Employees colluded and defrauded Amazon of 10 million US dollarsPutri Pertiwi
Former Amazon employee, Kayricka Wortham, was recently sentenced to 16 years in prison for embezzling $10 million from the company. Wortham carried out this act of collusion with several other employees.
Fraud is a serious issue, and according to the ACFE Report to the Nations, businesses suffer losses of over 5% annually due to such activities. Collusion, where multiple individuals work together to commit fraud, accounts for approximately 58% of fraud cases, with higher numbers of colluders leading to more significant losses for the company involved.
The sophisticated collusion scheme
Kayricka Wortham served as an operational manager from 2020 to 2022, granting her the authority to oversee subordinates and approve and handle vendor payments.
Research shows that collusion is often orchestrated by a group of individuals led or instigated by someone in a position of power, such as top management. These individuals can exploit weaknesses in internal controls and conceal fraud to evade detection by auditors. In this case, Wortham, holding a strategic position, acted as the mastermind behind the scheme.
Essentially, Wortham conspired with other employees who provided names and social security numbers to create fake vendors. She then instructed her subordinates to input these fraudulent vendors into the system.
The subordinates were unaware that they were dealing with fake vendors. Additionally, Wortham’s accomplice and lover, Brittany Hudson, owned a courier service business with a contract with Amazon, which further facilitated the fraud.
Lessons to be learned
The details of how this case came to light remain undisclosed. However, it is evident that weak internal controls allowed an individual to have full control over critical processes and transactions.
In this case, Wortham had complete control over the vendor approval and payment process. Moreover, the lack of adequate checks and balances facilitated her involvement in fraudulent activities without detection.
Furthermore, she colluded with two colleagues from other departments who had access to internal information, including names and social security numbers, or knowledge of vulnerabilities in Amazon’s system that they could exploit for their fraudulent scheme.
The group was briefly apprehended by authorities, but Wortham and Hudson were released on bail, and they used this time to engage in other crimes involving document forgery.
Although collusion is commonly led by individuals in positions of authority, as seen in the Amazon case, in other real-life scenarios, it could also be instigated by employees at the staff or supervisor level with strategic access. The absence or insufficient oversight by superiors in line with Standard Operating Procedures can contribute to these individuals misusing their access without being detected.
In essence, collusion can be perpetrated by any employee with extraordinary access without proper supervision.
Detection and mitigation
While no internal controls can guarantee perfect prevention and detection of collusion, the implementation of the following practices and controls can deter potential perpetrators or lead to early detection:
- Job rotation. By rotating jobs, access and knowledge can be held by more than one person, minimizing the risk of abuse. This method also ensures a check on transactions previously handled by former incumbents and enforces compliance with company rules and policies.
- Audit trail. Documentation or an audit trail aims to track all parties involved in transactions or authorizations. By knowing this audit trail, perpetrators can be traced if necessary.
- Whistleblowing system. According to the 2022 Report to the Nations, a whistleblowing system is the most effective fraud detection tool. Some other employees may have witnessed suspicious behavior, or one of the colluding parties may feel guilty and wish to report it.
A whistleblowing system allows anonymous reporting by the whistleblower. To ensure its effectiveness, companies should promote their policies to all stakeholders (employees, investors, partners, etc.).
Through the Canary Whistleblowing System, Integrity Asia offers a combination of several reporting channels centralized on a web application, enhancing our clients’ accessibility to reports while ensuring the whistleblowers’ anonymity. For more information on the Canary Whistleblowing System, please feel free to contact us.