Bullet Proof Your Business

Contractor Fraud

Our client is a large hardware, providing various types of timber to its customers.

During a stock take of its timber, it discovered that about $360,000 worth of stock was missing from its yard. Records had indicated that during the past quarter, $4,490,000 worth of timber had been ordered and paid for. Sales records indicated that $3,665,000 worth of stock had been sold during the period. Unfortunately only $465,000 worth of stock was present and accounted for. Where was the missing $360,000 worth of stock?

Initial investigations were undertaken discreetly, preserving the element of surprise.

Security at the site was relatively good. It was surrounded by a high barbed wire fence, and there had not been reports of penetration. Two guard dogs resided in the yard after hours, and the yard was visited by a patrol twice during each evening. We were confident that the stock had not been stolen from the yard by means of an unlawful entry.

Company auditors reconfirmed the accuracy of their findings.

Liaison was conducted with the company directors and we all agreed that it was likely the theft had been organised internally by the company’s own staff.

We used the following methodology to investigate the loss:

• Covert cameras were installed in the timber yard, and all recording data secured in a locked area within the control of the company director.
• Timber stock movement records were discreetly ‘micro’ managed by company directors.
• Background investigations were conducted in relation to the employee who operated the yard gate. This person was responsible for stock outwards records to be maintained. Similar investigations were undertaken with respect to the yard crane driver and all truck drivers. These investigations revealed that one of the truck drivers was very close and socialised with the employee who operated the gate, and recorded stock movements.
• A covert operative gained employment as a truck driver. Within 10 days he had be-friended the driver-friend of the gate keeper. It was learned that a builder was paying small sums of cash to drivers and the gate keeper for quantities of timber that were not ordered by or invoiced to this builder. For every $1000 timber he would pay $200 cash to the driver, who would split this with the gatekeeper. Conversations to this effect were covertly recorded by our Consultant, and the identity of the builder disclosed.
• Investigations revealed that this builder was a small operator who employed two staff, and built homes for large development companies.
• Surveillance was instigated by us, which revealed two loads of timber valued at $6400, were delivered to the builder. No records of this transaction were generated.
• The operation closed, shortly after the gatekeeper had our Consultant’s truck loaded and instructed him to deliver the load to the builder. As he left the yard he was stopped and this timber audited. The gatekeeper was unable to produce any record of the movement of this stock.
• In formal interviews the gatekeeper and two truck drivers admitted the scheme and unlawful theft of stock. All three agreed that the scheme had been going for about 5 months, and that at least $300,000.00 worth of stock had been unlawfully provided to the builder. Each interview was recorded by way of electronic recorder.
• All three staff were dismissed by us and company directors. At the time company property was returned.
• We attended the site of the builder, where our client’s timber was identified and photographed. The builder refused to answer any questions, however did not argue when we organised the removal of the timber from the site.
• Statements proving ownership and purchase, covert and overt admissions, and observations were prepared in a brief of evidence.
• We liaised with local Detectives, providing the brief of evidence. The three employees were later charged with stealing as a servant and received probation.
• The builder who refused to co operate or be interviewed by police was also eventually charged with and convicted of Receiving Stolen property. Unfortunately for him, when his books of account were seized by police, they did not reveal any payments to our client. They also revealed no payments for any timber during the relevant period. He also received probation.
• We conducted investigations to establish and identify these persons’ assets, including bank accounts.
• We liaised with lawyers who instituted civil proceedings against all four(4) persons. An application for Injunctive relief was successful and an Injunction placed on all property owned. The defendants settled with our client and repaid a substantial part of the loss.
• A complete analysis was conducted of the business and all risks identified.
• Over a period of 5 months risks were treated with risk management solutions, including formal stock control measures. This was two and a half years ago. No further thefts have been reported.

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