Case Study: A Silent Crime

Brooklyn Stephens

ACCT 341 – E1WW

Professor Dennis Trzeciak

Assignment 2-4

01/25/2015
 A Silent Crime

This case study involves the theft of a large amount of money in a shoe department store.

The theft was committed by Joe Anderson and was discovered by Russ Rooker. The losses are

estimated between 150,000 and 1,000,000. Joe Anderson worked at the store for five year.

Within those five years, there are several red flags that Rooker could use to conclude there was

fraud occurring and how it was happening.

The first red flag was the amount of returns processed by Anderson. As the illustration

states, on the first day of surveillance, 5,000 was credited back to customer’s credit cards. Over

the next six weeks 30,000 of losses were videotaped. With return amounts that high,

investigation should have been processed much earlier than it was.

In addition, because so many returns were processed, it would appear the store would

have a larger amount of inventory. An example listed in the story tells how on record there may

be 10 pairs of a certain pair of shoes. However, once Anderson processes a return on shoes that

were never actually purchased, the store would show a record of having 11 pairs of the particular

shoes. But, as we know, this was not the case. The store mangers could have been tipped off to

this fraud by simply comparing the physical inventory to the inventory records. It was estimated

that due to Anderson’s fraud, there were at least 17 pairs of shoes overestimated in the inventory

records per week.

An additional red flag that should have alerted management of some type of fraud was

the lifestyle the Joe Anderson was living. The illustration states the Anderson worked only 15

hours a week. However, it also states that Anderson lived the high life. He dressed well, ate at

fancy restaurants, wore a lot of gold jewelry, and drove a “decked out” conversion van. For
someone working only 15 hours a week, the lifestyle doesn’t match up. This would indicate that

Anderson must have been working some type of side job and earning some extra cash

somewhere.

The first thing the store could have done to prevent this type of fraud, is run analysis on

the number of returns. Comparing Anderson’s returns versus other stores returns would have

initiated an investigation, due to the extreme amounts. Any particular employee that has a

significant amount of returns over another typical employee should be investigated.

The store also should have reconciled the physical inventory counts to the accounting

records of inventory. This would have been enough to reveal Andersons fraud during the first

month of his operations. The records would have shown a high number of returns, a high number

of inventory, but that actual inventory would have been much less than what was being reported.

The store also should implement that all returns be approved by a store manager. If there

would have been some type of dual control issued on returns, Anderson would not have been

able to pull off his fraud. The co-worker or manager would have noticed the unauthorized returns

and he would have been busted immediately.

Lastly, the store should have had surveillance video on the register at all times, since the

opening of the store. The surveillance video was not installed until after the investigation had

started. However, the store was able to witness 30,000 in losses, just in the first six weeks.

It can be assumed that Rooker had to contact the Secret Service due to the size and

individuals involved in this case. For example, Anderson had a monthly routine with several of

his customers that relied on his money to survive. In addition, the illustration states that
Anderson was a feared man and that he allegedly carried a gun. It states that most liked

Anderson; however, many also feared him.

Furthermore, the illustration also states that it was determined the twenty seven

individuals were involved in this case. Anderson had racked up a large clientele list. Anderson

also had several visitors to and from his home on a daily basis. Due to the amount of people

involved, the nature of Anderson’s character, and amount of time it would take to research and

trace the trail of findings, it can be determined that the Secret Service was necessary.

Anderson was found to have increased his cut from 10%, to 50% by the time he was

actually caught. It can be assumed that Anderson figured since he was the one taking the biggest

risk, he should up his commission. In addition, he may have determined that the amount of time

he spent working this fraud for people deserved a bigger pay check. However, there is no

correlation between Andersons cut of the fraud and the time it would have taken his to get

caught.

Anderson committed these frauds by charging a certain amount back to the customer’s

credit card; he never actually took funds out of the register. Had Anderson been taking funds

from the register, the amount of money he took may have increased his chances of getting caught

sooner. However, since Anderson was not removing funds from the register and crediting funds

back via credit card, it would not have increased or decreased his chances. He could have

charged whatever he wanted to his clients, as they were paying him in cash. His transaction on

the company credit card terminal would have still been processed the same way, whether he was

charging 10% or 50% to his clients.

 In closing, there are several things the department store could have done to prevent this

type of fraud from happening. The store should have had several internal controls in place that

would have prevented the fraud. Better inventory tracking, analysis on employee returns, better

monitoring of the check out/return area, and dual control or supervisor approval of the returns

would have been enough to stop Anderson from committing this fraud.
 References

Wells, Joseph T. (2014). Principles of Fraud Examination. Fourth Edition. John Wiley and Sons,
Inc. Hoboken, NJ