Strippers, Christmas gifts and an RV: Workers push it with company cards

We’ve all heard about people who fudge their expenses, but some of them belong in an Expense Account Shenanigans Hall of Fame.

James Tomes sometimes tells his employees to treat themselves and their spouses to dinner on the company dime after a week of business travel. The president and chief executive of Telgian, a fire-protection consulting and engineering firm, says he tries to be a generous boss, though some employees have still tried to take advantage. A few put date nights on the corporate tab without asking, but one case of taking liberties stands out.

“One guy bought his whole family’s Christmas presents with the company credit card," says Tomes, who fired the employee over the $2,500 bill. “He said he traveled a lot and the company owed this to him."

Santa Claus is making a list and checking it twice, but this is the time of year when overwhelmed accounting departments can miss some tricks as they race to close the books at year-end. Awash in receipts, finance teams “kind of push things through as quickly as possible," as the year draws to a close, says Sarah-Jayne Martin, a director at financial-automation and business-software company Quadient.

For the less scrupulous among us, December can be “a perfect time to submit something where there might be fraudulent activity," she says.

Once an exclusive perk, corporate cards are in the hands of more workers these days, says Katie MacKillop, U.S. director of Payhawk, which works with companies like American Express to administer company credit-card programs.

Brazen abuses

Expense fraud costs businesses an estimated 5% of revenue on average and appears to be on the rise, according to the Association of Certified Fraud Examiners. The industry group says it’s possible companies simply catch more fraud than they used to, thanks to smarter software. Then again, artificial-intelligence tools make doctoring receipts easier than ever.

Martin says her firm’s clients have uncovered brazen abuses, including romantic getaways booked with a company card. In that case, an employee picked vacation destinations where he traveled frequently for business, so the extra trips initially went undetected.

In another episode, an employee claimed her luggage got lost on a business trip, leaving her with nothing to wear to a meeting. Charging a new outfit to the company was reasonable, Martin says, but the employee went for designer brands.

Then there was the man who discovered a certain strip club was categorized as a restaurant by his corporate-card issuer. He would use his company card at the club and submit the expense as a business dinner, Martin says.

Bogus expenses are often so small that they don’t hurt a company’s overall health, but some can, says Tomes. When his business was young, in the early 1990s, he discovered a bookkeeper had fabricated roughly $50,000 of invoices for phony janitorial, furniture and consulting services and pocketed the money. Worse, some legitimate invoices hadn’t been paid. It took months to dig out of the hole, with Tomes temporarily foregoing his salary to help repair the budget.

Dishonest employees are rare, he says, but now he takes no chances. Expenses at his company go through three layers of review. Even small businesses trying to limit costs should pay for at least two sets of eyes, he suggests, because the price of fraud can be higher than the accounting bill.

Dubious honor

For finance types, rooting out expense fraud is like a sport. At SAP, maker of the expense-reporting software Concur, auditors vie for unofficial quarterly awards for exposing the most outlandish charges.

One employee of an SAP client put his $1,659 monthly mortgage on the company tab. He got away with it for several months by disguising his lender as a business vendor.

Someone at another company tried to purchase an RV with a corporate card, according to SAP. On the road for a six-month assignment, he contended the motor home would be cheaper than hotels. The transaction was declined.

Employees of several SAP clients have expensed makeup, arguing their client-facing roles require them to look their best. One went further and tried to bill her employer for plastic surgery.

The pandemic spawned new kinds of expense-account abuse, according to SAP. Home-office allowances were sometimes funneled to unrelated home-improvement projects. One man who used to work in an office with free coffee figured he could bill his company for a daily Starbucks run—even requesting mileage reimbursements for driving to and from the coffee shop.

We gasp or laugh at others’ gall, but plenty of us might be guilty too. About 15% of submitted expenses don’t comply with corporate policies, according to SAP. Honest mistakes, like typos and accidentally blowing past spending limits as the cost of dining soars, account for many of those errors, says Chris Juneau, senior vice president and head of product marketing for SAP Concur. Still, 65% of business travelers in a 2022 SAP survey admitted to intentionally slipping personal expenses onto the company dime.

Damage done

The Jacksonville Jaguars were outscored by 46 points on Sunday, the most lopsided defeat in team history but arguably just their second-worst loss of the year. In March, a former financial manager was sentenced to more than six years in prison for stealing more than $22 million from the NFL club.

Prosecutors said Amit Patel, who was a financial manager for the team, skimmed money by inflating hotel, airfare, catering and other expenses for at least three years. Patel pleaded guilty and said he stole to fuel alcohol and gambling addictions.

Auditors say financial pressures—including addictions, divorces and medical bills—sometimes drive otherwise-decent people to cheat the system.

“For most people, the one place you go where you have access to somebody else’s stuff is your place of work," says John Warren, chief executive of the Association of Certified Fraud Examiners. “If I’m a normal Joe Blow and I need money, I’m not going to go rob a bank."

People often rationalize stealing from a business as less harmful than taking from another person, Warren adds. They also tend to sneak through fake expenses in small increments, which delays detection. Uncovering an expense-fraud scheme typically takes 12 to 18 months, he says.

John Toman, co-founder and chief product officer of financial software maker Pivot Payables, says a new client in the construction industry recently discovered a longtime, trusted employee stole about $120,000 over several years by padding expenses. The employee would buy supplies at a home-improvement store, throwing a $500 gift card into the shopping cart for himself.

More employees are doctoring receipts, auditors say. For instance, they manipulate screenshots to make a client dinner for two look like dinner for five, altering prices and adding line items. Toman says Pivot Payables may soon be able to catch that. The company has a database of over 100,000 merchants’ receipts, so it knows what a genuine one looks like. Using artificial intelligence and machine learning, the company is running trials to suss out such manipulation that isn’t discernible to the human eye.

Toman’s company has also developed virtual corporate credit cards that reduce fraudulent expenses by configuring them for use at certain merchants within certain hours and with predefined spending limits, adding an extra layer of security and control. Sharp-eyed accountants are often too late to save businesses from losses.

“Even if you find fraud, it’s after the fact," Toman says. “The damage is done."

Lynn Cook contributed to this article.

Write to Callum Borchers at callum.borchers@wsj.com