False Invoice Scams

I continue to be amazed by the number of embezzlements involving the “false invoice” fraud. In this con a manager or a low-level bookeeper fabricates a phony payee and writes checks to it as if were a legitimate supplier.

In one from the 2000’s Christine Mayfield bookkeeper for Watson Coatings, a small paint manufacturing company in St. Louis set up American Express as an account payble even though Watson had no AMEX cards. She used her personal card to purchase both every day and lavish items and in her bookeeper capacity paid AMEX.

The fraud ran for eight years until Watson could not understand why it was losing money on paper even though business was good. It hired a consultant and discovered the fraud.

Although Watson received monthly bank statements with cancelled checks, Carol Watson,  an owner, delivered the unopened bank statements to Mayfield but never reviewed the bank statements or reconciled the checking account. Mayfield had unsupervised responsibility for issuing, coding, and accounting for manual checks. Shockingly Watson had not required two signatures on checks.  Further their accounting firm hadn’t found the error.  Christine was fired, indicted, and served for a few years in club fed. Her husband was not part of the fraud but was sued along with her (because the account she paid was a joint account with him) and settled with him surrendering all his modest assets including the family home. Christine’s pastor felt sorry for her and hired her to run the church bingo game.  Guess what happened?

Later Watson sued American Express to recover over $1m. it had paid to AMEX on Mayfield’s cards. That case was dismissed by the Federal District court which was affirmed on appeal by the Court of Appeals.  Watson’s claim was based on the fact that AMEX was accepting payment on Watson check for an account in a different name (Watson’s).

Watson also sued its accounting firm for not catching the fraud. and  that matter was settled. 

I did a search on newspapers.com and the St. Louis-Post Dispatch archives and found many similar local swindles which I will detail over the next few months.