RiskTech Forum

SAS: Becoming the Smartest Guys in the Room: An analysis of the Enron emails using text analytics and case management.”

Posted: 9 April 2013  |  Source: SAS

As an investigator, gaining an advantage over fraudsters is essential to effectively catching and preventing fraudulent activity. Fraud happens every day and it is your job to prevent it. You need access to superior fraud detection and prevention solutions. To fully understand how SAS is superior in the fraud industry, let’s perform a what-if analysis on a previous case of fraudulent activity: the downfall of the Enron Corporation.

Enron Corporation was an American energy, commodities and services company based in Houston, Texas. In 2001, it filed for bankruptcy. Before its December 2, 2001,bankruptcy filing, Enron employed approximately 20,000 staff. It was one of the world’s leading electricity, natural gas, communications and pulp and paper companies, with claimed revenues of nearly $101 billion in 2000 .1 Later, it was discovered that many of Enron’s recorded assets and profits were inflated or even wholly fraudulent and nonexistent . For example, in 1999, Enron promised to pay back a Merrill Lynch investment with interest in order to show a profit on its books .2 Debts and losses were placed in offshore accounts that were not included in the firm’s financial statement. More sophisticated and mysterious financial transactions between Enron and related companies were used to take unprofitable entities off the company’s financial records. These “offshore” entities were limited partnerships between Enron and LJM Cayman LP and LJM2 Co-Investment LP, created to buy Enron’s poorly performing stocks to improve its financial statements. These two partnerships received funding of approximately $390 million from a group of investors .3 Enron created entities it called “Raptors” and transferred more than $1 .2 billion in assets into Raptor accounts, including millions of shares of Enron common stock, long-term rights to purchase millions more shares, plus $150 million of Enron notes payable .4 It capitalized the Raptors and booked the notes payable issued as assets on its balance sheet while increasing the shareholders’ equity for the same amount .

During Enron’s rise to the top, it was intertwined with multiple counts of fraudulent activity that could have been detected years before Enron’s fall if investigators had the right tools. What if investigators used SAS Enterprise Case Management integrated with SAS Text Analytics? Could the fall of Enron have happened differently? In order to answer this question, you must first understand the hardships behind detecting and preventing fraud, and how integrating SAS Enterprise Case Management and SAS Text Analytics can eradicate them.

Understanding the actions and motives of fraudsters is a vital part of predicting fraudulent activity. To gain an advantage, you must incorporate analytics in your investigative process. The goal of analytics is to turn data into useful information.
Unfortunately, most data is unstructured, making it much harder to analyze effectivel y. Unstructured data refers to information that either lacks a predefined data model and/or does not fit into relational tables. SAS Text Analytics processes large volumes of text and provides useful analytics to support investigations. By integrating SAS Text Analytics with SAS Enterprise Case Management, you can run analytics on any unstructured data.

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