Corporate Investigations, Second Edition

Compiled by Reginald J. Montgomery, CLI, CPP, CFE, CP, CST and William J. Majeski

Detailed Table of Contents

Dedication
Preface
Acknowledgments

Part I: Investigative Tools, Techniques and Working Relationships

Chapter 1: FCRA and Corporate Investigations
Bruce Hulme
1.1 Introduction
1.2 Definition
A. Terminology
B. Historical application
1.3 Pre-employment and Workplace Investigations
A. FCRA provisions
B. FCRA terms
1. Consumer
2. Consumer report
3. Employment purposes
1.4 The Opinion Letter
1.5 Best Evidence Requirement
1.6 Mandated Disclosure
1.7 Civil Liability
1.8 Enforcement Powers
1.9 Consumer Reporting Agencies
1.10 Legislative Relief
1.11 Law Enforcement Issues
1.12 Attorney-Client Privilege
1.13 Protection
1.14 Attorney Investigators
1.15 Outside Investigators
1.16 EEOC and Other Federal Laws
A. EEOC
B. Drug-Free Workplace Act and Occupational Safety and Health Act
C. Department of Health and Human Service Office
D. Foreign Corrupt Practices Act
E. Food, Drug and Cosmetic Act
F. Whistle Blower Act
G. Privacy issues
H. Gramm-Leach-Bliley Act
I. Other anticipated legislation
1.17 A Review of the FCRAãConsumer Reports and Investigative Consumer Reports
Endnotes
Appendix

Chapter 2: Assessing Credibility: ADVA Technology, Voice and Stress Analysis
John Palmatier
2.1 Introduction
2.2 Deception and the Voice
A. Overview
B. The detection of deception by voice stress analysis: The literature
C. The CVSA and voice stress analysis: Field validity study results
D. Vericator: Detecting deception using voice analysis
E. Differences in the technologies
F. Does the ADVA technology work?
2.3 Conclusions
References

Chapter 3: Profiling for Corporate Investigators
Raymond M. Pierce
3.1 Criminal Personality Profiling
A. Specific uses
B. History and development
C. How criminal personality profiling assists corporate investigations: Evaluating threats
3.2 Prevention of Workplace Violence
3.3 Loss Prevention and Leaks of Sensitive Information
3.4 Evaluating Clients or Adversaries during Negotiations

Chapter 4: Surveillance
John Belrose

Chapter 5: Electronic Eavesdropping and Corporate Counterespionage
Kevin D. Murray
5.1 Introduction
5.2 Why is Espionage Growing?
5.3 What You Need to Know
5.4 Retaining a Consultant
A. Finding the right consultant
B. What to expect from your consultant
C. The consultant's qualifications
D. Additional criteria
5.5 Electronic Countermeasures Sweep
5.6 Electronic Eavesdropping Detection -- How It's Done
A. The background interview
B. A survey of current security measures
C. The visual examination
D. The acoustic ducting evaluation
E. Inspection of telephone instruments
F. Inspection of telephone wiring
G. Inspection of junction blocks
H. Telephone room inspection
I. Phone line electrical measurements
J. Time domain reflectometry analysis
K. Nonlinear junction detection (NLJD)
L. Radio frequency spectrum analysis
M. Thermal emissions spectrum analysis
N. Additional tests
5.7 The Final Report
5.8 Espionage from Fifteen Other Angles
A. Direct entry
B. Trash collection
C. Information left in plain view
D. Tapping into computers
E. Dictation tapes
F. Poor key control
G. Attention-getting nomenclature
H. The carbon-film printing process
I. Asking the employees
J. Cheap locks
K. Spies often use the tools available
L. The information hourglass
M. Conversion of legitimate system features for eavesdropping
N. Uncontrolled links in the communications chain
O. Wireless communication vulnerabilities
5.9 No Longer Helpless
5.10 What to Do If You Suspect You Have a Problem
5.11 A Final Word

Chapter 6: Voice Identification: The Aural/Spectrographic Method
Tom Owen and Michael C. McDermott
6.1 Introduction
6.2 The Sound Spectrograph
6.3 The Method of Voice Identification
6.4 History
6.5 Standards of Admissibility
6.6 Research Studies
6.7 Conclusion
List of Cases
Endnotes
References
Appendix: Summary of Spectrographic Voice Identification Studies

Chapter 7: The Statement as a Crime Scene: Low-tech Tools for Corporate Investigations
Gerald R. (Gary) Brown
7.1 Introduction
7.2 Historical Perspective
7.3 Behavioral Profiling
7.4 Form Variance Analysis (TM): "The Common Man's Lie Detector"
7.5 Content Analysis
A. Introduction
B. Content analysis -- the nitty gritty
7.6 The Key Considerations and Questions in Content Analysis
7.7 The Statement: The First Step, Not the Last
A. The virgin statement
B. Benefits of statement analysis
7.8 Key Questions for Detecting Truth and Deception
A. Introduction
B. Obtaining a statement
C. Cautions when using statement analysis techniques
D. Reasons for using statement analysis
7.9 E-mails Analyzed
7.10 Statement Analysis in Other Languages?
7.11 Using Third-Party Experts
7.12 Summary
Endnotes

Chapter 8: The Art and Science of Communication during an Investigation
William J. Majeski
8.1 Introduction
8.2 The Importance of Communication
A. Introduction
B. The nature of communication
C. Perception
D. Verbal and nonverbal
E. Characteristics of communication
F. Some added complications
G. The interview
H. Looking for hidden messages
8.2 Conducting the Interview
A. Purpose of the interview
B. Listening
C. Classifying listeners
D. Ability and effort
E. Words
F. The observation of body language
G. Understanding your own body language
H. Communication chess
I. Structure of the conversation
J. Pre-interview preparation
K. Creating the proper conditions for an interview
L. Think before you say and do
M. Know the facts and circumstances
N. Know the person that you're speaking with
O. Psychological deficiencies or weaknesses
P. Initial impressions
Q. Maintaining control
R. Structure of conversation
8.3 Understanding the Use of Polygraph in the Corporate Culture
A. History
B. Modern polygraph tests
C. The examination
D. Is it appropriate?
E. Pre-test interview
F. The test
8.4 Conclusion

Chapter 9: Doing Business with Your Experts
Reginald J. Montgomery
9.1 Introduction
9.2 What Is an Expert?
9.3 Need
9.4 The Expert's Credentials
9.5 Retaining the Expert
9.6 Selecting the Appropriate Expert
9.7 Professional Conduct
9.8 Legal Considerations
9.9 Reports
9.10 Maintaining a Professional Reputation
9.11 Testimony
9.12 Summary
Endnotes

Chapter 10: The Changing Role of Law Enforcement in Corporate Investigations
Robyn R. Mace
10.1. Introduction
10.2. Historical Overview
A. A brief history of private security
B. A brief history of public policing
C. The security sector: law enforcement and private security
10.3. Strengthening the Security Sector
10.4 The Security Sector in the Twenty-First Century
A. National, civic and worklife issues
B. Threat assessment and mitigation
C. Disaster management and recover
D. Design and prevention
10.5 Toward an Enterprise Security Sector
Endnotes

Part II: Due Diligence and Forensic Accounting

Chapter 11: The Due Diligence Investigation
Don C. Johnson
11.1 Due Diligence
A. Definition
B. A historical perspective
11.2 Business and Investment Losses
11.3 Case Studies
11.4 Standards of Care
11.5 The Due Diligence Program
11.6 Terminology
11.7. The Due Diligence Team
A. The lawyer
B. The accountant
C. The investigator
11.8 The Investigation
A. Definition
B. Business and media database research
C. Public record research
D. Direct contact with industry, government and confidential sources
E. Personal disclosures and authorizations
F. Premises inspections and site surveys
11.9 Caveat Actor
A. Definition
B. Investigator beware
C. Investigator's audit trail checklist
11.10 Conclusion
Endnotes

Chapter 12: Forensic Accounting and Financial Fraud
Robert J. DiPasquale
12.1 The CFE Study
A. Scope of the CFE study
B. Summary of the Association's report
1. Cost of fraud
2. The perpetrators
3. Losses
C. Victims
D. Methods
E. Recapitulation
12.2 Reconstructing Financial Records
A. Types of records involved
B. The investigation
1. Lost or destroyed records
2. Interviews
3. Additional procedures
C. Analysis of the records
D. Checklists of records
1. Books of original entry -- business records
2. Other business records
3. Agreements
4. Computer and electronic files
5. Personal books and records
12.3. Common Scams Perpetrated against Companies
A. Fictitious employees
1. Overview
2. Other characteristics of fictitious employee scams
B. Fictitious vendor scams
1. Overview
2. Techniques for identifying fictitious invoices
3. Review of accounting records
12.4 Investigating Front Company Scams
A. Front companies organized to divert assets and funds
B. Front companies used to disguise a successor company
1. Organizational considerations
2. Operational considerations
3. Related-party transactions
12.5 General Procedures
12.6 Tax-Related Issues
12.7 Kickbacks
A. Inflated purchase price kickback
B. Deflated sales price kickback
C. Bad debt write-off kickback
D. "Red flags" for kickbacks
12.8 Checklists to Identify Potential Financial Motives to Commit Arson
A. Personal issues
B. Business issues to review
C. Investigate diversions of substantial assets to the other entities
D. Other
Endnotes

Chapter 13: Net Worth Application in Corporate Investigations
Al Ristuccia
13.1 Introduction
13.2 Net Worth Calculations
A. Net worth calculations in corporate investigations
B. What is net worth?
13.3 What Are Assets?
13.4 What Are Liabilities?
13.5 Net Worth versus Income
13.6 Adjustments to the Net Worth Computation
13.7 How to Apply Net Worth to Corporate Investigations
13.8 Summary

Part III: Types of Corporate Risks

Chapter 14: Environmental Business Risks: A Legal Investigator's Consultant Role
Larry R. Troxel
14.1 Introduction
14.2 The Usefulness of an Environmental Consultant: Four Examples
14.3 Due Diligence
A. Introduction
B. Taking the necessary steps
1. Set up a due diligence file
2. Develop a policy statement
3. Conduct random inspections
4. Know your company's waste
5. Conduct audits
6. Establish a hotline
7. Train your employees
14.4 Protective Measures
14.5 The Agency Visit or Inspection
14.6 Corporate Response Plan
A. Agency meeting or screening
B. Agency conferencing
C. Notify corporate counsel
D. Media access
E. Monitoring the inspection or search warrant process
F. Confidential and privileged documents
G. Agency personnel-employee contacts
H. Closing conference
I. Agency visit in-house review
J. Importance of an effective compliance program
14.7 Corporate Liability

Chapter 15: Intellectual Property Theft
Julius Bombet and Matthew Buchert
15.1 Introduction
15.2 The Law
15.3 Patents
15.4 Patent Investigations
15.5 Copyrights
15.6 Copyright Investigations
15.7 Trademarks
15.8 Trademark Investigations
15.9 Trade Secrets
15.10 Trade Secret Investigations
15.11 Other Intellectual Property
15.12 Targeting
15.13 Conclusion
Glossary
References

Chapter 16: Investigating the Sexual Harassment Case
Grace Elting Castle
16.1 Introduction
16.2 The Civil Rights Act of 1964 (CRA)
16.3 The Supreme Court Decisions of 1998
16.4 "The Letter"
16.5 What Is Sexual Harassment?
16.6 What Is a Hostile Work Environment?
16.7 Who Has to Comply?
16.8 Who Enforces These Laws and Rules?
16.9 Accepting the Assignment
A. Your business preparation
B. Your personal preparation
16.10 The Preliminary "To Do" List
16.11 Discussion of the Appendix
A. The FTC letter
B. EEOC requirements
C. Laws of the state (of the incident)
16.12 History of Prior Claims against the Corporation
16.13 The Current Case
16.14 Investigation Tips
16.15 Cultural Differences
16.16 Conducting the Interviews
16.17 Additional Tips
16.18 Preparing the Report
16.19 Conclusion
Endnotes
Appendix

Chapter 17: Computer Forensics
Harold F. Coyne, Jr.
17.1 Introduction
17.2 Hiring Process
17.3 Communication
17.4 Description of Equipment
17.5 Procedure for Copying Information Forensically
17.6 Forensic Copying
17.7 Examining the Data
17.8 Conclusion

Chapter 18: Investigating Internal Theft in a Small Business
Paul J. Ciolino
18.1 Introduction
18.2 The Initial Conference with the Client
18.3 Initial Investigative Steps
18.4 Undercover Operations
18.5 Electronic Surveillance
18.6 Surveillance
18.7 Interviews and Interrogations
18.8 Summary

Chapter 19: Product Diversion
Reginald J. Montgomery
19.1 Introduction
19.2 Diversion Is Not Theft
19.3 How Diversion Occurs
19.4 Diversion versus Other Forms of Product Abuse
19.5 The Four Areas of Diversion
A. Charity
B. Closeout or counterfeit dating
C. Market diversion
D. Dated product
19.6 Indicators of Diversion
19.7 The Role of the Investigator
A. Identify the diversion
B. Tracking suspicious sales
C. Using informants
D. Investigating through the sales force
19.8 Countermeasures
A. Positive action
B. Regular checkups
19.9 Examples
19.10 Prevention
References

Chapter 20: Employee Crime Claims
Jonathan Turner
20.1 Employee Crime
A. Overview
B. Why are employees dishonest?
C. Motivation
D. Opportunity
E. Justification
20.2 What Can Be Done?
A. Policies and procedures
B. Internal controls
C. Auditing and testing
D. Crime insurance
1. Limits and applicability
2. Deductibles
3. Riders
20.3 Making the Process Work
A. Putting the right systems in place
1. Hiring
2. Review the hiring process
3. Apply the process beyond hiring
B. Testing the organization
C. Responding to dishonesty
D. Coordinating the response
E. Identifying fraud losses
F. Assembling the team
G. Identifying the objectives
1. Overview
2. Criminal prosecution
3. Civil remedies
H. Managing the investigation
I. Preparing a claim
J. Filing the claim
K. Proof of loss
20.4 Conclusion

Chapter 21: Retail Loss Prevention
Jeffery Richardson, Sr.
21.1 Introduction
21.2 Shrinkage in the Supermarket Industry
21.3 Conclusion

Chapter 22: Investigating "Bust-Out" Fraud
Todd Scheffer
22.1 "Bust-Out" Defined
22.2 The Investigation
22.3 Conclusion

Chapter 23: Parking Lot Investigations
Ben Scaglione
23.1 Key Components to a Successful Investigation
A. Interviewing and interrogation
B. Collecting evidence
C. Photographs
D. Report writing
E. Secondary information sources
23.2 The Incident Investigation
23.3 The Accident Investigation
23.4 The Cash or Asset Audit
23.5 Conclusion
References

Chapter 24: Security Liability
James P. Carino
24.1 Introduction
24.2 Keys to Successful Litigation Defense
A. Organization and responsibility
B. Security guard force
C. Guard force suitability and supervision
D. Contract
E. Security training
F. Incidents and crime history
G. Written security policies and procedures
H. Guard post orders
I. Security awareness training
J. Signs
K. Lighting
L. Security equipment and electronic devices
M. Other factors
N. Written directives
24.3 The Impossibility of Absolute Security
24.4 The Security Plan and Civil Case Examples
24.5 Conclusion
Endnotes

Chapter 25: Investigation of Breach of Contract Cases
Kitty Hailey
25.1 Introduction
25.2 A Short Course in Contracts
A. Offer and acceptance
B. Oral or written
C. Express or implied
D. Legality
E. Expectation
F. Reliance
25.3 The Investigation
A. Investigator's role
B. The UCC
C. Initial steps in the investigative procedure
1. Contract with the client
2. Authorization
3. Clearance to communicate
4. Understand the terms of the original contract
5. Understand the scope of the breach
6. Non-compete clauses
7. Confidentiality agreements
8. Background work
9. Discovery
10. Client interview
C. The investigation begins
1. Organize the data
2. Field investigation
3. Organize all data
4. Review-review-review
D. Other considerations
25.4 Summary
25.5 Examples of Contract Investigations
Endnotes

Chapter 26: Insurance Fraud and the Defense Attorney
Todd DeStefano
26.1 Introduction
26.2 Combating Fraud
26.3 Types of Fraud
A. Insurance Fraud
B. Workers' compensation
1. Proving the workers' compensation fraud case
2. Indicators of fraud
3. Surveillance
4. Usual injuries
C. False claims based on inadequate security
D. Premises and product liability claims
E. Opportunity fraud and planned fraud
1. Opportunity fraud
2. Planned fraud
F. Antifraud programs
1. Squat-and-swoop cases
2. Investigating the squat-and-swoop case
G. Long- and short-term disability claims
26.4 Disability Management Program
A. Overview
B. Investigation
C. Using surveillance
26.5 Conclusion

Part IV: Dealing with Threats and Violence

Chapter 27: Corporate Executive Protection
David Roberts
27.1 Introduction
27.2 Threat Assessment Techniques
A. Introduction
B. Definition
C. Threat assessment techniques
D. Principles
1. The assessment must be clear
2. The assessment must be logical
3. The assessment must be accurate
4. The assessment must be relevant to the individual
E. Methodology
1. Aim
2. Procedures
3. The most likely place for an attack
4. The most likely time for an attack
5. The target: the personal protection officer
6. Enemy identification
7. Study the enemy
8. Advance party work and timings
9. Conclusions
27.3 Planning a Protection Operation
A. Close personal protection operations
B. Planning a close personal protection operation
1. Introduction
2. Essential considerations
27.4 Sample Report
27.5 Conclusions

Chapter 28: Contingency Planning for the Terrorist Attack
Sal LiFrieri
28.1 Defining a Terrorist and Terrorist Activity
A. Introduction
B. Who is a terrorist?
1. Cells
2. Patriot and militia groups
28.2 Intelligence-Gathering Approaches
A. The "box" rule
B. Approaches to intelligence gathering
1. The crystal ball approach
2. The proactive approach
28.3 Proactive Approach Positives!
28.4 Reactive Approaches
A. Off-site response
B. Press strategy
1. The use of lawyers
2. Canned press responses
28.5 Proactive Approaches and Data -- Gathering Intelligence from Communications
28.6 Identifying Trends
A. Review attack strategy
B. Analyze the information from the threat assessment worksheet
28.6 The Risk Assessment Process
A. Capabilities
B. Threat and vulnerability
C. Risk versus capability
Appendix: Facility Survey Checklist

Part V: Geographic and Cultural Considerations

Chapter 29: Latin Investigations
Peter F. Wade
29.1 Surnames
29.2 Significant Dates
29.3 National Identity Cards: Cedulas
29.4 Identifying U.S. Citizens in Latin America
29.5 Public Record Research
29.6 Verification of Employment, Education and Criminal and Civil Records
29.7 Business Terms
29.8 A Word about the Police

Chapter 30: International Investigations and Due Diligence
Jonathan Turner
30.1 Introduction
30.2 Globalization Brought Changes
A. Language, culture and ethnicity
B. The legal landscape
C. Geography: distance matters
D. Managing international investigations
E. "419" scams: Nigerian fraud letters
F. International "investment" groups
G. South American division of a U.S.-based multinational
30.3 Key Controls Are Weakened
30.4 Merger and Acquisition (M&A) Activities
30.5 Limiting Your Risk
30.6 Due Diligence
30.7 Mergers
30.8 Acquisitions
30.9 Conclusions

About the Compilers
About the Contributors
Index

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