Confessions of a Fraudster – Follow-up

In last week’s blog, I introduced you to Winfrey who wrote a letter of confession to her boss. She covered a lot of territory in the letter, but there were also plenty of gaps. The information in the letter is similar to the story an owner starts putting together when the red flags of fraud begin to reveal themselves.

Last week I provided three questions to consider. In this blog, we will answer these questions.

1. What pressure did Winfrey experience in her life that triggered her actions? Her family may have experienced some financial difficulties during her husband’s battle with cancer and probably after he passed away. There could have been a need to pay medical expenses or supplement their income if he was unable to work.
2. How did she identify the opportunity to start the scheme to pay her daughter? Based on her comments about the auditors, it appears that she is responsible for all the payroll reporting and transactions. It sounds like a small office environment and that Winfrey has untethered access to a lot of areas.
3. How did Winfrey rationalize her behavior? There are a lot of examples spread throughout the letter. The following are a few quotes. The first three relate to Winfrey creating transactions to pay Jane’s children, and the last one relates to Winfrey’s daughter working for the company. She rationalized her behavior because Jane’s children were paid for doing nothing. Winfrey’s daughter at least did some work for the company.
   • “You remember when you made me add your kids to the payroll?”
   • “They got paid, but they didn’t actually do any work.”
   • “I knew it wasn’t right.”
   • “Do you remember when she was up here filing and organizing the storage rooms?”

These three questions walk through the fraud triangle and provide a way to understand the fraudster’s mindset. In order to unravel the truth, we must identify the important parts of the story and make inferences to figure out the gaps in the story. This process will help us to focus on gathering evidence to determine the possible scheme(s) and the amount Winfrey stole from Jane.

The easiest thing to do is quantify the payments to Winfrey’s daughter, and the auditors have probably already completed this step. The next is to identify the payments to her daughter that were for legitimate work. These will probably look different and were probably the first payments made to her. There may even be a gap between the legitimate ones and the fraudulent ones.

Most people would end the investigation here, but there could be more to this story. If you choose to advance the investigation, you must balance resources with possible outcomes. This is where fraud fighting experience can help because there are numerous decisions that will have to be made and directions that the investigation can take.

If you were Jane, would you forgive your long time employee, Winfrey? Would you press charges? Do you think she will leverage the payments to your children in some way? These are very difficult decisions that will need to be made that will invoke a wide range of emotions.

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