Student Research Explores Fraud in Family Firms

Elle McEneany, a May 2024 graduate of St. John Fisher University, recently completed her Honors Keystone project, where she built upon experiences from her graduate-level Forensic Accounting class and further investigated the complex—and often overlooked—issue of fraud within family businesses.

McEneany completed her Keystone project under the advisement of Professor Erica Sysol ‘09, a family business member with forensic accounting experience. 

In her paper, McEneany delves into the intricate issue of fraud in family businesses, revealing how the intimate and often informal nature of these enterprises can breed various forms of deception. Unlike the typical image of simple theft, fraud in family businesses can be multifaceted, ranging from collusion among family members to embezzlement, false invoicing, and asset misuse. The trust and close relationships within family businesses can make it easier for fraudulent activities to occur undetected. For instance, family members in charge of different departments might conspire to create fake employees or manipulate invoices for personal gain. Additionally, relaxed reporting requirements and a lack of internal checks and balances further exacerbate the problem, allowing fraudulent schemes to flourish without scrutiny. Family members might feel entitled to the company's assets or pressured to artificially enhance the business's performance, leading them to commit fraud to meet expectations or out of a sense of ownership and entitlement.

The paper also examines notable case studies, such as Adelphia Communications and Crazy Eddie, to illustrate the extent and impact of fraud in family businesses. Adelphia Communications, run by the Rigas family, engaged in extensive fraudulent activities, including falsifying subscriber numbers and misusing company funds for lavish personal expenses. The lack of distinction between family and company finances allowed the fraud to persist until financial scrutiny exposed the discrepancies. Similarly, Crazy Eddie, founded by Eddie and Sam Antar, saw its founders engage in skimming, tax fraud, and inventory manipulation. The Antar family's collective participation in the fraud and their eventual infighting led to the company's downfall. These cases underscore the complexity and potential destructiveness of fraud in family businesses, highlighting the need for robust internal controls and ethical standards to prevent such practices.

McEneany earned dual bachelor’s degrees in accounting and corporate finance. An honors student throughout her academic journey, she demonstrated exceptional dedication and took advantage of the opportunity to take graduate courses within the MBA program during her senior year. In addition to her academic achievements, McEneany gained practical experience through internships at The Bonadio Group and within the Small Business Advisory Group.