With over 25 years of experience, we have investigated a variety of internal and external fraud cases in multiple business settings.  Some incidents involve relatively “simple” acts of dishonesty such as overstating hours worked, theft/pilferage of company property or falsifying expense reports.  Other schemes have been more complicated involving kick-backs, creating ‘ghost’ employees, paying fictitious vendors or manipulating financial records.  

Case Sampling

Employee Travel and Expense Reimbursement

Inventory Theft

Accounts Payable … Vendor Over-Billing

Employee Travel and Expense Reimbursement

Overview: While conducting a routine audit T&E expenses, it was discovered that a highly-paid company executive had, over a period of multiple years, defrauded his employer of more than $100,000. 

Incident Summary:  Executive perpetrated this fraud by both inflating the value of individual T&E receipts as well as submitting some of the same receipts multiple times for reimbursement. 

• Interestingly, he also took this ploy a step further by submitting some of the same business expense receipts a 3rd time as fraudulent documentation supporting a portion of his company reimbursed relocation expenses. 

Outcome:  Employee admitted knowingly overstating both travel as well as relocation expenses resulting in termination and full reimbursement of overstated expenses.  Enhanced internal controls were implemented within expense reimbursement of employee T& E as well as relocation program.

Inventory Theft

Overview: Following an investigation to identify the origin of high-dollar lossses related to missing inventory, employee meetings were conducted to build awareness among those employees working at the location.  

Incident Summary:  Several weeks later, an employee received an inbound carton returned by FedEx as undeliverable.  The returned carton contained company inventory but it lacked any supporting shipping documentation.  The employee who processed the returned shipment was suspicious about the return of the carton so the employee contacted me. 

• After investigation, it was determined that the package shipment was initiated by a warehouse employee to the employee’s fiancé and the items in the carton were ‘short’ from the physical inventory.  Additional research confirmed that, over an extended period, additional cartons had been shipped to employee’s fiancé.
• During a fact-finding interview, the employee admitted multiple incidents of shipping unpaid inventory which her fiancé would later sell online.  Furthermore, the employee acknowledged that she was rushing so didn’t catch the shipping address error.
• Interestingly, the employee had recently given notice that she had accepted a new job and processed the ‘incriminating’ shipment on the last day of employment.  The employee commented that, following the recent inventory shortage investigation and meetings, she was uneasy that her fraudulent action would be uncovered and decided it was time to find another job.

Outcome: Criminal prosecution and full court-ordered restitution in excess of $20,000.

Accounts Payable … Vendor Over-billing

Overview: While conducting a routine accounts payable audit, an AP Processor with a sharp-eye for details noted a steep increases in payments to a long term, established vendor.  

Incident Summary:  Over a two year period, payments to the vendor gradually increased and were now over 200% higher than two years earlier.  

• The AP Processor alerted the increase in expenses to the Accounting Manager.  In response, the Accounting Manager reminded the processor that his job was to test foot the invoices and ensure the documents had been approved by the responsible district manager.   The Accounting Manager also made it clear that the AP Processor would be evaluated based on his invoice processing through-put and nothing more! 
• Starting with the observations highlighted by the AP Processor, it was determined that the vendor had gradually inflated invoices by billing for “ghost” projects and the District Manager was not reviewing invoice detail and simply batch authorizing the payment.  Surprisingly, my investigation did NOT uncover apparent collusion involving the vendor, District Manager or the Accounting Manager.   

Outcome:  Vendor admitted to a billing fraud scheme and agreed to repay over $30,000.  AP internal controls were modified, employees were re-trained and the AP Processor was recognized for reporting his observation.

• Note - Concerns regarding possible vendor bankruptcy influenced decision to forgo prosecution.  After full reimbursement, the company severed the vendor relationship.

Fraudulent Payments for Tuition Reimbursement

Overview: Employee falsified documents related to company sponsored tuition reimbursement program.

Incident Summary:  A tenured employee failed to meet the minimum 3.0 grade for a work related college course.  In order to meet the minimum grade threshold for the tuition reimbursement program, she altered her grade report to reflect 3.0 grade for the course and was reimbursed. 

• Over the course of the next two years, the employee received tuition reimbursement by submitting falsified grade reports for multiple courses not taken.  Not only were the grade reports poorly altered, the employee did not change her cumulative GPA to reflect the courses claimed to have been taken.
• An anonymous tip alerted company management to the dishonest employee’s scheme and a fact-finding investigation was completed.  

Outcome:   The employee admitted submitting altered grade report documentation to falsely qualify for the employer sponsored tuition reimbursement program.  She was terminated and agreed to repay the company for the false tuition reimbursement claims.

Cash Handling

Overview:  A pattern of late deposits and cash variances were noted during routine reviews of bank activity at a district office.  The office supervisor was a long-term employee with over 10 years of tenure at the organization.

Incident Summary:  The office supervisor had incurred gambling losses resulting in, among other financial hardships, late mortgage payments.  Initially, he covered the late payments by taking loans from his retirement savings.

• As the employee continued to gamble, the situation worsened and eventually his home was placed in foreclosure.  Over the next 2 months, the office supervisor first started skimming cash from the deposits then, in desperation, began kiting deposits. 

Outcome:  The office supervisor acknowledged that, faced with foreclosure, he was forced to misappropriate company cash receipts.  In light of his tenure, the owner of the company decided to forgo prosecution, established a repayment plan and continued to employ the office supervisor. 

Medical Insurance Billing Fraud

Overview: As part of due diligence regarding the acquisition of a medical practice, a pattern of insurance over billing was discovered. 

Incident Summary:  On-site testing of financial records uncovered insurance billing scheme intended to inflate medical practice’s revenue/profitability.  Furthermore, the finding highlighted serious concerns about the medical group’s overall integrity and practices. 

Outcome:  Reported finding to in-house counsel and decision made by executive management to abandon the acquisition. 

***To maintain confidentiality, specifics such as dates along with organizational identifying and case specific details have been omitted or modified.