How a $12.5 Million Indictment Turned Out to be a $3 Million Loss

A $12.5 million indictment turned out to be a $3 million loss. How did this happen? During her session at the 34th Annual ACFE Global Fraud Conference, CEO and Founder of Acuity Forensics Tiffany Couch, CFE, CPA/CFF, walked attendees through a case study in which her determination to find accurate information revealed a 78.07% overstatement that, once uncovered, decreased the number of counts charged and incarceration time for her client.

Couch recalled the priorities of a Certified Fraud Examiner (CFE). CFEs have a profound responsibility when conducting their investigations. It is their duty to maintain professional skepticism, not withhold facts, and always strive for accuracy. She underlined the importance and need for good defense work; in particular, she emphasized that “the best defense attorneys are the ones that want the information.”

Couch then outlined a case history in which owners of tribal smoke shops were indicted with multiple counts of wire fraud and money laundering. After the U.S. government conducted raids on Chickie’s Smoke Shops, Couch was hired to represent the defendants. She examined the indictment allegations that the smoke shops Chickie’s traded with had not accurately recorded purchases and sales. After tracking down documents and sifting through tedious lines of data, Couch discovered that the smoke shops had in fact used a separate point of sale system to track their inventory and sales to customers.

Couch also investigated the alleged “check for cash scheme” and revealed that the calculation of tax loss according to the government was significantly overstated. After a detailed forensic investigation, the outcome of the case was that Couch’s client was charged with only one count of conspiracy to commit money laundering.

A key takeaway of this case study was the reiteration that in the U.S., a person is considered innocent until proven guilty. According to Couch, indictments are one piece of information in a case. They are not the absolute truth. Investigators need to understand the nature of the businesses they’re investigating to accurately assess information. This involves detailed and often tedious work, but the ability to present a factual case may require sifting through numerous documents and lines of data, especially if there are resource constraints during an investigation.

Session attendees were reminded that fraud loss calculation ties directly to incarceration and restitution decisions. The numbers you investigate have a direct impact on a person’s life. As Couch says, “You have someone’s life in your hands, so get it right.”