CHAPTER 9
CONVERSION
INVESTIGATIO
N METHODS
MOST INVESTIGATIONS OF
CONVERSION INVOLVE SEARCHING
PUBLIC RECORDS AND OTHER
SOURCES TO TRACE PURCHASES
OF
ASSETS, PAYMENTS OF
LIABILITIES, AND CHANGES IN
LIFESTYLE AND
NET WORTH. WHEN PEOPLE ENTER
INTO FINANCIAL TRANSACTIONS,
SUCH AS BUYING ASSETS,
T H E Y L EA V E T RA CKS OR “
FINA NCIA L
FOOTPRINTS.”
Conversion searches
are performed for two
reasons:
(1)to determine the
extent of
embezzlement and
(2)to gather evidence
that can be used in
interrogations to obtain
CONVERSIO
a confession. N
SEARCHES
To become proficient at
conversion investigations,
CONV E RSIO fraud examiners need to
understand that information
N SEARCHES
can be gleaned from:
The most c o m m o n
(1)federal , state , and local
technique used to
agencies and other organizations
investigate and
that maintain information that
resolve fraud is by can be accessed in searches ;
interviewing. An (2) private sources
interview is a of information ;
q uestion - and - answ er (3) online sources of
session designed to information ;
elicit information . (4) using the net worth metho d
of analyzing spending
information
Many federal, state, and local agencies
maintain public records in accordance
with various laws. Much of this
information can be accessed by anyone
INFORMATION
GOVERNMENT
who requests it, but some of it is
SOURCES OF
protected under privacy laws that
prevent disclosure to the public.
Federal records are generally not as
useful as state and local records in
fraud investigations, but they are
helpful in certain situations.
FEDERAL DEPARTMENT OF DEFENSE
The D e p a r t m e n t of D e f e n s e m a i n t a i n s
r e c o r d s o n a ll m i l i t a r y p e r so n n e l ,
SM O
O SU
T FRC
E D EE
AGENCIES
R AS
L
both a c t i v e a n d in active. This
MAINTAIN department
IN F O R M A TIO N also c o n t a i n s i n f o r m a t i o n o n
THAT C A N BE
individuals w h o m a y be a threat to
H E L P F U L IN F R A U D
INVESTIGATIONS. n a t i o n a l security.
SEVERAL, BUT NOT M i l i t a r y r e c o r d s are n o t c o n f i d e n t i a l
ALL and provide valuable information that
c a n h e l p y o u t r a c e a p e r so n ’ s
whereabouts through changing
add resses.
DEPARTMENT OF JUSTICE
The D e p a r t m e n t of J u s t i c e is t h e f e d e r a l a g e n c y c h a r g e d w i t h
e n f o r c i n g f e d e r a l c r i m i n a l a n d ci v i l laws. It m a i n t a i n s r e c o r d s
r e l a t e d t o t h e d e t e c t i o n , p r o s e c u t i o n , a n d r e h a b i l i t a t i o n of
offenders.
FEDERAL BUREAU OF PRISONS
This a g e n c y o p e r a t e s t h e n a t i o n w i d e
s y s t e m of f e d e r a l prisons, c o r r e c t i o n a l
SM O
O SU T FRCE D EE
R ASL
AGENCIES institutions, a n d c o m m u n i t y
MAINTAIN t r e a t m e n t facilities. The B u r e a u is
IN F O R M A TIO N
r e s p o n s i b l e for m a i n t a i n i n g r e c o r d s o n
THAT C A N BE
H E L P F U L IN F R A U D t h o s e w h o h av e b e e n d e t a i n e d i n
INVESTIGATIONS. vari ous facilities. S i n c e f r a u d
SEVERAL, BUT NOT p e r p e t r a t o r s are o f t e n
ALL repeat
offenders, i n f o r m a t i o n o n p r e v i o u s
incarcerations can often provide
i m p o r t a n t e vi d enc e.
INTERNAL REVENUE SERVICE
The Internal R e v e n u e Service (IRS) en for ce s all i n t e r n a l
r e v e n u e laws, e x c e p t t h o s e d e a l i n g w i t h a l coh ol ,
firearms, t o b a c c o , a n d explosives, w h i c h are h a n d l e d by
t h e B u r e a u of A l c o h o l , Tobacco, a n d Firearms.
FEDERAL
SECRET SERVICE
S O U RC E S
MOST FEDERAL
AGENCIES The S e c r e t Service is p a r t of t h e
MAINTAIN D e p a r t m e n t of H o m e l a n d S e c u r i t y
IN F O R M A TIO N
a n d is r e s p o n s i b l e for p r o t e c t i n g
THAT C A N BE
H E L P F U L IN F R A U D t h e p r e s i d e n t of t h e U n i t e d States
INVESTIGATIONS. a n d o t h e r fe de ra l dignitaries.
SEVERAL, BUT NOT
ALL
U.S. POSTAL SERVICE
The U.S. P o s t a l Service is a q u a s i - g o v e r n m e n t a l o r g a n i z a t i o n
t h a t is r e s p o n s i b l e for U.S. m a i l a n d for p r o t e c t i n g c i t i z e n s
f r o m loss t h r o u g h mail. P o s t a l i n s p e c t o r s are s o m e of t h e
b es t a n d m o s t h e l p f u l fe d er al investigators. They h a n d l e
m a j o r f r a u d cases i n v o l v i n g t h e use of m ail, a n d t h e y w o r k
for t h e p r o s e c u t i o n of of fe n de r s w h o vi ol a t e p o s t a l laws.
FEDERAL
CENTRAL INTELLIGENCE
The CIA is a c c o u n t a b l e to t h e
SM O
O SU
T FRC
E D EE
AGENCIES
R AS
L
p r e s i d e n t of t h e U n i t e d States. It
MAINTAIN i n v es t ig at e s s ecur ity m a t t e r s
IN F O R M A TIO N o u t s i d e t h e U n i t e d States,
THAT C A N BE
w h e r e a s t h e FBI has
H E L P F U L IN F R A U D
INVESTIGATIONS. j u r i s d i c t i o n for se curi ty w i t h i n
SEVERAL, BUT NOT t h e U n i t e d States.
ALL
SOCIAL SECURITY ADMINISTRATION
The S o c i a l S e c u r i t y A d m i n i s t r a t i o n (SSA) has i n f o r m a t i o n
a b o u t i n d i v i d u a l s ’ SSNs. This a g e n c y c a n b e h e l p f u l i n
i d e n t i f y i n g t h e area w h e r e a p e r p e t r a t o r w a s r e s i d i n g w h e n
a S S N w a s issued.
STATE STATE ATTORNEY GENERAL
S OUR CE S OF The a t t o r n e y g e n e r a l for e a c h sta te
IN F O RM A TIO e nf o r ce s all state, civil, a n d c r i m i n a l l a w s
N in cooperation w ith local law enforcement
STATE R E S O U R C E S agencies.
ARE OFTEN VERY
H E L P F U L IN F R A U D
STATE OF PRISONS
INVESTIGATIONS.
SEVERAL, BUT NOT The F e d e r a l B u r e a u of Pr i s o n s also
ALL m a i n t a i n s t h e n e t w o r k of sta te p r i s o n s a n d
a d m i n i s t e r s st ate c o r r e c t i o n s
d e p a r t m e n t s . It m a i n t a i n s r e c o r d s o n a ll
individuals w h o have been incarcerated
i n sta te p r i s o n systems, as w e l l as o n
i n d i v i d u a l s w h o are o n p r o b a t i o n or
parole.
SECRETARY OF STATE
The S ec re tar y of S t a t e m a i n t a i n s all t yp e s of r e c o r d s r e l a t i n g t o
b u s i n e s s es a n d U n i f o r m C o m m e r c i a l C o d e (UCC) filings. Every
c o r p o r a t i o n m u s t file d o c u m e n t s i n t h e stat e i n w h i c h it w a s
c h a rt e red .
STATE
DEPARTMENT OF MOTOR VEHICLES
S OUR CE S OF
These r e c o r d s e n a b l e y o u t o a c ce s s a
IN F O RM A TIO
perso n’s d r i v i n g history, address,
N
STATE R E S O U R C E S c o n v i c t i o n s for traffic violations, n a m e ,
ARE OFTEN VERY d a t e of birth, a d d r e s s of birth, a n d
H E L P F U L IN F R A U D p h o t o g r a p h . Driver’s l i c e n s e r e c o rd s m a y
INVESTIGATIONS. b e a s o u r c e of a pe rs o n’s SSN.
SEVERAL, BUT NOT
ALL DEPARTMENT OF VITAL STATISTICS
This d e p a r t m e n t m a i n t a i n s b i r t h records.
These records, a l t h o u g h q u i t e d i f f i c u l t
t o o b t a i n a n d o f t e n for a fee, c o n t a i n
i n f o r m a t i o n a b o u t a pe rs o n’s b i r t h date,
p l a c e of birth, a n d b i o l o g i c a l parents.
DEPARTMENT OF BUSINESS REGULATION
M o s t states h av e a d e p a r t m e n t of b u s i n e s s r e g u l a t i o n or a
similar agency that maintains licensing information
a b o u t various professionals.
COUNTY AND COUNTY CLERK
C o u n t y c l e rk s m a i n t a i n n u m e r o u s r e c o r d s o n
LOC AL
l o c a l cit izens, i n c l u d i n g voter r e g i s t r a t i o n
RECORDS
r e c o r d s a n d m a r r i a g e licenses.
THE AVAILABILITY
OF THESE COUNTY LAND OFFICE AND TAX ASSESSOR’S
RECORDS VARIES OFFICE
F R O M S T A T E TO These offices c o n t a i n real e st a t e r e c o r d s for
STATE A N D FR O M l a n d l o c a t e d i n t h e co unt y. There are t w o
C O U N T Y TO c o m m o n w a y s t o t ra c e real es t a t e records.
COUNTY.
First, l a n d o w n e r s h i p is n o r m a l l y f o u n d i n t h e
c o u n t y l a n d o ffi ce or i n t h e o ffice of t h e
r e c o r d e r of deeds. S e c o n d , p r o p e r t y tax
records, m a i n t a i n e d b y t h e c o u n t y assessor’s
office, also c o n t a i n p r o p e r t y records.
COUNTY SHERIFF AND OTHER OFFICERS
S i n c e m a n y f r a u d p e r p e t r a t o r s are r e p e a t
offenders, t h es e s o u rce s m a y h a v e i n f o r m a t i o n
on past embezzlements.
COUNTRY
LOCAL COURTS
AND LOCAL
Various local courts ma i n t a i n records on
REC ORDS
p a s t l a w violators, i n c l u d i n g p r e t r i a l
THE AVAILABILITY i n f o r m a t i o n l i k e p e r s o n a l history,
OF THESE e m p l o y m e n t history, p e r s o n a l a n d p h y s i c a l
RECORDS VARIES i n f o r m a t i o n , p r i o r charges, d i v o r c e s a n d
F R O M S T A T E TO
property settlement agreements, personal
STATE A N D FR O M
C O U N T Y TO injury lawsui ts, f i n a n c i a l c l a i m s a n d
COUNTY. l i t i ga ti o n , f r a u d c l a i m s a n d co-
c on s pi r at o rs , b a n k r u p t c i e s , wills, a n d
p ro ba te s .
PERMIT DEPARTMENTS
Permit-issuing departments can be helpful
i n i d e n t i f y i n g t h e n a t u r e a n d l o c a t i o n of
businesses, n e w leases, a n d r e c e n t
construction
UTILITY R E C O R D S PRIVATE
( Gas , electric and water bill,
A C Q U IA N TA N C E
garbage , sewer ) S
PRIVATE S O U R C E S OF
INFORMATION
( BE S U RE THAT YOU H A V E THE LEGAL RIGHTS
W H E N GATHERING A N D USING THE INFORMATION)
SHREDDED
" TRA S H IN G"
DOCUMENTS AND
ORIGINAL FILES
ON C O M P U T E R
A C C U R IN T
ONLINE
DATA AUTO-TRACK XP
BASE
DATABASES MAY BLACK B OO K ONLINE
B E S U B S C R IP TIO N -
BA SED, H A VE A
C H O I C E P O I N T , ETC .
P ER - U SE FEE, OR
AL LO W UNLIMITED
FREE SEARCHING. PUBLIC DATA
SOME
DATABASES PUBLIC RECORD FINDER
OVERLAP ONE
ANOTHER, BUT MOST
CONTAIN UNIQUE WEB DETECTIVE
INFORMATION THAT
M A Y B E U S E F U L TO A EBSCO PUBLISHING
CASE.
IN TE RN E
T
S Eavailable
The publicly A R CInternet
H is an
increasingly valuable source of
information . While search engines
like Google , AltaVista , and Yahoo !
do not search internal databases
like AutoTrackXP or LexisNexis, they
index a significant amount of the
public W eb . Results usually include
media .
EXAMPLE OF THE DEPTH SEARCH ENGINE
SEARCH BY PHRASE
Including words in quotation marks forces results to have an exact
phrase.
MINUS SEARCH TERMS
Filter out pages you don’t want by placing a minus sign before
unique terms found on the unwanted pages.
DOMAIN RESTRICTIONS
Google allows a search to be targeted at a specific domain ending
GOOGLE GROUPS
Google Groups can be an extremely useful source of solutions to
both technical and nontechnical topics.
CACHED RESULTS
Google provides a “cached” link following most search results that links
to a cached version of the result page on Google’s site.
EXAMPLE OF THE DEPTH SEARCH ENGINE
GOOGLE NEWS
The Google News service is limited in its usefulness because it
indexes only the last 30 days of news articles available on
the Web
GOOGLE IMAGES
This service provides a search of images published on the
Internet
GOOGLE EARTH
This and other services like it have become increasingly useful
in investigations. Because Google Earth shows satellite
pictures of most of the Earth, it is useful to quickly learn about
businesses and homes in a case.
NET
WORTH
METHOD
The Net Worth Calculation:
1. Assets − Liabilities = Net Worth
2. Net Worth − Prior Year’s Net Worth = Net
Worth Increase
3. Net Worth Increase + Living Expenses = Income
4. Income − Funds from Known Sources = Funds
from Unknown Sources
The most common way to make such determinations is through
net worth calculations. Essentially, the net worth method uses
the following formula, which is based on a person’s assets (things
owned), liabilities (debts), living expenses, and income.
The net worth method for determining amounts
embezzled has gained favor among fraud investigators
in recent years. The FBI regularly uses this method, as
does the DEA, which uses it to determine whether
suspected narcotics traffickers have income from illegal
drug sales. The IRS uses it to estimate unreported
income in tax fraud cases. Because only assets and
reductions in liabilities that can be discovered enter into
the calculation, net worth calculations tend to give a
conservative estimate of stolen funds.
