Over the course of two
years, each time he issued a cheque reimbursing an employee for expenses,
the thief, employed as an accounts payable clerk, issued a duplicate
cheque to himself and then doctored the records accordingly. The thief had
an intimate knowledge of his employer's accounting and audit procedures
which enabled him to execute the fraud
The fraud was
discovered when the employer's bank contacted the controller and advised
of discrepancies in the account from which the cheques were drawn.
Internal audits failed to discover the fraud. All cheques were within the
defaulter’s authority of $2,500.
The fraud occurred over
two years and amounted to almost $500,000. As soon as it became aware of
the loss, the company promptly investigated the thief’s assets as best
it could and promptly applied to a court for an injunction freezing all
those assets including bank accounts and land.
In the end, the
fidelity bond responded and repaid the company the amount of the loss less
the deductible. The insurer was left to recover from the thief and, in the
end, was only successful in retrieving approximately $800,000. It bore the
balance of the $200,000 loss. Had there been no insurance, this loss would
have been fully born by the Insured company.
