CLAIMS SCENARIOS

Crime Scenarios

CRIME


The following scenarios are provided to show the importance of having the proper coverage. All are real claims that have occurred along with the response from the insurance company; the names have either been changed or omitted to maintain anonymity.

If you would like to know more about how these coverages can help protect you and your business, please contact a Swarts, Manning & Associates representative.


Out of Control Controller

Coverage: Crime

Cause of Action: Employee Theft (Phantom Vendor)

Type of Organization: Fine-dining Restaurant

Description of Event: A restaurant’s controller had check-signing responsibility as well as access to the organization's checking account. During his employment, the employee set up a fictitious firm that allegedly provided financial services to the organization. The loss wasn't discovered until after the employee had left the   organization and was caught doing the same thing to his next employer, at which time he admitted that he had established the phantom firm for the sole purpose of stealing from his employer.

Resolution: A thorough investigation determined that the controller had taken nearly $600,000.



Untrustrworthy CFO

Coverage: Crime

Cause of Action: Employee Theft (Embezzlement)

Type of Organization: Private Company

Description of Event: The CFO and member of the board of directors of a restaurant chain had full access to his company's accounts. Over several years, this trusted employee gave himself unauthorized salary increases, bonus checks, and expense allowances. The fraud was discovered when an outside consulting firm conducted a thorough audit.

Resolution: The CFO embezzled more than $700,000.



Phony Consulting Firm

Coverage: Crime

Cause of Action: Employee Theft (Phantom Vendor)

Type of Organization: Trade Association

Description of Event: A trade association's human resources manager recommended that her organization hire an outside accountant to attempt to reduce the association's modifier on workers' compensation claims, thereby reducing payments. Senior management approved the HR manager's suggestion and even publicly congratulated her for her money­saving idea. The HR manager then set up a phony consulting firm and billed the organization for this and other consulting services that were never provided. The HR manager's actions went undetected for more than two years, until the accounting staff began questioning the billing amounts.

Resolution: An audit determined that the HR manager had stolen more than $500,000.



Invented Employees

Coverage: Crime

Cause of Action: Employee Theft (Payroll)

Type of Organization: Private Company

Description of Event: The payroll clerk for a food supply company added several relatives to the payroll. He faithfully deposited paychecks into the phony employees' bank accounts for nearly three years before he left the company and the new payroll clerk discovered the scheme.

Resolution: The company determined that the crooked clerk had made phony payroll payments totaling more than $300,000 to his relatives.


Go To Blog