My Number One Tip for Fraud Prevention

It happened again. Another fraud case. This time it was at UPS in Indianapolis, where an employee and a contractor are accused of stealing more than $1.2 million over a two-year period.

It worked like this. The UPS employee, Mark Gleason, set up a maintenance contract with Dayton R. Sloan II at D&S Construction in 2011 to provide general contracting services at close to 40 UPS locations in Indiana and Illinois.

Sloan had done some carpentry work around UPS facilities in the Indianapolis area and Gleason was the supervisor of the plant facilities. Apparently they hit it off well enough to become partners in crime.

visaGleason had the authority to sign off on invoices up to $5,000 so between January 2011 and December 2012, he authorized several invoices under that amount, payable to D&S. Sloan received the checks and deposited them in a corporate account.

Sloan would then use the money to purchase hundreds of thousands of dollars worth of prepaid Visa gift cards that he would share with Gleason. The two then went on quite the shopping sprees, purchasing flat screen TVs and jewelry. Gleason even used the cards for $3,000 of corrective eye surgery and more than $40,000 towards buying cars.

And it wasn’t even someone at UPS that caught them. A bank that D&S Construction used and a seller of the gift cards both became suspicious and alerted authorities, according to the prosecutors.

The two men now are being tried and face up to 20 years each on counts of wire fraud and up to 10 years on counts of money laundering in addition to fines and restitution. Kudos to UPS for prosecuting them. Another one of my fraud prevention tips is to always prosecute people who steal from you.

Which leads me to my number one tip for fraud prevention: Always poke around your books. If you are a CEO or business owner, you need to occasionally ask questions about items in your budget. How often do we pay for that? What does that company do for us?

Unless your company has a full-blown audit, these type transactions will go unnoticed. And even if you do have an audit, auditors often set the level at which transactions are reviewed. In this case, they most likely looked at invoices exceeding $5,000, and may have done a statistical sampling of transactions slightly below that level. So Gleason was able to continue his scheme until people outside of UPS caught him.

In addition to periodically asking questions and poking around your books, make sure your CFO or your auditors regularly conduct a statistical sampling at 80 percent below the transaction level. I have found that is the sweet spot for a lot of people committing fraud.

That may not have caught Gleason in his gift card scheme. But checking into the services that D&S was providing would have.

Never be afraid to ask questions about financial transactions in your company. And never hesitate to prosecute people who do steal from you.

4 thoughts on “My Number One Tip for Fraud Prevention

  1. Pingback: Lessons from the Fraud Triangle | The Turnaround Authority

  2. Pingback: Stories of Unbelievable Fraud for Fraud Awareness Week | The Turnaround Authority

  3. Pingback: Fraud and the Family Business – The Turnaround Authority

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