Once You Pop, You Can’t Stop: Why Fraudsters Commit Multiple Schemes at Once

Posted on Oct 7, 2020

Do you remember the old Pringles jingle, “Once you pop, you can’t stop”? The idea was that, once you got a taste of the sinfully salty snack, you’d be compelled to eat more and more. That same principle can apply to committing occupational fraud. Oftentimes, once an employee has committed one act of fraud, they’ll go on to perform further criminal acts.

Frauds in the News

The following are a few recent stories from the news about people carrying out more than one con job at their place of business:

The defendant in this indictment from Evansville, Wisconsin, is charged with 10 counts of embezzlement. In her position as executive director of a not-for-profit childcare center, she allegedly deposited tuition checks into the petty cash account and then withdrew the cash for personal use. She also allegedly altered checks being paid by her organization by making them payable to “cash,” in order to convert them to cash for herself. Other allegations include using the corporate debit and credit cards for personal use and falsifying the bank statements and reconciliations to cover up her embezzlement. In total, the indictment alleges a total of $311,000 of losses to the organization.

The office manager of a skilled nursing facility in Boise, Idaho, was sentenced to 37 months in prison for health care fraud. From the sentencing documents, “[She] used multiple schemes to cover her fraud. She embezzled the residents’ private payments and social security payments, including from their resident trust accounts. She fraudulently billed Medicaid for services that were covered by other health care benefit programs, and failed to report payments to Medicaid, causing overpayments, which she then embezzled. Finally, [she] collected and misused the social security checks of a deceased resident.” The total loss to the organization was approximately $611,000.

This indictment describes an upper management employee who got in over his head: He embezzled over $609,000 from his employer, and then resorted to kiting and falsifying documents to try and cover it up. Ultimately, the company went out of business and filed for bankruptcy.

An accounting employee at a nursing and rehabilitation center in Connecticut pleaded guilty to stealing more than $487,000 from her employer. She wrote checks to herself from the resident trust funds, and created payroll checks payable to other employees, forging their signatures to deposit them into her own bank accounts. She was terminated from that organization, but then stole $9,000 from her next employer by taking checks that had been returned to the company and depositing them into her own account. One of the counts was for filing a false tax return, for not reporting and paying income tax on all of her ill-gotten gains.

The head of a Chicago not-for-profit organization stole more than $200,000 in this indictment. The indictment includes charges of submitting false construction invoices for reimbursement when no actual work had been performed, and cutting checks to a related party, who then made payments to the CEO. A separate news article also mentioned buying a condo for an associate.

Defending Against Multiple Fraud Offenders

Time and time again, people who commit one fraud scheme are found to have committed even more. They can be juggling multiple schemes at once, or they can be found to have committed fraud at a previous employer. Often, once they find themselves getting away with one fraudulent transaction, they are emboldened to continue, and even increase, their activity. If they sense someone getting close to discovering their actions, they may take other fraudulent steps to cover up their tracks.

If committing multiple frauds is as enticing as emptying a tin of Pringles, then the solution is to counter it with something robust and healthier. Consider internal controls to be the bag of carrots to the can of chips – once you start on those, they can be tough to stop too! To defend against embezzlement and other acts, review your internal controls and look for potential weak points. Perform background and credit checks before hiring any employee who will have access to the receipt or disbursement of funds, and reperform those checks regularly during their employment. Ensure separation of duties. And never rely on trust. Anyone can find themselves in a situation of financial pressure or need.

If you’d like to learn more about the services Clark Nuber provides, including consulting on your internal control structure, please contact one of our professionals.

© Clark Nuber PS and Focus on Fraud, 2020. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Clark Nuber PS and Developing News with appropriate and specific direction to the original content.

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This article or blog contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.

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