By Nathan Peck | MiBiz
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GRAND RAPIDS — Halloween may have been two weeks ago, but Bernie Madoff’s crimes are enough to give bankers chills any day of the year.

Bernie Madoff is in prison, his surviving family disavowing knowledge his $65 billion fraud. Madoff’s crime can too easily be written off as East Coast greed, experts say. West Michigan isn’t immune to large-scale fraud. In a region with a reputation for solid values and a strong work ethic, criminals have bilked banks and investors out of millions in several multi-million dollar frauds and scores of smaller cases.

A group of investigators of financial crimes told bankers at the Risk Management Association that the large-scale Ponzi schemes of Robert Vorce and the former Cybernet Corp. can cause significant damage to banks’ balance sheets.

“How many loans does it take to pay off a big hit? Make sure you’re not buying everything you are told,” said Dave Distel, managing director and partner with CPA and forensic accounting firm O’Keefe and Associates. “Kick the tires regularly.”

Vorce bilked local banks out of $27 million in a fraud scheme where Vorce claimed he purchased, refurbished and resold yachts. Instead, he was funneling the money to fund a lavish lifestyle — taking Macatawa Bank for $9.2 million and Irwin Union for $8.6 million, as well as defrauding other local banks.

Roberta Gilligan, an agent for the FBI office in Grand Rapids handling the investigations of Robert Vorce and other financial crimes in West Michigan, said the con men in these cases left bankers and investors with a positive impression. Banks often are late to the game in verifying collateral.

“They’re charming and very convincing,” Gilligan said. “They will always leave the bankers very impressed and are very willing to talk about how well they’re doing. Without fail, banks don’t verify collateral until the money’s out the door.”

Dennis Echelbarger, founder and chairman of the accounting and auditing firm Echelbarger, Himebaugh, Tamm & Co., said there is no particular distinguishing personality trait in the majority of fraud cases save one: need. It may be a desire for an extravagant lifestyle, paying off debt or a gambling addiction, but there is often a reason for why the person feels fraud initially becomes necessary.

“We’ve seen it all in my career. I am not sure I can profile who will steal,” he said. “There are three legs of a triangle, but the one consistent fact is there is a need. Something occurred in their life causing a financial issue. … They will rationalize it, they need it for a little while, and it grows.”

Distel said that a healthy dose of skepticism can help uncover fraud and protect investors.

“The biggest thing is to understand the direction of how money moves. Look at the flow of money, and if it doesn’t make sense, ask more questions,” Distel said. “It comes back to common sense, slowing down the process, and if it doesn’t make sense, ask the questions. If something doesn’t smell right, it probably isn’t.”