Macy’s Fraud Lessons

If you’re looking for another example to demonstrate to resistant colleagues that fraud is not always “small” or impossible to prevent (a common cop-out), enter Macy’s.

The department store chain, which also operates Bloomingdale’s and Bluemercury cosmetics chain, “identified an issue related to delivery expenses in one of its accrual accounts earlier this month. An independent investigation and forensic analysis found that a single employee with responsibility for small package delivery expense accounting intentionally made erroneous accounting accrual entries to hide roughly $132 million to $154 million of expenses from the fourth quarter of 2021 through the fiscal quarter.”

Let’s reiterate.

🤦🏻‍♂️ One employee

🤦🏻‍♂️ Not an exec with high “sign-off authority”

🤦🏻‍♂️ One accounting process

🤦🏻‍♂️ Undetected for 3 years

🤦🏻‍♂️ Maybe $132m or maybe $22m more

But it’s okay, “the person behind the conduct is no longer an employee, and the investigation didn’t identify involvement by any other worker.” Is that latter bit meant to be reassuring?

Luckily, the Chairman and CEO assured investors, “At Macy’s Inc., we promote a culture of ethical conduct.” The market was less convinced. In afternoon trading Monday, shares fell 3.3%, or 53 cents, to $15.77.

“Promoting a culture of ethical conduct” is meaningless if you’re not identifying and educating people on fraud. Part of that communication and training needs to assert that fraud is a sin of commission AND omission. We then need to show that the sin has consequences (something our data 👇 suggests is not always the case 😬)!