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EMBEZZLEMENT – THEFT FROM WITHIN YOUR OWN BUSINESS. How To Detect And Protect Against This Crime
December 27, 2013
by Jeffery Johnson

 

South Bend / Mishawaka, IN – Unlike many crimes, embezzlement is difficult to uncover and its targets may be victimized over the course of several years without even knowing that they are victims.  And to make matters worse, embezzlement is most often committed by a friend, colleague or trusted employee of the victim.

Losses associated with embezzlement exceed $400 Billion per year.  If embezzlement were a business, it would be the third largest business in the world – larger than Exxon-Mobile, IBM or McDonalds.  Think of any business in the South Bend-Mishawaka area or anywhere within St. Joseph County, Indiana and the business of embezzlement would be much larger than that locally based company.

Embezzlement affects companies and people in every area, including the rich and famous.  Some of the famous who have been victimized by embezzlement include:

  • Kevin Bacon and Kyra Sedgwick
  • Jeffery Katzenberg
  • Steven Speilberg
  • Uma Thurman
  • Larry King
  • John Malkovich
  • Eliot Spitzer
  • Sandy Koufax
  • Zsa Zsa Gabor
  • Estate of John Denver
  • International Olympic Committee

PROFILE OF AN EMBEZZLER

What makes embezzlement so hard to uncover is that it is commited by everyday people as opposed to other criminals who have certain common characteristics which aid law enforcement in identifying them.

The profile of a “typical” embezzler includes the following:

  • Most have worked at the victim organization for at least five years
  • More women are charged with embezzlement than men
  • About half of all embezzlers earn less than $50,000.00 per year
  • They are typically a highly trusted and valued employee within the organization
  • They generally work alone
  • Quite often they will start small to “test the water” and if not detected will become bolder over time

There are certain telltale signs that an employee may be embezzling from your company.  These would include frequent trips to Las Vegas or the gambling boats; if an employee refuses to take a vacation; the company’s financial records are being rewritten for the “sake of neatness”; the financial records are in complete disarray; if a particular employee appears to be doing twice as much as any other employee and profitability is not at the level you feel it should be.

REASONS WHY PERSONS EMBEZZLE

Persons who embezzle often do not have a lot to show for all they have stolen over time.  Sure, there are those instances when an embezzler is actually caught because they are living an unexplainable lavish lifestyle.  However, the typical embezzler is not living beyond their means to the outside world.  The various reasons people embezzle include:

  • Gambling addiction
  • Addition to drugs
  • Shopping addiction
  • Belief that they are entitled to “extra cash” because they are overworked and underpaid
  • Greed

HOW TO PREVENT EMBEZZLEMENT

There are no surefire set of steps that will completely protect your company from embezzlement.  But there are some precautions you can take that could help prevent your company from becoming a victim of embezzlement:

  • Require two signatures on checks over a certain amount
  • The same employee should not be writing checks, making deposits and balancing the bank statements
  • Have the CEO conduct periodic spot checks of the company financial records
  • Don’t allow an employee to work on the books and records from home
  • Be familiar with company suppliers
  • Set a good example as a leader
  • Better background check at the time you are considering hiring someone

IF YOU SUSPECT YOU MAY BE A VICTIM OF EMBEZZLEMENT

If you suspect embezzlement there are certain actions and steps you should follow which could enhance the likelihood for recovery of embezzled funds.  These actions include:

  • Retain an outside forensic accountant
  • Retain a technology expert
  • Determine the total amount of embezzlement
  • Do not speak about the potential embezzlement with anyone unless they have an absolute need to know
  • Consult your attorney
  • Do not take any rash actions

ONCE EMBEZZLEMENT HAS BEEN CONFIRMED

Once you have confirmed that your company is the victim of embezzlement, the following are actions which you should consider taking in order to deal with this situation:

  • Confront employee with the evidence:  two persons
  • Obtain written statement from embezzler
  • Determine how much the employee still has from what was taken
  • Determine employee’s unencumbered assets
  • Determine other potential sources of recovery, i.e. insurance, relatives, etc.
  • Notify your insurance carrier

CONCLUSION

In conclusion, embezzlement is a major problem that causes significant harm to many companies.  In the South Bend-Mishawaka area several businesses have closed their doors permanently due to losses incurred as a result of employee embezzlement.  Being vigilant and mindful of the tips contained in this article may lessen the odds of your company falling victim to embezzlement.

 

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