In his own words, Daniel Jones was “The Dude.” With hiswaist-long dreadlocks, part-time rock band, and well-paid jobmanaging a company’s online search directory—he seemed to have itall. Originally from Germany, Jones, now age 32, earned hisdoctorate and taught at the University of Munich before coming tothe United States, where he started his career in computers. In1996, Jones started working with the company as a director ofoperations for U.S.-Speech Engineering Service and RetrievalTechnology—working on a new, closely guarded search engine tied tothe company’s .net concept. The company allows employees to orderan unlimited amount of software and hardware, at no cost, forbusiness purposes. Between December 2001 and November 2002, Jonesordered or used his assistant and other employees (including a highschool intern) to order nearly 1,700 pieces of software which hadvery low cost but were worth a lot on the street. He then resoldthem for reduced prices— reaping millions. When items with a costof goods sold of more than $1,000 are ordered, an e-mail is sent tothe employee’s direct supervisor, who must click on an “Approve”button before the order is filled. In no individual order was thecost of goods more than 1,000—he made sure none of the ordersrequired a supervisor’s approval. The loosely controlled internalordering system reflects the trust the company puts in itsemployees. In June, FBI agents said they saw Jones exchanging alarge box of software for cash in a department store parking lot.The FBI contacted the company’s security and began monitoringJones’ bank accounts. Previously, one account with his bank had anaverage balance of $2,159. In a short time, however, the averagebalance ballooned to $129,775. Another account at another bankshowed irregular deposits totalling $500,000—none of which appearedto be from any legitimate income or other source. Investigatorsalso noted that Jones purchased a Ferrari F355 Berlinetta, a JaguarXJ6, and traded in lesser vehicles for a Hummer, a Mercedes 500SEL,and a Harley-Davidson motorcycle. He also bought an $8,000 platinumdiamond ring, a $2,230 wristwatch, and a $4,000 bracelet. “Youfigured that I like big boy’s toys by looking at some of mypictures,” Jones wrote on his personal Web page. “I just can’tresist.” The Dude’s Web page includes a camera for monitoring hiscat and photos of his yacht, cars, and other treasures. For arelatively low-level manager, it was an impressive collection. Butat his company, where teenage software engineers can earn more thancompany directors, no one batted an eyelid. A neighbour across thestreet from Jones said that he was clearly wealthy, but notflamboyant with his money. He described Jones as an intelligent manwho didn’t flaunt his education, would loan neighbours tools, andwas always friendly. The neighbour was surprised to hear theaccusations against someone he called his friend. All he knew aboutJones was that he was a good neighbour who loved cars. “He wasvery, very helpful. The few times I had problems with my PC, he’dcome and help straighten them out,” the neighbour said. “They arejust ideal neighbours. I feel terrible for him and his wife." Jonesand his wife lived in a modest 1960s split-level home. In 2001, hejoined the city's Rotary Club, "where he seemed more outgoing andpersonable than the stereotype techie," said a local jeweller andimmediate past president of the club. He seemed like what I wouldexpect a genius software developer to be."
1. In the scenario, Jones' employer has been putting moreemphasis on controlling cost. With the slowing of overalltechnology spending, executives have ordered managers to closelymonitor expenses and have given vice presidents greaterresponsibility for statements of financial positions. What positiveor negative consequences might this pose to the company in futurefraud prevention?
