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Q&A Forum

Have you ever uncovered cases of occupational fraud?

Such as misappropriating funds, assets, self-dealing, kick-backs,etc? What tipped you off?


(CFO) |

Yes over the course of my career, I have seen misappropriating of fund from taking from petty cash to abusing P card for personal trips and gift cards on top of other kick backs!

Fraud was discovered from Petty cash reconciliation and surprise count; reconciliation of P card to receipts and police informing company that there could be a fraud on the company arising from their investigative work on another issue. Others via external informant due to dispute between the 2 conspiring parties.

It is difficult with paperless expense submissions enabled by technology where document can be doctored without being detected. No technology is available for business for such detection. Extra vigilance, education are required and a strong whistle blowing policy are strongly recommended.

(Tax/Business Consultant) |

Had a particular case in my career that involved misappropriation regarding a non-profit client. One of the management members suspected something wasn't right expenses were relatively high.

Was brought in and analyzed the client's records for 1 year then another year. It turned out that one of the directors/former staffer was siphoning money for personal usage. It occurred over time and the amounts weren't that obvious until you started the amounts paid with the invoices... there weren't any.

The problem was that, with many (smaller, local) non-profit organizations, many people served different roles over time and didn't think much of what each other does [that's an issue right there]. Almost all organization members are members of the local community so they knew each other and their families.

She was working with the treasurer, who back then, was relatively newer, and was still given check writing privileges (as she was the former treasurer) [anyone else see another issue?].

The situation was resolved and no legal authorities were brought in (mainly to cover up the disgrace of what happened, obviously!) and the perpetrator was made to repay the amounts. She was obviously removed from her position and no longer associated with the organization.

Another client case... During an IRS audit, the auditor questioned the revenues.
It turned out the client did Not report ALL revenues to his tax accountant.
Let's say that the client paid whatever taxes associated with the audit which spanned 2 years in which that occurred. The situation was reported to the "family" as it was "family" group situation and the elders were not pleased by what happened.

Had a former new corporate client... during an IRS audit... sat in front of me in a conference room and literally admitted that he committed fraud! Not only that, the one of the fraudulent corporate returns was used for getting a bank loan so bank fraud was also committed.

Anyone want to guess how that relationship ended?

There were smaller cases of "misappropriation" that wasn't bad and easier to resolve. But things like that do happen, just but probably not caught especially for smaller or private businesses, not just in publicly-traded companies.

No one outside the situation/company knows what goes on "behind the scenes".

I've encountered some tax practitioners/accountants who turn a relatively blind eye as they cared more about the client's money than the client.

Being a roving CFO now, from working in public tax accounting, puts a perspective on how I work with people and corporations on a business level.

Appearances can be and are very deceiving!

(Controller) |

Yes, tax fraud. Basically it was a lie in our nexus arguments we were making to taxing agencies that we should have been paying taxes to, but were not since we were claiming no nexus as we were fraudulently stating we had no assets or payroll in the jurisdictions. I left right after I found the fraud. I wanted to report it but I could not find a safe route to do so. I have a CPA license to maintain.

(Controller) |

Yes, misappropriation of funds, found when I was Assistant Controller for a $300 million company. I was asked by the VP of HR to cut a check for $50,000 to the President of one of our divisions for a bonus. When I requested a copy of the bonus agreement, since I wasn't aware that division had one, I was told I would get a copy, but needed to cut the check immediately, which my boss confirmed I should do. The next day I received copies of 2 bonus agreements- one for 2 years in the future, and the other allowing a maximum bonus of $11k. I took my findings to my boss, who took it to the CFO, who asked me to look back at some payroll records. Turns out, the President had been eligible for a $50k bonus- but he had already received it 9 months prior, before I or my boss worked at the company. I believe that he tried to get an additional $50k, and the VP of HR colluded with him. It was made to be loan, and he paid it back. (Later, he was fired for items unrelated, and received a full year's severance pay.)

(Business Manager) |

A contractor submitted periodic requests for payment during a construction project that took roughly a year to complete. We noticed his supply expense was greater than our expectations. I placed all of his periodic request for payment on a large table to review and just spread them out. Then, I noticed one subcontractor submitting invoices from one supply store that had two formats. Both invoices looked legitimate, but I thought it was unusual for one company to have different invoice formats. I contacted the supplier directly and turns out one set of invoices was legitimate and the other set was fraudulent. The subcontractor invoiced the contractor and the contractor passed the fraudulent invoices to us. We fired the contractor (he should have caught this, not us) and prosecuted the subcontractor.

Barry Zalma
Title: Consultant and Expert Witness
Company: Zalma Insurance Consultants
(Consultant and Expert Witness, Zalma Insurance Consultants) |

I've been working to defeat fraud for 48 years, especially with regard to insurance fraud. It is a $300 billion a year business. See my program on insurance fraud.


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