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U.S. Postal Inspection Service 1979- 2004
Team Leader, Financial Crimes and Money Laundering, U.S. Postal Inspection Service, Philadelphia Division (Retired) Supervised Hundreds of Internal Employee Criminal Investigations in 26 Year Career Certified Public Accountant Certified Fraud Examiner
Director, Corporate Compliance, AlliedBarton Security Services 2004-2006
Largest American Owned Private Security Services Provider– 48,000 employees $ 1.2 Billion Revenues Licensing & Regulatory Affairs Internal Corporate Investigations Sarbanes-Oxley Compliance Monitored Compliance with Corporate Code of Ethics Administered Whistleblower Hotline
SMART Business Advisory and Consulting, Philadelphia, PA, Senior Manager, Forensic Accounting and Litigation Support
CPA, CFE, Licensed Private Investigator Specializing in:
Fraud Examination White Collar Investigation Corporate Compliance Issues Whistleblower Hotline Advisory Services Financial Litigation Support
Sr. Manager, Department of Internal Audit Stratford, NJ Campus President of Philadelphia Chapter – ACFE 2007 ACFE Chapter of the Year Adjunct Professor of Accounting –La Salle University, School of Graduate Studies
Presentation contains my views-not that of UMDNJ
The HP Way Board Turmoil Discovery that Confidential Info Was “Leaked” Why it Was of Great Concern Who Was Hired to Investigate Tactics Used to Identify Leaks Outing the Source Importance of Executive Oversight
(“Tone at the Top”)
Civil & Criminal Action
Pump up Stock Price. 1939 A Core Ideology that Includes Corporate Culture with: A deep respect for the individual A dedication to affordable quality and reliability A commitment to community responsibility A view that the company exists to make technical contributions for the advancement and welfare of humanity Contrast with everyone’s current corporate goals: Increased Earnings. Reduce Costs.Key Areas to be Explored Acceptable Investigative Techniques What’s in Public Domain Record Ownership Issues Expectations of Privacy in Workplace Employee Ethics and Code of Conduct Importance of Continual Monitoring of Outsourced Investigations “The HP Way” Founded by Bill Hewlett and David Packard – January 1.$ 87 Billion in Revenues for 2006 One of 30 stocks comprising the Dow Jones Industrial Average 4 . Currently # 11 on Fortune 500 .
. . . . . . . . . . . . . Jr. . . . . . . Kleiner. . $ 212. . .) . . . . . . EVP & General Manager. . . . . . . . . . . . . . . Babbio. . . . . . . . . . . (Retired HP Chairman of Board) . . . . .991 Thomas J. . . . . . . . . . . . . . . . . . . . Medtronic. . Ryan. . . . . . . . . . . . . . . . . . . . . . . . . United Health Group). . . . . . Chairman & Sr. .000 Richard A. . .. . . . . . Retired SVP & CFO. . JH Media Consulting. . . . . .(Director. $ 253. . . . . $ 220. . . American Media. ……………. . . . . . . .000 5 . . $ 246. . . . . . . . . . . . . . . . .192 Robert L. . . . . . . . . . . . . . Chairman of the Board . Perkins General Partner. Keyworth II. Salhany President & CFO.399 Lawrence T. . . . …………. . . . . . . . . . . .399 George A. . . .Inner Turmoil at HP Carly Fiorina appointed CEO -1999 May 2002 HP merged with Compaq Computer Heirs Walter Hewlitt and David Packard strongly opposed merger and subsequently left board Stock price stagnant $ 18-$22/share for three years after merger Carly Fioina fired as Chairman & CEO in February 2005 Patricia Dunn replaced Fiorina as Chairman HP DIRECTORS and COMPENSATION FOR FISCAL 2005 Name Patricia C. Fellow – Progress & Freedom Foundation . . . . . . . . . . . . (Director. . . .(Director ARAMARK) . . . Nokia Corp. . . . . Inc. . …………. .$ 216. . . . . .(Director. . . . . . . . . . . . . Perkins Investment Partnership . . . . . Hackborn. Medical Technology . . . . .000 Lucille S. . . . . . .. . . . . . . . . . . . . . . . . .. . . . . . . .$ 236. . . .. .$ 251. . . . . . . . . . .. Vice Chairman & President Verizon Communications . . . .. . . . . . . . Inc. . . . . . . . . . .. Dunn. ……………. . . . . . . . . . . News Corporation) .
two minority members and three technology geeks”. Social Responsibility and Regulatory Issues Technological Champions .What do we need to compete with Dell. IBM and other major competitors Compliance Group . ZDNet News 2/27/07 The Maltese Falcon 6 .Focused on Sarbanes-Oxley Compliance.Firmly understood technological goals and obstacles in marketplace.3 Separate Board Divisions Identified Guidance Group . Tom Perkins View of Board “…three women. Dunn wanted to eliminate.
What Happened at HP? 2004-2005.Confidential information only discussed in boardroom was revealed to several tech-industry publications and published Info so confidential. Chairman of Board Dunn Ordered Investigation to Determine Source of Leaks – Code Name: Kona (Location of Dunn’s Vacation Home) How it Began-2005 Carly Fiorina outed as CEO and Chair in January 2005 Confidential board discussions regarding Fiorina’s ouster were reported and published by several news organizations . COM & Wall Street Journal Investigation Launched by Dunn – Furious with Leaks Code Named – Kona (Location of Dunn’s Vacation Home) 7 . it could only have come from a board member Boardroom Leaks were Suspected by Patricia Dunn.CNET.
Perkins George A.Board Members Thomas J.Initial Targets. (Jay) Keyworth Robert Knowling Carly Fiorina Initial Attempts to Identify LeakerUnsuccessful Kona II – Continued In January 2006 Suspects: Perkins Perkins’ Wife Lucille Salhany Richard Hackborn Shane Robison (HP Chief Technology Officer) Patricia Dunn 8 .
H-P’s outside law firm Wilson Sonsini Goodrich & Rosati Note of Interest: Ann Baskins. is married to Thomas DeFilipps a partner at Wilson Sonsini Goodrich & Rosati 9 . the general counsel of H-P at the time of the investigation.Other Suspects Nine Journalists (CNET –WSJ) Two additional HP employees Larry Sonsini .
Boston.The Investigation Security Outsourcing Solutions.hired by De Pante to obtain private phone records Investigative Techniques Pretexting –Impersonating another individual in order to obtain personal information Contractors hired by HP posed as various members of the board and contacted wireless carriers to request their telephone records 10 . Gentilucci. MA operated by Ron DeLia was hired by Anthony R.Joseph and Matt De Pante was hired by DeLia to gather information (Personal Indentifier Information) Bryan Wagner – NE. Manager of Global Investigations for HP Action Research Group – FL.
including Board members. Pretexting.Personal Data Compromised 24 Individuals.750 phone calls made on 157 cellular phones and 413 landlines. Identity Theft 11 .Legal or Illegal? Gramm-Leach-Biley Act of 1999 makes it illegal to obtain someone else’s customer information using false. fictitious or fraudulent statements Federal Trade Commission Act provides FTC the authority to generally prohibit pretexting for sensitive consumer information Violation of 18 USC 1028. HP employees & Journalists Records Compiled Included: 1.
” Nye wrote to his boss. 2006 e-mail From: Kevin Hunsaker (Chief Ethics Officer) To: Anthony Gentilucci (Manager.January 30. but above board. Tony Gentilucci.. Kevin Hunsaker. all undercover operations.It leaves me with the opinion that it is very unethical at the least and probably illegal. We use pretext interviews on a number of investigations to extract information…in a sense.” Vince Nye’s Concern “I have serious reservations about what we are doing. and HP’s chief ethics officer. Global Investigations) KH: How does Ron (De Lia) get cell and home phone records? Is it all above board? AG: (De Lia’s investigators)”…call operators under some ruse…I think it is on the edge.. “.” KH: “I shouldn’t have asked.” "I think we need to refocus our strategy and proceed on the high ground course" (Feb 7) 12 .
before you hit the “Send” button 13 .. ethical. so please clean up your files before then Can we push the numbers here? (Insert CEO’s name here) is such a (insert unfavorable description here) I should never have put that in an e-mail Does anyone know of any good file deletion software? Things You Should Keep in Mind About e-Mails Like diamonds…e-mails are forever.Things You Should Not Say in an e-Mail: We just received word that we will be hit with a subpoena next week. personal implications to sending this e-mail Assume it will be identified and discoverable at a later time Think…. especially if you are on a network A good computer forensics specialist can probably recover any deleted e-mails and other private files from your non-networked hard drive What are the legal.
Who Submits Bill for Reimbursement – Generally Reasonable Expectation of Privacy – Pretexting Would Not Be Permitted Records Owned by Owner of Phone Need for Clear Corporate Policy and Procedures and Acknowledgment by Employee OK for Policy to Require Itemized Receipts 14 .Ownership of Records How is Ownership Determined? Phone Purchased by Company. Provided to Employee for Official Use and Company Pays Monthly Bill – No Expectation of Privacy – Generally Phone Records are Property of Company – There Could be Exceptions Ownership of Records Phone Purchased by Individual.
org Sec. zabasearch.Acceptable Investigative Tools/Techniques Reviewing/Cataloguing Print & Internet Media Postings Physical Surveillance (Public Property) Conducting Background Investigations Using Public Information Dumpster Diving (At curbside) Great Sources Zoominfo.com.com Archive.gov 10-Q & 10-K Reports Company Web Pages Choicepoint Lexis/Nexis Pacer County Clerk of Court Public Information 15 .
This computer mysteriously was recovered and analyzed with approval of HP 16 .Other Good Investigative Sources on a Computer E-mail reviews are an integral part of any internal investigation Temporary Internet Files Cookies Favorites History Unallocated Space OLK Directory Outlook PST Files Registry Activity Dubious Techniques Used Placing tracer software in e-mail addressed to a reporter to identify who he communicated with Forensic examination of a computer reported stolen by Board Member George Keyworth.
Bryan Wagner posed as multiple individuals under investigation.Social Engineering The Human Element The Weakest Link in Information Security Using Deceptive and Manipulative Tactics on Individuals to Gain Unauthorized Access to Information Examples of Social Engineering Attacks Closing time bank transaction on a Friday. Contacted cell phone carriers. Caller posing as credit card investigator in effort to obtain personal identifier information Caller posing as employee from same company from another city Phishing Schemes Auditing procedures should be testing for social engineering attacks 17 . presented bad check for cashing…could not locate driver’s license…just received traffic ticket Pretexting.
Expectations of Privacy Important to have Corporate Policy and Procedures Addressing Privacy Issues: Comprehensive IT Policy E-mail. internet usage. The Firm reserves the right to inspect. on occasion and without permission. or in his or her custody and care. 18 . the work area of all employees. ownership of computer files and company owned computer and cell phone access Expectations of Privacy of Personal Property brought on Company Property Potential of Video Surveillance in Public Areas Policy Example An employee shall be responsible for all Firm equipment and property assigned to or requisitioned by. voice mail.
Sentencing Commission Sentencing Guidelines 19 .S.Code of Ethics Importance of Employee Handbook – Detailing Corporate Policies Initial and Periodic Annual Ethics Training Policy of Disclosure of Employee Financial Conflicts Acknowledgment of Receipt and Understanding of Code of Ethics Importance of Whistleblower Hotline Tone at the Top – Must be Supported by Senior Management Issues of Importance –Sarbanes Oxley .U.
Worked at HP 24 Years Was not charged 20 .New York Times Report September 20. 2006 Ann Baskins – HP’s General Counsel resigned prior to testifying Exercised Fifth Amendment Rights Against SelfIncrimination at Hearing Received $ 3.7 Million Severance Pkg. 2006 HP conducted feasibility studies on planting spies in San Francisco news bureaus of two major publications: CNET The Wall Street Journal Included possibility of placing investigators acting as clerical employees or office cleaners House of Representatives Subcommittee Hearing September 28.
Total Cost of Investigation $ 325. 21 .000 Who Did It ? George Keyworth “If someone had simply asked. I would have told them I was the leaker”.
Tom Perkins Keyworth’s Key Ally Furious with tactics employed. especially stock price Perkins learned that his phone information had been provided by AT&T without his authority and assumed the role as………………A Whistleblower Perkins Resigned from the board in May after learning about the tactics used by HP's investigators. furious with Dunn and furious with direction the company was going. leading to the regulatory filing that revealed the investigators' use of pretexting Received an undisclosed financial settlement 22 . Pressured the company to publicly disclose the reason for his departure.
Down Payment Indictments to Date Chairwoman .Kevin Hunsaker Investigator .Ron Delia Investigator – Matthew De Pante Investigator – Bryan Wagner 23 .Patricia Dunn Chief Ethics Officer.
5 Million Creation of Privacy and Piracy Fund for Law Enforcement Activities Related to Privacy and Intellectual Property Rights Implementation of Corporate Governance Reforms at HP to Ensure Compliance with Ethical & Legal Standards 24 . Identity Theft Conspiracy Settlement Agreement Payment of $ 14.Charges Use of False or Fraudulent Pretenses to Obtain Confidential Information from a Public Utility Unauthorized Access to Computer Data.
Plea of No Contest (Misdemeanor) Kevin Hunsaker (Ethics Officer) Ron De Lia – Private Investigator Matt De Pante – Private Investigator Bryan Wagner – Pled Guilty to Identity Theft yet to be sentenced – Faces Mandatory 2 years Imprisonment More Directly and Actively Involved in Pretexting than Dunn No charges filed against Baskins Civil Settlements Feb 2008 John Markoff Peter Burrows. Diagnosed with Cancer in Poor Health Felony Charges Dropped after Completion of 96 Hours Community Service & Restitution.Criminal Progress to Date Patricia Dunn – All charges dropped. Ben Elgin and Roger Crockett 25 .
Five Additional Lawsuits Pending HP Current Financial Status Stock trading in low $ 20’s Stock now trading in low $40’s Mark Hurd – CEO made great progress in turning HP around 26 .
Hackborn George A. Richard A.” Was it ethical???? 27 . Salhany Four New Directors Appointed Mark Hurd – Chairman & CEO Thomas Nolan.RESIGNED 05/2006 Robert Knowling – RESIGNED 09/2005 Robert L. Perkins . Chairman of the Board – RESIGNED 09/2006 Lawrence T. They believed that what they were doing was right and legal. Keyworth II – RESIGNED 09/2006 Thomas J. Dunn. Jr.HP DIRECTORS – Then & Now Patricia C. Ryan Lucille S. Babbio.Hunsaker’s Attorney: “All these people acted in good faith.
Ongoing Federal Investigation Investigation is Continuing No comment by Feds Federal Laws Relating to Pretexting and Identity Theft are Generally More Specific than California State Law SEC Recently Announced They Ended Their Investigation Know Your Investigator Are they Licensed? Obtain their Bio and CV Obtain a List of References Vet their Qualifications and Experience Civil Actions Continually Monitor their Progress and Performance 28 .
philacfe.Lessons Learned from HP www.com/whats new SOS Newsletter – July 1999 29 .
PRACTICAL EXERCISE Hotline Call: Allegation Accuses Current Executive of Misconduct Executive Purchased a Capital Asset Asset Subsequently Provided to Client Client Billed by Executive’s Employer Employer Did Not Know Asset Was Owned by their Own Executive Asset Provided by Limited Liability Company –Authorized Vendor 30 .
Access to Records Identified Vendor as LLC W-9 Form –Request for Taxpayer ID Cross Matched TIN (SSN) to an Existing Employee Secretary of State – Corporate Formation Documents – Executive was Identified as President of the LLC Reviewed Official Personnel Folder of Executive Reviewed Corporate Code of Conduct & Employee’s Acknowledgment Payment History Scheduled Out Payment History to Vendor and Compared to Other Vendors Supplying Similar Assets Executive Personally Approved Payments to LLC under their control Payments Were Substantially Higher Than Market and Continued Much Longer Than Asset Was Actually Needed 31 .
Box – Can I Obtain Box Application? Pulled Copies of Cancelled Checks from Co.O.Investigative Steps LLC address was P.Can I Review e-mails? Some e-mails Were Sent From Corporate Account to Aol Account – Can I Review AOL e-mails? Executive Has Cell Phone Personally Purchased – Submitted Allowance on Expense Report – Can I Review Calls Records Traced to this Phone? 32 . All Checks Were Deposited to Same Bank Account Personnel Folder Contained Executive’s Banking and Direct Deposit Account Information – Same Account as LLC Access to Executive’s Banking Info? E-mail Review Executive Had Computer Assigned by Company – Can I Review Hard Drive? IT Policy Published – Policy States: All e-mails are Subject to Monitoring.
Motor Vehicle & Criminal History Databases Forensic Laboratories Court-Ordered Electronic Surveillance Grand Jury Subpoenas Search Warrants 33 .Surveillance Can I Follow in a Public Place? Can I Photograph? Install Covert Recording Equipment in Office? Pretexting? Nonconsensual Electronic Surveillance-Including: Recording Telephone Calls. Conversations w/o Consent of Party Recorded ----DON’T DO IT !!! Additional Steps for Criminal Investigation Use of Law Enforcement Databases.
Presentation to Law Enforcement Agencies/Prosecutors What is Company Policy? Is Company Willing to Prosecute? Company Policy Desire to Publicize Recovery of Loss Reimbursement of Investigation Reporting Identification of Internal Control Deficiencies and Corrective Action Taken 34 .
S. 35 .Sarbanes-Oxley /U. and (B) appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct. Sentencing Commission Guidelines The organization shall establish standards and procedures to prevent and detect criminal conduct. the organization shall take reasonable steps to respond appropriately to the criminal conduct and to prevent further similar criminal conduct. The organization’s compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program. After criminal conduct has been detected.
Conclusion Cost to HP’s Reputation Far Greater to that paid to Investigators Deep Price Paid for Loss in Corporate Reputation. Ability to Attract and Retain Leadership Don’t Do Anything Illegal to Tarnish Your Professional Reputation and That of Your Client All investigations should be conducted legally and ethically 36 . Employee Morale.
edu 37 . Department of Internal Audit University of Medicine and Dentistry of New Jersey Fred. CPA.cantz@umdnj. Manager. CFE Sr.QUESTIONS/COMMENTS ? Fred Cantz.
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