Part 2 of 10
Background and History
The former CFO of a multi-location publishing house in the Greater Phoenix area is now serving time in prison (as of December 2011) for committing fraud and embezzlement. A detailed analysis of the before and after situations at the defrauded firm might prove instructive to any small business wanting to prevent material fraud.
The former CFO was in his thirties, married with four children. He attended church every Sunday, had a regular job with the Boy Scouts, was a college graduate, hard-working and trusted by all. In other words, he was the typical accidental fraudster.
My firm was hired to help out to determine if there was something inappropriate happening as cash was tight, even though business was good and the accounts receivable were healthy. But why were the financial statements were 7 months behind? (Red Flag!)
I requested bank statements from the former CFO (we will call him Ted, not his real name) several times, but I always received the excuse they could not be shared. Then Ted went on a second honeymoon to Italy, and finally the owner requested six months’ worth of bank statement copies sent to him from the bank.
One day later, as those statement copies included copies of all the check faces, I found fraud!