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Fraud Scheme Involving Fake Employees Allowed an HR Manager to Embezzle Millions from the Company Before the Irregularity Was Discovered
For years, an HR manager maintained an ingenious and nearly imperceptible scheme: he created phantom employees within the company, registered them on the payroll, and month after month collected their salaries.
The HR manager of a technology company in Shanghai was arrested for defrauding the company of millions of dollars. He created fake employees and collected their salaries over eight years, exploiting a loophole in the company’s internal system.
How the HR Scheme Was Discovered?
At the end of 2022, the company’s finance department noticed something strange. An employee named Xiao Sun, registered six months earlier, had perfect attendance, but no one had ever seen him. The suspicion led to an internal investigation, which revealed extensive fraud.
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The People’s Prosecution Office of Minhang District in Shanghai released a report on corporate crimes that occurred in 2024. One of the cases listed in the document caught the attention of the Chinese media. It details how an HR manager used his position to embezzle large sums of money.
How the Scam Worked
The person responsible for the scheme, identified as Yang, joined the company in 2014. He managed the reconciliation and administration of outsourced employees.
During his work, he realized that hiring and firing employees depended solely on his approval. Additionally, payments were not regularly audited.
Exploiting this flaw, Yang began to register fake employees. He created 22 false profiles, associating them with bank accounts under his control. Monthly, the salaries were paid to these accounts and withdrawn by Yang. For eight years, the scheme operated without raising suspicion.
The Collapse of the HR Manager’s Fraud
The discovery of the scam occurred when the finance team found Xiao Sun’s perfect attendance record suspicious. By cross-referencing information, they realized that no one knew this employee.
The internal investigation was deepened, and all evidence led to Yang. He was interrogated and confessed to the crime, admitting to embezzling about 16 million yuan (US$ 2.2 million).
Following the report, authorities blocked bank accounts linked to the scheme and analyzed thousands of attendance records and financial statements.
During the process, Yang managed to return 1.1 million yuan (US$ 150,000). His family contributed an additional 1.2 million yuan (US$ 165,000), but the total amount recovered was still far less than the sum embezzled.
Yang was sentenced to 10 years and 2 months in prison for embezzlement. Additionally, he lost his political rights for a year and was fined. His imprisonment reinforces the need for greater internal control in companies dealing with large financial volumes.
With information from udn.com.
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