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Security and Loss Prevention

You have completed your investigation on allegations against a plant employee of an acquired corporation, Lakes Inc. that is based on the basic information given below. Create a report on the results of your investigation and present final results that your investigation has concluded.

The following are the main points of the investigation, including what took place and the findings of the investigation:

1. You conducted an investigation at the plant of Lakes, Inc. based on an anonymous tip that the company received on June 12, 2007 that an employee was submitting false expense claims.
2. The tip stated that an invoice for the purchase of a computer server was false and that the actual purchase was for a high definition (HD) flat screen television.
3. The company requested that you perform the investigation.
4. The investigation took place from August to November 2009.
5. The investigation determined that $8,795.60 in false invoices had been submitted for reimbursement through the purchasing department.
6. The associate director of purchasing and his administrative assistant were terminated.
7. The investigation determined that there was no original invoice on file but only a copy. The purchase was made with a corporate purchased card issued to Mr. Bob Smith, the Associate Director of Purchasing.
8. The vendor, Sterns, was contacted and confirmed that the invoice number on the file copy matched on the invoice they had for the sale of a HD television.
9. Lakes, Inc. maintains a physical asset database in which all nondisposable items with a purchase price of $1,000 or more are recorded. Each item is assigned a unique ID number and barcode label, which are used to track the item. The database is maintained by the administrative assistant.
10. There was no record of the computer server in the physical assets database, and no ID number had been issued for any similar item in the past 10 months.
11. An on-site visit was made to Sterns, an approved vendor since May 2005.
12. The manager, Mr. Ted Jones, advised that in the past 6 months the same individual, Mr. Bob Smith, had made 2 other purchases that he considered odd because he asked that the purchase be held for pick up by either him or his administrative assistant, Ms. Mary Bad.
13. Mr. Jones also noted that Ms. Bad had used Mr. Smith's purchase card to make an additional 3 purchases with the same request that they be held for pick up.
14. Mr. Jones provided copies of the invoices that showed the purchase of a notebook computer, a digital camera, a digital camcorder, a GPS system, and a home theater system.
15. When these invoices were compared with the plant purchasing records it was found that the files contained only copies as opposed to originals. Each of the file copies matched an original invoice as to the invoice number, date, and amount but were different as to what was purchased. All other purchases were made with the same purchase card and approved by Mr. Smith.

Present a narrative report that takes the facts that are presented and demonstrate a step-by-step conclusion of what you believe is the culprit of the fraud.

Present findings step-by-step in a chronological order of time. Please notice dates and occurrences of financial transactions as you go through the 15 facts.

Understand misappropriation of the asset fraudulent disbursement scheme and how it fits in this case.
Conclude results and recommendations of actions toward the criminals of the fraudulent acts.

Solution Preview

To: Board of Directors, Lakes, Inc.

Our company contracted to investigate claims of fraudulent activities were occurring in the Lakes, Inc plant, a company acquired by the parent company. Our investigation was completed between August to November, 2009. Our work focused on the purchasing department, based on an anonymous tip received by Lakes, Inc. on June 12, 2007.

The complaint alleged an employee submitted false expense claims. The tip was specific to an invoice for a computer server that was falsified. That purchase was in fact for a high definition (HD), flat screen television. We have proven this invoice is falsified, as were others. Our investigation determined that fraudulent claims/purchase invoices had been submitted to the company on several occasions, dating back to May 2005. The total activity, according to our calculations comes to $8,795.60. We have also determined the activity was limited to two individuals, Mr. Bob Smith, the Associate Director of Purchasing and his administrative assistant, Ms. Mary Bad. Both have been ...

Solution Summary

The security and loss prevention are examined. The allegations against a plant employee of an acquired corporation are determined.