Chapter Billing Schemes

What they all have in common: Shells, iPads, TVs, and Classrooms

The 41-year-old Chris had a terrific career working for a sizable school district outside of a major Midwest metropolis. Chris was the IT director, and among his numerous responsibilities were buying the hardware and software the school system would require as well as making other necessary IT purchases. After being informed that he would be dismissed following an inquiry that revealed a multi-million dollar loss to the school system brought on by the commission of two different fraud schemes, Chris resigned in 2011.

In Chris's initial plan, he submitted invoices for Technology purchases made specifically for the district's schools. These invoices list the items and services that the district has acquired from legitimate businesses. Chris also authorized the bills or fraudulently obtained the approval of another party for the purchase invoices. The issue that was found suggested that neither the purchasing of products nor the provision of services had ever taken place. Chrishad been successful in forming fictitious corporations in the names of people who were working on his behalf. Chris and his "colleagues" agreed that they would each keep half of the invoice sums and give Chris the other half. By the time the scam was uncovered, the school system had lost a total of $3,333,448 as a result of the fraud operation.

The invoicing of bills for illegally obtained products and services didn't satisfy Chris. He was craving more. Chris came up with a second fraudulent technique in which he made personal purchases from reliable suppliers and then changed the vendor invoices to indicate purchases that would typically be made for classroom use. IPads, TVs, and cameras were a few of Chris's personal purchases. Upon scrutiny, the invoices revealed that the purchases were for projectors, digital microscopes, and computers. The suppliers received payment for the bills. Chris made money by reselling the electronics to other people and depositing the money into his own bank account. The school system was ultimately charged $76,214 for this fraud.

Chris received a federal prison term of 11 years, 4 months. He will also have to pay back the $3.4 million he stole from the school district. If he makes any money while incarcerated, 25% of it will be deducted from his pay. 10% of his gross monthly earnings will be garnished after he is let out of jail and able to work again. The school system won't be able to recoup the damages caused by Chris's scams for a very long time, if ever.

Questions:

1. Describe and describe the operation of a shell business. Provide an explanation of and an example of why Chris 's plan worked.

2. Why shouldn't suppliers be provided with a post office box as an address in relation to shell company schemes?

3. To assist counter invoicing schemes against a victim company, preventative/detective IT measure. Include any measures that may have stopped or caught Chris's plans in relation to his misdeeds. Be precise about the information they would have disclosed.