Eliminating Opportunities for Fraud

Case Study 1 - Internet Start-up Company

Plutonium was an Internet start-up company founded in 1988 at the beginning of the technology boom. One of the largest problems for Plutonium was developing the technological systems necessary to support the rapidly expanding user base. Furthermore, due to rapid expansion in the recent years, many of their systems had been added hastily, resulting in poor integration and eroding data integrity. As a result, the CEO of Plutonium announced an initiative to integrate all systems and increase the quality of internal data. In compliance with this initiative, Plutonium purchased an expensive and complex billing system called Gateway, which would automate the billing for thousands of Internet accounts via credit cards. During the integration, Gateway, in collaboration with Visa, created a phony credit card number that could be used by developers and programmers to test the functionality and integration of the Gateway system. Moreover, this credit card number was fully functional in "live" environments so that testers and developers could ensure functionality without being required to use actual personal or company credit card numbers. (The activity on this card was not monitored.) The integration went smoothly; however, it created thousands of corrupt accounts that required fixing.

Jonathan, the manager of the operations department, was responsible for the resolution of all data integrity issues. His team was tasked with fixing all corrupt accounts created by the launch and integration of the Gateway system. As a result, Jonathan was given the phony credit card number, which was kept on a Post-it note in his drawer.

One of the top performers on the operations team was a 29-year-old man named Chris. Chris worked in operations for more than a year, making $15 per hour, the same salary at which he was hired. He was an introvert working to support a family and put himself through school. Chris was the most technologically savvy individual on the team and his overall systems knowledge even exceeded that of his manager, Jonathan. Chris was brilliant in creating more efficient tools and methods to repair corrupted accounts. Therefore, Chris was tasked with conducting training for new employees and updating team members on new processes and tools that he had created. As a result, Chris quickly became a trusted and valuable team member; thus, Jonathan gave him and other team members the phony credit card number in order to further increase the productivity of the team.

However, after six months of working at Plutonium, Chris received an official reprimand from the company for using the company system to access Web sites containing pirated software and music. The FBI attended the investigation and determined that Chris had not been a major player in the piracy. Therefore, Chris was quietly warned and placed on a short-term probation. Jonathan was asked to write a warning letter for the action; however, after a brief conversation with Chris, Jonathan determined that Chris's intentions were good and never officially submitted the letter because Chris was a trusted employee and elevated the overall performance of the team. A few months after the piracy incident, Jonathan noticed some changes in Chris's behavior such as: his computer monitor was repositioned so that his screen was not visible to other coworkers; he had almost all the latest technological innovations; new Palm Pilot, MP3 Player, Play Station, a new laptop, and a new car stereo system; he was going out to lunch more frequently; and he had multiple fake user names and passwords that he frequently used for testing purposes.

Questions Include in the paper and answer Each.
Include a background of the Case ( Less than 150 words)
1. Evaluate this case using the three elements of the fraud triangle to identify:
a. Potential pressures for Chris to commit fraud.
b. Potential opportunities for Chris to commit fraud.
c. Potential rationalizations that Chris could use to commit fraud.
2. What are some of the symptoms that fraud potentially exists in this situation?
3. What could Jonathan have done to eliminate some of the opportunities for fraud?