$8 Million Fraud for Ghost Services

We’ve previously seen ghost cattle and real horses. We’ve seen fraud at the top. We’ve seen fraudulent coders and controllers. We’ve seen fraud in the middle of organizations. So far though, much of it has come through various accounting departments and personnel. For this post, let’s look at IT fraud.

James Gladden started in IT at the Alberta Motor Association in 2008. Think of this as Alberta’s version of AAA. By 2013, James had been promoted to VP of IT. Over three and half years, from early 2013 to mid-2016, James managed to steal about Can$8 million by submitting fraudulent invoices.

As VP of IT, Gladden had approval authority for IT-related invoices. He pled guilty to fabricating or falsifying 55 invoices. Gladden used a couple of methods for his scheme. He submitted genuine invoices for work done for the benefit of his personal company, Sprockit Apps Inc. In other cases, Gladden fabricated invoices. One example was a $500k invoice paid to a company called Datavox. The payment was allegedly for phone hardware. In fact, Datavox did no work for AMA.

None of the articles I could find explained why he did it, beyond simple greed. But we do know he bought a lot of stuff. Those purchases included luxury watches, two Porsches, a BMW, a Maserati, a 2014 Yamaha boat, a home in southwest Edmonton, and a $500k home in Scottsdale, Ariz.

We also know how he was caught. Gladden was allowed to spend some time working from home in August 2015 because of a leg injury. He was slow to recover and he remained out of the office for months, regularly failing to show up for meetings. In 2016 he was asked to go on disability and refused. He was later forced onto disability and his replacement found the fraudulent invoices. This is similar to what we saw with the Queen of Horses where an extended vacation surfaced her fraud.

AMA has said that they’ve improved their controls after this. Certainly, better capital budgeting controls would have helped. Improved vendor and invoice management would have helped prevent this as well. An audit should have surfaced a false invoice like the Datavox one. Finally, we come back to a fraudster again visibly living beyond their means.

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