SPOTLIGHT

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New wave of middle manager fraudsters

The economic downturn has led to a surge in ‘cappuccino crime’ among middle managers who are still trying to maintain their expensive lifestyles, according to new research by accountants PriceWaterhouseCoopers.

Managers who are jealous of the high pay still awarded to senior executives and who are worried they will lose their jobs are turning to fraud and theft, according to PwC’s latest Global Economic Crime Survey.

The research suggests that middle managers have overstretched themselves in the good years with high mortgages and private school fees. The survey found that the manipulation of financial statements or the invention of transactions accounted for 40% of all crimes against companies. This figure was only 11% in 2003.

Middle managers are committing 47% of all economic crimes, compared with 32% two years ago.

Tony Parton, PwC partner, said: “We are in a perfect storm of economic crime right now with increased pressures and opportunities to commit fraud accompanied by fraudsters’ growing ability to convince themselves their actions are defensible.

“Fraudsters can come from anywhere, but those feeling the tightest financial pinch are more likely to get involved. Middle managers on middle incomes may have stretched themselves with high mortgage repayments or school fees and are now facing pay freezes and less certain prospects for future employment.”

Large organisations report the most fraud with 46% of those with over 1,000 employees reporting incidents in their businesses. The results showed that 43% of British organisations have fallen victim to some form of economic crime in the past two years, the report said, compared to 30% of companies globally.

Much of the crime inflicted on employers is relatively minor, such as embezzlement by junior employees or customers filing false claims. But the incidence of more sophisticated accounting fraud — such as manipulating financial statements or inventing false transactions — has risen sharply since the crisis began.