Have you heard about the Pappy Van Winkle bourbon heist?
In the corporate world, most people work hard to earn their living, but there is always a fraction who want to take advantage of the system. Even with anti-fraud precautions and detailed inventory tracking, people still find ways to make money illegally. According to ACPE fraud statistics, the typical organization loses 5% of its revenue to fraud, and the total amount of money stolen from fraud losses is roughly $4 trillion a year!
At Gusto, we know you cannot always prevent fraud from happening, but we want to prepare you for the possibility of fraud occurring at your organization. That is why we have partnered with our friends at CPA Academy to bring you the webinar, “Fraud: Even Stupid People Can Do It, and Even Smart People Can’t Stop It.” This webinar takes a look into the world of fraud and how people get away with it under the guidance of Greg Kyte and Gusto’s very own Editor-In-Chief, Caleb Newquist.
Greg is the founder of Comedy CPE, which offers professional development with a comedic twist and has been named in Accounting Today’s “100 Most Influential People in Accounting.” His unique approach to educating people in the profession offers a fresh take on professional development in accounting.
In this article, we will take a look into Pappygate—a bourbon heist that cost the Buffalo Trace Distilling company over $100,000 in recorded fraud losses. We’ll also cover how the amount of money stolen from fraud cases rises exponentially as more people join in on the heist.
The Pappy Van Winkle Heist: over $100k in bourbon stolen from Buffalo Trace
It is a common fact that companies account for missing inventory throughout the year. Damaged products, loss, and theft are all considered when a company constructs the yearly budget, and despite an organization’s best efforts, fraud often occurs in the business world. In 2013, Toby Curtsinger—an employee at Buffalo Trace Distilling Company—tested the limits to see how much bourbon he could smuggle out of the distillery.
In the late 2000s and early 2010s, bourbon collecting was on the rise, and many people wanted to get their hands on high-end and rare bourbon bottles. One of the most sought-after names in bourbon because of its rarity is Pappy Van Winkle—distilled and bottled by the Sazerac Company at Buffalo Trace Distilling. Because of this rise in popularity, Curtsinger and his conspirators plotted to steal both bottles and barrels from the distillery. To remove the bourbon from the distillery, the group used a simplistic approach.
“These guys weren’t geniuses. … One of the guys worked in the loading dock and would just throw it in the back of his truck, cover it with a tarp, and take it home. Another one of the guys was a delivery driver who would take barrels from one distillery to another. [During his deliveries] he would stop off at his step-dad’s barn where he had an aluminum ladder setup. He just rolled the barrels down the aluminum ladder and into his step-dad’s barn.”– Greg Kyte
Once they smuggled the bourbon away from the distillery, Curtsinger sold the stolen bourbon barrels and bottles around town, primarily through a community softball league in which he participated:
“The dock worker who loaded the back of his truck was the ringleader. He was like the salesman that would fence the stolen goods. [While he sold the bourbon], he would be totally up front with people. He was like, ‘I work for Buffalo Trace and got this bourbon at a discount. I’ll sell it to you.’ And people were like, ‘What? I could buy a barrel of bourbon. That sounds cool to have in my man cave.’ And they would buy the barrel of bourbon. That’s how they committed the asset misappropriation.”– Greg Kyte
Eventually, the group was discovered because of a lack of caution when distributing the stolen liquor and Toby’s desire to sell more than just bourbon. Curtsinger expanded his reach from stolen bourbon to steroids, which he distributed throughout his softball league as well. Ultimately, his sale of steroids revealed his bourbon ring.
“[Authorities] broke the case because they were looking for steroids and found them on these guys and happened to find the bourbon. Both were open cases, and [when the authorities found the bourbon] they were like, ‘Hey, what’s up with all these barrels of bourbon?’”– Greg Kyte
The amount of bourbon found totaled over $100,000 after the authorities arrested Curtsinger and his associates. However, the total amount of bourbon stolen could have been many times more than that because much of it had already been sold or consumed.
“They valued [the fraud losses] at $100,000 because they only found $100,000 worth of stuff. But obviously, the bourbon that was already consumed or sold couldn’t be found. If [the authorities] didn’t find it, they didn’t ask about it. … $100,000 is just the tip of the iceberg because [the heist] lasted over seven years.”– Greg Kyte
Some sources claim that the total amount of misappropriated assets from the Pappygate are well over half of a million dollars because of the amount of time Curtsinger and his crew spent funneling bourbon away from the distillery. Statistically, the more prolonged fraud goes without being detected, the more assets fraudsters can misappropriate.
ACFE fraud statistics about asset misappropriation
Even though only $100,000 in assets recovered from the Pappy Van Winkle heist is a formidable amount, ACFE statistics on fraud cases show evidence that Curtsinger likely stole significantly more from Buffalo Trace Distilling. The amount of time the heist was running and the number of people included in the fraud point toward a substantially more considerable amount of misappropriated assets.
Generally, median duration non-cash asset misappropriation frauds last for around 18 months. Cases that last this long show a $125,000 median loss. Of the 8% of frauds that last over 60 months, the median loss is $715,000.
“It’s no surprise that the longer a fraud lasts, the larger the losses are. The median loss, according to the ACFE, for frauds that were over 60 months is more than $700,000. The [bourbon heist] lasted for more than seven years. … I’m going to say chances are the actual loss on this was at least $715,000 from what they see from the median loss for frauds that last at least five years.”– Greg Kyte
In addition to duration, the number of people involved in a fraud case links directly to the number of misappropriated assets. The larger the group of conspirators, the more assets are usually stolen.
“If you just have one perpetrator, the median loss is $74,000, $150,000 with two perpetrators, and over $300,000 with three perpetrators. The more people you involve, the more money you’re going to get… [because] if you’ve got more people, they’re going to want more money. They all have to justify that the risk is worth it.”– Greg Kyte
When you apply AFCE fraud statistics to the Pappy Van Winkle bourbon heist, the chances of $100,000 being the actual value of assets stolen from the Buffalo Trace Distillery is incredibly low. By looking at the median amount of fraud losses based on duration and group size, it is reasonable to suspect that Pappygate cost Buffalo Trace north of $700,000.
Learn more about fraud cases and how they are detected
Even though the likelihood of fraud happening to your clients may be low, it’s essential to be aware of the signs of fraud and how to keep it from occurring. Keeping an eye out for red flags and signs of fraud can protect you from dealing with a potentially devastating fraud case.
“We want you to understand the statistics that people who investigate fraud categorize people who are most prone to commit fraud, red flag behaviors, and best practices for [containing and preventing] fraud outside of what is generally taught.”– Greg Kyte
If you enjoyed this article and want to learn more about famous fraud cases and how fraud is detected, check out the entire webinar here. Our partner blog also has multiple fraud case study articles for you to read. One of our recent articles, A Fraud Case Study: Rita Crundwell and the City of Dixon, Illinois, details how fraudsters work to get the most out of the organizations they defraud.
Our mission at Gusto is to create a world where employers create work environments that promote employee happiness and consequently reduce the risk of fraud happening in their companies. Be sure to look into our People Advisory Program to learn how to train your team to reach their potential. We also provide a partner blog full of resources for all your advising needs. Visit our Gusto for Accountants page for more information on utilizing people-based accounting within your firm.