Wk 5 Discussion (Corruption in a Global Economy) - Post 1

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CHAPTER 10: CORRUPTION

EXHIBIT 10-1: Corruption

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LEARNING OBJECTIVES

After studying this chapter, you should be able to

10-1 Define corruption

10-2 Identify the four categories of corruption

10-3 Define bribery

10-4 Compare and contrast bribery, extortion, and illegal gratuities

10-5 Identify the two categories of bribery schemes

10-6 Understand kickback schemes and how they are committed

10-7 Understand bid-rigging schemes and explain how they are categorized

10-8 Describe the types of abuses that are committed at each stage of the competitive

bidding process

10-9 Be familiar with the controls and techniques that can be used to prevent and detect

bribery

10-10 Define conflicts of interest

10-11 Differentiate conflicts of interest from bribery schemes and billing schemes

10-12 List and understand the two major categories of conflicts of interest

10-13 Be familiar with proactive audit tests that can be used to detect corruption schemes

CASE STUDY: WHY IS THIS FURNITURE FALLING APART?

A number of years ago, the Washington Post ran a series of articles detailing charges of

waste, fraud, and abuse in the General Services Administration (GSA), the federal

government’s housekeeping agency. In particular, for more than a decade a furniture

manufacturer in New Jersey had churned out $200 million worth of defective and useless

furniture that GSA purchased.

Despite years of complaints from GSA’s customers about the shoddiness of the furniture

and equipment, the GSA had done little to investigate the contractor, Art Metal U.S.A.

Government agencies that had been issued the furniture, like the Internal Revenue Service,

the Central Intelligence Agency, and the State Department, told horror stories about

furniture that fell apart, desks that collapsed, and chairs with one leg shorter than the

others.

When federal employees complained to the GSA, they were ignored or rebuffed. “You didn’t

fill out the right form,” GSA would say, or “You have to pay to ship it back to the contractor

and wait two years and you might get a replacement.” After several years, this behavior

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naturally gave rise to the speculation that bribery and corruption were the cause of the

problem.

A series of articles in the Washington Post led to a congressional investigation. Peter

Roman, then chief investigator for a subcommittee of the U.S. Senate Committee on

Government Affairs, recalled when Senator Lawton Chiles of Florida, chairman of the

subcommittee, called him to his office. “He wanted a full investigation into all the practices

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of GSA,” Roman said. Unlike a private audit, a congressional investigation involves a

thorough review of financial and operational records, interviews, and sworn testimony,

when necessary. If there is enough evidence to show a crime has been committed, then the

U.S. Justice Department prosecutes. Roman said this was “one of the few white-collar fraud

investigations the Senate had done in years, with the exception of the Investigation

Subcommittee’s organized crime inquiries.”

The first step in such an analysis involved general oversight hearings for the Subcommittee

on Federal Spending Practices and Open Government. At one of the first hearings, Mr.

Phillip J. Kurans, president of the Art Metal furniture company, appeared, uninvited, and

demanded an opportunity to testify. He told Senator Chiles that his company produced

good-quality furniture at bargain prices and challenged the subcommittee to prove

otherwise. He invited the senator to the plant in Newark, New Jersey, to inspect their

records.

“Chiles had me in his office the next morning,” Roman recalls. “He said, ‘Tell them we

accept their offer. Get up to New Jersey and find out what happened.’”

Roman assembled an investigation team borrowed from other federal agencies. The

principals were Dick Polhemus, CFE, from the Treasury Department; Marvin Doyal, CFE,

CPA; and Paul Granetto from the U.S. General Accounting Office. “We agreed that the logical

approach was to do a cash flow analysis,” Roman recalls. “If the furniture was defective,

then someone had to generate cash to bribe somebody else to accept it. All of us had

experience in following the money, so we went off to Newark to look for it.”

Together, they paid a visit to Art Metal U.S.A. on behalf of the senator. Kurans grudgingly

sent them into a large room filled with thirty years of financial records. In the past, the

sheer volume of paper had caused two GSA investigations to end without incident and the

company’s own auditors to find nothing untoward. Half the team began controlling the

checks, separating them out into operations and payroll, while the others reviewed the

canceled checks to do a pattern analysis.

“Marvin Doyal and I still argue over which one of us first found the checks to a

subcontractor that had been cashed rather than deposited,” Roman says. “As we began to

review the operational checks,” he remembers, “one of the items that stood out were checks

made out to one company, but under three different names: I. Spiegel, Spiegel Trucking

Company, and Spiegel Trucking, Inc.” Were the bookkeepers careless in writing the wrong

name? The investigators discovered that the checks made out to I. Spiegel (which were

folded into threes, like one would fold a personal check to be placed in a wallet) were

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cashed by one Isador Spiegel. These checks were not run through any Spiegel Trucking Co.

business account and had been used solely for cash. The checks to Spiegel Trucking Co., on

the other hand, “looked like they had been used for actual delivery of furniture to various

GSA depots or customers,” Roman said.

The other item that caught the investigators’ eyes involved checks made out simply to

“Auction Expenses” for even sums of money. Kurans told them that the company bought

used machinery for cash at auctions throughout the East Coast. That was the reason, he

said, that the company spent large amounts of cash.

Yet when the team called operators of furniture auctions they found that auctions required

the buyer to show up with a certified check for 10 percent of the amount bought. The rest

was also to be paid with certified checks. Over four years, Art Metal generated $482,000 in

cash through so-called “auction expenses.” More than $800,000 flowing to Spiegel was

converted into cash. This was enough evidence to garner Kurens a subpoena to appear

before the subcommittee. The subpoena enabled investigators to obtain “literally a

truckfull of documents” from Art Metal, Roman said, “which filled a whole room in the

basement of the Russell Senate Office Building.”

With over $1 million in cash discovered, the next step for the investigating team was to look

for evidence of bribery. They painstakingly interviewed every furniture inspector in GSA’s

Region Two, eventually focusing on a former regional inspector of the GSA. Over the past

four years, this man had bought eleven racehorses at an average price of $13,000 each—

much more money than a GSA furniture inspector could afford. At this point, Senator Chiles

authorized bringing in a special counsel. This was Charles Intriago, Esq., a former Miami

Strike Force prosecutor. When confronted, the inspector availed himself of his Fifth

Amendment rights, and the search for another witness continued. They found one: Louis

Arnold, a retired bookkeeper at Art Metal. Arnold would testify that Art Metal management

was paying off GSA inspectors. Arnold revealed a third source of cash, a petty cash fund

totaling about $100,000 that was used to pay for the inspectors’ lunches and hotel expenses.

Based on Arnold’s testimony, investigators subpoenaed three banks that had photographed

all of their cash transactions: “We found pictures of the treasurer, the plant manager, and

occasionally one of the partners cashing these ‘auction expense’ checks and taking the

money in twenties.”

During the Senate hearings, several senior agency officials testified to the shoddiness of the

furniture. Roman, who spent some time on the floor of the plant, saw many examples of

shabby workmanship. For example, although plant managers claimed they had bought a

quality paint machine to paint filing cabinets, Roman said all he ever saw was a man

wearing a gas mask, with a hand-held paint sprayer, wildly spraying at cabinets that darted

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past him on a conveyor belt. “It was like seeing a little kid playing laser tag, and the target

appears for half a second, and he takes a wild shot at it and hopes he hits the target,” he

said.

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Marvin Doyal testified to the generation of $1.3 million in cash, a company official testified

that the money had been used to bribe (unnamed) GSA inspectors, and company officials

and GSA inspectors availed themselves of their Fifth Amendment rights. Interagency

problems between the subcommittee and the Justice Department played a major role in a

failed plea bargain with a former GSA official. At this point, Senator Chiles and the staff

decided that the subcommittee had gone as far as it could go.

Why did Art Metal not make an attempt to hide their fraud? “In the first place,” Roman

said, “they thought nobody would ever come. Secondly, they had been the subject of two

GSA-appointed investigations” that uncovered nothing.

The result of the investigations proved disappointing to Senator Chiles and the

subcommittee staff. “In the end,” however, Senator Chiles later said, “we achieved our

legislative mission. We were disappointed that the plea bargain and other subcommittee

efforts didn’t pay off as fully as they might have, but we sure got GSA’s attention.”

Embarrassed by the subcommittee disclosures, GSA stopped awarding government

furniture contracts to Art Metal U.S.A. Having lost what amounted to its sole customer, Art

Metal soon went bankrupt. Its plant manager and general counsel were convicted of

related offenses within two years. The investigations into the GSA prompted a

housecleaning of that agency. At the time of the hearings, GSA had 27,000 employees; today,

it employs about 13,000. GSA’s role as the federal government’s chief purchasing agent has

been greatly diminished. The Art Metal case showed that centralized purchasing is not

always a good idea.

Several names and details have been changed to preserve anonymity.

OVERVIEW

In Chapter 1, we learned that occupational frauds fall into three major categories: asset

misappropriations, corruption, and fraudulent statements. We have already covered the

various forms of asset misappropriations in Chapters 2 through 9. Now, we turn our

attention to corruption.

Black’s Law Dictionary defines corrupt as “spoiled; tainted; vitiated; depraved; debased;

morally degenerate. As used as a verb, to change one’s morals and principles from good to

bad.” It further defines corruption as “an act done with an intent to give some advantage

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inconsistent with official duty and the rights of others. The act of an official or fiduciary

person who unlawfully and wrongfully uses his station or character to procure some benefit

for himself or for another person, contrary to duty and the rights of others.” This strikes at

the heart of what corruption is: an act in which a person uses his position to gain some

personal advantage at the expense of the organization he represents.

Corruption Data from the ACFE 2009 Global Fraud Survey

Frequency and Cost

Of 1,843 cases in the ACFE’s 2009 survey, 33 percent involved a corruption scheme. Although

corruption schemes were far less common than asset misappropriations, which have

already been discussed, they were more costly. The median loss of corruption cases in the

survey ($250,000) was nearly twice as large as the median loss of asset misappropriation

schemes ($135,000) (see Exhibit 10-2 and 10-3).

Types of Corruption Schemes

In the fraud tree, corruption schemes can be broken down into four distinct categories:

bribery, conflicts of interest, economic extortion, and illegal gratuities. As Exhibit 10-4

shows, approximately 56 percent of the corruption cases the ACFE researchers reviewed

involved bribery, while 53 percent involved conflicts of interest.

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EXHIBIT 10-2: 2009 Global Fraud Survey: Frequency of Three Major Fraud Categories

The sum of these percentages exceeds 100 percent because some cases involved multiple fraud schemes that fell into more than one category. Other charts in this chapter may reflect percentages that total in excess of 100 percent for similar reasons

EXHIBIT 10-3: 2009 Global Fraud Survey: Median Loss of Three Major Fraud Categories

EXHIBIT 10-4: 2009 Global Fraud Survey: Frequency of Corruption Schemes by Type

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CORRUPTION SCHEMES

As previously mentioned, corruption schemes in the ACFE studies are broken down into

four classifications:

• Bribery

• Illegal gratuities

• Economic extortion

• Conflicts of interest

Before discussing how corruption schemes work, we must understand the similarities and

differences that exist among bribery, illegal gratuities, and extortion cases. Bribery may be

defined as the offering, giving, receiving, or soliciting any thing of value to influence an

official act. The term official act means that traditional bribery statutes proscribe only

payments made to influence the decisions of government agents or employees. In the case

of Art Metal U.S.A., this is exactly what happened. The furniture supplier paid off

government inspectors to accept substandard merchandise.

Many occupational fraud schemes, however, involve commercial bribery, which is similar

to the traditional definition of bribery except that something of value is offered to influence

a business decision rather than an official act of government. Of course, payments are made

every day to influence business decisions, and these payments are perfectly legal. When two

parties sign a contract agreeing that one will deliver merchandise in return for a certain

sum of money, this is a business decision that has been influenced by the offer of something

of value. Obviously, this transaction is not illegal. In a commercial bribery scheme, however,

the payment is received by an employee without his employer’s consent. In other words,

commercial bribery cases deal with the acceptance of under-the-table payments in return

for the exercise of influence over a business transaction. Notice also that offering a payment

can constitute a bribe, even if the illicit payment is never actually made.

Illegal gratuities are similar to bribery schemes, except that something of value is given to

an employee to reward a decision rather than influence it. In an illegal gratuities scheme, a

decision is made that happens to benefit a certain person or company. This decision is not

influenced by any sort of payment. The party who benefited from the decision then rewards

the person who made the decision. For example, in Case 1739 an employee of a utility

company awarded a multimillion-dollar construction contract to a certain vendor and later

received an automobile from that vendor as a reward.

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At first glance, it may seem that illegal gratuities schemes are harmless if the business

decisions in question are not influenced by the promise of payment. But most company

ethics policies forbid employees from accepting unreported gifts from vendors. One reason

is that illegal gratuities schemes can (and do) evolve into bribery schemes. Once an

employee has been rewarded for an act such as directing business to a particular supplier,

an understanding might be reached that future decisions beneficial to the supplier will also

be rewarded. Additionally, even though an outright promise of payment has not been made,

employees may direct business to certain companies in the hope that they will be rewarded

with money or gifts.

Economic extortion cases are the “pay up or else” corruption schemes. Whereas bribery

schemes involve an offer of payment intended to influence a business decision, economic

extortion schemes are committed when one person demands payment from another.

Refusal to pay the extorter results in some harm such as a loss of business. For instance, in

Case 2234, an employee demanded payment from suppliers and in return

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awarded those suppliers subcontracts on various projects. If the suppliers refused to pay the

employee, the subcontracts were awarded to rival suppliers, or were held back until the

fraudster got his money.

Bribery, illegal gratuities, and economic extortion cases all bear a great deal of similarity in

that they all involve an illicit payment from one party to another, either to influence a

decision or as a reward for a decision already made. But conflicts of interest are different in

nature. A conflict of interest occurs when an employee, manager, or executive has an

undisclosed economic or personal interest in a transaction that adversely affects the

organization. As with other corruption cases, conflict schemes involve the exertion of an

employee’s influence to the detriment of his employer. But whereas in bribery schemes a

fraudster is paid to exercise his influence on behalf of a third party, in a conflict of interest

scheme the perpetrator engages in self -dealing. The distinction between conflicts of interest

and other forms of corruption will be discussed in greater detail later in this chapter.

BRIBERY

At its heart, a bribe is a business transaction, albeit an illegal or unethical one. As in the GSA

case discussed above, a person “buys” something with the bribes he pays. What he buys is

the influence of the recipient. Bribery schemes generally fall into two broad categories:

kickbacks and bid-rigging schemes.

Kickbacks are undisclosed payments made by vendors to employees of purchasing

companies. The purpose of a kickback is usually to enlist the corrupt employee in an

overbilling scheme. Sometimes vendors pay kickbacks simply to get extra business from the

purchasing company. Bid-rigging schemes occur when an employee fraudulently assists a

vendor in winning a contract through the competitive bidding process.

Kickback Schemes

Kickback schemes are usually very similar to the billing schemes described in Chapter 4.

They involve the submission of invoices for goods and services that are either overpriced or

completely fictitious (see Exhibit 10-5).

Kickbacks are classified as corruption schemes rather than asset misappropriations because

they involve collusion between employees and vendors. In a common type of kickback

scheme, a vendor submits a fraudulent or inflated invoice to the victim company, and an

employee of that company helps make sure that a payment is made on the false invoice. For

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his assistance, the employee-fraudster receives some form of payment from the vendor.

This payment is the kickback.

Kickback schemes almost always attack the purchasing function of the victim company, so it

stands to reason that these frauds are often undertaken by employees who have purchasing

responsibilities. Purchasing employees often have direct contact with vendors and therefore

have an opportunity to establish a collusive relationship. In Case 119, for instance, a

purchasing agent redirected orders to a company owned by a supplier with whom he was

conspiring. In return for the additional business, the supplier paid the purchasing agent

over half the profits from the additional orders.

Diverting Business to Vendors

In some instances, an employee-fraudster receives a kickback simply for directing excess

business to a vendor. There might be no overbilling involved in these cases; the vendor

simply pays the kickbacks to ensure a steady stream

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of business from the purchasing company. In Case 1987, for instance, the president of a

software supplier offered a percentage of ownership in his company to an employee of a

purchaser in exchange for a major contract. Similarly, a travel agency in Case 1211 provided

free travel and entertainment to the purchasing agent of a retail company. In return, the

purchasing agent agreed to book all corporate trips through the travel agent.

EXHIBIT 10-5: Kickbacks/Overbilling

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If no overbilling is involved in a kickback scheme, one might wonder where the harm lies.

Assuming the vendor simply wants to get the buyer’s business and does not

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increase his prices or bill for undelivered goods and services, how is the buyer harmed? The

problem is that, having bought off an employee of the purchasing company, a vendor is no

longer subject to the normal economic pressures of the marketplace. This vendor does not

have to compete with other suppliers for the purchasing company’s business, and so has no

incentive to provide a low price or quality merchandise. In these circumstances the

purchasing company almost always ends up overpaying for goods or services, or getting less

than it paid for. In Case 1211, described above, the victim company estimated that it paid

$10,000 more for airfare over a two-year period by booking through the corrupt travel

agency than if it had used a different company.

Once a vendor knows that he has an exclusive purchasing arrangement, his incentive is to

raise prices to cover the cost of the kickback. Most bribery schemes end up as overbilling

schemes even if they do not start that way. This is one reason why most business codes of

ethics prohibit employees from accepting undisclosed gifts from vendors. In the long run,

the employee’s company is sure to pay for his unethical conduct.

Overbilling Schemes

Employees with Approval Authority

In most instances, kickback schemes begin as overbilling schemes in which a vendor

submits inflated invoices to the victim company. The false invoices either overstate the cost

of actual goods and services or reflect fictitious sales. In Case 520, an employee with

complete authority to approve vouchers from a certain vendor authorized payment on over

100 fraudulent invoices in which the vendor’s rates were overstated. Because no one was

reviewing her decisions, the employee could approve payments on invoices at above-

normal rates without fear of detection.

The ability to authorize purchases (and thus to authorize fraudulent purchases) is usually a

key to kickback schemes. The fraudster in Case 520, for example, was a nonmanagement

employee who had approval authority for purchases made from the vendor with whom she

colluded. She authorized approximately $300,000 worth of inflated billings in less than two

years. Similarly, in Case 127, a manager was authorized to purchase fixed assets for his

company as part of a leasehold improvement. The assets he ordered were of a cheaper

quality and lower price than what was specified, but the contract he negotiated did not

reflect this. Therefore, the victim company paid for high-quality materials but received low-

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quality materials. The difference in price between what the company paid and what the

materials actually cost was diverted back to the manager as a kickback.

The existence of purchasing authority can be critical to the success of kickback schemes.

The ability of a fraudster to authorize payments himself means that he does not have to

submit purchase requisitions to an honest superior who might question the validity of the

transaction.

Fraudsters Lacking Approval Authority

Though the majority of the kickback schemes the ACFE researchers reviewed involved

people with authority to approve purchases, this authority is not an absolute necessity.

When an employee cannot approve fraudulent purchases himself, he can still orchestrate a

kickback scheme if he can circumvent purchasing controls. In some cases, all that is

required is the filing of a false purchase requisition. If a trusted employee tells his superior

that the company needs certain materials or services, this is sometimes sufficient to get a

false invoice approved for payment. Such schemes are generally successful when the person

with approval authority is inattentive, or when she is forced to rely on her subordinates’

guidance in purchasing matters.

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Corrupt employees might also prepare false vouchers to make it appear that fraudulent

invoices are legitimate. When proper controls are in place, a completed voucher is required

before accounts payable will pay an invoice. One key is for the fraudster to create a

purchase order that corresponds to the vendor’s fraudulent invoice. The fraudster might

forge the signature of an authorized party on the purchase order to show that the

acquisition has been approved. If the payables system is computerized, an employee who

has access to a restricted password can enter the system and authorize payments on

fraudulent invoices.

In less sophisticated schemes, a corrupt employee might simply take a fraudulent invoice

from a vendor and slip it into a stack of prepared invoices before they are input into the

accounts payable system. (A more detailed description of how false invoices are processed is

found in Chapter 4.)

Kickback schemes can be very difficult to detect. In a sense, the victim company is being

attacked from two directions. Externally, a corrupt vendor submits false invoices that

induce the victim company to unknowingly pay for goods or services that it does not

receive. Internally, one or more of the victim company’s employees waits to corroborate the

false information provided by the vendor.

Other Kickback Schemes

Bribes are not always paid to employees to process phony invoices. In some circumstances

outsiders seek other fraudulent assistance from employees of the victim company. In the

case study at the beginning of this chapter, for instance, Art Metal U.S.A. paid huge sums to

quality insurance inspectors so that the General Services Administration would accept Art

Metal’s substandard equipment. In this case the vendor was not overbilling the agency; he

was instead trying to dump substandard products in lieu of providing equipment that met

government specifications.

In other cases, bribes come not from vendors who are trying to sell something to the victim

company, but rather from potential purchasers who seek a lower price from the victim

company. In Case 1866, for instance, an advertising salesman not only sold ads, but was also

authorized to bill for and collect on advertising accounts. He was also authorized to issue

discounts to clients. In return for benefits such as free travel, lodging, and various gifts, this

individual either sold ads at greatly reduced rates or gave free ads to those who bought him

off. His complete control over advertising and a lack of oversight allowed this employee to

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“trade away” over $20,000 in advertising revenues. Similarly, in Case 986 the manager of a

convention center accepted various gifts from show promoters. In return, he allowed these

promoters to rent the convention center at prices below the rates approved by the city that

owned the center.

Slush Funds

Every bribe is a two-sided transaction. In every case in which a vendor bribes a purchaser,

there is someone on the vendor’s side of the transaction who is making an illicit payment. It

is therefore equally likely that employees are paying bribes as accepting them.

In order to obtain the funds to make these payments, employees usually divert company

money into a slush fund, a noncompany account from which bribes can be made. Assuming

that the briber’s company does not authorize bribes, he must find a way to generate the

funds necessary to illegally influence someone in another organization. Therefore, the key

to the crime from the briber’s perspective is the diversion of money into the slush fund. This

fraudulent disbursement of company funds is usually accomplished by writing company

checks to a fictitious entity or submitting false invoices in the name of the false entity. In

Case 1605, for example, an officer in a very large health care organization created a fund to

pay public officials and influence pending legislation.

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This officer used check requests for several different expense codes to generate payments

that went to one of the company’s lobbyists, who placed the money in an account from

which bribe money could be withdrawn. Most of the checks in this case were coded as

“fees” for consulting or other services.

It is common to charge fraudulent disbursements to nebulous accounts like “consulting

fees.” The purchase of goods can be verified by a check of inventory, but there is no

inventory for these kinds of services. It is therefore more difficult to prove that the

payments are fraudulent. The discussion of exactly how fraudulent disbursements are made

is found in Chapters 4 and 5.

Preventing and Detecting Kickback Schemes

Kickback schemes are in most respects very similar to billing schemes, which were

discussed in Chapter 4, with the added component that they include the active participation

of a vendor in the fraud. Because of their similarity to billing schemes, the controls

discussed earlier relating to billing fraud—separation of purchasing, authorization,

receiving and storing goods, and cash disbursements; maintenance of an updated vendor

list; and proper review and matching of all support in disbursement vouchers—may be

effective in detecting or deterring some kickback schemes.

These controls, however, do not fully address the threat of kickback fraud, because they are

principally designed to ensure the proper accounting of purchases and to spot

abnormalities in the purchasing function. For example, separation of duties will help

prevent a billing scheme in which an employee sets up a shell company and bills for

nonexistent goods, because independent checks in authorization, receiving, and

disbursements should identify circumstances in which a vendor does not exist or goods or

services were never received. But this is not an issue in most kickback schemes, because the

vendors in these frauds do exist, and in most cases these vendors provide real goods or

services, albeit at an inflated price. Similarly, because the vendor is conspiring with a

purchasing agent or another of the victim’s employees, the fraudulent price will usually be

agreed to by both parties at the outset, so that the terms on the vendor’s invoices will match

the terms on purchase orders, receiving reports, and so forth. On the face of the documents

in the disbursements voucher, there will be no inconsistency or abnormality.

Many kickback schemes begin as legitimate, nonfraudulent transactions between the victim

organization and an outside vendor. It is only after a relationship has been established

between the vendor and an employee of the victim organization (e.g., a purchasing agent)

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that the conspiracy to overbill the victim organization begins. Since the vendors in these

schemes were selected for legitimate reasons, controls such as independent verification of

new vendors or independent approval of purchases will also not help detect or deter many

kickback schemes.

In working to prevent and detect kickbacks, organizations must tailor their efforts to the

specific red flags and characteristics of kickback schemes. For example, the key component

to most kickback schemes is price inflation: the vendor fraudulently increases the price of

goods or services to cover the cost of the kickback. Organizations should routinely monitor

the prices paid for goods and services, comparing them to market rates. If more than one

supplier is used for a certain type of good or service, prices should be compared among

these suppliers as well. If a certain vendor is regularly charging above market rates, this

could indicate a kickback scheme.

Organizations should also monitor trends in the cost of goods and services that are

purchased. If a supplier raises its prices to cover the cost of kickbacks, this increase may be

noticeable. Furthermore, kickbacks, like most other fraud schemes, often start small and

increase over time as the fraudsters become emboldened by their success. Kickback

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