A former senior accountant for a Chicago construction company was sentenced to two years and two months in federal prison for embezzling more than $1.8 million from the company.
Richard A. Mandarino, age 46, and residing in Scarborough, Ontario, Canada, pled guilty to a charge of federal wire fraud. The fraudulent activities took place from 2015 to 2017 while he was working remotely in Canada on the company's construction projects there.
Mandarino admitted to submitting false payment requests through the company's accounting system, which led to checks being issued to vendors for goods and services that were never actually provided. He diverted these funds for personal use, benefiting both himself and others.
To conceal the thefts, he created fictitious credits and offsets within the accounting records, making the scheme complex and multilayered.
Mandarino's deceptive actions were described by prosecutors as a calculated betrayal of the trust his employer had placed in him regarding the company's finances. Along with the prison sentence, he was ordered to pay full restitution for the amount stolen. The case was prosecuted by federal authorities in the Northern District of Illinois.
Source: https://www.justice.gov/usao-ndil/pr/former-accountant-chicago-construction-company-sentenced-more-two-years-prison-18
Commentary
The source describes the crime as "multilayered' and complex.
The embezzlement scheme carried out by the accused (a former accountant) was considered multilayered and complex primarily because it involved not just the simple theft of funds, but a sophisticated method of concealing those thefts within his employer's accounting system.
Rather than directly siphoning money, he submitted false payment requests for fictitious vendors, creating an intricate web of fake transactions. To further hide the fraudulent activities, he generated fictitious credits and offsets in the accounting records, which obscured the true movement of money and made detection much harder.
This approach contrasts with more straightforward embezzlement cases where an employee might directly divert funds to their own account without elaborate accounting manipulations.
Specifically, the former accountant exploited weaknesses in the payment approval processes and the complexity of the accounting records, taking advantage of remote work setup, which added another layer of difficulty for oversight.
The scheme's complexity required a higher level of financial acumen and careful timing to avoid raising suspicion, making it much more deceitful and damaging than typical embezzlement, which often involves simpler or one-step thefts.
To prevent such complicated schemes, organizations can institute multiple layers of financial controls and regular audits that include thorough verification of vendor legitimacy and payment approvals.
Segregation of duties is critical, ensuring that no single individual has control over all aspects of a financial transaction, from invoice creation to payment processing. Continuous monitoring using data analytics to flag unusual transactions or duplicate payments can help catch irregular patterns early.
Additionally, fostering an environment where employees feel empowered and obligated to report suspicious activities without fear of retaliation can be effective in deterring internal fraud.
Finally, ensuring strong oversight, even in remote work scenarios, through secure access and managerial reviews, is also essential in mitigating risks of such fraudulent schemes.
