Financial Crimes 101. Goals. Crimes. Goals (cont) Theories of Theft. Become familiar with various types of financial crimes

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1 Financial Crimes 101 Everything you never thought you needed to know Goals Become familiar with various types of financial crimes Identify and become familiar with other agencies and resources to help you Goals (cont) Crimes Specific state statutes Elements of financial crimes Reporting requirement and framework of each type of financial crime Worker s Comp Auto Insurance Embezzlement Thefts Securities Asset Forfeiture ID Theft Real Estate Larceny False Pretences Trick or Device Embezzlement Theories of Theft Act, intent and possession are all common elements of theft. Larceny PC 487/488/484 Taking and carrying away Original taking Unlawful appropriation of another s property Without owner s consent 1

2 False Pretenses PC 532 Illegally obtained by false pretenses Intent is to defraud Owner voluntarily gave property in reliance of false representation w/o reservations Corroboration of false pretence is needed In writing 2 witnesses 1 witness + corroberating circumstance Trick & Device Possession of property is obtained by trick, fraud or false representation Permanently deprived of property Owner gives away property to wrongdoer, but only for some agreed special use Embezzlement Wrongful use of property entrusted Fraud occurs after property is entrusted to wrongdoer Owner never intends that the trustee shall use the property for anything else other than it s specified purpose. Sentencing enhancements PC Over $65, year Over $200, years Over $1.3 million---3 years Over $3.2 million---4 years As of January 1, 2008 Hearsay Rule-Business Records 1271 E.C. Evidence of a writing made as a record of an act, condition or event in not made inadmissible by the hearsay rule if: Made in regular course of business Made at or near time of act Custodian testifies to identity and mode of preparation Source/method/time of preparation indicates trustworthiness Fraud occurs when: Fraud someone knowingly lies to obtain benefit or - to cause the delay or denial of some benefit that is due or entitled Simply put: - Lying to get money or property from someone else 2

3 Fraud Facts Average organization loses more than $9 per day Typical suspect-college educated white male Men commit 75% of fraud Median loss is 4 times more than women Losses caused by management is 4X more than those of employees Highest losses are due to what type of fraud Worker s Compensation Fraud WI Make or cause to be made any knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying any compensation as defined in the Labor Code PC 550 PC 118-Perjury Types of W.C. Fraud Applicant Fraud Billing/Provider Fraud Premium Fraud Elements Misrepresentation someone lies Intentional Misrepresentation was for purpose of receiving or denying benefits that a person would normally be or not be entitled to Materiality of lie reasonable insurer would attach importance to statement Applicant Fraud Fraud committed by applicant to gain WC benefits Usually misrepresents the current injury or fails to disclose a previous injury Applicant Fraud (cont.) Many cases involve failing to disclose previous injury Apportionment term used to signify the amount of financial responsibility an employer has for the injured employee due to the injury determined by doctor Most common type of WC fraud (Film) 3

4 Billing/Provider Fraud (upcoding) Doctor or hospital billing for services not rendered or billing at a higher rate False records False bill Inflate services actually rendered Billing/Provider Fraud (cont.) Common indicators 1 st notice of injury to insurance company comes from attorney or M.D. rather than WC form Boilerplate medical report Extensive (expensive) testing Soft tissue injuries Long time to heal Premium Fraud IC Willful misrepresentation of facts to obtain WC insurance at a lower rate. Employer who falsely reports employee information for purpose of paying a lower insurance rate. Number of employees Employee misclassifications Cases Cases tend to appear out of nowhere. Sometimes just review what is submitted and write an arrest warrant. Other times-interviews, records and surveillance. Investigative Steps Suspected Fraud Claim Form (SFC) Call local DOI office-no use in both working the case Call NICB to determine prior claims or info on suspect Call SIU investigator, NICB investigator or insurance claims representative Investigative steps (cont) Obtain all paperwork Consider search warrant for medical records Possible Undercover operation 4

5 Juristictional issues What is SIU- Other things Special Investigations Unit Required of most insurance companies Investigators generally put entire case together. Could contain interviews/video/doctor reports insurance paperwork NICB Other things (cont.) National Insurance Crime Bureau Maintains insurance claim information on every insurance claim made Searchable database by different fields for purpose of identifying fraud Auto Insurance Fraud PC 550 basically states: Knowingly present or cause to be presented any false or fraudulent claim for the payment of a loss or injury, including payment of a loss or injury under a contract of insurance. Examples Fake accidents aka purposely driving a car into a pole. Pre existing damage Staged accidents All involved have a script Examples (cont.) Real accident with excessive claim Cappers contact victims and steer them to crooked attorneys and doctors. Fake or exaggerated injuries Paper accidents No accident ever occurred Counter report made with police Purpose and Funding 1996 Law Real Estate Fraud $3 fee per recorded document Can be divided between DA s office and law enforcement 5

6 Counties with Real Estate Units Typical Crimes Sacramento Yolo Solano Butte El Dorado Santa Clara Alameda Contra Costa Fresno Most large So. California Counties as of 2008 Theft of Title or Equity (theft or embezzlement) False or Forged Instruments Loan Fraud Foreclosure Fraud Rental Schemes Real Estate Investment Schemes Crossover with Elder Abuse Notary Fraud Complaint Investigation DA does complete investigation Law enforcement lacks resources Law enforcement lack expertise What to do Complete interview of victim after they have provided every piece of paper they possess regarding transaction Obtain a property profile Document Chronology Obtain names of all potential witnesses Documents-Search Warrant Escrow files Know what is in an escrow file Loan file Know what is in a loan file Notary record Are they an accomplice? Appraisal Are they an accomplice also? Training CDAA has a 2-3 day seminar every year Junior College offers courses Principles of Real Estate Real Estate Financing Real Estate Law Escrow Procedures 6

7 New Notary Law (2010) AB 886 (Gov. code ) Allows peace officer to seize notary journal without a search warrant-----(gov. Code 8206(d)) Must have PC required in both federal and state law to seize Must notify Secretary of State of seizure Thumbprint required for all documents Deletes personal knowledge as a form of personal identification acceptable to a notary Elder Abuse (financial) 368(d) person not a caretaker who commits theft, embezzlement, forgery, fraud or ID theft on an elder or dependant adult. 368(e) person who is a care taker Extra year of sentence Elder Abuse (cont.) Related to real estate Issues with elders- Elder Abuse (cont) Elder signing over of the property Loan using house as security Predatory Lending-Is it a crime? Are they of sound mind when the transaction took place? Does the elder know the significance of what they are signing? Asset Forfeiture Asset Forfeiture (cont) PC or more related felonies Taking of over $100,000 Freeze order Seize order (after conviction) Freeze houses Financial accounts Titles to vehicles Advertise in newspaper Notice all lien holders Upkeep of house 7

8 Securities Law Generally found in Corporations code Governed by California Department of Corporations (DOC) Make friends with an investigator or attorney in DOC if you ever get a case Securities Law (cont.) Trading without permission Guaranteed sure winner Excessive trading (churning) Insider information Risky investments and misrepresentations Securities Law (cont.) Corp code in part defines a security in part as an investment contract Corp code states in part that it is unlawful for any person to offer or sell in this State any security.unless such sale has been qualified under the code or unless exempt under the code Many exceptions to Corp Code ID Theft Up and coming crime Been around since dirt- Previously known as fraud/forgery Will continue to grow over time Can cause headaches for the victims ID Theft (cont.) Double Victimization Original Victim Years of trying to clear credit & build good credit again Secondary Victim Who was suspect trying to rip off posing as you ID Theft (cont.) Some DA s offices have dedicated ID Theft units within their offices PC Any person who willfully obtains personal identifying information of another person and uses information for any unlawful purpose including to obtain credit, services, goods, real property and medical services. 8

9 ID Theft (cont.) PC Reporting requirements PC Falsely impersonates another PC 530 Receiving property in assumed character Tip: Search warrant and seize computer Jurisdictional Issues ID Theft County of residence of victim County of where ID info was stolen from County where ID information was unlawfully used Allied Agencies FBI DOJ DMV FTC NASD DOI NICB SIU USPI DOC 9