‘Aloha, Hawaii!’
How to Unravel a Fraudulent Travel Reimbursement Scheme

By Dominic A. D’Orazio and Joseph T. Wells

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JUNE 2008 - Marin Jensen seemed to have it all. A self-proclaimed family man, he had a lovely wife named Julia and two young children. Julia stayed home to manage the active lives of their kids, while Marin appeared to be a model employee at the American Logistics Agency. From the exterior, their lives were picture-perfect.

The Jensens’ $400,000 home was nestled on a quiet tree-lined cul-de-sac in one of the Northeast’s affluent communities. At first glance, one might surmise that the area consisted of folks who spend a great portion of their professional lives climbing the corporate ladder. Of course, it’s no crime for a middle-management employee to live in such a neighborhood. Certainly, there are other ways to accumulate the type of wealth needed to afford the property, but when the Jensens’ lifestyle exceeded their income, questions arose.

After working for American Logistics for several years, Marin Jensen rose to the position of senior logistics management specialist. He was considered likable, and several program directors wanted to use his services. During one particular year, he split his work time between his main office and three other customers. Once his work for the extra customers was finished, however, Jensen began to struggle financially. He had become accustomed to the extra cash.

The American Logistics Agency is a part of the federal government. As an integrated entity, it develops, fields, and sustains base command and control, intelligence, surveillance, and reconnaissance systems. American Logistics deals with research and development, management, and distribution of equipment to support soldiers fighting overseas. The company employs about 10,000 people worldwide and is also supported by thousands of contractors.

Like any federal government entity, in addition to its researchers, procurement officials, and logistics specialists, American Logistics employs lawyers, internal auditors, and criminal investigators, along with a resource management office and a personnel office to ensure that the agency is properly financed and staffed. It is one of the state’s largest employers and produces $3.4 billion annually for the state’s economy.

The Copycat

As Marin Jensen’s supervisor, Arthur Kiley had no complaints, until one Monday when Jensen mistakenly left photocopies of his new travel order document in the machine. Kiley was the first to notice, and when he looked at the travel order, he observed that the signature block had been cut out of a previously signed order and taped to the new one.

“Marin, may I ask what you’re doing with this signature taped to your travel order?” asked Kiley.

Jensen replied that he was simply trying to make the signatures darker because when he faxed them to the ticketing office, the color was muted. Kiley pressed on, threatening him with an audit of his past reimbursements of travel claims if he did not come clean.

By the end of the day, Jensen had not confessed, so Kiley did a little detective work. When he looked inside Jensen’s trash can, he found a travel order with the signature cut out of it, copies of pay stubs, and copies of other travel orders where the initial “J” was handwritten by Jensen. The “J” pertained to the first name of Kiley’s boss, James Heyward, who was the authorizing official for Jensen’s travel orders and subsequent travel voucher claims.

Kiley contacted Samuel Mezzacante at American Logistics’ legal office for guidance. Upon being informed of the possible fraud, Mezzacante first contacted the criminal investigators. Next, he called me in the Internal Review Evaluator Department, and set up a meeting to examine the evidence. Mezzacante requested our services to review Jensen’s travel vouchers and determine how many were fraudulently filed.

In the meantime, Kiley obtained several of Jensen’s settlement vouchers and tried to compare the dates of supposed travel to what Jensen was actually doing on those dates. The settlement vouchers were subsequently turned over to the Internal Review Evaluator Department.

We notified the Defense Finance and Accounting Service and requested copies of all vouchers paid to Jensen, going back five years. The next step was to contact the Bank of Commons, the contractor that managed the Government Travel Card program. All government travelers are required to use the Government Travel Card for all official travel-related expenses such as hotels, car rentals, limousines, airlines, or trains.

Have Committed Fraud, Will Travel

While reviewing Jensen’s travel vouchers and receipts, we noticed that on trips to Springfield, Virginia, he stayed at an unfamiliar hotel chain. When we contacted its corporate office, they confirmed that the hotel was located in four cities in Virginia—but not in Springfield.

Next, we contacted Joseph Somers, an evaluator from our headquarters in Virginia, and asked him to go to the Springfield address listed on the hotel receipt and verify whether any hotel existed at that location. When Somers tried to go to the address, he could not find it. The place simply did not exist.

Martin Dais, our director, told us to check every receipt and contact every vendor to ask for legitimate receipts from the companies involved. On some claims, Jensen charged car rentals from one company on his Government Travel Card, while his travel vouchers showed that he used a different one: Alamo Rent A Car. In all of those cases, Jensen’s claim for River Run Rent-A-Car was higher than his actual charge. When we looked at the River Run receipts that were attached to his vouchers, we noticed that they were always in the same position on the letter-size paper, which indicated that Jensen had a template and was printing out his receipts as he needed them for “proof” of his various trips. We contacted River Run’s corporate headquarters to ask if Jensen had used the agency to rent cars for his business trips and were told that Jensen did not show up in their database as ever having rented a car. A River Run official also faxed us an example of a valid receipt. When we compared that receipt to the ones that Jensen had printed, we realized that the only difference was a five-digit code that appeared at the bottom of the valid receipt. This code identified either the person handling the transaction or a specific River Run agency office.

When we compared Jensen’s travel claims to his Government Travel Card charges, we discovered that he had charged train tickets at the station nearest to the airport, while his travel vouchers claimed that he took a limousine from his residence to the airport and back. The cost was always under $75, which would have required him to submit a receipt to our finance office. So, an $11 charge (cost of the train ticket) became a claim for $74 (cost of the limousine)—a net profit of $63 in each direction for each trip that Jensen claimed.

Another travel voucher claimed that he went to a location in northeast Pennsylvania, but his Government Travel Card transactions showed that he was gambling in an Atlantic City, New Jersey, casino at the time. We thought it unlikely that Jensen was capable of being in two places at the same time.

Each year, Jensen’s claims grew to a larger amount. When we conducted a review of Government Travel Card transactions, Jensen’s name came up because he was using the card in restaurants close to his residence. These types of transactions are classified as a misuse because there was no official purpose for him to eat at the local restaurants. While reviewing the travel vouchers, we noticed a pattern developing: Jensen always left a few days before his scheduled departure date or stayed a few days after his travel had ended. After piecing his travel vouchers together, we noticed that, over a three-month stretch, Jensen was basically on the road 100% of the time. For example, his travel vouchers showed him leaving on a Monday and returning on a Thursday. Then he would leave the next day (Friday) and return Tuesday. Again, he would leave the next day (Wednesday) and return Monday, and so on. Obviously, we questioned whether he was actually on travel status the whole time.

In one part of the review, we noticed Jensen had scheduled a trip in February—just a few months back. He made reservations through the government ticketing office for a plane ticket that took him to Savannah, Georgia. On the day that he departed for Savannah, he went to the Delta Airlines counter and charged a round-trip flight to Savannah through his Government Travel Card. Then he went to the Continental Airlines counter and had the counter person exchange his government-issued round-trip ticket to Savannah for a one-way personal ticket returning from Los Angeles. A few weeks after returning from Savannah, he called Continental and had the company exchange the one-way trip from Los Angeles to a round-trip ticket to Hawaii for July 15. Because that date had not yet come, we knew that Jensen was planning a vacation. We had to work fast.

Permanent Vacation

During the course of our investigation, Jensen had his security clearance taken away from him, which meant that he could not work on any classified or secret work. Soon after, Jensen’s computer was taken away from him so that forensic investigators could retrieve all of his e-mail, along with any files he may have stored on his hard drive.

Having no security clearance or a computer to do even minor tasks, Jensen wrote an e-mail during the week of April 11 to Kiley, claiming he felt that there was nothing to do but resign from American Logistics. His last day was April 15. We had to get all of our paperwork to the prosecuting attorney before Jensen could go to Hawaii.

While checking his computer files, the forensic investigator retrieved electronic files for his fabricated hotel and car rental claims, which is what the internal evaluators had suspected all along. In addition to the files, there was e-mail correspondence between Jensen and his wife, who asked him point-blank when the next travel check was coming in. They needed the proceeds to pay for the current month’s mortgage. Once we calculated that the scheme exceeded $100,000, Agents Huntington and Harter brought it to the attention of the U.S. Attorney’s Office (USAO).

Agents Huntington and Harter, along with local police officers, went to Jensen’s house at around 5:00 p.m. on July 14 with a warrant for his arrest. As he was handcuffed and led out of his house, his wife came running down the stairs to ask, “Marin, what about our trip to Hawaii?”

On the way to county jail, the two agents asked Jensen why he carried out this scheme to defraud the federal government. He replied that he worked harder than most people in the federal government but was not justly compensated for his work.

The next day, Huntington and Harter escorted Jensen to the federal courthouse at the state capital. At Jensen’s arraignment before the federal judge, his attorney asked if Jensen could go to Hawaii with his family because they were scheduled to depart that day, but the judge confined Jensen to the state of his residence. Meanwhile, his wife took the children and spent a week in Hawaii without him.

Jensen was charged with one count of wire fraud, covering more than 150 fraudulent vouchers and totaling over $150,000. He was found guilty and was ordered to pay $151,460 to the federal government for fabricating expense vouchers. He was also sentenced to 20 months in federal prison and ordered to serve three years of supervised release upon the completion of the prison term. According to the transcript filed in the federal court, Jensen took the money over a five-year period to pay off mounting credit card debt.

Lessons Learned

After talking to various parties involved in ensuring that Jensen traveled and performed his duties in conjunction with his travel orders, no one could unequivocally say exactly whether Jensen had properly performed his duties. If he worked for Kiley, he would tell customers A and B that he was working for his immediate supervisor. At other times, he would tell Kiley that he was working for customer A or B, regardless of where he was. Kiley had no control of Jensen, nor did he corroborate with customer A or B to attest that Jensen was indeed traveling for them. It was sheer luck that Kiley found the taped travel order in the copier—and sheer stupidity for Jensen.

Although many red flags appeared during the perpetuation of this fraudulent scheme, nobody investigated them. For example, when the travel account for one customer had totally been expended, the budget analyst did not ask why all of the funds were spent. Individuals who are responsible for reviewing and authorizing travel claims must review them for accuracy and legitimacy.

Recommendations to Prevent Future Occurrences

Implement electronic travel order and travel voucher claim system. Since this scheme was discovered, American Logistics has started using a new electronic travel order and travel voucher claim processing system. Controls are set to detect individuals who might manipulate the system, like Jensen. Still, the individuals who are responsible for authorizing travel claims should review them for accuracy and legitimacy.

Require and check for appropriate documentation. Travelers should submit appropriate documentation (e.g., receipts for any costs $75 or higher) when filing their travel voucher claims. Otherwise, the voucher should be returned to the traveler until he or she can support the claim.

Establish or use a cross-communication system within the organization. All authorizing officials should take the time to review vouchers for padded or incorrect claims. A system should ensure that all departments are notified and capable of reacting when a false claim is uncovered, so that proper actions can be taken to minimize damage and weed out individuals responsible for the fraud.


Dominic A. D’Orazio, CGFM, is a senior evaluator for a U.S. Army Internal Review Office in the northeastern United States. He has assisted criminal investigators on numerous cases involving white-collar crime and has over 28 years of experience in auditing. Joseph T. Wells, CPA, CFE, is founder and chairman of the Association of Certified Fraud Examiners, Austin, Tex. He is a member of The CPA Journal Editorial Board and can be contacted at jwells@acfe.com.

Editor’s Note: This case was condensed and adapted with permission from Fraud Casebook: Lessons from the Bad Side of Business, edited by Joseph T. Wells, copyright 2007, John Wiley & Sons, Inc., www.wiley.com. For privacy considerations, most of the names of the individuals and organizations are pseudonyms.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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