Jessica’s dilemma: competing loyalties

Tuvana Rua, Leanna Lawter, Jeanine Andreassi and Christopher York

Case A Tuvana Rua is an Assistant

Professor, Leanna Lawter is
It was the Winter of 2009. Jessica was sitting in her office building, staring out of the window. Her
an Associate Professor of
building resembled a one-floor warehouse with offices in the front and a large warehouse Management,
stacked with aisles of inventory in the back. Jessica was reflecting on the ironic juxtaposition of Jeanine Andreassi is an
her bucolic suburban work environment and the snowstorm that was raging outside her window. Associate Professor and
It reflected the internal torment she was experiencing and the difficult choice she had to make. Christopher York is a Clinical
Jessica was the Staff Accountant for the US subsidiary of the R.R. Jessen Corporation, qa Assistant Professor, all at the
Scandinavian multinational manufacturing organization. The past few days had been difficult for her. Department of Management,
Jessica has discovered some disturbing information about Michael, who was her boss and friend, Sacred Heart University,
and was unsure what to do. She had received a phone call two days prior from one of her company’s Fairfield, Connecticut, USA.
vendors, Paper Express, asking why they had not received payment for a delivery of paper. Jessica
was puzzled as she had processed that payment herself through the batch payment accounting
system. When she looked into the vendor’s account, she saw that the payment had been processed,
but also found some manual entries of transactions for payment in the system to the client. It was
unusual for a manual entry of this sort to be made to the ledger as payments were automatically
generated by the accounts payable system. Jessica approached her boss, Michael, about what she
thought was an error in the system. When she asked him about the manual entries, Michael angrily
dismissed the issue immediately, but something just did not seem right. Jessica found herself in a
quandary: who had made the manual entries? Why was her boss, Michael dismissing her concerns?
Was it her place to act or remain silent? How would she handle this dilemma?

R.R. Jessen U.S.

R.R. Jessen Corporation was a Scandinavian multinational organization. The company had
manufactured marketing products since the 1940s and operated in over 65 countries globally.
R.R. Jessen U.S. was founded in 2002 by Jim Axel, the current CEO. The US subsidiary was
responsible for serving countries in North and South America and had grown significantly from
2002 through 2008. By 2008, R.R. Jessen U.S. had 23 employees and provided a
family-oriented culture where employees maintained good relationships with each other, top
management, and the R.R. Jessen’s owners. Being a small company, the subsidiary did not
have a human resources department (HR). Instead, the company outsourced payroll and relied
on talent agents to aid in its selection process for new employees.
In 2008, the US division of R.R. Jessen started to have severe financial problems. Although sales
had increased over the years, the company was not profitable and was struggling to pay its loans
and vendors. The parent company had conducted several audits, but had not uncovered any
irregularities. Given the financial downturn, the subsidiary had to downsize and laid off eight
employees in various departments that year.

Disclaimer. This case is written

solely for educational purposes
Employees at R.R. Jessen U.S. and is not intended to represent
successful or unsuccessful
Jessica had been working in the accounting department of R.R. Jessen U.S. since 2007. managerial decision making.
She was an outgoing, friendly woman in her mid-30s. She was brought up in an Italian Catholic The author/s may have disguised
names, financial and other
household, regularly attended church and was raised to be honest and do the right thing. recognizable information to
She was also the loving mother to three children and the devoted wife of Adam, who worked as protect confidentiality.

DOI 10.1108/TCJ-03-2016-0029 VOL. 13 NO. 4 2017, pp. 513-527, © Emerald Publishing Limited, ISSN 1544-9106 j THE CASE JOURNAL j PAGE 513
 an independent contractor in the construction industry. Jessica cared about having a strong
family and friends, especially since her father died when she was young. At work, she was known
to be loyal, conscientious, intelligent, and hardworking.
Jessica had started her career in accounting as a bookkeeper in 1995 and had worked in various
capacities at accounting departments of four different companies. Even though Jessica did not
have an accounting degree, she was confident in her abilities and accounting skills. Jessica built
her skill set over time through experience and thanks to the mentoring she received at all her
employers. She enjoyed working in accounting and was looking forward to advancing her career
in this field even further when a position became available at R.R. Jessen U.S. in 2007.
Jessica was recruited to be in charge of accounts receivables at R.R. Jessen U.S.

When Jessica was hired, the accounting department had two other members, namely, Liz and
Michael. Liz was recruited a couple of months before Jessica and was responsible for accounts
payable and bank reconciliations. She was in her mid-20s and was friendly but rather
disorganized. Unknown to the subsidiary, Liz struggled with drug addiction. She was on friendly
terms with Jessica and had a close relationship with Michael.
Michael, the Head of the department and controller for R.R. Jessen U.S., hired both Jessica and
Liz. Michael was in his 50s, of Italian descent, and had grown up in a close-knit family. He had
worked as an Inventory Manager at a diamond company prior to being hired by R.R. Jessen U.S. in
2006. Michael worked hard and liked to play hard, too. He lived an expensive lifestyle and enjoyed
the good things in life, such as a big house in an expensive neighborhood and Harley Davidson
motorcycles. He also loved cars, vintage sports cars, in particular. He owned a collection of antique
Corvettes, which he kept safely in a warehouse and flaunted by driving a different car to work every
day. Michael had a loving wife and a teenage daughter. His wife was his confidant and fiercely loyal
to him. She enjoyed the lavish lifestyle he provided for her and their family.

Michael had struggled with alcoholism and drug abuse and had been on the 12-step program for
several years. He had a two-sided personality: while he was often kind and friendly, especially to
friends, he was short-tempered and threatening to others when he did not get what he wanted.
Jessica had seen him yelling and cursing at suppliers on several occasions and witnessed him
threatening Corvette salesmen on the phone when he could not get the sales terms he wanted.
Michael reported directly to Jim Axel, the CEO of the subsidiary. Jim was a Scandinavian man in his
mid-50s. He had been living in the USA for a long time and was the Founder of R.R. Jessen U.S.
Since the early days of the subsidiary, Jim had put countless hours into growing the business.
He had overseen every aspect of the company and believed strongly in the checks and balances he
had created in the company’s accounting structure. While Jim was serious, he was also trusting,
kind, and respectful toward his employees. He had good relationships with them and upper
management of the subsidiary, particularly, with Michael. Jim had the final say in Michael’s selection
for the Controller position for R.R. Jessen U.S. Because he was the hiring manager, Jim completely
trusted Michael and the way he ran the accounting department.

Jim was not the only one who trusted Michael without reservations. Jessica also trusted,
respected, and was loyal toward him, as Michael had been personally involved in her hiring.
Over the last two years, Michael had become a close friend of Jessica and her family, inviting
them for dinner at his home on many occasions. Michael also recently helped Jessica’s family in a
financial crisis by giving them a personal loan when her husband Adam lost his job and they faced
foreclosure on their home. Additionally, Michael had recently hired Adam as a Contractor to work
on a remodeling project on his house to help them out financially. Despite their close relationship
and the helping hand Michael extended to Jessica’s family, Jessica was somewhat intimidated by
Michael and was wary of his short temper.

Something amiss at R.R. Jesson U.S.

In 2008, the accounting department had a bit of a shock when employees discovered Liz high on
drugs and passed out on her desk. This immediately led to her termination from R.R. Jessen U.S.
It was also the same year that the US division of R.R. Jessen started having trouble with its

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finances, which resulted in the downsizing of the subsidiary. During that time, Jessica almost lost
her job. Even though Michael made a cost savings case to the CEO for Jessica’s termination,
Jim insisted that Jessica stayed with the company as he believed it was essential for Jessica to
keep her position to maintain the checks and balances he created for the subsidiary. Jessica
became responsible for accounts payable in addition to her duties overseeing accounts receivable.
In January 2009, one of R.R. Jessen U.S.’s vendors, Paper Express, called Jessica regarding an
outstanding invoice that had not been paid. What puzzled Jessica was that she had entered that
invoice for payment into the accounting system herself. Jessica promised the vendors to
investigate the issue further. In R.R. Jessen U.S.’s accounts payable system, invoices were
entered into a vendor payment system. In the vendor payment system, each vendor was set up
for payment with their bank account information. Payments were authorized by Michael, the CFO
of R.R. Jessen and Jessica’s boss. Payments were processed in a batch method on a regular
basis through the company’s bank account. When a payment was processed, the payment was
recorded on the general ledger and in the specific sub-ledgers for the accounts. When Jessica
reviewed Paper Express’ account, she saw that in addition to the payments for invoices which had
been generated through the accounts payable system, there were some additional journal entries
which had been manually entered for payment to Paper Express. So as not to look improper, the
manual entries had been credited to general ledger cash and debited to cost of goods sold. Upon
further investigation, she found a number of other manual journal entries into the payment system
with a description of different vendors, some of whom Jessica did not recognize. Jessica
immediately suspected something was amiss. She then looked at the payment history for Paper
Express. The payments generated by the accounts payable system had been deposited into a
different account than the payments generated by the manual entries. She then checked the
accounts for the vendors that she did not recognize. All payments to these vendors had been
generated through manual payment entries. After studying the accounts a little further, Jessica
realized that these vendors were not actually business partners with R.R. Jessen U.S.
Jessica was in shock. Someone was embezzling from the company. Jessica did not know who
was responsible for the fraud she had uncovered. She trusted Michael and felt she should
approach him about the irregularities. When Michael arrived at the office that day, Jessica told
him about the phone call with the vendor, Paper Express, and how that conversation had led to
her discovery about the payment irregularities. Michael’s initial response was: “There is no
error. We just had an audit, if there was one, they would have caught it.” When Jessica
persisted, saying, “Michael, someone entered manual entries which is not something we are
supposed to do.” Michael became agitated and angrily replied, “Fine, I will look into it.”
Later that day, Michael asked Jessica to meet him at the company’s warehouse, which was in the
back of the building. Michael seemed upset and told Jessica that he was certain Liz had made the
entries as she had a drug problem and needed the money for her addiction. Michael urged Jessica
to let the issue go as the auditors from the parent company did not find anything wrong, and he
tried to appeal to Jessica’s friendship with Liz. “Listen, if you insist on digging this up, Liz can go to
jail, and I think neither of us would like to see that happen.” Despite Michael’s description of the
situation, the story did not make sense to Jessica. The most recent suspicious journal entry was
made two days ago, but Liz had not worked for the company for six months. Jessica confronted
Michael saying, “If it were Liz, why was the last entry made two days ago?” Michael’s temper flared
even more and he urged Jessica to let it go. He threatened Jessica, “Now that you know about this,
if all of this were to come out, you could go to jail as well. If you don’t want that to happen, you better
forget everything you saw and keep your mouth shut.” Frightened by this belligerent encounter,
Jessica replied, “I understand,” turned around and hastily left the warehouse. Because R.R. Jessen
Corporation U.S. did not have an HR department, ethics training or a written ethical code of
conduct, Jessica was uncertain how to proceed. Even though she was uncertain about whom to
contact, Jessica knew she had to do something in order to uncover the truth.

Jessica’s investigation
The next day, when Michael left the office, Jessica went into his office and started her own
investigation. First, she searched Michael’s desk drawers to get the recent bank statements of

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 R.R. Jessen U.S. Once she made copies, she called the bank to request copies of earlier ones.
After she accumulated all supporting documents, she planned to spend the weekend
documenting the paper trail related to the manual entries.
Two days later on a Saturday morning, Adam, her husband, left to install a door at Michael’s house.
Jessica sat in her basement and started reviewing the copies of the journal entries and the bank
statements of R.R. Jessen U.S. as soon as Adam left the house. She entered all the payments for
the past six months into an Excel spreadsheet. Jessica noticed that there were a number of wire
transfers and checks amounting to roughly $700,000 to various vendors which R.R. Jessen U.S.
did not work with. She was certain someone was embezzling from R.R. Jessen. There were only
two people who could authorize payments in the company – Michael and Jim. No one else could
have added the manual entries in the payment system and authorized the payments. One payment
on the bank statements had a web address as a link on the payment summary, which hyperlinked
to a Corvette dealership website. Michael was a collector of Corvettes, and it seemed that
R.R. Jessen U.S. might have been paying for his rather expensive car collection!

Jessica’s dilemma: honesty or loyalty?

As Jessica tried to comprehend all the evidence on the spreadsheet, she felt betrayed, scared,
but most of all, torn. Staring at the undeniable evidence of Michael’s embezzlement from the
company, she asked herself: “Can I ignore this?” The weight of her moral obligation toward her
employer sitting on her conscience, she then had to ask herself the harder question: “Should I
report Michael?” Both options were equally unappealing. She felt loyal toward Michael, her boss
and her friend who had helped her and her family through difficult times. At the same time, she
had an undeniable loyalty toward her employer, not to mention she wanted to stay true to her own
moral values and upbringing.
When Adam came back from working on Michael’s house and walked into the kitchen, he saw
Jessica sitting still as a statue and looking white as a ghost. “What is wrong?” he asked. Jessica
immediately broke down into tears and told him everything she had discovered. Adam was in shock.
Michael had helped their family numerous times and they had become close friends. They dined
together, laughed together, and their kids called him Uncle Michael. This was a man they trusted.
After being quiet for a while, Adam asked, “What are you going to do?” “I don’t know […] I am so
torn. Michael is a good friend, and I want to do right by him but what he did was wrong, and now that
I know about it, I don’t know how I can keep quiet,” Jessica replied. Adam pressed further: “How can
you do this to Michael after all he has done for us? The guy bailed us out from foreclosure!” Adam
walked out of the kitchen without saying another word. When he came back, he had a bottle of wine
in his hand. He said, “Today you do nothing but chill out. Tomorrow, when you wake up, you decide
what you are going to do, and whatever the decision is, I will be 100% behind you.” With that,
Jessica took the glass of wine he poured for her. “This is going to be a long night” she thought.
This was definitely the hardest decision that she had ever faced in her accounting career.

Case B
As Jessica took the bottle of wine from her husband and weighed her loyalties toward
Michael and R.R. Jesson, she thought to herself, “Michael didn’t bail us out. The company did.
He used the money he stole from R.R. Jesson to help us.” That made her realize what she had
to do; she just did not know how she would do it. After a night of torment, Jessica decided to
call Jim, the CEO of R.R. Jesson U.S. Thanks to the close relationships promoted by the
company culture, she was close with Jim. The next day, very early in the morning, Jessica
called him and asked to meet to discuss an important matter. The meeting took place at a
Starbucks where Jessica explained to Jim the entire situation backing up her story with the
analysis she had done and the information she gathered from the general ledger and the bank
statements. At first, Jim had a hard time believing what he heard. “I couldn’t believe it either at
first but the evidence is undeniable,” Jessica assured him. Jim was devastated by Michael’s
actions as he trusted him very much. He never questioned Michael or his integrity, despite
some serious red flags, such as the discrepancies between expected earnings and actual
earnings of the company.

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After their meeting at Starbucks, Jessica and Jim went to the town’s police station and reported the
crime. The weeks and months that followed were rather complicated and nerve racking for Jessica.
First, Michael was asked not to come to the office for a week. Due to the nature of the crimes
involving wire fraud, federal authorities became involved. Because Jessica was close to Michael and
his family, the police asked Jessica to help gather evidence against Michael by calling his wife Sally
on a recorded call. During this recorded conversation, Sally confessed everything. She told Jessica
that Michael had been stealing from the company, where he had been spending the money, how he
was emptying the accounts as they spoke with the intention of hiding some of it with family and
opening up a secret bank account in another bank. “Which bank is that?” Jessica probed further.
The police officers were concerned that Sally was going to get suspicious and hang up. The two
women had been friends for a long time, and Sally trusted Jessica full heartedly, so Sally replied
without hesitation: “TD Bank.” That piece of information together with everything else that Sally
shared with Jessica on the phone that day helped the D.A. build a very strong case against Michael.

The investigation continued and the findings were disturbing. Michael started stealing
from R.R. Jesson U.S. the very first day he started working by making a $1,000 transfer
from the company to his personal bank account. This discovery by the police triggered
the double checking of the references Michael had provided. A phone call to his
previous employer suggested that Michael got into trouble before because the previous
employer stated that they would never hire him again even though they did not provide
R.R. Jesson U.S. with a rationale.

In the investigation, it became clear that Michael stole over $2 million in assets from his employer.
To complicate matters further, he lied to federal investigators during their inquiry. It became clear
that he “hid assets with substantial value from investigators, repeatedly violated court orders,
supplied false information to U.S. Probation, and even participated in submitting false documents
to the [State] Department of Motor Vehicles, thereby evading the district court’s order regarding
two motorcycles” (United States of America vs Defendant, 2012, p. 22).

The investigation confirmed that Michael had a co-conspirator in accounts payable, Liz, who
worked for Michael in the accounting department and was responsible for accounts payable and
bank reconciliations. Liz had been added as an authorized signature on the bank account without
Jim knowing, as payments to vendors required two authorized signatures for processing. Liz was
an easy target and accomplice for Michael since she had a drug addiction and Michael knew it.
She was not only afraid that she would lose her job if this came out, but she also needed the
money to support her addiction.

After a long hearing, the district court in his state sentenced Michael to 96 months in prison
(United States of America vs Defendant, 2012, p. 23). He was charged with one count of
conspiracy to commit wire fraud, three counts of wire fraud, and two counts of interstate
transportation of stolen property (United States of America vs Defendant, 2012, p. 23). By the
time the scheme was detected in February 2009, Michael and his co-conspirator, Liz, had
collectively stolen approximately $2,516,288 of R.R. Jesson US’s money with Michael receiving
the majority of those funds. In particular, $2.1 million was sent either to Michael or to third parties
that benefited him (United States of America vs Defendant, 2012, p. 26). In the investigation
it became clear that over the course of the fraud he purchased 20 cars, spent about $200,000 on
landscaping for his home, and funded a college fund for his minor child. In the court proceedings,
it did come out that Michael had a previous history of drug and alcohol addiction (United States of
America vs Defendant, 2012, p. 4). In a sworn testimony, his teenage daughter said
“These addictions create a distortion that I believe create a reality that none of us can really
understand” (United States of America vs Defendant, 2012, p. 4).
Michael was brought to trial with Jessica’s help. During the entire process, until the last court
appearance in which the phone recordings were played, Jim made sure that Jessica’s identity
was kept confidential. No one at the company knew it was Jessica who found the irregularities
until Michael was sentenced to eight years of jail time. Additionally, because after being
terminated from the company Michael began to suspect that it might have been Jessica who
reported him and had started threatening her via phone calls, e-mails and texts, Jim asked for
24-hour police protection for Jessica and her family until Michael was sent to jail.

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 After both Liz and Michael were behind bars, Jim announced to the entire company what Jessica
had done and how they all owed their jobs to her. He then, in front of the entire subsidiary,
presented Jessica with a certificate of recognition together with a flag that was flown over the White
House in Jessica’s name to honor her for her integrity. After this, Jim decided that he did not want
to hire another controller but rather mentor Jessica into the position by whatever means possible.
First, he had her complete workshops and courses, and then asked her to develop a five-year
professional development plan. The five-year plan she created consisted of earning a four-year
college degree in accounting which Jim readily agreed to pay for in full. Jessica was promoted
multiple times afterwards. She recently graduated with her four-year degree in accounting and is
now managing half of the subsidiary’s operations. Jim keeps reminding Jessica how valuable she is
to the company and how her integrity is the reason why R.R. Jesson U.S. is still in business today.

Reference
United States of America vs Defendant (2012), “Defendant’s Name deleted for privacy”, 467 Fed., Appx. 85
(2nd Circuit).

About the authors

Tuvana Rua (PhD) is an Assistant Professor of Management at the Sacred Heart University.
She teaches business ethics, management, entrepreneurship, and negotiations at the graduate
and undergraduate levels. Her research focuses primarily on self-control, ethics, and decision
making and she has published in journals such as the Personality and Social Psychology Bulletin
and Journal of Management Development. Tuvana Rua is the corresponding author and can be
contacted at: ruat@sacredheart.edu

Leanna Lawter (PhD) is an Associate Professor at the Sacred Heart University, where she teaches
entrepreneurship, management, and human resources. She also consults on designing
performance management systems and HR analytics. Her research focuses on women
entrepreneurs and the impact of human resource practices on work attitudes and performance.

Jeanine Andreassi (PhD) is an Associate Professor at the Sacred Heart University. She has
published primarily in the area of work-life and has published in journals such as the Journal of
Managerial Psychology, Journal of Family Issues, and Cross Cultural Management:
An International Journal. She also serves on the editorial board of Journal of Family Issues.

Christopher York (Esq.) is a Clinical Assistant Professor at the Sacred Heart University. He has
served on a number of academic, federal, and state advisory councils regarding health policy and
financial regulation, and has published articles in professional journals on health policy and
business topics. He also served as the Secretary of Citibank's Board of Directors, the Associate
General Counsel of Citicorp, the Vice President of Planning and Marketing of AmBase
Corporation, and EVP-Management and COO of Project HOPE. He is a Member of the Bars of
the US Supreme Court, the 5th and 11th Federal District Courts, and the State of Georgia.

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