Nathan Mueller's Employer, Reliastar Fraud

Nathan Mueller’s employer, ReliaStar was acquired by the large insurance company ING in 2000. Mueller had a deep understanding of accounting systems and was in charge of transitioning his old employer to the new ERP system. Mueller learned “all aspects of the ERP system including financial reporting, journal entries, and most importantly, checks and wire payment processing” (“Lessons Learned,” 2014). Mueller was an accounting manager of the reinsurance division at one of ING’s offices. He stole almost $8.5 million in a little over four years. Mueller’s department at ING was the reinsurance division, which gave him the ability to approve company checks of up to $250,000. He embezzled this significant amount of money from his employer by requesting

checks paid out to made up vendors, then depositing the checks into either his own bank account or a dummy account.
Mueller’s worked in the accounting department of his division. The accounting department consisted of 6 employees and Mueller was one of three in his division that could request checks. To add to the opportunity to embezzle, he could log-in as another employee and request a check, while approving it using his own account. This allowed Mueller and other employees to have access to each other’s computers and have the authorization to request checks. It was the subordinate’s job to collect the printed checks before being mailed off to clients. Mueller would request a check the day before the subordinate took a day off, or give the subordinate the day off, so he could collect the checks and remove the one written to pay off his credit card bills.
In June 2003, Mueller had $88,000 of credit card debt. His credit card company had the name “Universal” in it, and Mueller came up with a strategy to write a check on behalf of his company paid out to “Universal” as a scheme to pay off his debt. The checks went undetected because one of ING’s customers had “Universal” as part of its name. Mueller started by embezzling small amounts then increased the amount as he became more confident that no one knew that he was defrauding the company. One of Mueller’s fraudulently approved checks was bounced back to the head accounts payable department in Atlanta because he forgot to put his personal credit card number on the check. The accounts payable department did not raise eyebrows, but sent the check back to the requester, which was Mueller. This event stopped Mueller temporarily, but financial pressures and opportunity triggered him to commit fraud again.
Mueller knew he had to be smarter as to prevent a check being returned to the A/P department.

He created a dummy company so he could write checks out to that company and use the stolen money for his own purposes. Mueller did not have to create a client name in ING’s accounting system because ING already did a lot of business with a company with “Ace” in its name. Using this system, Mueller embezzled about $8 million in a four-year period. The fraud was concealed by hiding the debits in an expense-type ledger account with lots of reconciliation activity. Furthermore, Mueller was undervaluing the Canadian dollar when recording ING investment income from Canadian investments. Segregation of duties was severely lacking because Mueller was the only one reconciling this account for seven years. According to the article, ING’s accounting system had “thousands of journal entries and billions of dollars of transactions” (“Lesson’s Learned,”

2014).
Mueller needed an explanation for the money he used to buy luxury cars, trips, and watches. Employees at work noticed his lavish lifestyle beyond his pay grade, but did not raise suspicions. Employees trained in fraud awareness and having an effective fraud reporting system could have stopped this fraud earlier. Furthermore, the accounts payable department in Atlanta could have inspected the returned check. It should have looked odd that a credit card company was being billed to a single account with Mueller’s work address. Setting up the role for a risk management person to review “abnormal interactions with outside parties” (“Lessons Learned,” 2014) can help companies detect possibly fraudulent activities or at least detect abnormal interactions.
Mueller rationalized his behavior because his income was not enough to pay all his and his pregnant wife’s bills. Also, college loans needed to be paid. Financial pressure and lack of internal controls and segregation of duties presented Mueller a huge opportunity to embezzle. Employees should
He was not caught until a coworker became suspicious from talking with Mueller’s ex-wife about his “gambling winnings.” Mueller told his family, friends, and coworkers, that he was an extremely successful gambler, hitting several jackpots. He would first wire money to Vegas, then fly down there first class, carrying back up to $100,000 in so-called gambling winnings. His reluctance to confess to his wife triggered a divorce in 2006.
The coworker who caught Mueller’s fraud performed a query running all the checks she supposedly approved. This query red-flagged ten “Ace” checks totally $1 million that she did not request. The coworker reported the finding to her supervisor. One morning in 2007, Mueller’s bossed asked him for the supporting vouchers for the Ace checks. Mueller was able to delay the meeting a day, but another meeting with the boss and subordinate exposed the fraud when Mueller ran out of the office. Fraud investigators ranged Mueller’s doorbell, ending with Mueller stating he needs to talk with his attorney.
Mueller eventually pleaded guilty to fraud, sentenced to 8 years in prison.

For good behavior and completing a drug abuse for alcohol, he is due released only after about five and a half years in prison. A lot of systems were missing or manipulated to commit the fraud. ING top management should be aware that Mueller knows all the inner workings of his division’s ERP system and that the opportunity for fraud is stronger. He also had full authority to request and approve checks, while simultaneously writing associated journal entries to conceal the embezzlement. Segregating the operational duties from the recordkeeping responsibilities is a way that could have prevented this fraud. Authentication controls put in place to restrict access to other employer’s computers would have prevented Mueller from impersonating the subordinate or coworker. A lower limit should have also been placed on Mueller’s approval authority of

$250,000.
A new-hire procedure for a credit check could have highlighted that he was strapped for cash. Also, an effective tip-line where is ex-wife could have called in an expressed her thoughts about her former husband’s abnormal behavior may have drawn some red-flags that a fraud was occurring. It may have been hard for an internal audit or outside audit to catch the fraud because Mueller did not make up dummy names in the system and hid the change in debits to a reconciliation account. Also, the entries did not look unusual because the account had thousands of journal entries.
Having a strong tone at the top for fraud prevention could have eliminated or stifled the opportunity Mueller had for embezzlement. Procedures were simply missing to prevent embezzlement. Management at IGN should have conducted an interview or had a transition process after the acquisition highlighting Mueller’s deep understanding of the company ERP system. A segregation of duties and strong internal controls, including preventing an employee to log-in as another employee, would have prevented the fraud. Furthermore, an analytical procedure reviewing variances in the reconciliation account may have potentially red-flagged some abnormal activity. Moving forward, IGN can implement these procedures in the division that was victim to the fraud and communicate the importance of creating a culture that is not scared to report fraud and punish those who commit fraud criminally and civilly.