University receives restitution from investment fraud

What has Ball State done to make sure this doesn't happen again?

• The Board of Trustees Audit and Compliance Committee now looks at the investment strategy and policy and reviews the investment portfolio regularly

• The university's whistleblower policy now has a hotline through an independent third-party

• Improvements have been made in the selection and authentication of brokerage firms

• All purchased securities are held for safekeeping through a registered third party.

• The schedule of reconciliations of accounts has been improved.

• External support and expertise have been engaged for the auditing of certain areas, such as information technology.

Source: Bernie Hannon, vice president for business affairs and treasurer

Ball State has recollected some – not all – of the $13 million it lost in a 2011 investment fraud.

Jason Bartolacci, instructor of fraud and forensics at Carlow University in Pennsylvania, said Ball State is lucky it received any money at all.

What has Ball State done to make sure this doesn't happen again?

• The Board of Trustees Audit and Compliance Committee now looks at the investment strategy and policy and reviews the investment portfolio regularly

• The university's whistleblower policy now has a hotline through an independent third-party

• Improvements have been made in the selection and authentication of brokerage firms

• All purchased securities are held for safekeeping through a registered third party.

• The schedule of reconciliations of accounts has been improved.

• External support and expertise have been engaged for the auditing of certain areas, such as information technology.

Source: Bernie Hannon, vice president for business affairs and treasurer

“In a lot of investigations I’ve worked on, generally the money is gone," Bartolacci said. "They generally do this as a lifestyle requirement, spending money on house, cars and other things."

The university received a check for $694,763 from the U.S District Court in August. The money came from a Florida investment adviser, Seth Beoku Betts, who is currently serving his fraud sentence of four years and three months.

During the 2011 and 2014 fiscal years, Ball State used money they had set aside from a contingency fund to write off the total amount lost, said Bernie Hannon, vice president for business affairs and treasurer.

The money from Betts was put in the same contingency fund to partially restore the losses, Hannon said.

Bartolacci said it is easier to get back higher amounts of money, such as with cases like Ball State's. This is because in investment fraud, there is a lot of middle ground.

“Everything leaves a paper trail—catching someone isn’t really the difficult part,” Bartolacci said.

With investment fraud, the victim is typically someone the perpetrator knows because they have to build some kind of relationship, Bartolacci said.

“It was easy for me to search and find some information on Ball State,” Bartolacci said. “The more things like this are publicized, people are on the lookout and watch for this. The more you get information out and people educated, the better off everyone is.”

The investigation on the fraud is still going.

“The timing and length of the investigation are entirely at the discretion of the law enforcement agencies and Ball State cannot predict the length of those investigations,” Hannon said.

A management action plan has been developed and implemented to make sure Ball State's investments are safe in the future, Hannon said.