Samsung America Inc. (SAI), a branch of Samsung Corporation was involved in the international trade of textiles, metals and other businesses. Samsung Corning Precision Co. Ltd (SCP) was a collective investment of Corning and Samsung Corporation. SCP bought metals that were precious from Englehard Corporation. In the usual dealings of the enterprise SAI would compensate Englehard Corporation, and SAI would be reimbursed by SCP.
John Y. Lee was involved in Asser misappropriation of Samsung’s assets. He was the director of Samsung America Inc. in the department of Korea export. What motivated him to commit this fraud was his greed for money, own expenses that he had to take care of and finally he wanted to make a down payment on a townhouse he had seen in Fort Lee in New Jersey. He wanted to gain more from the enterprise than his monthly benefits and salary (Chow, 2016). Lee was involved in a comprehensive fraud scheme to steal money from the subsidiary of Samsung for five years. This was between 2002 and 2007.
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In September 2000, Lee came up with an identity that was false referred to as Engelhard Supple Co. and made it look like as if his fake firm was Engelhard Corp which was a company that was based in New Jersey. He opened an account with the identity of ESC at a branch of the Bank of America in New Jersey. In agreement with the bank documents, the address that was provided by Lee for ESC was a similar address to that of his personal residence in New York on the western side. He further falsified documents which included invoices and purchase orders that made it look as if another subsidiary of Samsung, Samsung Corning Precision Glass Co.
Limited had bought services of metal refining from ESC. Then, John Lee altered records to seem as though SCP was compensating Samsung America for the labour of ESC. For the purpose of making it look as if Samsung Corning owed some finances to ESC, Lee created a fake balance sheet and forged the supervisor’s signature. He gave the falsified documents to Samsung America so that Samsung America could transfer money directly into his bank account. To hide his bad conduct, John Lee sent the falsified documents to the department of accounting of Samsung America Company. Over the years, he got roughly $1.5 million from this plan (SAMPSON, 2016).
The scheme came to light at a time when to financial auditors from Samsung Corning questioned the supervisor who Lee had forged his signature. The supervisor acknowledged in his interview that he was not responsible for signing or making any false balance sheet and he had not conducted any business dealings with John Lee since 1994. Some days after the interview, Lee confessed his fraudulent behaviour to the auditors of Samsung Corning. Immediately, Samsung informed federal authorities and relieved Lee from his duties in the company.
The consequences of John Lee’s actions were that he was taken to court to face charges of wire fraud. However, he skipped bail and ran way with a young woman who was pregnant to raise the child. He raised the child for seven years and came back to the United States of America to surrender himself because of the guilt he felt. Following statements and documents from the court, during Lee’s plea hearing, he confessed his responsibility in a detailed plan to embezzle finances from the Samsung Company (Kiefer, 2016). He admitted that he created a false entity company that was owned by him. He also admitted to creating the false invoices, documents in addition to payment applications that made it seem that Samsung Corning had acquired services from Engelhard.
In the agreement of his plea deal, John Lee confessed that the loss to the firm was roughly between $1 million and $2.5 million. In addition, he admitted that he signed and filed a personal return on income tax which did not include the $339,138 he had stolen from his company in 2006. As a result, he was sentenced to seventy-five months in jail for his role in the embezzlement of funds in Samsung America. Additionally, he was also given a sentence of three years of release that was supervised, and he was demanded to pay the company a restitution of $1,693,271.
Lee’s action affected the organisation by making it lose millions of dollars that it was unaware of. Samsung America approved for finances that it thought was going to Englehard Corporation but in reality, it was going to the pockets of John Lee. The company could have used the embezzled finances in doing something constructive that would increase the business’s profits. Also, the company spent a lot of money in paying a lawyer that would represent them in court when they filed fraud charges against John Lee. They also had to use a lot of money in paying the auditors to audit the finances of the company to confirm if there is another unknown embezzlement taking place in the firm.
To lessen the likelihood of asset misappropriation in Samsung America Inc. at that time or in the future, the company should have done thorough background analysis to know their employees. Listening and observing employees can assist a company to identify potential fraud risk. It is crucial for the management to be involved with their workers and take the time to know them. Unfortunately, it is the worker who you least expect that commits fraud hence it is paramount to know your employees and involve them in discussions.
Also, the company should make the employees aware of the policy of fraud risk including the forms of fraud and their consequences. Those individuals who are planning to commit asset misappropriation will be mindful of the fact that the management is closely watching them and will be deterred by this hence avoiding fraud. The company should also have implemented some internal controls. This is the plans implemented to protect the assets of the company, ensure the accounting records’ integrity and detect and deter theft and fraud (James L. Bierstaker, 2007). Duties segregation is a critical part of the internal control that can minimise the risk of fraud from happening. Also, hiring fraud experts is very crucial. They can assist in developing antifraud procedures and policies.
In summary, asset misappropriation and embezzlements are serious crimes that should be dealt with accordingly like in the case of John Lee when he was sentenced to seventy-five months in prison. Having the right strategies in place in a company can significantly minimise fraudulent activities from happening or reduce losses if a fraud already happened. Making the policy of the company known to the workers is one of the suitable methods to deter fraudulent behaviour.
References
Chow, E. (2016, June 29). articles/30110/samsung-america-director-arrested-for-wire-fraud . Retrieved from https://www.law360.com: https://www.law360.com/articles/30110/samsung-america-director-arrested-for-wire-fraud
James L. Bierstaker, R. G. (2007). Accountants' perceptions regarding fraud detection and prevention methods. Managerial Auditing Journal 21.5 , 520-535.
Kiefer, E. (2016, June 30). new-jersey/hoboken/ex-samsung-director-gets-jail-time-1m-embezzlement-scheme-hudson-county-nj . Retrieved from https://patch.com: https://patch.com/new-jersey/hoboken/ex-samsung-director-gets-jail-time-1m-embezzlement-scheme-hudson-county-nj
SAMPSON, P. J. (2016, June). news/ex-executive-gets-prison-for-embezzling-1-6m-from-ridgefield-park-company-1.1623517 . Retrieved from http://archive.northjersey.com: http://archive.northjersey.com/news/ex-executive-gets-prison-for-embezzling-1-6m-from-ridgefield-park-company-1.1623517
