A former talent relations executive at HBO has admitted to diverting nearly $1 million in production funds to a fake company she created. The type of fraudulent billing scheme using a shell company can be accomplished with nothing more than a fictitious name and a payment destination. In this case, the executive used the name Shine Glossy, LLP to submit invoices for style and makeup services that were not actually provided to actors, had them sent to the email address email@example.com and set up a company in her husband’s name with a bank account to deposit the checks.
A strong system of internal controls can minimize the risk of this type of vendor fraud and/or identify red flags to catch it when it occurs. Important areas for consideration include overall segregation of duties, due diligence in accepting new vendors and monitoring vendor activity over time. Additional detail be found in this related article addressing this type of vendor fraud.