The Natural Gas Supply Association (NGSA) has dropped the civilfraud charges against a former Canadian Embassy aide pending theoutcome of negotiations between her and her attorney and theproducer group.

Attorneys for Margaret Elizabeth Martin and the NGSA currentlyare negotiating and anticipate an “equitable resolution” of theissues stemming from her alleged participation in a schemeengineered by the group’s ousted president, Nicholas J. Bush, todefraud the association of about $3 million, according to sources.However, if there’s no resolution, civil charges against her couldbe refiled in either the United States or Canada, they said.

Martin, who was an “economics counselor” at the embassy inWashington between 1990-1991, allegedly uncovered Bush’s fraudactivities while living with him for a short time after she leftthe embassy, but she agreed not to report his actions toauthorities in exchange for “certain purchases” made with the moneyhe acquired from the fraud, according to amended court papers filedby NGSA in late April. The purchases included a $250,000 home inCanada, jewelry and a mink coat, the civil lawsuit said. The NGSAaction had charged Martin, who now is director of Canadian federalgovernment relations for TransCanada Pipelines Ltd. in Ottawa, withfive counts of fraud. She denied all charges.

Most company or association officials who commit fraud actalone, said Gary Zeune, president of Columbus, OH-based Gary Zeune& Associates, which provides courses on fraud detection andprevention for the FBI, the U.S. Attorney’s Office, certifiedpublic accountants and lawyers. “The reason is because every timeyou add one more person to the scheme, the risk of being detectedgoes up exponentially.” He noted that jilted “paramours” anddisgruntled co-workers usually are the ones that report the illegalactivities to authorities.

Zeune said he’s preparing a new course titled “Fraud: The 10Scariest Cases You’ve Ever Seen,” and plans to include the NGSAfraud case among them. “It’s a very interesting case because it’svery typical of non-profit associations and small companies whereeverybody trusts everybody. There’s never a hint of anything wrong,and then all of a sudden-and this kind of stuff happens all thetime-there’s a glitch in the fraud mechanism.” As with Bush, “the1099 [tax form] got out to one of the two [consultants] he waspretending to pay, and then came a telephone call and the wholething started to unravel. That happens on a regular basis.”

It was representative of fraud cases in other ways also, Zeunesaid. “It involved a high-level person where nobody questions theirauthority, there weren’t checks and balances in the organization,and they basically acted like the internal controls didn’t apply tothem.”

The NGSA case, however, failed to fit the typical fraud profilein at least one respect-the duration of the fraud, he noted. Zeunefound it hard to believe that Bush was able to carry out hisallegedly fraudulent activities for 12-13 years. “If Nick’s fraudreally did run 13 years…that’s extraordinarily long. Most peoplesimply 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 wassmart in the context that when he allegedly stole the money throughthese fake consulting contracts…he had it treated as a consultingexpense, and that way when every year the books were closed…[theamount] he stole that year and put into expense wasn’t detected inthat year’s audit…” Those that have the “hardest time maintaininga fraud are the ones where they steal the money and then turnaround and try to bury it in some kind of asset account,” whichcarries forward each year.

Also, the amount of NGSA money stolen – $3 million plus-wasactually “fairly sizable” for an association, according to Zeune,but small in terms of the sizes of corporate fraud. He estimatedthat fraud/abuse cases rob the U.S. economy of about $400 billioneach year. “Fraud on average sucks about 6% of revenues out of theaverage American company. That’s about $9 per day per employee.”

It’s difficult to estimate how much of the $3 million may berecoverable, he noted. “It’s very, very rare that people save anyamount 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’sa plea bargain, the length of jail time he could face would dependon a number of factors-is it his first offense, were multipleoffenses involved, is he going to make restitution, and was anyonehurt as a result of his actions, Zeune said. He noted WebsterHubbell, former U.S. associate attorney general, got 21 months forstealing nearly $400,000 from his law firm in Arkansas, whileanother man-who helped to bilk his company out of $100 million-got52 months.

If Bush didn’t report the $3 million to the Internal RevenueService, “which would be par for the course, he’s going to have taxfraud on his hands. If he mailed any of those [consulting] checksto 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 hadmoney transferred someplace by his bank, they might charge him withwire fraud,” according to Zeune. Charges involving alleged misuseof identities and social security numbers may be less likely.”Identity fraud is fairly new, and the case law isn’t completelysettled on that one yet.”

Reports of Bush’s involvement in extramarital affairs throughoutthe years should have sounded a warning bell to NGSA. “It wasfairly well known, I understand, that he was having an affair. Whensomebody’s having an affair, there’s a real high likelihood theycan’t support both lifestyles on what they’re making,” Zeune said.This “doesn’t mean they’re committing fraud, but it’s one of thewarning signs.” The fact that NGSA knew little about Bush’s homelife-not even his home phone number-wasn’t “real normal behaviorfor someone who’s running a major association.” Other telltalesigns would be increased spending and “significant changes inbehavior.”

To commit fraud, there has to be three factors present. Zeunecalls it the phenomenon of the “triangle of fraud.” The first is amonetary 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 avery low probability that they’ll get caught,” he said. And lastlyand most importantly, the person has to be able to rationalize thefraud activity with his/her own behavior. Usually “what you tellyourself is that I’m only borrowing the money, and I’ll pay it backnext month,” which never happens.

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