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BrewDog pub in Brighton | accountingweb | BrewDog CEO warns of insider fraud peril after rogue employee plot
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Rogue employee organises fraud hiccup in a brewery

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BrewDog’s CEO takes a glass-half-full view after a rogue employee brouhaha but warns financial professionals of the risks of insider fraud.

13th Sep 2023
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Hear the one about the fake emails, fake meetings and 100,000 cans of BrewDog beer? The Scottish brewer’s co-founder James Watt has told the tale of a rogue employee who duped the entire company before their scam fell apart, with lessons for business on spotting insider fraud.

BrewDog management was delighted with their apparently overqualified new hire who joined the sales team a few months back, Watt wrote on LinkedIn.

“She then started like a house on fire, winning fantastic new distribution points, ensuring beer deals with famous music festivals and sending sample fridges to top influencers,” he said.

 “We were especially delighted that she managed to list two of our beers in a key supermarket chain we had been trying to crack for years.

“She had been very insistent on working alone and demanded the business give her the space she needed to operate.”

Despite refusing to have anyone attend her meetings and even cutting the head of sales out of meetings with supermarkets, the business let it slide, Watt said.

“The results were so good that our team in that country decided to accept her operational idiosyncrasies and she produced signed purchase orders on emails from the relevant customers she had sold to, which quickly dispelled any doubts over her effectiveness,” said Watt. “One purchase order alone was for over 100,000 cans of BrewDog beer.”

Quick unravelling 

Things were going well, until they weren’t, Watt said.

BrewDog’s head of sales for the territory met with two influencers who had apparently been sent shipments, only to find they hadn’t received a single beer.

“And after that everything unravelled quickly for this rogue sales team member,” Watt said.  “We discovered fake emails, faked meetings, forged purchase orders. They had even gone to the trouble of setting up fake email addresses which subtly mimicked the actual email addresses of real customers.”

Instead of sending purchase orders to the brewery from the true address (for example, [email protected]) the individual set up alternatives (such as [email protected]) to fool the sales team.

Then other fake purchase orders came to light, with customers stating they’d never met the person.

“Even the address this employee had given us was fake,” Watt said. “The crazy thing is that if they had applied this level of focus and ingenuity to their role, they would have genuinely been unstoppable,” Watt said. 

The wheeze was uncovered just before BrewDog shipped 100,000 cans to a fake address, Watt said.

A glass half full type, Watt said that through identifying the fraud and being upfront before any real harm came to either the company or their customers, “we’ve ended up establishing some great relationships and we hope this will lead to those new distribution points soon”.

Don’t water down fraud controls

Accounting experts said the story should serve as a warning to financial professionals regarding the ingenuity of insider fraud.

“From fake emails, meetings and purchase orders, the recent BrewDog fraud is an all too familiar story,” said Paul Sparkes, commercial director at cloud accounting software business iplicit.

“It comes down to ensuring that businesses have proper controls and systems in place – with clear separations of duties whereby no one person has sole control over the lifespan of a transaction,” he said. 

“In the BrewDog example, there was a lot of trust placed in one person and perhaps a lack of financial governance. This should be a part of all finance systems, as a standard.”

Not small beer

Insider fraud is particularly pernicious due to the breach of a trusted employer-employee relationship, said James Gliddon, partner at law firm Foot Anstey. Further damage can occur from the fraudster’s knowledge of the organisation’s systems and controls, and routes to evade them, he told AccountingWEB.

“Businesses cannot operate by distrusting everyone in their organisation and, instead, must rely on proper fraud prevention and response controls, which naturally would include reliance on their accountants and auditors to being alive to such risks,” Gliddon said.

“The forthcoming Economic Crime and Corporate Transparency Bill is likely to go further and make corporates criminally liable where their employees commit fraud in the same fashion as the Bribery Act,” he said.

Intelligent technology may be the best way to uncover malicious employees inside businesses that want to scale, added Paul Ellis, an invoice fraud expert from Manchester-based payment experts Medius.

“Business and finance leaders simply can’t afford to be defrauded at the best of times, let alone in this current climate as record-high inflation eats into profit margins,” he said.

“Financial software has the capability to create a robust system of checks and balances – from validating important vendor data, anomaly detection and creating visibility in the end-to-end invoice process – which will help businesses notice fraudulent activity and reduce the risk of unnecessary revenue drainage.”

Replies (7)

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Replying to Ivor Windybottom:
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By JustAnotherUser
13th Sep 2023 15:46

A (old) link? and a head line, no commentary, the purpose of this is what? There's is a lot more to this story than one old article

Here's another link where he won in relation to these accusations...

https://www.bbc.co.uk/news/uk-scotland-north-east-orkney-shetland-63049157

And James personal post on the matter

https://www.linkedin.com/feed/update/urn:li:activity:6980452792276586496/

And another source showing BBC's failure to accurately validate the claims being made.

https://twitter.com/DSanderson_85/status/1575424605916889089?s=20&t=JLpA...

Thanks (2)
Replying to JustAnotherUser:
By Duggimon
14th Sep 2023 10:37

I think the point is that as business leaders go, James Watt is not someone to hold up as a shining example.

https://www.bbc.co.uk/news/business-57519513

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Replying to Duggimon:
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By JustAnotherUser
14th Sep 2023 12:02

Fast forward to today, and Brewdog is listed among The Sunday Times' Best Places to Work in 2023.

You could argue that a leader who learns is a good example.

I knew as soon as I saw the article the commentary would be about James Watt and not the content of the article, I cant say he is anymore good/evil that any other CEO of a $billion + company that's grown so fast. There's just a lot more to this companies story that a few BBC headlines.

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By RichyC
14th Sep 2023 09:25

Watt is a nasty person and he warns finance professionals about Page 1 risks from the fraud and risk manual!

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By JazzySasha
14th Sep 2023 13:56

Vaguely interesting story sadly spoiled by sloppy writing. Unfortunately too often the case these days on AWeb.

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By Jeffyss
15th Sep 2023 13:23

By the way this entire story is false. He made it up.

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