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Fraud
DAVID MALAMED
It Takes One to Know One
After Scalzo explained how he had lost a high-paying job
(when arrested he was a senior vice-president, commercial banking) and his reputation and, most of all, feared losing his family, which he had terribly embarrassed, the man told him he couldn’t give up on the people who had supported him (which his family had done since he accepted a plea agreement in 2013). “You have to leave here a better man than the one who came in,” he said. He also urged Scalzo to work out, which the well-spoken Scalzo continues to this day (he served 27 months of his sentence and is on probation). “This guy just changed my whole perspective on life,” he says. A self-described good Catholic boy from an Italian family,
I
F IT’S TRUE THAT IT TAKES A THIEF TO CATCH A THIEF, then the following cautionary tale should help fraud investigators better understand what can drive a seemingly honest person
to commit a fraud that sends him to prison and destroys his career. James “Jimmy” Scalzo would like anyone considering the commission of a fraud to know what it can be like when the consequences of his or her crimes catch up with him or her. In July 2013, the then 46-year-old former high-ranking loans
officer at two banks in Wisconsin and Illinois was sentenced to 35 months in prison and ordered to pay restitution in the amount of US$679,737.23 aſter he pleaded guilty to one count of bank fraud and one count of money laundering for having carried out frauds totalling US$1.4 million. He had faced up to 30 years’ imprisonment on the fraud charge and an additional 20 years on the money laundering charge. Three days aſter he began his sentence in the medium-secu-
rity Federal Correctional Institution in Terre Haute, Ind., the married father of four children decided his life was no longer worth living. “I wrapped a telephone cord around my neck and I was determined to throw myself on the floor and either break my neck or lacerate it and bleed out,” he told CPA Magazine. Fate intervened in the unlikeliest of people. “As I had this
cord around my neck, a guy with tats from his earlobes to his feet — the kind of guy who, if we were in a pub, I’d say, ‘Fellas, let’s get the cheque because I don’t want to stay here’ — asked me what I was doing and told me to come talk with him.”
48 | CPA MAGAZINE | NOVEMBER 2017
Scalzo grew up in Kenosha, Wis., on the southwestern shore of Lake Michigan, not far from Milwaukee and Chicago. While pursuing a degree in English and communications at the University of Wisconsin, he took a summer job in the mail room of a local bank in 1989, at age 22. Uninterested in the banking industry, he changed his mind when the president of the bank, who was a family friend, asked him how much he was making. “US$3.75 an hour,” Scalzo replied. “Our job pays US$23,000,” the president said. Scalzo suddenly loved banking. During a training period, which included a stint working as a
teller, Scalzo learned an insightful lesson about how things actually worked in banks, one that should get the attention of anyone working in a supervisory position in the financial indus- tries. “I was, unequivocally, beyond a shadow of a doubt, the worst teller in history,” he says. “I could not get the drawer to balance no matter what I did.” As a result, all the tellers who were itching to leave at the end of the day had to wait on him as he tried to balance the numbers. “These people were pissed at me beyond belief.” One of them told him to carry a plastic sandwich bag with
some change in it so he could add or subtract whatever amount was required to make the numbers balance. “They said that if I wasn’t able to balance the till a report would have to be sent re the discrepancy and then I’d be watched or maybe moved. That stuck with me.” He also noticed that although everyone told him banking was
the most regulated and rule-oriented industry, no one training him seemed to do things the same way. In other words, a person might be able to create his or her own rules, as long as no dis- crepancies were ever reported. Charismatic and driven, Scalzo quickly moved up the ranks in the banking industry as a loans officer. He was a closer, who
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