Greater Phoenix Multi-location Retail Fraud

This is an occupational fraud story in the Greater Phoenix area I discovered.

The former CFO was in his thirties, married with four children, 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.

The owner hired my firm to help him determine if there might be something funny going on as cash was tight, though business was good, and the A/R was healthy, but the financial statements were 7 months behind. RED FLAG!

Though the CFO refused to share the bank statements with me, when the CFO went on a second honeymoon to Italy, the owner finally got six months’ worth of bank statement copies sent to him from the bank. One day later, I found fraud.

The former CFO for convenience, was a signer on the checking account, since the owner’s office was 25 miles away in another city.

Over a 57-month period, the former CFO wrote and signed 67 manual company checks to pay personal credit card bills, and other personal debts, the last manual check being written by him at 5am on the morning he flew to Italy!

In total, we identified 73 fraudulent checks totaling  $231,299.

One of the ways the former CFO found money to steal was to write out vender checks, then put those checks into a locked file cabinet. When suppliers called looking for their money, they were given a check number and a date and asked to be patient waiting for the mail, but many vendors never received those checks.

In fact, the cash crunch got so bad under his watch, after the credit line was used up, the former CFO took $12,500 cash of his own money (well by then, was it really his own money?) and put it back into the company bank accounts, then continued his fraud for 6 more months, until he was confronted, confessed and fired, in May of 2008.

The last six months of company business was good enough that his last six months of embezzlement netted him another $55,219, stealing over $9,000 a month.

Though it took three years to see justice down, the former CFO was finally sentenced to six months in prison and is now in jail.

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