AIS

A short list of cases that may be instructive for thinking about internal controls, segregation of duties, reconciliations, and monitoring.

  1. $3.1 million from diverted customer payments, price changes, and G/L entries

    Company: Cargill, Inc. Port of Albany (NY) facility, which receives, stores and sells grain products

    Fraud: $3.1 million over 10 years; and caused at least $25 million in losses

    Accounting responsibility: responsible for accounting functions in Albany related to Cargill’s grain operations, including creating customer contracts, generating and mailing invoices, and receiving and processing customer payments.

    She stole money by diverting customer payments to her personal bank accounts and sold grain products for millions less than her employer paid, causing enormous financial losses.

    ... stole hundreds of customer payments sent to Cargill totaling at least $3,115,610 and deposited them into her personal bank accounts. Backis also regularly created fraudulent invoices and mailed them to Cargill’s customers. The fraudulent invoices charged Cargill’s customers prices substantially less than what Cargill paid to acquire the grain products, causing Cargill significant financial losses. The fraudulent invoices also directed Cargill’s customers to send payment directly to Backis, thereby bypassing Cargill’s corporate controls. To hide her activities, Backis made false entries into Cargill’s accounting software to make it appear that customers were paying prices higher than those in her fraudulent invoices and that customers owed Cargill millions of dollars for delivered grain products, only to reverse those false entries. As a result, Cargill lost at least $25 million.

    Source: https://www.justice.gov/opa/pr/upstate-new-york-woman-admits-stealing-31-million-cargill-inc
    News date: 11/28/2016; Added 12/11/2016
  2. Bank teller cashes fraudulent checks for a fee

    Bank teller cashing checks

    ... received and cashed fraudulently obtained income tax refund checks in exchange for a fee. Alexander’s co-conspirators, including Tracy Mitchell, Keisha Lanier and others, filed fraudulent income tax returns using stolen identities and directed other co-conspirators to bring the fraudulently obtained refund checks to Alexander to cash. Alexander received and cashed approximately 330 fraudulently obtained tax refund checks that totaled more than $600,000.

    Source: https://www.justice.gov/opa/pr/georgia-bank-teller-sentenced-prison-cashing-fraudulently-obtained-income-tax-refund-checks
    News date: 12/8/2016; Added 12/11/2016
  3. Strategies for combating payroll fraud from CGMA Magazine

    When a large construction organisation became a victim of payroll fraud, the organisation’s officials failed to question why the payroll clerk had begun driving a new Jaguar.
    ...
    Eventually, the company realised she had not been lucky at the slots and instead made off with $700,000 (€619,000) in paychecks made out to “ghost employees” cashed into her bank accounts, ...

    The lessons for combating fraud are summarized by: 1. have a system, 2. use data to look for outliers, 3. segregate duties, and 4. check documentation

    Source: http://www.cgma.org/MAGAZINE/NEWS/PAGES/PAYROLL-FRAUD-DETECTION-PREVENTION-201615251.ASPX
    News date: 10/07/2016; added 12/26/2016

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    • Possible sources for accounting fraud cases with enough information to use as a classroom mini-case

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