MULTI-STATE CHECK FRAUD

The Philadelphia Inquirer reports that a Philadelphia man has been sentenced to 10 years in federal prison for his role in a scheme to steal checks payable to vendors and employees of the city of Arlington, Texas. Prosecutors said the man was romantically involved with his codefendant, an accounting department employee of the city of Arlington. The codefendant stole checks between February and June 2007 and sent them to the Philadelphia man who, in turn, gave the checks to a second codefendant to deposit into a business account. The man was convicted of conspiracy and bank fraud in May 2010, which was his fourth federal fraud conviction.

Lessons Learned

Reviewing financial controls — particularly in regard to check authorization and issuance — as well as monitoring financial statements and reporting is an essential part of an organization’s anti-fraud program. In this case, several checks written to pay legitimate vendors and employees of the city were readily stolen and falsely endorsed. Oversight and control over employee access to checks is an important component of overall sound financial management. Controls over the reporting and follow-up related to missing checks need to be robust — with every effort made to address the possibility of fraudulent behavior. The fact that checks were being stolen and deposited in a Philadelphia bank account suggests the city’s controls could have been stronger.


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