NCI, Inc. Reports $18 Million Embezzlement by Corporate Controller

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Last week, NCI, Inc. reported that it fell victim to $18 million of embezzlement by its corporate controller. Read the Company’s Press Release here.

NCI is a Northern Virginia-based provider of enterprise solutions and services to U.S. defense, intelligence, health, and civilian government agencies. The controller reportedly embezzled $5 million in 2016, and $13 million over the previous five years. According to the Company’s preliminary findings, the misappropriations were reflected as expenses in the Company’s financial statements. Accordingly, NCI has concluded that the un-audited interim financial statements for the nine-month period ending September 30, 2016, contain material errors related to the theft in that period and therefore should not be relied upon by investors. The misappropriations were also treated as allowable indirect costs on its government contracts. How the Company will be obligated to reimburse the government for any such costs paid to it in the course of its government contracts[1] remains unclear. The Company has stated that it expects to recover a “large portion” of the funds from the former controller and through insurance coverage.

Though the fraud at NCI is considerably large, embezzlement by corporate insiders, particularly accounting personnel, is not uncommon. According to a study by the Association of Certified Fraud Examiners (ACFE) in 2016, companies typically lose an estimated 5% of their revenues to fraud. Moreover, nearly 17% of the frauds reported in that study were perpetrated by accounting personnel – more than any other department.

To learn more about Aronson’s fraud investigation capabilities, or if you feel that your company may be the victim of a fraud, please contact Michael Kresslein at 240.364.2612 or Bill Foote at 301.231.6299.

[1] According to NCI’s most recent 10-Q filing, for the nine-month period ended September 30, 2016, cost-plus fee contracts represented 60% of total revenue.

About Michael Kresslein

Michael Kresslein has written 1 post in this blog.

Michael J. Kresslein is a director in Aronson LLC's Forensic & Valuation Services Group, where he specializes in fraud investigations and commercial disputes. With more than 19 years of experience, he combines forensic accounting, legal and investigative skills to assist his clients with a wide range of forensic and litigation matters, including calculating commercial damages for litigation; conducting investigations regarding embezzlements, accounting improprieties and other matters; and providing expert testimony.

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