A Slice of Betrayal

Everyone loves pizza, even bad pizza is still pretty good. Everyone knows that the best pizza comes from local pizzerias, and that is the case with Joe’s Pizzeria. The chain was founded in 1990, and because of its popularity it grew to over 30 location around a Midwestern city.

As the momentum of the business grew Joe’s had to hire more administrative staff. In 2002, Joe’s hired Mario Rossi, who advanced to not only the companies’ controller/CFO, but to a personal friend of the founder, Tony Gallo, as well. Through the rest of the 2000’s Joe’s continued to grow, but also went through financial troubles. To keep the business running Tony had to let people go, he had to cash in his retirement account, and even take money from his kid’s saving.

All this might have been avoided though. While Tony was pouring all his resources into Joe’s, Mario was taking it right back out. From 2004 until he was let go in 2009 Mario forged 166 check, worth nearly $300,000 which he used for personal expenses.

As CFO Mario had access to the corporate checkbook, Tony’s signature stamp, and the accounts. He abused this access to write fraudulent checks, that he recorded as having been for business expenses, but he cashed for his own use, to include paying for his children’s Catholic education.

After his scheme was exposed in 2009 Mario was let go from Joe’s, and he was charged in 2010 with forging the checks, as well as filing false income tax returns. Mario pled guilty to all charges and was sentenced to 27 months in prison, followed by three years of supervised release. Additionally Mario was sentenced to pay back Joe’s $291,034.25, and to pay the IRS $68,023 in unpaid taxes.

At trial Mario’s wife pled the judge for leniency because of the impact this would have on their six children. Tony on the other hand had no mercy for Mario, because of the personal and professional betrayal involved.

Questions:

1. What type of check tampering scheme was Mario running according to the Well’s textbook? Explain.

2. Review the latest ACFE Report to the Nations. How does Mario’s scheme compare in loss and length of time to the average check tampering scheme?

3. What are some possible reasons for the differences between this fraud and the average check tampering fraud? What preventative measures could be put into place to help prevent or detect as listed in the Well’s textbook?

4. Do you think the judge should have shown leniency in this case because of Mario’s family? Why or why not?