Fraud and Accounts Payable: A Real World Example

I recently read an article about a woman who stole $57K from her former Massachusetts employer.  While the amount stolen was not millions of dollars, I think the example of HOW she stole the money will be of interest to anyone in accounts payable.

This is an excerpt from the article in the UnionLeader (June 30, 2010).

Hogan allegedly schemed her former employer, a biopharmaceutical services company based in Waltham, Mass., by creating false entries into the company”s accounts payable system. She was employed there as an accounts payable clerk, says the release.

During a three-year period, Hogan allegedly entered her mother”s name into the company”s accounts payable system as a fraudulent vendor. According to authorities, on separate occasions between November 2002 and November 2005, she created false invoice entries that resulted in checks being made payable to her mother.

Nine checks totaling about $57,400 were deposited into a bank account held jointly by Hogan and her mother, according to the release. The money was then allegedly used by Hogan for personal bill payments and other personal use.

What I find most interesting about this example is how uncomplicated and unsophisticated the crime was.  This person simply set her mother up as a vendor and then paid her.  Not complicated.  Do you have controls in place in your organization that would have stopped this fraud?

Lets go through what controls this company should have had in place.

This was a simple crime. By implementing the basic controls discussed above, this organization would have been able to identify this fraud long before it lost $57,400. Our solutions help companies identify this type and many other kinds of fraud. Fraud can occur within any organization and this example demonstrates that fraud doesn’t always have to be complex.  

Do you have any control procedures in place that you would like to share that might stop this kind of fraud?

Thanks for reading.

Karl

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