DALTON ARRIVES AT the office of his client SoJo Technologies in San Francisco to assist the CFO in interviewing a suspected harasser and fraudster, Julianne Cranson. Julianne is a high-level sales executive who has always been one of the company's top producers but is suspected of numerous violations, including kickbacks, undocumented discounts to customers, fraudulent reporting of travel expense, and threatening employees. Dalton advises Kelli Jackson on how to approach Julianne and how to read her. Dalton has also coached Kelli on presenting to the audit committee and board and is planning a return visit for hands-on instruction for her team.

PEOPLE-CENTRIC SKILLS IN THIS CHAPTER

• Differences between audit interviews and fraud interviews
• Fraud interview techniques and questions
• Reading body language, tone, and voice inflection in any situation
• Listening and responding to plausible deniability

KEY WORDS

• Reading People
• Body Language
• Neurolinguistic Eye Cues
• Gesture Clusters
• Facial Expressions
• Plausible Deniability

Another day, another long flight. Orlando to San Francisco is a nice six-hour jaunt and, on a Sunday night, is not exciting. Dalton loves to travel inconspicuously and not say a word to anyone throughout the flight. This is his me time. Draped in his Adidas Firebird tracksuit (reminiscent of Run DMC), he boarded for the long trip. He was sad to leave the kids with Leslie; he always is. It never gets any easier. It only seems to get harder on the kids, and that is why Dalton continues to rely more and more on his team. Early retirement is definitely the plan.

Once the plane settled into a comfortable cruising altitude, Dalton dove into researching SoJo Technologies. Kelli has been a friend for many years and Dalton has watched her grow into this role with SoJo. He always knew she was going to be a star; it was just a matter of time. She has been CFO for the past four years and the company has grown exponentially in that time. She has been a major part of the expansion and going public. Since before Kelli's arrival, SoJo's top salesperson has been Julianne Cranson. Julianne was one of the first employees of the company and has strong ties to SoJo's founders. She is one of the main reasons why SoJo has gone public and has grown over the past five years. Julianne's profile reads like that of many top salespeople:

• Early 40s
• Extroverted personality
• Good conversationalist
• Always thinking five steps ahead
• Very good at psychoanalysis

Julianne will be a challenge for Dalton. She has been accused of rampant fraud, but the company has struggled to pin down the exact nature of the fraud. In fact, Dalton doubts if the owners really want to accuse her of fraud. She has been such a big part of the company's success that it is hard to think of SoJo without her. Jules (as she likes being called) has been accused of giving away software modules outside of the contract terms and other internal abuses. She has always had leeway to do what it takes to get the deal done. However, the leeway has turned into abuse, Kelli suspects. Jules has also been going through a bad divorce over the past two years: cheating, custody battle, a little bit of everything. Since the divorce proceedings began, Jules has been inconsistent. You could see it was taking its toll on her and her work.

When the long flight finally landed, Dalton hurried to the hotel to unpack and relax for a few minutes before calling it a night. There would definitely be a long day ahead.

The next day, as he summoned an Uber, Dalton shook his head as he thought about all the poor saps looking for a place to leave their cars while they dashed inside stores or restaurants for whatever brought them to San Francisco's Financial District. As his Uber turned onto Sacramento Street, he reflected on the fact that parking always seemed to be a challenge. What a beautiful day, with weather he rarely experiences living in Dallas. The bay wind whipped over his freshly shaved head as he headed for the elevator. His thoughts turned toward the day's visit to SoJo Technologies, the tech giant recently in the news for their latest medical invention, a device purported to eliminate the need for corrective lenses. Their product was expected to revolutionize the industry—no more surgeries, no more contact lenses, no more eyeglasses. Ever the skeptic, Dalton wondered if something like this could really work. The video showed users wearing the device at the office, in the gym, and while driving. Well, he thought, at least it's stylish. The promo ran through his head again. For as little as 30 minutes a day, you could eliminate the need for glasses? Hmm. If it worked, their device would cost a lot of people their jobs. He sighed. Therein lay the rub. Market disrupters are great until the layoffs start happening. Dalton pondered how Stuart De La Deccio was taking it. The head of the largest eyewear conglomerate in the world must be panicking right about now. His factories supplied the bulk of the world's prescription eyewear.

Dalton stared impatiently at the elevator numbers, wondering how much longer it might be. It was going to be a bright, clear, beautiful day, he thought as he patted his jacket pocket to make sure he had grabbed his sunglasses. Well, at least De La Deccio would still have his sunglasses division, Dalton said to himself as the elevator doors opened.

Dalton stepped into the plush lobby of SoJo Technology's headquarters. It radiated opulence mixed with the cutting-edge crispness of state-of-the-art technology. This place never failed to impress, he reflected as he stepped up to the receptionist. He glanced at the receptionist's nameplate and warmly greeted him: “Good morning, Steven! How are you today? I am here to see Kelli Jackson.” Steven smiled. “I'm doing well. Your name?”

After completing the security protocol, Steven directed Dalton to the door to Kelli's office. Kelli was deeply engrossed in the content displayed on her 40-inch curved monitor. That's an impressive swoopy screen, Dalton thought. The darn thing dominated more than half of her desk.

It was always good to see Kelli. “Kelli! I saw SoJo's recent media release. Congrats! Your product is going to revolutionize the industry!” Kelli stood and gave Dalton a warm embrace. “Thanks, D. So glad you could make the trip up. The PR is the lone bright spot on a roller-coaster period for us. Try as I might, I cannot fathom that the accusations against Julianne are true. She's been with this firm since the beginning.”

Dalton sat down and adjusted the sharp crease of his black pinstripe suit pants. He signed and nodded his head. Leaning forward, he said, “We've known each other forever. Tell me what's going on. I know we briefly covered the key details on our call on Friday. Now let's fill in the blanks so I can understand your suspicions in greater depth.”

Kelli pulled up her chair, uncrossed her legs, and leaned on her desk to assemble her thoughts. She rested her folded hands on the desk and began:

“As you know, our annual employee survey results came back this past October. Every year we get the standard complaints about this and that. This year, we received very specific information that necessitated a deeper look into the sales department. While our survey is anonymous, we are able to easily determine which division they pertain to. Two team members indicated departmental ethics of the accused are less than stellar. Their comments were very specific. They accused Julianne Cranson of encouraging kickbacks, providing undocumented discounts to customers, submitting fraudulent travel expense reports, and possibly most disturbing of all, threatening and intimidating her team members.

Dalton, looking a bit perplexed, asked, “Why do you think they chose the survey and not the ethics hotline?” Kelli shook her head, rolled her eyes, and said, “This is on the back burner, but we are definitely planning on looking into this. If employees do not call the hotline for these types of issues, we have to question the effectiveness of our hotline.” Dalton took this as something to follow up on after the current issue was resolved.

Kelli leaned back and quickly entered a few keystrokes to pull up her notes. Glancing away from the screen, she continued: “We take employee comments on the survey very seriously. The specificity of the accusations highlighted by Julianne's team members is more than a little disturbing. My first thought was that the two were conspiring, perhaps setting up Julianne or one of her directs, in an effort to topple a good executive. It's not unheard of to orchestrate such a move to open a position in the executive ranks. But a deeper dive by our IT team discovered that the survey results, as indicated by the associated geolocator codes embedded in the survey acknowledgment, were from two team members in completely different offices. This lowers the likelihood of collusion.”

Dalton pondered this information for a few moments. Kelli continued, “We don't have a formal fraud department, so Edward pulled the sales results from Julianne's team. You know Edward, don't you? He's our chief operating officer. He joined us a few years back from Optical Solutions.” “Of course,” Dalton replied, “I believe I ran into him at an industry event just a few months ago. Great guy. His son plays soccer for Freedom Force. They won the cup this year.”

Kelli chuckled. Dalton remembered little details about everyone. It was uncanny at times. “Yes, his son is on track to receive several college scholarship offers. At any rate, Edward and I reviewed the sales reports. Julianne always has positive growth and exceptional performance. Over the past few years, the increases have not been large, but she is still the best at SoJo and is known as one of the best in the industry. This year is no different. Her numbers show a steady increase. She is on track to receive her full sales bonus, plus go on the annual company sales incentive trip. However, due to the survey accusations, I asked our controller to review Julianne's expense reports. Everything looked normal at first glance. But yesterday Christine found a few unusual entries. Four hotel expenses reported this quarter matched a hotel folio from January. Christine said she wouldn't have noticed, but a smudge from smeared printer ink caught her eye. It seems that smudge also appeared on another receipt. After going back and reevaluating all of Julianne's expenses, Christine identified multiple entries supported by the same receipt. The dates had been altered, but the details remained the same.”

Dalton thought that discrepancy should have been caught—same expense amount multiple times? Dalton then recalled the many previous conversations he had with Kelli. One of her main objectives was to build the infrastructure to support a company whose sales had outgrown its surroundings. SoJo still used a rudimentary accounting software and had minimal data analytics options other than manually created spreadsheets. He rested his elbow on his knee. His hand gently brushed his goatee as he considered this information.

Kelli interrupted his thoughts. “Over the weekend, Christine did a deeper dive. She pulled expense reports from the last two years and identified nearly $72,000 in questionable expenses. We give our sales team a ton of leeway in order to get the job done, so we do not ask a lot of questions, but it's also clear from our management team that everything has to stay above board. Our reputation is too valuable to risk, especially in this period of significant growth and innovation.”

Kelli went on with her narrative. “Given that Christine seemed to have substantiated one of the claims from the employee survey, I asked Edward to look into Julianne's customer relationships. We have a standard pricing practice. Deviations from the sales price cards require documentation and approval. However, since Julianne is an Executive Vice President (EVP), she is not required to obtain additional approvals for exception pricing she personally recommends. Edward noted that a couple of key accounts received unusual discounts. I want to caution you not to read too much into this; it is normal for the sales team to have discretion over pricing. However, it does go against company practices because the discounts do not seem to be supported with comments or explanations indicating why a discount was warranted. The discounts are excessive based on our history and are not in line with anything else the sales team has offered over the past five years. By itself, this would be just a minor note and a quick conversation with Julianne. However, combined with the survey results and the expense reporting anomalies, we feel a full investigation may be warranted.”

Dalton steepled his hands and looked Kelli in the eyes. “I agree. Has HR looked into the employee practices allegation? If not, I'd prefer they refrain so Julianne isn't tipped off that something is amiss.” Kelli picked up her pen and jotted a quick note. Dalton continued, “Can I get copies of the documents both Christine and Edward reviewed? Did they formalize their conclusions in a report?” Kelli stopped and stared at him. “No, I'm sorry. They both sent me emails requesting calendar time to cover the details and their conclusions in face-to-face meetings.”

“Perfect. I can appreciate not wanting to put something like that in an email.” Dalton took the paper copies Kelli handed him of the expense reports, sales reports, and customer records. He looked at the pages briefly. “Do you by chance also have the survey?”

“Of course,” Kelli replied. She began typing. Reaching over to the printer, she grabbed the survey and passed it to Dalton. “What else do you need?”

Dalton thought about what else might be required and his next steps. As an executive coach and trainer, he no longer dealt with this type of situation on a day-to-day basis. He did have plenty of experience in investigative techniques because he worked on the fraud investigations team in a few of his previous roles and now played the role of expert witness in many prosecutions. He was excited about this challenge and the other opportunities he and Kelli had discussed the previous week.

“Who knows about this? It's important that Julianne remains unaware of the situation until we interview her.” Kelli's hands toyed with her wedding ring, spinning it around and around her finger. This was a common sign of nervousness. Since their relationship went back many years, he knew Kelli commonly played with her jewelry when under stress.

“Given the focus on our recent product development efforts, we have not had a chance to discuss this with the full executive team. As of right now, only Simon, Edward, Christine, and Joseph, our legal officer, are aware of the situation.”

Dalton nodded and then asked, “Simon is the HR EVP, correct?” Kelli nodded. “Okay, let's keep the audience small. You'll need to ask each of them to refrain from sharing the information with anyone else.”

Kelli sighed. “Dalton, we cannot afford for this to leak to the media. I'll pull everyone together this morning to emphasize the gravity of the situation.”

Dalton's eyes reflected complete understanding. He softened his features and leaned forward. “Kelli, we will do everything we can to protect your company. You did the right thing by contacting me to do the fraud investigation. Many companies try to keep everything in-house, but then find that they need professional assistance when the magnitude of the fraud is uncovered. If your suspicions are confirmed, do you plan to prosecute?”

Kelli looked surprised. “Why would I prosecute? We need to keep this out of the press.”

“I suspected that is what you would say. If Julianne has committed these acts and you do not prosecute, then she will likely repeat these practices against her next employer.”

Kelli nodded. “I appreciate the feedback. I'll need to bring Brandon up to speed. As CEO, the decision is his to make.”

“Please tell Brandon to reach out to me if he would like to discuss his options. There are too many unknowns to decide now, but the tide is turning on crisis management. I realize you don't want this to get out, but is it better to contain the message or, depending on what the message is, get ahead of it and make sure it is the right message?”

Kelli leaned her head slightly to the right and furrowed her brow. She responded only through her body language, not with words. Dalton gave her a winning smile, the smile that brought confidence to his face and to the minds of his clients. He liked to call it his “Blue Steel,” a reference to some movie he could not remember the name of.

“For now, let's walk through our next steps,” Dalton continued. “At a very high level, our investigation will follow a standard process:

• Planning
• Obtaining and analyzing evidence
  • Data analytics/electronic forensic discovery
  • Interviews
• Reporting

“We will approach this from two opposite directions. We will assume that the fraud has occurred and has not occurred. Our goal is to obtain evidence supporting our hypotheses. You see, both sides of fraud must be examined. By law, proof of fraud must preclude any explanation other than guilt.

“We will spend the next couple days planning our approach and reviewing the results of Edward's and Christine's analyses. We'd also like to look at the raw data to do further data analytics. This assessment will include an evaluation to address the potential kickbacks that were cited in the employee survey results. If you could arrange for a data dump of the sales records, vendor records, and expense reports going back five years, that would be ideal. We will review the data for suspicious records, unusual transactions, trends, anything that could look suspicious and can confirm or deny our hypotheses.

“Once we have the results, I'd like to interview Julianne as well as a few of her employees. Our discussion with Julianne will be followed by having her give a written statement. We will record the interview just in case Brandon opts to prosecute. As a matter of fact, we will prepare our entire investigation with the assumption that your firm could pursue prosecution.”

Dalton and Kelli discussed some of the other opportunities she wanted his assistance on. Dalton assured Kelli that abnormal is the norm in today's corporate America. “These things happen. Just like I told Caleb after he had a subpar game a few weeks back, everyone makes mistakes. How you react to those mistakes is what truly matters.” They discussed some potential coaching opportunities and presentation and speaking training she wanted to do for her senior leadership team's continued development. He spent some time with her senior team and headed off, excited to have his team dive headfirst into the data.

A week later, Dalton returned to SoJo. He met Simon, the head of SoJo's HR department, on the third floor. “Julianne has received a meeting invitation to interview a prospective candidate. We followed your instructions and set the meeting in a private conference room. She should be arriving in the next few minutes.” Simon showed him into the room and sat quietly with Dalton. Simon needed to attend the meeting to have someone from Human Resources involved so Julianne could not claim harassment or duress.

Dalton got up and took a look around the room, then pulled a chair to the end of the table. I don't want her hiding her hands under the table while we talk, he thought. I need to see any telltale signs of deception, so her hands and feet need to be visible. He had specifically requested a conference room that would give him the space to sit facing the door but farthest away from it, and strategically place another chair kitty-corner from him at the table. Once the room was set to his liking, he sat near the empty chair and faced the door. While he waited, he once again reviewed the data analysis of Julianne's expense reporting. His team's analytics identified nearly a hundred questionable transactions. Julianne had a habit of reusing receipts for expense reporting. Her People-Centric skills were fairly good, but she sometimes neglected to pay attention to the details. Her cover-up abilities seemed to get worse with time. This was a telltale sign of a person who had gotten away with everything for a long time and was getting a bit too comfortable with their deception. Her abnormal behavior was being normalized.

Based on his team's work, it looked like Julianne had a haphazard approach to modifying hotel receipts, often forgetting to change the folio numbers or using earlier sequenced numbers. Why on earth would an accounting system count backwards? Dalton shook his head, wondering how Julianne could miss something so basic. His team uncovered several other anomalies, including records supporting unusual discounts and large refunds to customers. He made a note and adjusted the list of questions he planned to use to get Julianne's thoughts on these transactions.

Julianne stepped into the room and said, “Hello. My name is Julianne Cranson. How are you today?” Dalton stood and took her hand. Julianne was very professional, with light blondish-red hair and dressed in a brown pant suit.

“It is a pleasure to meet you. My name is Dalton Zimmer.”

Julianne firmly grasped his hand and was grateful he returned the firm handshake. Too often men assumed that they should gently clasp a woman's hand. Frankly, limp handshakes gave her the creeps and felt somewhat offensive. She then noticed Simon was in the room and thought how odd it was to see him here. “It is a pleasure to meet you, Mr. Zimmer!” Julianne's bubbly personality radiated throughout the room. Simon got up and closed the door and then took his seat at the opposite end of the table.

Julianne looked confused. The mood in the room was about to change. Dalton took a moment to study her and said, “Unfortunately, I'm not here today to interview for a position in your firm. Please have a seat Mrs. Cranson.”

Kelli walked briskly to meet with the team and discuss Dalton's conversation with Julianne. She was nervous with heightened anticipation. Shortly after, Joseph, Edward, and Brandon filed in and waited for Dalton to arrive. The air was thick with tension. Uncomfortable with the silence, Simon stated Julianne took it well when we placed her on leave of absence.

Brandon sighed and tossed his pen onto the conference room table. The unexpected clatter startled everyone, including Kelli. Brandon looked at Simon, saying, “I still can't believe it. She is a great employee and she is the main reason our market share consistently beats the competition. Dalton had better have hard evidence that supports this situation because I am not happy at all.”

At 9:01 am Dalton stepped into the room. “Good morning. How is everyone?” Dalton felt the tension but was used to it and it did not ruffle his professional demeanor. He was chipper but serious. He viewed situations like these as a puzzle and he liked enjoyed complication.

Brandon glared at Dalton. Simon gently spoke up. “Good morning Dalton. Thank you for joining us. Do you have information that will resolve this situation?” Dalton laid his computer bag on the floor and pulled out his laptop. He took a deep breath and began. “I know this is a difficult situation and you are anxious for our results, so I won't keep you waiting any longer. My goal is to present you with the facts on what has occurred, and how Julianne reacted, and then we can talk about next steps.” He connected his Mac to the projector screen and opened the file to his report.

Brandon leaned back in his chair and crossed his arms and legs. Dalton noted he looked less than pleased. Glancing around the room, he observed that the body language from everyone was closed off and somewhat defensive. Well, he thought, this will be fun.

“Let me start by walking you through the investigative work we completed. As you know, we agreed our scope would include the following:

• Data mining and data analysis using the data dumps you provided us at the onset of our engagement
• Interviews with key individuals, including Julianne. We obtained Julianne's consent and videoed these sessions for your records.
• Written statements from key individuals, including Julianne

“Let's start with the data. We requested five years of transaction records covering sales, vendor payments, and expense reports. We found more than a hundred suspicious transactions.

• Our review identified what appears to be modified hotel receipts used to support 34 different business trips expensed over the last 36 months. My team validated that a handful of the hotel's folio numbers were left unchanged. However, 28 of them showed folio sequence numbers that don't align with the timing of the transaction. You see, hotel folios are invoices and are assigned numerically. Hence, as time goes by, the folio number should increase. But the hotel receipts associated with Julianne's expense reports reflect folio numbers that are nonsequential and do not seem to correlate to her business trip dates.
• We also identified unusual refunds and sizable discounts issued to three of your largest customers. We reviewed your sales records, invoices, customer refunds, and inventory levels looking for any unusual patterns. We pinpointed three customers who, considering their sales volume and history, seem to have been issued higher-than-normal refunds in relation to the remaining customer population. All three of these customers belong to Julianne. Specifically, she is the primary contact managing these relationships. The customers in question are:
  • Seibert Industries: 28 refunds
  • Lushane Optical: 8 refunds
  • Curtis Laboratories: 6 refunds

  What we found most interesting about these refunds is that none of the 42 transactions resulted in a change in your inventory levels. In each case, the refund was processed, with Julianne's approval, and the billing adjusted, but the sales returns account didn't change and neither did the physical inventory level.

  We also noted that all three of these customers received special pricing on 46 invoices over the last three years. Our analysis identified 17 invoices for Seibert, 13 for Lushane, and 16 for Curtis, with discounts falling outside of SoJo company policy. In some cases, these discounts resulted in SoJo selling inventory below cost. We reviewed the discount approvals and in each case the reduction was authorized by either Julianne or by one of her directs. That being said, company policy requires discounts be explained and justified. The notes for all of the transactions in question merely state, “Discounted per Julianne Cranson.”

Brandon interrupted Dalton. Dalton saw this coming, as Brandon's body language indicated his displeasure: he was continually rolling his eyes. “This does not seem like anything that would result in prosecuting for fraud. Your analysis is interesting, but I suspect there is a reasonable explanation for these transactions. It is well within Julianne's job duties to authorize customer discounts. These hardly indicate that Julianne has committed fraud.”

Dalton slowly turned and pondered Brandon's comments. “I understand your position and I am not saying she committed fraud. That is for the court to decide, should you opt to prosecute. However, these transactions do seem a bit odd, don't you think?” Brandon leaned back in his chair, steepling his fingers and resting his chin against his index fingers. “Mr. Zimmer, I agree that these look unusual, and I am interested in hearing what Julianne had to say about them. I will reserve my judgment for now. Please continue.”

“Of course. Let's watch the video to see my interview with Julianne on the 2nd of this month. Pay close attention to Julianne's facial expressions—they provide a key to determining whether she is being truthful or deceptive. Using the BASIC method, I will show you how I combined facial recognition with advanced interrogation techniques to identify areas where Julianne was deceptive during our interview.

“The video starts out with Julianne walking into the room. Watch her facial features as I explain that I am not here to interview for a company position. She first expresses surprise. You will see her eyebrows go up, her eyes open, and her lips part as she sits down. When she notices Simon in the room, you will see a fleeting glimpse of what could be a sign of fear cross Julianne's features. She is likely wondering why Simon is participating in the meeting, why she was really called in, and why there is a camera in the room.” Dalton pointed to the screen as the video continued to play. “Now watch as her eyes seem to change emotion. Her upper eyelids open to expose more of her eyes and her lips stretch horizontally while she pulls her chin and head back. The movement is subtle and very brief. It is possible she believes her situation has been exposed. However, given the short duration of the emotion, it is also possible she's rationalizing her surprise over the meeting's turn of events.

“Before my questioning begins, she seems to have moved into curiosity mode. She appears confident and seems to have banished any thought that her suspicious activities have been detected. Look how her facial stance moves into relaxed confidence and her features are symmetrical.” He paused the video and turned to the group. “Research performed by Paul Ekman isolated nine facial indicators providing reliable clues to decision:

• Micro-expressions: Involuntary expressions that briefly flash across the subject's face.
• Squelched expressions: Indicates that a person is trying to hide his or her emotions, but in contrast to a micro-expression, a squelched expression is performed on purpose and involves the signaling of multiple emotions.
• Reliable muscle patterns: Reliable muscles are not easy to control. These include the muscle that narrows the eyelids, the orbicularis oculi, and produces crow's feet at the outer corners of the eye. The orbicularis oculi is difficult to move into a smile deliberately when your emotional state does not support smiling. The entire face must be watched carefully for clues of deception. When someone is attempting to deceive, their true emotions and thoughts are often displayed via the reliable muscle patterns on the upper portion of the face (forehead, eyebrows, eyes).
• Blink rates: Blinking can be voluntary or involuntary, but deception can trigger higher rates of blinking.
• Pupil dilation: Pupil dilation is a reliable indicator. We are not aware of anyone who can control the size of their pupils. Unusually dilated pupils are generally associated with fear but can also be caused by other uncontrolled emotions.
• Tears: While tears are obvious indicators of distress, they are not hard to fake. Take note of tears, but do not be misled by them.
• Asymmetrical expressions: Genuine emotion, apart from contempt, is displayed by both sides of the face. Attempts to conceal emotion or portray a particular emotion is often limited to one side of a person's face.
• Timing: True emotion is expressed simultaneously. The timing difference for feigned emotion is brief, but it is there if you watch for it.
• Duration: Genuine emotion generally lasts between five and ten seconds. A fixed expression held beyond ten seconds may indicate that the subject is attempting to hide their true thoughts and feelings.”¹

Dalton scanned the group to gauge their understanding before continuing. “Caution must be observed with any and all of these indicators. Detecting deception requires an understanding of the person's baseline behavior when being truthful. As you observed, I started our conversation by asking Julianne a series of questions designed to elicit truthful responses. This allows me to baseline her facial features and body language.

“Body language is also important. We must watch for clusters of behavior that indicate deception. Your body reveals your inner thoughts. Behavior or gestures inconsistent with spoken words is a tip that the subject may be lying. It is estimated that a significant percentage of communication is nonverbal and is mostly conveyed through body language.” Dalton was standing and presenting and he leaned forward, putting his hands on the back of the chair in front of him. “One last thing to note about body language. A person's gestures and body movement naturally emphasize their spoken words. When a person's hands and body do not align with the words they use, deception is suspected.”

Dalton stood and walked to the front of the room as he juggled the remote control. “Conversely, stillness of the body and hands is also concerning. A lack of movement often indicates that the brain is trying to control the body's responses. At times, this control is successful for half of the body, such as a one-sided shoulder shrug, or a single hand movement when both hands are normally used.

“Aside from observing Julianne's facial features and body language, I encourage you to listen closely and resist the urge to fill in missing information when hearing her responses. Pay attention to exactly what is said and, more important, what is not said.”

Dalton restarted the video and turned up the volume. Julianne could be seen stepping into the room. The camera perfectly captured her facial expressions as she introduced herself. Friendly emotions show before confusion and, just as Dalton said, a momentary glimpse of uncertainty or fear briefly flickered before she sat down, and her countenance began to exude confidence mixed with a heavy dose of curiosity.

Dalton talked as the video played. “As I mentioned earlier, my initial questions are designed to baseline her body language and facial expressions. As I explained to Kelli the last time we met, the BASIC method of interrogation differs significantly from other types of interviews, such as those conducted during an internal audit. In an audit interview, the person you are questioning is considered an expert and is treated as such. The interview is structured as a conversation designed to get the person to relax, to allow the auditor to obtain as much information as possible about the topic at hand. Process-flow conversations or discussions about journal entries focus on how transactions flow or why they are booked, to enable an auditor to gain an understanding of the process, journal entry, and so on. Emotion should not play an integral role in these types of interviews.”

Dalton looked around the room and determined that a more in-depth explanation was needed before proceeding. The last thing I need, he thought, is for these folks to confuse a fraud investigation technique with normal business practices. He paused the video and picked up a marker before walking over to the white board. Drawing out a table he stated, “Let me show you what I mean.”

Confident in his explanations, Dalton restarted the video from the beginning and then fast-forwarded until Julianne was seen sitting down. He hit play just as he was heard saying, “Julianne, let me start by explaining who I am and why I am here. I've been hired by your company to gain an understanding of your sales process and to look for opportunities for internal control weaknesses. Do you mind if we record our conversation?” Julianne shook her head no. Dalton prompted her. “Would you mind speaking your response? We prefer to obtain oral consent to record.”

Julianne replied, “No, I do not mind.”

“Thank you.” Dalton looked toward the other end of the table and said, “Simon is here just to observe. So let's get started. Can you tell me a little about yourself? How long have you been with SoJo?”

Julianne took a breath and went over her resume and background. Her body language was relaxed as Dalton established rapport. The video showed them laughing and talking as if they had been friends for ages. As the interview progressed, Dalton opened his folder. “Julianne, the company has reviewed their sales transactions and I wondered if you might help me with a few of them?” Julianne's face lit up. “Of course, Dalton. I am happy to help. Let me take a look.” Dalton removed a printed invoice for Seibert Industries from his folder. He slid the paper over to Julianne. She leaned over the document and looked up. “Julianne, can you tell me about this sale to Seibert Industries?” Julianne leaned back and moved her chair, slightly angling it toward the door. She twisted her torso to rest her waist against the conference room table. Dalton stopped the video.

“As you can see, Julianne has modified her previously open body language to a closed off position. Her feet are pointed toward the door and she has firmly placed the conference room table in between us. Her upper body faces me, but her lower body desires to escape the room.” Dalton hit play as Julianne explained that Seibert is her top customer. “They buy corrective eyewear supplies. This invoice is for $3.5 million in frames.” Dalton took the invoice she handed back to him. He reviewed it momentarily and then pointed to the discount. “What do you think about the discount shown here?”

Julianne glanced at the numbers. “It seems reasonable. Seibert is a top customer and they buy more than $100 million in product from me every year.”

Dalton nodded his head. “I see you approved the discount?”

“Yes,” she replied. “Again, it is normal and customary for Seibert to receive discounts.”

Dalton pulled the company policy document out of his folder. “Julianne, I hear what you are saying, but I wondered if you could help me with something. Your company policy says that discounts must be fully documented with justification supporting the discount included in the account notes. Can you take a look at the account notes for me?”

Julianne took the second paper and read the notes. “It looks fine. I approved the discount.”

Dalton smiled. “Yes, I believe you did. Can you show me the justification supporting the discount?”

Julianne looked annoyed. “As far as I'm concerned the discount is justified. I am an EVP and well within my authority to approve a discount.”

Dalton removed a second invoice from his folder. “Julianne, what can you tell me about Lushane Optical?”

Julianne reviewed the invoice and looked up sharply at Dalton. “Lushane Optical purchases about $64 million in product from me each year. I authorized a discount for certain frames and lenses.”

Dalton watched her reaction. She was beginning to perspire. Gone was the friendly tone and the rapport they had experienced earlier.

Julianne continued, “I really do have to go. I apologize but I have another meeting to attend.” She rose and headed for the door.

Simon spoke gently as she reached for the door handle. “Julianne, I believe Edward took care of your morning meetings. Please have a seat so Mr. Zimmer can finish his questions.”

Julianne slowly returned to her chair. Dalton handed her a third invoice. “This one shows discounts for Curtis Laboratories. Can you tell me about them?”

Julianne grabbed the paper and tossed it onto the table. “It is the same situation. They are a large customer. I authorized discounts for their products.”

Dalton calmly picked the paper up and returned it to the folder. “All told, it seems you authorized discounts for these vendors that exceeded 30% and you sold your company's products below cost. What is the business case supporting these deep discounts?”

Julianne replied, “You know, if you think about it, I am the wrong person to ask. You should speak with Edward. He is aware of the importance of these clients.”

Dalton wrote a brief note on his pad. He smiled. “Thank you. I appreciate your assistance. I'll ask Edward.”

Dalton changed topics. “I wondered if you could also help me understand a few of the refunds these customers received. Here is one for Curtis Laboratories. They received an invoice adjustment of $25,000 for what is noted as defective frames. What do you know about this transaction?”

Julianne once again took the paper, reviewed it, and put it down in front of her. She looked at Dalton and smiled. “Mr. Zimmer, I am sure you are aware that we are not perfect. SoJo has its fair share of defective merchandise.”

Dalton studied her features as he said, “Yes, yes. I am sure you do, Julianne. However, I find it odd that the merchandise was not actually returned to SoJo.” Dalton watched her eyes closely. “We seem to have the same situation with both Seibert Industries and Lushane Optical. As a matter of fact, these three companies represented more than 87% of the total returns for SoJo this fiscal year. I was wondering if you could help me understand how these three companies could receive such a large portion of your company's defective merchandise?”

Julianne retorted, “Again, I am not in charge of operations. I am a sales representative. I sell the product. As a matter of fact, I am thrilled you are looking into this because it has been a rather large problem for myself and my team. Imagine having to face my largest clients and accept responsibility for the faulty workmanship produced by the operations team. I've had numerous conversations with the head of production, but his quality control measures continue to fail. I recommend speaking to him about the problems in his shop.”

Dalton stopped the video. He turned to the executives. “As you can see, Julianne is quite angry and defensive. She hasn't answered any of my questions.”

“Now wait a minute, Zimmer,” Brandon said. “Of course she is angry and defensive. She is in charge of sales. She does not manage the production line.”

Edward interrupted. “Brandon, there isn't a problem on the production line. None of the other clients have complained about the quality. I've reviewed the numbers. I personally walked the production line, and internal audit reviewed the quality control procedures.”

Brandon wiped his face with his hands and then pulled his fingers through what was left of his hair. “This whole thing makes no sense. Why would Julianne do this? She makes plenty of money.”

“If I may,” Dalton said, “I would like to continue. This next section of the interview focuses on her expense reporting.” He turned the video back on. Julianne was now sitting squarely facing the door. Her arms were crossed and her face clearly showed her displeasure. Her shoulders were nearly perpendicular to Dalton. On the video, Dalton was now reaching into his folder and pulling out several hotel invoices. “Julianne, do you recognize these receipts?”

Julianne's angry eyes immediately flashed. “Of course I do. That is a hotel receipt from my favorite hotel in Manhattan.”

Dalton laid six of the hotel receipts side by side. “And,” he asked, “do you recognize these?” Julianne's scowl remained firmly in place, but her eyes changed; a slight flicker was evident in her eye muscle. She blinked several times and said, mimicking Dalton's question, “Do I recognize these? Hmm. They look like the receipt we just talked about for the St. Regis hotel in Manhattan.” Julianne uncrossed her arms and folded her hands into her lap.

Dalton stopped the video and explained, “Up to this point I think you will agree that Julianne has been evasive. She's refused to directly answer any of my questions. Her oral responses included several verbal cues that indicate she is working hard at denying accountability. At this point, I am confident she knows she has a problem. Watch her body language as we begin to talk further about her expense reports.”

The video resumed and Julianne could be seen assuming an almost royal stance with her back straight, mouth planted in a firm scowl, hands gently folded in her lap, and ankles crossed.

Dalton continued, “Yes. They do look like the same receipt, right down to the folio number. Only, the dates seem to be different. And right here, there is an ink smudge. How do you think that smudge happened to be on six different receipts spanning more than 24 months?”

Julianne didn't move. She stared him down for several seconds before replying. “You will need to ask the hotel. I am not familiar with their front desk practices.”

Dalton then pulled the remaining 28 hotel receipts from his folder. “Julianne, I have 28 more hotel receipts here. They also span the last 24 months and they seem to have a few unusual things in common. They are largely identical, with the exception of the folio numbers. But the thing I don't understand is why the folio numbers seem to be out of sequence. Let me show you. Here we have a receipt from July 24. The folio number is 009-9898. Next we have a receipt from the same hotel dated August 11 but the folio number is 002-0099, and one dated October 10 with a folio number of 009-9891. What do you think might have caused this?” Dalton's tone was very even, stating facts without attempting to lead Julianne or sound condescending.

Julianne stared for a long time at the invoices. She coldly looked up at Dalton and said, “It must be a sad, sad life you lead. Do you spend all your days harassing executives about their expense reports? I don't spend my time reviewing hotel receipts. I travel frequently to New York, Mr. Zimmer. I stay at the Regis because it is close to Seibert Industries and I am required to entertain my clients at nearby restaurants. The Regis is convenient and comfortable—”

Dalton stopped her. “How often do you travel to New York?”

“I think you already know the answer to that question. Clearly you have been through my expense reports with a fine-tooth comb.”³

Dalton closed the folder. The video showed him quietly looking at Julianne. Her body language and facial expressions revealed indignation, but it only reached the lower half of her face. Julianne's mouth was slightly open and her lower jaw was tense, but her eyes remained shrewdly focused and failed to show the normal wide-eyed stance often displayed when someone feels they've been falsely accused. “Julianne, we can stop this right now if you will be honest and upfront with me. How is it that 34 expense reports are supported by the same two hotel receipts?”

“I do not know. My admin prepares my expense reports. Perhaps she lost my receipts and covered her tracks using a duplicate copy? How should I know?”

Dalton tilted his head sideways, showing interest. “You believe your administrative assistant forged receipts for your expense reports?” Julianne's eyes relaxed as she said, “Of course! That is exactly what happened. She handles everything like that for me.” Dalton nodded. “I see. I am sure you would be interested to know that I took your administrative assistant's written statement earlier this week. Would you like to see it?”

Julianne's face fell. “Yes,” she quietly replied. “Yes, I would like to see it.” Dalton thumbed through his folder and pulled out a handwritten paper. “Do you recognize Megan Zamora's handwriting?” Julianne held the paper for a long time. She read the statement. “Julianne, can you read the last paragraph out loud for me?” Dalton said. Julianne began reading Megan's statement, which explained that Julianne insisted on completing her own expense reports. The paragraph recounted how Megan once attempted to help Julianne out with her travel expenses. Megan indicated that Julianne flew into a rage so fierce that she threw her crystal paperweight across the room, nearly hitting Megan's shoulder as it shattered against the wall behind her. Megan ended the paragraph with a brief statement saying she didn't believe Julianne meant to throw it at her, but as a result of the incident, she never offered to help with Julianne's expenses again.

Dalton took a pad of paper and a pen and slid them across the table to Julianne. “Julianne, I'd like you to write down your thoughts on how 34 expense reports are supported by the same two receipts. I'd also like you to explain the customer discounts and the returns for your three largest clients.”

Dalton turned off the video. “At this point, I've asked Julianne to write her own statement explaining how these things might have occurred. Once she was done, Simon and I left her alone in the room while my associate and I reviewed the written statement. Our analysis identified several inconsistencies in Julianne's written statement, which we later discussed with her.

“I'd like to go over a couple of key highlights from her statement.” Dalton pulled up his electronic report on the display. Pointing to the screen, he said, “When asked if her submitted falsified receipts for her hotel expenses at the St. Regis in New York City, Julianne's written statement indicated:

Apparently, there is a system glitch or something that caused the same receipts to be attached to my expense reports. I am trying to be as honest as possible. We are fortunate that you identified the situation and we can now take measures to rectify it. We've relied on external guidance almost from the start and from the moment Edward suggested that it would be foolish to do things in-house, I thought we shouldn't rely on outside firms.

“In her written response, Julianne is casting blame for her expense report receipts on a system glitch or an unnamed third party but qualifies it with the word ‘apparently,’ indicating that she is just speculating. However, what comes next is most interesting. Julianne states, ‘I am trying to be as honest as possible.’ What Julianne just told us is that her first sentence was not as honest as it could or should be. The word ‘trying’ means attempted but not completed. People say what they mean to say. Julianne used the word ‘trying’ to give the appearance that she was being truthful.

“In my follow-up conversation with her, I asked, ‘Julianne, have you ever falsified a receipt for your expense report?’ Her response was, ‘I don't believe I have ever intentionally submitted falsified receipts.'

“In this example, Julianne again failed to answer my question. She is using plausible deniability to answer the question honestly but leaving an out. She is going to focus her comments on an error or that she honestly lost track of the expense reports and did not do this on purpose.” Dalton wanted to make sure the senior management team understood the importance of plausible deniability and of what they had just heard. Julianne was answering the question honestly, but she gave herself an out. SoJo could not come back and say she was lying unless they were able to prove she did this intentionally, which can be challenging. It was key to listen for other answers to yes/no questions, because people answer questions in very specific ways.

Julianne's written statement addressed the customer discounts. She wrote:

Customers can purchase products from multiple suppliers, so they sometimes need pricing incentives to close the sale. Supplier discounts received for raw materials are available to offset these end sale incentives, allowing the company to make a narrow profit while retaining the customer relationship. My team does not provide discounts when they are not warranted. Sales are a key component of this firm's profitability and we work hard to ensure sales growth continues.

Dalton went on. “Notice here that Julianne says, ‘My team does not provide discounts when they are not warranted.’ This is a classic avoidance technique to give the appearance of answering the question while allowing her to avoid admitting personal guilt. Julianne says her team does not provide unwarranted discounts without addressing the fact that she admitted during our earlier recorded conversation that she authorized these deep discounts without explaining why they were warranted.

“I asked her the following question to clarify her statement: ‘Julianne, was the 30% discount to Seibert Industries justified?’ She responded, ‘I intend to fully explain why I approved the discount for Seibert Industries. As I have indicated previously, Seibert Industries is a valuable customer and SoJo must retain the relationship. Sometimes discounts are needed to obtain the sale.’ In this statement, Julianne said ‘I intend’ to fully explain. She may have great intentions but using the word ‘intend’ does not mean that she is going to carry out the task.

“We next turn to Julianne's written statement regarding customer refunds. These refunds could be construed as customer kickbacks, as alleged in the employee survey.”

SoJo has a great reputation in the industry. It is sometimes necessary to process refunds for products with manufacturing defects. I am not familiar with what goes on in Operations and cannot explain why Seibert Industries, Lushane Optical, and Curtis Laboratories comprise the bulk of SoJo's returns.

“Julianne clearly states, ‘I cannot explain why,’ indicating that she is perhaps being deceptive.

“In my follow-up questioning, I asked her, ‘Did you authorize kickbacks in the form of customer refunds to Curtis Laboratories?’

“Julianne's indignant response revealed her true feelings: ‘I really don't have to take this. What do you take me for? Do you honestly think that I am going to answer your question? Only a fool would give customers kickbacks.’

“Julianne's delaying tactics and ultimate response, ‘Only a fool would give customers kickbacks,’ highlights her inability to be truthful. The response should have been a simple yes or no. However, Julianne avoids telling the truth by not responding to the question. She is now being defiant.”

Dalton paused. He closed his laptop and turned off the projector. “Brandon, according to Donald Cressy and the Association of Certified Fraud Examiners, the fraud triangle model can be used to explain the factors that cause someone to commit occupational fraud. It consists of three components which, together, lead to fraudulent behavior:

1. Perceived unsharable financial need
2. Perceived opportunity
3. Rationalization ⁴

“When I evaluated this case, I went back to my initial conversations with Kelli. As you will recall, Julianne's husband filed for divorce three years ago. The messy case is still tied up in the courts. She has an $8 million-dollar estate in one of the wealthiest neighborhoods in the city. As the breadwinner for the family, she shared her frustration that it is her responsibility to pay the mortgage and provide for her four children's private school tuition. The family travels extensively and, in the past, her husband and children spent their summers at their estate in Japan. In my opinion, this financial pressure could be perceived by Julianne as an unsharable financial need. I know her husband is very successful, but it seems like the divorce caused significant financial strain.

“As for opportunity, Julianne's position allowed her to potentially falsify expense reports, as well as authorize discounts and approve customer returns, both of which could be construed as alleged kickbacks. Her position enabled her to effectively circumvent your firm's policies and procedures. In addition, statements gathered from other employees, including her assistant, Megan Zamora, support the finding that Julianne has a reputation for bullying and threatening those who she feels are beneath her. Consequently, no one seemed willing to question her actions. We should probably do a review of policies and procedures and the current control structure. As SoJo continues to grow, the infrastructure of the company needs to evolve.

“Lastly, she rationalized the situation. In reviewing her oral and written statements, we see how Julianne justified her decisions. She indicated that a third party worked on the expense reporting process, therefore there are ‘glitches’ in the system. She goes on to say that she needs to stay at the St. Regis because it is close to Seibert Industries and she is required to entertain her clients. It is possible that she stayed elsewhere and rationalized billing the company for the higher expense covering the $700-per-night Fifth Avenue accommodations. Lastly, when talking about customer discounts, she indicated that discounts are received from raw material manufacturers, so offering a 30% discount off standard pricing is acceptable. Some of these facts I am not here to dispute; I'm just here to report what could have happened.

“Brandon, I know you are reluctant to prosecute, but the evidence we have accumulated does lead us to believe additional discovery work is needed to rule out wrongdoing. To complete our investigation into kickbacks, we'd need to gather information from your customers. To finish piecing together the situation on her expense reports, we'd need transaction records from the St. Regis. That being said, much of Julianne's own statements indicate she is working very hard to mislead this investigation.”

Brandon sat for a moment before saying, “I need to process this information. I appreciate the work you have done thus far. However, before we can proceed, we need to provide an update to the audit committee and the board. Kelli, I expect you to work with Dalton to pull the needed details together. Joseph, as our legal officer, I'd appreciate you running the hoops on governance. Please let me know if we need to call a special board meeting or if this matter can wait until we meet next month.

“Simon, I expect Julianne to remain on leave of absence until we have this sorted out. Please ensure you have connected with IT to limit her access to critical systems, customers, and records.” Brandon stood and turned to Dalton. He shook his hand and said, “We will be in touch.”

Kelli was as disappointed with the results as she was happy with the work Dalton and his team had completed. This was exactly what she was looking for. That is why she had reached out to Dalton: she knew she would get a professional investigation in addition to the myriad services she wanted to use him for. This was a great introduction to Dalton for Brandon. Kelli planned on suggesting that Brandon talk to Dalton on how to handle this situation moving forward.