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Introduction

Exhibit 1.5

2006 National Fraud Survey: Distribution of Losses

1–999

1.2%

1,000–9,999

9.1%

10,000–49,999

15.8%

$ Loss

50,000–99,999

11.6%

100,000–499,999

29.1%

500,000–999,999

8.8%

1,000,000 and up

0%

5%

10%

15% 20% Percent of Cases

24.4% 25%

30%

35%

position, gender, age, education, tenure, and criminal histories. In cases where there was more than one perpetrator, respondents were asked to provide data on the principal perpetrator, which was defined as the person who worked for the victim organization and who was the primary culprit.

The Effect of the Perpetrator’s Position

Personal data gathered about the perpetrators indicated that most of the frauds in this study were committed by either employees (41.2%) or managers (39.5%). Owner/exec- utives made up less than one-fifth of the perpetrators. (See Exhibit 1.6.)

Although the highest percentage of schemes was committed by employees, these frauds had the lowest median loss, at $78,000 per incident. Frauds committed by man- agers caused median losses of $218,000 per incident, while the median loss in schemes committed by owner/executives was $1,000,000. This figure is almost 13 times higher than the typical loss in employee schemes. The differences in the loss amounts were most likely a result of the degree of financial control exercised at each level: Those with the highest positions also have the greatest access to company funds and assets. (See Ex- hibit 1.7.)

The Effect of Gender

The 2006 National Fraud Survey showed that male employees caused median losses more than twice as large as those of female employees; the median loss in a scheme

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