Payroll and inventory fraud – are you next?

March 13, 2012 2 Comments

Apparently, there is quite a bit of money to be made from gourmet mushrooms (no, not that kind). So much so that Gino Silva and Steven Perei, both employees with D’Artagnan, a mushroom distributor set up their own company in direction competition with the employer.

Starting in December 2007, Silva and Perei made sales on behalf of their own company, Mediterra, then stole D’Artagnan’s inventory to complete the sale. To conceal the theft, Silva enlisted the help of D’Artagnan’s inventory control specialist to manipulate purchase order records and alter inventory records. This scheme was simple, yet quite brilliant – by using their employer’s inventory for their new company, top line sales essentially equaled bottom line profit. Why pay for inventory when someone else can foot the bill? The mushroom scheme lasted just over 12 months.

The mushroom scheme was not Gino Silva’s “first rodeo”. From 2005 to 2008, Silva was vice president of operations for Philips Accessories and Computer Peripherals. While working there he conspired with others to add “ghost” employees to the company’s payroll that ended up being paid approximately $1.2 million for nonexistent services (Ghost employees may be real people or fictitious but they do not work for the company).

Silva pleaded guilty to the payroll scheme in December 2008. In June 2009, he received a 27 month sentence and a restitution order for $843,414. In April 2011, Silva pleaded guilty to the mushroom scheme, and in March 2012 received a 28 month sentence, a year of supervised release and $71,179 in restitution for the mushroom scheme.

Silva committed two very different frauds and was eventually caught and sentenced twice. Is he a criminal mastermind? Certainly not, but he still managed to defraud two companies with relative ease. Will he commit a third fraud once he is released from prison? Who knows? But, the temptation may be too great… and this time, he probably knows how not to get caught!

I can tell you that there a literally thousands of companies that he could join and commit exactly the same frauds without being caught for at least a year. Is your company next?

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Filed under Fraud Awareness, Fraud in the news, Fraud investigation, Fraud prevention, Small business fraud Tagged with , , , , ,

About Paul McCormack
I have over 20 years of experience in corporate fraud and intellectual theft prevention, detection and investigation. Unlike many fraud experts, I have both industry and professional services experience. To date, I have conducted over 800 interrogations of fraud suspects including numerous senior corporate executives. As a freelance writer, I have written over 1,000 articles on a broad range of topics. My areas of expertise include: • Asset Misappropriation • Big Data • Bribery, Corruption, and Collusion • Check, Wire, ACH, and Credit Card Fraud • Consumer Fraud • Corporate Security • Cybersecurity • Data privacy (Europe, Brazil, Russia, India, and China) • Drug Trafficking • Embezzlement • Employee Fraud • Executive Protection • Fintech • Financial Statement Fraud • FCPA • Healthcare fraud • Identity Theft • Intellectual Property Theft • Internal Audit • Interrogation Tactics • Loss Prevention • Mobile Fraud • Money Laundering • Operational Excellence • Organized Crime • Payments Fraud • PCI Compliance • Retail Fraud • Risk Management • Terrorism and Counterterrorism • UK Bribery Act • Workplace Violence

2 Responses to Payroll and inventory fraud – are you next?

  1. Internal Control Freak says:
    March 31, 2012 at 6:17 pm

    I just found this blog. I will work through it. You might enjoy my stories. Search WordPress for internalcontrolfreak.

    Benson Dana, CPA

    Reply
  2. admin says:
    April 6, 2012 at 12:34 pm

    Company or even small Business owners should implement a fraud prevention program. You may not get rid of fraud but at least you can minimize it. Take for example are those in telecommuting business, getting a work monitoring and billing tool can prevent and protect them from overbilling. This will put business owners in control of the in’s and outs of the business.

    Reply

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