Teaching people to steal

You lose a legitimate business receipt, then tag an extra few dollars onto a taxi receipt to compensate. Your expense claim is approved so the next time you ride a cab on business, you bump up the fare again by a couple of dollars. Before you know it, you're doing it every time you travel. It's a nice supplement to your income, but this type of fraud costs corporate America more than $400 billion annually, according to The Association of Certified Fraud Examiners.

Before pointing the finger at your employees, however, take a look at your internal control systems. They might just be teaching workers to steal, advises Gary D. Zeune, a cpa from Columbus, Ohio.

Zeune lectures on corporate probity and brings to life this arid topic by hiring ex-cons through his agency, The Pros & The Cons. In a classic case of poacher-turned-gamekeeper, Zeune employs paroled fraudsters to give audiences of cpas and financial and corporate executives the inside take on fraud.

The Pros & The Cons began in 1994 and now has up to eight regular speakers on its books. The number varies according to who's out on parole. The audience, Zeune says, is interested in two things: How good a story-teller are these guys, and what did they do before they committed the fraud?

When someone like Webster Hubble, former U.S. Associate Attorney General and the most recognizable ex-con speaker, walks in front of a group, says Zeune, people automatically take notice. Convicted of mail fraud, tax evasion, and overbilling clients (almost $400,000), Hubble is not your average ex-con—let alone public speaker. "People in the audience can begin to understand that if something like this can happen to a Web Hubble," Zeune says, "then it can happen to anyone."

Although multimillion-dollar frauds make the headlines, most corporate fraud goes undetected, Zeune believes. "What management doesn't understand is that just because something is accurate, that doesn't mean it's true.

"Most people comply with what they perceive are reasonable controls and reasonable systems," continues Zeune. "When the employees feel these are unfair, however, they'll start to think of ways to circumvent them. I would say that the majority of the money that disappears out of companies is through expense reports—and in very small amounts at a time—but it's usually something specific that triggers fraud."

Zeune recounts the tale of a former colleague who was out of town on business when his hat blew off and landed in a puddle. The hat was ruined and, because he was going to be out of town for a while, he bought a new one. When he eventually claimed the "hat" expense it was declined because it was a personal item. This really irked him, so on his next expense report he attached a note to it saying,"Now find the hat." —M.D.