Criminal intent can make or break a business fraud case. Yes, intent can be hard to prove, but it’s also difficult to refute when every arrow seems to point to one person, often the business owner.
The case surrounding Theranos Founder Elizabeth Holmes is an example. “Holmes was found guilty on some charges but not others because the jury could not agree about whether she had deliberately deceived investors. Much of her case relied on proving her fraudulent intent,” explains Laura Harris, CFE, who is a research specialist with the Association of Certified Fraud Examiners. “While an individual might be under pressure or have potential incentives to commit fraud, it does not translate directly to the intention to commit fraud.”
Forensic accountants can play a crucial role in helping refute criminal intent by uncovering and examining patterns of behaviors and other clues. Was the business owner overly relying on the professional advice of others? Were they deceived by a bookkeeper or another employee or partner? What about negligence? How likely is it that the business owner eventually realized they made errors but never intended to cause harm?
You can bet the IRS will jump right into analyzing records and other evidence to prove the criminal intent they assume exists. Forensic accountants can mirror those efforts and more. When working as litigation support for the defense, these professionals are trained to find clues that rebut assumptions related to criminal intent. These breadcrumbs often uncover the evidence of harmful advice, intent among employees or partners instead, or negligence.
The work of a forensic accountant is part art and part science as they:
- Look for hidden transactions, manipulated records, or unusual patterns of behavior.
- Identify suspicious patterns, trace financial transactions, and reconstruct financial activities.
- Assess internal control systems to identify vulnerabilities and weaknesses that may be exploited by other individuals.
- Identify patterns of behavior and potential motives that help mitigate or refute fraudulent intent.
One of our most high-profile cases in this arena is the 1996 U.S. Senate inquiry into Swiss banks’ involvement in hiding assets from Holocaust victims. Steven Bankler was hired to consult for the U.S. Senate Banking Committee and was instrumental in uncovering more assets and victims than had previously been identified.
“The issues Bankler pointed out to the U.S. Senate Banking Committee could only have been uncovered through an expert and thorough understanding of forensic accounting principles, such as which assumptions to disregard,” we previously wrote. You can read the entire story here. Feel free to contact us with questions.