Not all shell companies are dishonest. Despite their often-sinister reputation, these paper-only companies may be used legitimately to hold another business’s assets. Or they may be the “empty container” left after a company downsizes or is acquired. That said, some fraud perpetrators use shell companies to embezzle funds, evade taxes, dodge debts and commit other illegal acts. For many businesses, the biggest threat posed by illegitimate shell companies is that unscrupulous employees will use them to perpetrate billing fraud. Here’s how to spot a shell scheme in your midst. Under cover Employee-perpetrated shell company schemes take one of two forms. In the first, an employee sets up a shell company to send out — and collect on — fictitious bills. Perpetrators don’t have to send the bills for...
