Question

Sunkist, an internet company, founded at the beginning of the technology boom had problems developing the technological systems necessary to support its rapidly expanding user base. In addition, due to the rapid expansion in recent years, many of its systems had been added hastily, resulting in poor integration and eroding data integrity. As a result, the CEO of Sunkist announced an initiative to integrate all systems and increase the quality of internal data. In compliance with this initiative, Sunkist purchased an expensive and complex billing system called Gateway, which would automate the billing for thousands of Internet accounts via credit cards. During the integration, Gateway, in collaboration with Visa, created a phony credit card number that could be used by developers and programmers to test the functionality and integration of the Gateway system. Moreover, this credit card number was fully functional in “live” environments so testers and developers could ensure functionality without being required to use actual personal or company credit card numbers (the activity on this card was not monitored). The integration went smoothly; however, it created thousands of corrupt accounts that required fixing. Michael, the manager of the Operations Department, was responsible for the resolution of all data integrity issues. His team was tasked with fixing all corrupt accounts created by the launch and integration of the Gateway system. As a result, Michael was given the phony credit card number, which was kept on a Post-it Note in his drawer. One of the top performers on the Operations team was a 25-year-old male name Robert. Robert had worked in Operations for over a year and was making $15 per hour, the same salary at which he was hired. He wan an introvert working to support a young family and put himself through school. Robert was the most technologically savvy individual on the team, and his overall systems knowledge even exceeded that of his manager, Michael. Robert was very brilliant in creating more efficient tools and methods to repair corrupt accounts. Therefore, Robert was tasked with conducting training for new employees and updating team members on new processes and tools that he had created. As a result, Robert quickly became a trusted and valuable team member, thus Michael gave him and other team members the phony credit card number in order to further increase the productivity of the team. However, after six months of working at Sunkist, Robert received an official reprimand from the company for using the company system to access Web sites containing pirated software and music. The FBI attended the investigation and determined that Robert had not been a major player in the piracy. Therefore, Robert was quietly warned and placed on a short-term probation. Michael was asked to write a warning letter for the action; however, after a brief conversation with Robert, Michael determined that Robert’s intentions were good and never officially submitted the letter because Robert was a trusted employee and elevated the overall performance of the team. A few months after the piracy incident, Michael noticed some changes in Robert’s behavior such as (a) his computer monitor was repositioned so that his screen was not visible to other co-workers, (b) he had almost all the latest technological innovations, (c) he was going out to lunch more frequently, and (d) he frequently used multiple fake usernames and passwords for testing purposes. Questions: 1. Evaluate this case using the three elements of the fraud triangle to identify the following: a. Potential pressures for Robert to commit fraud. b. Potential opportunities for Robert to commit fraud. c. Potential rationalizations that Robert could use to commit fraud. 2. What are some of the symptoms that fraud potentially exists in this situation? 3. What could Michael have done to eliminate some of the opportunities for fraud?

Answer 1

The three elements of fraud:

​A. Potential pressures for Robert to commit the fraud:

Even though Robert has been working for the company for over an year, he is making the same salary of $15 per hour at which he was hired. He has not been awarded with an increment even though he is a brilliant employee.Further, he has a family to support and also has to get himself through school. This financial crunch may have created potential pressure on Robert to commit the fraud.

B. Potential opportunities for Robert to commit the fraud:

​Robert is technically competent fellow and even better than his boss when it comes to sorting out data integrity issues. Further, since he did well in the program, the phony credit card number was shared with him.The activities on this card are not monitored. Thus, Robert has the opportunity to use this card for personal use and siphon the company's funds away.

C. Potential rationalizations for Robert:

​​Robert can argue with himself that even though he works hard and is good at this job, he has not been provided with any growth in the company. Further, due to listening to some music, he was reprimanded and obviously must have felt insulted. The loyalties he had towards the company must have waivered after the incident.

2. The symptoms that fraud could exist in this situation are as follows:

​​-Robert positions his screen in a way that no one can see what he is doing. This points out to a possibility of him doing something unethical.

-With his meagre salary, buying expensive stuff is not possible for Robert. However, he has all the latest technological innovations.

-There was a change in Robert's lifestyle.He began going out for lunches.

-He used multiple fake usernames and passwords . This was probably because he did not want to leave a trail of the fraud.

3. Michael could have taken the following measures to eliminate the possibility of fraud:

​​-Even though Robert had performed exceedingly well, Michael should not have shared the credit card number with him. It should have been kept confidential.

-He should have definitely had the activity on the credit card monitored.