What type of scheme involves forming a shell company to purchase goods and resell them to the employer at an inflated price?

• A. Pay and return scheme
• B. Need recognition scheme
• C. Cash larceny scheme
• D. Pass-through scheme

Answer: (D)

This question centers on using an intermediary to siphon value through inflated transactions. A shell company is created to act as the supplier, purchases goods, and then resells them to the employer at a price higher than market value. The extra margin is diverted to the perpetrator while the employer pays what looks like a legitimate vendor. The shell company simply passes goods and money through the chain, masking the true beneficiary of the extra profit. This is the essence of a pass-through arrangement: an intermediary that facilitates the flow of value and inflates the cost to the employer, enabling diversion of funds.

It’s not about stealing cash directly, as in cash larceny, nor about other patterns that don’t hinge on an intermediary inflating prices through a shell company.