First, how much investments could a firm manage or maintain to not miss $10.4 million dollars?  I am left wondering how this amount was not missed for over three years, and how controls that I would expect implemented by any investment firm did not prevent or detect this level of theft for such a long period.  Cases like this one makes me wonder just how many of these thefts are occurring today but have yet to be discovered, much like when I wrote something similar a year ago when this particular case was on-going and yet to be discovered.  Is also makes me wonder how many individuals who gamble regularly support their hobby or addiction with stolen funds.

Former company official admits embezzling $10.4M from northern NJ investment firm

NEWARK, N.J. — Federal prosecutors say a New Jersey man has admitted embezzling more than $10.4 million from the investment management firm where he served as chief financial officer.

Newmark’s lawyer, Michael B. Himmel, said his client has a “significant” gambling problem.

Thirty-nine-year-old David Newmark of Montville surrendered to authorities Wednesday and pleaded guilty to wire fraud and tax evasion charges. He faces up to 25 years in prison when he’s sentenced April 24 and also will have to make full restitution. Newmark stole the money from Short Hills-based Columbus Hill Capital Management. Prosecutors say he created a phony account to collect fraudulent deposits between February 2008 and March 2011 and diverted the funds to bank accounts he controlled.  Newmark’s lawyer, Michael B. Himmel, said his client has a “significant” gambling problem.

Click to read the article at therepublic.com

Another pattern I have been tracking is that no contexts seem to be immune.  Individuals with access and opportunity seem to be stealing everywhere possible.  I’m not saying everyone is stealing, because that is certainly not the case.  But I am saying a significant risk exists for theft or embezzlement within every business, entity, government agency, program, club, group, and every other type of organization that maintains funds, regardless of the nature, size and context of each potential victim organization.

I truly believe employee behavior is a leading indicator, often detected long before evidence of the actual diversion of funds has materialized.  Living beyond ones means seems to come up in many of the cases.  Know your employees, and for anyone who is a member of any social club, sports program or any other member organization, know who handles your finances and what controls are in place to safeguard your funds.

Below is a small sampling of Google Alerts received today alone:

Woman jailed for embezzling youth soccer funds (over $200,000)

http://www.vancouversun.com/business/Woman+jailed+embezzling+youth+soccer+funds/6006470/story.html

A local judge accused of embezzling court funds and other misdeeds could be removed from the bench

http://www.wxyz.com/dpp/news/a-local-judge-accused-of-embezzling-court-funds-and-other-misdeeds-must-answer-for-her-actions

Sentencing for Ira town clerk who admitted embezzling

http://www.wcax.com/story/16536416/sentencing-for-vt-clerk-who-admitted-embezzling

Former Tenderloin Housing Clinic Employee Sentenced For Embezzlement

http://sfappeal.com/news/2012/01/former-tenderloin-housing-clinic-employee-sentenced-for-embezzlement.php

A Kent County minister accused of embezzlement is due in court today.

http://www.wwmt.com/news/embezzlement-1400637-accused-minister.html
Former Shelby Schools superintendent charged with embezzlement

http://www.ludingtondailynews.com/news/63161-former-shelby-schools-superintendent-charged-with-embezzlement

Recently I worked an event at our church where I brought personal things from home to help during the event.  One of the items was a professional apron, one of the good kinds I’d purchased at a chef supply center.  I wear my apron all the time, keeping my clothes clean while also also acting as a wipe rag (for everything).  As planned, I wore my apron, and when finished, kept it with my things (separate from the church’s things) to bring home.  My high-quality utensils were there as well.

Towards the end of the event other volunteers were a bit more eager than I expected with their cleaning, and my personal things were taken from the table.  Once cleaned, they became mixed and ultimately secured away with the church’s things.  Doors locked, I’d have to wait to get my things back.

Although I wasn’t able to access my things to bring them home that day, I also knew nothing should happen to them since they were secured at a church, the one place I thought where nothing would happen to my things.

Well… I still don’t understand why I was surprised to find that when I returned to the church for my personal items, they  were gone.  Why did I think that items of high quality, clearly things the church would likely not spend the funds on, being safeguarded at a church for me, would be any different from being stored anywhere else?  Nothing is sacred anymore, and I should have expected my items to have disappeared (and they did).

I am sure someone working at the church soon after our event came across my items, immediately recognized the items did not belong to the church, and also recognized the items were high quality, things they would benefit from having.  It is likely someone I know, who I will be working with at some future church event, standing side by side with a church going thief hypocrite, making me wonder each and every time.

Just another sad sign of our declining society.

In this latest case capturing headlines due to the victim organization being the San Francisco Giants, much can be learned from what little has been publicized about the breaking case thus far.

One particularly interesting detail is that the embezzlement was not known by the organization, nor was it detected by any of the internal controls one would think would be implemented within such an organization.  Rather, as is common in so many cases, the suspect did something outside of their employment that triggered the discovery.  One can more than speculate that had it not been for the suspect triggering her own scheme, the organization may have never learned of her theft (also very common).

In this case a letter written by the suspect supporting a loan application, sent by the potential lender to the employer (Giants) to be validated, is reported to be responsible for identifying the thefts.  For the San Francisco Giants, the drastic change in the lending industry in response to past lending fraud, requiring validation and corroboration of applicant-provided information, may have saved the organization from an even larger loss.

Where were the internal controls?

Who authorizes, processes, reviews, reconciles and records the payroll at this and every organization?  Fraudulent payroll schemes are common and should be easily prevented and/or detected before reaching such large amounts as with this case involving over $1.5 million.  At a minimum, the payroll details of those who have access to payroll should be scrutinized regularly to ensure such a scheme could not occur for long, a recommendation I have been making for twenty-plus years.  This individual is reported to have had an annual salary of $80,000.

Here’s a link to one of the several articles:

http://abclocal.go.com/kgo/story?section=news/iteam&id=8336001

“A Catholic nun broke one of the Ten Commandments by embezzling $850,000 from a suburban New York City college and gambling it away in Atlantic City, according to federal prosecutors.”

While thefts from these groups are not unusual, the amount of stories related to these groups in the last two weeks is alarming.

“LAKE OSWEGO — A woman who kept the books for a Lake Oswego parent group and two sports clubs was arrested Thursday on accusations of embezzlement.
Ranae Marlee Mason, 45, was accused on the belief she embezzled about $84,000. The baseball group noticed irregularities and audited their books, noting that $5,000 was missing. That led to the other two groups reviewing their accounts. The football league was missing $51,000 and the PTA $30,000.”

“Preston Junior High School Secretary, Idaho.  Allison Kay Hoth, 40, a secretary at Preston Junior High School was arrested and charged with theft for allegedly taking between $30,000 to $40,000 from one of the school accounts over the space of two years.”

“Magnolia Park PTO vows changes after embezzlement.  OCEAN SPRINGS, MS (WLOX) – The Magnolia Park Elementary Parent Teacher Organization in Ocean Springs could soon be changing the way it does business. That word comes a day after the PTO treasurer was arrested and charged with embezzling thousands of dollars from the organization.  Fitts, who volunteered as the PTO treasurer, is accused of taking $20,000 over a six month period.”

And yet another today -

Federal Way youth sports treasurer sentenced in embezzlement

“The former treasurer for three Federal Way youth sports leagues was sentenced today to 30 days in jail and must pay nearly $34,000 in restitution for embezzling funds from the leagues.  Colleen A. Wiley, 44, pleaded guilty Jan. 18 to first-degree theft. Prosecutors say Wiley wrote unauthorized checks and an unauthorized wire transfer totaling $33,967.20 – the restitution she must now pay.  According to court documents, the Federal Way woman stole the money from three leagues between August 2007 and January 2009. The three leagues involved are the Puget Sound Junior Football League, the Federal Way American Little League and Federal Way Junior Football Hawks.”

Here are the URL links to the referenced stories:

http://www.kgw.com/news/local/Oswego-PTA-sport-clubs-lose-84K-to-embezzeler-115211694.html

http://www.idahostatejournal.com/news/local/article_96229af8-2e2b-11e0-bb41-001cc4c03286.html

http://www.wlox.com/Global/story.asp?S=13959511

http://blog.thenewstribune.com/crime/2011/02/04/federal-way-youth-sports-treasurer-sentenced-in-embezzlement/

It seems incomprehensible how a scheme this large could have occurred and for so long.  The only explanation I can find without access to more of the case details is that this salon must of done a crazy level of business. I just never imagined a hair salon could generate such profits and cash flows to enable any individual to divert funds of this level without notice.

I liked the finer points of the article – such as the defendant’s own retained expert witness who showed that the defendant had been withdrawing funds long before she started putting funds back into the business.  It seems in most cases if the expert retained for the party identifies information that could be detrimental to the retaining party’s case, the expert is paid, released from the engagement and never disclosed in the matter.  Once again, without further details it is hard to determine what happened, but having your expert testify to facts to your detriment is usually not the desired goal of retaining an expert.   The expert has to remain objective, unbiased and uncover all the facts, supporting and refuting any allegations regardless of the party, but it is widely known that once you, the retained expert, uncover facts that could lead to the detriment of the retaining party’s case, continuing work and testifying is often no longer desired by counsel.

Here’s the URL to the full story:

http://www.mysanantonio.com/news/local_news/article/Jurors-return-guilty-verdict-in-hair-salon-984317.php

In my experience it has been difficult if not impossible to have a convicted embezzler see the inside of a jail cell.  If sentencing has included any jail time at all, it was common for the term to be very minimal, and frequently it was served at a half-way house or equivalent.  “We have limited space in our prisons, and we need that space for the violent criminals” is a common response I have heard, not that I could argue with that logic.

But still, I truly believe the level of theft and embezzlement is where it is today because individuals no longer fear the consequences of their actions, meaning they don’t perceive their chance of going to jail as being realistic if they steal large amounts of money from their employers or anyone else for that matter.  In sentencing I have experienced in my cases, I can’t argue with that either.

So, much to my surprise, when I saw that a woman was convicted and sentenced to twenty (20) years in jail for embezzling $408,500, an amount less than a million dollars, I took notice.  I have had individuals convicted of stealing well over a million dollars and receive a fraction of what Ms. Mattoon received.

I am by no means saying I believe someone who embezzles should not be appropriately punished for their actions, because I firmly believe there should be genuine consequences for stealing any amount of money.  I am seeking, though, some level of consistency in the sentences received by individuals convicted of embezzling, so that we can see the perceived and genuine risk of going to jail return, reducing the frequency of occurrence for victims of these crimes.

I am just trying to equate embezzling with twenty years.  Do you think someone who stole $408,500 should have received a prison sentence of twenty years?

Here’s the URL link to the story:

http://www.ktvn.com/Global/story.asp?S=13853352

In several cases I have investigated that spanned the holiday months, I have seen spikes in the amounts and frequency of the thefts.  Every employer should take the time in January and February to look back and thoroughly review the activity leading up to the end of the calendar year, to ensure no “holiday” theft occurred.

In many embezzlement cases the police are notified, and once sufficient evidence has been obtained to support an arrest, the police obtain an arrest warrant for the suspect’s arrest.  Once issued, the arrest warrant can be executed at any time, although it is common for financial criminals to come in quietly along with their attorney to turn themselves in.

As much as victims desire to have the suspect locked up during holidays, most police agencies look hard at whether key holiday times, such as Christmas Eve, would be the best time to execute an arrest, especially given financial criminals are generally non-violent.

Below is the link to a case I found today where the suspect, the former CFO of a company, was arrested Christmas eve, accused of stealing close to $400,000.

What struck me as odd regarding this story was the fact that they arrested the CFO at his home on Christmas eve, especially in light that the article stated the investigation lasted six months, and also the fact that the police requested anyone with information to call 911, the number reserved for emergencies.  Most every agency frowns upon using 911 for anything but emergencies.

There’s obviously much more to this story than what was published.

Here’s the URL:

http://www.yorkdispatch.com/news/ci_16934303

I recently finished an embezzlement case, and since the individual who handled all the financial aspects of this company for the retirement-aged owners was terminated for stealing, the owners turned to a well-known temporary agency to solicit help running their business.

Today I received the call I should have expected but never saw coming.  My client, the original victims of their office manager’s embezzlement, were back at the police station, filing a second complaint on a new matter.  Figure it out yet?

Unbelievable, the individual brought in from the temp agency has been embezzling from the company while helping them complete the investigation and implement internal controls to prevent such a theft from ever occurring again.  The individual purportedly has been writing checks to themself and forging the owners’ signatures – in a time when they have little to no funds due to the last embezzlement.

At a time where I am trying to become less cynical, how can the person brought in from a well-known agency to help retirement-aged owners recover from an embezzlement, stealing the little funds they had left to operate their business.

If the business closes, which is highly likely given their dire cash situation, what do we tell all the folks loosing their jobs, let alone the owners loosing their business?

The time is long overdue for the courts to lock folks like this up.