Employee fraud: recent developments in Australia
Unfortunately, Melissa Caddick is not Australia’s only corporate swindler. Fraudulent conduct in the workplace still occurs all too often and is incredibly costly for employers (financially and reputationally). Two recent, lesser-known cases concerning senior employees serve as timely reminders of the need to ensure appropriate checks and balances exist across a business to deter and detect unauthorised expenditure of company money.
False expenses: director steals millions to pay for personal luxury items
Proceedings were recently commenced in the Federal Court of Australia by Deloitte Services Pty Ltd (ACN 087 279 678) and Deloitte Financial Advisory Pty Ltd (ACN 611 749 841) (collectively, Deloitte) against a former director, Mr Paul Quill for misuse of company funds.
Deloitte claimed that between 2016 to 2022, Mr Quill incurred expenses of approximately $3 million on his work credit card for personal items, ranging from fine art, furniture, jewellery, watches and a hot tub (amongst other things).
Mr Quill allegedly submitted fake invoices, by falsifying genuine invoices from third-party suppliers, making it seem as if they were for work-related expenses while also creating fake emails claiming to be from a Deloitte partner to further legitimise his “con”.
Upon learning about Mr Quill’s deceit, Deloitte dismissed him and reported him to the Australian Securities and Investments Commission, the police and the Australian Restructuring Insolvency & Turnaround Association.
On 19 April 2022, the Federal Court of Australia ordered that Mr Quill repay Deloitte $3.1 million.
Billing fraud: employee cashes in from falsified invoices
Rentokil Initial Pty Ltd (ACN 000 034 597) (Rentokil) commenced Federal Court proceedings against its former Head of Operational Support and Supply Chain, Mr Jesse Kelly and two entities of which Mr Kelly was the sole director and shareholder.
Initially, Rentokil successfully obtained freezing orders and some ancillary orders against Mr Kelly and the entities on the basis that between March 2020 and July 2021, Mr Kelly misused his position and breached his fiduciary duties by falsifying invoices in the names of third-party suppliers and defrauded Rentokil of around $3.2 million. The Court has since ruled that Rentokil is owed $3.38 million plus interest.
The falsified invoices directed that payment be made to one of two ANZ bank accounts or a CBA account. It was subsequently discovered that the ANZ accounts were held by Mr Kelly (and one of his entities). After Rentokil commenced an investigation into these discoveries, Mr Kelly admitted to falsifying the invoices and tendered his resignation. In late April 2022, the Court ordered that the Mr Kelly’s and his business’ assets be sold and all proceeds be paid to Rentokil (up to the amount of approximately $3.5 million).
Protecting your business - how can your business mitigate the risk of employee fraud?
- Ensure there are governance systems where credit card statements and other financial records (i.e. invoices) are reviewed and escalated where any anomalies are identified.
- Provide comprehensive and regular risk and fraud training to all employees, but especially financial/accounts and operative employees.
- Review expenditure authorisations for employees and consider whether dual authorisation is required over certain financial thresholds.
- Ensure that your policies and procedures are regularly updated and identify persons authorised and/or responsible for managing business transactions.
If you suspect that an employee has committed (or may commit) fraud in the workplace, it is essential that evidence is preserved and appropriate action taken, including reporting to appropriate law enforcement agencies.