Procurement Fraud: £340k Recovered After P300 Investigation
A Midlands manufacturing firm discovered £340,000 in fictitious and inflated supplier invoices stretching across 28 months. The fraud had been authorised at senior level — making internal identification almost impossible without objective evidence. P300 EEG identified the perpetrator and cleared the finance approver. Full civil recovery followed.
Important Use & Limitations Notice
Anonymisation: All names, company identifiers, supplier names, and identifying details have been anonymised or adapted. This case study is presented as a documented investigation outcome for educational purposes.
Evidential use: P300 EEG results in this case were used as supporting evidence in civil fraud proceedings and disciplinary hearings. Not presented as standalone determinative evidence.
Purpose: For educational and investigative planning purposes only. Not legal advice.
Case Background
A long-established East Midlands manufacturing company discovered the fraud during an accounts review triggered by its annual external audit in early 2025. The external auditors flagged a pattern of supplier invoices that could not be fully reconciled against delivery records — invoices that had been processed through the normal approval chain, authorised at procurement management level, and paid without query over a 28-month period.
The procurement function was managed by "David Hargreaves" (anonymised), a procurement manager with eight years of service at the company and a reputation for tight supplier relationships and cost management. Hargreaves had sole authority to onboard new suppliers and had been the primary authorising signatory on the invoices identified by the auditors.
The invoices related to three supplier accounts. Companies House and HMRC searches conducted by the company's forensic accountant revealed two of the three suppliers to be shell companies with no trading history, no employees, and bank accounts that had been opened within six months of the first invoices being processed. The third was a legitimate supplier whose invoices had been systematically inflated above the actual contracted rates.
A second potential suspect was "Rachel Pemberton" (anonymised), the finance manager who had processed the payment runs. Pemberton had not been involved in supplier onboarding or invoice approval but had processed the bank transfers. Whether she had been complicit in the fraud or had processed legitimate-looking invoices in good faith was unknown. Both were referred for P300 EEG investigation.
How the fraud operated — three mechanisms
Shell company invoicing — "Apex Logistics Solutions Ltd"
A shell company incorporated in Hargreaves' partner's maiden name processed 34 invoices totalling £187,000 for logistics consultancy services described in vague terms. The company had no employees, no trading premises, and bank records showed all payments were immediately transferred to a personal account connected to Hargreaves. No services matching the invoiced descriptions could be identified in the company's operational records.
Shell company invoicing — "Meridian Facilities Group Ltd"
A second shell company processed 19 invoices totalling £93,500 for facilities maintenance and equipment hire. Same pattern — no evidence of services rendered, immediate onward transfer of payments. This company had been incorporated 11 days before the first invoice was processed.
Invoice inflation — legitimate supplier
A genuine, long-standing components supplier had its invoices systematically inflated above contracted rates across 41 transactions — a total overcharge of £59,500. The inflated amounts had been processed through the standard approval chain. The supplier had been paid the contracted amounts; the difference between the contracted rate and the inflated invoice amount was routed to a separate account during payment processing. This mechanism required knowledge of both the contracted rates and the payment processing system.
Why standard investigation had reached its limit
The forensic accountant's report was comprehensive and clearly documented the fraud. The problem was attribution — specifically, establishing that Hargreaves had knowingly created the shell companies and had not been deceived by a third party, and establishing whether Pemberton had been a knowing participant or a victim of the same deception. Hargreaves had produced an account in which a third-party consultant had introduced both shell company suppliers, and he had genuinely believed them to be legitimate. The forensic accountant could confirm the fraud. They could not confirm who had designed it.
Investigation Design
Both subjects were tested on the same day in sequential sessions, with Pemberton tested first to prevent any contamination of her session by knowledge of Hargreaves' result.
Probe Set 1 — Shell company creation knowledge
Stimuli built around specific details of the shell company incorporation process — the exact registration dates, the names used during incorporation, the bank account opening sequences, and specific company reference numbers. Only the person who had created or directed the creation of those companies would hold these details as neurological memory rather than as information subsequently read in a document.
Probe Set 2 — Invoice construction mechanics
Stimuli built around the specific service descriptions used on the fictitious invoices — descriptions that had been constructed to be plausible but vague enough to avoid easy verification. The wording used had been reconstructed by the forensic accountant as likely constructed by someone with knowledge of the company's internal processes. Probe stimuli tested recognition of the specific phrasings and their intended meaning.
Probe Set 3 — Payment routing knowledge
Stimuli built around the specific routing details of the payment manipulation mechanism — the account numbers involved in the inflation diversion, the timing of transfers, and the specific process steps that enabled the manipulation. Knowledge of these details at the operational level required either having designed the mechanism or having been directly shown how it worked by someone who had.
Probe Set 4 — Financial accumulation knowledge
Stimuli built around the total financial benefit extracted across the 28-month period — a figure known only to the forensic accountant and the company's legal team, not disclosed to either subject during the investigation process. Recognition of this specific figure, in the precise form in which it appeared in the probe stimuli, would be consistent with having tracked the running total as an active participant.
Subject 1 — Pemberton (finance manager) — Morning session
Three probe sets tested (Sets 1, 3, 4 — Set 2 was not relevant to her role in the payment chain). 90-minute session including baseline calibration. Verbal result held until end of day.
Subject 2 — Hargreaves (procurement manager) — Afternoon session
All four probe sets tested. 110-minute session including extended baseline to account for the broader probe scope. Session conducted in a separate room; Hargreaves had no contact with Pemberton before or after her session.
End-of-day results debrief
Results for both subjects delivered jointly to the company's managing director, HR director, and legal adviser at close of the afternoon session. Written reports for both subjects delivered the following morning.
Results
Rachel Pemberton
Produced no meaningful P300 recognition responses across any of the three probe sets tested. Her neurological profile showed no familiarity with the shell company creation details, the payment routing mechanics, or the total accumulated figure. She had processed the payment runs on the basis of invoices that had been approved through the authorisation chain — and her brain held no knowledge that distinguished her from any other finance professional who had processed legitimate-looking approved invoices in good faith. Cleared on the day of testing.
David Hargreaves
Produced statistically significant P300 recognition responses across all four probe sets — probability scores of 96%, 94%, 97%, and 95% respectively. Among the strongest results in our corporate fraud case dataset. His brain held operational knowledge of the shell company creation, the invoice construction mechanics, the payment routing details, and the precise accumulated total — in each case at the level of detail consistent with having designed and personally executed the fraud over 28 months.
Pemberton's clearance protected the company as well as her
Had Pemberton been implicated without objective evidence, the company faced two compounding problems: a wrongful dismissal claim from a finance manager who had done nothing wrong, and the loss of a key member of the finance function at the same moment the company was managing a £340,000 fraud recovery and all its associated legal process.
The P300 clear result — delivered the same day as Hargreaves' deception-indicated result — meant Pemberton could be informed of her exoneration before any disciplinary action against Hargreaves was initiated. She remained in post and was actively involved in supporting the civil recovery process, including providing witness evidence about the payment processing procedures that Hargreaves had exploited.
Why senior tenure makes this fraud type particularly difficult to detect without P300 EEG
Hargreaves had eight years of genuine service and a track record of legitimate cost management. His authority to onboard suppliers was an established part of his role. His account — that he had been introduced to the shell company contacts through a third-party networking event and had genuinely believed them to be legitimate — was implausible but not impossible. The forensic accountant could prove the fraud had happened. Without P300 EEG, proving that Hargreaves had known it was fraudulent at the time was significantly harder.
The P300 result addressed this directly. His recognition responses to the shell company incorporation details — specific registration sequences and bank account opening timing that only the person who had set them up would hold in neurological memory — were not consistent with someone who had been deceived into using a supplier he genuinely believed was legitimate. They were consistent with someone who had created the suppliers himself.
Key Investigation Findings
- Hargreaves produced deception-indicated results across all four probe sets, with probability scores ranging from 94% to 97% — the highest across-the-board scores in our senior employee fraud case dataset.
- His strongest recognition responses were on Probe Set 3 (payment routing mechanics, 97%) and Probe Set 4 (accumulated total, 95%) — consistent with having actively tracked the financial progress of the fraud and personally managed the diversion mechanism.
- Pemberton produced clear results on all three probe sets — establishing that she had processed payment runs in good faith on the basis of invoices that had been legitimately authorised through the chain above her. Her exoneration was documented and communicated to her the following morning.
- The recognition responses to Probe Set 1 (shell company creation) were the most forensically significant — they established that Hargreaves held operational knowledge of the incorporation process that could not be explained by having been deceived into using a supplier he genuinely believed was legitimate.
- Hargreaves' P300 profile showed no evidence of anxiety or stress countermeasure use during the session — consistent with the composed presentation of a long-tenured employee who had managed the deception successfully for nearly three years and believed he had covered his tracks.
Civil Recovery — £340,000 Returned
The combination of the forensic accountant's documentary analysis and the P300 EEG report provided the company's legal team with a significantly stronger evidential package than the documentary evidence alone would have produced. The civil recovery process moved through five stages.
Freezing injunction — same week as EEG results
The company's solicitors applied for a without-notice freezing injunction against Hargreaves' personal assets the week the written EEG report was received. The application cited the forensic accountant's documentary findings and the P300 EEG report as the evidential basis. The injunction was granted, freezing assets up to £340,000.
Injunction grantedHargreaves' legal response — account revised
Following service of the freezing injunction — which included the P300 EEG report in the supporting documentation — Hargreaves' solicitor contacted the company's legal team to indicate that he wished to discuss a resolution. His account of having been deceived by a third-party consultant was withdrawn.
Account change — negotiation beginsWithout-prejudice settlement negotiations
A series of without-prejudice exchanges between legal teams over four weeks. The company's position, supported by the documentary and EEG evidential package, was that full recovery was achievable through litigation with high probability of success. Hargreaves' position was a reduced settlement. The company declined to accept a partial recovery.
Negotiations concluded — full recovery agreedSettlement agreed — £340,000 recovered in full
A consent order was agreed providing for payment of £340,000 — the full amount identified by the forensic accountant — within 30 days, with Hargreaves acknowledging liability in the settlement terms. The freezing injunction was discharged on receipt of payment.
£340,000 receivedDismissal and regulatory referral
Hargreaves was dismissed for gross misconduct. The matter was referred to the relevant professional bodies and, at the company's solicitors' advice, to Action Fraud. The civil settlement did not preclude further proceedings and was structured to reflect that position.
Dismissed — referrals madeWhat This Case Demonstrates
Senior tenure is the hardest fraud to attribute — P300 EEG addresses this directly
Procurement fraud by a long-tenured, trusted senior employee is the most difficult internal fraud type to attribute through documentary evidence alone. Every suspicious transaction has a plausible legitimate explanation available to someone with the seniority and sector knowledge to construct one. P300 EEG addresses this by testing what the subject's brain actually holds — not what their account says — and the recognition responses to shell company creation details that only the creator would neurologically hold are not susceptible to a plausible alternative explanation.
The P300 report changed the economic calculation for the perpetrator
Hargreaves did not concede liability after seeing the forensic accountant's report. He had a prepared account that addressed every documentary indicator. He conceded after seeing the P300 EEG report included in the injunction paperwork — because a neurological recognition response to specific shell company incorporation details cannot be explained by having been deceived into using a supplier you genuinely believed was legitimate. The report did not produce a legal finding. It changed the cost-benefit analysis for litigation from the perpetrator's perspective — and produced a full recovery in eight weeks.
Clearing the finance approver was not a sideshow
Pemberton's clear result was as strategically important as Hargreaves' deception-indicated result. Without it, the company had a second potential defendant, a second potential wrongful dismissal claim, and the loss of a finance function member at the worst possible moment. The P300 investigation resolved both questions simultaneously — at the same cost, in the same day, with the same evidential weight for both outcomes.
Investigating Procurement or Senior Employee Fraud?
When documentary evidence confirms fraud but cannot establish who designed it, P300 EEG provides the individual attribution that supports civil recovery and protects the innocent. Initial consultation is free.