Case #7: Vendor Conspiracy Fraud

The Conviction:

In September 2009, a federal grand jury indicted a former law firm employee and two senior officials of a printing supply company in an alleged $1 million fraud scheme perpetrated against the law firm. The indictment stated that from September 2002 through November 2006, the law firm’s employee conspired with two officials of the supply company in placing fraudulent orders for “tab dividers” and later submitting numerous fraudulent invoices for payment as if those supplies had been delivered. Allegedly, the amount the law firm overpaid the printing supply company for supplies that were never ordered nor received was approximately $1 million. All three defendants pled guilty in 2010 and are awaiting sentencing.

The Alleged Scheme:
Allegedly, the law firm’s employee processed legitimate as well as fraudulent orders received from the printing supply company. Legitimate orders were faxed by this employee to the supply company’s tab divider department. However, allegedly this same employee sent all fraudulent orders directly to one of the indicted accomplices. This accomplice would then invoice the law firm for the fraudulent orders as if they were delivered. The law firm’s employee would approve those invoices and forward them in batches for payment along with legitimate ones, the indictment said.

Though prosecutors said the alleged scheme totaled approximately $1 million, the indictment suggests that the law firm employee’s share of the proceeds was relatively slim.

The Scheme’s Downfall:
The law firm’s spokesperson declined to say whether the firm alerted the authorities to the embezzlement scheme.

Lessons Learned:

Be informed – learn from the experiences of others. Get involved – and YOU will be prepared.

Read more in Business Fraud: From Trust To Betrayal