Fraud Risks in Higher Education - March 2019

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1 Fraud Risks in Higher Education - March 2019 As part of UC Merced s Fraud Risk Management Program, Internal Audit is providing this overview of recent fraud cases at universities. The following are headlines from March The purpose of this monthly newsletter is to make you aware of fraud risks in Higher Education. The recent Admissions scandal shows that money and conflicts of interest can result in fraud in the most unexpected places. Thank you for your diligence in preventing fraud here at UC Merced. Internal Audit now provides administrative support for the UC Merced Whistleblower Hotline. If you d like to discuss concerns, please consider contacting us. Contact Information UC Merced Internal Audit (209) UC Whistleblower Hotline (800)

2 Man Charged with Stealing Equipment from University of Louisville s School of Music - March 22, 2019 Two men stole musical instruments and equipment valued at more than $70,000. The men identified where the instruments were stored at the school and were able to break into the location on at least two occasions over a 30 day time span to steal the instruments and equipment. The stolen items were later recovered. [From the news article, it was apparent that the school was slow in noticing that the instruments were missing.]

3 University of Minnesota employee used university funds to buy computers he resold for profit - March 21, 2019 A former employee bought 78 computers for his department from September 2017 to August 2018 and resold them for personal gain through Craigslist. The computers originally cost the university $134,000 and the employee was able to obtain $125,000 from the sales. The purchases were identified when a finance staffer noted the purchases made through the university bookstore were never set up on an inventory maintained by the IT department.

4 For nearly 10 years, a Washington University official embezzled. She will serve 30 months in prison. - March 8, 2019 [This headline relates to the same fraud included on a September 11, 2018 headline. This article updates the details and provides more information related to how she got away with the frauds for so long.] A former business director was sentenced for three separate schemes that lasted nearly a decade. Along with 30 months in prison, she was ordered to repay $381,583. She was living out of the pocket of Washington University. She paid her moving company, a home cleaning service, divorce lawyers, painters and construction companies by creating, submitting and approving about $155,000 in false invoices to the university. She billed the university for travel for herself and relatives to Poland, Germany, Thailand, Canada, Florida, Arizona, New York City and Texas, prosecutors said. She also bought about $140,000 in VISA gift cards at the Washington University bookstore by forging other employees signatures and charging the purchases to 100 different university accounts, prosecutors said. The gift cards, which she used for personal purposes like jewelry, were purportedly going to medical residents. The gift card scheme was uncovered only due to an error by the bookstore. After the store double-billed one of the employee s transactions, they called the listed employee to notify her that they would be issuing a credit.

5 Former chemistry department officer indicted on theft charges - March 4, 2019 A former Administrative Officer at the University of Texas at Dallas was indicted for embezzling more than $130,000. She had been with the university since Internal Audit identified that the thefts occurred over a four year time span ( ). The former employee made personal purchases which were charged to the university.

6 Ex-employees charged with defrauding more than $380,000 from Utah State University - March 1, 2019 A husband and wife who worked at Utah Valley University for more than 15 years have been charged with taking more than $380,000 from the college through multiple alleged schemes that funneled money into their business accounts. The husband was the Associate Dean of Students in Student Affairs. It was identified that he stole $34,300 from student organizations and clubs. Investigators began looking into the wife after her coworkers reported she was misusing her position as financial manager of the university s Technology & Computing College. The coworkers told university officials they feared she d retaliate against them if they reported her, according to a university news release. The couple was transferring funds to their personal business, was reimbursed for personal travel, and had various other schemes.

7 Lori Loughlin, Felicity Huffman among 50 charged in college admissions scheme - March 12, 2019 Federal prosecutors have accused 50 wealthy parents, coaches and test proctors, among others, of conspiring with William Rick Singer, a college admissions consultant, of committing bribery and fraud to get students into some of the nation's most prestigious schools. According to the Justice Department, parents often paid Singer between $250,000 and $400,000 although some allegedly spent up to $6.5 million to help their children cheat on standardized tests, create fake athletics profiles and bribe officials, in order to boost their chances of admittance. Potential Impact on California Universities California Assembly Speaker Anthony Rendon detailed a package of a half dozen bills introduced to stop cheating on college admissions. While the measures apply to the state's universities and colleges, they also affect private education benefiting from CalGrants. "We know there's a crisis with respect to access," Rendon said. "This college admissions crisis, to the extent it impacts the UCs, is a crisis that really continues to undermine public confidence, and for us as a legislature to make sure that we're looking at it, is something that we have to do." Court papers revealed the parents were charged with conspiracy to commit mail fraud and honest-services mail fraud. They included mothers and fathers from the most privileged spheres of society, including CEOs of private companies, securities and real estate investors, the co-chairman of a global law firm, a fashion designer and two well-known actresses.