easily outperformed the other officers. By the late 2000s, he had sole-signing authority for loans “of about US$750,000 to one million,” he says, describing a working environment that was intensely focused on making loans happen. In the early 2000s, Scalzo decided he wanted a source of


income to supplement or possibly even replace his banking job, which he had soured on to a degree. He had inherited a consid- erable amount of money following his father’s death and used it to purchase some investment properties, mostly in residential real estate. He partnered with two first cousins, who ran the operations while he was “the financial backstop.” All went well until he discovered one of the cousins had been using “our operating account as a personal piggybank.” He says he’s unaware of what the cousin was using the money for. Some time in either 2006 or 2007 (he isn’t quite sure of the date), Scalzo took the first step on a path that eventually led to


One of his schemes was to mortgage the home belonging to


the parents of his cousin-partners. He rationalized it by think- ing that the parents had helped out in the past if money was short. When the parents discovered the fraud, and aſter Scalzo was unable to cover the loan, they went to the FBI. It wasn’t long before the bureau came knocking on Scalzo’s door. During his time in prison Scalzo thought a great deal about


the banking industry. He believes the Wild West atmosphere that existed in the banking industry prior to the 2008 recession might now be returning, noting that the Trump administration is committed to repealing vital aspects of the Dodd-Frank finan- cial reform act. He also sees a return of the “low to no-doc loan,” which brought on the sub-prime mortgage scandal in the US. Scalzo also confesses that he could never have authorized


US$1.4 million in fraudulent loans if two signatures had been required for every transaction.


“I knew that if it appeared that I couldn’t be fiscally responsible for myself, how was I going to get to the president’s job and be fiscally responsible for the bank and customers” He advises forensic investigators and auditors to look for


prison. He approved a US$67,000 loan to one of his cousins, without providing any legitimate documentation or collateral, and redirected the money to himself to cover the losses from the cousin’s wrongdoing, concerned that the bank would find out his business was faltering. “I was desperate because in my mind my career was accelerating and I knew that if it appeared that I couldn’t be fiscally responsible for myself, how was I going to get to the senior level or president’s job and be fiscally respon- sible for the bank and customers if I couldn’t be [that way] for myself.” If he had stopped aſter that first fraudulent loan, he might


never have been caught. But he didn’t. The recession in mid-2008 played havoc with his investment


properties. “In a matter of months I went from a positive net worth in real estate value to one that was completely upside down,” he says. Describing himself as arrogant and conceited about his


ability to work the system, Scalzo embarked on a series of eight additional fraudulent loans to cover his losses and also allow him to lead the life of a seemingly wealthy bank executive. “He forged borrowers’ signatures on loan documents, redirected funds from the loans to his personal use without the knowledge of the borrowers, and took funds from some fraudulent loans to pay off balances on previous fraudulent loans in order to conceal the original fraud,” a court document would later note.


loans officers who are skittish about being subjected to loan reviews or having their own cash flow analyzed. “Also really watch out for people who are always putting loans in the ‘excep- tion-to-policy’ category. That’s a key phrase in banking: ‘We’re going to make this loan but it’s an exception to policy.’ It’s per- fectly legal but someone who constantly operates with loan exceptions means that their deals are in the gray area.” Although some fraudsters and con artists have turned their


criminal past into a business — notably Frank Abagnale, whose life of crime was the basis of the Steven Spielberg film Catch Me If You Can — Scalzo says that is of no interest to him. “I don’t have a book, no podcast, nothing on YouTube,” he


says, adding that he now works in “operations management” at a Gold’s Gym in Wisconsin. Since his release, Scalzo has accepted two unsolicited and


unpaid speaking engagements, which have afforded him the opportunity to publicly take full responsibility for his actions and, perhaps more importantly, talk about how and why he turned to fraud. “If my talk can stop even one person from [com- mitting fraud] then my whole suffering might have some sense of value,” he says.


DAVID MALAMED, CPA, CA•IFA, CPA (ILL.), CCF, CFE, CFI, is a partner in forensic accounting at Grant Thornton LLP in Toronto (linkedin.com/in/forensicaccountant)


NOVEMBER 2017 | CPA MAGAZINE | 49


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