Hypothetical Incident and Response
Investigating Fraud and Embezzlement in White Collar Crime
Incident
It is believed by the CEO of a medium-sized tech company that the CFO is engaged in the white collar crime of embezzlement. He is not sure why this is, but he has a gut feeling that the CFO—although well-liked by everyone—is doing something illegal. What has set him on edge about the CFO is that the company’s bank called while the CFO was on holiday and inquired about a check written to the CFO. The CEO could not say why such a check would be written to the CFO and all of a sudden it seemed that numerous red flags were visible: unexplained expenses charged to other units, for instance. Various units have made comments over the years that unexplained large expenses seemed to be charged to their units. Nothing was ever done because it seemed like a typical mistake of poor accounting. However, now the CEO is suspicious. The CEO wants the private investigator to look into this. If the CFO is embezzling, there should be some signs of this that an investigator could identify.
How It Occurred
It turns out the CEO is right to be concerned. The CFO is embezzling. His method is this: the company has a two-factor authentication process in place for authorizing all funds released by check—each check needs two signatures. The CFO would stop busy executives on their way out the door for holidays and get their signatures on several checks, saying that this would be just in case funds were needed while the executive was on holiday. The CFO would then use the signed blank checks to move money from the company’s accounts to his own. Then he would cancel the check, remove it from the bank’s reconciliation and destroy it. To reconcile the company’s accounting books, the CFO would charge the stolen amount to another’s unit as an expense.
What the Investigator Will Do
According to Nemeth (2019) and Sennewald (2004), white collar crime involving accounting means there should be an independent audit to see whether red flags can be identified and whether a paper trail can be discerned. The investigator should order an audit of the company’s accounts. If there are extraneous expenses to units, these should be flagged to see if there is a pattern. If units are unable to explain the expenses, a record should be made. Red flags do not prove fraud—but they may indicate that there is smoke, and where there is smoke it is very likely that there is fire.
What the investigator should do next is look at the people involved. The CFO is going to need to be investigated. For instance, what kind of home does he live in? Where is it? How luxurious is his lifestyle? What is his salary? Is the life he is living supportable on the salary he is receiving? Where did he come from? Fraudsters typically have a past history of fraud, so it would be worth looking into his background and what his history is with his other employers. They might be able to testify as to his employment history, present employment history, where he lives, what he does, and so on.
The investigative methods used should be described in a step by step manner. It should include everything the investigator did—where he went, when, to whom he talked, what times everything took place, how the investigation was conducted, and when the investigation ended.
It should close with a conclusion that describes the results of the investigation and what has been learned. It should end with closing remarks that show one is a professional, i.e., an expression of professional courtesy and thanks towards the client and to anyone else who contributed to or aided the investigation in any way. Exhibits and attachments may also be included, such as photographs, records legally obtained, video still frames, or anything else referenced in the report that could help to make it fuller.
References
Chen, J. (2019).…
