A significant financial scandal has impacted the iconic retailer, Macy's. According to one source a massive embezzlement scheme totaling $154 million was recently discovered.
The fraud, carried out by a single former employee over a span of three years, involved the deliberate misrepresentation of shipping expenses to distort the company's financial health. This manipulation led to inflated performance figures and forced Macy's to delay its quarterly earnings report, triggering alarm among investors and analysts.
Despite the scale of the deception, Macy's clarified that its liquidity and ability to meet supplier obligations remained unaffected. In response, the company launched a forensic investigation and emphasized its commitment to ethical conduct, with CEO Tony Spring assuring stakeholders of transparency and accountability.
The incident has intensified scrutiny of Macy's internal controls and auditing practices, especially as the company's stock has already suffered a nearly 20 percent decline this year.
Source: https://evrimagaci.org/tpg/macys-faces-154-million-embezzlement-fallout-74208
Commentary
According to sources, the embezzlement scheme involved a single employee who worked in the accounting department responsible for small package delivery expenses.
Over nearly three years - from the fourth quarter of 2021 through the third quarter of 2024 - this individual managed to conceal between $132 million and $154 million in fraudulent expenses.
The method used was deceptively simple yet effective: the employee made intentional, erroneous accounting accrual entries that misrepresented the company's delivery costs. These false entries were small enough relative to Macy's total delivery expenses – about three percent of the $4.36 billion spent during that period - that they went unnoticed for an extended time.
The scheme was only uncovered shortly before Macy's was due to release its third-quarter earnings, prompting the company to delay the report and triggering a three percent drop in its stock price.
Although Macy's has confirmed that the employee acted alone and is no longer with the company, it has not disclosed the individual's name, title, or how the funds were used.
The company has also refrained from labeling the incident as "embezzlement" in its official communications.
What makes the Macy's incident unusual is that there is no disclosure of how the expenses were misused leading most to conclude that the person was manipulating the books to hide expenses. In most cases, the reporting states what the wrongdoer spent the stolen funds on, such as gambling or a second home.
The final takeaway is that one employee - whether through a crime or errors - can impact stock prices which can then lead to very costly shareholder litigation and even more stock drops. For that reason, organizations should spend the time an effort to provide oversight of all outgoing expenses.
Additional Sources: https://nymag.com/intelligencer/article/how-did-one-macys-employee-hide-usd154-million.html; https://finance.yahoo.com/news/did-macy-worker-conceal-154-122300029.html?guccounter=1&guce_referrer=aHR0cHM6Ly9tMzY1LmNsb3VkLm1pY3Jvc29mdC8&guce_referrer_sig=AQAAAGaryjfTAY5fKUMo3NtTbRt8hNibNB0BRAJUsmuwltvZFrnrK2TG8Ioi4_M42qmQiS753I3_1429LpP5xyVrHA0DJ1DXYteXZr4x-TesWmQVCqxCNjTslsbmc81_vSJVUdm6p43ME8wzdyDGFRvXllRDWqEMhJzZLSVkSOuxsqPS; and https://www.nbcnews.com/business/business-news/macys-says-employee-hid-154-million-2021-rcna181602
