Our client, a long term provider of manufactured fuels to heavy industrial customers, maintained its primary manufacturing facility in the southeastern United States. Following a change in plant managers, an employee in the Quality Assurance (QA) laboratory at the facility confided that he had been forced for several years by the preceding manager to alter laboratory QA results which were reported to customers. Market custom in this industry called for self-reported QA results to accompany each batch, or load, of product that was shipped to customers, and in this case the customers were potentially being defrauded into purchasing out-of-spec product.

In being retained to perform an in-depth investigation into the nature of this fraud, our team was to characterize the extent of damages, and identify the conditions that led to its occurrence. Through an extensive review of records, interviews of employees, and background investigation of certain subjects, we were successful in determining the motives, rationale and extent of the fraud.

Because of changes in manufacturing technology within this particular industry, the subject facility was to become obsolete within several years. As a result, our client had not invested extensively in the upkeep and replacement of manufacturing equipment and apparatus at the plant. Because of the lacking equipment and relative inexperience of the prior plant manager, the facility encountered difficulty in consistently producing product that met customer specifications. With a compensation scheme rewarding the plant manager for his facility's performance, and the self-reporting nature of the industry for QA results, the plant manager had the motive, rationale and opportunity to direct the fraudulent entry of records. Based on the extent of the estimated damages, our client made a significant voluntary restitution payment to a number of their customers.