Occupational fraud may be the most costly and common type of financial crime in the world, according to the Association of Certified Fraud Examiners (ACFE). “Occupational fraud” means fraud committed by individuals against the organizations that employ them. In 2021, the ACFE estimated that $4.7 trillion is lost to fraud globally.
Asset misappropriation schemes, the most common, have a median loss of $100,000.00. Financial statement fraud schemes, the least common, have a median loss of $593,000.00. Several cases of fraud in 2022 topped those numbers. From purchases for Apple to postal workers in New Jersey, here’s a list of five of the biggest fraud schemes of the year.
- Employee Theft at Apple
Dhirendra Prasad, who for worked as a supply chain buyer for Apple, is estimated to have cost the company $10 million. Apple alleges that Prasad took kickbacks, stole parts, and caused the company to pay for goods and services it didn’t receive. Prasad is accused of conspiring with two vendors to commit fraud and launder money. The U.S. government has seized approximately $5 million in property and cash from Prasad, who is also being charged with tax evasion. Prasad pleaded guilty in November 2022.
- Employee Fraud at the New York State Department of Labor
Wendell Giles and Carl DeVeglia, two New York State Department of Labor employees, allegedly used their state computer systems to approve false applications in 2020 and 2021 for unemployment insurance and the federal Pandemic Unemployment Assistance (PUA) program. Giles and DiVeglia recruited family members and friends to submit false applications over the phone and to lie about eligibility questions. They pocketed a share of the benefits. DiVeglia even texted Giles to suggest a vanity license plate for Giles’s new vehicle, “TY PUA” (“Thank You Pandemic Unemployment Assistance.”). Giles responded, “Lol.” The pair pleaded guilty and admitted to misappropriating $826,530.
- Employee Theft at the U.S. Postal Service
Three U.S. Postal employees and six co-conspirators were charged with perpetrating a $1.3 million fraud and identity theft scheme. The defendants engaged in a years-long scheme to manipulate credit card companies and major retailers across New York and New Jersey by stealing credit cards in the mail and using those cards to purchase, and subsequently sell, luxury goods, according to U.S. Attorney Damian Williams. USPS Inspector-in-Charge Daniel B. Brubaker said, “These nine defendants…sought to enrich themselves by stealing mail directly from hundreds of postal customers. They further compounded their crimes by committing identity theft against those customers to facilitate their elaborate scheme to defraud several national financial institutions. Make no mistake, the Postal Inspection Service will not allow thieves, no matter who they are, to use the U.S. Mail to harm postal customers or the financial institutions that serve them. We are pleased the members of this criminal syndicate have been apprehended and their crime spree brought to an abrupt end.”
- Employee Theft at Home Depot
Adrian Jean Pineda, an employee at Home Depot, used play money to steal approximately $400,000 from a Home Depot in Arizona. Pineda was responsible for counting the cash in the store’s registers and then putting the money in a deposit bag that went to Wells Fargo. Instead, he purchased “Prop Money 100 Dollar Bills” (realistic double-sided fake money) from Amazon.com and allegedly replaced the real money with the fake money. The scheme was discovered when Home Depot began to investigate the thousands of dollars that were missing. Pineda carried out his scheme for four years and was eventually caught on surveillance camera replacing cash in the registers with fake money from his wallet. Investigators said Pineda had become bolder over time, purchasing a new car and hiring a personal trainer. “It was evident that he was spending much more than he was making,” said Frank Boudreaux Jr., the special agent in charge with the U.S. Secret Service’s office in Phoenix. Pineda was arrested and charged with the theft.
- Employee Theft of Hunger Relief Monies
The Justice Department recently charged 48 people in Minnesota with stealing $240 million by billing the government for meals they did not serve to children who did not exist. The case is the largest fraud uncovered in any pandemic-relief program. The participants targeted two federal food-aid programs, which were intended to feed children in after-school programs and summer camps. The programs were reconfigured during the pandemic to reach millions of children stuck at home, pouring in billions of dollars more and changing the rules to let families pick up meals to go. The defendants allegedly faked receipts for 125 million meals. One accused conspirator had filed paperwork stating he was feeding 5,000 children a day in a second-story apartment. Other defendants used websites, such as listofrandomnames.com, to create fake lists of children they could charge for feeding, and a number-generating program to produce ages for the children they were supposedly feeding. “The subjects in this case weren’t interested in feeding our future,” said Michael Paul, a special agent for the F.B.I. “They were interested in feeding their own gluttony.” Of the 48 defendants, several have been arrested, some have turned themselves in, and others have fled the country.
As a team of forensic accountants, SDC CPAs handles multiple employee theft/dishonesty and computer fraud claims on a daily basis. The claims have ranged from thousands to millions of dollars misappropriated. No two cases are the same, but they share similarities. They all serve as cautionary tales for business owners to be wary. Taking stock of existing safety measures now could mitigate or prevent losses in the coming year.
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Association of Certified Fraud Examiners. “Occupational Fraud 2022: A Report to the Nations.” https://legacy.acfe.com/report-to-the-nations/2022/. Last accessed November 28, 2022
United States Attorney’s Office: Northern District of California. “Former Apple Employee Admits Defrauding Apple Of More Than $17 Million.” United States Attorney’s Office: Northern District of California, November 1, 2022. https://www.justice.gov/usao-ndca/pr/former-apple-employee-admits-defrauding-apple-more-17-million. Last accessed November 21, 2022.