CASE 9.

FCS Fund Management is an investment marketing business with sales of over $10 million and with offices in Norwich, Connecticut, Dubai, and Hong Kong. It sold high-yield investment schemes, offering returns of up to 20 percent. FCS has clients in the United Kingdom, Europe, and the Middle East, many of whom are U.S. expatriates. FCS sold its investment products through salesmen operating in these locations. The CEO of FCS Fund Management, James Hammond, knew that many of the accounts were, or might be, misleading, false, or deceptive in that they purported to confirm the existence of genuine investments. Describe how the rationalization element of the fraud triangle is present in this case.

CASE 10. Len Haxton is the owner of a local CPA firm with four separate offices in a medium-size town. He and his wife started the firm 20 years ago, and they now have over 50 full-time employees. Recently, he discovered that one of his employees had stolen over $20,000 from the business during the past six months because of lax internal controls. Len was furious about the situation, but was uncertain about whether he should initiate a criminal investigation or just fire the employee. 1. List four reasons why Len should have the employee prosecuted. 2. List three reasons why Len might not want to seek prosecution of his employee. 3. If you were Len, what would you do?

CASE 13. A prominent New York fertility doctor was recently sentenced to more than seven years in prison for his insurance fraud conviction. Dr. Niels Lauersen received the seven-year, three-month sentence and was ordered to pay $3.2 million in restitution and an additional $17,500 in fines. Lauersen was convicted of pocketing $2.5 million during a 10-year period. Prosecutors say he stole from insurance companies by falsely billing fertility surgeries that were not covered by insurance as gynecological surgeries. Tearful former patients called out to Lauersen and wished him well as he was led away. He is now in prison. At his sentencing, the judge said, You were a medical doctor at the top of your profession and a public figure at the apex of New York society. Your fall from prestige has been Faustian in its dimensions. A probation report recommended that Lauersen be sentenced to 14 years imprisonment. Lauersen, 64, has lived in the United States since 1967, when he left Denmark. His lawyer, Gerald Shargel, argued for leniency, saying Lauersen had an honorable purpose: to make it affordable for women with fertility problems to have children. This is a very tough sentence. This is a very unusual case, Shargel said. His client had treated 14,000 women, delivering 3,000 children in a single year. 1. What pressure might have motivated Dr. Lauersen to commit fraud? 2. What opportunity might have allowed Dr. Lauersen to commit fraud? 3. How did Mr. Lauersen rationalize his fraudulent activities? 4. How could Mr. Lauersen have both helped his patients and not lied or stolen from the insurance company?