Artem Kovbel
4 min readSep 17, 2020


How forensic helps a businessman to avoid losses.

Five incredible cases about the disclosure of fraudulent schemes in the companies, that have led to the dramatic losses for the owners and why Forensic procedures are necessary for supervision over the business.

Forensic is a symphony of analytics and information, compiling which you will be able to compose an incredible play. There is a creative approach using the Forensic tool in projects aimed at revealing fraudulent schemes. Recently, we have managed to identify a whole range of unscrupulous schemes, which are described in details below.

Case #1

A situation in which the director of one of the agricultural companies, a minority shareholder, created a fictitious debt for the company (accounts payable) by conducting fake transactions in which the company was provided with a number of services without their actual provision, as evidenced by the absence in the Industry Classification System, which had the right to provide such services.

Thus, accounts payable were formed. Then, these accounts payable were transmitted to a legal entity, controlled by this minority shareholder ( he was also at the same time the director of the legal entity). Then, the accounts payable were eliminated, which is directly indicative of the unscrupulous nature of actions of the minority shareholder.

The purpose of this agreement was the understatement of the financial result of the company in order to reduce its retained earnings this deprivating of the majority shareholder from the dividends, diverting cash flow to related parties. Also, this operation was aimed at gaining additional control over the company by accumulating. liabilities on the controlled legal entity, as a result of which, while conducting claims activities, the assets could be arrested and recovered. The fact of such unscrupulous actions was revealed as a result of the Forensic procedure.

Case #2

Works on construction of an silo complex. During the site renovation, works on its expansion and modernization were carried out. The works were carried out with a clear overstatement of price ( in some cases- by a hundred-fold). This fact became clear after the accountant received a “message” from the contractor about where to give a kickback. After that, a tech inspection was carried out, which determined a clear overstatement of the cost of the site renovation.

Case #3

Lease of commercial real estate property at reduced rental rates

The results of the independent assessment showed significant understatements in the cost of rental rates, according to which real estate properties were leased. Furthermore, some of them were leased out at low price to the director of the company and his relatives, where as a result of a spontaneous inspection performed in a form of a secret buyer (HUMINT procedure — human source intelligence),it was verified, that the majority of lease providers worked according to a scheme under which rental payment were paid in cash. Accordingly, they were not includedz in the official income statement and in the cash flow statement. That is, it overpassed the majority shareholder, who was in the non-operational control and didn’t receive a significant part of the company’s profits.

One of Forensic rules saying that leaving operational control leads to a loss of business.

Case #4

The owner resigned from operations management, leaving his hired manager a 30% stake in the business and making him a CEO.

Let’s analyze this situation through the prism of the so-called fraud triangle.

The manager lost a large amount of money in the bank, which has withdrawn from the market ( about $3 million) and there emerged a need to compensate for this loss.

A favourable opportunity existed, as:

a) The owner was in a non-operational control;

b) The manager (director with a 30% stake), who was not limited by the statute in making management decisions, has transferred a number of clients to a newly created structure, causing the company 50% losses of turnover. He acted on the grounds, that “ I deserve more, because I invest all my time in the development of the business, while the shareholder with a 70% stake “rests on his laurels”, I just take what’s mine, what rightfully belongs to me.”

Conclusion 1: While leaving your top manager in control, don’t forget to pay attention to what are the company’s resources used for, to avoid a situation like in another case, where the CEO spent about $1 million during a year on his personal needs:

  • Restaurants;
  • • Expensive family vacation;
  • • Purchase of a car;
  • • Purchase of jewelry, etc.
  • All these costs were identified during a management accounting.
  • Conclusion 2: While leaving the business to the top-manager, do not forget “ to chain up a Cerberus” in the form of a forensic specialist.
  • Case #5
  • The head of a legal department of subsidiary company of a large transnational corporation was accused of an unscrupulous scheme in the commercial department- selling products at understated price in order to reach KPI sales targets, that were tied to earnings not from the net profit, but from sales revenue.
  • This scheme is common in companies with a weak system of internal controls in terms of internal policies. The vulnerability was the absence of clearly structured discounts policy, which led to abuse by the sales department in terms of selling products below its actual cost price. This scheme has also led to underpayment of VAT to the budget.
  • Bottom line: it is always necessary to establish rules of procedure in all spheres, especially in dep. of purchase and sale!
  • Main conclusion: never leave your business alone with top-managers or business partners.
  • Another Forensic rule is: if you, as the owner, are in operational control, do not think, that no one steals in your company. Therefore, you need to carry out Forensic procedure regularly, as along with the improvement of internal controls in the company, fraudulent schemes are also being improved.
  • Do not let fraudulent symphony prevail over the Forensic symphony.



Artem Kovbel

Auditor, Fraud investigator Co-Owner, Partner, Forensic services at Crowe Erfolg Site: Member ASIS, ACFE, ASCP