Tales from the Ethics Suite Case Vault

Posted by

The Bottomless Beer Kegs Case

The Bottomless Beer Keg Case

This is the first post in a new series providing real details about real cases to help create awareness about preventing and detecting fraud, theft, and misconduct. At the end of each case study, we’ll also ask for your help in solving or sharing your own thoughts on how to investigate the facts as they are presented. In this case, we recall a bar theft at an all-day dining outlet that went undetected for more than a year.

It started as it often does, with a P&L review meeting full of people at least three steps removed from the reality of day-to-day and moment-to-moment operations. “Our pour costs in the all-day dining outlet have been increasing over the last few months,” said a company controller. “Prices have been going up,” said the outlet manager. After some discussion, it was determined that the cost of beer seemed to be driving the increase. “Beer?” asked the outlet manager. “Are you kidding me? That’s impossible. It’s got to be the new supercall vodka drinks we’re selling. I don’t think we priced them high enough.” Still, assignments were handed out and the outlet manager agreed to look into why the cost of beer was increasing.

The usual review of sales, inventory, purchases, spillage logs and all associated costs was conducted. Still, no one could figure out why the outlet’s beer costs were climbing. A week passed, then three, then another P&L review meeting and more questions about what was going on with beer cost.  Our marching orders were again to figure it out.

As a new manager, I didn’t get many opportunities to voice my opinion, but at this point, I figured it couldn’t hurt.  So, I asked the outlet manager if he checked the inventory personally.  “Of course,” he said. “I looked at the inventory reports for every week in the past three months.” “No, I mean did you actually go into the warehouse and look at the inventory and compare it to the inventory and purchasing reports?” The outlet manager thought that was a waste of time because accounting personnel were present at every inventory as was required by our policies.  Still, he agreed to let me go take a look.

I checked the beer bottles, cans and kegs every single week for a month before I realized something was off. As you probably know, before all of the fabulous technology available today, we inventoried beer kegs by rolling them around to determine if they were full, half-full, or empty. You could tell a keg was full if it was too heavy to roll.  I noticed that oddly the same kegs seemed to be full each week and I told the outlet manager.  He wasn’t surprised since we went through a lot of beer but I explained that the exact same kegs were full each week. “How do you know?” he skeptically asked.  “I just do. I’ve seen them every week for four weeks.” “OK,” he said. “I’ll take a look myself.”

“I don’t see anything wrong here. They’re full. What’s the big deal?” “How could they be full for four weeks?” We eyeballed the kegs for a while. Tried to move them around, but they wouldn’t budge, even a little bit. Finally, we came realize that they had been CEMENTED TO THE FLOOR.

What’s the lesson here?

Don’t give up on an investigation. Listen to your instincts, voice your concerns diplomatically, and even if it takes weeks or months, keep digging and eventually you will identify the source of the problem.

If you can guess how the empty kegs glued to the floor helped perpetrate a fraud, comment below or send your thoughts to info@ethicssuite.com and we will publish it in a follow up!

Leave a Reply