Lloyds Procurement / Invoicing fraud – manager sent down for 5 years

We recently  featured the case of the Lloyds TSB senior manager who was accused of fraud. Jessica Harper was found guilty and last week she was sentenced to 5 years in prison.

Jessica Harper - going down...

Previous reports explained how she had falsified invoices to her own benefit and had received around £2.5 million from the bank through this means. That’s a pretty well known and basic fraud, but there was one new aspect that came out in court that added a slightly different slant to this case.

The usual technique in these cases is for the fraudster to create new company or companies. So I set up Smith, Smith and Smith Ltd, probably create a real company with that name, open a bank account in, produce invoices which I authorise and generate payments to Smith, Smith and Smith.

However, in this case, she used a real firm to add to the camouflage. Whilst she somehow created a bank account that was under her control, it was in the name of a firm who were real suppliers to Lloyds TSB. Here’s the Independent:

She used a bank account set up in the name of software firm ISB Ltd but which was really her own, and doctored and made up invoices and emails to pay herself large sums.She knew ISB's managing director, Simon Sutcliffe, socially and had helped the firm win work with Lloyds. The court heard that she lied and told Mr Sutcliffe the problems over payment receipts had been resolved when he asked her to look into them.

I assume some sort of payment notifications were going to the firm – who would then obviously be confused because they would know that they hadn’t received that money! There’s not the slightest hint of the firms involvement in this, and I can imagine that a senior manager at your client  telling you “don’t worry, just an internal error, I’ll sort it out” would probably re-assure you. But maybe there’s a message there for suppliers – if you see something strange, don’t hesitate to raise it formally, and escalate if necessary with your client.

Anyway, I  assume she produced and authorised invoices to that firm, but the money went into the account she controlled. That still leaves a couple of key questions.

  • Why did her manager or other people involved with her work not spot that there was £2.5 million being paid without any services being received in return?
  • How was she able to authorise such a lot of money without any counter-signatories? Or did signatories just take her word that these non-existent services had been delivered?

But this is a problem when budgets are huge. I know of a different large bank, who received a credit note from a supplier for several hundred thousand pounds. They paid it as an invoice! The mistake was only picked up by the supplier’s auditor months later. What seemed amazing was that the budget holder didn’t notice a swing of that magnitude in the budget situation. But if your overall budget for a large IT or transformation programme is measured in the tens of millions, then what’s a few hundred grand between friends?

Voices (2)

  1. Pete from Purchasing Insight:

    Great piece Peter.

    Actually, this kind of fraud isn’t new. It is, in my opinion, one of the simplest and most effective ways to make a great deal of dishonest money fast. (It’s number 6 in my top way to perpetrate purchase to pay fraud http://purchasinginsight.com/6-top-ways-to-perpetrate-purchase-to-pay-fraud/).

    There is often under investment in P2P process control and it’s incidents like this that high light the importance of proper purchase to pay processes.

    I cannot comment on the details of this particular case but I have seen many times in my professional experience, a deliberate blind eye being turned to either potential or actual fraud because it is not seen as high enough priority. Until of course someone like Jessica Harper decides to take full advantage and fills her boots.

  2. RJ:

    It’s not always a fraud problem, either.I once worked in a reasonably large organisation where the Finance Director believed he had full control over expenditure because no invoice above about £500 could be paid without his personal approval and one of the other Directors’ signature. As a result almost every invoice in the firm was signed by numerous junior staff members before arriving on the desks of the Directors, some of whom then had to approve hundreds of them at the end of each day.

    The FD’s views on appropriate control processes only changed when I showed him an invoice from one of his competitors for £1,000 of services that had a typo turning it into £10,000. The invoice had been paid and was covered with 8 separate signatures, including his own, approving it!

    Any control process needs to be backed up with common sense and a proper audit/analysis procedure that is independent from cost centre management. Having said that, people will always try, and probably succeed, to find a way around any control system so it’s actually good news when they get found out and loopholes can be closed.

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