Diary of a Bad, Bad Bookkeeper – (Day 97) The Shell Company Scam

[ad#Adlinks Fraud]

Dear Diary,

Another day, another dollar…or at least, another stolen dollar.

Well – I’ve had my own company for about two weeks now and I’ve made a couple thousand dollars skimming off the deposits.  The boss hasn’t noticed.  As far as he’s concerned, all of the invoices are paid, and I’m doing my job incredibly well.  In fact, I just passed the three month trial period, and the boss gave me a $0.50 an hour raise.  When he told me that, I felt like saying, “Really?  A whole $0.50 an hour.  You’re too kind.  Now I can buy that car I need.”  But instead, I didn’t.

Still, I do need a new car.  Fifty cents an hour is only an extra $1,040 per year.  That’s not even going to pay for a cup holder.  My car is breaking down and dying in the most inconvenient places, so I really just want to get a new car.  I don’t really need anything fancy, but the best cars are at least $20,000.  I need to figure out how to get a bigger down payment.  I want to put down at least $5,000, but the way things are going, that’s going to take a couple more weeks.  I have no idea if my car can make it a couple more weeks.

I thought about starting another business, but I don’t really want to pay another $100 or so for the licenses…plus, the time it takes to go to the bank and get another account…I’d rather not.

But I did come up with another idea.  I wrote a check to Johnson Hauling for $1,500.

“What’s this check for,” the boss asked me when I gave it to him to sign.  I had been hoping he wouldn’t notice it, since I slipped it in with a bunch of other checks.  But since he had…

“That’s a new vendor we’re using,” I told him.  “We needed to haul away a bunch of left over trash and remnants from the newest renovation project, and they were the best deal.  They delivered a trash can to the project, then hauled it away when they were done.”

[ad#Adlinks Credit]
In case I didn’t mention it, the company I work for buys, renovates and sells houses.  So paying $1,500 to haul away remnants was not that uncommon.

“Okay,” he said, distracted as he signed the next check, and then the next.  Finally, he handed me the pile of checks and gave me a dismissive wave of his hand.

I left the office triumphant.  The truth was, I didn’t need to create another company because Johnson Hauling is my husband’s company.  The check that he had just written, I was able to cash at the bank because I’m a signer on the Johnson Hauling bank account.  My husband will never know that I got this money because I can just cash the check.  And the boss has never met my husband, so he has no idea that my husband and I have different last names.  The result… I am now $1,500 closer to buying my new car.

I think I’ll go test drive a Toyota Prius.  It’s a very energy efficient car.  After all, it’s my moral duty to save the planet.

**************************************************************

A Little More Information About This Kind of Scam:

This scam is commonly referred to as a shell company scam because the embezzler is paying a valid company for services that were never rendered or products that were never delivered.  Thus, the company is solid with a banking history while the transaction is nothing but air.  Any teller will cash that check without qualms and hand over the money to whomever’s name is on the account.

This scam is also often pulled when a payment is made to an individual or an employee.  The embezzler’s excuse might be that this person was just a subcontractor for the day and was paid under the table.  Many times, the embezzler will even go so far as to pay someone they are friends with, and then let the friend take a portion of the embezzled funds.  They can steal for a long time this way without getting caught, especially because the owner gets used to seeing that name.

[ad#Adlinks Fraud]
To Stop This Scam:

It’s important to do your homework.  If you don’t recognize the name of a company, or know anything about the transaction that took place, then ask questions – lots of questions. Ask who ordered the product or services.  Whoever requested the order – sometimes it might be another employee – it’s important to ask them why they placed that order.  Ask to see a Purchase Order, Shipping Receipt, or an Invoice from the company.  Go and look at the service that was done or the product that was delivered.  Talk to someone at the company for which the check is written too and make sure that they actually delivered the product or service.  A good rule of thumb is this… If the payment is for a new account – whether a vendor, employee, subcontractor, or customer – demand proof.  Make contact, or ask for paperwork.

Warning Signs:

  • If someone is colluding with the embezzler to steal from you, they may look you straight in the eye and lie about what they’ve done for your company.  That’s why it’s important to go with your gut when you meet someone.  If you don’t like them, “fire them.”
  • Also, if you ask for paperwork and it doesn’t have an address or phone number, be suspicious.  Valid companies automatically put their contact information on all their paperwork because they want to make sure they get paid – and if you can’t call them with questions, you won’t be paying.  So, ask for the invoice or statement, and be very, very slow at paying anyone you’re suspicious of.  Let them call you and demand payment when in doubt.
Tagged , , , , , , , , , , , , , . Bookmark the permalink.

10 Responses to Diary of a Bad, Bad Bookkeeper – (Day 97) The Shell Company Scam

  1. Pingback: Diary of a bad, bad bookkeeper | AuditMyBooks

  2. Hi Erica:

    Keep these Bad Bookkeeper stories going. We learn so much from them!

  3. Tammy Martin says:

    This is one of the reasons I became a bookkeeper. Great examples to pass on to my clients, as this a big part of my practice.

  4. LIC says:

    This is the awesome article. Thanks

  5. I really loved this post. You write about this topic very well. I really like your blog and I will definetly bookmark it! Keep up the super posts! colon cleansing

  6. Hi! I could have sworn I’ve been to this site before but after browsing through some of the post I realized it’s new to me. Anyhow, I’m definitely delighted I found it and I’ll be book-marking and checking back often!

  7. Wanted to drop a comment and let you know your Rss feed isn’t functioning today. I tried including it to my Google reader account but got absolutely nothing.

  8. Would you propose starting with a free platform like WordPress or go for a paid option? There are so many choices out there that I’m totally overwhelmed .. Any tips? Many thanks!

  9. Have a fantastic day!. Could you tell me the name of this design, or is it a special theme one? The reason I ask is that When I look at your RSS feed it seems to be just a lot of messed up text. Is the problem with your site, or mine? Could it be browser related? Anyone else having this same problem? Hair Loss Treatment

Leave a Reply