Big frauds

‘Fruitcake fraud’ teaches small businesses lessons in internal controls

Management at Collin Street Bakery, the maker of famous fruitcakes, trusted its close-knit family of employees. Big mistake. That faith cost the company close to $17 million in a massive fraud that serves as an excellent case history.

"The worst gift is a fruitcake. There is only one fruitcake in the entire world, and people keep sending it to each other.” With that joke delivered by Johnny Carson Nov. 22, 1978, on The Tonight Show, mail-order fruitcake orders began to plummet, or so says Collin Street Bakery (CSB) of Corsicana, Texas, the maker of the famous Deluxe® Fruitcake since 1896. The company says that sales eventually recovered. However, years later, the company’s bottom line suffered again, but it wasn’t because of some corny joke.

CSB’s deficient internal controls allowed quiet and unassuming controller, Sandy Jenkins, to embezzle nearly $17 million from his employer from 2004 to 2013. “The Fruitcake Fraud” (now the subject of a Discovery+ documentary) is an excellent case study for small businesses’ promotion of diligent auditing, and fraud prevention and deterrence programs. And this analysis of Jenkins’ crimes and his psyche could improve company controls. (See “New documentary recounts the Collin Street Bakery fraud scandal,” by Michael Fowler, KETK, Dec. 3, 2021.)

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