Windor Meat Packing

Management Fraud

Why honest management steals

This case, like the previous one, is another lesson learned in understanding why honest people in management steal.

There are a number of reasons:

  • To maintain a lifestyle of apparent success
  • Colleagues are stealing and succeeding
  • Feel justified due to unfair compensation
  • Simple greed
  • For survival, either at the personal or corporate level

The last is what we have here.

The bank is usually the first to probe. Where are the receivables, the inventory, and the cash? For management the questions come from every direction. Well the short answer is they never existed!

So do not bother to look for cash in a Swiss bank; no, sadly this is another case of the ‘hope in hope’ syndrome. Several years ago, the misstatements started small, and grew. Bad management did not get any better and bad management was too proud to ask for help. Once this vicious cycle starts, it is already too late and bad management becomes fraud. And in this case, management has had no fun and has lived under the stress of an ongoing fraud to maintain the family business. There is no doubt that as the bank and others look back, the signs of fraud were there, such as ‘not in normal course’ business conduct.

But it is not surprising to find the signs missed because it is not a person’s nature to equate the sixth sense with the possibility of a fraud, instead they wish to be kind. This taught me that the big picture is always important and must come first in the fraud scenario assessment. Use that free-floating mind to consider all possibilities and only then begin to eliminate useless facts and focus on what is relevant for investigation. This will quickly bring instant relief to management!