Financial Reporting Project

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Memorandum: of Fraud Examination

TO: Mr. Robert Moritz, U.S. Chairman and Senior Partner, PwC

FROM: Bilen Kebede, Lead Forensic Accountant

DATE: MAY 31, 2015

SUBJECT: Icon Telecom Lifeline Fraud

Lifeline Fraud Executive Summary

Using the Lifeline fraud case as an example, this memo will analyze the case and prevent future fraud by similar telecommunication companies. Suggested recommendations include a proactive fraud auditing, a whistle-blowing system, and employee assistance programs (EAPs).
Facts of The Case and Charges
In 2014, both Icon Telecom and Wes Yui Chew, who was the sole owner of the company, were convicted of making false statements and money laundering for around $27 million from cell phone subscribers and the US government. Beginning in 2005, Lifeline provided subsidies to participating telephone companies not only for landline service, but also for wireless service for qualifying low-income customers (U.S. Attorney’s Office, 2015). Nonetheless, Icon took advantage of the subsidy program to be reimbursed for more than it merited.
Icon Telecom provided Lifeline discounts to subscribers from July 2011 through September 2013. In this short period of time, the organization misappropriated a large amount of the funds available. At the start of the business, the company stated that they had 2,200 Lifeline subscribers. By the end of 2012, Icon was claiming more than 135,364 subscribers. This dramatic increase in the number of subscribers went unnoticed for years.
Wes Yui Chew confessed to submitting false documents to the Universal Service Administrative Company (USAC), an administrator of the Universal Service Funds. He also admitted to moving “more than $20 million from an Icon bank account to his personal account. He acknowledged the money was derived from the fraud scheme” (Marks, 2014). His actions went unnoticed by auditors.…...

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