All employers want to trust their employees, but once again we see a case of the employees giving employers a reason not to trust them. In this recent article (Four indicted with embezzling $380,000, Stacy Hairston, The Franklin News-Post, March 10, 2017), we read of four men indicted on a total of 194 felony embezzlement charges. Their scheme, which netted approximately $2,000 per charge, was uncovered when the company they worked for contacted the Franklin County Sheriff’s Office to look into discrepancies on deliveries made to a scrap company. The investigation revealed evidence that the men would use company trucks to deliver the scrap, but receive checks for the scrap in their personal names, not that of the company. The investigation also revealed that the scheme had been going on since 2013. That’s a lot of scrap!
Luckily, the owner suspected that not all the scrap generated was being properly accounted for, resulting in either unexplained shrinkage of inventory or possible diversion of cash receipts.
Some lessons that can be learned from this case, and tips to prevent something similar from happening at your company, follow:
Diverting a revenue stream is not a common fraud scheme, but it does happen. In this case, the scrap was cumulatively significant in amount and the employees took advantage of the lack of company controls to make some money on the side. If you think your company may be facing a similar revenue diversion scheme, contact Certified Fraud Examiner and CPA Mike Rosten.