Question

The board of directors of Let’s Eat, Inc., a large food and beverage manufacturer, asks a CFE Certified Fraud Examiner (CFE) to investigate a potential bribery scheme involving one of its senior managersVice-Presidents, Marshall Smith. Mr. Smith recently contracted with a relief organization to supply food and water to a region of the world that was devastated by a massive earthquake. The board suspects that Let’s Eat is paying bribes to get the supplies into the region, and it wants the CFE to look into the matter and report back. The CFE interviews Mr. Smith, who explains that he accepted the contract with the relief organization as a charitable effort, and that he expects to break even on the contract. He also tells the examiner that the drivers who deliver the supplies are given cash to keep with them so that when they are stopped by the local militia, they can pay whatever is demanded and continue their mission. Smith says that these special payments are a cost of doing business. He also mentions that in the past, drivers without cash were murdered. The CFE is sure that none of the money is flowing back to Mr. Smith, whose only motive is to get the supplies delivered. Also, the operation is expected to be completed within the next few months. The CFE considers whether he should report the special payments to the board or keep silent.

Please answer the following questions about this case:

What harm might be done to the relief agency if the examiner CFE were to report the special payments to the board?

What might the consequences be to the earthquake victims if the examinerCFE were to report the special payments to the board?

If you were in the examiner’s CFE’s position, how would you feel if earthquake victims died from dehydration or starvation as a result of not receiving the supplies?

What good might come out of the examiner CFE reporting the special payments to the board and what harm might result if the examiner CFE overlooked the special payments?

What should legal considerations be taken into account considered by the CFE?

Answer 1

1.Possible harm to the relief agency if the Examiner CFE were to report the special payments to the board is that the Boars Of Directors of Let's Eat Inc. may stop the supplies considering the cash payments to the drivers in the nature of bribe. This may cause a legal action on the relief agency, as they may be accused of accepting bribe, resulting in legal expenditure. Apart from this, it would reduce the charitable supplies from Let's Eat Inc. and to compensate this, they may have to expense their own money to purchase food and beverages.

2. Consequences to the earthquake victims- If the Board at their discretion, stop the supplies, the earthquake victims may suffer from starvation and dehydration, particularly if the supplies made by Let's Eat Inc is large. They may have to pay from their pocket to buy food, resulting in lost of their money(savings).

3. If I would have been in the Examiner's CFE position, I would have been filled with feelings of remorse and sin, if the earthquake victims died from dehydration or starvation as a result of not receiving the supplies, particularly if it is due to reporting to the Board, resulting in termination of supplies by them.

4. If the Examiner's CFE reports the special payment to the Board, its positive aspect could be that they may consider the special payment necessary to facilitate the charitable supplies and withdraw the request for investigation on its senior Manager Vice Presidents Marshall Smith. Hence, it may result in amicable terms between the Board and Marshall Smith. It could definitely be helpful to both charitable agency and Earthquake victims.

If Examiner CFE overlooked the special payments, the Board will suspect that the money is retained by Marshall Smith, when the accounts of the company would not match. The Board may initiate legal action on Marshall Smith due to lack of knowledge. It would even result in questioning of competency of CFE Examiner.

5. There should not be any legal considerations by the CFE as it does not involve any illegal element. Considering the military conditions and tense environment, cash payment made to drivers can be considered as valid and legal. But the prior condition is that the cash payment made to drivers must be reported to the Board. Moreover, the lives of the earthquake victims are above any law.