Accounting departments often don’t have the time or resources to question the legitimacy of every bill that comes across their desks. Unscrupulous criminals can exploit this vulnerability by sending unsuspecting companies invoices for products that were never delivered, services that were never rendered — often from companies that don’t exist.
With hundreds and sometimes thousands of invoices processed every month, how can your company stay ahead of invoice fraudsters? Below are some recent examples to help you know what to look out for.
1. Fictitious Companies
Cecile Nhung Campbell, an accountant at Kia Motors in Irvine, CA, was short on cash and decided to abuse her employer’s lack of anti-fraud protocols. She set up a phony out-of-state company and sent bills to her employer totaling over $1M, which was deposited into Cecile’s shared bank account with her husband. When Cecile’s misconduct was uncovered, Kia Motors pursued criminal charges, and she was sentenced to six years in prison. Her husband was sentenced to four years for his part as an accomplice.
2. Products Never Delivered
Gary Tenaglia, a 64 year old millionaire and businessman, was contracted to remove ice and snow at the Detroit Metro Airport. He claimed to have purchased $1.5M worth of specialty de-icing product that would do the job better than salt. The ice-melting substance was never actually ordered, but Wayne County Airport Authority paid the invoice and Tenaglia pocketed the money. He was charged with wire fraud conspiracy.
3. Suspiciously High Amounts
In 2007, the twin sisters who ran a small parts supply company C&D Distributors LLC realized they could get away with altering their invoices to greatly inflate the shipping costs and prices of their items. Small parts such as washers and bolts, which cost pennies, were invoiced to the U.S. Department of Defense for hundreds of thousands of dollars. These astronomically high charges went unnoticed by the DoD, which later admitted to automatically paying invoices to expedite shipments of crucial items to troops in Iraq and Afghanistan. By the time they were caught, the sisters had received more than $20.5M for goods and services they conjured out of thin air.
4. Phishing Scams
Even large tech companies aren’t immune to invoice fraud. From 2013 to 2015, a Lithuanian man named Evaldas Rimasauskas orchestrated a combined phishing and invoice scheme targeting Google and Facebook. He posed as an employee of Taiwan-based computer manufacturer Quanta Computer, and emailed false invoices to Google and Facebook, who paid him a combined $120M over the course of two years. Rimasauskas was eventually caught and extradited to the US, where he was charged with wire fraud, money laundering, and identity theft. He now faces up to 40 years in prison.
The sheer volume of invoices companies receive may make auditing them seem like an impossible task, but a lack of oversight and anti-fraud controls make your organization vulnerable to fraud like the outrageous examples listed above. Our AP Audit and Contract Audit offers real-time audit of invoices, contracts, and purchase orders to help you identify fraudulent merchants, billing mistakes, and payment term violations to decrease spend in your accounts payable process and give you peace of mind. Get started today.