The United States recently charged former Jacksonville Jaguars employee Amit Patel with wire fraud for allegedly stealing $22.2 million from the team. This is an astonishing amount for a mere four-year employee.
After reading the indictment and having investigated hundreds of similar cases both inside and outside of the sports industry, my immediate impression was that the unique environment of professional sports allows for misconduct on this scale to occur. was.
Unlike the story of Jeff David, the former chief revenue officer of the Sacramento Kings and Miami Heat, who used the peculiarities of the team’s sponsorships to embezzle tens of millions of dollars, Patel’s fraud scheme was sports-specific. It wasn’t something. But that’s overshadowed by the current realities of professional sports. There aren’t many (any?) other industries where multi-billion dollar entities operate like private mom friends.
Considering the Jaguars situation
Forbes valued the Jaguars at $4 billion, and the indictment alleges that from October 2019 until his retirement in February 2023, Patel was responsible for monthly financial statements, department budgets, and virtual credit cards (” VCC”) program management.
For non-accountants, this means that Patel has access to issue credit cards, use those credit cards, account for credit card transactions, budget credit card spending, and reconcile that budget with actual credit card spending. It means that.
In most companies, even those worth $4 billion, these tasks are divided among multiple people to prevent unchecked access by a single person, an internal control known as “segregation of duties.” According to reports, Patel, who has no background in accounting, was given such extensive responsibilities due to employee turnover.
Fraud using virtual credit cards
The VCC platform is popular with businesses looking to eliminate red tape. Issuing a physical credit card for a new employee or initiative can take weeks, but with providers like Ramp and Brex, admins can create unlimited new credit cards in just seconds on-screen. can be created.
These platforms have user-friendly interfaces that provide insights into spending patterns by function, business unit, account, etc., and artificial intelligence can classify and import almost all of these transactions into a company’s accounting system. , can be reviewed by an accountant.
But the Jaguars did things a little differently.
Rather than automatically enter all transactions into the accounting system, the Jaguars’ accountants utilized Patel’s Excel spreadsheet that described monthly credit card transactions. Although the total amount was accurate, certain individual transactions were not.
For example, in October 2022, Patel purchased a Patek Philippe watch worth $95,484.15. Instead of including that transaction in an Excel spreadsheet, Mr. Patel duplicated and quickly included future legitimate transactions covering $95,484.15.
There is a high possibility that this plan could have been discovered earlier.
Because Mr. Patel allegedly modified transactions in Excel, an individual reviewing the VCC platform could have viewed “real” transactions, such as the $95,484.15 purchase on the online marketplace. there is.
It’s also worth asking tough questions of external auditors. Reconciling manual spreadsheets to their source (VCC platform) is a typical audit procedure. And the auditor will not only compare the bottom totals, which should match thanks to Patel’s correction, but also the number and content of the individual transactions.
Overreliance on financial variance analysis
While $22 million over four years may seem like a lot, it doesn’t take into account the Jaguars’ non-player spending of approximately $131 million per year (according to Forbes). Some NFL executives have said the over-budget variance would have been subject to “scrutiny from many sources,” but the truth is murkier. Differential analysis has limited effectiveness against recurring fraud because there are fewer red flag peaks and valleys than in the past. period and budget.
Requires reflection and positivity
When cheating occurs in professional sports, there are two immediate reactions across the industry.
The first reaction is introspection. Because sports are insular and details spread quickly, owners and presidents typically ask human resources and auditors if similar plans could be made. their team. Some people dive even deeper. NBA franchises launched full audits after David’s story surfaced, and I’m sure other teams are echoing Patel’s issues.
But it is the second reaction that usually permeates, a feeling of invincibility. In response to the Patel issue, multiple former soccer executives commented that this issue could never happen in their organization. Some even pointed out that this was an accounts payable issue, despite the fact that the VCC program automatically debits your bank account every month.
I’m skeptical. When you combine the economics of professional sports with private companies focused on team operations rather than financial management, you create an atmosphere in which cheating occurs.
Thankfully, the Jaguars have reportedly added to their accounting department since Patel’s departure, and it’s safe to assume that other teams in professional sports are also looking into VCC programs and keeping a close eye on them.
But it is Next This plan should be concerning because the perpetrators of the scam are a bit like the Jurassic Park concept.
Life finds a way.