Forensic accounting students at SUNY Old Westbury will soon be offering their services to businesses and nonprofits that suspect they have been the victims of fraud.
David Glodstein, lead professor of the school’s graduate forensic accounting program, said he has spent the past several months recruiting partners and publicizing plans for the Justice for Fraud Victims Project. Mentors will oversee groups of three to five students. Each team will provide free assistance to a metro area small business or nonprofit concerned about fraud, Glodstein said.
The help of forensic accountants, who typically charge rates of $150 to more than $300 an hour, is often out of reach for small businesses and philanthropic organizations who fear they've been victims, he said. Forensic accounting involves investigating and identifying misappropriation, embezzlement and other types of fraud.
“Say someone’s lost $5,000, but it’s going to cost another $5,000 to investigate — that might close the business or that might close the not-for-profit organization. And who’s going to put another $5,000" into recovering that loss, Glodstein asked. “That’s where we come in to do the investigation and get it ready for any legal proceeding that might take place.”
More than one in 10 businesses has been a victim of a scam, according to a 2018 Better Business Bureau report, and more than one in 20 loses money to a scam each year. The nonprofit consumer support group noted that fraud likely totals more than $7 billion per year.
Glodstein said merchants and nonprofits turn to law enforcement agencies that do not always employ staff with the expertise they need or otherwise lack the resources to take on cases.
The Nassau County District Attorney’s Office declined to comment on its approach to allegations of financial fraud. The Suffolk County District Attorney’s Office did not respond to a request for comment.
The Justice for Fraud Victims Project will review a business or nonprofit's accounting, banking and tax documents, conduct interviews and produce reports that may be used in legal proceedings. These probes may also help organizations learn how to prevent future incidents of fraud, Glodstein said.
“We are going to ... quantify what the loss is and who has done this; and have the students issue a report, including recommendations for correcting any internal control issues,” he said. “Then with the assistance of the mentor, [they] determine the correct avenue for legal proceedings.”
Glodstein envisions mostly taking on allegations of internal fraud, but said the initiative will try to help organizations struggling with phishing and other exterior scams as well.
He is reaching out to law enforcement agencies and making the rounds at local law schools, chambers of commerce and financial institutions, with hopes that they will refer cases to the program. Glodstein said he has so far identified a couple of potential clients.
Joseph Garcia, president of the Farmingdale Chamber of Commerce, said the Justice for Fraud Victims Project is a promising idea. The chamber hosted a seminar about two months ago designed to help merchants who have recently raised concerns about email phishing, wire transfer and fraudulent check scams, he said.
A year ago, Garcia said he was the victim of a scheme in which emails requesting gift cards and a bill payment purportedly from him were sent to chamber board members and staff. Thankfully, Garcia connected with those who received these emails before they took action.
“It's still something that people are pretty embarrassed about, and they don’t necessarily want to tell their competitors or their colleagues that they fell for,” Garcia said. “I have a feeling [the Justice for Fraud Victims Project] will end up being pretty heavily utilized by business owners and nonprofits that will feel more comfortable going to maybe an academic setting to talk to somebody who focuses on this in ... an impartial and nonjudgmental setting.”
$7 billion in fraud losses
A 2018 Better Business Bureau report found that more than one in 20 businesses loses money to a scam each year, for an estimated annual cost of about $7 billion.