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Two California men this spring were sentenced to two years in a California prison for embezzling more than $300,000 from Amgen Inc. in a scheme that involved charges to a corporate meetings card to "fictitious businesses whose names were strikingly similar to Amgen's legitimate vendors," according to the Ventura County District Attorney's office, which prosecuted the case. As a result, Amgen fraud tested and fortified its meeting card use, reconciliation and approval processes.
Jason Rimmer, a former Amgen event planner, provided co-defendant Robert Nipar with information to set up American Express merchant accounts for companies with names very similar to actual vendors that the biotech company used for its meetings. "Nipar then charged Amgen for nonexistent services and forwarded false invoices to Rimmer, who approved them for payment. Funds for payment on the bogus invoices were then deposited directly into Nipar's bank account," according to the district attorney's office.
The two each pleaded guilty to one count of felony grand theft last September, but sentence hearings were continued to April for Rimmer and May for Nipar to give them an "opportunity to pay Amgen back prior to their sentences being imposed." They reimbursed Amgen for all but $3,572 of its losses, according to the prosecutor.
The case also prompted Amgen's meeting, travel, legal, audit and other departments--about 30 people in all--to spend months closing gaps identified in its meeting procurement, reconciliation and approval processes, former Amgen meeting planning director Betsy Bondurant said during an Association of Corporate Travel Executives meeting here in May.
Now president of her own consulting firm, Bondurant said the cross-functional Amgen team asked, "If you were trying to be fraudulent against the company, what would you do? What are the gaps? What do we need to close up?" Amgen also worked with supplier American Express to set spending limits by employee grade level and meeting type, and it developed lists of approved vendors and others to more easily run reports on the non-approved "to review those more closely," Bondurant said.
The "learning," Bondurant said, is that Amgen designed its meeting card program "for the 99 percent, to make sure we had the right process in place so if we ever got audited we were protected," rather than focusing on the 1 percent who "look for gaps in the system so they can work it."
Amgen five years ago began "looking into the possibility of implementing a corporate meeting card" to "streamline the process, increase productivity of our staff and streamline the payment processes." At the time, the meeting team spent about 10 percent of its time "chasing invoices" that hadn't been paid, she said.
As the travel department owned the relationship with American Express and the company's T&E card, Bondurant said, her team worked closely with travel, the audit department and others to ensure that the proper policies and standard operating procedures were in place for a meeting card.
"One thing that we learned in retrospect," Bondurant said, "is that all of us looked at this as how can we put process in place to satisfy audit, financial and Sarbanes-Oxley requirements. We did not look at the SOP we developed to avoid fraud. So that was our bad, but it was certainly learning."
As part of the SOP, each planner or cardholder reconciled all charges against a meeting number using both the online reporting and a paper process, Bondurant said. The paper reconciliation was then sent to a manager for approval.
"On a month to month basis, the manager was looking at reconciliations and approving because she saw names that looked very familiar," Bondurant said. "It wasn't until" Rimmer left the company, and the manager noticed discrepancies in names as she reconciled the monthly statement, that "she thought, 'Wait a minute, that's not exactly the name of that company.' She then went back over a few months' worth of reconciliations and a light bulb went off."
Deemed as possible "intentional fraud," the issue was escalated to the company's board of directors and its audit committee, the CEO and hierarchy above the meetings department. Eventually, the company also decided to take the matter to the prosecutor's office, which spent 10 months investigating. Bondurant said her team "had to do damage control on a number of fronts." As the internal and then external investigations began, the allegations needed to be contained.
"At first, we all wanted to believe that we had misinterpreted this, that this wasn't intentional," she explained. The CFO wanted to tear up the meeting card and program, which Bondurant said she had to fight "because it was such a useful tool."
Charges were filed in June 2007 and the matter was reported in the local papers, Bondurant said. By then, the new meeting card processes had been fully tested.
"It was interesting that this person was able to figure out how to work the system. We felt, frankly, vulnerable and used. Those of us who worked out the SOP and process and thought we developed a nice bow around this process learned that it wasn't foolproof by any means," Bondurant said. "It was just frankly embarrassing to fess up that this happened within your organization and on your watch."
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