Corporate Fraud Handbook: Prevention and Detection, 4th Edition

CHAPTER 7

Billing Schemes

Case Study: Medical School Treats Fraud and Abuse

Fraud seemed to plague a certain southeastern medical college, with one bad case erupting after another. One supervisor's minor transgression opened a Pandora's box of fraud perpetrated by his assistant. It all began when Bruce Livingstone, 1 a married supervisor at the college's three-person business office, took his girlfriend on a business trip using school funds drawn from a suspense account (a temporary account in which entries of credits or charges are made until their proper disposition can be determined). Livingstone did not submit an expense report to offset the charges that month, a violation of a policy governing the college's extensive travel budget.

  Once officials realized that employees had grown lax about submitting timely expense reports, they attempted to reconcile the suspense account by requiring employees to settle their own accounts before receiving their paychecks.

  Not wanting his indiscretion revealed, Livingstone had to disguise the additional expense of taking his girlfriend on a business trip. He submitted a phony expense report in which he unwisely named a female senior auditor at the college as his traveling partner. He forged the auditor's signature on a letter that stated she had participated.

  As luck would have it, the unsuspecting auditor herself reviewed the bogus ...