Specializing in financial investigations as we do, I am always fascinated when new financial frauds come to light, and I always want to know how the person got caught.

In the case of the recent Yale School of Medicine fraud in which an administrator took more than $40 million in fake computer purchases (desbribed in The Washington Post) the end came down to an anonymous tip.

It should not have required a tip to catch this one. It needed someone who can do percentages. To do that going into an investigation, you need to make sure you know what sizes and distances you are talking about.

A percentage is the answer to the question, “Compared to what?” Is a million computers sold in a year a lot? We all intuitively know that a million computers sold in one year in China is a drop in the ocean among a billion people, but a million computers sold in Plattsburgh, New York in one year sounds far-fetched. [I thought Plattsburgh had maybe 50,000 people in it. The real answer is 19,500 – and a million units is nuts with either figure.]

 

The Yale Facts

Jamie Petrone-Codrington was an administrator at the Yale School of Medicine’s Department of Emergency Medicine. She bought equipment on behalf of the department, some of which would be extremely expensive. But she didn’t need higher approval to buy any lot of goods under $10,000. Since one X-ray machine or MRI costs a lot more than $10,000, she decided to fake purchases of things that cost less than that – computers.

According to the criminal complaint and plea agreement, Petrone bought some $30 million worth of goods for the medical school between 2018 and this year. Since January 2021, she bought 8,000 iPads and Surface Pro tablets for use by the department. She broke up all the purchases into lots of less than $10,000. Her fraudulent purchases (at least the ones she’s paying back) started in 2013 with a mere $82,825, but like most fraudsters she started taking increasingly as the years went by and she didn’t get caught.

[“But she’s been here for years!” is what co-workers often say when they learn that a colleague has been robbing the company under their noses for many years. That’s because it takes years to make sure the systems are so lax that you can start taking really big money.]

Petrone pleaded guilty to two counts of wire fraud and filing a false tax return. In addition to prison time, she agreed to make restitution of some $47 million.

The fraud was basic. Petrone would buy these thousands of unneeded computers for the medical school, and then would have them shipped to a company she controlled. The company would then sell the equipment on and she would keep the money.

 

The Crazy Percentage Nobody Noticed

While it’s true that Petrone broke up her thousands of computers into lots of $10,000 or less, at the end a certain period her department still had those thousands of machines on its books.

This made no sense. Just as a million computers for Plattsburgh is nonsense, so is the idea that this department needed 8,000 computers in a year.

If you work at the medical school as Petrone’s supervisors would, you know that for the 476 students enrolled there you have more than 11,000 faculty and staff. Is it remotely reasonable to be buying 8,000 computers a year? These things last 3-5 years, so maybe if you hadn’t bought any computers in years you might buy 8,000 for the entire medical school.  But Petrone was only buying for one department. The 8,000 number is bonkers.

 

All Size is Relative

I have seen suspect purchasing before, and there too it all turned on the size of the place being bought for.

We were hired by one of two warring unions, asked to examine the rival union’s LM-2 financial returns filed with the Department of Labor.

The first thing we did was to find out how big our target local was. How many members did they have? How big was their office and how many people worked there?

We then started looking at the financials and noticed something odd: For a really small local, they bought an awful lot of office furniture. Either they were buying for phantom members who didn’t work there, or they were buying top-of-the-line office furniture that had no place in a union local representing hard-working people doing dangerous work for less than what your average plumber charges.

It all turned on percentages: this many dollars compared to this many people.

A good investigator fills in the blanks. Not just the dollars on the page, but the number of people the dollars service.

Raw numbers mean nothing without context.