Look out for these five fraud perpetrators
April 19, 2019
By Amy Buben, Yeo & Yeo CPAs
The Embezzler. The Common Thief. The Hacker. The Inventor. The Glutton. No, these aren’t cartoon villains. They’re all-too-real occupational fraud perpetrators who fleeced their employers of thousands — or even millions — of dollars. Although we’ve attached the names to actual criminals in cases reported by the U.S. Justice Department, they could just as easily apply to crooked employees working in your organization.
1. The Embezzler. Embezzlement is the theft of money or assets by someone in a position of trust or responsibility — and it happens all too often. In one recent Missouri case, an office manager and accountant was indicted for embezzling more than $116,000 from her employer.
The employee made close to $48,000 in unauthorized purchases on company credit cards, including an airline ticket for her boyfriend. She also allegedly issued approximately $41,000 in unauthorized checks to herself, claimed $20,000 in unauthorized or fraudulent expense reimbursements and invented extra paychecks for herself totaling more than $5,000.
For a while, the thieving office manager lived the high life. She used her embezzled funds on travel, restaurants and vehicles. She even used ill-gotten gains to pay her attorney — a decision that made her subject to money laundering charges.
2. The Common Thief. Most occupational fraud perpetrators are little more than common thieves. They’re so ordinary and benign-seeming that their bosses and coworkers may consider them “above suspicion.” This provides them with the ideal cover to steal large sums over the course of many years.
Consider this Boston-based crime perpetrated by a long-time employee: On hundreds of occasions between 2004 through 2016, the worker used her company’s credit card (issued in the name of another employee) to make unauthorized purchases. She bought clothing, furs and jewelry at boutiques, then sold the items to consignment shops. The employee also issued checks from the company to herself and primarily used the funds to pay personal credit card bills. In the end, this common thief got away with a not-so-common sum of $2.4 million before being caught.
3. The Hacker. Computer hackers can do major financial damage — particularly when they’re working from the inside. Current or former employees may steal valuable customer and employee data and use or sell it to commit identity theft. Or they may simply do malicious damage to files — and their companies.
For example, an Arizona man was convicted of deleting files from the computer systems of the California-based consulting company where he formerly had worked. Besides consulting with clients (usually Native American tribal governments), the employee led the firm’s IT and marketing departments. In 2014, he was relieved of IT and marketing duties after he failed to keep up with his work.
The employee responded by deleting the firm’s website and marketing materials. After resigning from the company, he continued to delete files, including client information, work product and backup files stored by a third party. He then issued a final “wipe” command. These actions cost the employer more than $50,000.
4. The Inventor. Occupational thieves are nothing if not imaginative. Take this Texas man who received a 27-month sentence after he pleaded guilty to charging his employer for nonexistent goods from a nonexistent company.
The employee submitted invoices from his invented company for nonexistent goods, which he purchased using his employer-issued credit card. He then used his home computer to submit charges for the goods. When handing down the man’s sentence, the court noted that it was “incredible” that the crime went on for eight years before an auditor spotted it.
5. The Glutton. Employees who commit fraud often feel that they’re “owed” more than their employer pays them. So they take what they want, even if it’s illegal — and even if they’ve sworn to uphold the law.
Such was the case with a retired Massachusetts State Police trooper. While still employed, he lied about overtime hours he worked and received pay for full shifts even though he departed one to seven hours early. The former trooper earned approximately $68,000 in overtime pay in 2016, $14,000 of which was attributable to partly or entirely missed shifts.
It’s bad enough that the former trooper got greedy with overtime hours. What made his conduct even worse was that the funds were earmarked to help reduce accidents and injuries on the Massachusetts Turnpike through an enhanced police presence.
These are only some of the types of characters who are regularly arrested for fraud. Obviously, you can’t be expected to spot all potential perpetrators in your midst. But you can put internal controls in place that make it harder for crooked employees to commit fraud. Talk to your accountant about the controls your company needs.