Fleecing the Faithful—Again: Former YWAM Leader Defrauds Many


A Swedish Christian businessman swindled friends, family, and missionaries of millions of dollars

Ken Walker | posted 6/08/2011 09:52AM

When Jan and Henny Pauw visited Le Rucher on a summer missions trip, they never dreamed it would wind up costing them their retirement nest egg. The Dutch couple became ensnared in a faith-based Ponzi scheme that operated for a dozen years before it unraveled.

Nestled on two acres at the base of France’s Jura Mountains and the nearby Swiss Alps, the Le Rucher retreat center opened in 1994 to help stressed-out missionaries recuperate. But Le Rucher became the setting for the promotion of the fraudulent Nordic Capital Investments (NCI), which has created resentment toward Le Rucher co-founder Erik Spruyt. Last October, Swedish businessman Kristian Westergard, the founder of NCI and a close associate of Spruyt’s, was convicted of gross fraud in Sweden and sentenced to prison.

In 1998, the Pauws went to Le Rucher—then associated with Youth With a Mission (YWAM)—with their evangelical church in Ermelo, the Netherlands. An industrial chemist by trade, Jan had never been on a Christian mission. On the couple’s first trip, Spruyt suggested they consider becoming long-term volunteers. Jan replied that they couldn’t afford it.

When the Pauws returned the following summer, Spruyt repeated the suggestion. Jan demurred. Then, they say, Spruyt introduced them to NCI, a special investment fund that paid interest of 15 percent a year (the rate on a contract they later signed). It had the potential to generate enough income to support the couple. Part of the attraction was the promise that some of the fund’s earnings would generate charitable support for select Christian missions. The Pauws invested euros worth $260,000. The following year they moved to Le Rucher as volunteers.

In total, the couple received more than $230,000 before payments ceased. But the principal amount of their nest egg has vanished. They still rue their decision to trust Spruyt’s referral to NCI. In a 2001 e-mail with a sample NCI contract, he said, “If you want to take this seriously then this is the procedure that I recommend to you with the amount you want to invest.”

“All we have now is our old-age pension and a small pension from my work as an industrial chemist,” Pauw says. “Sometimes we think, How could we have been so stupid to believe them? Why did we trust them?

Read the rest of this article at Christianity Today here >>>

Some remarks

I guess what we are reading here is how well affinity frauds work. You gain the trust of the leaders or as a leader you have a natural amount of trust associated with you and from there on it becomes easier to lure in new victims. And for the record this works the same with all these marvelous business opportunities that lure in the small people. It is not surprising that these business opportunities are so often targeted at church communities: there is a naturally higher level of trust.

Part of why this works is that lack of financial understanding, business understanding, innumeracy so you which is being replaced by trust in the person offering you the opportunity. It is for this reason that leaders are targeted first. Once you have the leader over the bridge the rest of the sheep will follow. And for the record, no one is immune and we all run a risk of falling for it.

On Affinity Fraud

Affinity fraud is when one person gains the trust of others because they share the same religion, race, ethnicity, career or other social characteristic and then deceives them in some kind of financial transaction. Now this is not necessarily intentional, as this may also be the result of a misguided participant in one scheme or another, a gifting club or pyramid scheme or the pyramid scheme posing as a legitimate MLM.

In a world of increasing complexity many do not know how to properly investigate the credibility of an offering and trust becomes an increasing factor relied on.

“You can trust me, because I’m like you. We share the same background and interests. And I can help you make money.”

The normal process of cautious skepticism is replaced by social blah blah, and for the record, it works. Another tactic used is to first lure in some prominent members of a group and once that is done the others are pitched using the credibility and good name of the group leaders: the elder, the pastor etc.

With the hierarchy of leaders and followers already established, the investment becomes merely an extension of our desire to belong and be accepted.

The fact that some of the earlier entrants, the ones you know and trust, are receiving good money is not a guarantee that it is all good, that is the essential working of a pyramid scheme, the high INITIAL returns. The case outlined in Christianity Today show that exactly and there are many more known cases throughout history.

What makes those types of scams extra attractive is that  once an affinity fraud victim realizes that he or she has been scammed, all too often the response is not to notify the authorities but instead to try to solve problems within the group. This usually just ensures that the fraud continues without anyone reporting it to the authorities until it is too late to recover funds. Scammers recognize that the tight-knit structure of many groups makes it less likely that a scam will be detected by regulators and law enforcement officials, and that victims will be more forgiving of one of their own members.

Some tips

Some way to revent becoming a victim of affinity fraud are:

  • NEVER TRUST PEOPLE BLINDLY.
    No matter how well you know someone or think you can trust them, always be cautious when it comes to handing over your hard earned money. Ask questions about the scheme and keep on doing that until you understand the scheme. Let them know that you are aware of all the scams that are taking place regularly in today’s world. Just because a person is a fellow Christian, it does not mean that he or she is a good person who will not cheat you, intentionally or out of ignorance.
  • DO YOU DUE DILIGENCE; CHECK THINGS OUT THOROUGHLY
    Use the Net, call others with financial; insights and not associated with the scheme or seek professional advice, but whatever you do, never step into a scheme you do not understand.
  • DO NOT GET GREEDY
    The strange thing is that many of these schemes promise high yield on low risk or even risk free investments. In the financial world however the principle  is usually exactly the other way around: the higher the returns the higher the risks. Greed is a sin, not just because the Bible tells us it is, but because nothing good can come of greed. It leaves us wanting more and more, no matter how much we already have. Desist from this emotion and you and your money are safe. Know that God will provide you in all your needs which is something different than all your wants.

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Alert: Tax Refund Scam Mail Circulating


Did you receive a Tax Refund Notification email like this?

The sender of the email is using the following address (in my case) www-service@nz.govt.nz.

Delete but most of all do not respond or give any of your details. I just got confirmed that this is a scam from the IRD.

Document Reference (168591)

 

Marketing Fraud


On the false profits blog an article was published by Robert Fitzpatrick, founder of Pyramid Scheme Alert and co-author of the book False Profits. The main theme of the article is on why people fall for pyramid and Ponzi schemes.

The Evolution of Fraud

01/17/2010 07:21 PM

As business has grown more complex, fraud has evolved and adapted accordingly. Multi-level marketing (MLM), the most common form of pyramid/ponzi fraud, is the product of years of evolutionary adaptation in the scam and swindle field, matching the adaptation of the legitimate marketplace. Public awareness and law enforcement always lag behind new forms of fraud. The success of MLM’s and other financial Ponzi’s at duping millions of people, rich and poor, educated as well as illiterate, shows that public understanding has not caught up to this new mutation.

A study of consumer fraud’s evolution shows three stages that parallel the three levels of development in American business. America evolved from leading the world in manufacturing (now China) to becoming the financial capital of the world (now moving to Asia/Europe/Middle East), to our present status as the world leader of consumer-purchases driven by marketing.

The Three Stages of Consumer Fraud:

(1) Product-based fraud in which consumers are tricked into buying defective or even non-existent products or to pay far more for a product than is worth

(2) Financial fraud in credit, banking, insurance, mortgages, stocks and bonds.

(3) Marketing fraud, in which consumers are induced to personally identify with the fraudulent company and to help it defraud others by becoming part of the marketing program themselves with their own purchases and personal promotions.

All three are in operation today but public awareness is now quite strong in the first stage — product frauds. Regulation is also well established. “Lemon” laws, return policies, product safety rules, and trusted consumer alert publications are available now that help to protect people from the old plague of bad products and price gouging.

The second stage — financial fraud — is still rampant, but public awareness is growing. We now know about crushing credit card terms, unjust banking fees, predatory pay-day loans, and the disaster caused by “sub-prime” mortgages. In 2010, America may even get its first consumer protection law aimed at “financial” products. The new law and the growing anger at predatory lending and banking practices show that public awareness and consumer protection are starting to catch up in this area.

The third stage — marketing fraud — is the highest and newest state of fraud, the one which the public is most vulnerable to, has least awareness of, and has the least legal or governmental protection from. This is area in which Ponzis and Pyramids and multi-level marketing operate. There is not even a dedicated law against pyramid schemes in America. Many other countries also do not have anti-pyramid laws. Canada, for example, has some regulations on multi-level marketing (MLM), and it has anti-fraud laws, but it appears helpless to make the connection between the two. So “endless chain” buy/sell scams that wipe out the savings of 90-99% of participants are safe to plunder Canadians and Americans and are spreading worldwide as “free enterprise.”

Read the rest of the article here >>>

As requested by Robert here some further elaborations.

Marketing Fraud

Marketing fraud as it appears to transpire from the article is an extreme version of what we know as false advertising, whereby claims are made about a product, service or business opportunity that are actually know to be invalid, false and deceptive. In that sense the “marketing fraud” is a species of false advertisement be it a more insidious one.

The modus operandi that transpires from the article is most certainly one that is recognizable. At the same time however it seems to me that the methods used for what is classified as marketing fraud are just what marketing nowadays is all about.

Read the rest of the post at Dierckx & Associates >>>

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THE FRAUD TRIANGLE: PERCEIVED PRESSURE ILLUSTRATED


Wherever a fraud occurs, three elements are always present:

  • opportunity;
  • a perceived pressure;
  • a way to rationalize the behavior;

This is not the place to extensively explain the fraud triangle but there was this article  in the Southland Times that illustrated how things may work out.

The CASE
A woman was accused of using a two year old cancer victim to fraudulently obtain money. Charges included causing loss by deception, obtaining by deception and theft. She’s been running an appeal for the two year old leukemia patient and kept the proceeds. Her offending according to her own story started because she need money to feed her gambling habit. She claimed to be addicted to betting at the TAB and was placing bets around six times a day for amounts between $5 and $200. The lady in question was pointing at agents claiming to be more responsible in how they monitor punters’ behaviour. The NZ Racing Board does have a responsibility to take proactive measures tio minimise problem gambling and if we are to believe the lady such proactive measures had not been taken.

Perceived Pressures
Financial pressures are probably the most important when it comes to committing fraud. The fact that someone has always been honest appears to be of little to no significance when severe financial pressures exist or are perceived to exist. The six most common financial pressures associated with fraud that benefits the perpetrator are:

  • greed
  • lifestyle issues
  • high bills or debts
  • poor credit facilities
  • personal financial losses
  • unexpected financial needs

This list is not exhaustive and other financial pressures may be found. Furthermore these financial pressures are not mutually exclusive and several may exist at the same time. It is claimed that there is for instance a rise in employee fraud and thefts that relates to the current economic crisis. Pressures are up for many, those that lost their job may have severe pressures, that are still in a job may consider unethical means out of fear for losing their job. 

Closely related to financial pressures are vices: addictions like gambling, drugs and alcohol, and by now even the internet porn addictions.
The relationship is indirect in that it is not the vice itself that makes people commit fraud but the immediate need for cash to finance the habit. Vices are the worst kinds of pressure in that they drive people into an out of control lifestyle where they are immune to reason. This is why they are considered one of the worst kinds of pressures.

Opportunity
The lady pointed at the agents an even her family so as to notice behaviour and intervene. Apparently no-one had noticed the troubles the lady was in and an opportunity opened itself up where agents were, at least according to the lady, lax in relation to their monitoring of potential problem gamblers. Regardless of what the merits of such an argument are, one could just imagine how it may be important for an employer to notice behavioral changes that may indicate that something is wrong but most of all to ensure that there are no unnecessary opportunities to steal and get away with it. An employee with a vice could well become a fraud hazard. Would you recognize a problem employee?

We are more than happy to assist you and your employees for instance with a fraud risk assessment or fraud awareness training, a fraud risk management program, or where you suspect that something may be wrong; why not contact us. We would welcome the opportunity to assist you in getting to the bottom of your concerns and work towards a resolution.

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JOHN JOINS THE TEAM AT IRS, ROTTERDAM, NETHERLANDS





I am pleased to advise that as per 7 September 2009 I have started work at IR}S as a Senior Consultant.

IRS is an initiative of recognized top specialists in the area of integrity, security, forensic investigations, compliance, IT-security and restructuring. Staff at IRS consists of dedicated professionals keeping office in Rotterdam – The Netherlands.

The multi-disciplinary approach of IR}S makes the difference in:

  • integrity management
  • fraud and fact-finding investigations
  • forensic IT
  • transaction & restructuring services
  • security risk management

Clientele mainly consists of governments, enterprises, financial institutions, shareholders, advisory boards and venture capitalists. Do not hesitate to contact me should you have any enquiries.

 

More information can be found at http://www.irsnl.com.

 

I can be contacted at

 

T +31 (0)10 511 9555

F +31 (0)10 511 9556

M +31 (0)6 51438205

E john.dierckx at irsnl dot com

I look forward to hearing from you soon.

 

Recruitment Risk Reduction Tips


When recruiters/head hunters, managers or HR professionals are in need to
fill a position, they should look for more than just a proper skill set, experience or a good fit for team or company. They should also consider whether or not there are or may be reasons for not contracting a specific applicant

It is estimated that around 10% (US) of applicants have criminal convictions. A considerable amount of resumes contain serious falsehoods or omissions. Diplomas and certificates can  be bought at a reasonable price by those that want to beef up their academic achievements. It is therefore important to avoid costly mistakes and
that appropriate measures are taken to reduce the risk associated with recruitment/hiring new employees. Especially in tighter markets where there is a shortage of skills, the need for proper hiring procedures may be overlooked or neglected.

At all times however, you will want to find a balance between required controls and attracting applicants. Employers, should use evaluation tools. For the purpose of this article however, and realizing that such a programmatic approach is not always
realized, here are some tips that can be used immediately, at no cost, that will assist you in better informed decisions and will hopefully reduce your recruitment risks.

It is well known that even the best fraud controls will not do their job if you hire
dishonest employees. While it may not always be possible to predict the future and while it is believed that everyone deserves a second chance, I also promote that you can only make a good decision in these matters if you are well informed. I speak from experience when I say that I have often ended up being involved in cases where the signs were all
over the wall. If someone had only taken the trouble of a proper evaluation of the information provided by candidates.

Ok, enough now,here are some tips that may assist you in making better informed
decisions.

  1. First determine what the actual needs of the organization
    are and whether or not these needs may be addressed internally.
    Consider recruiting internally first. 
  2. If at all possible use pre-formatted application forms and include any documents or authorization forms that you may require. This ensures that you stay in control of the information you require from each applicant and forces to sit down and document your requirements.
  3. Have each job applicant sign a consent form for a background check, including a check for criminal records, past employment, financial information and education. Announcing upfront that your firm checks applicants’ backgrounds may discourage applicants with something to hide, and encourage applicants to be truthful and honest about mistakes they have made in the past.
  4. In addition to an actual check, ask whether or not an applicant has been convicted for criminal offenses in the broadest possible terms allowed by law. Laws may differ considerably so ask your lawyer or HR professional where the boundaries are.
  5. Towards the end of an interview, advise applicants that the firm performs a
    criminal background and reference check as a standard business practice.
  6. Ask the applicant if he or she has any concerns to share. Good applicants will usually pay no heed to the question. Applicants with a problematic background may either reveal relevant background information or withdraw their application.
  7. You could ask applicants during an interview what they think a former employer might say about them. For example, “If we were to contact past employers, how would they describe your performance, work style?” Since the applicant has signed an authorization and has been advised that such checks may occur, the applicant may be more motivated to reveal information about past jobs.
  8. Make sure that the applicants are advised in clear terms that any false or
    misleading statements or material omissions are grounds to terminate the hiring process or employment, regardless of when discovered.
  9. Should employment commence before the completion of a background check: make
    sure that any agreement states in writing that employment is conditional upon a background report that is satisfactory to the employer.
  10. Verifying past employment is often a neglected but very important tool for an
    employer. Generally speaking, past job performance can be a predictor
    of future success and offers you an opportunity to test whether or not there may be issues as to how the applicant may fit in.
  11. Verification of dates of employment and job title are critical because an employer:
    there may be hidden and unexplained gaps in the employment history to
    should be discussed or may raise concern. There may be many reasons for a gap in employment.
  12. When you are provided contact details of referees from past employers or otherwise, always use the general number of the organization as opposed to any private number or DDI provided. Ill-willed applicants may have made arangments with friends or family.
  13. Gaps in employment histories should at all times be discussed. There may be a thousand very valid reasons for these gaps, however if an applicant cannot account for them that could be a red flag. Where in doubt, consider ways to corroborate the explanations provided by the applicant.  
  14. Ask for previous addresses, and likewise, if an applicant cannot account for them that may be another red flag. In some jurisdictions (for instance US) previous addresses are paramount to efficiently and effectively perform adequate criminal background checks due to the way the system is set up.
  15. Obtain a listing of all past addresses for five to ten years.
  16. Advise applicants that besides pre-employment screenings, employment screenings may be performed for specific reasons for instance if a future investigation is required.
  17. Since you already obtained the authorization, do actually check for criminal records. There are services providers that can assist in this, as well as obtain financial and other background information.
  18. Finally, documenting an attempt to obtain references can demonstrate due diligence and may be seen as an expression of how serious you take your company and its employees, the applicant included. They are after all your most important asset.

Originally posted at Dierckx & Associates.

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A Pro-active Approach to Occupational Fraud, Abuse and Employee Theft


Time and time again reports show that when it comes to fraud, the greatest threat is not from outsiders but from insiders. Organizations can be proactive in preventing, detecting, investigating and resolving employee theft and fraud. 

LEAD BY EXAMPLE
Senior management and business owners set the example for the organization’s employees. A non-consistent attitude toward rules and regulations by management will more than once be reflected in the attitude of employees. Every employee, regardless of their position, should be held accountable for their actions, so yes that includes top management.

And in all honesty, more than once we have found our initial client contact to be the involved party. It is often management that has the greatest access to fraudulent opportunities and it is more than once that same management that can get away with control overrides.

POSITIVE WORK ENVIRONMENT
Create a positive work environment that encourages employees to follow established policies and procedures and act in the best interests of the organization.

Fair employment practices, written position descriptions, clear organizational structures, comprehensive policies and procedures, open lines of communication between management and employees, and positive employee recognition will all work to reduce the likelihood internal fraud and theft.

I see the importance in my daily practice. Once fraud and/or theft is established and a  perpetrator has been identified, more than once the issue of feeling not-recognized is at least part of the motive for stepping across the line.

INTERNAL CONTROLS– Internal controls are designed to ensure the effectiveness and efficiencies of operations, compliance with laws and regulations, safeguarding of assets, and accurate financial reporting (See for instance the COSO model).

The internal controls controls for safeguarding assets and financial reporting require policies and procedures that address amongst others:

  • Separation of Duties
    No employee should be responsible for both the recording and processing a transaction. I am aware that In New Zealand with a substantial percentage of very small businesses this is sometimes hard. However there are always options and more than once overriding this basic procedure for the sake of practicability has been disastrous.
  • Access Controls
    Access to physical and financial assets and information and accounting systems should be restricted to authorized employees and its use should be monitored on a regular basis.Start off with simple checks: just ask your employees out of the blue, I need the password of so and so who’s not here today, can anyone help me? You’ll be surprised, or check for the yellow post its on the bottom of the screen or the back of the computer.
    And where it comes to physical access: more than once actually today I could have nicked all the confidential assets of my client: the person I was supposed to meet was tucked away in the back of the building, the rest of the crew was at a seminar, and me I walked around and saw computers standing open, no one to receive me at the door and access to all offices. Not good.
  • Authorization Controls
    Policies and procedures addressing the controls to initiate, authorize, record, and review financial transactions.
    Internal controls will reduce the opportunity for fraud as a detterent factor and will enhance the efficiency and effectivity of your operations.


EMPLOYEE SELECTION
If you hire dishonest employees you run a risk. Honest employees are an asset to any organization, even one with poor internal controls. However, a dishonest employee will ignore management’s attempts to provide a positive work environment and search for ways to defeat even the most comprehensive internal controls to commit fraud.

It is good to realize upfront that no internal control system is  100% fail safe.

Therefore it is very important to keep dishonest applicants from becoming an employee. A thorough pre-employment background check should include:

  • Criminal history for crimes involving violence, theft, fraud, etc
  • Civil history for lawsuits involving collections, restraining orders, fraud, etc
  • A financial background check (Baynet)
  • Driver license for numerous or serious violations especially where driving is part of the job
  • Education verification to verify degrees from accredited institutions. By now I receive approximately 20 emails a day offering me different  degrees and certifications for sale. You can no longer afford to be just impressed with what you see. A check is a  requirement.
  • Employment verification to verify positions, length of employment, reason for leaving


EMPLOYEE EDUCATION
Employees should receive information on the policies and procedures related to fraud, the internal controls in place to prevent fraud, the organisation’s code of conduct and ethics policies, and how violations of these policies will be disciplined.

Every employee should sign a form to verify the receipt of this material. On a periodical basis it is recommended that employees receive training on these subject matters.

And before I forget: referring new employees to the companies intranet for further advice without providing them a full package is not a good option top keep them updated. They are an important asset, make education something personal.

REPORTING SYSTEM
If anything, more than once I encounter witnesses saying that they “had this feeling all along that something was not ok. But I didn’t know where to go to to express my concerns and I didn’t want that colleague to become a suspect for nothing”

Every organization should provide a confidential reporting system for employees, vendors, and customers to anonymously report any violations of policies and procedure and even concerns.

Employers should promote and encourage the use of the reporting system. Not just from a reactive point of view but also pro-actively. More than once vices are involved or  signs are visible at an early stage, bosses don’t see, colleagues do: make sure they can communicate those concerns.

AUDITS/ASSESSMENTS
Random, unannounced financial audits and fraud assessments are important to identify new vulnerabilities and measure the effectiveness of the controls in place.

In addition to gathering important business intelligence through audits and assessments; it will deliver a strong message to employees that a pro-active stance in respect of fraud is a priority

INCIDENT INVESTIGATION
A thorough and prompt investigation of policy and procedure violations, allegations of fraud, or the warning signs of fraud will provide management with the facts necessary to make informed decisions and reduce losses.

And again it send a strong message to the internal organization that these things are taken seriously.

APPROPRIATE PUNISHMENT
Employees who are identified as committing fraud and theft should receive appropriate punishment for their misdeeds. A failure to do so leaves an impression that the only risk for this conduct is termination. At all times it is recommended that recovery of damages including the costs of investigation, litigation or prosecution is sought.

This post was previously posted at the Dierckx & Associates Blog. I believe, based on current experiences that it is still current.