Case Study

Internal investigation uncovers 6 year, $3 million fraud

Stroz Friedberg is a specialized risk management firm built to help clients solve the complex challenges prevalent in today’s digital, connected, and regulated business world

Internal investigation uncovers 6 year, $3 million fraud

Concerned over excessive office supply costs from a single vendor, a major insurance company hired Stroz Friedberg to conduct an internal investigation into a long-term employee. Stroz Friedberg’s preliminary covert investigation of the suspected employee and subsequent due diligence of the vendor revealed that the vendor was a non-existent company formed by the employee to issue false invoices to the insurance company for office supplies. The findings were stunning: Not only did the “vendor” share the employee’s home address, but all of the invoice payments had been handed directly to the employee himself who claimed that the account would be better served with his personal interface. We determined that, over a six-year period, more than $3.6 million in supplies had been billed and paid for, but never delivered.

Stroz Friedberg analyzed invoices, checks, delivery records, and storage capacity relating to the investigation and compared the company’s financial documents, including checks payable to the vendor. Additionally, Stroz Friedberg was able to trace the money paid to the employee/vendor to multiple foreign-based bank accounts controlled by the employee. Stroz Friedberg’s investigation included over 40 interviews; forensic analysis of the hard drive of the employee’s work computer, server, and backup tapes; the review of previous internal and external audits of the company; and a field investigation in the foreign country where the employee previously resided and where four bank accounts and several homes were identified as being controlled or owned by the employee.

In addition to submitting an internal report providing recommendations on financial controls and physical security safeguards, Stroz Friedberg assisted the client in preparing a referral of the matter to federal authorities for prosecution. The employee pled guilty and received a substantial prison sentence.

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