Government agencies are usually difficult to navigate, even for people who work there because of all the red tape. However if some has access and really understands the system, the process can be a breeze. For the unscrupulous having easy access and knowledge of a government system is just the opportunity they have been waiting for.
Rhonda Smith was a purchasing agent at a large government agency. She had been there for years, and was well liked by everyone she worked with. Michael Judy was a local business owner, respected in the community, and had gone though all the steps to become an approved vendor for the same government agency. So it was a surprise to everyone when Rhonda and Michael were arrested, and accused of conspiring to defraud the government.
About six years previously Rhonda and Michael had enacted a scheme to overbill the government. Michael’s company, which already had contracts with the agency, would send invoices that were overstated, or for services that were never provided. Rhonda, as a purchasing agent would approve these fraudulent invoices. In order to keep the scheme going Rhonda would let Michael know what other companies had bid for new contracts so Michael could underbid them. Through this scheme the two were able to defraud the agency of over $110,000.
When the fraud was discovered years later the pair were arrested, but chose to cooperate with investigators. Both Rhonda and Michael pled guilty to the charges. Michael was sentenced to three months in prison, followed by two years of supervised release. Additionally he was fined $100 and was ordered to pay back $110,581 to the government agency jointly with Rhonda. Rhonda was sentenced to three years probation, and also fined $100 along with the joint repayment.
Questions:
1. This fraud took six years to be uncovered, what are some reasons it may have taken so long? What preventive measures listed in the Well’s textbook would have helped detect or prevent this fraud?
2. What is unique about this fraud, as compared to other billing schemes listed in the Well’s textbook? What kind of fraud is this according to the Well’s textbook? Be specific in your descriptions.
3. Review the ACFE Report to the Nations (RTN). How do the losses from this fraud compare to the average loss from a billing scheme? Provide page #’s from RTN.
4. What do you think about the sentence both Rhonda and Michael received? Is it fair? Why or why not?