David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley.

You are, no doubt, familiar with the parable of the Prodigal Son. One of two sons asks his father for his share of his inheritance now, squanders it, returns to his family, and is forgiven.  There are interesting similarities between this Biblical story and several recent fraud investigations.

In each case, said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley, the fraudster was a family member who would eventually inherit a share of the family business.

It was not necessarily a son or daughter, but sometimes a brother, sister, cousin, uncle, aunt, or in-law. In a couple of cases, the fraudster was the designated “successor” to the owner; in others, it was one of several family members who stood to share in ownership of the business once the current owner or owners passed control to other family members.

Over the years, the fraudster had risen in authority and trust within the family business.  In the case of the designated “successors,” it was well known throughout each company that he or she would be assuming control in the future. Like the Prodigal Son, the fraudsters didn’t want to wait for their share of the inheritance, but wanted it now. In several of the cases, the fraudster needed the funds due to either a gambling problem or drug problem.

In other cases, said Anderson, a Certified Fraud Examiner who recommends that every organization enact a comprehensive fraud deterrence program created by an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. the motivation was soaring personal debt – usually due to living beyond his or her means – or funds were needed to invest in or start a new business. Remember, the word “prodigal” means “wastefully extravagant,” quite a fitting term for a familial fraudster.

Due to the family relationships and positions of trust, as well as the as long-term experience in company operations, each of the fraudsters discovered ways he or she could take funds from the business with a low risk of discovery.  Some of the methods used were:

• Charging personal expenses on company credit cards – in such cases, the fraudster was the person responsible for approving credit card charges.
• Having the family business pay for purchases made by non-family businesses of which the fraudster was an owner or investor – again, the fraudster was usually the person responsible for approving such payments.
• Writing checks to himself or herself, but recording the checks as having been written to one of the family business’s vendors – in such cases, the fraudster had control of the bank accounts, bank statements and bank reconciliation process, so no one else was aware of the deception.
• Diverting revenues by either pocketing cash intended to be deposited or depositing checks to a different bank account under the control of the fraudster – in such cases, the fraudster controlled the bank deposit process as well as the revenue recording process . . . and the fraudster often had the ability to process “credits” to customer accounts.

Because of the fraudster’s family ties, employees who noticed problems or unusual activity were reluctant to step forward and inform other family members.

In a couple of cases, these Prodigal schemes were discovered early on. As in the parable, the fraudster apologized, repaid the small sum taken, and promised to “never do it again.” The company/family agreed not to take any legal action and continued to employ the fraudster.  However, in both cases, the fraudster was “good” for only a short period of time, and then resumed the fraudulent activities.

In a few other cases, the fraudster was dismissed from the company, but the company/family took no legal action. In still other cases, the company/family was initially reluctant to take legal action against the fraudster; however, once the extent of the fraud was known and the amount taken was large enough to overcome any family ties, the company/family ended up taking legal action.

The moral of the Bible story is that something lost now is found; to make sure your corporate profits are not lost, never again to be found, engage a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley.  A Certified Fraud Examiner can examine your accounting and purchasing programs and procedures and make recommendations for enacting strong fraud deterrence measures that will help safeguard your company, Anderson said.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.