1) Final Project Part I Milestones 2) Final Project Part II Milestones

PBSJ’s former Chief Financial Officer, Scott Deloach, and two former workers in the finance/accounting department were involved in a long-term scheme to steal more than $35 million from PBSJ over the course of 13+ years. In addition to Deloach, Maria Garcia and Rosario Licata were accused of taking unauthorized money from 1992 to 2005 after the headquarters moved to Miami, Florida ( Three Former , 2006).

The type of fraud that was committed was occupational fraud. Occupational fraud is the act of an employee misusing a company’s assets for personal gain. The fraud would take place starting with Licata. Licata would issue unauthorized checks from the PBSJ master cash account and would disburse the funds to Deloach. Deloach would then deposit the checks in personal bank accounts in different areas, splitting the proceeds with Licata and Garcia.

Fraud can be hard to discover but someone must know what to look for. The fraud was discovered by the company relocating to Tampa. As a result of accounting irregularities, the financial practices were changed which lead to the discovery of concealed accounting journals. 3 The three employees involved also all lived lavish lifestyles that eventually caught up to them.

Deloach owned several properties that were worth millions of dollars in Florida Keys, along with luxury cars and even a yacht. Garcia used the money to purchase high end sports cars, jewelry, ownership in a restaurant, and more. While Licata used her share to purchase real estate, engaged in gambling activities, and more ( Three Former , 2006).

Fraud Scheme Fraud Scheme The fraud scheme for this case would be the misappropriation of funds or occupational fraud also known as embezzlement. Specifically for this case, check embezzlement was committed. Since Deloach, Licata, and Garcia all received money either directly or indirectly from the secret bank account, they are all responsible for committing check fraud.

Employee embezzlement or occupational fraud takes place in many different forms. Such as inventory theft, cash theft, accounts receivable forging, and forging of documents. Check theft is a very common embezzlement scheme that often takes place in small businesses. In fact, small businesses fall to check forgery or payment tampering four times as much as larger businesses (Watson, 2020). Small businesses normally have a very close knit accounting or finance department with people who have been there for many years and who have gained a lot of trust within the organization. Allowing someone to keep the same access to information for a long period of time gives them a better opportunity to embezzle said money. On average this fraud may go undetected for up to 14 months and can be less costly than any other embezzlement (Watson, 2020). 4 In order to prevent internal fraud, internal controls must be put in place. These controls are policies and procedures that are put in place to prevent and detect any fraudulent activity.

These controls can include separation of duties, second management approval, and access control. PBSJ lacked internal controls and this is why they fell victim to theft. It has been stated that Maria Garcia held many different positions in the finance department. When a single person has too many duties, things can go undetected because there is no back-up or anyone else looking over their shoulder. The checks that were forged went directly from Licata, who was a manager in the accounts payable department, to Deloach. There should’ve been someone in between the accounts payable department and the CFO to sign off on these checks and require backup documentation. A good example of this person would be a Controller or an Assistant Controller. Although this was a secret bank account, there should’ve been documentation on the other end.

Red Flags With any fraud case there are many red flags. Unfortunately most red flags go undetected and unnoticed. The six most common red flags can be living beyond one’s means, financial difficulties, unusually close association with a vendor or customer, excessive control issues unwillingness to share duties, recent divorce or family problems, and a general “wheeler-dealer” attitude involving shrewd or unscrupulous behavior (Moody, 2018).

In this case, with the 3 people directly involved, the one red flag that can relate to them is the lavish- lifestyle. Deloach, Licata, and Garcia all lived high-end lives that involved luxury sports cars, fancy houses, big boats, and real estate. They funded this high-end lifestyle with the share they got from the embezzled money. This is significant because Licata and Garcia’s roles 5 within the company would not have financially allowed them to do that alone. Deloach was the CFO so his paycheck would be higher, but for the two in the accounting and finance departments, this would’ve been tough to imagine.

Evidence/Documentation Evidence There are four types of evidence that can be used to prove fraud; real, demonstrative, documentary, and testimonial ( Summary of the Rules of Evidence , 2018). Real evidence is evidence that is relevant to the case such as an event or characteristics. Demonstrative evidence demonstrates (or illustrates) the testimony of a witness during the case and is only admissible when it fairly and accurately reflects the testimony. Documentary evidence is considered “real evidence”. An example of documentary evidence is a contract, when a contract is written it contains real evidence, and if broken the contract can be used in the court of law. Testimonial evidence can be very basic and does not need any kind of evidence to make it admissible, meaning it implies what is conconfessed by a reliable witness ( Summary of the Rules of Evidence , 2018).

In order for a fraud interview to be effective, the interviewer must be prepared with documents and statements by witnesses, in this case could be colleagues of Deloach, Garcia, and Licata. Before an interview begins the interviewer must collect any evidence that may pertain to the case which can include documents, statements, emails, accounting records, and more. Once this evidence has been collected, the interviewer must write clear, accurate, and unbiased reports that directly reflect the investigation and their results ( Investigation Section , n.d.). These reports 6 and findings of the evidence will then be used by management, lawyers, prosecutors, and those of the court systems.

Evidence in the case include Deloach, Garcia, and Licata would include bank statements, accounts receivable and accounts payable reports, and witness statements. These statements may come from the bank tellers, colleagues, or even those involved. Bank statements would be beneficial for this case because it would show the cashed checks. Using these cashed checks can be cross examined to the accounts payable and accounts receivable reports to see if these were legitimate invoices or if they were unauthorized.

Documentation Documentation is very important in fraud cases. Documentation can include bank statements, invoices, accounting reports, purchasing reports, emails, and more. In addition to the documentation listed, a fraud examiner may also look at previous audits and previous investigation files, if provided. Examining prior audits may give the examiner a better insight at the fraud at hand.

In this case, the documentation that would need to be collected would be bank statements, copies of checks, copies of accounts receivable and accounts payable reports, open invoices, and internal and external emails. Bank statements of the accounts where the check is being cashed from will give a copy of the check, time and date stamp, and signatures. Having this documentation can give us a timeline of how long the three employees were taking the unauthorized checks. As the examiner, I would also request any and all emails from Garcia, Licata, and Deloach. Using these emails can help pinpoint who was involved, what the exact plot 7 was, and when it was happening. I would use this information in an interview to get an admission from the employees.

Interview- Witness Who In the case of Deloach, Garcia, and Licata, I would want to interview their colleagues as witnesses. I would like to know how these three performed at work, how they acted at work, and how they conducted their every day duties. Understanding how people perform and act at work can tell a lot about a person and the best people to give that insight are the colleagues. I would determine the importance of the information by determining relevance and credibility of the witness. I would want to talk to the people of the accounts receivable and the account payables departments, as they would have the most insight and information.

Information/ Witness The information I would obtain from the witnesses would be character information, managerial information, and personal information. I would want to know the employees daily duties according to their colleagues, and how well they performed those duties. I would also want to obtain any red flags that their co-workers may have picked up on. These red flags would be behavioral based or work based. Deloach, Licata, and Garcia lived very lavish-lifestyles, so I would want to ask the witnesses about their knowledge on that.

The questions I would ask would be informational questions. Questions like; “what did you witness?” or “do you know who was involved?”. These questions are vague but they allow the witness to speak freely on their behalf. I would also ask “how did Deloach (Garcia and 8 Licata) perform on their day to day duties?” or “did Deloach (Garcia or Licata) mention anything about their recent estate sale?”. These questions may open up a conversation that the witness had had with the employees that may not have seemed suspicious at the time.

Interview- Suspect Approach The approach of an interview is very important and must be conducted appropriately. I would take the fraud theory approach. Using this approach allows me to develop a theory of what might have happened based on the witness information. This approach must be conducted appropriately because it determines if the fraud is provable or not. The fraud theory approach involves the following steps; analyzing available data and information, creating the hypothesis or theory, testing that hypothesis or theory, and refining and amending the hypothesis or theory ( Planning and Conducting a Fraud Examination , 2016). This approach is widely used because it allows the investigator to go into an interview with the right tools in order to get a confession or admission.

Types of Questions/Rapport/Admission of Guilt There are five general types of questions that can be asked during an interview. These questions can be introductory, information, assessment, closing and admission- seeking questions. All types of questions should be used in an interview but depending on the case, some question-types should be more focused on. In this case, I would use all the question-types when interviewing the suspect(s). 9 The first thing I would do would be develop a rapport with the interviewee. Developing a rapport is important because it sets the tone for the interview. I would start developing the rapport by asking introductory questions. Introductory questions such as “Hi there, I am Payton.

Have we met before?” or “I am working on an assignment and I was hoping you would sit with me for a little while so I can gather some information?”. These questions clearly define who I am and why I am there.

I would then start the informational-questions segment. These questions are used to gain information about the suspect and what they do. These questions can be “What is your current position at PBS&J?” or “What does your position require you to do? What are your daily responsibilities?”. Asking these questions allows the suspect to explain what they do and what their job entails. Their answers allow me to better understand their job title from their point of view.

Next would come the closing questions. It seems premature to put the closing questions 3rd, but it closes out the general questions which allows me to dive into the investigative questions. These questions wrap up the informational questions which leave no doors open.

Asking questions like “You’ve known your colleagues for 5 years, is that correct?” or “do you suspect any of your colleagues could have falsified any documents?” lets the interviewee understand why the examiner is there.

Then comes the assessment questions. The assessment questions now dig into the operations and the internal controls of the company. “Are you the only one who handles invoices with vendors?”, “what are the internal controls?” and “does anyone have to sign off on checks?” gives a better understanding of the fraud that had occurred. 10 The final questions that would be asked are the admission seeking questions. Admission seeking questions are used to get a confession. These questions must be conducted carefully or else they can not be used in the case. The correct way to ask these questions can be “Is there anything you would like to tell me about the previous invoices?” and “our investigation clearly shows that you took company assets without permission. Why Did you do it?”.

Fraud examiners must conduct these interviews in a timely manner and must be thorough and accurate. If the questions and the interview is not accurate, the admission, if given, may not be used.

Communication Results of the Investigation I have discovered that there was many years of embezzlement happening with the CFO and with two employees of the Accounting/ Finance department. My findings had discovered that Scott Deloach would cash checks given to him by Rosario Licata from an unauthorized checking account. Then Licata and Deloach had a mutual agreement with Maria Garcia and would then split the cash between the three of them. They would process these checks by creating false invoices. My findings have concluded that this embezzlement has been going on for many years. After interviewing their colleagues, I have come to the conclusion that these three lived lifestyles well beyond their means. I would recommend prosecution to go further.

Fraud Investigator’s Responsibilities Information given must be clear, accurate and unbiased. Information must be given orally or written, but written has been proved to be better as it is clear documentation. This information 11 may need to go to stakeholders, the public, all involved in the case, the media, and much more.

Providing clear and accurate information will make the process easier for the state and federal prosecutors. Establishing a solid report of findings also gives the fraud investigator a good name and will help them succeed later on. 12 References Investigation Section . (n.d.). ACFE.

https://www.acfe.com/uploadedFiles/Shared_Content/Products/Books_and_Manuals/INT RO%202012%20-%20final.pdf Planning and Conducting a Fraud Examination . (2016). ACFE.

https://www.acfe.com/uploadedFiles/Shared_Content/Products/Books_and_Manuals/U.S.

%20Sample%20Chapter_2016.pdf Summary of the Rules of Evidence . (2018, March 29). FindLaw.

https://corporate.findlaw.com/litigation-disputes/summary-of-the-rules-of-evidence.html Moody, M. (2018, May 26). The 6 Most Common Behavioral Red Flags of Fraud . ACFE Insights. https://www.acfeinsights.com/acfe-insights/6-common-red-flags- fraud#:~:text=Unusually%20close%20association%20with%20a,involving%20shrewd %20or%20unscrupulous%20behavior The PBSJ Corporation - Company Profile, Information, Business Description, History, Background Information on The PBSJ Corporation. (n.d.). Reference for Business.

https://www.referenceforbusiness.com/history2/60/The-PBSJ- Corporation.html#:~:text=1973%20The%20PBSJ%20Corporation %20is,1980%20Architectural%20services%20are%20added.

Three former PBSJ employees pleaded guilty to fraud. (2006, September 29). Tampa Bay Business Journal.

https://www.bizjournals.com/tampabay/stories/2006/09/25/daily55.html Watson, B. D. (2020, June 25). Expect an Uptick in Employee Embezzlement Following COVID-19 Lockdowns . Cozen O'Connor. https://www.cozen.com/news- 13 resources/publications/2020/expect-an-uptick-in-employee-embezzlement-following- covid-19-lockdowns