FRAUD PRESENTATION SILKA GONZALEZ BLANCA WEGENER SILVIA OROZCO

United States v. Hernandez Case Number 97-Cr-832-Gold Case Number 97-Cr-832-Gold United States District Court Southern District of Florida Southern District of Florida

Case Introduction The case involves a scheme devised by a teller to steal cash from the bank where he was working, followed by the laundering of the stolen money. The case was initially investigated by the bank’s internal auditor, and it was referred to the FBI.

Legal Definitions Embezzlement - The fraudulent conversion of property from a property owner. The embezzler must have had the right to possess the item, and used that position of trust to convert the property. fraudulentpropertyfraudulentproperty Money Laundering - Financial transaction conducted knowing that the funds or property represented the proceeds of some unlawful activity and that the transaction is designated in whole or in part to conceal or disguise the nature, location, source, ownership or the control of the proceeds of such specified unlawful activity.

The defendant was hired as a teller at the Intercontinental Bank in Miami. The defendant opened an account with Intercontinental Bank where his salary would be directly deposited. The defendant had heard conversations in the bank about similar schemes, and he had been curious about how it could have been done without it having been detected. Case Facts

The defendant frequently volunteered for many extra duties: Organizing the work that had already been processed by other tellers before the work went to the Proof Department - this task was usually done in a separate station to the side or in a separate room. Organizing the work that had already been processed by other tellers before the work went to the Proof Department - this task was usually done in a separate station to the side or in a separate room. Handling of deposits that came into the bank by mail. Handling of deposits that came into the bank by mail. Receiving payroll tax checks from commercial customers. Receiving payroll tax checks from commercial customers. Case Facts

From May 28, 1992 to July 1, 1992, the defendant used his teller position to embezzle $65,420 from the bank by cashing out numerous checks in 27 separate instances. The defendant was suspended from his job on July 1, Case Facts

Defendant’s Scheme The defendant removed checks from multiple – check deposits. The defendant replaced the checks he took with other checks. The checks used as replacements were checks that commercial customers had brought in for their payroll tax payments to be sent to the IRS or checks that a foreign customer had mailed to the bank for deposit.

The defendant was never the teller who had processed the multiple checks from which the defendant had removed checks. The defendant had access to remove and replace checks while he was organizing the tellers’ work. The defendant structured the transactions by doing the cash outs in amounts under $10,000 over several days, rather than making them all on the day he took the checks. Defendant’s Scheme

At the same time the defendant was taking this cash from his teller drawer, he was making cash deposits at a Great Western Bank close to the International Bank of Miami. The defendant did not report any of this money in his tax return for that year or any subsequent year. The defendant withdrew all the proceeds from the Great Western Bank and opened two bank accounts at Nations Bank right after he was suspended from his job at the International Bank of Miami. Defendant’s Scheme

When the defendant removed the money from Great Western Bank, he structured it into several cashier checks of less than $10,000. Also, he put three of the cashier’s checks in his ex-wife’s name. When the defendant was putting the money that he removed back into the banking system, he used his parent’s bank account. The defendant made $17,500 in cash deposits into his parent’s accounts. Checks were then issued to himself from his parent’s bank account totaling the same amount. Money Laundering

When the defendant heard from the U.S. Attorney’s Office regarding the case, he immediately moved the money he had left to an account in his cousin’s name. He later asked her to return it when he has not heard further from the U.S Attorney’s Office. Money Laundering

How he was Caught One of the checks the defendant used as a replacement check had a stop payment. This condition made one of the multiple deposits from one customer incomplete. The customer complained for the incomplete deposit. When the bank personnel investigated the multiple deposit into which the replacement check had been placed, they saw that some checks have been removed and cashed out.

How he was Caught The cashed out checks were cached out by Hernandez. One of the cashed checks was over his authorized amount. The bank was able to suspend him. These events started an internal investigation which later was referred to the FBI.

Summary The evidence showed that: The defendant had ample opportunity to divert checks while he was organizing work for the Proof Department. Every single improper cash out was done by him.

Summary The evidence showed that: Every cash out was traced to the defendant. The bank kept internal ledgers of all cash outs by each teller. The bank kept internal ledgers of all cash outs by each teller. The defendant had a unique teller stamp (even though the defendant had smudged his teller number every time he used the stamp). The defendant had a unique teller stamp (even though the defendant had smudged his teller number every time he used the stamp). The defendant had a bag to conceal cash as he left the bank. The defendant deposited almost all the cash he stole at Great Western Bank and those deposits stopped abruptly when he was suspended.

The Decision in the Case The defendant was indicted by a federal Grand Jury in October The defendant was charged with several counts of bank embezzlement and several counts of money laundering.

The Decision in the Case On May 5, 1999, a jury found the defendant guilty of all embezzlement and money laundering counts. On August 9, 1999 the judge sentenced the defendant to 37 months in prison. He was also ordered to pay restitution to the bank.

Opinion This case shows the vulnerability of all organizations to employee fraud: the employee who commits the fraud is precisely the smart, polite and cooperative employee who can gain the employer’s trust. This case also shows the value of even the simplest internal controls. This could have been a much larger fraud if the bank had not acted immediately.