Case Study: All-American Girl
Katie Jordan was a college graduate and seemed to be a very trust worthy person.
She started working for Aramis Properties when she finished college. This was her first job so she was very excited. Katie was happy and eager about the opportunity that she was given and wanted to do a good job so that she could move up within the company. Katie was hired as an onsite property manager. Her duties were to show apartments to prospective tenants, collect rent, and supervise a maintenance crew. Katie was responsible for running the day to day operations of the complex.
She reported to a man named Gil Fleming. Mr. Fleming really liked Katie because of her enthusiasm and she was very good at her job. No one had any complaints about Katie, and when the company acquired another apartment complex, they asked Katie to run it. The new job would be away from any of the company offices.
She would have very little supervision. Mr. Fleming trusted that she would do a great job. He was unable to travel to Houston often so, that let Katie unsupervised. Katie had a fiance that was injured in a motor cross accident and left him without income.
He also did not have any health insurance to pay the medical bills. Katie’s life started becoming hard and she found herself strapped for cash. An employee on the maintenance crew named Manuel quit his job and she saw that as an opportunity. Since Katie was the only person that worked in the office area who knew that Manuel quit, this was her opportunity to make some extra cash. There was no computerized time clock so the employees had paper time cards. They turned in the time cards to Katie and she signed off on them and sent them to the corporate office.
Once the paychecks were processed, the corporate office would send them to Katie and she would distribute them. She cashed the first check that she received for Manuel at a liquor store. She saw that this scheme was working so she continued on with it. When the maintenance crew started to be overworked she knew that she had to hire another person to help them. She told the office that she had to hire an extra person because of all the structure complaints that were coming in. The office thought nothing of it and they let her hire the new person.
She saw how easy that was and decided to tell them that she also needed an assistant to help her in the office. Mr. Fleming let Katie hire an assistant. No one knew that there was really no assistant but Katie. Aramis Properties became the victim of what is known as a ghost employee scheme. A ghost employee is an individual on the payroll of a company who does not actually work for the company.
Because there was no checks or balances for Katie, she was able to keep paying Manuel even after he quit. Katie was the approver of the time cards and she was also the one who distributed the checks.Aramis Properties did not require Katie to submit new personnel information to a human resources department; this allowed her to keep paying personnel that quit and to create a fictitious person. The hiring and paying of personnel should be a separate task. Personnel records should be maintained by a human resource department. There should also be a person verifying that individuals are still working for a company.
If Aramis Properties would have required a back ground check, Katie would not have been able to create a fictitious employee.When payroll and personnel records are kept separately, the company could run a comparison report to identify people on the payroll that do not have a personnel file. They should also periodically check for people that do not have a Social Security number. These are the types of alerts that will let a company know if an employee is a ghost employee. The lack of internal controls by the Aramis Company caused them to be the victims of a ghost employee scheme.
This scheme cost the company sixty five thousand dollars.Katie was a trusted employee who had little supervision. To avoid being victims in the future, the company can install computerized time clocks that go straight to payroll and have the paychecks mailed directly to the employees home. All hiring of new employees should go through a personnel department. If they keep payroll and personnel information separate, they would not become victims of a ghost employee scheme again. References Wells, J.
T. (2011). Principles of fraud examination. (3 Ed. ).
Hoboken, NJ: John Wiley & Sons, Inc