A SITE CALLING FOR THEFT
By Yehudah Barlev
A new CFO took advantage of the trust and stole from the company at least 1 million shekels. The main tool he used was the bank’s website where the company’s account was managed, through which he managed to bypass all the control mechanisms
Skinhead Performance is a startup company established by two friends Eli Malachi and Shauel Templer, together with Skinhead Performance Inc. – a company incorporated in the US, where they also market their products. They all constitute the Skinhead Group. The company develops and markets products in the sphere of cellular communications.
The Company hired the services of an external CFO till June 2010. In 1.6.2010 Avraham Yaakov has started his job as the CFO of the group. Among his responsibilities were the preparation of the group’s budget for the years 2010 and 2011, as well as preparing a budget estimation for 2012. He was also obligated to prepare the quarterly cash flow statements; invoices production and management; debt collection; customers and contracts management; salaries preparation and payment; suppliers and payments (to suppliers) management; bank accounts and bank transfers management; preparation of quarterly and monthly financial reports for investors and auditors; preparation of materials and assistance to the external auditors in Israel and the US; Preparing the company for due diligence.
Detailed instructions regarding his duties and responsibilities were given to Yaakov by the CEO of the Company, both through daily e-mail correspondence and in a key document on 31.5.2010 and 2.7.2010 The Company’s signature rights were changed and Jacob was registered as the authorized signatory of the Company, related together with the founders to the A group. The signature rights in the company are divided according to 3 groups; A, B and C. Charges up to 20,000 US dollars require a signature of two A group members in attachment of the Company’s stamp. Charges which exceed the above sum, require signatures from members of groups B and C as well.
A Gap of 800 thousand US dollars
Yaakov reported to the CEO that due to adjustments related to the work of the previous CFO, the preparation of the Company’s audited financial statements for 2010 was delayed. In October 2011, the CEO asked Yaakov to receive an accurate and up-to-date report on the status of the Group’s bank accounts. Yaakov submitted the report, but in a preliminary examination, a gap of $ 800,000 was found between Yaakov’s previous reports and the balances that were updated on the bank’s pages. On November 15, 2010 the CEO has asked Yaakov to clarify that gap. Yaakov claimed at first that the missing balances were in the company’s other foreign currency account, located in a US bank. Jacob offered to wait for the afternoon, as of the difference in time between Israel and the United States, in order to contact the bank branch and receive the required information. As the conversation with the CEO ended, Yaakov left the company’s offices without informing his managers and did not show up the next day, and the CEO of the company made a telephone call to the bank from which he heard that there was no account other than the accounts in which the gap of $ 800,000 was opened. After consultation with the Chairman of the Board of Directors, the CEO has urgently invited an investigative comptroller to examine the Company’s financial structure and the reasons for the discrepancy, including the feasibility study for irregular transactions in the financial system. The investigative comptroller and his team were required to act in a very tight schedule, since the is operating in a “fog”, without a CFO, and obligated to report the board of directors and its investors which included venture capital funds. The company was also a moment before an additional another round of fundraising from the funds. The following are findings from the investigative audit report, which was submitted within ten days.
100 internet transfers in two years
Only in 2011, Yaakov has conducted various online bank transfers, to bank accounts possessed by him, a total amount of 1,712,004 NIS
In 2010-2011 over 100 money transfers have occurred from the Company’s bank account via the online-banking system. All these transfers were classified as “online transfer”, meaning that the money was transferred from the subject back account to another bank account via inputting of commands in the online banking system. 22 and 39 transfers were proceeded in the years 2010 and 2011 accordingly. The bank has provided documents which show that the receiving bank accounts are ultimately possessed by Yaakov. On 1.09.2010 24,924 NIS were transferred from the Company’s bank account, to Dalia’s Yaakov – Avraham Yaakov’s mother. Only in 2011, Yaakov has conducted various online bank transfers, to bank accounts possessed by him, a total amount of 1,712,004 NIS. Additionally, an electronic data sheet, provided by the bank – detailing the online bank transfers which were made via the website during the September-December 2010 was received. The analysis of data sheet, shows that the same operation pattern has continued during these months, resulted in additional withdrawal of 344,218 NIS. Some of these transfers were classified as “salary expenses”, although his monthly salaries were paid in time, to bank account number: 14568900165, registered in “Metropolin” Bank, Eilat branch. No bank adjustments were made to the Company for a year. Until the date of the audit, no audited financial statements of the Company were submitted for 2010. A check with the Company’s executives has showed that no permissions for performing bank transfers from the Company account, to any other account were ever granted to Yaakov.
During his ongoing work as the company’s CFO, Yaakov was exposed to the codes of entry to the Bank’s website. By typing the commands in the bank’s website, the measures of control and supervision of the company’s managers, including the signing rights procedure in the bank account, were bypassed. The site allowed Yaakov to carry out the money transfers completely independently, without the need for additional approval, or authorization of a company manager or another signatory. In this way, the Company’s signature rights procedures were bypassed and neutralized.
Stealing (also) through the salary
During the conversations between the Company’s managers and the investigative audit team, all possibilities that the top management could approve such transfers were denied. In addition, the possibility that Yaakov was applying for a loan or another payment, other than his monthly salary was denied as well. Also, although some of the money transfers made through the Bank’s website were intended to pay real suppliers, Yaakov did not ask the company’s managers to approve such transfers too. The bottom line showed that Yaakov exploited the absolute trust he had received from the company’s top managers and the company’s CEO. Yaakov abused the permissions granted to him by the company’s managers for the purpose of fulfilling his position as the CFO and withdrew at least 1 million NIS during his employment period.
Not only that, but a review of the paychecks has showed that, although Yaakov began his employment with the company only on 01.06.2010, a paycheck was also registered in the payroll system on his behalf for May 2010. The paycheck was produced for a full month of work.
Compulsory and non-compulsory deductions that should’ve been deducted from Yaakov’s salary were grossed, not in accordance with the employment agreement between Yaakov and the company or were not deducted from his paycheck at all. For example, the Company leases vehicles under an operating lease for its employees. The Company usually incurs the direct expense of the leasing. Later, deducting these expenses, as well as payments for fuel, from the employees’ salaries. Starting from November 2010, Yaakov has stopped deducting the required amounts from his paycheck, and continued to withdraw his increased salary, while he reported to the company managers that he was continuing to offset these amounts.
Two weeks after he disappeared from the company, Yaakov was arrested and confessed during his interrogation in the police of the acts attributed to him, as was detailed in the investigative report.