Indeed Michael told Alan Campbell, the president and founder of Condor, that "I plan to be a millionaire by the time I'm 35 and, while that means I will have to work even harder than my father did, I know I can do it and I know I can succeed." Campbell was impressed by the young man. Himself a self-made millionaire, Campbell took pride in identifying "self-starters; people who can get up and go; people I can rely on, trust and work with. My sort of people."

The only nervousness that Campbell had about the young man was that although he was enthusiastic, he was relatively inexperienced. He did not want Condor to be the training ground for someone to "just get up to speed and then move on, leaving me with a critical gap in my management team just when we get to our business peak." However, when Michael announced that he was recently engaged to his childhood sweetheart and was looking for a long-term position upon which he could build a future and provide for a family, Campbell's concerns melted away.

Michael Flanders joined the management team of Condor Construction as its new CFO 10 days later. He inherited a mess. A certified public accountant (CPA) had been assisting the company on a part-time basis since the previous CFO resigned almost three months earlier. That position started out as a caretaker role "just for a couple of weeks while we find a new person" but continued on an ad-hoc basis for three months as the business juggernaut that was Condor went about its ever-expanding enterprise — and expanding it was.

Campbell had been approached by an English property finance company eager to capitalize on Condor's U.S. success. With the promise of "all the funding you need" Campbell paid scant attention to the finance function as he went about securing the funding deal of a lifetime. In the five years since starting business in the United States, Condor had grown from a team of four people to ten specialists, including Flanders. Sales of finished condominiums had just topped $120 million. Campbell saw the opportunity to do twice, maybe three times, the amount of business he was doing at present. The money would really flow!

Two weeks after he started, Michael was working late when Campbell came over and sat down at his desk. Over a couple of glasses of Jack Daniels, Campbell told the young man of his plans for the company and how, if he carried on the way he had started, that there was "a piece of this in it for you. What I will need," said Campbell, "is a fairly creative tax structure to deal with the profits that we will be making. I want to plan for that now so we are ready to go when the money rolls in. There will be a significant bonus in this for you if things go well." "You can rely on me," replied Michael, "I will treat your money as if it were my own." And, true to his word, he did.

From the time that Michael Flanders commenced employment with Condor Construction, organized chaos — as Alan Campbell once described it — had degenerated to out-and-out bedlam. In addition to trying to come to grips with the business of the company and trying to catch up with the work that was left incomplete by the external CPA, the number of new projects the company was undertaking as active developments had doubled. Michael felt himself being dragged down by the ever-increasing workload. Fourteen-hour days and late nights had become the norm. The fun of the job had developed into the daily grind. To make matters worse, two further development sites had been purchased because "they were such a good buy," according to Campbell. There were no firm plans in place yet to develop these two properties.

The young CFO needed help and he knew it. However, he did not want the CPA back. That would have been a significant blow to both his ego and his pride. He just wanted someone who could work with him — for him really — a person he could trust to not question his judgment and decisions; someone like his brother Daniel.

Daniel Flanders was even less experienced than his older brother and he did not have Michael's creative flair. However, what he lacked in style he more than made up for in organizational skills. Determined, methodical and pedantically meticulous, he was everything that Michael was not and none of what Michael was. In short, the two brothers complemented each other perfectly.

When Michael first floated the idea of hiring his brother, it was met with firm rejection by Condor's CEO. Nathan Collingwood wanted an independent, externally recruited person and did not like the idea of siblings working together in any part of the company, and especially not in the finance department. However, even after Collingwood expressed his concerns to Alan Campbell about Michael's proposition, Campbell agreed to the hire; albeit on a short-term basis, "until the current mess gets sorted," said the boss.

"Michael went and talked to Alan privately about the hire one afternoon, and the next day Alan told me we would be taking Daniel on for six months or so," Collingwood said. "I don't know what they talked about, but nothing I said to Alan about it seemed to make any difference. Condor was his company; in the end the decision was his. So, 14 months after Michael joined Condor, we had the two Flanders brothers working for us."

With all of the development work underway, not to mention the two "stock" properties, it seemed to Campbell that every week Michael was coming to him looking for more money for one thing or another. In addition, the construction company that Campbell had contracted to build three of the four current developments was running into delays and their quality of work was dropping. If it continued, Campbell would not meet the standards required to achieve the market premiums that he thought the projects were capable of. Campbell realized that "more human resources are needed to get things back on track and we need it now." To address the needs, Campbell brought in contractors who had worked for his old UK firm. This required the establishment of offshore payments and wire transfer arrangements with Condor's bank, Belford First National.

Belford already had very firm instructions from Campbell regarding drawing on the group checking accounts. There were only four approved signatories and any two of these were required on all checks that were cut. For reasons of internal control the CFO was not one of the signatories. When it came to wire transfers, a tighter regime was put in place. Campbell insisted that he personally sign all wire authorizations and that the bank had to orally confirm the instruction with him before any wire transfers were actioned. With these controls in place, Campbell felt assured that no money would leave the group accounts without his knowledge or the agreement of approved persons.

The problem with Campbell's check controls came from the increased workload — often all four signatories would be out of the office at project sites when payments needed to be made. Within two weeks of his commencement as CFO, Michael was harassing the signatories to come back to the office to sign checks to meet various project and office expenses. Eventually, it became the practice to have three or four checks signed in blank and held in Michael's office safe, to cover "emergency payments."

Alan Campbell was in England completing a week of meetings with his British joint venture partners when Condor's CEO, Collingwood, telephoned to say that he had received a disturbing call from Jeff Segar, the Security and Systems Compliance Manager at Sinclair Savings and Loan. Segar had told him that several large deposits had been made through the Internet banking function to one of Sinclair's customer's accounts. Segar told Col-lingwood the deposits had originated from accounts linked to the Condor Group at Belford First National.

Sinclair's anti-money-laundering software had flagged the transactions as suspicious because the sums transferred were then withdrawn by check from the Sinclair account the following day. Pressed on the matter, Segar told Collingwood that it was prudent for Collingwood to review the group's bank accounts for electronic withdrawals and to verify that each of these was made with proper authority. "I can't tell you whose account it's going into but I will tell you that we cannot see a reason why sums like this would be coming out of your accounts and going to this person's account."

Knowing that Campbell would ask, Collingwood pressed on with his questions of Segar and suggested the names of a couple of Condor's staff. "Like I said," said Segar, "I can't tell you whose account it is as that would breach privacy, but you might not want to talk to the people you just mentioned until you have made other discrete inquiries." The people Colling-wood had suggested were Michael Flanders and Robert Petrino, the contracts and construction manager.

It was 2:00 PM in San Francisco when Nathan Collingwood hung up with Alan Campbell. Collingwood was furious. Once before a contracts manager had "looked after himself" at the expense of the company and history, it seemed, was about to repeat itself. There was little that could be done in the way of making inquiries, subtly at least, until the staff went home for the day. Even then he had no idea where to start. Leaving the office, he walked down the quiet service alley that ran to the adjacent parking lot. Upon reaching his car — hot and stuffy after being closed up all day in the hot sun — he pulled out his cell phone and called Julia Meyers at Stern, Katz, Meyers LLP.

Meyers agreed to see Collingwood immediately once she became aware of the nature of the advice he was seeking. A junior partner in the profitable law firm (the Meyers in the firm's name came from her near-retirement uncle), Julia had earlier in her career worked in the District Attorney's (DA) office and had prosecuted her share of corporate fraudsters. In the 40 minutes it took Collingwood to drive to the Beachwood Boulevard office, Meyers had put together a must-do priority list and sketched out an action plan for Collingwood to follow. She had also alerted a private investigator that a client may need some urgent assistance and had contacted me, a Certified Fraud Examiner(CFE), to let me know she might need my services on the case. By the time Collingwood arrived at the law firm, the wheels had begun to turn in what would be a testing and consuming investigation.

Bottled water in hand, Meyers took Collingwood through her suggested approach. She reminded him that at present there was only a suspicion that funds may have been embezzled and until there was something more concrete than an unconfirmed telephone conversation with a "name no one" bank officer, that Collingwood should keep the information he had received to himself. Her composure reassured Collingwood as she mapped out the strategy.

Collingwood returned to Condor's office just before the end of the day. Robert Petrino had left for the day and would not be in until mid-morning tomorrow. As was his practice, Petrino called into jobsites at the start and the end of each day, which left him time to complete the paperwork side of his job during the middle of the day. As luck would have it, both Michael and Daniel Flanders had joined a new gym earlier in the week and that night was their second training session. By 5:20 PM the office was silent and, apart from Collingwood, empty.

The first part of the plan was to look at the bank statements for the dates indicated by Jeff Segar from Sinclair Savings and Loan. It took Nathan almost an hour to find the bank statements because they were out of order in the files and not where he had expected them to be. Frustrated, he pulled together all the statements he could find, regardless of their corresponding accounts, and headed into the boardroom, one of only two private meeting rooms on the floor leased by the company. He was still missing some pages as he organized them into account order on the boardroom table. Small bundles of paid checks were attached to some of the statements, but some statements had none at all.

With all of the statements that he could find set out before him, he flicked through the piles of paper until he came to the most recent. "I saw them immediately. On the first account there were four transactions, all electronic debits. They totaled over $78,000. Two transactions, each for $25,000 were in the week preceding the call from Segar. As I scanned other group accounts for the same month I saw lots of transfers between the various bank accounts; movements in and out. So much activity was going through the bank accounts when I would have expected very little; something was wrong."

Collingwood worked through the bank statements and scheduled out just over $250,000 of transfers to Sinclair Savings and Loan. There were more pages missing than he had first realized. It was nearly midnight when he decided to call it quits for the night. He was tired, loaded up with coffee and had decided that he was getting nowhere. As he tidied up the last of the piles of bank statements before he left the room, he saw it: a canceled check. It was signed by himself and Robert Petrino. It was made out for the sum of $20,000 to Daniel Flanders. With a rush of adrenaline, fueled by caffeine, Collingwood examined the check over and over. He looked at the date; almost six months ago. He did not remember any payments being authorized for Daniel Flanders for $20,000. Daniel had barely started then. No, this was wrong. Locking the office, and despite the hour, he called Julia Meyers on her cell phone.

To his surprise Julia answered almost immediately. She had been waiting for some report on his snooping around, and while it was later than she expected, she was eager to hear what had been discovered. After listening without interruption to Collingwood's report, Julia suggested they move to the next step in the plan; to confront the suspected offenders and seek an explanation. Collingwood expressed his opinion that he considered Robert Petrino was in the clear, but Michael and Daniel Flanders had some explaining to do. They agreed that Julia would visit the Condor offices first thing in the morning and the two accountants would be interviewed. Julia would also alert the private investigator and me, in the capacity of a CFE, about the case's developments.

When Michael and Daniel Flanders arrived at work at their customary 7:50 AM, they were mildly surprised to see that Collingwood was already in. The two accountants, whose work area was directly across the office from the boardroom, were rather amused. Collingwood, in contrast to them, rarely arrived in the office before 9:00 AM. It was a point of some discontent, more with Michael than Daniel, that Collingwood was paid so much but seemed to do so little. They had often discussed that between Robert Petrino and Nathan Collingwood it was a toss-up as to who did the least amount of work.

Julia Meyers entered the reception-less offices of Condor Construction just after 9:00 AM and went straight to the boardroom. Reluctant to confirm Collingwood's view that Daniel Flanders was embezzling from the company, she agreed to a range of questions that would be put to the Flanders brothers. It took another two and a half hours before Julia was satisfied that the drafted questions sufficiently covered the concerns raised by the suspicious transactions. They agreed that the interviews would commence at 2:00 PM, when the accountants returned from their lunch break.

It was not unusual for Michael Flanders to be called into boardroom meetings. Since starting at Condor he was often involved — too late in his opinion — in discussing new projects, capital-raising issues and tax implications of various proposals. The invitation to join Julia Meyers and Nathan Collingwood at 2:15 PM was clearly another such meeting. He picked up his leather-bound writing compendium, pen and the ever-present calculator and headed into the meeting, closing the door as he entered the room.

When he emerged 45 minutes later he was ashen and very quiet. Gone was the cheeky smile that endeared him to so many, replaced with a drained look that one might expect to see on the face of a mourner at the funeral of a close friend. As he left the boardroom he was closely followed by Nathan Collingwood, who walked over to the accountants' desks. "Daniel, do you have a minute? There is something I need your help with," Collingwood asked the younger Flanders brother.

The boardroom table was covered in bank statements and canceled checks. The air in the room was hot and stale. Daniel's throat was dry and he began sweating profusely. He took a gulp of freshly poured, chilled water from a glass Collingwood obligingly handed to him.

Julia began the interview. Skillfully, but not in an accusatory manner, she outlined the concerns "that Condor now finds itself faced with." Beginning with generalities and moving to specifics Meyers put the transactions in question to a clearly unsettled Daniel Flanders, pausing often to allow the young accountant time to offer an explanation. Meyers was met with a continual and assertive denial of any knowledge of the transactions in question. Aside from admitting that he was the person responsible for posting the ledgers and doing the bank reconciliations, Daniel Flanders offered no explanation as to what might have occurred.

His response was in stark contrast to that of his older brother. Michael Flanders had been dismissive of the questions put to him and offered a number of explanations for the missing money. He repeatedly told Meyers and Collingwood that "you do not understand the accounting process" and that "the transactions were part of the intercompany account-ledger balancing process affecting the tax position of the group — something that I am not at liberty to go into detail with you."

Both Meyers and Collingwood made notes of the questions and answers put to both of the accountants. When everything but the check for $20,000 had been discussed, Collingwood put forward a series of suggestions to Daniel Flanders regarding the purpose of the transactions. Daniel was emphatic. "If that is what you think has happened here then you do not understand the accounting process properly," he said. However, Colling-wood had simply put forward the explanations offered by Michael not more than 40 minutes earlier. Finally Julia Meyers put the $20,000 check on the table. The color drained from Daniel's face. "It's not mine; I haven't seen it before," he said turning it over. But there, endorsed on the back, was an account in his name at Sinclair Savings and Loan.

Collingwood stood up and called Michael back into the boardroom. One last time he asked both men if they had anything more to say. Both said nothing. Moments afterward, they were suspended on full pay and they made their way out of the offices of Condor Construction for the last time. Five days later, Michael and Daniel Flanders submitted their resignations by e-mail to Nathan Collingwood.

Now it became the job of the CFEs to try to ascertain what had happened, how it had happened and the amount missing. Julia Meyers had called me immediately after her first conversation with Nathan Collingwood to say that she might need my help on the case. I was the head of a forensic accounting firm and had experience in other embezzlement cases. That same day, I gathered a team of forensic examiners and we headed over to Condor's offices.

My team reconstructed, both in tables and diagrams, the electronic transactions conducted in each of Condor's fourteen bank accounts during the 18 months that Michael Flanders had been employed. We analyzed the computer system's audit logs and confirmed that a number of the electronic transactions were set up via the Internet during the work day using Michael Flanders's login name and password. Other transfers were originated off-site between the hours of 1:00 AM and 4:00 AM when there was no one at the Condor office. Regardless of the number of transfers that took place each week, an accumulation of funds ultimately ended up in an account at Sinclair Savings and Loan.

We also examined canceled checks and identified the ledger entries used to mask the embezzlement. Our complete forensic investigation lasted six months as information was sought, enquiries followed up and missing documents located.

People wanted to know how the embezzlement occurred. Given the tight controls in place and Alan Campbell's strict instructions to Belford First National, how did these funds get transferred out? The answer, as is often the case, proved to be very simple. Soon after Michael Flanders started working at Condor, he needed to upgrade the firm's accounting software. The package upgrade, approved by Nathan Collingwood, was undertaken online and required a credit card payment. Michael used his own credit card and paid just under $900. Collingwood intended to cut a reimbursement check to repay Michael, but it was overlooked by the company until Michael's credit card statement arrived.

With a credit card account balance already running in arrears and no presigned checks on hand, Michael set up a direct debit from Condor Construction's main checking account at Belford to his own checking account at Westside Community Bank using the Internet banking system. That night the $900 direct debit went through and the money transferred to his checking account. It would be six months before he started drawing significant sums from Condor's accounts this way — a week after his brother Daniel began working in the accounting department.

The investigation also revealed that in the first six months of his employment, Michael Flanders had regularly cut presigned checks and deposited them into various bank accounts, including one in Daniel's name at Sinclair Savings and Loan, his own account at Westside Community Bank and an account at the Shelton Community Credit Union in the name of his fiancee. We discovered that Michael opened the Sinclair account in Daniel's name by posing as Daniel and using his brother's Social Security number as proof of identification.

The first fraudulent check occurred three weeks after Michael began at Condor. It was for $4,500, but as he became more comfortable with stealing, the amounts grew. On average, the fraudulent checks were for amounts around $10,000. By comparison, the electronic transfers were rarely below $10,000 and often exceeded $15,000. Also the check embezzlements happened less frequently (usually once a month) than the Internet transactions (one or two a week). During the month before Michael Flanders's employment was suspended, the amount embezzled online exceeded $78,000.

In all, some $1.6 million disappeared through the accounting alchemy of Michael Flanders. To hide his online embezzlement in the company ledgers, before the employment of his brother, Michael had created a number of fictitious intercompany accounts, loans and suspense accounts. In addition to coding entries to these, all of which were dutifully posted by his brother once he came onboard, entries were logged against unreconciled wages and salary accounts, equity accounts, fictitious construction costs, IRS tax provision accounts, personal drawings and the equity contributions of Alan Campbell. With complete control of the accounting and general ledger system and with no regular oversight, Michael was free to create as many fictitious accounts as necessary to cover his actions.

However, the biggest surprise to all of us came from the civil proceedings against Michael Flanders, when it was revealed that most of the funds he embezzled from Condor at First Belford went into an account at Sinclair Savings and Loan in the name of Cynthia Flanders, his mother. It was Cynthia who cut the checks on Sinclair Savings and Loan and deposited them into Michael's account at Westside Community Bank. Cynthia's account had been flagged as suspicious by the Sinclair anti-money-laundering software.

While law enforcement was notified at the outset of the investigation, it was not until our final report was submitted that the matter was taken up as an active file. State and federal agencies are considering filing criminal charges of embezzlement and money laundering against Michael and a criminal charge of money laundering against his mother. Civil proceedings were recently abandoned because the cost of litigation was beyond Campbell's and Condor's means.

David Petterson, CFE, is a Regent Emeritus of the ACFE. Although based in New Zealand, Mr. Petterson works across the South Pacific, holds a bachelor's degree in business studies, and is professionally qualified as an accountant. He is the Principal and Managing Director of Forensic Accounting Services Ltd.