Are You a Scammer? Cheating on Corporate Expense Reports
Here's how buys at Victoria's Secret, iTunes and a psychic hotline were found.
Feb. 19, 2009 — -- You'd think that given the horrible job market, people wouldn't risk fudging their corporate expense reports. But I hear about people skimming a little off the top almost as often as I hear about people getting their hours or paychecks slashed these days.
Just this week, a human resources consultant told me about a manufacturing firm that hired her to get to the bottom of a communication rift between employees and management. What she found was a tangled web of employee expense fraud ranging from inflated expense reports to bogus office supply orders to doctored receipts for reimbursement.
"One guy -- fairly high level -- was actually caught changing all the 0s on his receipts for reimbursement to 8s," she told me in an e-mail. "Can you believe that? He only made off with a couple hundred bucks. Not quite worth your job, is it?"
But don't just take my anecdotal word for it. According to a survey published in December 2008 by U.K. expense management provider GlobalExpense, 30 percent of adults in the U.K. viewed exaggerating expense claims as acceptable and 20 percent admitted to having done so themselves.
Add economic hardship and a belief that they won't get caught to the mix, and 13 percent of employees who regularly claim expenses say they're likely to pad their expense reports. (Curiously, the Association of Certified Fraud Examiners in Austin, Texas, reported in 2008 that fabricated or inflated expense reimbursement schemes accounted for 13 percent of all employee theft in the United States.)
"People feel bitter when they feel like they're not being well compensated or they're being overworked," said Cynthia Shapiro, author of "What Does Somebody Have to Do to Get a Job Around Here?" and "Corporate Confidential."
And bitterness can be a breeding ground for fudged expense reports and other forms of employee theft, experts said.
"This happens more in recessions because companies get rid of their checks and balances," Shapiro said. In other words, when the HR and accounting cats are away, the office mice will play.
Tough Economy Means Tougher Auditing
That's not to say nobody's minding the financial store in corporate America. Plenty of companies still maintain elaborate internal, external or automated auditing systems. Indeed, during a recession, many companies ramp up their auditing practices in an effort to identify and stamp out wasteful spending -- bad news for those who refuse to play by the expense report rules.
Curious about how these corporate cheaters get caught, I contacted a couple of auditing firms that work with Fortune 500 companies for their take on the matter. There were the obvious dumb goofs: claiming expenses from a day you didn't travel, consistently claiming a higher amount of expenses than your counterparts or rounding up hotel and restaurant bills to the nearest zero.
Then there were those bogus expense claims so outrageous, so brazen that they warrant a bit more discussion:
Lingerie, Cattle and Psychic Hotlines -- Oh My!
"When you have a downturn in the economy, you tend to see more fraudulent use of company credit cards," said John Verver, a vice president of ACL Services, an audit technology firm in Vancouver, British Columbia, that serves a majority of Fortune 500 companies, the Big Four public accounting firms and hundreds of government agencies.
What's the tip-off to auditors that you're boldly going where no corporate account has gone before? Charges to stores like Victoria's Secret, Home Depot, Best Buy or establishments that have nothing to do with your line of work, such as salons, spas, even stockyards.
"One customer of ours found that a manager who had a ranch in a remote location was buying steer at a cattle auction," Verver said.
Another audit software firm I spoke to, Oversight Systems in Atlanta, was so incredulous at the gall of some of the corporate scams it uncovered last year that it created the First Annual Fraudies Awards.
Among the winners: The employees of a single company who collectively racked up more than $100,000 in iTunes downloads on their corporate credit cards.
Also: The employee who bought $4,000 worth of goodies from Victoria's Secret on his company credit card. Not only did his employer catch him in the act, the wife he was cheating on did too.And finally, the employee who tried to stick her company with $3,400 worth of calls to a psychic hotline. As Patrick Taylor, CEO of Oversight Systems, said, "The real humor in it is that the psychic didn't warn her that she was going to get caught."
Double Dippers, Short Sellers and Resellers
Another common expense account scammer is the double dipper who tries to bill the company twice for the same purchase. "So you've got maybe three employees, and they all go to lunch together or they all they go to a conference together and they all claim the same amount," ACL Services' Verver said.
Either that, or they claim a restaurant bill both with a receipt they turn in as part of their expense report and via the charge on their corporate credit card statement.
Yet another version of the double dip is having your spouse meet you at the gas station when you're filling up the company car and filling up their tank on the company card too, Oversight Systems' Taylor said.
Then there are the short sellers who inflate purchases of company inventory so they can pocket a percentage of the cash outlay themselves. At the company my consultant pal was hired to help, one employee was ordering supplies from a friend's firm, with the agreement that only 75 percent of the inventory would arrive so that the guy ordering the supplies could pocket 25 percent of the payment issued by his company.
But my favorite expense account scam (not because I condone any of this, but because I can't believe the guy had the moxie to dream it up and then go through with it) is the Fraudie winner for best foreign travel scam.
According to Oversight Systems, this employee booked himself an international plane ticket for a business trip using his own credit card, submitted a copy of the ticket for reimbursement from his company, swapped the ticket for an airline credit, sold the airline credit on eBay and stayed home from work the week he was supposed to be traveling.
His downfall? "There were never any expenses from the rest of the trip," Taylor said. No hotels, no rental car, no meals.
Scam Not Worth the Price
I think you can see where this is going. Corporate auditors have witnessed every expense account scam in the book, and they're wise to both the sneaky and stupid ways that undercompensated, overworked, disgruntled employees think. Tempting as it may be, it's just not worth the risk to your reputation, your livelihood and your criminal record to try to scam your company.
Sure, there's a chance you'll get away with pilfering a few hundred or even a few thousand bucks by fudging your expense report. Most likely, though, you won't. And if you thought finding a new job was hard now, try sending out your resume with corporate fraud on your record.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
Michelle Goodman is a freelance journalist, author and former cubicle dweller. Her books — "My So-Called Freelance Life: How to Survive and Thrive as a Creative Professional for Hire" and "The Anti 9-to-5 Guide: Practical Career Advice for Women Who Think Outside the Cube" -- offer an irreverent take on the traditional career guide. More tips on career change, flex work and the freelance life can be found on her blog, Anti9to5Guide.com.