Introduction

Background

Jake Walker, on 27 July 2017 received a notice from the Bardigo First Bank, where his company CarpetCircuit Décor holds its accounts, stating that the firm’s line of credit was overdrawn by a significant amount, which was initially set up for contingencies. The bank notice came as a shock for Mr. Walker as the account, which was set up within an upper limit of $300,000, was overdrawn by $50,000, mas maintained for his firm in the case of unprecedented events requiring urgent cash injection. Also, Mr. Walker was not aware of any such contingencies that might have arisen in the recent past. Apart from the notice from the bank, Jake Walker also received an anonymous letter containing a newspaper clipping warning him to be careful and to watch his staff. The anonymous whistle blown through the newspaper piece alerted him of the misdeeds going on in the company under his watch. These factors, coupled with the common discontent expressed by some of the trusted staff motivated Jake for taking the help of an investigating firm. Mr. Walker engaged our services to get his company examined for a potential financial fraud.

Executive Summary

The investigation started when Jake Walker, manager and co-owner of CarpetCircuit Décor received notice from the bank citing his line of credit had been overdrawn, which coupled with an anonymous whistleblower letter made him aware of the possibility of wrongdoings in his firm. Mr. Walker had been experiencing several issues concerning his business including quality concerns being raised both in and outside the company from the client. Mr. Walker was especially concerned about the increasing accounts of customer dissatisfaction. Daisy Sefton had been with CarpetCircuit Décor since long and was handling the accounts department of the firm. Her brother in law Pham Anh (Andy) was also employed in the company as a warehouse manager. Daisy asked for a raise on Wednesday, July 26, 2017, due to her father’s poor health, who later was found to have been dead for the past six years. The fraud investigation team examined each and every aspect of the warehouse and accounts department and informally interviewed the office employees under the guise of employees from another company due to a business deal with CarpetCircuit Décor. The examination of the personal work desk and cabinets revealed several key invoices and documents indicating three probable areas of asset diversion, purchasing/supplier fraud, sales fraud and billing fraud. Upon interviewing Daisy Sefton she admitted to having had played a key role in the embezzlement scheme that was running in the company.

Scope

Approach

Fraud Examination Team Members

CLIENT NAME, Chief Financial Crime Investigator, Chase Klim an agent was appointed as a recently graduated accountant, was deliberately brought in to shadow Daisy Sefton. Jasper Binchy was planted in place of Pham Anh (Andy) as the warehouse manager. Further, each fraud investigators were accompanied by an external auditor to examine the accounts with the possibility of a fraud. Finally, the investigative team included Angus, an IT Forensic Investigator.

Procedures

As a part of the examination, the Financial Crime Investigation team undertook the following actions:

Conducted close surveillance of the warehouse and the inventory and gathered evidence about the mix- up that was being carried out wherein Pham Anh (Andy) switched the prime quality Caverra marble tiles from Italy with the “Carverra” marble tiles that were brought from Vietnam.
Conducted a thorough search of Pham Anh (Andy)’s personal property to find a van with the name Marble Impressions stamped on its surface. Apart from Pham Anh’s personal property, the team also undertook a thorough investigation of his office premises and found certain key documents like the evidence of his regular visits to the Ho Chi Minh City in Vietnam.

Individuals Interviewed

Findings

Over the next few weeks, the accounts and the warehouse divisions of the company were scrutinized by the undercover investigating officers posted within these offices. Chase Klim, the agent in the accounts office picked up several interesting pieces of information. It was found that Daisy was being increasingly protective over the general ledger book of the business and refused access to her new mentees, Chase and Carol. Further, it was found that she refrained from assigned key roles and responsibilities pertaining to the sales and receivables accounts to both of them, overriding Jack’s orders to do so. Further, Chase also picked up on the office grapevine network, through Daisy’s friend Mary, the information rotating that Mary was selling most of her home furniture on an online site “Buy, Swap and Sell”. On the Other hand, Jasper Binchy, the investigating agent planted in the warehouse as a replacement for Andy (another prime suspect for business fraud), went through Andy’s personal belongings and found a photocopy of an airline booking receipt which showed that Andy was due to travel to Ho Chi Minh City via Vietnamese Airlines on the same day that he was supposedly travelling to Italy in his garbage bin. However, Andy’s computer records could not be accessed.

On Wednesday, 2 August 2017, Chase Klim, the investigative officer planted in the accounting officer arrived earlier in the office, finding the lights on. It was discovered that Daisy was having an altercation with some unidentified person on Skype, and sounded fairly upset. The gist of the conversation can be summarised in a manner that indicated that someone was desiring money from her with respect to the health of their mother and they had plans to get married. When Chase entered the office, Daisy shut down her computer, made a mobile call and left the premises. At around 8 on the same day, Chase’s co- mentee, Carol came in with Daisy’s purse stating that she spotted her in a coffee shop with her sister, and made a hasty exit after spotting Carol, leaving her purse behind. As per Carol’s account as an eyewitness, Daisy’s sister Rose was driving a fairly expensive car, a new black Maserati, with the name Andy written on the license plate.

Andy used to organize the marble to be delivered at unusual times of the day, usually on the weekends or out of office hours and he is totally responsible for the Caverra marble goods and dispatch procedures.
Further, it was found that there was poor segregation of duties between buying, warehousing, and goods inward, with Andy maintaining control over all functions of the warehouse.

Revelations from the caged section of the warehouse

Revelations from Daisy’s filing cabinet

Second Drawer

A close scrutiny of the second drawer revealed 42 blank CarpetCircuit Décor cheques in a chequebook along with CarpetCircuit Décor NCR receipt books. The receipt books were identified by Jack, however, he claimed that the amounts inked on the receipt books were not aligned with the printed spaces on it, indicating that they were tampered with.

Jack Walker received an email from the Italian manufacturers of ‘Caverra’ marble on Saturday, August 2017, stating that their contract expired with CarpetCircuit in June following their receipt of a cancellation letter signed, which turned out to be an unauthorized email sent from his office.

Upon Andy’s arrival, the units in the caged section of the warehouse increased from 500 to 900, fully packed with marble. The CCTV footage was found to have been removed for the last 24 hours and a check of the access code monitor indicated Andy’s access code was entered at 8 pm on the previous evening and an exit occurred at 7.15am.

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