Industry Insights

Wakeyleaks & the Fraud Triangle

April 2017
Author:  Rand Gambrell

Rand Gambrell

Director

Forensics & Valuation Services

1801 California Street, Suite 2900
Denver, CO 80202-2606

Denver
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Wakeyleaks is the nickname given to the Wake Forest University football scandal. The scandal revolves around Tommy Elrod, a member of the Wake Forest Football Radio Network broadcast team. Elrod was accused of providing opposing football teams with the Demon Deacons’ game plans since the 2014 season.

You may think providing football game plans to opposing teams isn’t that bad. Consider that the average Division I athletic department generates revenue of approximately $56 million (based on a 2012 study). The University of Texas reported $165 million in revenue, and 66 percent was generated by the football program. College football is big business.

College football coaches are largely evaluated on the number of winning games. As a result, coaches are constantly searching for a competitive edge and are extremely protective of providing any information (practice reports, player injuries, etc.) that could put them at a disadvantage. Think of Apple’s design protection, and you get a sense of how protective football coaches are of their playbooks and game plans.

An interesting element of Wakeyleaks is that, so far, there’s no indication Elrod was paid or compensated by the opposing teams he provided with game plan information. Prior to his radio role, Elrod spent 11 seasons as an assistant coach for the Demon Deacons and played quarterback for four seasons during his Wake Forest time. Elrod had a long-term and close relationship to the Wake Forest football program. Where did it go wrong? The evidence points to Jim Grobe’s resignation in 2013.

Grobe became the head football coach of the Wake Forest Demon Deacons in 2001. In 2003, Grobe hired Elrod to serve as a graduate assistant; through 11 years, Elrod held a number of positions with Grobe's staff. However, Grobe resigned at the 2013 season’s end and was replaced by Dave Clawson, previously the Bowing Green University head coach. Clawson chose to let Elrod go. Elrod was then hired prior to the 2014 season start by IMG Sports as part of the Wake Forest IMG Sports Network.

I have previously written about the fraud triangle. To summarize, the fraud triangle theory hypothesizes that three elements must be present for fraud to take place: a perceived need (typically financial), opportunity to commit fraud and the individual’s rationalization of their behavior.

As a member of the Wake Forest broadcast staff, Elrod had the opportunity to closely observe the Demon Deacons' football practices, including the upcoming weekend's game plan installation. In addition, Elrod's history gave him access to coaches likely to share their thoughts and plans for the upcoming opponent.

Elrod hasn’t been publicly interviewed, so we’re left to speculate his rationale for passing information to opposing coaches. However, based on Elrod being let go, he may have justified his behavior on feeling mistreated.

Which brings us to the final leg of the fraud triangle:  a perceived need. Often fraud perpetrators commit their crime because of financial needs or pressures, e.g., a gambling or substance abuse problem, their spouse lost their job and the stack of unpaid bills is growing or perhaps they want an unaffordable lifestyle. Sometimes a perceived need has nothing to do with money; it’s the desire to get even with an individual or an organization for a real or perceived slight. This may be the case with Elrod; after 11 years working for Wake Forest University—the same university where he received his undergraduate degree—he was unceremoniously terminated when a new head football coach was hired. Elrod may have felt betrayed and decided to get even by giving away the football program’s secrets.

Wakeyleaks can teach organizations two important fraud prevention lessons. First, it serves as a reminder that an organization's most valuable asset is its intellectual property. The aforementioned Apple reports nearly $322 billion in assets on its balance sheet, its technology, designs, patents, trademarks, etc., are worth significantly more (as evidenced by the company's $690 billion market capitalization). For a college or university, intellectual property may take a variety of forms, such as educational materials, publications, results of research and faculty. Unlike tangible assets (cash, inventory, machinery and equipment, etc.), which are easier to safeguard, intellectual property by its nature is nebulous and can be difficult to protect. Organizations need to have a plan and process to identify their most valuable assets, including intellectual property, and develop and monitor internal controls to safeguard those assets.

Second, organizations need to recognize money isn’t always a fraud perpetrator's primary motivation. Sometimes fraud perpetrators are motivated by a perceived desire to get even with the organization for real or perceived slights. Leadership and management need to be sensitive to their organization’s mood and attitude to help ensure they identify and address unhealthy attitudes before they become unhealthy behaviors. Otherwise, your organization could be involved in the next leaks scandal.

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