Inside Corporate Fraud: Detection Strategies & Red Flags
Download MP3 Description
- Case Study: Employee & Vendor Fraud
- A grass seed company in Oregon was defrauded by an employee and a vendor.
- Oregon is a major producer of grass seed, with large-scale farming operations.
- How the Scam Worked
- The employee partnered with a vendor to skim grass seed and money from the company.
- They used a per-pound kickback system, inflating invoice prices and splitting the extra funds.
- A separate business entity was registered to disguise kickbacks as "consulting" or "brokering" fees.
- Red Flags & Prevention Tips for Business Owners
- Watch for large, unusual transactions that could indicate fund diversion.
- Investigate vendors and management companies listed on your accounts payable.
- Check if any vendor principals are your employees or ghost companies.
- Look up business addresses—is it just a mailbox?
- Review when LLCs were formed and their listed members.
- How to Detect & Prevent Fraud Early
- Most fraud cases are discovered after significant financial losses.
- Cross-train employees so no single person controls payables and accounting.
- Require accountants to take mandatory vacation time to allow review by others.
- As a CEO or manager, regularly review financial records or assign multiple people to do so.
Fraud is often easily detectable with the right oversight—don’t wait until it's too late!
