The NASPP Blog

I know that many of you are eagerly anticipating the 18th Annual NASPP Conference (I certainly am).  To give you a taste of the topics that will be presented at the Conference, this week we begin a series of guest blog entries by Conference speakers.  For our inaugural entry in this series, we feature Jennifer Namazi of Stock & Option Solutions on Finding and Foiling Fraud in Equity Compensation Plans.

Finding and Foiling Fraud in Equity Compensation Plans
By Jennifer Namazi, Stock & Option Solutions

I’m really excited about our “Foiling Fraud” panel at the NASPP Conference because the issue of potential fraud is an interesting complexity, and let’s admit it, a mysteriously scandalous topic in the world of administering equity plans. While I’m sure we’d all like to believe the best about everyone, let’s be realistic–fraud does exist.

In recent years, we’ve been privy to several high profile fraud cases around equity plans as they played out in the media, some of which will be presented as case studies in our panel presentation. The great part is that we’re going to talk not only about what went wrong in these cases and how to detect and foil fraud, but we’ll also discuss how to prevent ever getting there in the first place.

When I first explored the various fraud cases, I was surprised to find out that most fraud is NOT planned carefully in advance, but rather the seizing of an opportunity at hand. I guess I envisioned fraud as something committed by shady characters that somehow slip through the hiring screening process. I changed my perspective when I read or watched several interviews from various people who got caught in the act–the vast majority appeared to be solid citizens living everyday lives and said they didn’t set out with the intention to commit fraud–it was that the situation presented a set of circumstances and they either eased themselves or jumped in. Hmmm, something to think about–note to self: “not all fraud starts out as a single blatant act.”

After digging into the case studies, I made my own conclusion that fraud occurs most often in cases where (let’s use the cliché here) you’d least expect it. When I say least expect it, I mean the type of fraud AND the characteristics of the person committing the fraud. As far as I can tell, there is no single “profile” that one could use to proactively screen and identify potential fraud artists. Even really benign and seemingly routine process areas, such as issuing control numbers at the time of a DWAC (as you’ll learn from one of our case studies), can present opportunity for fraud. I was amazed to learn how many times the immediate supervisor of the person who committed the fraud was simply astounded. It was implausible, right?

This is a point I think will apply to many of us–we have decent controls and checks and balances. The question is do we have enough of the right ones? Are we monitoring them at the right frequency and with the appropriate level of oversight? Do we have loopholes in areas we’ve never thought about? Is the segregation of duties structure conducive to fraud?

Make sure you join us at the NASPP Conference as we talk about types of fraud, case studies (mistakes leading to fraud and lessons learned), how to detect and unravel fraud, and–perhaps most importantly–how to shore up your practices to ensure that circumstances don’t present an opportunity for temptation. I’m looking forward to seeing everyone at the Conference! Enjoy a safe and relaxing summer (while keeping up with the NASPP blog, of course!).

Who doesn’t love a good mystery? Filled with intrigue and suspicious characters, Jennifer’s session, “Finding and Foiling Fraud in Equity Compensation Plans,” promises to be one of the most suspenseful panels at the 18th Annual NASPP Conference–don’t miss it!  The Conference will be held from September 20-23 in Chicago. Register today!