Do you think it is more likely that people are stealing more $$$$ from you now than before this “Great Recession”?     “YES” is my guess.

Estimates are that 20% of fraud is prosecuted, 40% is not prosecuted and 40% goes undetected.   (So what we read about is only 20% of what is happening)

Of the 60% that is discovered, auditors find 20% and 80% is found accidentally.  (Accountant’s Guide to Fraud Detection and Control – Howard Davia, et al.).

The average organization loses 5% of annual revenue to fraud.  (2010 Report to the Nations on Occupational Fraud & Abuse.  Joseph Wells CPA , June 2010 Journal of Accountancy)

– This was the 6th study and the result has been consistent over the years.   5% of annual revenue is a BIG AMOUNT.

What might be detected in your company if we developed a plan to randomly, but systematically, do a specific test of your business for fraud?

The really smart people, who aren’t getting caught, are counting on you not taking steps to improve your odds of plugging holes in your ship.  They are betting you will keep busy answering the phone, solving the obvious problems, procrastinating, and won’t give me a call.

One Fortune 1000 company used a new software program developed by Attenex to look at e-mail of employees it suspected of committing fraud; initially it thought there might be a loss of $20,000 but it turned out to be $2,000,000.

Lets look at a few examples of the 20% that ended up in the papers

11/15/2010 – Seattle Times –  4 plead guilty to misuse of Hanford federal govt credit cards – Agree to pay back $670,500.  Transferred $ to family businesses, bought TV’s, refrig’s, lawn mowers & gift cards.

9/11/2010 – 2 men plead guilty of creating $9,600,000,000 that’s billion in fake investment losses to offset gains of wealthy clients.  Clients repaid the IRS $400,000,000 in taxes, interest and penalties.

9/5/2010  Meridian Mortgage – Seattle Wa – founder Darren Berg – $32,000,000 diverted to finance luxury bus company he owns, and for personal use.  FBI trying to untangle – were $200,000,000 went.

8/5/2010  – Disgraced Kirkland Broker – Rhonda Bread – embezzled $11,400,000 from 100 of her investors.  She started doing this in 2000 and it took 10 years before she got caught.

7/17/2010 –  Various cities-  94 people caught – $251,000,000!! Largest health care fraud sting in US history.  Filing false claims – unnecessary or never done. New Haven, Conn.  – 64 year old Catholic priest caught by routine audit – charged with stealing $1,300,000 from parish (2003 to 2010).  He was only person with computer access to parish financial records. Members thought he was humble and had cancer (he didn’t but was a way to get away to spend time with male escorts, strip bars, & lavish living)

Philadelphia – Bookkeeper is guilty of embezzling at a synagogue.  Jury convicted her of helping embezzle $1,200,000 from the synagogue where she worked for almost 40 years; 46 counts.  Drained away 10% of the synagogue’s budget, while staff forced to take a 5% pay cut in 1998.

Boeing – CFO resigns over unethical hiring, CEO resigns,  Costs US Air Force $223,000,000 to shift the rocket contract to Lockheed.

University of Washington –  $35,000,000 fine for Medicare & Medicaid over billing.  Plus all their problems with recruiting, gambling, & drugs.

Portland General Electric – $8,500,000 fine for manipulating western power markets.

Former Microsoft worker – $4,000,000 repaid plus to prison for stealing software.

Seattle – Senior accountant for Paul Allen’s Vulcan company , embezzles nearly $2,000,000; 8 counts of wire fraud.  Also grand jury charges that she forged $330,000 in checks while working at her former employer, HealthNet of Alabama (these allegations surfaced after she was arrested on the Vulcan embezzlement charge).

Renton licensing agent – $675,000 in defrauding 1,000 people who unwittingly bought wrecked cars with “washed” titles.

Seattle travel agent – $400,000 in airline ticket fraud over 3 year period regarding Trident Seafoods.  Trident paid for them, but he sold them to others and pocketed the money.

Renton dentist –  $175,000 repaid plus 6 months home detention for false Medicaid billing.

Lacy, WA- Office manager of the Washington chapter of the National Alliance for the Mentally ill (Washington states largest advocacy group for the mentally ill), charged with embezzling $169,000 during her 5 years; 40 counts.  Note- $174,100 was the chapter’s revenue in 2000!

Lynwood retirement home bookkeeper – Steals $30,000 of Social Security checks, embezzles $36,000 from general & patient trust fund account and writes $91,000 in checks to herself.

(Remember the above are only the caught 20% we read about in the papers.)