Case Study - Mexico

A former employee from the Mexican division of a multinational manufacturing company sent an email to a Senior Executive following his termination which made allegations of theft and mismanagement against the General Manager in Mexico. Kreller was asked to conduct an investigation into the allegations. Kreller interviewed the former employee who indicated that he believed the general manager committed fraud related to the purchase of several used machines. In addition, the former employee said that the GM was profiting from the sale of scrap and that some of the company’s parts were being sold in flea markets at prices below cost and he believed they were being stolen from the warehouse. Kreller conducted a lifestyle inquiry investigation regarding the GM to determine if there were any discrepancies between his salary and his apparent lifestyle, to locate any financial concerns or criminal records and to determine if there were any discrepancies from his resume such as education or licensure. Nothing of concern was located; however, research indicated that his wife came from a wealthy family. Next, a surprise audit was conducted by a forensic accountant at the facility in Mexico. After a review of files, however, it was determined that a full audit could not be undertaken due to a lack of supporting documentation and records in the files. As a result, it was decided to concentrate on the purchase of the used machines. Anomalies were discovered in the purchase of the used machines. It was confirmed that the GM had purchased two used machines from a sole source who was an acquaintance of his rather than putting the purchase out for bid. This occurred subsequent to his receiving approval to purchase a new machine. In addition, the GM, had been authorized to repair the company’s machine, but, instead, bought two used machines and traded the company’s machines without consulting headquarters. An expert was contracted to conduct a valuation of the four used machines purchased from the GM and the two machines traded by him. The expert indicated that the company’s overall loss in the purchase and trade of the machines was over 75,000 USD. Enough evidence was developed against the GM that management was able to proceed criminally against him for fraud. In addition, his termination was supported by the findings regarding his administrative shortcomings. The Controller, although not believed to have been complicit in the fraud, was also terminated as it was apparent that he was in a position far beyond his capabilities and also had significant administrative shortcomings.