There’s a lot of Fraud going on now-a-days, but what exactly are we going to call “Fraud” and how are we going to define it? Early in my career things happened which forced me to ponder these questions.
When I was in public accounting, our meal reimbursement was per diem: we collected the same amount no matter what we actually spent. I went to work for a Fortune 500 company and its reimbursement policy was “actual.” Furthermore, for anything under $25, a receipt was not required.
My first week on the road, one night I craved McDonald’s for dinner, $5.87. Anal accountant that I am, I attached the receipt to my expense report. There are two things you must know to fully appreciate this story: 1) $25 back then would be the equivalent of $100 today, 2) it was difficult for one person to spend $5.87 in one sitting at McDonald’s, but I was up to the challenge.
I got a call from my boss. He said, “Don’t ever do that again. Executives with this company do not spend $5.87 for dinner; furthermore, I do not want to see your expense report cluttered up with receipts for anything under $25.” So, from that point on, all my dinners cost between $23 and $24.99, I didn’t have to prove it, and everybody was happy.
Now… are we going to call this “Fraud” or is this one of those “generally accepted” things that’s covered under GAAP?
A few years later I was working for another company. They had a great travel policy. I could come home every weekend, and if I was going to be in the air more than three hours, I got to fly First Class. In addition, if I was on the road two or more consecutive weeks, there was flexibility as to what I could do the “middle weekends” as long as the cost didn’t exceed the round-trip plane ticket home. My dilemma? What could a North Carolina boy do for a weekend if he was out on the West Coast, and he had the price of a First-Class plane ticket in his hip pocket?
How about: fly from LA to Salt Lake City on Friday afternoon, rent a car, check into a nice hotel, eat at some great restaurants, ski Alta on Saturday, ski Snowbird on Sunday, fly back to LA Monday morning, and still have a couple hundred dollars left over. Anal accountant that I am, I attached a Cost Justification Worksheet to my expense report showing how much money my ski weekend had saved the company.
I got a call from my boss. He said, “As far as I’m concerned, what you did is in accordance with company policy. You told me about it before you did it and I approved it, but now that I see it in writing, can you make it look different? This is supposed to be a job and it looks like you’re having too much fun.”
I told him that I had a good friend who was a travel agent, and she could give me receipts to make it look like anything he desired. He said, “Good. From now on just put down the price of the plane ticket and don’t tell me what you do.”
Now… are we going to call this “Fraud”, or does this come under the umbrella of political correctness?
I was in San Antonio doing an audit. I came across a situation where I suspected that three guys had conspired to embezzle $1 million. Going through proper channels to get the proof I needed would take a long time. Furthermore, I needed to talk to customers and these guys were in the position to prevent me from doing that. So, I grabbed a handful of customer files, went back to my hotel, and started making phone calls. I told the customers that I worked for a market research firm that had been hired by the company to review the sales function and would they mind answering a few questions. They didn’t mind and within 30 minutes I had all the proof I needed that these three guys had embezzled $1 million.
I confronted the head guy the next morning. At first, he denied everything. Then I told him what I knew and how I found it. He became very angry and said that calling his customers without his permission was the most unethical thing that he had ever encountered in business. Coming from him, I took that as a compliment. But this made me think: did I commit Fraud to catch a thief? Or was this one of those “vigilante justice” things that we’re OK with from time-to-time?
It seems that we have a problem before we even get started on the subject of “Fraud”. What are we going to call Fraud? Fortunately, our system has developed a venue of ultimate arbitration for these difficult-to-define issues. That venue is called the Supreme Court. In 1964 the Court was hearing arguments on pornography in the case of Jacobellis vs. Ohio and Justice Potter Stewart uttered this famous quotation:
“I shall not attempt to define the kinds of material I understand to be (pornographic)… but I know it when I see it.”
That’s the way I feel about Fraud. I know it when I see it. We’d all like our Frauds to be black and white but, in reality, they are usually many shades of grey. They depend on the people involved, the time, the place, the circumstance, and I know it when I see it. Everybody draws the line in the sand in a little bit different place. Everybody’s moral compass points in a slightly different direction. I call these variances the “personal doctrine of fairness.”
A few years ago, I was doing a series of projects for a large company, some of which involved Fraud investigation. The guy I was reporting to called and said he wanted me to join a particular industry association. I told him that it cost $200, and I saw little value in it. He responded that it would “look good” for me to belong to an association in the company’s business segment. I should go ahead join and include it on my next expense submission.
A few weeks later he called me again. He said someone at the corporate office had seen the association thing. They didn’t think it was proper that the company should pay association dues for an outside consultant. He needed me to deduct $200 from my next expense submission. I gently reminded him that he asked me to do it and he approved it in advance.
He said, “Look, this is not a battle that I’m willing to fight. Besides, if anybody can figure out a way to get the $200 back without getting caught it’s you.”
Fraud? I know it when I see it. Rest in peace, Justice Stewart.
Comentarios