I was once contacted to perform an internal investigation by the board of directors of an organization. The specifics or even type of organization isn’t relevant, because, as you read this, you will see how easily the situation could happen within yours. The board was concerned about unusually large expense reports submitted by the organization’s officers and about potential abuse of organization-issued credit cards.
It became clear early in the investigation that this abuse went all the way to the top. Not only did the top officer have two bank cards issued to him, but four gasoline cards at different brand stations as well! And while the officer submitted receipts for all charges, they were definitely being abused. Rumors around the office were that he passed them out for his family, including his wife and grown children, to use in their autos. When we tracked the activity for all cards side-by-side, the pattern was more than obvious … but what may be obvious in appearance isn’t in itself evidence or proof of fraud.
Quite often, gasoline was purchased at different stations in different towns within one day, or even the same day, so there was definitely a mountain of circumstantial evidence. This would have been enough for the board to bring charges, but, personally, I prefer to find that one thing that you can’t explain your way out of.
We had the officer’s calendar and could easily substantiate that gas charges occurred after scheduled flight times on days that he was flying in or out of town. Even with timestamps on gas receipts, though, he could claim that those flights were delayed, and he decided to stop on his way to or from the airport. Would we have to check actual arrival and departure times on all flights to catch his hand in the cookie jar? I always want my reports to be as bulletproof as possible, so I test how I could weasel out of the accusations if it were me. Another thing I can be certain of, however, is that fraudsters get more greedy and comfortable as time goes on. This is what usually does them in. They get careless, people get suspicious, someone calls in a tip … And so it was.
Did you realize that some airlines charge for bottles of water? I was surprised too. But instead of forking over his own two bucks for water on one particular flight—you guessed it—he charged it on the office card. So at the exact time that the timestamped water purchase showed him at 32,000 feet, his gas card was being used in the town his son-in-law worked in.
In the end, the ‘smoking water bottle’ made any attempts at his explaining away all the other instances much more futile.
Author: Richard C. Gordon, CPA/ABV/CFF, CFE, CGMA, Director of Forensic and Valuation Services