Case in Point:
Lessons for the proactive manager

This month we are returning to normal programming, which for us is our review of the events from 2019 in the ''Fraud & Ethics'' category. We noted a wide variety of fraud and ethical issues, perhaps more diverse in the ways these issues occurred than in any prior year.

Here are the top five most frequent types of stories in this category:

1. Occupational Fraud -- an employee defrauds the institution in some way.
2. Research/Grant Fraud -- either falsifying research work or fraudulently billing the sponsor.
3. Theft of Property -- typically someone external to the institution taking an asset.
4. Admissions Fraud -- this category reached the top five largely due to the Varsity Blues Scandal that hit many institutions. To date, over 50 people have been charged in this scandal.
5. Improper Spending -- these cases were not considered fraud per se, but underwent substantial scrutiny due to their appearance and effect on the institution’s reputation.

Many people are surprised to learn that education as an industry is a frequent victim of fraud. We have been in the top 10 regarding frequency of fraud for several years according to research done by the Association of Certified Fraud Examiners. The most common type of fraud we see in education is occupational fraud, which simply means an employee steals or misappropriates from their employer. In 2019, occupational fraud accounted for 36% of the stories we linked in this category. For comparison, the next closest was Research/Grant Fraud, which accounted for 16% of the stories linked.

The best way to prevent occupational fraud is by having good internal controls. In my view the two most important components of internal control are: (1) ensuring one person does not have complete control of a process, and (2) management adequately fulfilling their oversight role. Too often, the lack of simple oversight allows occupational fraud to occur. If you manage money, people, contracts, accounts, or just about anything else, paying attention to what is going on is part of the oversight deal. Certainly, there is more to internal controls than these two items listed, but in my view, these are the two most frequent components that allow fraud to be perpetuated against an organization.

We again invite you to review the events of the past month with a view toward proactive risk management. As always, we welcome your comments and suggestions.

M. Kevin Robinson, CIA, CFE
Associate Vice President
Office of Audit, Compliance & Privacy
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Information Security & Technology Events

May 28: Ransomware Attack: An official at Michigan State University said that a school computer system has been targeted by a ransomware attack threatening to publish student information. Dan Olsen, deputy spokesperson at MSU, confirmed today to FOX 17 that the university was recently the victim of a NetWalker ransomware security breach. He offered the following statement to FOX 17. "Within hours of the intrusion, MSU IT took prompt action and notified law enforcement agencies," Olsen said. "At this time, we believe the intrusion is isolated to one unit on campus. (link)

May 26: Data Breach Lawsuit: A December data breach that jeopardized the personal information of thousands of current and former Wichita State University students -- some of whom attended the school decades ago -- is now the subject of a federal lawsuit. Michael Bahnmaier of Wichita is seeking class action status in the lawsuit, which accuses the university of negligence in keeping and storing sensitive data, waiting too long to alert potential victims about the hack, and "knowingly and deliberately" enriching itself by not paying for security measures that would have guarded against the breach. (link)

May 11: Online Proctoring & Privacy: Online proctoring has surged during the coronavirus pandemic, and so too have concerns about the practice, in which students take exams under the watchful eyes (human or automated) of third-party programs. Chief among faculty and student concerns are student privacy and increasing test anxiety via a sense of being surveilled. Pedagogically, some experts also argue that the whole premise of asking students to recall information under pressure without access to their course materials is flawed. This, they say, may only motivate students to game the system, when cheating is what online proctoring services seek to prevent. (link)

May 09: Zoom Bombing: Oklahoma City University held its virtual graduation celebration on Saturday, but the event was hacked by someone who broadcast a racial slur and a swastika as a student gave a blessing. The university used Zoom to host the virtual event. "Although we took safety precautions, unfortunately the digital platform we used to connect has become a target," Burger said. Pictures of students were displayed and a student gave a blessing when the racial slur and swastika suddenly appeared. (link)

May 04: Cyber Attack: Students and digital security experts say York University must release more information about what the school calls an "extremely serious" cyber attack last week. York says the Friday evening attack corrupted a number of its servers and workstations, though it has not yet said if any sensitive information was stolen. In a statement, York said its IT department quickly severed the school's internet connection and shut down many of its online programs after the attack began, a move that mitigated the scope and severity of the breach. York has advised that everyone at the university will need to reset their passwords as a result of the attack. (link)

Fraud & Ethics Related Events

May 26: Grant Fraud Settlement: The University of San Francisco has agreed to pay $2.5 million to settle allegations that it submitted fraudulent information to get AmeriCorps service grant money, the Justice Department announced Friday. The U.S. Attorney's Office for California's Eastern District says the private Jesuit university obtained $1.7 million for its teacher residency program, which grants money for tuition and living costs to students who volunteer at high-needs San Francisco public schools. The justice department said that the director of the program falsified more than 1,500 time sheets from 2014 to 2016 to get the education awards administered by the Corporation for National and Community Service. (link)

May 14: Wire Fraud & Intellectual Property Theft: A former Cleveland Clinic Foundation doctor was arrested Wednesday and appeared in court on Thursday on charges of wire fraud and making false claims to obtain millions in federal grant funding. It is the latest move in a federal crackdown on alleged participants in China's Thousand Talents Plan. The government believes the program may recruit U.S.-based scientists and researchers to steal intellectual property and scientific advances paid for with American funding. (link)

May 15: Unemployment Fraud: More than 200 Oklahoma State University employees have been victims of fraudulent unemployment claims. This has affected numerous people, both nationwide and statewide, prompting the Attorney General's Office and Oklahoma State Bureau of Investigation to create a joint task force. "There is no information indicating this fraud was targeted at Oklahoma State University employees specifically. Unfortunately though, many employees were included as part of a much larger unemployment fraud issue," Shannon Rigsby, Public Information Officer at OSU, said. (link)

May 11: Wire Fraud: According to the FBI, 63-year-old University of Arkansas-Fayetteville professor Dr. Simon Saw-Teong Ang reportedly failed to disclose alleged "close ties with the Chinese government" in order to receive grant money from NASA. Ang was arrested on May 8 on one wire fraud charge. A statement released by the US Department of Justice states that the complaint filed against Ang charges that he had close ties with the Chinese government and Chinese companies, and in order to receive a grant from NASA, did not share that information. (link)

May 01: Academic Cheating: The Georgia Tech campus is buzzing about the allegation that students in physics classes posted questions from their final exams to the online tutoring service Chegg where tutors provided answers. A Tech spokesman said Monday Tech was looking at possible cheating in two widely subscribed physics classes that had several sections. All told, he said about 1,000 students took exams in the implicated classes, although there is no figure yet on how many test-takers may have cheated. (link)

Compliance/Regulatory & Legal Events

May 19: Breach of Contract Lawsuit: Former Grand Canyon University men's basketball coach Dan Majerle is suing the school that fired him, according to court documents obtained by Arizona Sports. Majerle is suing under three causes for action, including breach of contract. The court documents detail Majerle's firing and the wrongdoing he alleges, including not providing a severance provision. (link)

May 12: Title IX Lawsuit: A federal appeals court said Tuesday the parents of an LSU freshman who died in a hazing ritual 2½ years ago can pursue claims that the university disciplines its fraternities and sororities differently and that male students who enter Greek life face a greater risk of injury than females. LSU claimed sovereign immunity and sought to nullify a lawsuit filed by Stephen and Rae Ann Gruver, whose son Max died weeks after he enrolled at LSU in 2017. The 5th U.S. Circuit Court of Appeals in New Orleans ruled that because LSU accepts federal funding, it had waived immunity from lawsuits that allege discrimination on the basis of sex. (link)

May 13: Criminal Charges Dropped: A judge dismissed criminal charges Wednesday against former Michigan State University President Lou Anna Simon arising from the Larry Nassar sexual assault scandal. Simon was ordered to trial last year on charges that she lied to police about her knowledge of a sexual misconduct complaint against Nassar, who was a campus doctor and now is serving decades in prison. (link)

May 11: False Tax Returns: A former Emory University professor was sentenced on federal charges after he admitted to earning hundreds of thousands of dollars from China for research projects and failing to report it on his tax returns. A federal judge ordered Xiao-Liang Li to pay $35,089 in restitution after he pleaded guilty to filing a false tax return, according to the U.S. District Attorney's Office. Federal prosecutors said that in 2011 while Li was working for Emory, he was also employed by Thousand Talents Program, a talent recruitment initiative funded by the Chinese government. (link)

May 08: Sexual Abuse Settlement: Ohio State University will pay $40.9 million into a fund for 162 victims of sexual abuse by Dr. Richard Strauss, who worked for the university until the late 1990s has since died. The university and the plaintiffs in a combined 12 federal lawsuits announced a settlement two months ago, but the total damages in the agreement weren't revealed until Friday in a filing in U.S. District Court in Columbus. (link)

May 08: Sex Discrimination Lawsuit: A former University of Michigan student-athlete says she was sexually assaulted and stalked by a male teammate and was met with indifference from the university, her coach and athletic officials, creating a hostile environment on the team. The student-athlete filed the 62-page sex discrimination lawsuit Thursday, May 7, in federal court, naming UM's Board of Regents, Athletic Director Warde Manuel and Track and Field coach James Henry, among others. (link)

May 06: Title IX Revisions: Education Secretary Betsy DeVos on Wednesday formally announced new protections for those accused of campus sexual harassment and assault, a controversial move that upends Obama-era guidance she had argued denied due process to the accused. The new rules, which are set to go into effect in August, narrow the definition of sexual misconduct on campuses. They define sexual harassment as a "school employee conditioning education benefits on participation in unwelcome sexual conduct," "unwelcome conduct that a reasonable person would determine is so severe, pervasive and objectively offensive that it effectively denies a person equal access to the school's education program or activity" or "sexual assault, dating violence, domestic violence, and stalking." (link)

May 04: Tuition Refund Lawsuits: They wanted the campus experience, but their colleges sent them home to learn online during the coronavirus pandemic. Now, students at more than 25 U.S. universities are filing lawsuits against their schools demanding partial refunds on tuition and campus fees, saying they're not getting the caliber of education they were promised. The suits reflect students' growing frustration with online classes that schools scrambled to create as the coronavirus forced campuses across the nation to close last month. The suits say students should pay lower rates for the portion of the term that was offered online, arguing that the quality of instruction is far below the classroom experience. (link)

May 04: NCAA Allegations: The University of Louisville has received a notice of allegations from the NCAA. This is in relation to the pay-for-play scandal associated with Brian Bowen. An FBI investigation alleged Bowen received $100,000 from Adidas to push him to attend Louisville. After the investigation, UofL parted ways with both Athletics Director Tom Jurich and head basketball coach Rick Pitino. (link)

May 04: Due Process Lawsuit: A University of Utah medical student disciplined for sexual misconduct is now suing the school, saying his two-year suspension was too harsh and detrimental to his career. Robert Byron says Utah's flagship university violated his right to due process in proceedings that favored the other side. His two-year penalty approved by U. President Ruth Watkins stems from a classmate's report that he victimized her in April 2019 -- an allegation Byron contends is in large part inaccurate. (link)

May 01: Title IX Lawsuit: During a class in 2013, a psychology professor at George Mason University named Todd Kashdan told students he had once performed oral sex at a party, an anecdote he later said was meant to make a point about exhibitionism, according to findings from an internal school investigation and a federal lawsuit the professor filed against the university. His suit, filed in September in federal court in Alexandria, alleged that GMU and its officials had run a flawed investigation, displaying bias against men, and violated his rights to due process and freedom of speech. But a federal judge sided with the university in an April 23 ruling that dismissed the case. (link)

May 01: Public Records Lawsuit: UNC will be required to release the names of individuals found responsible for rape, sexual assault or related acts of sexual misconduct, according to a North Carolina Supreme Court ruling announced Friday. The 4-3 decision ends a nearly four-year fight for records of the University's sexual assault disciplinary proceedings that began when this month's graduating seniors were halfway through their first semester at UNC. (link)

May 01: Sexual Assault Lawsuit: A Penn State student has expanded her allegations that the university failed to adequately address her "train rape" claim and that she was treated differently in classes because she is African American. Kayla Williams, from Allegheny County, on Monday in an amended complaint filed in U.S. Middle District, provided more details on the allegations she made in the original one in February. Since then Williams has been suspended for the spring and summer semesters because a Title IX panel found she harassed a former roommate and assaulted a ride-share driver. (link)

May 01: Title IX Lawsuit: A former Michigan State track athlete has filed suit against the university, as part of a larger set of lawsuits against the NCAA involving at least two other institutions, in failing to uphold Title IX regulations after she was allegedly sexually assaulted in March 2017. The lawsuits, filed Wednesday in the U.S. District Court for the Western District of Michigan, aim to hold MSU and the NCAA accountable for negligence, fraud and breach of contract in each of these seven individual cases. The other institutions include Nebraska and an unnamed American East Conference Division I college, according to ESPN. (link)

Campus Life & Safety Events

May 18: Hazing: The University of Kentucky on Monday announced the firing of all four of its cheerleading coaches and a longtime advisor after an internal investigation found incidents of alcohol use, hazing and public nudity during off-campus events. After a three-month investigation, UK has dismissed head Coach Jomo Thompson and assistant coaches Ben Head, Spencer Clan and Kelsey LaCroix from their duties with the program. The investigation also found lax oversight and poor judgment by T. Lynn Williamson, who served as the cheerleading program's advisor for four decades. (link)

May 13: Noose On Campus: A University of Illinois student on Tuesday pleaded guilty to misdemeanor disorderly conduct for making a noose out of string and leaving it last September in a residence hall elevator. Andrew Smith, 20, pleaded guilty before Champaign County Circuit Judge Heidi Ladd, who sentenced him to a year of court supervision. Smith of Normal, Illinois, was originally charged with a hate crime, a felony. (link)

May 12: Mass Shooting Threat: A UF student is in jail after threatening a violent massacre at Virginia Polytechnic Institute and State University. He was previously under a UF code of conduct investigation for harassment, "endangering behavior" and sexual harassment. James Kelly, a 36-year-old business finance student living in Bowling Green, Florida, was arrested by the Bowling Green Police Department Monday for written threats to kill, do bodily injury or conduct a mass shooting or act of terrorism, according to an arrest report from the department. (link)

May 05: Free Speech: A recently released Gallup-Knight Foundation study, "First Amendment on Campus 2020 Report: College Students' Views of Free Expression," reveals underlying attitudes toward free expression that are likely to inform our post-pandemic future. This survey of over 3,000 full-time U.S. college students was conducted in late 2019 as the latest in a series of similar studies in 2016 and 2017. This survey provides deep insights into the next generation's attitudes toward free speech and expression at a time of rapid technological and political change -- an understanding of which will be critical for policymakers, business leaders, academics and members of the media seeking to understand our shared democratic future. (link)

If you have any suggestions, questions or feedback, please e-mail me at robinmk@auburn.edu. We hope you find this information useful and would appreciate hearing your thoughts. Feel free to forward this email to your direct reports, colleagues, employees or others who might find it of value. Back issues of this newsletter are available on our web site.

If you have any suggestions for items to include in future newsletters, please e-mail Robert Gottesman at gotterw@auburn.edu.

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