Westchester Distribution Inc.

Westchester Distribution Inc. is a distributor of brewers, and it was founded in the early

1980s by Vince Patton(president). Over the past 27 years, the company have earned its

reputation for outstanding customer service. Since 2001 to now, they have competed and won for

six consecutive years the “15 Miller Masters National Quality Awards.” Nowadays, the company

has grown and makes approximately 30 million in revenue of the 10 million it used to make back

in 2009

The Westchester Distribution Case is about three staff in the company and one customer.

Carter Mario (sales force) and George Pavlov (sales manager) have been supplying kickbacks of

alcoholic beverages to customers since they had incentive quota and were each in line to receive

bonuses if quota were achieved. The customer Mr. Moon wanted to return the products he

bought but the sales managers tried to bribe him for not to do it by offering three Neon beer signs

worth $300 each one. Joe Roberts (vice-president of Sales) trying to solve the situation took one

Neon beer and gave it to these two employees, so they could give it to the customer and solve the

problem. The situation got worse because Mr. Moon contacted his attorney to write a letter to the

company telling what was happening.

Due to the kickbacks if “ABC”, the Alcoholic Beverage Control, finds out about them

then there will be a penalty of about 45 days without a license. Because of the industry ABC

assumes that the management puts pressure on the employees in these situations so Carter and

George would not be punished.

Furthermore, George and Carter had been faking expenses reports by falsifying broken

bottles to get credit from the company in their pay check. As a result, Vince Patton(president) and

Elizabeth Jones(Vice-president-finance) of Westchester, face the difficult task of determining how

to prevent these incidents from happening again by strengthen its internal controls, as well as

punishing the three men involved.

There are a few points to discuss about Westchester Distributing. The first should be the

falsification of expense reports in regards to the broken bottle claims. In 2008, the claims for

broken bottles was approximately $35,000. There will always be broken bottle claims as it is part

of the business, but if there are no strong internal controls then it will be abused by the employees.

For example, with George, he was submitting false bottle claims to receive money. The money is

paid by the driver and there is no guarantee that that was how much they spent. One way to have

better control over this is to have a specific form that the customer must sign to acknowledge that

there were broken bottles and that they were reimbursed for that amount. Also having to bring the

broken bottles back can be used as a double check to see how many bottles were broken and thus

having a better estimate of how much money needs to be reimbursed.

Another point that needs to be discussed is the lunch expenses that were falsified by

Carter and George. What is submitted is torn off receipts from the restaurant. Not only that, it is

an amount that they write in themselves. There is no guarantee that what they wrote and what they

paid are not different. One way to control this is for them to show the full receipt. With that we

can verify the whole amount that was paid for the lunch with the items included on the receipt.

With this we can have a better idea of how much the receipts actually are.

The neon signs that were taken was also part of the problem. They were able to be taken

without any problems and any authorization. Since the main warehouse which store these signs

and other point-of-sale merchandise can be accessed by almost any employee, there is a risk of

them just taking it. This causes the recordings to be less reliable as the people taking the goods

also records what they take. This is a poor segregation of duties. To prevent this, Vince should hire
two supervisors to record and keep the merchandise. One would oversee recording, while the other

will be in charge of giving out the supplies. This way, they cannot just take the merchandise as

they need it, risking theft. They would first go to the recording supervisor to get permission to take

the merchandise and then with his approval, head to the warehouse supervisor to get the

merchandise.

Along with the above-mentioned problems there needs to be a clear written policies and

procedures to guide employees besides the Standards of Conduct. While the three employees were

the cause of the problem, part of the blame lies in the fact that Vince and Elizabeth did not have

proper procedures in place. Putting requirements like full receipts for the lunches and forms for

the broken bottle claims in writing puts a clear policy that must be adhered to. These policies

should also include some, if not all the regulations from ABC, and all activities that are strictly

forbidden. This way there is a clearer choice on what to do when certain situation arise.

Finally, they would need to decide on what to do with the employees who caused this

mess. In regards to this, there are three people in question, George, Carter, and Joe. Each player

had a different role which caused this situation to arise. With Joe we believe that it should be only

a two week leave without pay. Along with this he must read up on all the rules that ABC has in

place. This way if something like this happens again he will be better aware on what needs to be

done, if not at least to learn that he must go to Vince in these situations. With George and Carter,

there should be 2 months leave without pay, along with a fine. The reason why we chose not to

fire them is because of the risk of them talking to ABC about the issue. With them only being

suspended and fined, they are still linked to this company, and be grateful that they didn’t lose

there jobs.