Microsoft Engineer Charged With Fraud – FBI says he resold $9 million in software, bought cars, jewellery, and yacht.
Sales of Microsoft’s high end software were brisk last year – at least for one employee who was charged on Wednesday 11 December 2002 with illegally pilfering and selling $9 million worth of it for his own profit.
Daniel Feussner, a mid level Microsoft engineer who headed up one of Microsoft’s .Net technology projects, was arrested after an FBI probe uncovered his scheme. Feussner allegedly ordered products through
Microsoft’s internal purchasing programme and sold them on the street. According to a complaint filed a day before his arrest with the US District Court in Seattle, federal authorities say Feussner used his earnings to acquire a lavish car collection, a $172,000 yacht, expensive watches and diamond jewellery. He is charged with 15 counts of fraud and could face a maximum of five years in prison and a $250,000 fine for each charge, according to a spokesman for the US Attorney’s Office in Seattle. Microsoft released a statement on the matter, raising an issue that prompted some analysts to say that most companies should worry about internal control. ‘We take employee theft very seriously and realize the effects it can have on the value we provide our customers and shareholders,’ it said in the written statement. ‘We have a number of internal measures in place to identify theft and work very closely with the appropriate authorities on these matters.’
While working as a manager of a speech recognition project out of Microsoft’s .Net development group, among other positions, Feussner used internal purchase orders to buy high end server software, which he then sold for cut rate prices while keeping the proceeds, the complaint alleges. Orders passed through a New York software vendor called ClientLogic, which would mail products to Feussner. He then sold the software out of a Seattle area parking lot for cash, as well as through a middleman company called Cybershop Inn, court records indicate. Some 1700 products filtered through the scam, including development software, and copies of Microsoft’s Windows operating system, beginning in late 2001, authorities said. The FBI said that Feussner’s arrest is part of a larger probe into illegal use of Microsoft’s internal purchasing programme. Matt Berger, IDG News Service, 13 December 2002, Available @ www.pcworld.com/news
Post Script – Microsoft Engineer Charged With Fraud – found dead
A former Microsoft manager facing federal fraud charges dies unexpectedly at a Bellevue hospital while out on bail. The circumstances surrounding the death of Daniel Feussner, 32, remain under investigation.
Following the submission of Daniel Feussner’s death certificate to Assistant US District Attorney’s office in Seattle, prosecutors closed the case. Ian Ith, Seattle Times, 17 February 2003, Available @ www.seattletimes.nwsource.com
Required
(a) Describe the main functional cycles of operation that may exist in a company such as Microsoft Inc.
(b) Critically assess the key objectives of control within the transaction processing cycles of a company such as Microsoft Inc.
(c) Based on the information above, explain:
§ what control activities appear to have failed,
§ why the control activities appear to have failed, and
§ how Daniel Feussner took advantage of such failures.