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Recessions of the past, much like the one today, foster an environment highly conducive to fraud
schemes, and statistics from several surveys show that all types of
white-collar crimes are up in the US. A recent study conducted by the
Institute of Internal Auditors found that of respondents from organizations where
fraud was
detected since 2008,
43% reported that fraud increased from 1% to 10%, 28% indicated an increase from 11% to 20%, and 14% said fraud went up by more than 20%. Theft of company property
and resources such as proprietary information was the fastest-growing fraud
reported
by respondents, followed by embezzlement, including expense account
fraud and third-party or vendor fraud. Although
individuals are the ones committing the fraud, it is the
company that suffers the backlash, resulting in more
than just monetary loss.
Fraud hurts company reputation,
market share and share price, and
it diverts attention away from the core business. This
month's case from SI's files highlights an extreme occurrence of fraud...fortunately, SI
reported it before our client extended financing.
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A company in a briefcase...
As previewed in our last SI Insider, this month's case file tells the story of an "entrepreneur" who
left a trail of unpaid debt, fines and criminal charges that spanned
across Europe and the US. Despite his shady past and no experience in the oil industry,
this individual approached our client for funding of a new oil trading venture in the US.
In our background investigation, the SI research analyst found several recent articles reporting that analysts and business sources in Norway
were concerned about our subject's VAS Petroleum (VASP) Company, the entity for which VAS Global Limited would serve as a holding company. One of the articles described "the VAS Petroleum affair" as "a
sleazy story of multinational corruption almost too strange to believe" and
called VASP "a company in a briefcase." Everything about the proposed terms of contract with a Russian energy group defied Norway's longstanding commercial practices in the oil
industry. VAS Petroleum had no track record in the oil industry and no one in the business community had heard of the company. By any definition, VAS Petroleum is a shell - a
U.S. Delaware-registered LLC with no stand-alone office, no Web site with contact
information or even a company description. Internet reports indicated that VAS Petroleum is owned by
another company, VAS Holdings, which also has no track record and no Web site: "A shell owning a shell."
And
a top banker in Norway said of our subject and his
partners: "You need a credible cast and this bunch is just not very credible." Media sources also
revealed that our subject had been linked to the arms trade, though officially he claimed to have made his millions
importing whiskey. He purportedly worked as a "head" at Metric Resources in Spain in the late 1990s, which,
according
to the
Spanish
press,
is
owned by a Russian company with ties to organized crime. But the begrimed trail does not end
there. Record searches in Norway, the United Kingdom and in several
jurisdictions in the US disclosed numerous unpaid judgments, fines for environmental pollution
and criminal convictions for driving under the influence and possession
of a controlled substance.
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Can a background
investigations company determine through public records an applicant's or employee's legal status or if he/she is using a
fake ID?Most background investigations companies can
run address
traces
to check what names and addresses are associated with the claimed Social
Security number (based on credit headers and other third-party identification information for that SSN or
address). These searches can indicate if the number is valid and
its state of issuance, but they do not verify that the number was issued by the Social Security
Administration (SSA) to the individual listed in the traces. An employer can contact SSA's Social Security Number Verification Service (SSNVS) to check its record with the information that the SSA has on file for the purpose of preparing a W-2 form, which means the subject must be a
current or
former employee. A current employee is defined as a person who has received and accepted a job
offer. A third-party can be retained to
perform the SSNVS checks; however, that third party must be contracted to perform wage reporting
functions only. The SSNVS cannot be used for non-wage reporting purposes, such as
identity, credit checks, mortgage applications, etc. |
July case study preview:
Next month, we will bring
you a story about
a CEO and his companies which, among many frauds and other
misdeeds, defaulted on payments of millions of dollars and are the
defendants in pending government actions to recover pension
liabilities of $100,000,000.
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 More from SI
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