Fidelity Investments firings reveal potential of benefits fraud
The news that Fidelity Investments has fired or allowed roughly 200 employees to resign in the wake of internal investigations that revealed instances of alleged employee benefits fraud revealed a new fault line employee benefit executive’s role: spotting fraud.
The financial services firm with 40,000 employees and $2.4 trillion in assets under management, discovered that employees had purchased personal computer and fitness devices through a company program that offered a 20% reimbursement. The workers in question allegedly returned the items while keeping the reimbursed funds.
Risking one’s job for a $2,000 MacBook doesn’t surprise Ary Rosenbaum of the Rosenbaum Law Firm. As an ERISA and employee benefit attorney, he has seen employees try to game their employee benefits program for far less than a $200 Fitbit.
“There’s always abuse. I worked for a third party administrator and we once had an admin who was caught stealing from a participant’s account. It’s not shocking,” he says. “When you have an employee benefit program, there will always be abuse.”
The Wall Street Journal discovered the spate of Fidelity terminations — some dating back to last year — while reviewing broker records of the Financial Industry Regulatory Authority, the self-regulatory agency for the financial services sector.
“In some instances, employees purchased equipment and immediately canceled their orders but still collected the company’s reimbursement. In some of the cases, the company identified employees who had received reimbursements for as much as $2,000 for equipment they didn’t keep, one of the people said,” reports Journal.
The terminations and resignations didn’t just stop there. Fidelity put marks on brokers’ records stating the reason for their departure. These marks are viewable to the public and future employers and clients and are “difficult and costly to remove.”
This response is not overkill, according to Rosenbaum. “When you are dealing with a highly regulated business you have to watch what you do. It’s like a criminal record because it will always be brought up,” he says.
Employees typically look for larger, more expensive forms of fraud, according to Rosenbaum, who thinks that Fidelity Investments was informed about the abuse.
“Usually this is tipped off but with the bigger ticket items, this is figured out through an audit,” he says. “When an employee is stealing a million bucks you will find out a lot quicker than a $100 Fitbit. It’s amazing they caught that many people.”