Expert Says Fraud is Usually a One-Man Job
The Natural Gas Supply Association (NGSA) has dropped the civil
fraud charges against a former Canadian Embassy aide pending the
outcome of negotiations between her and her attorney and the
Attorneys for Margaret Elizabeth Martin and the NGSA currently
are negotiating and anticipate an "equitable resolution" of the
issues stemming from her alleged participation in a scheme
engineered by the group's ousted president, Nicholas J. Bush, to
defraud the association of about $3 million, according to sources.
However, if there's no resolution, civil charges against her could
be refiled in either the United States or Canada, they said.
Martin, who was an "economics counselor" at the embassy in
Washington between 1990-1991, allegedly uncovered Bush's fraud
activities while living with him for a short time after she left
the embassy, but she agreed not to report his actions to
authorities in exchange for "certain purchases" made with the money
he acquired from the fraud, according to amended court papers filed
by NGSA in late April. The purchases included a $250,000 home in
Canada, jewelry and a mink coat, the civil lawsuit said. The NGSA
action had charged Martin, who now is director of Canadian federal
government relations for TransCanada Pipelines Ltd. in Ottawa, with
five counts of fraud. She denied all charges.
Most company or association officials who commit fraud act
alone, said Gary Zeune, president of Columbus, OH-based Gary Zeune
& Associates, which provides courses on fraud detection and
prevention for the FBI, the U.S. Attorney's Office, certified
public accountants and lawyers. "The reason is because every time
you add one more person to the scheme, the risk of being detected
goes up exponentially." He noted that jilted "paramours" and
disgruntled co-workers usually are the ones that report the illegal
activities to authorities.
Zeune said he's preparing a new course titled "Fraud: The 10
Scariest Cases You've Ever Seen," and plans to include the NGSA
fraud case among them. "It's a very interesting case because it's
very typical of non-profit associations and small companies where
everybody trusts everybody. There's never a hint of anything wrong,
and then all of a sudden-and this kind of stuff happens all the
time-there's a glitch in the fraud mechanism." As with Bush, "the
1099 [tax form] got out to one of the two [consultants] he was
pretending to pay, and then came a telephone call and the whole
thing started to unravel. That happens on a regular basis."
It was representative of fraud cases in other ways also, Zeune
said. "It involved a high-level person where nobody questions their
authority, there weren't checks and balances in the organization,
and they basically acted like the internal controls didn't apply to
The NGSA case, however, failed to fit the typical fraud profile
in at least one respect-the duration of the fraud, he noted. Zeune
found it hard to believe that Bush was able to carry out his
allegedly fraudulent activities for 12-13 years. "If Nick's fraud
really did run 13 years...that's extraordinarily long. Most people
simply cannot maintain their composure under that kind of stress.
Most of the frauds run two to three years."
Bush probably was able to continue for so long because of the
"smart" way in which he carried out his scheme, he said. "Nick was
smart in the context that when he allegedly stole the money through
these fake consulting contracts...he had it treated as a consulting
expense, and that way when every year the books were closed...[the
amount] he stole that year and put into expense wasn't detected in
that year's audit..." Those that have the "hardest time maintaining
a fraud are the ones where they steal the money and then turn
around and try to bury it in some kind of asset account," which
carries forward each year.
Also, the amount of NGSA money stolen - $3 million plus-was
actually "fairly sizable" for an association, according to Zeune,
but small in terms of the sizes of corporate fraud. He estimated
that fraud/abuse cases rob the U.S. economy of about $400 billion
each year. "Fraud on average sucks about 6% of revenues out of the
average American company. That's about $9 per day per employee."
It's difficult to estimate how much of the $3 million may be
recoverable, he noted. "It's very, very rare that people save any
amount of it. Now they might spend it on things like cars,
vacations and a home," which are "assets that have some value."
In the event Bush is found guilty of criminal charges or there's
a plea bargain, the length of jail time he could face would depend
on a number of factors-is it his first offense, were multiple
offenses involved, is he going to make restitution, and was anyone
hurt as a result of his actions, Zeune said. He noted Webster
Hubbell, former U.S. associate attorney general, got 21 months for
stealing nearly $400,000 from his law firm in Arkansas, while
another man-who helped to bilk his company out of $100 million-got
If Bush didn't report the $3 million to the Internal Revenue
Service, "which would be par for the course, he's going to have tax
fraud on his hands. If he mailed any of those [consulting] checks
to any other address, he'll probably be charged with mail fraud.
And if he took the checks and put them in the bank and then had
money transferred someplace by his bank, they might charge him with
wire fraud," according to Zeune. Charges involving alleged misuse
of identities and social security numbers may be less likely.
"Identity fraud is fairly new, and the case law isn't completely
settled on that one yet."
Reports of Bush's involvement in extramarital affairs throughout
the years should have sounded a warning bell to NGSA. "It was
fairly well known, I understand, that he was having an affair. When
somebody's having an affair, there's a real high likelihood they
can't support both lifestyles on what they're making," Zeune said.
This "doesn't mean they're committing fraud, but it's one of the
warning signs." The fact that NGSA knew little about Bush's home
life-not even his home phone number-wasn't "real normal behavior
for someone who's running a major association." Other telltale
signs would be increased spending and "significant changes in
To commit fraud, there has to be three factors present. Zeune
calls it the phenomenon of the "triangle of fraud." The first is a
monetary need. "That is like the driver of the behavior." Secondly,
there has to be an opportunity to commit the fraud. "[T]he person,
who's going to do the dirty deed, has the perception that there's a
very low probability that they'll get caught," he said. And lastly
and most importantly, the person has to be able to rationalize the
fraud activity with his/her own behavior. Usually "what you tell
yourself is that I'm only borrowing the money, and I'll pay it back
next month," which never happens.