When you think of expense fraud, you probably think of it as the ultimate white-collar crime – polite, quiet, and under the radar. But a recent case in Greensboro, South Carolina, puts that image to shame, alleging that a mid-level manager was kicked and punched by superiors in the company gym to persuade him to participate in expense report fraud.

Intimidation

A former sales manager, Mr. Fisher, at UNIFI, a successful, international, textile company, based in Greensboro, has filed a suit alleging that upper management of the company was involved in large-scale expense report fraud and intimidated him, verbally and physically, into playing along like a good boy. The case has yet to go to court, so it is not possible to say whether the charges are warranted. However, the suit brings to light some of the inventive ways expense fraud can be carried out, which is instructive for expense managers.

Fake Samples

One of the ways the CEO defrauded the company, according to Mr. Fisher’s suit, was to pressure employees to buy him things like golf clubs and sunglasses, while on business travel, and then file an expense report for “samples.” As the CEO grew more and more demanding, Mr. Fisher ended up behind in his expense reports to the tune of $50,000 out of his own pocket. This would, of course, indicate that the company was not using company credit cards for the purchases, nor had a reliable system for verifying that purchases were, indeed, for company-related expenses.

Double The Fun

Another method for fraud was to file travel expenses through two separate managers, pocketing one full reimbursement for tickets and accommodation. Again, a company credit card would have made this more difficult to do, but it also points to the importance of having a fully integrated expense report system for the enterprise as a whole. Having departments independently responsible for reimbursement, without a central checkpoint, clearly opens up easy avenues for fraud.

Creative Expensing

The whole trouble started, according to Mr. Fisher, because the CEO wanted to sell his house and wanted Mr. Fisher to buy it from him. When Mr. Fisher protested that he couldn’t afford to do so, the CEO explained that he would teach him how to “creatively expense it.” So this was expense fraud quite beyond the nickel-and-dime level, you often think of expense fraud as being.

Direct And Indirect Loss

This case highlights how expensive expense fraud can get for a company, but it also shows that without proper checks in the system, like automated expense reports, online reporting and other advances in the business of keeping track of travel expenses, managers are vulnerable to coercion. Without a reliable system in place, these managers have little protection from predatory individuals in upper management. This can not only lead to direct losses from fraud, but also indirect losses resulting from lawsuits and loss of reputation, making up-to-date systems and policies a must for any serious business.