The Benefits of a Fraud Hotline

"Bill Blake” was terminated by his employer, a retail grocery business, for unsatisfactory job performance evaluations. Finding himself out of a job and in need of money, Bill decided to retaliate against his former employer. Having worked in accounts payable, he knew that the company did not have adequate controls over that area. He created a fictitious vendor named “Tri-State Trucking” and, using an Excel spreadsheet, created and submitted Tri-State Trucking invoices to his former employer for services that were never rendered. The accounts payable department approved the invoices, and checks were made out and sent to Tri-State Trucking’s post office box address. After stealing $1.8 million over five years, Bill bragged about his ongoing fraud scheme to a stranger in a bar. The next morning the stranger called Bill’s former employer and alerted them to the scheme. Bill was ultimately convicted of fraud and sentenced to five years in prison.

“Pete Raymond” was the president and CEO of a medium-sized business specializing in data processing. The company’s board of directors did not create and enforce adequate internal controls to monitor Raymond’s activities, an oversight common to many corporate boards. Pete exploited this lack of oversight and embezzled more than $800,000 from his employer via a variety of disbursement schemes. After years of getting away with hundreds of thousands of dollars, Pete became reckless and sloppy in executing his schemes. For example, some of the invoices submitted by fictitious vendors created by Raymond were simply handwritten by him on blank sheets of paper. Eventually, the increasingly large amounts of cash being diverted to Raymond created cash flow problems for the company, which prompted a forensic examination of the company’s finances. When questioned about the suspicious handwritten invoices, Raymond’s secretary acknowledged that she knew that the invoices had been created by Raymond and that such conduct constituted “impropriety” on the part of the CEO. Because the perpetrator was the president and CEO, Raymond’s secretary said she didn’t know who to tell about the fraudulent invoices. The company did not have an anonymous “hotline” for reporting this type of behavior.