Students

Accounting students get real-world fraud lessons

Nathan Mueller shares how his $8.5 million embezzlement that lasted four years began with a breach of controls and small choices.

Madeline Sargent

2020-06-30

In June 2003, Nathan Mueller committed fraud for the first time with a $1,100 check. He got away with it, so then he paid off all his debt. Eventually, Mueller was living far beyond his means. By September 2007, he had embezzled $8.5 million from ING, a multinational insurance firm where he had been an accounting manager.

And then it all caught up with him.

After authorities discovered Mueller’s theft, he was sentenced to 97 months in prison — a term that he began in February 2009 at the Federal Prison Camp in Duluth, Minnesota. He served five and a half years in prison with six months of home confinement. Since his release in 2014, Mueller has been sharing the story about his fraud scheme at accountancy conferences and schools across the nation.

Clinical Professor of Accountancy Melissa Sumelson brings the world into the classroom when she invites Mueller to visit her Ethics for Professional Accountants (ACC 360) class each semester. First, students study the risk factors of fraud and a case about his scheme.

“It’s eye-opening to hear Nathan tell his story in person. It is impactful for students to see that a normal guy could make a series of wrong choices that resulted in a multi-million-dollar fraud and years in prison,” explains Samuelson, who surprises students with his visit. “I hope students learn from Nathan’s experience and realize that small choices can snowball into larger problems.”

Students learn how Mueller’s embezzlement was made possible by a breach of controls, pressure, and rationalization, as well as strategies for preventing and detecting similar schemes.

Mueller’s money mindset

“My obsession with money started early,” says Mueller, who grew up in the small town in Minnesota. “I grew up with a loving family. I had a great life as a child, and I recognized that. I appreciated that I had a great family, did well in school, was good at sports. I was popular, and I had all this positivity in my life. But I focused on the one thing we didn’t have — money. From a young age, I thought the only way I’d be happy in life, seen as successful, was if I had financial success in my career. I chose to major in accounting because CPAs in my little town had nice cars and homes.

College was a shortcut for Mueller, who graduated with an accounting degree in less than four years. He says he didn’t go to get an education or experience the social life that it has to offer. “I went to college to get a degree so I could get a job, and I didn’t care about my grades,” says Mueller, who adds that he couldn’t interview with big firms that came to campus because his GPA wasn’t high enough, limiting his career options.

Mueller moved to the Twin Cities, where he started his career at a small accounting firm that consisted of a certified public accountant (CPA), and the CPA’s wife and daughter, which he joked was “not necessarily a firm.” There he gained experience in accounting and business processes on a small scale. But after two years with the accounting company, Mueller went looking for bigger and better.

“I didn’t make the kind of money my friends were making at the big firms,” he says.

Breach of passwords only the beginning

Mueller found work at life insurance company ReliaStar in an entry-level accounting position where a billion dollars passed through the six-person department. It was the first time he had to log in and use passwords.

On his first day, Mueller’s coworker not only shared the reconciliations and other accounting tasks he’d have to do but how she created her new password every 30 days — her initials, the month, and the year. “I knew my colleague’s passwords,” Mueller explains. Later, this is one of the many issues that helped him steal company funds.

ReliaStar didn’t have secure internal control procedures. “We used a lot of shortcuts and workarounds to get our job done,” Mueller says. “Those were also things I used to commit fraud.”

Mueller continued to learn more at ReliaStar, taking on new responsibilities and absorbing the processes and procedures. He passed the CPA exam and moved up to be an accounting manager, which gave him the responsibility to manage the firm’s incoming and outgoing funds. He also gained the trust of his boss and coworkers. Then Mueller played a lead role in transitioning ReliaStar onto a new enterprise resource planning (ERP) system.

“I wasn’t setting up the system controls to break them, but it helped me manipulate them later,” Mueller says. Anyone coming into the division — internal and external auditors, Sarbanes-Oxley internal control testers, state insurance examiners — were told to see Mueller if they noticed anything strange. “They came to me first, not my boss,” explained Mueller. “Later, this helped me deflect questions and keep information away from those who could have caught me sooner.”

Reviewing Mueller’s road to fraud

In 2000, multinational insurance firm ING acquired ReliaStar shortly after Mueller helped the company switch to the ERP system. Consequently, he helped roll out the system to all employees at ING. “I wasn’t thinking about committing fraud at this point, but it helped me understand how it all worked and commit the fraud and cover it up later on.”

As a part of the changeover team, Mueller became an expert on all aspects of the ERP system, including financial reporting, journal entries, and checks and wire payment processing. Two years later, Mueller discovered that he and the coworker whose password he knew had the authority to approve checks up to $250,000.

“I recognized that I shouldn’t have the authority and should alert accounts payable to have it revoked. But I thought, ‘I’m never going to abuse this,’ ” Mueller rationalized. “When I was driving home from work that day, it hit me that I could steal money.”

The thought to steal company funds crossed Mueller’s mind often over the next year and a half and always ended with the idea, “I’d never do that. That’s a line I could never cross.”

But when Mueller’s wife became pregnant, his high personal debt — that was unbeknownst to her — combined with the opportunity to steal, and his rationalization that taking money and paying off his debt would make everything OK, created the elements of the fraud triangle. The fraud triangle describes three conditions commonly found when fraud occurs: pressure or incentive, opportunity, and rationalization. Mueller felt pressure to commit fraud to support his wife as a stay-home-mom and pay off his debt. He had the chance to steal funds from ING, and he justified his actions.

“I convinced myself that the only option was to steal money to support my family and pay off my debt,” says Mueller, who was also working nights and weekends at a CPA firm. “The reality was that I made a lot of money but was living beyond my means and just needed to be responsible and stop spending money on stuff I didn’t need.”

Unfortunately, the pressure, rationalization, and ability to approve and request checks under his coworker's identity and then approve them under his account, motivated Mueller to go for it.

The first time Mueller logged into the ERP system as his coworker and approved the first fraudulent check for $1,100, he didn’t think it would work, but “I knew that if I got caught, I could talk myself out of it the first time.”

Mueller didn’t get caught, and his scheme grew.

He and his subordinate were also allowed to physically pick up checks, which allowed him to take physical checks to the bank to deposit into the account of a fake vendor he set up. After almost getting caught and taking a break from the scheme, Mueller began hiding his debits in ledger accounts that he controlled.

“I continued to steal more and more,” he says. “There was a point where I was stealing $400,000 a day.” By the time Mueller had embezzled $8.5 million from ING, the guilt had wreaked havoc on his health, ruined his marriage, and he’d distanced himself from friends and family. “I wanted it to all be over, but I couldn’t see a way out of it without going to prison.”

Mueller makes amends after prison

Since his release from prison in 2014, the U.S. attorney’s office has been looking over his financial life — Mueller owes $7 million in restitution. He’s happily remarried and has repaired relationships with his family and friends.

“I’m happy to make enough money to support my family,” says Mueller, who speaks at accounting conferences and drives Uber and Lyft. “Now, my relationship with money is a lot healthier. I’m happier with myself and my marriage, and I don’t need material things. Money isn’t as important as it used to be. I feel lucky to be able to support my children, family, and friends.”

Mueller urged students to consider being catalysts in driving a healthy work culture when they begin their careers. “Become a virtuous employee and recommend participating in ethics weeks.” He also stressed to students to “be honest with yourself. Have self-awareness about who you are and what you stand for.”

“Having him in the classroom made everything feel real,” says accounting student Alesa Gause. “I understood more where he was coming from and why he did what he did and the consequences of having to put his life back together.

“As soon as you catch something, it’s important to say something,” continued Gause, who aspires to be a CPA. “Don’t wait, because that opens the door to opportunity and rationalization.”

Read Mueller’s detailed description of the fraud scheme.