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4 High-Profile Cases of INSIDER FRAUD Revealed (And How To Prevent It)

August 10, 2023

by

Paul Dixon

#

SAPCompliance

Attention-grabbing headlines describing cases of nefarious employees swindling their employers in intricate fraud schemes are increasingly common in news sites worldwide. After all, it's a surging problem that collectively costs businesses billions of dollars annually.

And here is a statistic that should concern CFOs globally: According to a KPMG report, since Covid-19, insider fraud has significantly increased. Why? Because a combination of economic challenges and the adoption of hybrid work have created new reasons and opportunities to commit the crime.

But back to the high-profile internal fraud cases. This VOQUZ Labs article will reveal and explain four famous cases involving well-known global companies.

Some are worthy of a movie script or a Netflix crime series - except they are all real. And importantly, we'll also discuss how companies can mitigate the risk of becoming victims by automating internal controls processes.

Here are the companies that were all defrauded by employees that we'll discuss in the article:

  • Apple
  • IKEA
  • ING
  • Amazon

1. Apple Employee Swindled a Massive $17 Million (2023)

The first real-world internal fraud case involves an employee who took a big bite of an apple that wasn't his - so much so that the individual began a three-year jail term in April 2023.

Here's what happened: Former Apple employee Dhirendra Prasad worked as a buyer in Apple's global service supply chain in the US between 2008-2018.

According to federal prosecutors from the Department of Justice (DOJ): "Prasad admitted he began to defraud Apple as early as 2011 by taking kickbacks, inflating invoices, stealing parts, and causing Apple to pay for items and services never received."

A significant facet of this case is how Prasad and his co-conspirators (external vendors) manipulated invoices and colluded to deceive Apple's internal controls system. The DOJ also alluded to the insider information that Prasad would have known, helping to design fraud-detection techniques to avoid detection.

We don't know the details of the case apart from the information publicly made available by the DOJ, but here are two possible reasons how the fraud could have happened:

  • Lack (or ineffective) of a three-way match system
  • Inadequate segregation of duties (SoD)

Forward-thinking companies can strengthen the above processes by embracing internal controls automation, which alerts businesses to potential internal fraud threats far sooner than manual ones.

For example, VOQUZ Labs' remQ Business Inspector (an add-on to SAP) is internal controls automation software for organizations that use SAP ERP or S/4HANA as their ERP system.

BROCHURE – the benefits of our products!

remQ - Stop losing your money to fraud!

remQ is a continuous monitoring software for SAP ERP and S/4HANA, with a large library of built-in controls that help check master data and business processes to avoid financial losses through errors and fraud. remQ can be set up in less than a day, works regardless of organization size and industry, requires no consulting project, and reduces the cost of compliance through automation.

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2. IKEA Employee Jailed for Stealing $400K (2008)

For the next real-world occupational fraud case, we will rewind the clock to 2008. It was a year when athletes were running around Beijing's Bird's Nest Olympic stadium - but it was also when a 25-year-old IKEA employee in the US was running an internal fraud scam that netted him $400K (and prison time).

And this is what happened: Prosecutors said that the ex-IKEA employee used records of legitimate purchases to issue unauthorized refunds to himself for merchandise that customers never returned.

But how was this possible?

Again, we don't know the confidential specifics of the case, and everything written below is speculation. But as this was 2008, ineffective manual internal controls and lack of proper oversight likely contributed to the employee's ability to carry out the fraud.

And putting an internal controls manager hat on and examining in further detail what could have happened - it's highly possible that the Swedish furniture giant's business process data (customer purchases are part of this data) was not effectively monitored.

In 2008, many companies, including IKEA, will have relied on manual internal controls processes, which in all likelihood, made it easier for the employee to steal half a million dollars before anyone noticed.

However, what's changed in 2023?

The following may be surprising to some of you reading: Nothing has changed for organizations that still use ineffective manual internal controls processes that are a fraudster's best friend.

But everything is changing for businesses making the shift to internal controls automation.

Why? Because today these kinds of occupational fraud could cases can significantly be deterred or detected far sooner (e.g. red-flag alerts in real-time) by implementing automated internal controls systems - such as remQ for SAP.

3. ING Employee Embezzled $8.5 Million (2009)

Nathan John Mueller is now a fraud and ethics speaker and talks at conferences worldwide (you can watch a video of him here). But in 2009, he was sentenced to 97 months in prison for embezzling $8.5 million from ING, the multinational banking corporation.

At the time, he was an accounting manager at the Dutch financial giant and discovered he could (illegally) sign and approve checks up to the value of $250K.

But how? What was the weakness in the ING internal controls processes?

In two words: shared passwords. It sounds unfathomable, but Nathan could log in to ING's ERP system as someone else and stole millions of dollars by fraudulently signing checks as colleagues - and then approving them under his name.

And as discussed earlier in the article, with the incredible advancements in technology enabling internal controls automation, processes have evolved significantly. Automated, continuous monitoring systems (like VOQUZ Labs' remQ for SAP) have become instrumental in preventing and detecting fraud far sooner.

WHITE PAPER – enhance your knowledge!

Reduce Fraud & Boost Cost Savings by Automating Internal Controls

Our White Paper explains how using robust controls and automation, organizations can better manage fraud risks, comply with regulations, improve operational efficiency, and save substantial costs.

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4. Amazon Defrauded of Nearly $10 Million by Employees (2023)

The fourth shocking employee fraud case comes from e-commerce giant Amazon - specifically in Georgia in the US. In July 2023 (only weeks ago at the time of writing), the US DOJ announced a 16-year prison sentence for the crime's mastermind: Kayricka Wortham.

This fraud scheme involved fake vendors and fictitious invoices. Recommended reading: If you'd like to read a detailed report specifically about the Amazon case, our whitepaper will be insightful - Reduce Fraud & Boost Cost Savings by Automating Internal Controls.

Closing Thoughts

This article revealed four cases of employees working at famous companies who swindled their employers for millions of dollars with elaborate internal fraud schemes. But remember this:

It's just the tip of the iceberg.

If you search in Google News for terms such as insider, employee, occupational or internal fraud, you will see how ubiquitous the problem is - perhaps your organization has been a victim too. And if your business uses SAP as its ERP system, VOQUZ Labs' remQ software can help you mitigate the growing problem with a solution that offers an immediate ROI and can be set up in a day.

VOQUZ Labs remQ Business Inspector software operates as a SAP add-on with a library of 100+ pre-built shipped controls ready to run. You can click here to learn more about how remQ can assist your business with its goals to cut audit errors, reduce fraud, and stay compliant within your SAP ERP or S/4HANA environment.

ABOUT THE AUTHOR

Paul Dixon

Paul is a RegTech content writer & strategist with extensive experience in digital marketing and journalism. His work has appeared in the Guardian newspaper. He also holds a degree in International Relations, where he studied global sanctions compliance and cross-border finance.

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