By AMY ZIPKIN
Published: March 21, 2009
AS the financial crisis has continued to unfold, new suspicions of fraud have been emerging — and with them a need to find whether there is evidence of wrongdoing. That’s why the demand for fraud investigators is rising.
Recently, the Federal Bureau of Investigation announced that the number of open mortgage-fraud investigations was more than 1,600 at the end of fiscal 2008, which ended Sept. 30, compared with 881 two years earlier. In addition, 530 corporate-fraud investigations were open, it said.
The bureau is recruiting people to help with these investigations, including those with experience in computer science and accounting. People who speak a foreign language and those who are certified fraud examiners also have an advantage. Certification is a credential offered by the Association of Certified Fraud Examiners that notes proficiency and experience in fraud prevention, detection and deterrence.
Outside the government, fraud investigators work for security consulting firms like Kroll; at accounting firms like Deloitte Touche and Eisner; and at global business consulting and internal audit firms like Protiviti. Some hang out their own shingle. These firms may be retained by lawyers or by companies pursuing an internal investigation.
The number of certified examiners is up 10 percent compared with last year, according to the association, a trade group based in Austin, Tex. Median compensation for full-time certified fraud examiners in 2008 was just over $90,000 a year, the association says.
Corporate fraud investigators say the work requires curiosity and tenacity. And they warn that it can be time-consuming and even tedious. Because they are retained on the recommendation of corporate or outside counsel, they are bound by lawyer-client privilege and do not have a say in whether to prosecute a crime. Still, they say, their efforts can be rewarding.
A hero of the breed recently emerged in the form of Harry Markopolos, who repeatedly warned the Securities and Exchange Commission that Bernard L. Madoff was running a giant Ponzi scheme at the expense of investors. Mr. Markopolos, who was working for an investment company when he started looking into Mr. Madoff’s activities, left in 2004 to start his own investigation firm.
Although the S.E.C. did not act on Mr. Markopolos’s warnings, he has helped ease the way for investigators in his wake who may suspect various “mini-Madoff” scandals and other types of fraud.
While many investigators have backgrounds in forensic accounting, internal audit and law enforcement, experts say the field also draws finance executives, paralegals, librarians and former journalists. “What you need is an uncanny ability to get people to talk,” said Jules Kroll, the recently retired founder of the firm that bears his name.
Two years ago, after Annie Cheney, a freelance writer, completed a book called “Body Brokers: Inside America’s Underground Trade in Human Remains,” she considered what to do next. She found writing a book to be a solitary experience. “It was very lonely,” she said. “I needed a job.”
Because she loves reporting and figuring out puzzles, Ms. Cheney sent a résumé to Kroll, the risk management and fraud investigation company. Hired as an analyst, she was recently promoted to director.
Philip S. Deming, who runs Philip S. Deming & Associates of King of Prussia, Pa., started his career with the Treasury Department and has advanced degrees in human resources development and human resources management. In one case that he investigated, he found that an employee had padded an expense account. In another, he discovered that a woman had fabricated a college degree.
The need to investigate fraud these days is so great that Mr. Deming has hired temporary workers — including lawyers, private investigators and certified fraud examiners — who are paid $150 to $275 an hour.
Teaching can also be part of a fraud investigator’s job. Pam Verick, who directs the fraud risk management practice at Protiviti, also conducts training sessions for employees of clients. In these sessions, she guides them through the possible workings of schemes involving bribery, kickbacks and fraudulent financial reporting.
Occasionally, during a break, a participant in the class will take her aside and say, “I have a concern that something we just talked about is happening,” she said. The concern is then referred for investigation to the internal counsel at the participant’s company.
WHEN Ms. Verick conducts her own fraud investigations, she is always alert for fact patterns. And the technology she uses to obtain them has become more sophisticated. She says she now recovers trace evidence from cellphones, BlackBerrys, hard drives and network files.
Ms. Verick said that in her experience, if fraud is uncovered, most companies do not prosecute. Instead, they make individual agreements with employees who make restitution.
The 18-hour days spent and the vending-machine meals eaten during investigations are worth it, she says, when a client says, “Thank you, we needed to hear that message.”
Dina Blake, a graduate student in accounting at West Virginia University in Morgantown, W.Va., hopes to investigate fraud one day. She plans to pursue forensic accounting and to receive a fraud-investigation certificate; she has an entry-level job lined up this fall at Ernst & Young, the auditing firm, in Washington.
She said her studies had given her an understanding of the hardships of those who lost retirement savings as a result of corporate fraud. She says she is approaching her new career with idealism. “I’m going to help straighten out the business world one way or another,” she said.