Rex Banner is the manager of a Stop Mart convenience store. He has been employed by the company for 12 years, the last 9 years of which was as a store manager. Rex applied for a promotion to regional manager, which oversees all 30 locations, but was once again denied promotion. Had he been promoted, the regional manager salary would have given Rex $14,000 more per year.

Rex was upset and decided that if the company would not give him the additional compensation he deserved then he would give himself a raise at the expense of the company. He knew that whenever he hired a new employee, the required paperwork sent to the corporate headquarters was simply filed without being reviewed. Thus, Rex completed all the company employment forms for a fictitious new employee he named “Sam Jones.” He figured that, when the company was notified by Service Canada that the Social Insurance Number for “Sam Jones” was fraudulent, Rex would simply report that the employee had just quit and that Rex had no way to contact him. Rex’s scheme involved the following actions:

■ He put “Sam” on the schedule.

■ Every week, he submitted a signed time card for “Sam” along with all the other legitimate employee time cards.

■ Every two weeks when Rex received the employee paycheques, he pulled “Sam’s” pay- cheque and hid it in his briefcase.

■ He then cashed the paycheque for “Sam” and enjoyed the extra money.

Requirement

While Rex’s actions are clearly unethical, were they justified, given that he was again denied a promotion and therefore undercompensated? Will Rex be caught? Does the company bear some responsibility too? If the company required direct deposit of its employee paycheques, could this type of fraud be prevented? Can you recommend any other procedures the company could adopt that would help to prevent Rex’s fraud?