Employee Theft — Scrap Metal Recycler
A scrap metal recycler that buys, processes and resells metals discovered that one of its primary suppliers had been overpaid for years. Working together, the supplier and an employee at the facility's scales had misrepresented the quantity and type of scrap the supplier sold.
The professionals of RT Forensic Accountants were engaged to review the supplier's full transaction history, identify how the theft had been carried out, and quantify and substantiate the loss for the company's crime claim.
- Industry
- Scrap metal recycling
- Peril
- Employee theft
- Coverage
- Crime / fidelity
- Result
- Losses in excess of $800,000 over a four-year period were quantified and recovered
The Loss
Scale associates could enter tare weights and material grades by hand. That control gap let the scheme inflate what the company paid: the same material was weighed more than once, containers were logged at abnormal tare weights, and cheaper metals were recorded as higher-value grades.
The Process
We reviewed nearly 1,000 purchase tickets and more than 23,000 individual transactions, using a range of analytics to flag suspicious entries. Each flagged transaction was reviewed against the photographs taken at the scale to confirm fictitious entries, and payment records obtained with the finance and accounting team showed the supplier had been paid for them. The analytics also showed inventory balances inflated by the fictitious purchases and later written off, giving the insurer further strong evidence of the loss.
The Results
Duplicate transactions, in which the supplier was paid for material that was never there, and intentional product misclassifications accounted for more than $800,000 of dollar-for-dollar loss over four years. Each item was supported by ticket details, scale photographs, and payment records, giving the company a documented, defensible basis for its claim.