When manufactured spend backfires

Posted by: jason

Several years ago at another company, I overheard a co-worker of mine lamenting to our travel agent that she didn’t have the credit score to get a credit card and wasn’t sure how she was going to pay for an upcoming business trip. At the time, I had some cards with some pretty sizable annual spend requirements and an idea came to me. What if I added her as an authorized user for the purpose of business purchases? She would receive the reimbursement from work, hand it to me to pay off the balance and it would be a win-win situation. She had the means to travel for business and I would rack up the minimum spend and miles.

I drew up a simple contract basically saying that whatever was purchased on the card whether it was reimbursed or not would be her responsibility. I ordered a card for her and put our plan into motion.

At the end of the first month, I printed off a statement with all of her charges and handed it to her. She turned in her receipt for reimbursement and handed me a check for the exact amount. We followed this pattern for several months and everything was working fine.

After the first six months, I started to notice some personal spending that started to slip in. I didn’t pay much attention to it as I would hand the statement over and receive a check for the full amount. It didn’t really bother me – and it was more free miles.

After a while though, I was handed the check on the payment due date rather than in advance. This meant that I had to have the necessary funds available to cover the entire balance in order to avoid late fees. This worked as well as their check always cleared but I was starting to get a bit nervous. On the other hand, huge sums were running through the card and I was racking up free miles.

After about a year and a half, she found another job with another company and gave her two weeks’ notice. I figured that this was a good time to stop the relationship and get the card back. I handed her the bill and she handed me a check. As I examined the final bill a couple of weeks later – something that was really peculiar was a rather large purchase from an electronics store with a return a couple days later. Why would there be a large purchase the final week of employment?

On a hunch, I inquired with our Accounts Receivables department and asked if there were any reimbursement checks that matched this large amount – and there was. This person had been purchasing large amounts of electronics, getting it reimbursed, and then returning the item(s) and pocketing the reimbursement. I immediately felt sick to my stomach as I felt like I had in some way been a part of this scheme. There was probably a good reason this person couldn’t get their own credit card – had I given a drunk a drink?

I went to the electronics store and asked for all the receipts associated with her card number. I then pulled all the reimbursements and they matched up almost perfect for the past year. I turned over all the information to our internal auditors who launched a huge investigation. I came under scrutiny as well as I was connected with the scheme but was able to show that I had no involvement. They ended up prosecuting her for fraud and reached a plea deal. I never heard from her again and am not sure whatever happened to her career.

The reason that I’m telling you this quite embarrassing story is to just provide some caution as we all look for creative ways to manufacture spend for some extra miles. Looking back, it was quite foolish of me to entrust a card to someone else no matter how perfect it seemed. If something is too good to be true, it probably isn’t true.

  • Gene said,

    Just curious, what type of job did she have that would allow for reimbursement of purchases of “large amounts of electronics”?

  • JK said,

    There was no reason for you to snitch, i bet you didnt give the miles back, instead you turned on a friend who didnt betray you and always paid you back

  • jason said,

    @gene – IT

  • Scottrick said,

    I applaud you for doing the right thing. Both of you were employees, and it’s your responsibility as an employee to protect your employer from fraud. Admitting what happened must have been very frightening, but better than them finding out later, when they may not have been so understanding about your lack of intentional involvement with this scheme.

  • al said,

    I’m kind of with JK here… You found it unethical for her to defraud your company, but find nothing wrong with defrauding the bank?

  • jason said,

    @al – I’m not sure how the bank was defrauded?

    @JK – so if a friend is embezzling money, it’s best just to keep your mouth shut so as not to lose the friendship? I don’t get it.

  • Curtis said,

    Wow, that’s crazy. Certainly not your fault and did the right thing for turning that in. Definitely risky though! It can be hard doing that kind of thing with someone like family even.

    JK – hope your employer has access to your internet history and sees what kind of model employee you are, ha. They could have found out eventually anyway and then it’s more likely he would be involved as an accessory because he noticed it and didn’t notify. Plus it sounds like he was still employed there too. Sheesh…

  • DaninSTL said,

    In addition to your point she obviously had a low morals in this area. I think we should all keep to the moral high road when coming up with areas to create spend. If it is at someone else’s expense (even a store or corporation) we shouldn’t do it. I live life outside of the lines at times but I try to keep within the spirit of the rules. Loopholes yes, stealing no.

  • Angelina said,

    I think you did the right thing. You did her a favor and she took advantage of an opportunity. I see nothing wrong with being honest to your employer. Karma got her and hopefully she learned a lesson.

  • BR said,

    There’s no way he was doing anything wrong. He did the right thing. He was doing this woman a favor by giving her a credit card, and she undermined him by doing something illegal with the credit card. He did the right thing by turning her in.

  • Wiiilll said,

    It is not snitching if she committed her fraud without his knowledge or consent. She was making fraudulent purchases in his name, and he had to provide this information in order to clear himself from involvement in a crime he had no knowledge he was being made a part of. It was also very likely they would have eventually uncovered this through their owne efforts. If they had been partners in the fraudulent reimbursement scheme, and he decided to rat her out in order to avoid being held responsible herself that would be snitching.

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