Money loss due to fraud

Fraud Case: Matthews International Corporation

Fraud refers to cloth loss via deception perpetrated via way of means of people or businesses to reap money, property, services, or to advantage a commercial enterprise advantage. The Fraud case at Mathew International Corporation in Pittsburgh is an instance of white-collar fraud. Federal investigations into the fraud at Mathews International discovered a white-collar fraud in which workplace employees inside the business enterprise had been involved. The corporation which turned into commenced in 1850 via way of means of John Mathews is a publicly-traded corporation with branches in six continents and over 10,000 employees. This business enterprise focuses on cemetery products, forged bronze memorials, pix imaging, and architectural plaques.

Factors of the case

Mathews International misplaced greater than $15 million in an employee-related fraudulent scheme in one of the biggest fraud cases in Pittsburgh. $4 million was lost between 2013 and 2015 even though investigations indicate that the fraud began in earlier. Company documents indicate that the employee siphoned funds from the company for years. The company revealed to the Securities and Exchange Commission that discovery in its third-quarter financial revealed a 14.8 million theft over several years. However, the company’s management did not disclose how the money was stolen or how the discovery was made. Consequently, the company and the US Attorney’s office launched investigation. Cindy Mills, a former employee who worked in the accounting department of Mathews International’s bronze division was put under investigation. Mills was a treasury specialist who handled cash and bank accounts at her department. Her LinkedIn profile indicates that she had worked at Mathews for 34 years. Federal investigators found millions of dollars in cash and assets form Cindy Mills and her husband, Gary Mills. These findings opened a series of other investigations relating to the embezzlement of funds at Mathews international. She is under investigation for bank fraud, mail fraud, money laundering and tax evasion. As a result of the investigation and recovery, her accounts which had over $1 million were frozen; several luxury cars under her name and a yacht were seized. Her husband, Gary Mills who runs a charter boat fishing company is mentioned in the seizure even though he is not a suspect in any of the investigation. Even though the company alleges loss of more than $15 million, the federal prosecutors in Pittsburgh have established that she stole $9.8 from Mathews International between 1999 and 2015 (Ansari). The company indicated that it would recover the money through insurance and items purchased by the stolen money. The company had also recorded another fraud activity in January. Peter A Kalemon, an employee at Mathews International was sentenced to prison for stealing more than $400,000 by cashing out fraudulent checks and fake invoices.

As can be seen from Mathews International’s fraud incident, most fraudulent activities are done over a number of years before they are discovered either through suspicion or auditing. Most fraudsters work within the company’s finance department and often manipulate company books to indicate that they are well balanced. In such a case it is difficult for auditors to discover any embezzlement in the corporation as soon as it. Whistleblowing is the main way through which such sophisticated fraudsters can be discovered.

Internal controls

Internal controls within an organization help to safeguard company assets and prevent fraudulent activities by tracing where company money goes (Cascarino). Most companies do not have fraud control mechanisms hence rely on internal auditors to manage fraud, identify fraud indicators and propose mechanisms for fraud prevention. However, corporate auditors may miss long-term fraud schemes that evade routine audits. Internal controls prevent the misappropriation of company assets, improve efficiency and help the business to achieve its objectives. It might take long to unearth fraud in a large corporation such as Mathews international when there are weak internal controls. The control of company money should not be left to a single individual. Money is sensitive and the most targeted business asset by fraudsters. Therefore to ensure that the company is protected against fraud, the flow of money should begin with an individual who generates the payment, another to post and the third to verify.  Such checks are necessary for ensuring that errors and fraud loopholes are sealed. Implementation of internal controls helps to reduce fraud.

Who was fraud?

The federal investigators established that between 1999 and 2015, Cindy Mills stole $9.8 million shillings from Mathews International Corporation. Peter A. Kalemon was also arrested in a fraud case involving more than $400,000. Since the cases of fraud had been ongoing for several years, Mathews International lost more than $15 million (Bowling). The two mentioned individuals were neither members of high-level nor mid-level management. However, when such incidents occur, members of the management at all levels are held responsible.

Conclusion

Fraud occurs in an environment where there are institutional weaknesses and opportunities. A fraud incident usually begins as a test of the system and then develops into a bigger scheme. It is important for the management to put in place effective control measures that will ensure that such incidents are detected and prevented before they develop into larger schemes. Fraud affects a company’s reputation and financially. The loss of assets and reputation if not properly handled may destabilize even large corporations.

The fraud incident at Mathews International has provided insights into what a regular fraudulent activity can develop into. First, it indicates that the absence of internal controls may have severe consequences. Mathews International did not give details of how the fraud was discovered. This means that all audits carried out since the fraud started were unable to detect the fraud. Given the period the fraud by Cindy Mills had taken to be discovered indicates that her activities were well covered against all existing controls. She managed to steal a large amount of money from the corporation without being detected despite the fact that she was a lower level employee. Therefore, the discovery must have been as a result of suspicion and whistleblowing by a fellow employee. Secondly is that fraud can be carried out by any employee who has access to company money and understands the system weaknesses. Unlike in scenarios where the senior and mid-level management are involved in fraud, the case for Mathews International involved lower level employees. Therefore, the focus on fraud should not overlook any level of management and employee.

Finally, fraud is a legal aspect, and those who are found to engage in fraudulent activities face the force of the law. Cindy Mills and Peter Kalemon are in custody following their fraud activities at Mathews International. Therefore it is important that employees refrain from such activities that may have them arrested or lose their properties and dignity. Control measures also need to be supported by all employees

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Works Cited

Ansari, Azadeh. ”Busted: Feds Charge Cashier With Stealing $9.5 Million”. CNN. N.p., 2015. Web. 17 Mar. 2017.

Bowling, Brian. ”Feds Investigate $14.8M Embezzled From Pittsburgh-Based Matthews International Corp.”. TribLIVE.com. N.p., 2015. Web. 18 Mar. 2017.

Cascarino, Richard E. Corporate Fraud and Internal Control: A framework for Prevention. Hoboken: Wiley, 2013. Print.