Scenario: A Case of Corporate Fraud

The CEO of the company Promotions 3.0 is concerned as it has just come to his attention that there is possible fraud involved at his company. The company has 32 employees. Since the startup five years ago, employees have gone from lower than average salaries to average salaries with the directors sharing in the company ownership. Since the companys inception, due the extremely talented and experienced directors, the company revenues have gone from breaking even in their inaugural year to $5 million dollars in year five due to landing some very big accounts which have taken away from their larger competitors.

The following departments appear in the company structure: Finance Director, Sales/Marketing Director; Promotion/Design Director; IT Director; HR Director.

Each department has 5 professionals working under them. They all work online from home except that they convene twice a week at rented offices on the third floor from Office. Office Professional Services Inc. provides support personnel like administrative assistants and they also provide conference rooms and design and graphics equipment, etc. The office space that Promotions 3.0 rents is only shared with a television network affiliate and a childrens toy company. All the companys computers are portable laptops and taken with all personnel only between the rented offices and their homes. On the days when employees meet in the offices, lunch is brought in for them and they eat in the conference rooms.

This tip came from an employee via the ethics anonymous reporting hotline:

Check the internal database, there are several anomalies in the revenue streams. Someone is defrauding the company.

• What potential type of fraud might have occurred? How do you support this allegation?