Discovering Fraud By Walking Around

Have a fraud story to share? Send me yours for a chance to win a copy of my book! See details below.

I’ve had a front row view of more instances of fraud than I could have imagined when I first began my career. In my work as the Turnaround Authority™, I’ve seen hundreds of millions of dollars stolen from the companies I’ve worked with. Almost half of my clients have encountered some type of fraudulent situation.

You may think that I uncover fraud by going over the books and discovering something wasn’t quite right. And in many cases that is what has happened. I have plenty of those stories, of accounting personnel setting up dummy companies and payroll accounts, and embezzling hundreds of thousands of dollars.

My favorite story of uncovering fraud this way was when I sat myself down at the CFO’s computer, one I suspected of stealing. He was so organized that he had created a folder on his desktop with an entire spreadsheet detailing all the money he had stolen from the company. It’s so handy when thieves do a lot of my work for me.

But I’ve also found out about many cases of fraud from other employees in a company by employing a form of MBWA, management by walking around. Popular in the 1980s, MWBA really just means walking around and talking to people, face to face, and getting a sense of what is really going on in the office. (For more on MWBA, read my previous column about it, “Get Out of the Corner Office and Hit the Front Line.”)

In one instance of a twist on MBWA, I hosted a midnight barbecue for people working the nightshift. You could call it MBGH, management by grilling hamburgers. As I was grilling and we were all standing around chatting, the employees opened up to me and we began swapping stories. And boy, did I hear a doozy. One of the guys mentioned that he had a concern about excess inventory purchasing. Of course I made a mental note of that. Turned out to be a case of multi-million dollar fraud, which I uncovered because the employee felt comfortable chatting with me in the informal atmosphere.

I uncovered another case of fraud when I learned that a payroll clerk had returned to work the day after an appendectomy. That raised a red flag for me, as it seemed to be an extreme example of devotion to a job. After casually chatting with some other employees about her dedication, I learned they were in awe of sweet “Aunt Tess” because she had not missed a single payroll day in 25 years. Isn’t that something? Why yes it is, and that something is criminal. Aunt Tess was there every payroll day so she could handle the paychecks for the fake employees she had created, allowing her to steal up to $100,000 a year.

One of the best ways to uncover fraud in your company is to create an open door policy, a feeling of camaraderie where communication is encouraged. Generally, if fraud is occurring, someone in the company knows about it or is suspicious that something not quite right is going on. You want to encourage them to share their concerns with you so you can follow up.

I have plenty more stories about fraud and ways to prevent it in my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.” One of the most rewarding parts of writing this book has been hearing from readers who share their stories of fraudulent activity with me.

Do you have a story of fraud? Please share it with me at lnkatz@aol.com. I’ll print the stories here, and the best story will win a copy of my book.

One thought on “Discovering Fraud By Walking Around

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

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