Don't miss opportunities to help organizations during fraud aftershocks

An organization discovers devastating, costly fraudulent activity. It’s now waffling on spending money on a proactive fraud prevention plan. But while the fraud still stings, now’s the time for a consulting CFE — internal or external — to pitch substantive anti-fraud measures that could save the organization.

Late on a Friday evening, many of the executive team members of a packaging firm, Divayo Inc., were in the office preparing for a Monday board of directors’ meeting. Stephen, a CFE at a local accounting firm that worked for Divayo, exited the elevator in the company’s building and followed a swirling sea of cigar smoke to the corner office of Doug, Divayo’s general counsel. He had his feet up on his desk, a Churchill-style cigar in one hand and a Scotch in the other. The board’s briefing binder sat unopened on his desk. Doug stared off into space. Stephen introduced himself, and they engaged in small talk. Doug seemed only mildly interested in Stephen’s responsibility to follow up on an anonymous tip about fraudulent activity at Divayo. Stephen, obviously, didn’t disclose that Doug was the subject of the tip.

The following week, Stephen and a colleague interviewed Doug about a long list of issues, including his approval of unauthorized travel expenses, the awarding of bonuses and pay increases to himself, and conspiring with the company’s CFO to cover cash advances to his personal bank account. Doug said he was innocent, but the document trail was so detailed and compelling that Divayo terminated him after Stephen’s interview.

Systematic failure to prevent fraud

Unfortunately, Doug wasn’t the only executive at Divayo engaged in fraudulent conduct. Over the course of the next month, Stephen discovered that the company’s entire executive team was committing various frauds.