Are Your Employees Committing Fraud?

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Fraud is big business. Companies are most at risk of fraud from their employees, since they have access to information and assets. On average, companies lose 5% to 6% of their revenues to internal fraud. This means that a company with sales of $50 million is likely losing $2.5 million to $3 million each year to employees with sticky fingers. In this age of amazing shrinking profit margins, 5% or 6% could mean the difference between being in the red or in the black.

You might be thinking that your company has never had that much stolen in one year. Correction: You don’t know if you’ve had that much stolen by employees. Companies can’t quantify exactly how much has been stolen from them, because they simply are not aware of all the frauds committed.

The average is 6 percent, and it’s based upon a consideration of the known and unknown frauds in companies. Don’t get caught in the trap of thinking that your company is much better than average. As managers of companies, you may like to believe that you’re doing better. But some companies are doing better, and some are doing worse. Assume that your company is losing 6 percent, and try to improve on that.

The Schemes
Fraud committed by employees comes in all shapes and sizes, but generally falls into three categories. Asset misappropriations are the ones we hear about most often. These include theft of inventory, theft of money and theft of anything employees can get their hands on. Continue reading

West Allis School District Will Steal Your Money… Twice

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Years ago, I wrote regularly about Milwaukee Public Schools and their penchant for wasting taxpayer money. The district portrays itself as poor, with an annual budget of more than $1 billion and spending that exceeds $14,00 per child with horrible outcomes.  (In case you’re wondering, “rich” districts in Wisconsin spend much less per child, and have dramatically better outcomes.)

The West Allis-West Milwaukee School District is the focus of this article. The district has been overspending for years, and is now holding a referendum. The dishonesty surrounding the whole issue is astounding. But I can break it down easily for you: For years the district has been stealing from taxpayers by spending money foolishly. Now they are crying that they are broke, and they want to steal from taxpayers again. The message is “approve our referendum or else.”

Dan O’Donnell breaks it down nicely in this article. I’ll give you the highlights: Continue reading

Support for Dr. John McAdams of Marquette University

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I am a proud graduate of Marquette University (both undergraduate and graduate), and currently serve as an adjunct instructor in the accounting program. I love my alma mater deeply, but I cannot stand by and watch the treatment of Dr. John McAdams over the last year without saying something.

More than a year ago, Dr. McAdams criticized Cheryl Abbate, who was the instructor for a Theory of Ethics class at Marquette. A firestorm ensued, and Abbate claimed that the criticism by Dr. McAdams was bullying. She allegedly got hateful emails… not from Dr. McAdams, but from third parties he appears to have had no direct involvement with.

Dr. McAdams was then suspended, a move I believed was retaliatory and inappropriate. Although he was suspended with pay, all of his classes were canceled and he was instructed that he was not to be on campus at any time. Continue reading

Rigging a Contest, Jennifer McKinney Style

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jennifer-mckinney-xyngularRemember our favorite serial scammer, MckMama?  Well, the infamous Jennifer McKinney is back and is scamming the sheeple again. (Who am I kidding? She never STOPPED scamming businesses and consumers.)

We’ve talked here at length about Jennifer and Israel McKinney’s unsuccessful attempt at defrauding the bankruptcy court. Of course the McKinneys have scammed many creditors over the years, losing FOUR houses along the way. We have also talked about Xyngular, the multilevel marketing company that MckMama shills for.

And it just so happens that the latest scam involves Xyngular.

On July 30 she announced the giveaway of a “free weekend vacation for two to anywhere in the continental United States.) People could get their names entered multiple times in the drawing… which was supposed to be “randomly” drawn. However, Jennifer McKinney appears to have chosen her winner ahead of time as you will see below. Continue reading

Fraud Prevention on the Cheap

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One common misconception among small business owners is that fraud prevention is expensive. And like anything else in this world, it can be expensive. A company that strives to eliminate virtually all opportunities for fraud by employees can spend a chunk of money doing so.

But it’s not always necessary to spend lots of money on fraud prevention. And it’s not always possible for a small business owner to spend a lot on fraud prevention. Let’s face it… budgets are tight and big new projects aren’t often possible. Continue reading

Finding a Thief: Personal Red Flags of Fraud

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As victims of occupational fraud reflect on crimes committed against their companies, they wonder if there were any signs that a fraud was occurring. They wonder how a trusted employee could steal from the company. Sadly, frauds are committed by people in positions of trust. What is it about those people that leads them to commit fraud?

Corporate thieves have many things in common with one another. There are many tell-tale characteristics about people and their lifestyles that signal the potential for fraud. These range from personal financial circumstances to attitudes on the job. A few of these traits alone do not indicate the potential for fraud, but the probability rises as we identify more of the characteristics.  Continue reading

The Fight Against Fraud: Arm Yourself With Prevention

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Fraud is big business. Companies are at the greatest risk of fraud from their employees, since the employees have easy access to information and assets. Some experts estimate that companies lose 5% of their revenues to internal fraud. At a company with annual sales of $100 million, that means that $5 million is walking out the door each year.

Executives tell themselves that their company isn’t the norm. They do better than average. They certainly haven’t been a victim of internal fraud to the tune of 5% of revenues. The sad truth is that they don’t know exactly how much has been stolen from their companies because they aren’t aware of all the fraudulent activities committed. Five percent is an average level of fraud for a company, and it would be wise for executives to take this number seriously. Continue reading

In Law We Trust

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johnny-degirolamoJohn G. DeGirolamo, founder of The Law Offices Of John DeGirolamo, Esq., uses the tagline “In Law We Trust.”  The firm’s website says:

Having spent two years at the firm, it became clear to John that he missed the criminal law that he spent his college and law school careers studying.

His affinity for criminal law during college and law school is well-documented. At the right are three mugshots of John G. DeGirolamo (click on any of them to see them full size). His arrests and/or cases include these in Hillsborough County, Florida: Continue reading

The Eyes Have It: Seeing the Signs of Fraud

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Would you recognize the clues that your client has been ripped off by one of its employees? Or would management conduct business as usual, blindly trusting their employees? Companies make the mistake of not actively searching for fraud. They tend to trust their employees and trust the procedures in place to safeguard company assets.

It may be good business to trust employees and empower them to make real contributions to the growth of the company. However, it is not wise to turn a blind eye to signs that a trusted employee may be stealing. Continue reading

Food Babe Scam: Why Vani Hari Is a Fraud

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vani-hari-food-babe-fraudA few months ago, I wrote here about “Food Babe,” the persona invented by Vani Hari. She is a pretend expert on food, blogging about supposedly dangerous additives. Some call her a “food activist,” but the truth is that she is paid for bringing paranoia and hysteria to her cult-like following.

I believe Vani Hari is a complete fraud for a multitude of reasons. The most compelling include: