                                     Abner Schoenwetter:

                                      • 97 Months Jail
                                      • $ 15,000 Fine


David H. McNab:                       Diane Huang:
• 97 Months in U.S. Jail                • 24 Months Jail
• $ 100,000 Fine                        • $10,000 Fine
•$ 1,000,000 Forfeiture Assessment
THANK YOU

				
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