Fraud Presentation 9 15 09

About The Speaker

Sherry DePew, Vice President of Product Management for Lavante

14 years at Boise Cascade, Director of Shared Services

President and founding member of Idaho IAPP Chapter

Treasurer: Oracle/PeopleSoft Supplier Relationship Mgmt. Product User Group

President: Oracle/PeopleSoft Accounts Payable Product User Group

Co-founder and Board member of Oracle/PeopleSoft Link Users Group

As VP of Product Management for Lavante, Sherry is responsible for using her experience as a former Director of Shared Services to collaborate with our customers to define Lavante’s P2P solutions

Presentation Outline

The Fraud Triangle

Common Types of Fraud

Employee Expense Reports

AP Fraud

Product Theft

Trends: Then and Now

Opportunity CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD “ If you make it easy for people to steal from you, they will.” - Frank W. Abagnale Controls Be Skeptical Segregation of Duties

Segregation of Duties

Persons setting up vendors cannot initiate P.O.s or process invoices.

Persons requesting checks cannot approve or sign them.

The person(s) issuing checks should not reconcile bank accounts.

Ensure reconciling of accounts is done by different people within cost centers.

Establish a separate post office box returned checks. Replace your company name and address on disbursement envelopes with a simple post office box number.

Receipt?

Accounts Payable Fraud CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD Opportunity: An AP Team member discovered an alternate name field in the ERP system shortly after the initial install. She found that she could change the name on the check without vendor add/change access. Although the name on the check was changed, there was no change to the vendor ID or address.

Apparently this person must of needed some major home improvements including a new kitchen, deck, pool, spa, and all new appliances.

Her boyfriend apparently needed a new motorcycle.

Passed Employment Background Screening

BA in Accounting - verified GPA & Transcripts

Previous employers out of business

Single Mother Raising Two Children

What I Didn’t Know (Background Checks)

The Trail of Evidence CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD Receive Invoice Make Duplicate Invoice Pay two with different amounts using different invoice numbers Payments scheduled a week apart Funds credited to Employee account as directed on the payment

Boise Cascade furnishes building products to Home Depot, Lowes, 87 Lumber and many others.

Boise runs about 30 distribution centers to supply customers like the home improvement stores.

Each center sends out numerous trucks of product daily.

Seven year employee

Average performance

Normal work day was from 5am to 1pm.

In early 2008 he experienced family financial problems.

Custody suit consuming financial and emotional resources.

By mid 2008 he decided to steal from the company to pay his bills.

First theft was in early September

Motive and Character:

The driver decided to come into work early and load some extra bundles of Trex decking onto his truck.

He then made his normal rounds and his last stop was to drop off the extra bundles at a friend’s house.

He returned to the distribution center on time.

Opportunity and Character:

A normal cycle count caught the shortage in the yard inventory.

At first it was passed off as a shipping error or clerical error.

As the losses increased, location managers suspected theft.

When another employee reported Trex material was being sold on e-Bay and that our driver was the one selling it, Corporate Security was called.

Discovery:

Fraud – It’s Progressive

THEN

NOW

Benford’s Law

Multiple Invoices just under approval level maximum

Rounded up Invoices

Compare Vendor/ Employee Files

Proper Authorization

ACH

Purchasing Card

Travel Card

Asset Management

BI-Business Intelligence

Vendor Management

Now What?

The single most important thing you can do is prevent a fraudulent vendor from being established in your vendor database.

Collect W8/W9 & Perform TIN Matching

Validate Address & Phone

Verify Business Legitimacy

Utilize 3rd Party Databases

Dun & Bradstreet

SIC or NAICS codes

Credit Information

Corporate Affiliations (Lexus-Nexus)

ChoicePoint, Experian, Intelius

Acknowledgements

ACFE (Association of Certified Fraud Examiners)

Corporate Security

Boise Cascade

Ida Corp

Frank Abagnale, Abagnale & Associates (www.abagnale.com)

Contact Information

[email_address] 888.331.9010

THANK YOU!

Fraud Presentation 9 15 09

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