Posted by Alexandra Entrup.

In December 2016, the United States v. Nosal (Nosal II) case was heavily questioned. David Nosal worked at KFI, Korn/Ferry International, however, in 2004, he made the decision to leave the company. Despite leaving the company, he resumed working as a contractor under an agreement that forbade competition with KFI. Regardless of the agreement, Nosal among additional employees were in the process of establishing a competing business. The company utilized the database, Searcher, to hold “information about over a million executive search candidates” (Harv. L. Rev.). Though Nosal and his colleagues took information from the database for their own use using their own login information, their credentials were rescinded after their decision to leave the company. Upon noticing that their login information no longer worked, they approached Jacqueline Froehlich-L’Heureaux, Nosal’s assistant during his time at KFI. Froehlich-L’Heureaux remained an employee despite Nosal’s absence so they decided to ask her for her own credentials. She gave them her username and password and Nosal and his partners utilized this information on multiple occasions. The article suggests that they accessed the database using her credentials “on at least three discrete occasions” (Harv. L. Rev.). An anonymous tip was sent to Korn/Ferry International and an investigation ensued.

The defendant was convicted and Nosal was accused of “nineteen criminal counts, five of which alleged CFAA violations under the ‘exceeds authorized access’ clause of §1030(a)(4) while Nosal was a KFI employee” (Harv. L. Rev.). CFAA, the Computer Fraud and Abuse Act, discusses computer use, specifically hacking. The act states that the invasion of a computer system is considered a crime. The article further discusses the CFAA and its application to the case stating, “the CFAA imposes criminal penalties on whoever ‘accesses a protected computer without authorization, or exceeds authorized access’ to perpetrate a fraud” (Harv. L. Rev.). This statement is especially important to the case because it dismisses Froehlich-L’Heureaux’s decision to give Nosal and his partners her credentials. Instead, it blames Nosal for using this information in a deceptive manner, perpetrating a fraud. Throughout the case the term “without authorization” was referred to as “an unambiguous term with a plain meaning”, implying that there aren’t any alternate interpretations.

In the Nosal I case, the CFAA nineteen criminal counts previously mentioned were dismissed. However, following the dismissal of these counts, further counts were filed. “In 2013, the government filed a superseding indictment with three CFAA counts resting on accomplice liability for the three times Nosal’s partners, without authorization, accessed Searcher with FH’s credentials after they had left the firm. The government also indicted Nosal on two trade secret misappropriation counts under the Economic Espionage Act and one count of conspiracy. A jury found him guilty on all counts” (Harv. L. Rev.). All arguments that Nosal proposed were rejected by the court. Looking at previous cases, it was certain that authorization much be approved by the computer owner. Nosal was obviously not given authorization, evident through the revocation of access to the system. The importance of authorization is common knowledge which is evident in the article’s statement, “the majority’s view that only the owner of the system has authority to grant access undermines the authorization upon which many forms of commonplace computer access depend.” The article further explains this belief with a comparison to social media, “it could be a crime for an individual to log in to someone else’s Facebook account with that person’s permission, simply because the system owner prohibits it” (Harv. L. Rev.).

Alexandra is a finance and information technology management major at the Stillman School of Business, Seton Hall University, Class of 2019.

Source:

http://harvardlawreview.org/2017/02/united-states-v-nosal-nosal-ii/

Posted by Samar Baeshen.

According to an October 21, 2015 news article in The New York Times, “Criminals Should Get Same Leniency as Corporations,” there are many critics arguing that corporations trying to make a big effort to defend their misconducted executives ought to be treated like common criminals. In addition, Emmet G. Sullivan, a federal judge, thought that criminals should be treated like big companies. Due to Obama administration’s method which gives companies the opportunity to not have a criminal record, Judge Sullivan believes that individual criminals should enjoy the same chances. In fact, the Department of Justice officials concur with Judge Sullivan’s opinion, which criticizes the American criminal justice system, and encourage Congress to lower the adjudication standards. Meanwhile, the Justice Department issued a new memo recently and released new approaches to prosecute individual employees after years of accusations about Wall Street criminals.

According to Judge Sullivan, the court is frustrated that the postponed prosecution agreements are not being utilized to give the same chances to individual criminals without causing any negative effects on the criminal conviction. Moreover, there are lack of the postponed prosecution agreements, according to the Justice Department, for both corporations and individuals. However, comparing the number of cases against individuals and companies, cases against individual criminals are enormously more than companies.

In general, the target of the Judge Sullivan’s argument is to reduce the long Sentence for prisoners who did not commit violent crimes.

Samar is a graduate student in accounting at the Feliciano School of Business, Montclair State University. 

Posted by Charles Batikha.

Ransomware is similar to a Trojan horse. Imagine receiving an email from a non-familiar email address. The email claims to be the IRS claiming you are being sued for tax evasion and instructed to click on a link to a website. You are skeptical, but what is the worst thing that could happen if you click on the link. Malware was the virus used when ransomware was first introduced, but more recently website URL and deceptive pop-ups are being utilized. Home computers are not the only victims, business and even government systems have been breached as well.

Upon clicking on the link your browser becomes frozen, unable to use your computer a message pops onto the screen informing you of the encryption of your computer. This renders it useless and a fee is charged for the encryption key, which will cost anywhere from $200 to $5000. This is the newest “variant” called Crypto-Wall or Crypto-Wall 2.0. Interestingly enough, the scammers instruct victims to purchase bitcoins to be used for payment. Bitcoins have become much more popular among criminals because of the concealment of their identity.

Ransomware has also begun to hit smartphones, locking them as well. I personally have fallen victim to this type of ransomware. A message popped up stating that I must contact Apple to unfreeze my phone, but every time I closed the pop-up the notification would come up again not allowing me to use my internet. I called the phone number on the message, and I noticed that the phone line was a Google number, which made me a little suspicious. Immediately after someone answered the phone, they gave me a scripted explanation of how my system was locked and I need to give them my credit card number for a fee for them to unlock my phone. Fortunately enough, I did not pay the fee and hung up on the pleading receptionist.

A way I have found to refresh your phone from ransomware is to clear your website data in the setting of your phone. This has given me the use of my internet after being hit with ransomware. Updated anti-virus software on your computer is another preventative tactic. Using a pop-up blocker and not fumbling with unsolicited emails are other great tips as well.

Charles is a graduate accounting student with a certificate in forensic accounting at the Feliciano School of Business, Montclair State University.

Posted by Ryan Neligan.

Earlier in the month, the state of New York banned the use of Fanduel and Draftkings, both websites in which people use to bet on daily fantasy sports. These websites are run daily in which people place down money and compete against each other in order to see who the best judge of sports is, and the winner acquires a large sum of money from those people who took place in the game. Games like this take place all over the world through these websites and have instantly gained a great amount of popularity.

The attention it is getting from the population has caused some heads to turn, such as the state government of New York. It has seen these websites as illegal gambling taking place within the state, and New York’s attorney general is set on shutting down this business. FanDuel and DraftKings are not going down without a fight though, as “the two biggest daily fantasy sports sites are taking on Eric Schneiderman in court, accusing him in lawsuits of bullying and abusing his powers in ordering that they stop operations in New York and are seeking a judge’s order to let them keep operating” (BloombergBusiness). To lose the participation of New York would be a huge blow for these two businesses, because New York accounts for “more than $1 billion each and have drawn investors across the sports, media and venture-capital industries. The state accounts for 5 percent of FanDuel’s customers and more than 7 percent for DraftKings, according to the companies’ filings” (BloombergBusienss).

Fanduel and DraftKings are taking action and are filing suit against this banning, for they do not see their business as an illegal online gambling site. They see it as a game of skill and knowledge in sports. Fanduel stated in its complaint about the case that “Such a shutdown would deprive hundreds of thousands of subscribing New Yorkers of the opportunity to pit their skills against the skills of others in selecting a ‘fantasy’ team of athletes from different sports teams and competing in contests offering prizes to the players whose fantasy teams perform best” (BloombergBusiness).

The case can be made for both sides of the argument. These websites are definitely a test of skill in the area of sports just like when people play regular Fantasy games, but it can also be seen as a website used for gambling and requiring money online, which is illegal in the state of New York. If these website continuing operating, the attorney general will take action and put chargers against these companies. The people of New York will be watching this case closely to see what the final outcome is, but for now daily fantasy sports has been banned from the state.

Ryan Neligan is a finance major at the Stillman School of Business, Seton Hall University, Class of 2018.

Posted by Luca Aufiero.

In the article, “Dealing with Fraud in Your Building – Forensic Accounting,” Steven Cutler discusses the types of fraud among co-ops and condos, the possible red flags, as well as how it may be perpetrated and deterred. Some signs of fraud from higher management could entail sudden lifestyle changes and lavish expenditures such as new expensive cars, residences, and exotic vacations. As there isn’t as much fraud today as there used to be, back in the 90s, there were two years where roughly 140 managing agents and 25 management companies were indicted for kickbacks. “Still, even today, there are enough instances of fraud to keep busy forensic accountants, real estate attorneys, and district attorneys” (Cutler). The more common type of fraud in a company is the misappropriation of cash. For example, management may use funds from the company to pay for personal expenses or use forged bank records to run multiple books.

More often than not, fraud is perpetrated by a member of the staff. This is all starts with the fraud pyramid: motive, rationalization, and opportunity. Some employees might not be monitored as much as they should or have certain access to records, giving them an opportunity to commit fraud. The motive is most likely to reside from a personal standpoint. Possibly drug related, family problems, or more commonly, financial problems. The rationalization behind the act might be that the person “deserves it” (sense of being underpaid), or “just borrowing money temporarily” (even though it isn’t). Some red flags among the financials might include: large number of unrelated transactions, unexplained changes to reserve funds, and missing accounting records.

If fraud does occur, it is recommended to create a paper trail to document items not only for attorneys, but for forensic accountants to investigate the damages. The forensic accountant looks at the banks reconciliations, statements, canceled checks, and bills paid to have to total admission to the records. This will then result in whether the damages were from gross negligence or fraud. At that point in time, the attorney will decide if it should be a crime (especially if fraud is involved) and therefore be reported and prosecuted. Some deterrent procedures include monthly reviews/reconciliations of the financials, control over collections (lockbox), and monitoring the work of others.

Luca is a BS and MS student in accounting with a certification in forensic accounting at the Feliciano School of Business, Montclair State University.

Reference:
Cutler, Steven. “Dealing with Fraud in Your Building – Forensic Accounting.” The Cooperator. Oct. 2015. Web. 20 Nov. 2015. http://cooperator.com/article/forensic-accounting

Posted by Ryan Neligan.

Human beings have a natural tendency to expand upon whatever the present is. In America, pilgrims settled in the state of Massachusetts and eventually expanded all the way to California. This trend of expanding continues today, as now people look forward to what is beyond Earth: Outer Space. This week Congress has passed a bill called the Space Act of 2015, which will help the small business of asteroid mining become an official operation.

The resources that are in outer space could be quite valuable to our world for the future. There are so many things untouched out there and in such great supply. In the past, “the prospect of large scale extraction of minerals from other planets or cosmic bodies has been both technologically and legally questionable, with starry-eyed entrepreneurs hard at work on the first part, but without much guidance on the second” (Good Magazine). Our civilization has not had the knowledge or technology in order to make obtaining a vast amount of resources from outer space an appropriate business. That has changed in current day though, as technology has made leaps forward in progress of this venture, and now to is officially about to become legitimate. With the passing of the Act, the business of space mining could boom into a full blown industry in the market, for “this lays the legal groundwork for private businesses to own extra-planetary resources, as well as sell their goods back on Earth” (Good Magazine). Huge potential is seen for space mining. Businesses are waiting for the new act to become official so they can jump into the extraterrestrial world of space mining and make as profit off of it.

The Space Act of 2015 is not yet complete to be used, but it is laying the foundation to open up endless possibilities that reach far beyond he extant of this world. Humans continue to expand the horizons that are in front of them, and this act would put them in the galaxies.

Ryan Neligan is a finance major at the Stillman School of Business, Seton Hall University, Class of 2018.

Posted by Ilse Narvaez.

Oladipupo Kupoloyi, an 18-year-old Nigerian living in Binghamton, NY, pleaded guilty to his participation in a wire fraud conspiracy. Kupoloyi was a student at SUNY Brome Community College through a student visa. The wire fraud statute involves fraud by wire, radio or television. According to the statute 1343, it applies to anyone having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent statements. A person involved and found guilty may be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. In order for someone to be found guilty, the government must show there was an interstate wire used and intent to defraud.

An investigation by the U.S. Department of Homeland Security revealed that Kupoloyi had wired unlawfully obtained money to Nigeria using two different banks located in Binghamton. The fraud involved thousands of dollars that were sent overseas and Kupoloyi was unemployed and had no other source of income. One of his co-conspirators obtained money through the mail by requesting funds from a 65-year-old woman, while posing as a military representative stationed in Nigeria. Later, another co-conspirator contacted the same woman but in this case, claiming to be a U.S. Customs service agent. He advised the woman that he had valuable jewelry that could be released to her if she paid between $48,000 to 50,000. Since the woman did not have the money available they asked for her personal information such as social security number and opened bank accounts with it. Money from an unidentified business bank account was then transferred into the victim’s personal accounts (Borrelli).

Kupoloyi’s participation occurs when the woman is asked to withdraw the amounts and to purchase U.S. Postal, Western Union and Monegram in order to send them to his personal address. Kupoloyi then opened a bank account in M&T Bank and a second one in Citizens Bank. He deposited $81,000 and 28,000 respectively, and wired funds to Nigeria on two occasions. M&T Bank suspected bank fraud when for a third occasion, a fund wire to Nigeria was requested. The bank reported the suspicion to the federal investigators that later found about the scheme. On November 6, 2015, Kupoloyi pleaded guilty to conspiracy to commit bank fraud, mail fraud, and wire fraud. His sentence is expected to occur in March 25^th, 2016.

Ilse is a graduate student in accounting with a certification in forensic accounting at the Feliciano School of Business, Montclair State University.

Works-cited

Borrelli Anthony, “SUNY Broome Student Pleads Guilty in Wire Fraud Case.” Pressconnects.

Web.

Posted by Leonardo Terzulli.

Two new cases that have just arose, DraftKings and FanDuel, two one-day fantasy sports websites that guarantee immediate cash payouts, have been banned in the state of New York. New York’s Attorney General Eric Schneiderman, sent a cease-and-desist letter earlier this past week accusing FanDuel and DraftKings to be considered illegal gambling. This whole debate started over news that had been circulating that an employee who worked for DraftKings won $350,000 in a contest on the website. There were allegations that the employee had inside information that was used to help him win the contest. DraftKings response to the allegation was “the information was only available after player lineups had been locked in.” Both companies claim that employees are banned from participating in competition on the website, and failed to check-up on internal controls.

Both DraftKings and FanDuel have chose to file lawsuits feeling that the Attorney General wasn’t fair in his cease-and-desist order. “The two companies made separate filings that asked the New York Supreme Court to throw out Schneiderman’s order. In its lawsuit, DraftKings argued that Schneiderman’s cease-and-desist order is unconstitutional, saying the Attorney General acted as ‘judge, jury and executioner.’”

While there are already a few states that have prohibited daily sports, I feel that this case is really going to be contingent on the employee who violated the rules and lack of check-up on the internal control in the companies.

Leonardo is a finance major at the Stillman School of Business, Seton Hall University, Class of 2018.

Posted by Charles Batikha.

Tamira Fonville was a Mesa Airlines employee and part time recruiter for a hair show, but these were both false lives that Fonville was leading. Fonville spent her time along the east coast from New York to Washington D.C. trying to lure women to expose their financial information by fraudulently posing as a hair show recruiter wanting to hire young women. Unfortunately, there was no show and Fonville was not a recruiter, nor an airline employee. By the end, she caught herself in an addiction she could not stop, between signing off bouncing checks and scamming women; she was bound to get caught.

Ricardo Falana was Fonville’s assistant.  Before the banks would know what was happening, they both would wipe accounts clean. Foneville would ask the girls for their bank account information, lying, saying she wanted to deposit checks into their account. Once the checks were deposited, the account would be emptied before the banks could be any wiser. For individuals that were too smart to be scammed, Tamira would offer them a piece of the pie. These individuals were even “coached” to lie to bank employees, telling them their credit cards had been stolen. The problem was the piece of the pie that they were waiting for never came. After some time, these women came forward as victims.

Young women were not the only ones that Fonville scammed. She applied for a car loan under the impression of being an employee of Mesa Airlines with a $65,000 salary. Tamira used $30,000 to pay for her Chevy Camero, plastic surgery and her New York apartment. While she was living this lavish life, Fonville also was living off food stamps, while having her student loans, totaling up to $100,000, deferred.

Tamira was arrested in August 2014, said to have profited over $200,000 from the scams. She was sentenced 15 months for conspiracy to commit bank fraud as well as 3 cases of bank fraud. Falana, Tamira’s assistant, was sentenced to 80 months after pleading guilty to similar bank fraud charges.

Charles is a graduate accounting student with a certificate in forensic accounting at the Feliciano School of Business, Montclair State University.

Posted by Daniel Perez.

In “Accountants Increasingly Use Data Analysis to Catch Fraud,” Jo Craven McGinty highlights the rise in the use of mathematical and forensic procedures in the today’s audit industry. Americans are burdened with an estimated $300 billion a year due to employee fraud in the workplace. In the aftermath of large-scale fraud cases, such as Enron and WorldCom, audit firms are increasingly using more reliable audit procedures in their engagements to prevent such fraud cases from occurring again. Benford’s Law is the center focus of this article as it supports how similar procedures drives audit quality in the right direction.

In investigating refunds issued by a call center, a group of forensic accountants used Benford’s Law to detect employee fraud. Instead of traditional sampling used by auditors, the group of forensic accountants used Benford’s Law because it offers mathematical evidence that fraud may or may not be occurring: “According to Benford’s Law—named for a Depression-era physicist who calculated the expected frequency of digits in lists of numbers—more numbers start with one than any other digit, followed by those that begin with two, then three and so on.” In their testing of the refund amounts, the accountants expected to see a significant amount of refunds starting with “1,” followed by “2” and so on. The occurrence of refunds beginning with “4” were much more prevalent than it should have been according to Benford’s Law, raising the flag that fraud may be occurring. Applying similar procedures to Benford’s Law in the foundation of audits may grow to be a normal practice at some point in the future.

An application of the procedure to Enron’s financial statements portrays a clear variation from the normal results from Benford’s Law. McGinty’s article states that as computer programs, such as ACL, featuring forensic accounting procedures grow rampant in the marketplace, the use of these procedures does have a positive impact on future.

Article:

http://www.wsj.com/articles/accountants-increasingly-use-data-analysis-to-catch-fraud-1417804886

Daniel is a graduate accounting student at the Feliciano School of Business, Montclair State University, Class of 2016.