04/24/2018
Tom, a former CFO and now the CEO of a large farming operation, was perceived as a loyal and trustworthy employee and had worked for the company for over 25 years. He was responsible for all facets of financial accounting, from budgeting to financial reporting as well as investing the farm’s excess funds and reporting the results on a monthly basis. Several years ago, against the rules and policies in place, he invested $25,000 with a friend and lost the entire amount. To cover it, he hid the loss in a series of “journal entries” mixed in with other top-performing investments. As time passed, he continued to hide that loss month after month, year after year. He was able to do this because he was the sole person in charge of both investing and reporting. Eventually, and unfortunately for Tom, the owners decided to give him some “help” with his workload and hired a Controller to, among other things, train him on the investing and reporting. During the training and after Tom had gained the new Controller’s trust, he told him about the “adjustment” each month for the prior loss. Being new, the Controller kept the secret for a while, but eventually became uncomfortable and told management. To fast forward, this single “whistle blowing” incident resulted in an investigation that ultimately uncovered not only the “adjustment”, but multiple loans (none approved by management) that had been hidden in the books. Tom had submitted high-level summarized financial reports to management and had buried fraudulent loans with legitimate loans into one single account called “loans payable”. In the end, this trusted employee of over 25 years, who the owner was paying a six figure salary, who the owner had given thousands to for each of his kids to go to college, had played racquetball with, traveled together with their wives, went to church with (Tom was actually the treasurer at the church), had perpetrated a fraud and stolen over $1.2 million over several years.
