How a con artist stole millions from Procter & Gamble and Roche
Aug 4th 2009 10:40AM
Updated Dec 4th 2009 1:35PM
The male ego is a delicate thing. And when that ego finds its way into the upper ranks of a large company, it is uniquely vulnerable to the right sales pitch. As Fortune reports, last October one Dina Wein Reis (pictured), whose New York townhouse the FBI emptied of its millions in expensive trinkets -- including necklaces, watches, Louis XVI footstools, and Bugatti throne chairs -- was the scam artist who allegedly exploited this vulnerability to steal at least $20 million in merchandise from corporate titans like Procter & Gamble (PG), Roche (RHHBY), Unilever (UL), and Hershey (HSY).
Wein Reis's alleged scam was simple in concept. She cold-called top executives and offered them lucrative jobs running one of her companies. During the interview, she would propose that the executive's current employer sell her millions of inventory at a discount so her company could distribute it in backpacks for free to senior centers, schools, and Native American reservations. Once Wein Reis got the discounted inventory, she sold it to wholesalers and pocketed the profit.
To appreciate how this so-called diverter scam worked, it is essential to understand how Wein Reis's staff of attractive, intelligent female sales staff seduced these male executives. In spring 2006, Roche Diagnostics vice president Donald Dumoulin flew to Manhattan for a job interview. The job? CEO to replace the founder of a privately owned 60 company conglomerate. Dumoulin has been warmed up on the phone by a woman named Chaya who regaled him with stories of her boss's -- Dee's -- wealth and philanthropy.
Chaya then went in for the kill, offering Dumoulin a job paying millions a year while living in a plush Manhattan townhouse. There was just one more thing: Could Dumoulin free up some Roche merchandise for Dee's National Distribution Program?
Chaya described the NDP as a 6,500 pharmacy network for which Dee would buy merchandise at an 85 percent discount. The pharmacies would sell the merchandise in gift bags as samples. If the sampling program was successful, the producers would get access to those stores to sell merchandise at full price, minus a small cash discount. Chaya told Dumoulin that 30 big time manufacturers had already signed up for the program.
When Dumoulin arrived in New York, he was met at the hotel for his interview by Sara Golden, "a marathon runner, who was smart, slim, and blond, with wholesome good looks." Golden set up a meeting with Dee at her townhouse which was filled with all that expensive art work.
By August, Dumoulin and his Roche bosses had "checked out" NDP. Meanwhile, Dumoulin had decided not to go ahead with the job with Dee. But in September 2006, Roche shipped 189,000 pieces of equipment to one of Dee's New Jersey warehouses. Wein Reis was thrilled with Dumoulin -- he'd arranged for Roche to ship $11.7 million worth of merchandise that cost her $1.7 million.
With all the executives at big name companies who fell for this scam, one has to wonder whether there are any auditors working for these companies and if so, where they were when their employers fell victim to the scam. How many others are scamming big companies using tricks like this? How many other companies have yet to disclose their exposure to Dee? How much will this exposure affect their financial results?
After all the purely financial scams we've learned about during the last few years, this one is a refreshing change. And it reveals an eternal truth -- no policy manual can overwhelm the power of a scam that plays the male ego as well as Wein Reis allegedly did.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. Follow petercohan on Twitter. He has no financial interest in the securities mentioned.