The following investigative report, Over the Fence They Will Go, is taken from the Chester P. Karrick, Jr. book entitled Clyde and Chester, The Investigators: Fraud, Embezzlement, Theft. More reports are to follow.
On Monday, April 9th at 7pm, Author Chester P. Karrick, Jr. will be at Friendswood Public Library to discuss some of the investigative cases conducted by himself and legendary Houston private eye, Clyde A. Wilson.
From the Introduction---Chester met Clyde Wilson when Clyde was hired as a full time Security Consultant for the company that employed Chester. Chester was an assistant director of internal audit when requested to assist the security consultant on a fraud matter that started a working relationship that lasted for many years.
During their work together, Clyde and Chester conducted over 300 investigative and security review cases that resulted in the conviction and termination of many employees. Fraud of many millions of dollars was uncovered with millions being recovered from employees, third parties, and fidelity bond insurance claims.
The author selected fifty-nine of the most representative investigative cases covering many different areas and types of business…
Readers of a prior self-publication of this book who personally knew Clyde and Chester have suggested that some of the cases included herein might make an interesting TV series. Tom Selleck was suggested to play Clyde and Danny DeVito to play Chester as the physical resemblances are amazing. Unfortunately, since the first publication of this book Clyde has passed away. This is the first book the author has written and is now living in Friendswood, Texas with his wife. They have one daughter. Chester is now serving as a business consultant.
Over the Fence They Will Go By Chester P. Karrick, Jr.
While at the same location as the “Paint and Lead Caper” fraud covered in the prior chapter, Clyde and Chester were sitting in their rental car at 7:00 am one morning watching 30,000 employees file through the entrance gate to clock in for work.
A few minutes after seven they noted that several employees were jumping over the fence at the north side of the plant premises. They counted about 80 employees jumping the fence. Clyde and Chester could only conclude that the employees had entered the plant, clocked in, and were heading up the street to who knows where. Leaving the car they followed the employees for about six blocks. The employees entered a beat-up-looking building that was owned by a competitor of the client.
Previously at the plant, Clyde and Chester had learned that their client had lost several major repair jobs to the competitor. The client could not understand how he was being under-bid on the jobs or how the competitor had enough skilled employees to perform an acceptable job.
Clyde and Chester took turns during the day observing the competitors operation. About 10 minutes before 4:00 pm, they noted the client’s employees were leaving the competitors plant. They headed down the street to their permanent place of employment. The employees jumped back over the fence into the plant, presumably clocked out, and left the plant. Thus it appeared that the employees were paid a day’s work by the client and then went down the street to the competitor’s plant, worked all day, and earned an additional day’s pay.
From an unnamed source, Clyde and Chester were able to obtain a copy of the competitor’s employee payroll list. The names on the list were compared to the client’s employee payroll list. Sure enough, about 95 names were found on the lists. However, the competitor was paying only about 70% of the hourly rate paid by the client.
The next day Clyde began interviewing the 95 identified employees and after taking signed statements covering their improper activities, the employees were terminated. While Clyde was finishing with the “fence jumpers’’, Chester began reviewing surplus material and scrap material sales.
Chester selected one major job he had heard was finished the year before which reportedly had about $10,000,000 of new, unused, surplus steel products left over from that project. Checks of inventory files and records together with interviews of several appropriate personnel failed to disclose any information relative to the surplus parts. No one seemed to know, or would admit, knowing anything about the surplus. No sale of these parts could be found.
As the type of materials left over on that job appeared to be the same type that could be used by the client’s local plant competitor, Chester felt there was a possibility that the competitor was somehow getting the client’s new surplus materials at bargain prices. If the competitor was getting labor at 70% of the client’s cost and materials at a bargain price, this would explain why the client had lost bids on several major repair jobs.
Since the plant operation generated a lot of scrap material as well as surplus parts, the whole scrap and salvage operation became suspect. Chester reviewed the available records to determine which companies were the major buyers of surplus and salvage. It was not until later they learned that most of the scrap yards on the East Coast were reportedly controlled by the mob.
Chester and Clyde starting interviewing scrap dealers in the area to find out how they obtained their client’s business. In their first visit to a local small scrap operation owned by a man who was reportedly honest, Clyde and Chester introduced themselves and stated their business. The owner, who was about seventy years old, started bragging about how young he felt. He said he could kick out the light bulb hanging high over his head. To demonstrate, he stepped back and proceeded to kick the light bulb. Clyde exclaimed, “Wow, you sure are agile.” The owner grabbed Clyde by the throat and said, “Don’t you cuss me man.” Chester had to pull him off shouting, “No! No! He’s not cursing you, agile means you are quick, nimble and active.” The owner grumbled, “Well, OK then.” Clyde was able to cultivate his trust and received much helpful background information on many scrap dealers in the area.
About 9:00 pm the next night, Clyde and Chester were driving around the area surveying various scrap dealer operations when they noticed a light on in a scrap dealer’s office. They decided to go in and talk with whoever was inside. Upon entering the office, a man looked up from his desk and said, “Well, Clyde and Chester. I wondered when you would stop by.” Clyde and Chester looked at each other in amazement, as they had no idea that anyone there would know their names. The man reached into a desk drawer and tossed a big brown envelope onto the desk. He paused about a minute, and then reached into another desk drawer and pulled out a 45-caliber pistol, pointing it at them. He said, “There is $50,000 in the envelope. Then shaking the pistol at them, he said, “Take your pick, which one do you want?” Clyde and Chester looked at each other, then turned and walked toward the door, stating, “If you shoot us, you’ll have to shoot us in the back.” Driving off in their rental car, they knew they were getting close to a big-time scrap fraud as somebody was beginning to feel the heat.
Clyde and Chester then decided it was time to investigate the entire surplus and salvage operation. Most of the client’s plant scrap was being shipped out by rail car. The rail cars were pulled onto the client’s weight scale, weighed, and moved out of the plant. Clyde and Chester reviewed the weight scale procedures. They noted that inside the scale room, weight tickets were stacked to the ceiling all around the room. They were told that copies of the tickets were kept for years and years in case any question came up about the weight of any rail car. This seemed ridiculous. Clyde examined the scales and noticed that by moving the scale apparatus with his finger he could print out any weight from zero to 200,000 pounds. Suspecting that the weight man had some kind of deal going, Clyde took him aside and began interrogating him. In a little while, the employee admitted that for over twenty-three years he had been shorting the weight on every rail car by several thousand pounds. For his endeavors, a local scrap dealer left a fifth of whiskey by the employee’s car every Friday afternoon. The man’s fraud had cost the client thousands and thousands of dollars over the years.
Since the local scrap dealers were taking advantage of the client’s scrap and salvage sales, Clyde and Chester then concluded that the scrap dealers were also fraudulently obtaining surplus materials and parts from the client. As the client’s local plant competitor was using the client’s labor, Clyde and Chester then surmised that the competitor was also receiving materials and parts from the client. Chester thought it probable that the local competitor company had inside information on the client’s surplus material availability. The competitor might be ordering needed parts for repair jobs obtained by submitting lower bids than the client. Conducting a review of property records at the courthouse, Chester learned the competitor company owned an old building at the edge of town.
Driving by the location at night, they noted bars on all the windows. The building appeared to be well secured although there were no guards in the area. Looking through the windows, they observed that the building appeared to be used to store materials and parts. Clyde and Chester speculated that some of the client’s surplus materials might be inside. With the assistance from a local investigator, they were able to enter the building. They found that the building was substantially full of surplus materials and parts obviously obtained from the client. Chester also found the inventory records covering the $10,000,000 in surplus parts he had previously been looking for at the client’s plant. The client’s name was still on each inventory card. It appeared that the competitor had obtained all the parts together with the applicable inventory records.
Suspecting that the client’s scrap and salvage manager had a hand in this matter, they returned to the client’s office where Clyde began interrogating him concerning their suspicions. After an hour or so of denials, the manager finally admitted to having sold $10,000,000 in new, unused, surplus parts to a local scrap dealer for $70,000. He knew that the parts were destined for the client’s competitor. The manager admitted to receiving a used Pontiac worth about $3,000 for making the deal.
As the whole purchasing, scrap and salvage operation was so rotten and mired in fraud; Clyde and Chester were able to obtain a Grand Jury investigation into all related matters at the client’s plant. The yearlong Grand Jury review resulted in numerous indictments and convictions of client employees and local persons involved. Insurance bond claims were filed to recover the client’s losses.