Fraud investigations in education

Tonya Mead, PhD, MBA, M.Ed, School Psychologist, CHFI, CFE

The U.S. Department of Education sent to Harvard University and Yale University presidents the notice of investigation and records requests on February 26, 2020. For your review, a copy of the actual notices are included in this article. They are below.

Fed-Reg-App-AB-Harvard-Yale-2020-03812

What does this mean for fraud investigators and fraud examiners? Our success relies upon identifying discrepancies, requesting written narratives, obtaining records, and interviewing targets and witnesses for answers to follow up questions. Examine the the Federal Register again, what do you see? Let’s take a look at just one example pertaining to the Notice of Investigation and Records Request sent to Yale University, Appendix A, beginning on page 11059 of the Federal Register, third column, third paragraph.

Discrepancies identified by Investigators

  • Investigator Statement of Fact. “It appears Yale University failed to report a single foreign source gift or contract in 2014, 2015, 2016, and 2017.”
  • Discrepancy Identified. The investigators go on to add, “however Yale University says it ‘‘has a considerable presence abroad, represented by sites in dozens of cities and countries . . . [some]operated by Yale or a closely affiliated entity’’, claims ‘‘considerable success’’ insetting up ‘‘jointly run laboratories with Chinese universities . . . funded by Chinese granting agencies . . .’’, and has solicited and received directed foreign contributions advancing specific religious and ideological priorities.”

When reviewing credible allegations and pinpointing discrepancies early in the potential case, the fraud investigator can begin to formulate a “case theory.” This involves following these or similar steps:

  • Analyze the information available
  • Create a hypothesis (or best guess of the circumstances surrounding what may have happened, identify a target who may have had the motive, intent and opportunity and identify possible witnesses)
  • Test your hypothesis against the available facts;
  • Refine and amend your hypothesis until you are reasonably certain that a conclusion can be drawn.

As we have seen, investigating fraudulent activities in the education sector is no different from criminal investigations taking place in other industries. What is particularly helpful though is that the federal investigators, as they sought additional records from two of the largest, most impressive Ivy League colleges in the world ($39 billion endowment at Harvard University and $29 billion endowment at Yale University), they provided a glimpse of the best practices for the investigation of fraud and other criminal activities in higher education. Let’s turn back again to the actual notices. This time we will emphasize Appendix B: Harvard University, beginning on page 11061, second column, third paragraph. Here are a few key pointers.

  • Specificity of the time period in question. ” The time frame for this request is August 1, 2013 to the present.”
  • Specificity of the records requested. “gifts, contracts, and/or restricted or conditional gifts or contracts from or with (i) the government of the People’s Republic of China, Huawei Technologies Co. Ltd., Huawei Technologies USA,Inc., ZTE Corp, and their respective agents; (ii) the government of Qatar, the Qatar Foundation for Education, Science and Community Development aka the Qatar Foundation aka the Qatar National Research Fund, Qatari nationals, and their respective agents; (iii) the government of Russia, the Skolkovo Foundation, Kaspersky Lab and Kaspersky Lab US, Russian nationals, and their respective agents; (iv) the government of Saudi Arabia, Saudi nationals, and their respective agents; and (v) the government of the Islamic Republic of Iran, the Alavi Foundation, Iranian nationals, and their agents.”

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  • Flexibility in specificity of time period in question for some requested materials. “all records regarding or referencing The ‘‘Thousand Talents Program’’ and/orits agents; (ii) ‘‘Hanban’’ or the Office of Chinese Language Council International and/or its agents; (iii) Wuhan University of Technology and/or its agents; (iv) the ‘‘Wuhan University of Technology Harvard Joint Nano Key Laboratory’’ and/or its agents; and (v) any university, school, or other education or research entity domiciled in or organized under the laws of China, Qatar, or Russia and/or their agents. The time frame for this request is January 1, 2012 to the present.
  • Early identification of potential targets, witnesses or accomplices. A request for the “name and address of each person responsible for the Institution’s 20 U.S.C. 1011f reporting and compliance.” And here also ” list of each program, activity, and/or employee, faculty member, or student directly funded or supported by a gift, contract, and/or restricted or conditional gift or contract with or from a foreign source to the Institution.” As well as here too ” a list of all gifts, contracts, and/or restricted or conditional gifts or contracts from or with a person who is a ‘‘foreign source’’ as defined at 20 U.S.C.1011f(h)(2)(D).”
  • Diligently collecting information to determine organizational victimization or organizational liability for alleged offenses. “All records of, regarding or referencing the Institution’s audit and accounting practices and/or other institutional controls…”
  • Astutely utilizing Al Capone last ditch effort if all else fails. ” All IRS Form 990s and schedules, including Schedules F and R, for tax years 2014, 2015, 2016, 2017, and 2018.”
  • Meticulously scrutinize possible “Mistake of Fact” defense. “A verified statement by a duly authorized Harvard University official: (a) Affirming that the Institution solicits and accepts gifts from, contracts with, and/or comingles or intermingles funds from foreign sources with funds from domestic sources, only in material compliance with all applicable federal laws, regulations, and executive orders and generally accepted and applicable accounting standards; (b) affirming that for the calendar years 2013, 2014, 2015, 2016, 2017, 2018, and 2019 (each‘‘reporting year’’) the Institution’s Section 117 reports were accurate…”

This concludes my analysis of the Notice of Investigation and Records Request. If you have additional points you’d like to add, please feel free to make note of them in the comments section. Thanks!

Dr. Mead, PhD, MBA, MA http://www.ishareknowldge.com is a consultant specializing in human behavior, school and social psychology. She can be contacted at: tonya at ishareknowledge dot com

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