Purell Magazine Construction Fraud The Purell Magazine Construction Fraud case involves James Small, a facilities supervisor at Purell Magazine and Publishing House, who engaged in a sophisticated scheme of occupational fraud. Small was responsible for overseeing the painting operations as part of the company's conversion of its plant in Oakville, Ontario, into an office complex. This massive renovation project involved constructing an auditorium identical to one in the company's European offices. Small's fraudulent activities came to light when the vice president of administrative services, Richard Green, noticed forgeries in a stack of invoices related to the auditorium construction project. An initial investigation revealed that all the forgeries were in the painting division, with a budget of approximately $800,000 a year. Small, who earned about $30,000 a year, had been the only person overseeing the painting operations. Small's fraud scheme involved creating false invoices for the jobs done by the painters. He would take a copy of a trade invoice from an existing painting contractor and, using his home computer, create a replica with slightly different hours recorded for the trade contractors' work. Small would then submit these false invoices for approval, collect the approved invoices, and insert his own replicated fraudulent invoices as approved. This process allowed him to bypass the company's internal controls and obtain cheques for the false invoices. Over time, Small became bolder in his scheme. He started calling the accounts payable department, claiming that a carpenter or painter needed their cheque immediately. Due to his long-standing employment and good reputation within the company, the employees in the accounts payable department accommodated him. Small would then forge the contractor's name on the back of the cheque, endorse it with his own name, and deposit the cheque into his bank account. Small's fraudulent transactions ranged from $1,200 to over $66,000. He refined his strategy by submitting invoices for amounts slightly below what the painters were actually due. This approach, combined with the ongoing construction, meant that the individual invoice amounts did not raise alarms. Despite his fraudulent activities, Small's behavior at the office remained unchanged. He continued to dress the same way, drive the same car to work, and share little of his private life with other workers. However, outside of work, Small's lifestyle became increasingly extravagant. He purchased luxury cars, a boat, invested in real estate, and even bought a second home costing $416,000. These lifestyle changes raised suspicions among his colleagues, including the secretary for the audit department, Joyce Williams, who was also Small's neighbor and bowling team member. After four years without a vacation, Small took a trip to Las Vegas, only to be called back to Oakville, Ontario, where he was confronted by the auditor, the vice president, and two attorneys from the district attorney's office. Small readily admitted guilt, claiming he had expected to get caught. He insisted that no one else was involved and that the total sum of his fraud was about $400,000. However, a review revealed that Small had forged endorsements on more than fifty checks over four years, totaling $1,057,000. Small served only two years of an eight-year sentence in a state penitentiary. At the time of his indictment, his wife filed for divorce, claiming she knew nothing of her husband's crimes. Small expressed remorse in jail, stating that the loss of his family and the public humiliation had taught him a lesson. He acknowledged that the temporary enjoyment of the money was not worth the loss of pride, self-respect, and the harm caused to his family. In writing your response, the following points must be addressed fully: a) Describe Purell Magazine and Publishing House fraud prevention programme and identify any improvements that might be necessary to prevent this type of fraud or at least discover it sooner.
Purell Magazine Construction Fraud
The Purell Magazine Construction Fraud case involves James Small, a facilities supervisor at Purell Magazine and Publishing House, who engaged in a sophisticated scheme of occupational fraud. Small was responsible for overseeing the painting operations as part of the company's conversion of its plant in Oakville, Ontario, into an office complex. This massive renovation project involved constructing an auditorium identical to one in the company's European offices.
Small's fraudulent activities came to light when the vice president of administrative services, Richard Green, noticed forgeries in a stack of invoices related to the auditorium construction project. An initial investigation revealed that all the forgeries were in the painting division, with a budget of approximately $800,000 a year. Small, who earned about $30,000 a year, had been the only person overseeing the painting operations.
Small's fraud scheme involved creating false invoices for the jobs done by the painters. He would take a copy of a trade invoice from an existing painting contractor and, using his home computer, create a replica with slightly different hours recorded for the trade contractors' work. Small would then submit these false invoices for approval, collect the approved invoices, and insert his own replicated fraudulent invoices as approved. This process allowed him to bypass the company's internal controls and obtain cheques for the false invoices.
Over time, Small became bolder in his scheme. He started calling the accounts payable department, claiming that a carpenter or painter needed their cheque immediately. Due to his long-standing employment and good reputation within the company, the employees in the accounts payable department accommodated him. Small would then forge the contractor's name on the back of the cheque, endorse it with his own name, and deposit the cheque into his bank account.
Small's fraudulent transactions ranged from $1,200 to over $66,000. He refined his strategy by submitting invoices for amounts slightly below what the painters were actually due. This approach, combined with the ongoing construction, meant that the individual invoice amounts did not raise alarms.
Despite his fraudulent activities, Small's behavior at the office remained unchanged. He continued to dress the same way, drive the same car to work, and share little of his private life with other workers. However, outside of work, Small's lifestyle became increasingly extravagant. He purchased luxury cars, a boat, invested in real estate, and even bought a second home costing $416,000. These lifestyle changes raised suspicions among his colleagues, including the secretary for the audit department, Joyce Williams, who was also Small's neighbor and bowling team member.
After four years without a vacation, Small took a trip to Las Vegas, only to be called back to Oakville, Ontario, where he was confronted by the auditor, the vice president, and two attorneys from the district attorney's office. Small readily admitted guilt, claiming he had expected to get caught. He insisted that no one else was involved and that the total sum of his fraud was about $400,000. However, a review revealed that Small had forged endorsements on more than fifty checks over four years, totaling $1,057,000.
Small served only two years of an eight-year sentence in a state penitentiary. At the time of his indictment, his wife filed for divorce, claiming she knew nothing of her husband's crimes. Small expressed remorse in jail, stating that the loss of his family and the public humiliation had taught him a lesson. He acknowledged that the temporary enjoyment of the money was not worth the loss of pride, self-respect, and the harm caused to his family.
In writing your response, the following points must be addressed fully:
a) Describe Purell Magazine and Publishing House fraud prevention programme and identify any improvements that might be necessary to prevent this type of fraud or at least discover it sooner.
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