Current Events Paper: Payroll Fraud
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Current Events Paper: Payroll Fraud
Fraudulent disbursements, more specifically payroll schemes, are what pipe and tube manufacturer IPSCO Tublars Kentucky, Inc. (IPSCO) fell victim to, over a two-year period. 49-year-old payroll supervisor, Linda J. Lawson, will pay $651,621.58 in restitution and serve 33 months in prison for re-directing direct deposits to her own personal account after scheduling improper payroll for current and former employees.
The ghost employee scheme is the sub-classification of payroll fraud that Lawson committed. As Wells outlines on page 156 in “Principles of Fraud Examination”, four things are required to carry out this scheme.
“The ghost employee must be added to the payroll” since she used both current and former employees to carry out her scheme, ghost employees did not need to be created; they already existed in the payroll system.
“Timekeeping and wage rate information must be collected” … being the payroll supervisor, Lawson had access to enter fictitious payroll information for these unknowing accomplices.
“A paycheck must be issued to the ghost” … paychecks were issued as direct deposit transactions.
“The check must be delivered to the perpetrator or an accomplice” … direct deposit transactions for these erroneous paychecks were diverted to Lawsons personal accounts.
The rights and obligations of stakeholders, in my opinion, depend on their role.
Targets of fraud have a right to protect themselves and an obligation to protect those that depend on them. They also have a right to justice and restitution. IPSCO and their employees (both current and former) fall under this classification.
Law enforcement stakeholders have an obligation to investigate potential fraud cases and bring justice to those that have been victimized by such crimes. The U.S. Attorneys Office, The Federal Bureau of Investigation, and U.S. District Court Judge David L. Bunning fall under this classification.
The case has been successfully resolved; the perpetrator has been convicted and is serving time in jail as well as making financial restitutions to the company. Unfortunately, there were not many details about the case and I would have liked to know more about how they were alerted to the fraud and what steps they took in their investigation. My suspicion is that since she used current and former employees for two years, perhaps some of them notified the company that their tax forms showed more income than what they were paid.
References:
Fox 19 Web Staff. (2011, August 31). Former payroll supervisor sentenced for wire fraud. Fox 19 Campbell County: News.