Internal fraud hits banks at every level and at any time. It can be the teller at the window stealing cash, the call center employee pocketing card numbers, or even a high-level executive embezzling funds from the bank or customers.
This week, Pam Ace, an SVP of Bank of America’s global wealth & investment management division, and her husband Jonathan Ace, were each charged with internal fraud stealing over $2.7 Million from the bank.
You can download and read the whole indictment here – ace-indictment.
Charitable Donations Followed By Strong Arm Tactics
According to the indictment from the United States Attorney this is how the internal fraud scam went down.
From October 2010 to April 2015, Pam and her husband engaged in an embezzlement and kickback scheme to defraud Bank of America of approximately $2.7 million using fraudulent donations to non-profit organizations.
Step 1 – Make Non Profit Donations From Marketing Budget – As part of the scheme, Palestine Ace used her position as a Senior Vice President at Bank of America to misappropriate funds from a marketing budget and transfer the money to non-profit organizations. Specifically, she authorized 75 transactions, each under $50,000, to non-profit organizations in Boston and Atlanta.
Step 2 – Then Claimed They Needed Money Back – Then, she and her husband, either directly or indirectly, informed the non-profit organizations that a substantial portion of the donated funds must be returned in order to ensure that Bank of America would continue to fund the organization.
Step 3 – Write a Check to My Husband – The non-profit organizations either wrote a check to Jonathan Ace or Forde (another accomplice), or they returned funds to a Bank of America account, to which the defendants had access.
Step 4 – Use Strong Arm Tactics As Necessary -On various occasions, Jonathan Ace pressured the recipients of the donated funds to return a higher percentage of the funds to him, by using intimidation and threats of public humiliation. Keep in mind, in some cases these were organizations that were helping kids with AID’s get treatment or helping disadvantaged people.
Step 5 – Innocent or Not?
Pam and her husband claim that they are innocent and intend to fight the charges in court. Let’s let the courts decide this one based on the evidence which sound pretty damning to me.
Pay a Consulting Fee
Unbeknownst to her employer, Pam would have her husband approach non-profit organizations – many of them in Atlanta. He would advise them that they could get them large donations. The catch is they would need to pay a “Base Consulting Fee” to Jonathan to get the money. After the money was transferred he would have funds paid into relatives accounts – like Pam’s mom.
Expensive Purchases with Proceeds
Apparently, Pam wasn’t actually that charitable according to the charges. She found it was better to take money from the poor kids she was donating to and use the funds in a better way. She reportedly used some of the proceeds to throw lavish parties and buy expensive toys like a $17,000 Kawasaki Motorcycle.
She Cleverly By-Passed Internal Controls
As with most internal fraud, this employee of the bank was able to by-pass internal controls by using her influence.
Allegedly, she was able to conceal the fraudulent transfers from the bank by instructing other employees to exclude the fraudulent transfers from their regular accounting reports to her supervisor.
Alerted by Money Laundering Queues
Bank of America uncovered the fraud from their money laundering queues which investigators use to detect structured payments. The internal investigation that initially focused on the bank account of Pam Ace’s mother, according to an affidavit filed in court by FBI agent Sheila Magoon. At one point they became alerted because the funds in her mother’s account rocketed up to $200,000 very quickly. At that point, Pam began to taper the payments into $50,000 increments to avoid suspicion.
Interestingly enough, Bernie Madoff’s schemes were detected by Money Laundering queues and kiting alerts as well.
Preying on Charities
What makes this fraud so upsetting is the way that Pam and her husband preyed on charities – many of them who just wanted to help people. Since charities are happy to get anywhere – particularly from a big bank- she was able to lure them in with her sophisticated con.
If something is too good to be true – it often is.