Worst Fraud Cases of 2018

February 22, 2019

The January/February 2019 edition of the Association of Certified Fraud Examiners’ Fraud Magazine® includes an article by Sarah Hofmann, CFE, titled “5 Most Scandalous Fraud Cases of 2018.” The article highlights five significant fraud cases uncovered in 2018, as well as three additional cases described as “dishonorable mentions,” that were selected based on the number of lives impacted, money lost, and relevance to the anti-fraud profession. Listed below are Hofmann’s “5 most scandalous” cases:

  1. March 2018: SEC charges Theranos Inc. and its founder and CEO, Elizabeth Holmes, with fraud (false/misleading statements, wire fraud)
  2. September 2018: Danske Bank CEO resigns over $234 billion money-laundering scandal (money laundering)
  3. June 2018: Largest health care fraud takedown in U.S. history (insurance fraud, illegal prescriptions)
  4. February 2018: $2 billion fraud discovered at Punjab National Bank (fraudulent loans)
  5. July and September 2018: Former Malaysian prime minister at center of 1MDB scandal arrested (money laundering, corruption)

There are several commonalities and overlapping themes in the cases profiled by Hofmann. The industry involved in each case is one common theme to note. Of the eight cases covered, three are related to the healthcare industry, two are related to the banking and financial institution industry, and three involve government or political figures. These are not the only industries susceptible to fraud, of course, but they have received extra media attention and exposure in the recent history.

Another commonality among these cases is regarding what gave rise to the fraud. The cases profiled involved internal control problems, breakdowns in oversight, and weak governance. In the context of Dr. Donald Cressey’s fabled “fraud triangle”—comprised of pressure, opportunity, and rationalization—these factors often create the opportunity for a perpetrator to commit fraud. Had the entities involved in these cases had more effective internal controls, oversight, and governance in place, these frauds may have been detected sooner or even prevented.

Fraud comes in all shapes and sizes. Moreover, the majority of reported fraud cases involve losses of less than $200,000 (see figure below). However, the large scale of damage that resulted from fraud is yet another common thread in the cases discussed in Hofmann’s article.

Source: ACFE Report to the Nations

While the billion dollar frauds are the ones that make the headlines, it’s the $200,000 frauds that occur more frequently and can have a crippling effect on small and medium-sized organizations.

To learn more about Aronson’s fraud investigation capabilities, or if you feel that your organization may be the victim of a fraud, contact Brittany Garver at 240.364.2607 or Bill Foote at 301.231.6299.