Question 1: What is fraud? How to distinguish fraud from error?

Fraud is any activity that relies on deception in order to achieve a gain. Fraud
becomes a crime when it is a “knowing misrepresentation of the truth or concealment
of a material fact to induce another to act to his or her detriment” (Black’s Law
Dictionary). In other words, if you lie in order to deprive a person or organization of
their money or property, you’re committing fraud.
(https://www.acfe.com/FRAUD-RESOURCES/FRAUD-101-WHAT-IS-
FRAUD/)
The difference between fraud and error lies in the intention. Simply put, fraud
is an act that is intentionally carried out to benefit certain individuals or groups and
causes detrimental effects to others, while errors are acts of unintentional mistake or
negligence.
(https://www.integrity-malaysia.com/how-to-distinguish-between-fraud-and-
error/#:~:text=What's%20the%20difference%20between%20the,of%20unintentional
%20mistake%20or%20negligence)
Question 2: Define and give an example for each category.
Three categories of fraud (ACFE): Asset mistakes/ appropriation, Corruption
and Financial Statement Fraud.
(https://business.fau.edu/centers/center-for-forensic-accounting/public-resources-on-
fraud/fraud-in-businesses-and-non-profits/occupation-fraud/#:~:text=Occupational
%20fraud%2C%20as%20stated%2C%20can,corruption%2C%20and%20financial
%20statement%20fraud)
1. Asset mistakes/ appropriation: is the most common form of occupational fraud but
the least costly on average. It occurs when an employee improperly uses an
employer’s asset for personal use. It is not as simple as money being stolen by simple
theft as it can also occur when the employee borrows or misuses money for personal
reasons. Common cash theft is the simplest form of asset misappropriation. In addition
to this simple form, more sophisticated ways of asset misappropriation may occur in
three areas of an organization: its revenue cycle, expenditure cycle, and production
cycle.
Example: Feeding Our Future COVID-Relief Fund Fraud Scheme (2022)
(https://www.justice.gov/opa/pr/us-attorney-announces-federal-charges-against-47-
defendants-250-million-feeding-our-future)
In September 2022, the U.S. Department of Justice arrested 47 people
connected to Minnesota nonprofit ‘’Feeding Our Future’’ for their involvement in a
$250 million COVID-relief fund fraud.
 The scheme targeted the Federal Child Nutrition Program of the U.S.
Department of Agriculture (USDA). Among those arrested was the nonprofit’s
founder and executive director, Aimee Bock.
Means: The qindividuals involved in this fraud scheme had direct access to
critical data and systems related to the Federal Child Nutrition Program. Their
positions provided them with the necessary insights into how the program operated, its
funding mechanisms, and the loopholes that could be exploited. They used fake
documents, including inflated invoices and attendance records to fabricate the number
of children served and meals provided.
Motive: The primary motive behind this large-scale fraud was financial gain.
They used the stolen money to purchase luxury items like cars, houses, jewelry, and
even coastal resort property abroad.
Opportunity: The opportunity for this fraud was significantly aided by the
urgency to distribute COVID-19 relief funds, coupled with inadequate controls and
oversight. The relaxation of standards for participation in the Federal Child Nutrition
Program during the pandemic and the allowance for for-profit entities to partake
created vulnerabilities that the fraudsters exploited. Lack of proper financial oversight
within the nonprofit, such as not having an accountant on staff and insufficient board
oversight, also contributed to the scale of the fraud.
As of now, sixty defendants have been charged in this case, with fourteen
pleading guilty and no one yet sentenced.

2. Corruption is the second most common type of occupational fraud. The main form
of corruption consists of an individual exercising their undue influence upon others.
Examples of this form are conflicts of interest, bribery, improper gratuities, and
economic extortion. Corruption is mostly seen in bid rigging and kickback cases.
Example: Trinh Xuan Thanh Corruption Scandal (2018)
(https://vnexpress.net/duong-day-cua-ong-trinh-xuan-thanh-tham-o-13-ty-dong-bang-
cach-nao-3746634.html)
Corruption occured at Vietnam Oil and Gas Group (PVN) and Petroleum
Construction Corporation (PVC), which was performed by Former PVC chairman
Trinh Xuan Thanh and his accomplices.
In July 2011, Mr. Nguyen Anh Minh (then Deputy General Director of PVC)
was assigned to be in charge of the Vung Ang - Quang Trach Project Management
Board (in Ha Tinh). Mr. Trinh Xuan Thanh (Chairman of the Board of Directors of
PVC) and Vu Duc Thuan (General Director of PVC) handed over Nguyen Anh Minh
to direct Luong Van Hoa (Director of the Project Executive Board of Vung Ang -
Quang Trach Thermal Power Project) to transfer money to use.
From September 28, 2011 to February 23, 2012, Mr. Luong Van Hoa, along
with Le Thi Anh Hoa, Nguyen Thanh Quynh (Director and Chief Accountant of
Quynh Hoa One Member Limited Liability Company), made and signed four tax
fraud contracts. to hire the company to carry out the items to withdraw a total of more
than VND 13 billion from the Board of Directors.
Of the 13 billion VND, Mr. Trinh Xuan Thanh received 4 billion VND, Mr. Vu
Duc Thuan received 800 million VND, Nguyen Anh Minh received 3.6 billion VND,
Bui Manh Hien received 400 million VND, Luong Van Hoa received 757 million
VND. Le Thi Anh Hoa and Nguyen Thanh Quynh inherited nearly 2 billion VND.
The remaining 1.5 billion VND was shared by Mr. Trinh Xuan Thanh, Vu Duc Thuan,
Nguyen Anh Minh and Bui Manh Hien.
3. Financial Statement Fraud occurs when an individual manipulates an
organization’s financial statements. This kind of fraud not only damages the company,
but it also damages lenders, shareholders, and others who rely on financial statements
to make decisions. Financial statement fraud is usually perpetrated by senior
managers. Although it is the least common form of occupational fraud, on average
financial statement fraud is the most costly
Example: Waste Management Scandal (1998)
(https://www.linkedin.com/pulse/when-numbers-lie-cautionary-tale-from-waste-incs-
1998-moses-g)
Waste Management Inc. is a publicly-traded US waste management company.
In 1998, the company’s new CEO, A Maurice Meyers, and his management team
discovered that the company had reported over $1.7 billion in fake earnings.
The Securities and Exchange Commission (SEC) found the company’s owner
and former CEO, Dean L Buntrock, guilty, along with several other top executives. In
addition, the SEC fined Waste Management’s auditors, Arthur Andersen, over $7
million. Waste Management eventually settled a shareholder class-action suit for $457
million.