Litigation + Valuation Perspectives

Demystifying Valuation, Economic Damages + Forensic Accounting

Fraud in the Workplace – A Novel Use of Bank Statements

Cora was a very bright accountant. She was also very creative at her job – especially when it came to stealing money from her company.

Cora was the Controller for a commercial property management company, known as Promanco (well, actually, that’s not the company’s real name, but we’ll use it to protect the privacy of the real company). One of Promanco’s services was to collect tenant rent payments and deposit them into a bank account set up by Promanco for the benefit of the landlord of the commercial property.

The president of Cora’s company, a fellow we’ll call Irving, had a suspicion that his controller was up to something, but couldn’t quite figure out what it was. Seems that clients of the company kept complaining about their deposit statements being messed up – that they didn’t seem to mesh with the rents the clients knew were being collected by Promanco. Irving did a bit of research on his own and found that some of the client rent deposit accounts were, indeed, out of balance. The president had repeatedly asked his controller to install procedures to insure that the accounts were always accurate. After much pleading from the president, Cora didn’t seem to make much progress on correcting the problem. Irving decided he’d had enough and terminated his controller.

Irving didn’t want to alert his clients that he was finding some accounting problems with their rent deposit accounts and decided to call Henry & Horne in to help him figure out what Cora had done.

One of our forensic accountants, Julia, and I visited the president and obtained some background information regarding Cora’s performance. We agreed to conduct forensic accounting procedures regarding work being done by the controller and set up a date and time for our next visit to the company offices.

Almost immediately during the following visit, Julia noticed that the monthly bank statements on file in the controller’s office were photo copies of the original bank statements. Julia then contacted the bank which faxed over copies of the original bank statements. She then noticed that the originals and the copies did not match. Cora the controller had typed up a section on the bank statements that had her own numbers on it – not the bank’s. This scheme helped Cora hide thousands of dollars she had been funneling into her own bank account.

At the conclusion of our forensic procedures, Irving replaced all the monies Cora had diverted from Promanco’s clients’ bank accounts. He notified the affected clients of what had happened and what he had done to correct their accounts. The clients were happy.

Cora the controller has now become Cora the convict.

Don Bays, CPA/ABV, CVA