The enemy within: Betrayal of leaders

When an accountant raised questions to his organization’s management in 2016 about the possible manipulation of employee remuneration at an Indonesian mining operation, little did he know that he was pulling the string that would unravel a larger fraud scheme involving top executives. Once discovered, though, the fraudsters’ downfall came quickly.

Some managers had been diverting company funds to their own accounts, and in the process, they withheld payments from some employees. This misbehavior understandably angered the company’s labor union, whose leader threatened industrial action. Management of the mining operation, which was owned by a company listed on the Australia Securities Exchange, couldn’t afford a strike that would disrupt the mining operation, and so the managing director and the chief financial officer of the parent company initiated an investigation.

The authors of this article, with the help of whistleblowers, conducted that investigation on behalf of the parent company to find out more about the suspected fraud inside the mining operation. Here we detail how the fraudulent leaders scammed the company and some of the lessons learned — from this investigation and others that we’ve conducted — about leadership fraud and the importance of the right tone at the top at any organizations wishing to prevent and detect these types of crimes.