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Conflicts of Interest

Conflicts of interest (COI) occur when an employee must choose between the financial interests of the company and their own personal benefit. Over the years, I’ve worked COI investigations ranging from minor issues like providing rental houses for remote employees to creating a company and approving purchases and invoices.

  • An employee in Alaska operated an air taxi company during business hours using his work computer and phone.
  • A welder was being paid as a full-time employee while also acting as a contract welder and submitting invoices from their private company for work performed outside working hours.
  • An employee-owned home in South Dakota and rented the properties to their company when housing was scarce.
  • A site foreman in Oklahoma owned a hot-shot company that he was using to haul pipe to the job site.
  • An employee in the purchasing department was buying products from a vendor while their salesman was her husband.
  • A facilities manager created 4 new companies ranging from custodial to construction and began to use them at their company as he phased other legitimate vendors. $3.5 million later he was indicted for wire fraud and money laundering for submitting and approving fraudulent invoices.


Conflicts aren’t always fraudulent or prohibited, but they should be properly managed.

When I first address these investigations, I wanted to know whether they disclosed the conflict, perhaps when they were hired, or to their manager, or during the annual Code of Conduct Certification. The answer to this question determines the initial tone of the investigation. If the employee disclosed it and their supervisor knew, then what steps were taken to properly manage the conflict? Most of the time, it means that an additional approval step should be taken to review purchases and pricing for reasonableness. Sometimes it results in a formal letter requiring the employee to make a choice between their outside business and the company. It might require additional management training.

But what if the employee hasn’t disclosed it? This is where it gets messy. Why did they hide it? How much money was paid out and were the services or products delivered? The investigation takes on a completely different tone when the conflict comes as a surprise to management. In the facilities example above, I downloaded all the vendor master files and used CaseWare IDEA® to perform duplicate testing on the bank accounts to find the additional companies involved. Then all the invoices and payments in the facilities cost center were analyzed to determine the extent of the pricing markups and duplicates. In the end, the case was determined by the courts to be an egregious conflict of interest and both employees pleaded guilty and served time.

IDEA is an essential tool used to perform data analysis to detect conflicts of interest. The most fundamental test is to use the join and duplicate functions to match the vendor master and the employee HR master file by bank account, tax number, address, and/or phone numbers. The results will be surprising.

We specialize in helping professionals put data analytics to work. Our team of experts will help you build a successful program and tackle tough challenges together. Alternatively, try our full-service fraud investigation consulting option for immediate ROI. Contact [email protected] to get started!

CaseWare IDEA , Fraud , News

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By Jennifer Ellison

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