Schemes, Scams, and Cons
Although Zac is a sharp young auditor, I figured I’d share a few of my own observations—because if there’s one thing I’ve learned in my years of financial crime investigations, it’s that experience has a way of humbling even the best of us.
Auditors don’t just check the math—they follow the money, expose deception, and, sometimes, bring down criminal enterprises. Early in my career, I learned that understanding fraud isn’t something you get from a textbook. You have to live it.
I’ve spent 34 years in financial federal criminal investigations, another four as a Senior Forensic Auditor, and a fair bit of time before that in law school, where I learned how to argue about everything, including lunch options.
In this issue, I will introduce how the eye of a financial investigator views schemes, scams, and cons— using real-world cases, along with exploring some emerging cases. We discuss cases including a construction mogul who “forgot” $2 million, a lawyer funding poker debt with law firm money, and a Bitcoin investor who thought the IRS wouldn’t fact-check his numbers.
Fraud leaves a money trail. The key is knowing where to look.
As a reminder—
Fieldnotes: Personal case insights and lessons
Emerging Risks: What’s happening in the world of fraud
Before we go any further: this is not legal advice. If you need legal advice, go find yourself a lawyer—not some guy on the internet that used to chase fraudsters.
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Lessons from the field:
The Art of Following the Money
Auditing is about stories. Not the ones you tell at dinner parties (unless your crowd enjoys conversations about forensic accounting), but the ones told through data, documents, and discrepancies.
One of my earliest cases involved an independent audit of a health care fund. A young auditor flagged some hospital receipts—long medical terms misspelled, outdated letterhead, and, upon closer inspection, entirely fabricated documents. Classic red flags. That auditor brought the case to federal investigators (which included yours truly), and that was the start of unravelling a multi- million-dollar fraud scheme.
In fraud investigations, you start at the beginning of a transaction and work your way to the end. Who’s involved? What’s normal? What isn’t? Every financial crime statute requires intent proven beyond a reasonable doubt, (forgetting and mistakes can be a defense in criminal court) and that’s where the real work begins. As the saying goes, “In God we trust, all others must bring data,” and that is where the investigation started, scouring the claims to identify false documents.
Interviewing is an important skill in any investigation, as agents met with each claimant, the hospitals, and the health care fund employees who touched and moved the fraudulent claims through their system. And, of course, we followed the money as it hit bank account after bank account.
By the end of this case, the fraudsters were convicted—including a high-ranking officer who conveniently approved payments and pocketed a cut of the illegal proceeds.
Fraud Finders:
What’s Happening in the World of Fraud?
If you want to stay informed, keep an eye on your local Department of Justice (DOJ) press releases—a source of real-world case studies on what not to do. Here are a few recent gems:
Construction Company Owner Pleads Guilty to Filing False Tax Returns
Turns out, just because customers don’t send a 1099 doesn’t mean you can pretend income doesn’t exist. In this investigation, a construction company owner intentionally failed to report over $2 million in receipts thinking that the government would not be the wiser.
Attorney Charged with Tax Crimes
According to the press release, this attorney allegedly reclassified gambling debts as “legal fees” (creative, but illegal), used firm assets to pay personal associates performing little to no work at the firm, and funneled client money into personal accounts. Pro tip: If you need to fund your poker habit, try winning at poker.
Early Bitcoin Investor Sentenced for Filing Tax Returns
After making millions selling Bitcoin and buying a house, this investor allegedly inflated his cost basis, claiming he bought at prices higher than what he sold them for. In fact, his claimed purchase prices were greater than the highest price bitcoins sold for in the market prior to the purchase of the house. The Bitcoin Investor then filed a false federal income tax return that substantially inflated the cost basis of the bitcoins, thereby underreporting his true capital gain from his sale.
Final Thoughts
Fraud never really changes—just the methods. Keep learning, stay skeptical, and if something seems off, follow the money. And for those still convinced they can outsmart auditors, regulators, and investigators? Well, I’ll be reading about them in the next round of DOJ press releases.
Until next time-
Zac Explains Audits is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.