No-show jobs, where individuals collect paychecks without performing any actual work, may sound like something out of a mob movie, but they occur in a surprising range of real-world settings. From organized crime to family-run businesses and public corruption cases, these schemes reveal how falsified payrolls can become a vehicle for fraud, tax evasion and abuse of power.
Mob movies play them up — a member or associate of an organized crime group needs to report legitimate income, and thus needs to show employment, steady wages and earnings documentation. They don’t know where the office or job site is. They don’t show up to work at all, except when they need to collect their paycheck (they don’t seem to like direct deposit).
No-show jobs have been featured in recent indictments of organized crime figures, including allegations of procuring union memberships that then enable a person to obtain a no-show job.
In a case from 2014, the prosecutor’s press release spells out the specifics:
“From about December 2010 to about September 2011, [the defendant] had a ‘no-show’ job at the [company], that is, a job for which he was paid wages and benefits but which he did not perform. When [the defendant] did not complete his required deliveries, he was nevertheless, based on his fraudulent representations, paid wages by the [the company] and accorded benefits from employee pension and welfare funds managed by the [union].”
We’ve all seen or read about these cases involving organized crime, but what about other situations or more common scenarios? What exactly is a “no-show” job and how does it impact the work of a fraud examiner?
No-show jobs are a form of asset misappropriation; they constitute a fraudulent disbursement and are under the payroll scheme category in the ACFE Occupational Fraud and Abuse Classification System (also known as the Fraud Tree). No-show jobs are essentially falsified earnings. The employer — sometimes unaware, but sometimes by choice or through threat — pays the person a salary and benefits without having them perform the requisite duties in the company. This is a way to funnel funds out of a business as well as decrease the net taxable profit.
These schemes bear a close resemblance to the “ghost employee” scheme, except that the person is real and has at least done the minimal amount of paperwork to qualify as an employee, even if they are not actually qualified to do the work (since they generally don’t ever show up and do any actual work).
Here is a case in point: From 2001 to 2006, Jordan Davis managed a Ben & Jerry’s ice cream store located on the campus of the University of Minnesota. The store was designed to help expose under-privileged high school youth to a university environment in hopes of motivating them to pursue higher education, as well as giving them the skills to enter the workforce.
The store, which never made a profit, was a project of a federally funded community nonprofit organization run by Davis’ father. Davis managed the store full time for five years, but then was hired full time as a police officer with the Minneapolis Police Department in October 2006. However, he continued to remain employed by the store and receive pay and bonuses, even when he was also working for the police department.
The Circuit Court opinion describes how, for the next four years, Davis did little, yet earned substantial sums of money in earnings:
“Other employees assumed Davis’s daily responsibilities at the store. Davis intermittently provided assistance to the store for a time; for example, he purchased supplies if the store ran low and spoke by telephone with an employee who called for help. Although Davis remained ‘on-call,’ by 2010 he did little to no work for the store.”
For this little work, Davis was paid the equivalent of his full-time salary. The Court opinion notes that the nonprofit continued — at his father’s direction — to pay Davis salary and bonuses, including during times when other employees were not being paid, such as when the store was closed for university breaks. All told, the nonprofit paid Davis $149,880 from November 2006 until December 2010.
Father and son were both indicted for misusing federal program funds and the father pled guilty. Davis went to trial and was convicted. The Court’s opinion is a worthwhile read because it analyzes multiple factors in the issues that Davis raised on appeal, including whether there was evidence of intent to defraud (the Court found there was indeed plenty of evidence).
No-show jobs also feature prominently in connection with other schemes, like corruption. In a case from 2018, a senior-level military official conspired with his wife and a former classmate (all three had graduated together from the U.S. Military Academy at West Point) to funnel contracts to the classmate and his businesses. One side scheme involved the provision of a no-show job.
The business owner and the Army leader worked together so that another conspirator — Mr. Price — was added to the payroll of one of the classmate’s business entities, which was then awarded a contract by the corrupt Army leader. Mr. Price purportedly was to provide services and support to the Army leader. Eventually pleading guilty, Mr. Price fraudulently received over $100,000 in salary payments even though he did nothing for two years. The business owner’s company billed the Army for more than $400,000 for this position. The Army leader was well-aware of the fraud and falsely certified and approved the “work” of Mr. Price, including approving false status reports and invoices.
Business owners of closely held business can also manipulate the financial standing of their company — all while lining their own pockets — when they place family members or close friends on the payroll in a no-show job. In November 2020, Philadelphia electrical contractor Donald Dougherty and his Certified Public Accountant Michael McKale were indicted for tax fraud.
The press release further details the allegations:
“According to the Indictment, Dougherty and his accountant, McKale, worked together to falsify corporate records so that Dougherty could pay less federal income tax than he was legally required to pay. The Indictment also charges that Dougherty gave his wife a no-show job at [Dougherty’s company], which paid $166,400 annually, mere weeks before she purchased a Jersey shore condominium for more than $900,000, and that he caused the falsification of corporate records in order to disguise her no-show salary as a legitimate business expense.”
Fraud examiners should look at a family member who draws a salary to determine what services or labor the person actually provides. Other evidence of actual contribution of labor or know-how include internal emails, presence or absence from the office or work location and other tangible evidence of work product. Vague descriptions or generalized duties should be red flags and are cause for additional scrutiny.
Relatedly, there are is another category of falsified wages — the low-show job. These are salaries and benefits paid to a person for intermittent or periodic work, or even more casual efforts. They typically involve some type of secondary benefit to the employer, such as access to non-public information or as a “favor” to a key supplier, vendor, or customer. Providing (non-substantive) internships to children or hiring spouses as “consultants” can be a way to remain in the “good graces” of an important party.
Low-show jobs can be a bit more difficult to identify because the person may actually be in a physical office location periodically or may be in regular communication (often albeit remotely), but may not submit actual work. The person may also submit work that is merely to create the appearance of actual effort, but is sloppy, unprofessional, or even copied from the works of others. This “work product” is a thin veil that appears to demonstrate the person’s hard work, but is only for show.
Low-show jobs also feature prominently in public corruption cases; examples abound from New York and Pennsylvania. Another case involves former New Jersey state senator Wayne Bryant. Bryant was indicted in 2007 along with the former dean of a school of medicine (the “SOM”).
The Court of Appeals opinion describing their conspiracy is telling:
“The charges stemmed from an alleged quid pro quo arrangement in which [the Dean of the School of Medicine (SOM)] gave Bryant a ‘low-show’ job at SOM (meaning he provided only minimal or nominal services) as a ‘Program Support Coordinator,’ in which position he received an annual salary of $35,000 (and a $5,000 bonus), in exchange for Bryant’s efforts as Chairman of the Senate Appropriations Committee to funnel State funding to [the] SOM. The quo was a ‘success’: during Bryant’s tenure at [the] SOM, the institution gained an additional $10 million in funding over three years.”
Ironically, Bryant was also charged alone in a separate no-show scheme, where he earned public pension credit for “work” he performed as an attorney for a county social services board. Bryant and the dean were convicted of the first scheme and Bryant was also convicted of the second scheme. The Court of Appeals upheld both convictions.
Hopefully this article has shed some light on the fleeting shadows of no-show jobs. Fraud examiners should consider the possibility that no-show or low-show jobs may be a factor in fraud investigations or audit engagements. Reviewing payroll records, employee files and running data analytics may prove to be useful. If the business still hands out paper checks, there may be clues on the checks themselves — such as a double endorsement. Direct deposit information, like bank account numbers, should be checked for potential duplicates. Likewise, conducting interviews with staff may prove very insightful.
