After Microsoft (NASDAQ: MSFT) canned its former chief information officer recently for inappropriate conduct, it's now turning its attention to a former manager who was in charge of the software behemoth's internet domain names. Carolyn Gudmundson was indicted late last week on 11 counts of wire fraud and seven counts of mail fraud.

The whopper: stealing more than $1 million from Microsoft and Expedia.com (a travel website), along with another California company. With all those charges, Gudmundson faces up to 20 years in prison and fines of up to $250,000.

The defendant apparently used her Microsoft corporate credit card to pay for internet domain names for the company, for which she paid highly inflated prices using doctored receipts. She didn't provide receipts in many cases as well, but still was provided reimbursement by her former employer. First of all, Microsoft should not have provided expense report reimbursements without a receipt, but that's not the issue here. Criminal fraud is.

In addition, Gudmundson filed fraudulent invoices with travel site Expedia.com for domain names she had never paid for. Somehow, she also convinced a California domain name registrar to pay a "G.M. Lossman" for transferring multiple domain names to Microsoft. That's a lot of fraud just for involving internet domain names, yes? It's quite an intricate swindle based on something very rarely looked at in corporate America -- domain name management. That is, unless large receipts start showing up in those expense reports.

[DISCLOSURE: I own MSFT shares as of 12-10-07]

Last week, I featured former Crazy Eddie CFO Sam E. Antar's website as an exceptional source of information about corporate fraud from a former fraudster himself. Today, I am happy to bring you the first part of an interview with Mr. Antar. I asked him a few questions about the psychology and motivation of fraud. His responses provide tremendous insight into the mind of a criminal. For more information, be sure to visit his website.

Zac Bissonnette: You state on your website that greed and money are the motives for fraud. A lot of people look at fraudsters and say: 'There is so much intelligence and creativity there that they could so easily have done something legit.' Why do people commit fraud?

Sam E. Antar: You need to analyze white collar crime by its basic elements and outlined by the fraud triangle:

1. Incentive -What does the criminal expect to receive for committing their crimes? For example, an underlying incentive is greed for more money and power. Our incentive was both greed and power.
2. Opportunity - Can the criminal successfully commit their crimes? Lack of adequate oversight, internal controls, accountability, and effective audits present opportunities for the criminal
3. Rationalization - The criminal believes that they can effectively commit their crimes and reasons that they do not live by the same accepted norms and standards of society. They reason that for instance they are allowed to steal money because of personal financial problems whether perceived or real. However, in the Crazy Eddie frauds we had no rationalization. We committed our crimes simply because we could and did not care about our victims.
4. Capability - The criminal must have the requisite education, skills, knowledge, and experience to be capable of effectively committing crime.

The Crazy Eddie fraud can be divided into four periods:

1. 1969-1979: As a private company the primary incentive and motivation to commit fraud was to avoid income taxes and steal sales taxes through skimming. In addition we paid many employees "off the books." The company was highly profitable
2. 1980 -1983: We decided to legitimize the business with the goal of going public. The incentive was to make money selling shares to the public. Therefore, we skimmed less money each year and slowly converted everyone paid "off the books" to being paid fully "on the books. We "grossed up" their paychecks to compensate them for their extra individual taxes in order to help them receive the same net pay. As we gradually reduced the amount skimmed during those years our "reported profits" grew faster than our "actual profits." The company was still very profitable but most of the growth came from opening new stores and not existing stores. The effect of the gradual reduction in skimming made it appear that the company was growing faster because of opening new stores and higher existing store growth too.