The Expert Podcast

Here's another really good example of how fraud can occur inside of a company. Using ghost vendors which we've talked about many times before but this is…a little bit different spin on it This is a car dealership. In Toms river New Jersey great little Jersey shore town. And…they had an employee who was a manager there that was…enlisted with the. job description of marketing and advertising and they were to hire. Marketing companies. marketing agencies to do work for the dealership…But the person…Was making up. Ghost companies they made up. Limited liability partnerships shell companies. And build the dealership for services for these companies. But in fact these companies didn't exist Really They were just…entities that this person made up to bill the dealerships. He hid his connection to the companies by using an online payment service that a lot of for the transfer funds into accounts that he used his personal accounts. And. He…billed them for $1.3 million. According to the, complaint allegedly. This is a really good example of where when you're in trusting somebody. To spend money on your behalf as a company whether it's an employee a vendor that you verify. The place that the money's going and that you maybe do some spot checks. And audits on where the money's going to check the companies out If you're paying bills even by check…Invoices. Look to see if where you're sending the money to is actually a legitimate company that provides you with goods or services. You can do a very quick. Secretary of state. Inquiry to that corporation to see who are the principals who were the registered agents. What's the address. Sometimes a rogue. we'll create a corporation. That sounds like a company you really do business with. Let's say if you buy paint, From, Vanguard paint company…There's a legitimate vendor to your firm. A rogue employee might make up a company called. Vanguard coatings…Or Vanguard painting. Something similar. And they'll create invoices to that company, put them in with the other ones in. regular payments. Because they figure that bookkeeper accountant controller whoever is going to recognize it as a legitimate vendor. So think if you were this…Tom's river car dealer and you had an extra 1.3 million in your bank account. What could you have done with that In fact, We, worked on a case where the losses that a client…took it was about $800,000. From a fraud…Forensics on that money showed that had that money been properly kept in the company would have been really worth 1.4 million because it was over four years and the company had a certain profit margin based on their return on investment. And if they had had that 800,000 to hire more employees do more advertising. They would have made. Another 600,000. Over that period of time And that's not much over four years, really. That's about. What 140,000 a year. That's less than 20%. Most companies make 20% return on their investment. So if this 1.3. Had been kept within the company It might be worth. 1.6 1.7 1.8 who knows how long this took. So you're not just losing the money You're losing your return on investment So it's a very good reason to protect your assets. Do good audits do good spot checks. And trust your employees but verify what they're doing to make sure you're not being taken to the cleaners.