HOUSTON—Corporate fraud, like the kind alleged in a recent lawsuit filed against several Louisiana residents, can be difficult to detect and can go on for years before being discovered, experts say.
Routine audits, whether internal or external, often fail to catch fraud, Andrew Richards, a retired federal agent with more than 25 years’ experience investigating white collar crime, said. Instead, he said, a different kind of investigation is usually required to turn up evidence.
“An investigation does what an audit doesn’t, by not looking at the money, but at what a company or vendor is doing for the money,” Richards told the Louisiana Record.
In late April, Houston-based Superior Energy Services filed a lawsuit against Christopher Russo and Martin LeBlanc, both of LaFayette, former executives of Stabil Drill, a Superior Energy subsidiary company. The suit accuses Russo, LeBlanc and others of directing more than $65 million in payments to companies owned or controlled by Russo, LeBlanc and their co-conspirators. The alleged scheme included overcharging Stabil Drill, and Russo and LeBlanc using their corporate positions to personally benefit at the expense of Superior Energy, the suit states.
The lawsuit said that suspicions were raised in early 2016, and that an investigation showed that Russo, LeBlanc and co-defendant Scott Kerstetter had been overseeing transactions between Stabil Drill and a number of companies controlled in whole or in part by themselves and other business partners.
“Additional investigation revealed that defendant Laguna Oil Tolls LLC was basically a sham corporation set up so that LeBlanc, Russo and Kerstetter (.…) could divert corporate opportunities, direct profit from Stabil Drill transactions and overbill Stabil Drill for various products and services,” the suit claims.
When executives are involved—Russo was chief operating officer and LeBlanc chief financial officer—fraud can be especially difficult to detect, Richards said.
“Most investigations are caused by something that strikes somebody as not correct,” Richards said. “But when executives are making the transactions, you don’t often get people below the executive level questioning them. It might go on for years, and maybe people know about the transactions, but not necessarily realize that there is fraud.”
Superior Energy’s suit, filed in Harris District Court in Texas, alleges that the fraud scheme happened between 2008 and 2016, with most of the money, more than $38 million, going to Laguna Oil Tools LLC. That company was owned by Kerstetter, who was partners with Russo and LeBlanc in several other companies that were also involved in the fraud, Superior Energy claims.
Corporate fraud can happen at nearly any level, Richards said, and large corporations aren’t necessarily more or less vulnerable than small ones. Superior Energy is a publicly traded company with a market capitalization of $2.4 billion as of today.
Likewise, he said, there isn’t a typical kind of fraud. In his career he saw false invoices, executives asking companies to take on so-called “ghost employees” at inflated salaries and other schemes.
“There are so many different ways to defraud a company,” he said.