Through normal financial reviews, management discovered that the material cost component of production costs were substantially higher in the current year over the past year. It appeared that variances were due to both increased raw material costs, and a much higher level of defective finished products returned. Further, from information that was available, this problem seemed to be specific to the company in that known competitors were not facing similar cost increases.
The Investigative Solution
Through interviews with management, security reviews and analysis It was discovered that the purchasing manager had made significant changes in his lifestyle over the last 8-12 months. A life style analysis was performed by one of our fraud investigators and it was determined, among other factors that the purchasing manger had recently purchased a more expensive home, a new car driven by his wife and that he now had 2 children attending university. The analysis revealed that increases in the purchasing managers salary alone could not account for the increase cash flow required to support these activities and acquisitions.
Surveillance was established on the purchasing manger. During the course of the surveillance, the purchasing manager was observed after hours meeting with the sales person from one of the raw material suppliers. A transfer of documents was documented on video. Numerous other meetings were observed and when enough evidence had been collected, the purchasing manger was interviewed by experienced interviewers at The Investigators Group. The purchasing manager confessed that he had been receiving secret commissions from a sales representative from the raw material supplier, initially just to make favorable purchasing decisions, later when pressured; the purchasing manger was forced to accept lower quality raw materials at higher prices. Both of which contributed to higher material costs and reduced direct margins.
The Purchasing Manager's resignation was accepted, the supplier was replaced, and material costs returned to normal. The client chose not to proceed criminally.
The Investigators Group Inc. (IGI) was established in 1995 as a full service private investigation and security firm serving individuals across North America. We serve the legal, insurance and corporate communities as well as individuals through our civil and executive services. IGI provides professional surveillance services, fraud investigators, workplace investigations, undercover operations, loss prevention and security services.
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A licensed private investigator is trained in investigative techniques and must understand the procedural steps required to be followed in order for video surveillance to be admissible.
Employers can conduct surveillance using tools such as a swipe-card system, which data can be used for time-management and disciplinary purposes, or cameras.
I have seen first-hand how fraud can be harmful to a company’s reputation and brand. Engaging in a fraud investigation is difficult and can erode the trust and morale of employees and raise questions and concerns to your outside relationships, customers, suppliers and even prospective employees. That is why before engaging in any investigation, I will ensure that I explain to the client the investigation process, the potential scope and risks, and care is taken in planning the execution and timing of any investigation.