Weights That Don’t Measure Up: False Billing Scheme Case Study (Part 2)

This column was adapted from a case study by Joseph R. Dervaes, CFE, ACFE Fellow, CIA, that was published in “Fraud Casebook: Lessons from the Bad Side of Business,” edited by Joseph T. Wells, © 2007 by the Association of Certified Fraud Examiners Inc. Published by John Wiley & Sons Inc. Available in the ACFE Bookstore. 

Part 1 of this false billing scheme case study in the July/August issue discussed the perpetrators, the organization, and the initial investigation of a huge disbursement fraud. This column discusses the investigation, lessons learned, and recommendations to prevent future occurrences of false billing schemes.

To summarize the case, a legitimate vendor named “Richard” submitted false invoices to the Washington State Liquor Control Board and received almost $840,000 in unauthorized payments over a three-year period for services he didn’t provide. “Gerry,” an accounts payable clerk, processed the fraudulent transactions. These transactions included inflated weights on legitimate deliveries, deliveries that didn’t occur, and duplicate billings. In fact, 76 percent of all invoices from this vendor were false!

THE INVESTIGATION