TYPES OF BUSINESS FRAUD
A 2013 report suggested that 70% of companies fell victim to business fraud in 2013. This was up from 61% in 2012.
I previously wrote a piece for the Orange County Business Journal about common ways OC businesses are getting ripped off every year. In this post, I’m listing popular types of fraud facing businesses around the world.
As it often takes auditors 12 months to detect patterns of fraud, I’m sharing these cases so corporate executives and small business owners can be aware of similar issues in their organizations.
Fraudulent billing, fake invoices & vendors
A Chicago technology coordinator used a list of nine fake vendors to collect nearly a half-million dollars.
Over the course of 13 years, a utility employee in Vaughn, Canada paid out nearly 2.4 million dollars to fictitious companies for services that were never rendered.
Identity theft / wire transfer
A small packaging company in Cleveland was the victim of a $500,000 wire transfer fraud perpetuated by a scammer that had hijacked the email address of one of the company’s key customers.
International credit fraud
Citigroup recently announced a $400 million dollar loss due to providing credit to a Mexican oil company for outstanding invoices the company was supposedly owed from the Mexican government. The problem is, the oil company was no longer being awarded contracts by the Mexican government.
Dipping into deposits
A very typical form of fraud is to simply swipe some cash out of the bag on the way to the bank. The cash never goes into the bank, so it never gets onto the company’s books, which makes it harder to account for as missing in the first place.
Voided receipts from cash transactions
In Dallas, a supervisor at the county clerk’s office voided receipts for cash transactions and kept the money.
A bookeeper for a small bookstore in North Carolina was able to write herself checks totalling nearly $400,000, because she wrote small checks over a long period of time.
Finding the rats
As private investigators, when an executive or business owners comes to us with a feeling that something isn’t right, or that they’re losing money somewhere, they’re usually correct. Sometimes they even know where it’s happening, but they don’t know what to do about it, how to collect proof, or what to do with the situation when they have proof.
We’ve handled hundreds, if not thousands of these cases over the last 40 years.
Many of these executives want us to place undercover employees – which is an inexpensive, time-consuming and ineffective way of getting results. A better way, that is also much more cost-effective and timely, is to use investigators with interview and interrogation skills. The video below describes in detail how the benefits of this approach:
Getting court-admissible evidence
Catching someone in the act may not be enough by itself to make a case hold up in court. A private investigator who has past experience working in and with law-enforcement agencies will be able to navigate paramount legal channels when gathering evidence. The same investigator will also have the ability to assist attorneys by preparing only court-admissible evidence.
Here is where the learning curve becomes difficult: Law enforcement personnel are overworked and underpaid. Most are chasing murderers, rapists, and a myriad of violent criminals in our culture. So when you bring them a case where an employee stole $50,000, you can hardly blame them if they turn a deaf ear.
Here is what your private investigator needs to do: They need to complete their investigation with the paramount feature of having a signed declaration admitting guilt under the penalty of perjury and the laws of the State where the investigation was conducted. In other words, your private investigator must place the “evidence” in a box, wrap it up and put a pretty bow on it. Then they should take it to the prevailing law enforcement body – be it the District Attorney or the U.S. Attorney’s office.
There are no slam dunks in our business. Recently, we confronted a employee who we believed had stolen $1.8 million dollars by writing checks to vendors that did not exist, for work that never took place. He would then cash the checks at different banks in the area. He readily admitted the crime and told us he spent the money on cocaine, betting on sporting events and prostitutes. It took two years to get the case prosecuted, even thought we had a 23 page declaration which was signed by the defendant. He was finally sentenced to five years in state prison.
Persistence, determination and even patience is the rule in many of these cases.
What the plan is, how long it will take, and how much it will cost
Any private investigator you hire should be able to explain, in detail, what needs to be done for a successful case to be made and what challenges he or she will face. Also, they should be willing to explain these things to you before an investigation begins and before you pay for the service.
Here is what to ask when you call ANY private investigator:
- What is the investigative plan?
- How long will it take?
- How much will it cost?
Thomas G. Martin
MARTINPI OPERATES THROUGHOUT THE UNITED STATES AND FOREIGN COUNTRIES
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