Crossing the Line e-case

Summary

Crossing the Line chronicles the lives of five convicted white-collar felons. These ordinary people tell the story of how they devolved from corporate citizens to deceptive criminals, destroying their lives in the process. As they fight to rebuild their lives after serving time in federal prison, these individuals provide surprising insights into their past behavior and the road ahead. 

(c) Copyright Helios Digital Learning 2013. All rights reserved.

Introduction

Caption 1: Experts weigh in on white-collar crime. 

Chapter 1: Diann's Story

Diann Cattani was a human resources consultant hired to manage a large-scale project for a private company based in Atlanta, Ga. She was the sole financial officer, handling functions such as payroll, check signing, and reconciling bank statements. As time went on, Diann's workload increased but she didn't feel that her salary was keeping pace with her increased workload and responsibility.  She became dissatisfied with her compensation and resentful of her employer.  Even so, it was an incidental mistake that spurred her initial descent into deception.

Diann's pivotal "crossing the line" moment came during a family vacation.  Her travel agent accidentally charged Diann's family vacation to her corporate American Express card. Diann noticed the mistake and planned to reimburse the company as soon as she returned to work.  But, she never did.

Once back at work, Diann's resentment toward her employer began to grow. The work was piling up and she began to rationalize that the firm owed her money for all of the duties she was performing. Using the travel expense incident as a springboard, Diann began to steal money from the company. She rationalized using company money to hire and pay for babysitters when she worked late. She used corporate money to pay for gas and personal meals. When she filled out purchase requests for office equipment for the company, she included equipment for her home office as well. 

Diann took advantage of many opportunities to steal. She reimbursed herself from physical receipts and, when the credit card statement came in, she reimbursed herself again for the same items.  She created "dummy” invoices and used them to pay herself. She also paid personal credit card accounts with company checks and initiated other forms of deceit and criminal subterfuge.

The fraud Diann committed is typically rationalized by many corporate criminals as legitimate action; but they're actually classified as anti-organizational employee workplace crime.

Diann was able to commit these crimes because her employer allowed her to control all its financial accounts. In just a few short years, Diann stole approximately $500,000. With the guilt of her crimes weighing on her conscience and affecting her health, Diann ultimately confessed to the company's owners. She served 18 months in a Florida federal prison.

Diann's story illustrates how the elements of the fraud triangle--motivation/pressure, opportunity & rationalization--can converge and result in an ordinary person committing an extraordinary crime.  It also serves as a cautionary tale about the consequences of such transgressions.

Caption 2: Diann Cattani explains her rationalizations for committing fraud.

Chapter 2: Justin's Story

When Justin Paperny graduated from the University of Southern California at age 22, he was a disciplined young man. A fitness fanatic, Justin led a balanced life, had strong, healthy relationships with others and was soaring in his career. But just two years later, Justin was unrecognizable. He had abandoned all values he had once held dear in pursuit of the almighty dollar. His greed became insatiable and it propelled him into a dark tunnel of cynicism and selfishness that would eventually corrupt every aspect of his life.

Justin's descent began with jealousy. As a junior partner in a brokerage firm, Justin resented the fact that he was paid only a small fraction of the revenue the firm received from the clients he brought in. He felt his contributions earned him a bigger payout. It didn't matter that his earnings exceeded $20,000 each month. Instead of feeling satisfied, Justin began to feel greedy. He compared his earnings to another partner whose were significantly higher. He felt entitled to more; and when he saw opportunities to increase his earnings, he grabbed them.

Justin, very similar to Diann, felt as though he had been "harmed” by his firm, and believed he was justified in taking what was rightfully his. Justin's "philosophy” resulted in him spending 18-months in federal prison.

Justin's response to money is not uncommon. A report by University of Utah and Harvard researchers entitled,"Seeing Green: Mere exposure to money triggers a business decision frame and unethical outcomes", found that individuals who could gain monetarily through unethical behavior were more likely to demonstrate unethical behavior than those who weren't offered a financial gain. Watch as Justin explains why he crossed the line.

Caption 3: Justin Paperny discusses his background.

Chapter 3: Aaron & Weston's Story

In 2003, Aaron Beam and Weston Smith, both former chief financial officers (CFOs) of HealthSouth, found themselves in the middle of one of the largest reported healthcare financial scandals in United States corporate history.  HealthSouth used aggressive accounting methods to boost its financial statements.  In response to rising pressure to meet Wall Street earnings expectations, the CFOs felt internal management pressure to "cook the books.”  As a result, members of HealthSouth's finance team created fake journal entries in order to boost company revenue. By the time the fraud was discovered, more than $3.8 billion of fake revenue had been created. 

While both Aaron and Weston felt uneasy about the crimes they were committing, they strongly believed that they were doing what was right for the company.  They rationalized their behavior by believing they were preserving existing jobs, creating new jobs, and increasing the overall company's stock price. These are common rationalizations for pro-organizational employee crimes. Ultimately, Weston blew the whistle to the Federal Bureau of Investigation (FBI) and served 14 months in a federal prison camp for his role in the accounting fraud.

The case of HealthSouth illustrates the motivations behind and consequences of pro-organizational crimes. Pro-organizational crimes include activities such as accounting fraud as well as unethical behavior including exaggerating the benefits of a company's products to customers. Employees may participate in these acts to advance their company's reputation and financial goals.

Caption 4: Aaron Beam and Weston Smith talk about working at HealthSouth.

Chapter 4: Harold's Story

Unlike many corporate fraudsters, Harold was unwittingly corralled into committing crimes. Harold did not live a lavish lifestyle, nor did he intend to mislead investors. His boss asked him to create a spreadsheet showing investors a group of promissory notes had been paid; when in fact, those notes had not been paid in full.  Upon doing this, Harold found himself in the middle of one of the nation's largest Ponzi schemes. The government viewed Harold's spreadsheet as the key document that helped to perpetuate the fraud and mislead investors.

As Harold attempts to rebuild his life after being released from Fort Dix Federal Prison, he is still impacted by the stigma of being a convicted white-collar felon.  Harold believed he was fulfilling his responsibilities as the vice president of finance for his company by following his boss's orders. But his case is yet another example of an employee committing a pro-organizational crime.

Harold's story serves as a reminder to accountants that following orders doesn't absolve you of criminal behavior. It's especially important for accountants to exhibit professional skepticism at all times.

Caption: Harold Katz explains how he got involved in fraud.

Conclusion

Caption 6: Making the right choice.

Supplemental Readings

The following documents are suggested additional readings for the cases covered in Crossing the Line.

1. Diann Cattani Module:Confessions of a Con Artist
2. Justin Paperny Module:Securities and Exchange Commission v. Justin M. Paperny
3. Aaron Beam and Weston Smith Module
   • Former HealthSouth CFO Aaron Beam Charged with Bank Fraud
   • Securities and Exchange Commission v. William T. Owens and Weston L. Smith