Expense fraud: why senior managers are the worst offenders

Apparently, senior managers are more likely than staff to fiddle their expenses policy - just because they can.

by Elizabeth Anderson
Last Updated: 06 Jul 2011
Most of us probably wouldn't think twice about a spot of minor work-based larceny - like pocketing the odd highlighter or 'borrowing' an envelope - even if we'd shy away from expense-fiddling on the scale of Christopher Grierson, the US attorney whose dismissal made headlines this week. But legally, the distinction isn't clear-cut: any kind of theft could be seen as gross misconduct. According to Adrian Crawford, employment partner at Kingsley Napley: ‘even taking £1 can lead to an employer’s dismissal. It’s seen as dishonest and a betrayal to the company.’

Of course, the larger the sum involved, the more likely the case will attract attention. Grierson, a lawyer who had worked on a number of prestigious cases including the investigation into Madoff's Ponzi scheme, was fired after it was discovered he’d fiddled company expenses to the tune of £1m. Back in 2000, Greg Hutchings, then chief executive of Tomkins, resigned after it emerged he’d awarded himself generous expenses to fund private jets, as well as authorising large corporate donations to electoral campaigns.     

As these examples show, it’s not just your average employee committing company fraud; it's senior staff too. In fact, according to research by Global Expense, managers are 30% more likely to break company expenses policy than employees. (They're also less likely to show restraint, despite the financial squeeze - almost a quarter receive more than £5,000 a year for expenses, and 11% get more than £10,000).   

Why do they do it? ‘Often it’s because they can,’ says Crawford.  ‘Bosses know they can get away with it because they don’t need people to sign off their expense and it’s rarely picked up at audit stage.’

Presumably it was this privilege that allowed Grierson to clock up £1m in false expenses over a number of years. ‘Many wonder how fraud on such a large scale can go undetected, but often firms won’t have strict procedures in place to monitor all expenses,’ says Crawford.  

It’s also difficult to pick out your typical fraudster. KPMG suggests it’s most likely to be a middle-aged manager who’s been employed in the company for a few years - perhaps someone who appears a bit over-conscientious, staying late and working weekends. So not exactly someone who sticks out like a sore thumb.  

So all things considered, expenses fraud is a form of white collar crime that’s very difficult to spot – particularly if it’s committed by the people in charge. Crawford’s advice for employers is simple: ‘no one should be signing off their own expenses.’  Pity Grierson's bosses didn't work that out a bit sooner.

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