The Many Examples Of Employee Credit Card Fraud: What Public Employers Should Consider

Written exclusively for My Community Workplace for Government

A U.S. district judge sentenced a former City of Shreveport employee to 32 months in prison and three years of supervised release for allegedly scheming to commit credit card fraud. The judge also ordered the 42-year-old man to pay $409,769.56 in restitution. The former employee pled guilty to conspiracy to commit credit card fraud and aggravated identity theft on April 07, 2021.

The man, who worked for the Solid Waste Department in the City of Shreveport Public Works, used his position to steal three City of Shreveport Fuelman credit cards. He and a co-conspirator then used the cards illegally to purchase gasoline and other items at gas stations in the Shreveport area.

The employee would meet the co-conspirator and others at a local gas station and use one of the stolen Fuelman cards, along with the Fuelman personal identification number of a Solid Waste Department supervisor. They filled large containers that could hold up to 500 gallons of fuel, sold the tanks to a third party, and split the profits. They often ran multiple transactions to fill the tanks.

From September 03, 2017, to October 16, 2019, three credit cards belonging to the City of Shreveport were used to make $409,769.56 in transactions.

The man's co-conspirator is scheduled to be sentenced on Dec. 7, 2021. "Former City of Shreveport Employee Sentenced for Conspiracy and Aggravated Identity Theft" www.justice.gov (Aug. 03, 2021).

Commentary and Checklist

Employee credit card fraud can occur when a government employer issues a credit card with unlimited credit to an employee and the employee uses it for fraudulent, unauthorized purchases. Employees may use the card to pay for their personal expenses, or they may purchase items to resell and keep the cash. 

Employee credit card fraud can easily cost an organizations hundreds of thousands of dollars.

For example, from 2011 to 2014, an accounting manager at a Canadian software company used her company credit card to purchase more than 10,000 iPhones and iPads that she then resold, pocketing six million dollars.

In another case, an employee at an investment publisher used his company card to purchase audio equipment, social media follows, and a billboard in Times Square for his personal record label.

An Indiana county auditor and council member used county-issued, taxpayer-funded credit cards to purchase more than $300,000 in Walmart gift cards, allegedly for government spending. However, she used the gift cards to purchase personal items, including clothing, movies, makeup, and liquor. “9 Outrageous Cases of Corporate Card Fraud” www.teampay.co (Jul. 10, 2019).

Often, credit card fraud is easy to spot with basic oversight and auditing practices. By implementing certain protections when issuing credit cards, government employers can reduce the risk that they will lose thousands or millions of dollars to employees misusing credit cards.

Below are some ways an organization can prevent fraud and/or misuse of organizational credit cards.

  • Develop, distribute, and enforce a policy promoting honesty and integrity and prohibiting embezzlement and employee theft. Have all employees acknowledge in writing their receipt and understanding of the policy
  • Develop policies/procedures regarding the use of organization credit cards
  • Strictly limit the number of credit cards issued
  • Provide a credit card solely for the purpose of allowing an employee to perform their work more effectively
  • Place a credit limit on each card
  • Set the credit limit to the monthly credit amount the employee needs to perform their effectively
  • Employees issued a credit card should acknowledge by signature your policies/procedures regarding credit cards
  • Employees should acknowledge in writing that an organizational credit card is a tool to assist with performance and not a benefit of employment or job-related perk
  • List what is considered acceptable credit card purchases in your policy/procedures
  • Require written pre-approval for any purchases outside the norm
  • Require employees to acknowledge their credit card expenditures and provide an explanation of the expenditure, if necessary
  • Prohibit the use of an organization credit card for personal expenses
  • Prohibit employees from using credit card cash advances without approval
  • Require original receipts for all purchases over certain amounts on organization credit cards within 30 days of purchase
  • Require employees to immediately notify the organization and the credit card issuer if a card is lost, stolen, or compromised
  • Consistently discipline employees that do not follow credit card policies/procedures including, but not limited to, suspending, or terminating credit card privileges
  • Perform due diligence on all employees issued credit cards, including criminal background checks
  • Do not provide credit cards to employees with a history of embezzlement, fraud, or other fidelity crimes
  • Review monthly all statements directly from the credit card issuer
  • Do not allow employees to approve their own credit card expenses
  • Designate a third-party unaffiliated employee to manage credit card expenditures including collecting receipts; reviewing statements; comparing receipts to the statements; making certain that purchases made were used for the benefit of the organization; and to flag any questionable purchases for management review
  • Require management to review and approve all credit card purchases
  • Set alerts to provide notices of credit card purchases
  • Notify credit card issuers immediately when employees with organization credit cards are no longer employed; no longer granted authority to use a credit card; or when a card is reported lost or stolen
  • Limit automatic payments via credit cards to vendors and closely monitor credit card activity to such vendors
  • Closely monitor credit card expenses to identify suspicious or unusual purchasing activity
  • Select a credit card issuer that provides online statements; allows for credit limits by card/employee; and provides for 24/7 monitoring, including spending alerts and fraud protection
  • Closely review all credit issuer agreements to determine your exposure and responsibilities in case of fraud
  • Provide a means for employees and others to report suspicions of wrongdoing - including employee embezzlement and/or theft - easily, safely, and without retaliation
  • Consider a third-party mechanism for employees, vendors, and other workplace participants to anonymously report suspicions of credit card fraud
  • Investigate all suspicious or unusual credit card expenses in a timely and professional manner
  • If an investigation is warranted, use a person trained in investigating employee crime, theft, or embezzlement and/or a person experienced in forensic accounting
  • If embezzlement or fraud is detected or reasonably suspected, consult legal counsel immediately
  • Do not terminate a person or make accusations of fraud or other fidelity crimes without seeking information from law enforcement and advice from an attorney
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