Case Study: Say Cheese!

Every once in a while, a person devises a fraud scheme so complex that it is virtually undetectable.
Intricate planning allows the person to cheat a company out of millions of dollars with little chance of
getting caught.

Jerry Harkanell" is no such person.Harkanell's payroll scheme put only about $1,500 in his pocket before
a supervisor detected his fraud, less than half a year after it began.

Harkanell worked as an administrative assistant for a unit of a large San Antonio hospital. His duties
consisted mostly of clerical tasks, including the submission of payroll information for the unit.

An exception report for the month of March listed some unusual activity on Harkanell's time sheet. He
had posted eight hours that resulted in overtime wages for a particular pay period. The pay period
coincided with a time of low occupancy in Harkanell's unit. During times of low occupancy, there is no
need for anyoneespecially an administrative assistant-to work overtime.

When his supervisor confronted Harkanell about the eight hours, he confessed. He said he posted the
time because of financial problems and threats from his wife to leave him. He immediately submitted
his resignation, a hospital administrator accepted it, and Jerry Harkanell became a former hospital
employee.

The hospital administrator shared the specifics of this incident with Oscar Straine, director of internal
auditing for the hospital and a certified fraud examiner (CFE).

"Nobody leaves for just eight hours," Straine said. "There must be a lot more there. "

When Straine delved into the records, he found exactly what he had suspected. Since October of the
previous year, Harkanell had been overstating his hours. He had recorded hours that he had not actually
worked; he had posted his hours to shifts for which pay was higher; and he had reported vacation time
as time worked, drawing not only additional pay but extra vacation time too.

Unfortunately for Harkanell, his method of cheating his employer left a well marked paper trail. In his
administrative role, he collected and submitted the unit's manually prepared time sheets to his
supervisor. She signed the time sheets, made copies to retain for her records, and returned them to
Harkanell for delivery to the payroll department. Harkanell then altered his original time sheet before he
delivered the approved documents to the payroll department. Amazingly, he completed his time sheets
in pencil, allowing him simply to erase the old numbers and make changes.

The audit staff compared the supervisor's copies of time sheets with the time sheets on file in the
payroll department. Discrepancies between the two stood out. The investigation lasted less than a
month. The results revealed that during a 26-week period, Jerry Harkanell defrauded the hospital of
$1,570.

Interviews conducted with coworkers and supervisors revealed one detail that might have tipped
Harkanell's hand even earlier, had anyone recognized a suspicious act for what it was

One Friday before payday when Harkanell had the day off, he showed up at the hospital anyway. This
was more than a minor inconvenience since he didn't own a car. But Harkanell took the bus to work just
so he could personally get the unit's time sheets approved and turned in to payroll. At the time, no one
questioned why he didn't simply ask someone to cover for him.

At the completion of the investigation, the hospital filed a claim with the district attorney's office.
Evidence consisted of copies of the approved time sheets, copies oftbe altered time sheets, and
affidavits from Harkanell's supervisors.

An assistant district attorney in charge of the case called the hospital shortly after receiving the case.
She had uncovered some interesting details about Harkanell's past during a routine background check. A
computer search revealed that he had a criminal history and that he was currently on parole. In fact, the
assistant district attorney reported, Harkanell previously had been sentenced to life in prison for armed
robbery.

The news that the hospital had unknowingly hired a convicted felon distressed Oscar Straine. He
discovered that the hospital's ability to conduct thorough background checks on prospective employees
was restricted by money and access to records. The hospital routinely checked criminal records in Bexar
County (where the hospital is located) and any counties in which an applicant reported having a history.
But cost and time prohibited the hospital from checking records in all 254 Texas counties, especially
when hiring a low-salaried employee like Harkanell.

The complaint against Harkanell went to the grand jury quickly. Straine testified, the grand jury issued
an indictment, and a warrant was issued for Harkanell' s arrest.

The sheriff s department attempted to locate Harkanell several times but with no success. He had
moved and, not surprisingly, left no forwarding address. The DA's office notified the hospital that
Harkanell had disappeared and that it had no imme diate plans to continue the search.

Harkanell remained at large for several months, but luck was on the hospital's side-or, perhaps more
accurately, stupidity was on Harkanell's. Just as he had done with his time sheet fraud, he left a clue
behind, this time concerning his whereabouts. This was no subtle hint either. He might as well have
mailed the hospital an invitation with a map.

The following January, Straine was talking to a woman in the Human Resources department who had
worked on Jerry Harkanell's original case. Straine called this woman to talk about his continuing
concerns over the hospital's inability to do a more thorough background check on prospective hires.
During the conversation, the woman asked, "By the way, did you happen to see the paper a few weeks
ago?"

"I don't know what you're talking about," he replied.

" Oh-well, Jerry Harkanell' s picture was on the front page of the business section of the Express. "

"You have to be kidding." But she wasn't.

Straine immediately searched online for a copy of the article. Within minutes, he'd found a story about a
nonprofit organization that helps low-income families buy houses with low-interest loans and no down
payment.

Sumber: Corporate fraud handbook: prevention and detection yang ditulis oleh Joseph T. Wells.