The words "fraud" and "embezzlement" bring to mind former Enron CEO Kenneth Lay or Martha Stewart's five-month imprisonment resulting from insider trading charges.
But after former Tufts Director of Student Activities Jodie Nealley was fired and accused of embezzling approximately $300,000 last month, students were exposed to embezzlement within the context of a university setting.
In recent years, cases of fraud and embezzlement have gained greater attention on the national scale, mostly within a corporate setting. But after several colleges experienced fraud last year, the focus on such cases in higher education has increased as well.
Education Manager Allan Bachman of the Association of Certified Fraud Examiners (ACFE), who has experience with internal auditing in higher education, said corruption in colleges and universities can generate an unusually high amount of buzz.
"There is a certain level of trust with higher education institutions, which in turn gives [educational cases of fraud and embezzlement] a little more media attention," he said.
According to the ACFE's 2006 "Report to the Nation," there were 73 cases of fraud in the education industry last year. These cases, which were reported on campuses of varying size and location, accounted for seven percent of all occupational fraud issues in 2006.
One such case occurred at the University of Michigan. In March 2006, three employees - the public media deputy director, a development director and an account executive - were fired on embezzlement allegations. These charges carried the possibility of five years of jail time and a fine of either $10,000 or three times the amount of money embezzled.
Those crimes were discovered through an investigation and full-fledged audit process which uncovered insufficient documentation, improper reimbursement, lack of adequate authorization and potential increases in bonus payments, all of which totaled upwards of $50,000.
Auburn University also reported two separate cases of embezzlement last year. One case involved Casey Dillard, a former cashier at Auburn's College of Veterinary Medicine's Large Animal Clinic who was accused of embezzling $80,000 from the university over the span of her employment.
In the second case, former professor and advisor/treasurer to the Alpha Tau Omega fraternity, Lloyd Frank Lawing Jr., was convicted of embezzling roughly $940,000 through one of the fraternity's real estate transactions.
One of the largest cases of university embezzlement occurred in 2004, when Delores Cross, the former president of Morris Brown College in Atlanta, Ga., was indicted on charges of embezzling $3.4 million dollars. The embezzled funds were obtained from federal loans and grants under the guise of students who did not exist or who had already graduated from the university.
Cross pleaded guilty to all charges in May 2006, and Morris Brown College lost its university accreditation, causing its student enrollment to drop from 2,500 students, to its current total of less than 50.
Outside of higher education, cases of embezzlement and fraud in other industries have gained public attention nationwide.
"I think media attention to fraud in general has increased, with all the 'Enrons' of the world," Bachman said.
Though corruption in certain industries may be given slightly more media coverage, fraud and embezzlement can occur in many occupational fields, according to Jeffrey Denner, founder and partner of Denner-Pellegrino, a criminal defense law firm in Boston.
"You see embezzlement everywhere: in universities, government, and corporations both large and small," Denner said. "Embezzlement cases can occur any time someone is put in a position of responsibility."
"Universities are like any other organization on the planet: [issues of embezzlement and fraud] occur at exactly the same frequency," Bachman agreed. "Any environment with controls and humans with a failure of character will be prone to issues of fraud."
Although each industry's predisposition to fraud is virtually equivalent, there are still disparities between the causes and effects of embezzlement and fraud in each industry.
The AFCA published a list in 2006 that ranked education as the seventh most fraud-affected industry. The category "Business/Financial Services" took first place.
Denner said universities could be growing more like corporations in the ways they operate, which might lead to more instances of embezzlement in higher education.
"Businesses are established to make money, so they often tend to have their eyes more focused on the bottom line in their practices, although that has been changing over time," he said. "With rising tuition and increased costs, universities have started to be run more like businesses."
Bachman agreed. "The business processes of colleges are pretty much exactly the same as those of any other institution - both are protected in the exact same way: through oversight controls and accountability."
AFCA's report also cited the 2006 median dollar loss in educational fraud cases as $100,000. This is a significant jump from the 1996 report, which cited the median dollar loss to be only $32,000 - but Bachman said those figures cannot be compared on face value.
"An increase in the median dollar loss could have occurred for a number of factors ... I'm reluctant to compare numbers," he said. "Our survey is compiled from voluntary reporting, which, in some cases, may have contributed to underreporting in the education industry in past years."
Some cases of fraud or embezzlement, especially in the education industry, fail to surface, Bachman said.
"Many cases in the education industry never see the light of day. Tufts did go public with [its] case, so that in turn draws attention to it," he said.
However, attention may not always have negative implications. According to Bachman, attention, as in Tufts' case, can serve to ultimately benefit the university.
"In Tufts' case [such media attention] creates an awareness - it shows that Tufts is an organization that is willing to face its issues and confront them in a public way," Bachman said. "In this case, it worked: Tufts' approach was a good one."
By bringing media attention to such issues, Tufts was able to jumpstart movements to protect against future issues of fraud and embezzlement, Bachman said.
"In Tufts' case, the ultimate result is that it will tighten controls and make it more difficult to perpetrate that type of action in the future," he said.
