The Red Envelope Audit

The day my uncle reported me, he sent a red envelope in the family group chat. It was for a hundred dollars, with the message: "Good things are coming." Twenty-three people grabbed a piece of the red envelope, and eight replied "Congratulations." No one asked what they were congratulating. Because the day before, my uncle had said in the group: "Someone's going to audit Ethan's company." I looked at my phone screen and smiled. Let them audit. I had been waiting for this day for three months. 1. My uncle's name is George Williams, my dad's older brother. My dad's name was Arthur Williams. He passed away from stomach cancer six years ago. When he passed, my uncle came over. Not to pay his final respects. But to take the bankbook. "How much money did your dad save up in his life?" That was the first thing he said when he walked through the door. My mom was crying on the bed, and I stood in the doorway. "Uncle George, my dad hasn't even been buried yet." "I know," he said, sitting down. "But bank matters can't wait. If your dad had savings, we need to sort it out first. The Williams family's money can't just go to outsiders." Outsiders. He glanced at my mom. My mom had been married into the Williams family for twenty-six years, and in his mouth, she was an outsider. I didn't argue with him that day. My dad had $110,000 in his account. My uncle took $60,000, calling it "his share of the brotherhood over the years." My mom stopped me, saying: "Don't fight with your Uncle George. Your dad just left us, and he's the only elder left in the Williams family." I didn't fight. I was twenty-four that year, two years out of college. My salary was $4,500 a month. $60,000 was more than a year of my salary. I remembered that. Later, I started a company. It wasn't some legendary tale. I just started by selling things at a flea market, then moved into wholesale snacks, and slowly built it up bit by bit. By the third year, my annual revenue surpassed five million. By the fifth year, it surpassed twenty million. My uncle came to see me. "Ethan, your cousin Kevin is working odd jobs, very unstable. Isn't your company short on people? Let him come help you." I looked at him. "Uncle George, the company has a hiring process—" "What process?" My uncle slammed his hand on the table. "He's your own cousin! If your dad were still alive, would I even have to beg you?" My mom tugged at my shirt from the side. "Ethan, just let Kevin come. We're all family." So, Kevin joined the company. I put him in the purchasing department. A base salary of $8,000, plus commissions—he could make $12,000 to $15,000 a month. Double what he was making before. My uncle was very satisfied. He was satisfied for three months. Then he came back. "Give Kevin the Purchasing Manager position." "Uncle George, he's only been here for three months. He has no experience—" "What do you mean, no experience? If you can be the boss, your cousin, who is even more outstanding than you, can certainly be a purchasing manager!" I looked at him. "Uncle George, this is my company." "Your company?" My uncle laughed. "If your dad were still alive, would this company even be yours?" That sentence was like a thorn, piercing right into me. I didn't say anything. The next day, I promoted Kevin to Deputy Purchasing Manager. Not because of my uncle's words. But because my mom cried all night again. 2. After Kevin became Deputy Manager, the demands from my uncle's family started to escalate. First, my aunt, Mary, called: "Ethan, your cousin is getting married, and he's a little short on the down payment for the house. Loan him $300,000." "Loan?" "Yes, loan. It's not like he won't pay you back." $300,000. I did have money in the company accounts at the time, but it was all tied up in cash flow. Pulling out $300,000 wasn't easy. My mom said: "Just loan it to him. It's family." So I loaned it to him. Transferred straight to Kevin's account. Didn't even get an IOU. Then my uncle came again: "Your grandmother isn't doing well. You pay her hospital bills. You make a lot of money." I paid it. $80,000. Then my aunt came again: "Kevin's getting married, and we don't have enough for the banquet. Pitch in $50,000." I pitched in. Then Kevin came: "Bro, I'm a little short on buying a car. Loan me $100,000." I loaned it to him. I keep a notebook. Every single transaction is recorded in it. It's not that I'm petty. It's that I discovered something— My uncle was telling people outside: "My nephew's company, to be honest, relies on the Williams family. Could he be where he is today if I hadn't pulled him up back then? Giving us a little money is nothing." A classmate of mine told me this. She heard it at the grocery store. My uncle was chatting with someone while buying groceries. "Ethan makes so much, what's it to him to give us a little? If it weren't for the Williams family name, who would do business with him?" $1.46 million. Eight years. That's the total amount I had spent on my uncle's family. His exact words were, "giving us a little money is nothing." Kevin worked at the company for three years. He was relatively honest the first year. Starting the second year, purchasing costs kept getting higher and higher. I asked him: "Why is this batch of raw materials 15% more expensive than last quarter?" He said: "The market price went up. You know that." I checked the purchasing prices of our competitors. They hadn't gone up. I then looked into the suppliers Kevin was dealing with. And I discovered something. Of the three suppliers Kevin recommended, two had legal representatives who were his college classmates. The suppliers quoted high prices, and Kevin signed off on the inventory. Where did the price difference go? I had finance audit all the purchase orders Kevin was responsible for. Three years. Total price difference: $870,000. $870,000. I gave him $300,000 for his house down payment. $100,000 for his car. Plus his salary, commissions, and holiday bonuses. His way of repaying me was stealing $870,000 from my company. Sitting in my office that night, looking at that report, my hands were shaking. Not out of fear. But out of anger. 3. I didn't expose Kevin immediately. I did something else. I hired a professional accounting firm to conduct a comprehensive audit of the company's accounts for the past three years. The public explanation was, "The company is seeking financing and needs to standardize its financials." Kevin didn't take it seriously. He even told my uncle: "Ethan's looking for financing. Make sure he makes me a Vice President when it happens." The day the audit results came out, I locked my office door and spent the entire afternoon reading it. Besides Kevin's issues, the audit revealed something else— Because of the fake accounts Kevin had created, several company expenses were misclassified. As a result, the company had overpaid nearly $500,000 in taxes over the past three years. $500,000. I could apply for a tax refund for this amount. But I didn't apply for it immediately. Because I suddenly thought of something. If someone reported me for tax evasion and the IRS came to audit my books— What would they find? They would find that I hadn't evaded taxes. They would find that I had overpaid taxes. And they would also find that Kevin had been cooking the books for three years. I closed the audit report. Then, I fired Kevin. The reason given was "company restructuring and downsizing." I gave him severance pay. Sent him off with dignity. Kevin even shook my hand when he left: "Bro, thanks for taking care of me these past few years." I looked at his face. Smiled. "You're welcome." My uncle exploded. He stormed into my house that very night. "What is the meaning of this?!" "The company is restructuring. It has nothing to do with Kevin personally." "Bullshit! He was doing a great job. What right do you have to fire him?" "Uncle George, it was a company decision." "A company decision? Your company? If it weren't—" He was about to say that sentence again. I cut him off. "Yes, my company. My name is on the business license." My uncle glared at me. "Ethan, don't forget your last name is Williams." "I haven't forgotten." I looked right into his eyes. "But the name Williams was given to me by my dad. Not you." My uncle slammed the door when he left. The noise was so loud the whole building could hear it. My mom was pale with fear. "Ethan, how could you speak to your uncle like that..." "Mom, he stole $870,000 from my company." My mom froze. "What?" "Kevin took kickbacks at the company. For three years. $870,000." My mom sat on the sofa, speechless for a long time. After a while, she finally said something. "Well... just let it go. We're all family..." I looked at my mom. "$1.46 million." "Huh?" "In these eight years, I've spent $1.46 million on Uncle George's family. Add the $870,000 Kevin stole. That's a total of $2.33 million." I enunciated every word. "Mom, you tell me, which relatives are worth $2.33 million?" My mom stopped talking. 4. A month after Kevin was fired, I noticed something. The company's financial system login records showed that after Kevin left, someone tried to log in using his old account. The login failed because I had already changed the password. But the IP address of the login attempt was from my uncle's house. I had the IT department check it. It wasn't just once. Over the past month, there were seventeen login attempts. All from my uncle's IP. They were trying to get into the company's financial system. Why? To find "evidence" of my tax evasion. I looked through the backups of Kevin's computer from when he was still employed. I found that before he left, he had copied a massive amount of files. Purchase orders, expense reports, tax return forms. Some were real. Some he had altered. He had modified the traces of his fake accounts, making those numbers look like I was evading taxes. I sat in front of my computer, staring at the screen. They weren't reporting me on impulse. They had been preparing for at least half a year. They started collecting materials and modifying data while Kevin was still at the company. The firing was just the catalyst. They had been planning to take me down for a long time. That day, I called Director Martinez at the accounting firm. "Director Martinez, regarding that audit report, please generate a detailed version for me." "Mr. Williams, how detailed?" "Detailed down to the original vouchers, cash flow, and final destination of every single fraudulent transaction." "Understood." "Also," I added, "hold off on the tax refund for now. Wait for my notice." Director Martinez paused. "Mr. Williams, are you waiting for someone?" I didn't answer. I hung up. I was waiting for my uncle. My uncle moved faster than I expected. Forty-seven days after firing Kevin, I received a call from the IRS. "Mr. Williams, we've received a report against your company and need to conduct a tax audit. Please cooperate." "Understood. When would be a convenient time?" "The day after tomorrow, at 9:00 AM." "No problem." I hung up. Opened the family group chat. Sure enough, my uncle had already sent a message. "Good things are coming." Below it was a red envelope. For a hundred dollars. Twenty-three people grabbed a piece. Eight replied "Congratulations." My aunt sent a voice message: "Let's see how stubborn he is this time!" Kevin sent a sinister smiling emoji. My third uncle asked: "What good thing?" My uncle replied: "You'll know when the time comes." I put down my phone. Picked up the receiver and called Director Martinez. "You can start preparing the tax refund documents." 5. The day the IRS arrived, I got to the company an hour earlier than usual. I organized all the ledgers, vouchers, and reports, and placed them in the conference room. The audit report remained locked in my drawer. At exactly 9:00 AM, three IRS agents arrived. The team leader, whose last name was Davis, was in his forties and very stern. "Mr. Williams, we received a report alleging that your company is engaging in tax evasion. According to procedure, we need to conduct a comprehensive audit of your company's accounts for the past three years." "Agent Davis, cooperation is expected. All the materials are in the conference room. You can review them anytime." I opened the door to the conference room. Agent Davis glanced at me. Most business owners being audited didn't look this relaxed when they walked in. I was too calm. He didn't say anything and led his team into the conference room. At 10:00 AM. A minivan arrived at the company entrance. My uncle was here. And not just my uncle. My uncle, my aunt, Kevin, my third uncle, my third aunt, my oldest aunt, her husband, my second aunt, and seven or eight distant relatives whose names I couldn't even remember. Over twenty people. A massive contingent. "Uncle George, what are you all doing here?" Sarah, the receptionist, tried to stop them. "Just taking a look!" my uncle said loudly. "Taking a look at Ethan's company!" He looked around, a look of triumph in his eyes. "Seeing how many more days this company can stay open!" I looked down from the window of my office. Over twenty people were crammed into the company entrance. A few passersby had already started gathering to watch the spectacle. I called the front desk. "Let them up." "Mr. Williams?" Sarah's voice sounded a bit panicked. "Let them up," I repeated. "Open the main conference room. Serve them tea." When my uncle led the group upstairs, his face practically screamed, "I've finally waited for this day." He looked even more triumphant when he saw the IRS agents in the conference room. "Oh, you're here?" He pulled up a chair and sat down. "Audit away, audit thoroughly." Agent Davis frowned. "And you are?" "I'm his uncle." He pointed at me. "To be honest, the Williams family owns a piece of this company too." Agent Davis looked at me. I nodded. "He's my uncle. Let him watch." My uncle looked even more pleased with himself. He waved at the relatives behind him. "Sit down, everyone, sit down! Let's all see what kind of 'good deeds' Ethan has been up to today!" The relatives filed in, filling the main conference room. My aunt sat in the front row, legs crossed. Kevin stood in the corner, hands in his pockets, expressionless. After sitting down, my third uncle whispered to his wife: "George said the IRS found a massive problem. He might be fined millions." My third aunt gasped: "Then isn't he finished?" The voices weren't loud. But I heard them. Over twenty pairs of eyes stared at me. Not a single look held any concern. Some were gloating. Some were just waiting for the show. Some looked indifferent. And then there was one—my uncle. His eyes held naked expectation. Waiting for my downfall. Waiting to see me cry. Waiting for me to beg him. I sat in my seat and took a sip of tea. Fine. If it's a show you want, it's a show you'll get. I wanted to see who would be crying in the end. 6. The IRS audited for two days. During those two days, my uncle came every single day. The first day, he could sit still. By the second day, he was getting restless. "Why aren't they done auditing yet?" He paced back and forth in the hallway, chain-smoking. "Is it almost done?" He asked everyone who came out of the conference room. No one answered him. At 4:00 PM on the second day, Agent Davis asked to speak with me. "Mr. Williams, the preliminary audit results are ready." "Okay." "Regarding the materials provided by the whistleblower, I need to verify a few things with you." "Go ahead." Agent Davis opened a stack of files. "The whistleblower provided copies of some purchase orders and tax returns from 2021 to 2023, claiming your company evaded taxes by artificially inflating costs." He looked at me. "But we found in the actual accounts that the materials provided by the whistleblower and the actual data entered into the company's books—don't match." "They don't match?" "The numbers on the purchase orders provided by the whistleblower are higher than the actual numbers entered into the books." I remained silent. "In other words," Agent Davis paused, "the materials provided by the whistleblower have been altered." I nodded. "I know." Agent Davis looked at me. "You know?" "These purchase orders were handled by my former Deputy Purchasing Manager, Kevin Williams. During his employment, he artificially inflated purchasing costs and transferred the difference into his personal account. These altered materials are copies he made before he left." I pulled the audit report out of my drawer. "This is a comprehensive audit I commissioned from an accounting firm half a year ago. It contains the complete chain of evidence of Kevin's fraudulent accounting." I handed the report to Agent Davis. "Including the original vouchers for every fraudulent transaction, the corresponding bank statements, and the private accounts where the funds ultimately ended up." Agent Davis flipped through a few pages. His expression changed. "Mr. Williams... why didn't you report this to the police earlier?" I smiled. "Because I was waiting for someone."

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