Government Employee Fraud Costs Taxpayers

Are you concerned about government employee fraud (cheating for profit) and embezzlement (misappropriation of funds)? After all… it’s your tax dollars!

Insider threats are a part of any organization in government and industry. According to Transparency International in their latest Corruption Perceptions Index report on public sector corruption – over 68% of 180 countries failed a passing grade. The USA performed reasonably well (75/100 score), but is not without its own challenges.

The FBI, using the Hobbs Act (among others) investigates, monitors and prosecutes for a wide variety of corruption including those happening in prisons, border crossing locations, elections and so on. This could impact federal, state or municipal governments. The largest municipal fraud in U.S. history was committed by Rita Crundwell, Treasurer and Controller for the the small city of Dixon, IL (population 15,000) from 1990 to 2012 where she embezzled over $54 million dollars of taxpayers money to support her lavish lifestyle.

A co-worker noticed an anomaly in the city’s financial report, advised the Mayor and the FBI was immediately called. This resulted in a 20 year conviction which Rita is currently serving.

But what about other government frauds we hear less about:

• Healthcare: schemes like upcoding, unbundling and kickbacks are rampant resulting in billions of dollars lost per year. Statistica reports a 5 fold increase in fraudsters since 2013
• US Navy: Leonard Francis (aks “Fat Leonard”) scammed $35 million in in defense contracts by buying off naval officials with expensive meals, liquor, women and bribes.
• US Postal Service: MIlton Cleve Collins pleaded guilty to major fraud against the U.S.
  government in connection with a $1.5 million construction contract.

Notable former politicians convicted include William Jefferson (LA) for 11 counts of bribery; mayor Larry Langford (AL) for conspiracy, bribery, fraud, money laundering and filing false tax returns; governor Rod Blagojevich (IL) was sentenced to 14 years in prison for 18 counts of corruption; Rick Renzi (AZ) convicted on 17 of 32 counts of corruption for personal gain; mayor Kwame Kilpatrick (MI) received 28 years for corruption; and Jesse Jackson Jr (IL) was convicted of illegally spending $750,000 in campaign money on personal items.

Guarding against “insider threats” like fraud are realities all government (and taxpayers) must face. Fraud takes many forms including forgery, mail fraud, conspiracy, false claims, embezzlement, theft, bribery, conflict of interest, etceteras. Fortunately, there are some measures that can be taken to mitigate the risk. These include:

• Whistleblower Hotline: set one up for anonymous callers.
• Education: the Association of Certified Fraud Examiners offers training in all types of fraud to maximize preventative measures and taking corrective action.
• Independent audits: have certified public accountants review your financial records.
• Computer monitoring software: keep a record of your employee activities at work to ensure they are not involved with suspicious behavior.

Let’s hope all levels of government take appropriate steps to avoid fraud and protect our tax dollars from future corruption and embezzlement.

-Steve Marshall is a contributing author on cybersecurity