| National Marketing Corporation –Case Study | | | | |

|

Section A I would explain to Fred that I will keep his name confidential and would discuss with him if I felt the need to disclose for his permission before doing so. Unfortunately, I do not have the authority to guarantee his employment. What I can do is document his involvement and investigate Rick’s assessment of Fred’s performance in case it becomes an issue. First, I would access both personnel files to gather any kind of personal data that could help get an idea of each of their personalities. How many times has Fred been “passed over” for the position? Are there any complaints filed by him or about him? In Rick’s file I understand he was hired by the COO because they worked together but was anyone else involved in the hiring process? Was there a background check performed? What are his salary and bonuses? Is he living beyond his means? The fact that their relationship is deteriorating is important because Fred may be trying to lash out at Rick if he’s worried that he’s going to be fired before he can retire. Rick may be trying to get rid of Fred if he is actually committing fraud. Depending on the size of the company, have I met both of them? What are my perceptions? Do I agree with Fred’s description of Rick as a “super salesman” type, flashy dresser, and is he driving a Mercedes? The first allegation concerned Rick’s relationships with some of the vendors. I would pull the vendors information and background check, assuming one was done, to determine if they are a legitimate business with references and see if any of Rick’s relatives, etc. work there. The second allegation concerns expense reports so I would access the reports and examine the receipts submitted and verify that they were filed with proper documentation and if the amount was reasonable. Was it only one time or twenty for the same client? The same place? The last allegation concerning the one supplier that is used without competitive bidding, I would verify the company’s credentials and compare their bids with industry averages and see if any clients complained about the quality of products produced by the company. I would wait to confront Rick until I investigated the bids of Bravo Graphics. If everything seems to be legitimate I would inform him that I received an anonymous tip and explain the allegations and ask for comments, etc. I wouldn’t want to tip him off if he is guilty of fraud and try to destroy the documents proving before I found them. I believe it is a very hard decision to make on when to confront Rick it all depends on what the investigation uncovers. It depends on the scope whether law enforcement needs to get involved and how they would want to handle it or if it is kept in house. I would just make sure I’m not accusing him unless I have undisputed evidence. I would tell Rick’s boss after investigating and determining the scope of the fraud and also after ensuring the COO wasn’t involved. They worked together before and he recommended Rick so I would verify he isn’t involved before talking to him. If I believed the COO is involved, I would go to his boss to discuss the next step. The key is not giving them a chance to destroy evidence and uncovering all parties involved.
Section B After reviewing the personnel files, I have some concerns that Fred’s motivation is based on his resentment for being passed over, the changes to the department through new innovations that are improving quality, reducing personnel and staying below their target expenses. There was concern about sabotage to the new computer system so it isn’t unreasonable to think he could exaggerate or allude to Rick behaving inappropriately or committing fraudulent activities.
Section C Based on the evidence that Bravo Graphics received jobs using overpriced bids, I would definitely look into the other allegations and not confront Rick. Unfortunately trying to find evidence of receiving gifts from vendors is hard to prove since there usually isn’t any hard evidence. I would look into the expense reports to determine if there is any fraud there but the bidding is serious enough that I would notify the COO, assuming he isn’t involved, and determine how best to confront him. Whether they want to keep it in house? Will they fire him or let him resign if he pays the money back? Will the company prosecute? I would investigate Bravo Graphics. Do they have other customers? Since they are located near Rick’s house, is it just a front? Do they file company tax returns? Should charges be brought against Arthur Andrews for creating a fake company? I would try to access bank records of both Rick and Bravo Graphics to track cash flow. In response to the special investigation, I think there should be more segregation of duties. The vendors need have their credentials verified buy the accounting department before being approved as a vendor. This would include checking references, if they filed tax returns, and the fact that their address is near an employee’s home address so is it in a residential area? All bids should have competitive bids and not just given to one vendor. Even if they need to rush the order and can’t wait for the other bids, they should still get them to ensure competitive pricing and rotate vendors when they can’t wait for bids and not use the same one consistently.