BBB CEO Believes CFEs Should Look to Technology to Fight Fraud

Steve McFarland, CFE, CICA, CBM, first entered into fraud investigation as a personal favor to a friend who had fallen victim to a fraudulent general contractor.

July 2016

ACFE Member Profile
Steve McFarland, CFE, CICA, CBM
Chief Executive Officer
Better Business Bureau of Los Angeles and Silicon Valley

Steve McFarland, CFE, CICA, CBM, first entered into fraud investigation as a personal favor to a friend who had fallen victim to a fraudulent general contractor. Fresh from graduate school, he was appointed an interim investigator on a cased and was able to get a settlement for his friend and other victims of the contractor. He translated that zeal for justice into a career, becoming the CEO of the Better Business Bureau (BBB) of Los Angeles and Silicon Valley. Working to protect both consumers and businesses from fraud, he believes it is especially pertinent for CFEs to learn more about technology and cybercrime. He says, “Staying ahead of the perpetrators is a daunting mission. Education and training are sorely needed, as are the technical skills needed to stop the acts before they occur.”

Where were you born and raised?

I was born in Hayward, California, and raised in San Jose, California. I participated in team sports through high school and at the college level while working summers for a local accounting firm. Early on, I knew I wanted to be trained in accounting to learn the flow of business from a practical vantage.

How did you become passionate about fighting fraud?

Just out of graduate school, I learned one of my good friends had lost a lot of money when an unscrupulous general contractor filed bankruptcy and left him and dozens of other subcontractors empty handed. We suspected the contractor used the cash to open a new business, so I took on the investigation as a personal challenge. A few months later, I attended the bankruptcy hearing and shamelessly asked the federal judge a series of probing questions about the debtor. To my surprise, she set aside her decision and appointed me, a mid-20s greenhorn, as the interim investigator on the case with permission to examine the assets of the general contractor. The judge sensed the debtor’s lack of candor and she was tired of pounding the gavel case after case without having a resource to verify her suspicions.

Fortunately, I found enough incriminating information and obtained the confessions of several staff members, resentful of their boss, who knew I was looking for the truth. The case ended with a settlement, mostly in favor of the subcontractors, so the stress was worth the effort, and the experience for a young, aggressive examiner was priceless. Years later, my typical clients were comprised of high-tech firms intrigued by my unique mix of accounting, CFE and private investigator skills along with my curiosity and zeal for human intelligence.

What is one of the biggest lessons you have learned since becoming a CFE?

Build trust. You must build trust — with your clients, your prospects and even your adversaries. You can acquire credibility, but you must build trust. Billy Graham said, “If you lose money, you have lost something. If you lose your health, you have lost a lot. If you lose your values, you have lost everything.” Compromising your values and professionalism will erode the trust you worked so hard to achieve. As a CFE for 23 years, I have learned clients appreciate honesty and candor as much as hard work.

What steps led you to your current position?

One of my projects involved an owner of a professional baseball team who was looking to retire. He asked me to consider running for his seat as a board member of the nonprofit BBB. It was a prestigious position and I was honored to serve. Serving the BBB allowed me to travel extensively for business and attend meetings via conference call, some from Tel Aviv. After 20 years of serving as a director on the BBB board, I was elected CEO. No doubt, my prior CFE experience in fraud detection and prevention was a determining factor in the board’s decision.

What does your role as CEO of the BBB entail?

My role includes many common responsibilities of a large nonprofit organization, including direction of revenue generation and operations for our California area that includes more than 500,000 businesses and 19 million consumers. Our terrific staff and volunteers handle 350-400 consumer complaints per day. They are truly amazing, caring folks. Perhaps my most important role is representing the BBB and its free services to the community. This includes speaking engagements, working with law enforcement, leading scam seminars at our colleges and senior centers, writing for numerous publications and regular TV and radio appearances.

What is a memorable case or project that you have worked on?

My career has been laced with several interesting cases; some involving international money laundering and covert intelligence collection. I got a front row seat with cases involving brazen, heartless fraudsters that ended with a sense of relief when nobody on our side was injured or worse. Over time, the projects became increasingly more docile, some including competitive intelligence. During the last few years, we have exposed countless scams and schemes like fake award rip-offs, egregious locksmiths, phony phishing schemes and bogus gold brokers.

One memorable case dealt with Fred, a desperate man in the South Central area of L.A., who pleaded with me to investigate a rental broker scam. A nonexistent ghost property was listed on Craigslist and the broker took Fred’s $1,400 deposit, while Fred ended up with nothing. Fred’s information provided a few clues which eventually led me face-to-face with the scammers. I convinced the crooks to return the $1,400 (the only funds the victim had to his name) by threatening to involve my contacts at local TV and radio stations. Soon, the district attorney became involved and this particular scheme, along with many others, was shut down, saving hundreds of potential victims the same fate. I will never forget Fred dropping to his knees thanking me as he cried outside on the sidewalk.

Through your work at the BBB, how do you think organizations and communities can most effectively help those around them be aware of fraud?

The BBB’s mission is to promote and foster the highest ethical relationship between businesses and the public through consumer and business education, voluntary self-regulation and service excellence. Our role is to educate and inform our communities about scams, prevention and mitigation. The most effective way we can provide value to our communities is to provide information on our website, BBB.org, through social media and using education from seminars, roundtables and media. Last year, the BBB provided more than 165 million business reviews and serviced nearly 900,000 consumer complaints.

How do you think technology has helped spread fraud awareness?

While the internet has provided so many new avenues for fraudsters, it has also provided countless tools and vehicles for gathering information that consumers and businesses must employ. With so much information available, consumers have a duty to research providers before they buy. For example, the BBB has a new online tool, ScamTracker, which consumers, law enforcement and the media can use for free.

Conversely, businesses have an obligation to promote themselves fairly, as consumers have tools to compare trustworthy providers. Businesses are becoming more aware they will yield more long-term business with honesty and fairness. Consumers look for value and value most often originates from reliable, trustworthy providers.

What types of issues do you see on the horizon for those fighting fraud?

Cybercrime has become a huge concern for government, business and consumers. The stakes are huge. Government and businesses are mounting awareness campaigns but staying ahead of the perpetrators is a daunting mission. Education and training are sorely needed, as are the technical skills needed to stop the acts before they occur. There is so much opportunity for our young CFEs and investigators to join the battle against cybercrime.

What activities or hobbies do you like to do outside of work?

Adult league ice hockey, fishing and camping with family.