Let us say you are the chief financial officer of a mid-sized software company. You are a new employee anxious to prove your worth to an overbearing boss.
The quarterly numbers have to look good, and the CEO is pressuring you to do whatever is necessary to achieve that end. Now fictitious sales transactions have been discovered, and you may be facing charges of securities fraud.
How it happens
Fraud is a serious matter. However, it is the kind of crime that can sneak up on the perpetrator. For example, because you are in a position of financial responsibility, you can perform some accounting tricks that would help improve financial statements and boost the price of company stock. You may not feel guilty about doing so because you are aware of the new product in the pipeline. When the company introduces that product, the resulting sales growth will provide cover and you can quietly reverse those fictitious transactions.
The crux of the scheme
By booking the fake transactions, you created fictitious invoices. The accounting system automatically credited the company sales account while posting debits to accounts receivable, which would remain on the books until you were able to clear them. Unfortunately, the phony sales had a profit margin of 100 percent, and this is where you tripped up. A fellow employee with a solid background in finance and an eye for detail discovered the abnormalities in the accounting system—and now federal agents want to talk to you.
What to do
You are wise enough to know that a criminal defense attorney will help you through this crisis. You did not intend to commit fraud, but the pressure from your boss and the opportunity provided by your position as CFO combined to create a situation that snowballed into financial chaos. You realize your career is at stake and that you could go to prison. However, your attorney will remind you that there will be a thorough investigation and options to explore in order to achieve the best possible outcome for your case.