Internal fraud: prosecution the missing link
By AdvocateDaily.com Staff
Oswald, the founder and owner of Oakville-based white-collar crime investigation boutique Forensic Restitution, points to one of his own cases where he traced the theft of $450,000 to one of his client’s employees.
“We had this one slam dunk,” he says.
Forensic Restitution was called to investigate activity at an insurance company after an account director happened across an anomaly, Oswald says.
“As the company’s fiscal year-end neared, the account director decided to take one of the larger clients out for lunch,” he says. “In preparation, he examined the client’s file and found a series of claims had been made.”
Oswald says the account manager casually mentioned the claims during lunch, only to learn the client hadn’t made any all year.
“We got called in to see what happened,” he says.
Oswald discovered that the account manager who was responsible for that client’s file managed to manipulate the system.
“By changing her own email address to that of her client she was able to send herself an email, in the name of the client, announcing that the client had changed their banking information,” he says.
But the new bank account information the manager sent was her own, not the client’s, Oswald says.
She also created a letter, using the client’s company letterhead, confirming the change in the account and updating the e-transfer system, he adds.
“Then, again on behalf of the client, she made her first claim. She approved it as the account manager and it went through no problem,” Oswald says.
Because the manager had the authority to approve claims under $50,000, he says they were never checked or scrutinized.
“She then proceeded to put through a whole bunch of small claims. Every month she’d put through a claim for between $25,000 and $50,000,” Oswald says.
The case, he says, was ready for prosecution.
“We had the money going into her bank account, we had the transfers. It was really easy to follow the trail to get to prosecution on this particular case,” he says. “But we were suddenly called off the job.
“It disappointed us that we didn’t actually prosecute it.”
Oswald says he later learned that the account manager was terminated and that the matter wouldn’t be pursued further.
“She had allegedly been sleeping with both her direct superior as well as his boss, and threatened to tell their wives of their affairs if they proceeded with prosecution,” he says. “So you could say she understood the concept of insurance. She got away with $450,000 purely because she actually blackmailed them into letting her go.”
By not prosecuting her, the company inadvertently sent its workers a message that it’s OK to steal, Oswald says.
He says that Association of Certified Fraud Examiner statistics show that six per cent of business income is lost to internal fraud.
“There’s probably a whole lot of companies that never find it because fraud is designed to be concealed. The fact that you found fraud in the organization and that you’ve prosecuted it should be a plus on your side rather than a negative,” he says.