Reply to post: How to (financially) rape a company

IT boss 'set up fake companies to charge his employers $2.4m'

Fatman

How to (financially) rape a company

Without getting too detailed here, this is just a lesson on how to defraud an employer.

BTW - this """lesson""" does not purport to represent what happened at the company mentioned, it is a general description of how this fraud can go unnoticed. (BTSTGTTS)

Imagine the amount of fraud that occur if a whole bunch of executives were in on the fraud.

You have your low level 'retail' managers that can divert income from the company (especially if that revenue stream comes in as cash), with them taking a cut (of that cash stream) on its way to the upper level fraudsters.

Then the fraudsters hit the company on its expenses.

The fraudsters use accomplices that infiltrate and use legitimate supplier companies to perpetuate the fraud by generating 'phantom invoices'; which purport to provide products and services to the prime target company, but which in fact are just plain bogus.

These accomplices are situated inside the "phantom" supplier in such a way that they can intercept the incoming payments and direct them to "bogus" bank accounts the accomplice controls, often created with forged documents that provide for the power to open and close bank accounts.

Another aspect of the fraud involves overbilling the prime target for a legitimate product or service, with that overbilled invoice getting approved and paid for the entire over billed amount. That supplier's records either show a credit memo for the over billing, or the invoice is reduced before posting. The overpayment is refunded to the prime target, but it is deposited into an unauthorized bank account controlled by the fraudsters. From that supplier's perspective - YOU over paid, and we refunded that overpayment. End of discussion. The supplier can point to the check as proof. Unless someone took the time to determine where that check ended up, ...

One of the easiest ways to induce this fraud is to bill the prime target for "consulting services" by another legitimate company where some more fraudsters are in on the scam, where those payments are directed into unauthorized bank accounts.

Since the prime target company managers have approval authority for invoices for products and services (many times NOT) performed; and cover by the upper level executives in on the fraud, unraveling this fraud takes a lot of time. Which is why it took so long to discover in this case.

A very good reason why one should run criminal record checks on anyone who handles cash, or has payment approval authority. Also, a good reason why larger firms should audit their financials at least every two or three years. Six years is way too long. Even spot checking invoices could have led to an earlier discovery of this fraud.

I only wish there was an appropriate icon for a thief in the night.

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