Posts Tagged ‘employee theft’


Public Signs: The Start Of A Trend For Consequences?

Day after day, people choose to break the law, and there simply are not enough resources available to address the growing frequency of crimes.  Naturally the resources are directed towards the most serious offenses, such as homicides, assaults, sexual assaults and robberies.  Unfortunately, as more and more members of our society put their own needs and life before anything and anyone else, ignoring laws and the safety of everyone else around them, the risk of consequences no longer appears to be a deterrent.

Just this morning coming home from an 18 hour shift, I only had to stop for two red lights.  In both cases (100%), when my light turned green, a vehicle from my left ran their red light, crossing at a high rate of speed across my green light.  Two for two.  Even with me waiting and my having a green light, they ran the light without any concerns for my safety.  These people have become a menace on the roadways.

Two years ago a judge in Texas ordered a couple to wear a sign on a public street for several months.  The sign stated they were caught steaming $250,000 from a victim’s fund.  See link below.  Just recently there were two more sign sentences.  The first involved a woman who stole from Walmart, and the second was a woman who, each day, drove around traffic, over grass and sidewalks, to go around a school bus with its red lights flashing.  See pictures and links below.

Unfortunately for the woman who passes the bus each morning, when news crews came out to talk with her during her punishment, she expressed no remorse and refused to comment.  Lesson learned – at least everyone now knows these individuals for what they did.

Perhaps each town should work with the courts, and dedicate an area within their town where more convicted sign bearers could march in public – they could call it the walk of shame.  Maybe the risk of being publicly humiliated would act as a deterrent, and start to reverse the sad trends we have been experiencing.

Kudos again to the judges handing out these sentences.

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Is “Trust” a consideration in designing and implementing internal controls?

When I am working on evaluating, designing and implementing internal controls and accounting procedures within client organizations to minimize the risk of employee theft and embezzlement, I am frequently asked why certain measures are needed, given that a certain individual works within a position.  The individual is often described as a long-term, honest, loyal, dedicated and trustworthy employee who would never steal, let alone do anything else harmful to the organization.  The human element.

My response has always been the same.

1) Internal controls and accounting procedures should be objective, not subjective, and should look at the positions and opportunities rather than the individuals who fill those positions.  What does each position entail, what are their duties and responsibilities, and what opportunities exist within each position are key elements to the assessment?  Who presently fills each position, how long have they worked there, and attributes about them as a person and their background are not part of the evaluation (unless we are also measuring competence, capacity, efficiencies and/or other separate objectives simultaneous to assessing the strength of the internal controls).

2) Organizations do rely upon trust.  And they should.  Not the “trust that an employees will not steal”, but rather “trust the employees will consistently adhere to the established controls, policies and procedures” every time.  Internal controls always include measures to ensure that happens (compliance).  “Trust, but Verify” – in the words of the late Ronald Reagan.

3) The individual often described as the most honest, loyal, dedicated, trustworthy person ironically is almost always the very same person who has embezzled funds, lots of funds, over a long time, operating below the radar screen of suspicions, because they were perceived as honest, loyal, dedicated, trustworthy… and therefore provided too much latitude and opportunity.

Employers expect to “trust” their employees.  For example, employers trust that:

- their employees will devote all their efforts towards their employer;

- their employees will honor and adhere to all policies and procedures of the organization, regardless of whether they are satisfied with their employment and current situation, or not;

- their employees will keep all information learned through their employment confidential, only to be used within the contexts of their employment (and not steal or share customer or client lists, vendor profiles and histories, employee listings, competitive bidding information, pricing and price lists, trade secrets and other confidential and proprietary information)

- their employees will do what they are supposed to do, all the time, and not just when someone is watching over them

But one area that employers should not “trust” their employees is with internal controls over the financial aspects of the organization.  Measures are always needed to safeguard assets, segregate duties, create checks and balances, identify procedures to prevent things from happening, and implement procedures to detect things early on when they do happen (prevent what can be prevented, and detect everything else as early as possible).


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Documents and Images – “Live or Memorex”?

A few years back (maybe dating myself) Memorex ran an ad campaign whereby they proclaimed their recordings were so realistic  it was hard to tell if it was live or recorded.  Funny how successful advertising lines can stick with you for life.

As newer technology has become available, more information has shifted into the digital world, including video, audio or image recordings.  What started out through basic copying has moved into electronic scanning, imaging and duplication, with near perfect results.  Technology available on most of today’s computers also allows for editing, and what was once reserved for highly trained and specialized experts has become commonplace and available through every home computer user.  For example, video can be captured through a cellular device, such as an iPhone, imported to a PC or Mac, edited, altered, added, deleted, combined and modified through iMovie, and saved as a final product.  Most of these often end up on YouTube to be shared.  Done carefully, only a trained eye may be able to tell the video was altered from the original footage.  Same holds true with songs and other audio files.

As we all know photographs too have all gone digital, and while traditional “film” cameras do still exist, it is becoming  harder and harder to find film to even purchase and develop.    Software such as Adobe Photoshop can be easily used to import, alter and change a picture, adding and/or deleting to the original captured image.  The end result is a digital photo that can be sent across most every digital medium that exists.

How are these “digital” solutions impacting the field of forensics?  Two quick links.

First, when any electronic evidence including video, audio or photographic information is provided, it now more than ever has to be independently and objectively authenticated before any reliance can be placed on the evidence.  No longer is it simply a matter of preserving the original in its original form and format.  One now needs to preserve the files or images provided, as well as search not only for evidence of the files being altered, but also for the original unaltered versions of the same information if they still exist.  Evidence of who and when any alterations were made should also be sought.

Below is a link (URL) to a recent article regarding electronic (digital ) pictures for use in a legal proceeding (criminal case or lawsuit):

The second link to forensics has to do with two recent cases of employee embezzlement.  In both cases what appeared to be original, full color versions of monthly bank statements were found within the financial files of the victim organizations.  In both cases, individuals internal and external to the organization used and relied upon these bank statements in the files.

Upon closer inspection after other indica of employee embezzlement became apparent, the bank statements were found to be altered, full color scanned images of the organization’s monthly bank statements.  In one case the canceled check images were cut and pasted into position from other statements, concealing the fraudulent canceled check images.  Even closer inspection of each statement revealed clues the statements were not only scanned color copies, but were also altered prior to reprinting in color.  Hole punches and folds/creases found in the original documents were scanned and captured in the copies, providing further discoverable evidence the statements were not originals.

Knowing how easy it is for someone to alter and reprint real looking documents, organizations and individuals alike need to recognize how easy it is for someone to create and present original looking documents.  While everyone will not aspire to become an expert document examiner, we all need to develop a sixth sense when reviewing documents, to question the authenticity of documents as part of important transactions and decisions, and ensure that we don’t place blind reliance (“trust”) on information that could have been created simply to fool us.  When in doubt, take the extra time necessary to ensure the authenticity of the documents you are relying.  In the world of forensics, we are!

Attached is an interesting link (URL) to a page relating to detecting altered documents through Forensic Document Examination Services, Inc.:

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Embezzlement versus Larceny: Ice Cream Truck?

Larceny is a legal term for theft or stealing, the taking of another’s property for personal gain with no intent to return the property (permanently deprive rightful owner of their property).

Embezzlement is a form of larceny, with some unique characteristics.  Embezzlement involves an individual using (and exploiting) a position of trust and opportunity, committing theft acts over time, with or without intention of returning what was stolen, and the activity is concealed (covered up) so as to avoid detection, allowing the suspect to continue perpetrating future theft acts.

Stealing the end of day deposit rather than taking it to the bank to be deposited into an organization’s bank account would be larceny.

Stealing (skimming) $100 from each day’s deposit, and altering the bank deposit slip to reflect the reduced amount to be deposited,  would be along the lines of an embezzlement.

In this recent article, it appeared the driver of an ice cream truck stole the truck’s contents.  One event, discovered all at once, and not well concealed.  Larceny, not embezzlement.

Had the driver skimmed cash or ice cream from the truck and deposits, and concealed the short (theft) by altering his records, that would have been an embezzlement.

Here’s the article:

 Ice Cream Truck Embezzlement

Omaha Police received a report of embezzlement, filed on May 17. The manager of Frosty Treats filed the report, saying an employee stole all the ice cream from one of the trucks.

The manager told police when a driver went to pick up the tuck near 10th and Arbor on May 16, the truck was empty of all its ice cream.

A neighbor in the area said he or she witnessed the employee of the truck unloading all the ice cream into his home.

The manager told police there was $1600 to $1700 worth of ice cream in the truck.

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Here, There, and Everywhere: Embezzlement is BIG Business, and Business is Good.

Just read the following headlines for a mere sampling of the hundreds of articles appearing online in only the past two weeks:

  • Ex-ICE Intelligence Chief Pleads Guilty to Embezzlement
  • Dixon, Illinois Comptroller Allegedly Embezzled $30 Million To Fund Horse Breeding Business
  • State of Okla. charges former, current City of Cleveland employees with embezzlement
  • Jail for woman accused of embezzling from Jensen’s Animal Hospital
  • Former Tea Fire Department treasurer pleads not guilty to embezzlement
  • Former Macomb County sheriff’s deputy with embezzling funds from Romeo Lions Club
  • Church bookkeeper accused of theft
  • Parish mgr charged in 2nd embezzlement
  • Guilty plea in youth hockey embezzlement case

Thus the age-old question: Are more people stealing today, or have we become better at detecting it?

Regardless of which school of thought you subscribe, one thing appears obvious to me:  I am observing more incidents of such theft occurring  than ever in my 23 years “in the business.”

I base my conclusion not upon how many cases I have investigated recently, but by the sheer number of Google AlertsTM I receive daily based on the search term “embezzlement.”  The trend for the past two years provides between 12 and 20 alerts, each and every day, and, when you consider only one in nine of such matters ever becomes public, that extrapolates to a range of between 108 and 180 instances, daily!

The frequency of thefts wherein individuals violate their positions of trust for personal gain, coupled with the wide range of unexpected and non-traditional contexts for embezzlements, should sound alarms and send warning signals to each and every employer to ensure controls exist and operate as designed to prevent and detect thefts.

Beyond the traditional contexts of for-profit, not-for-profit, and governmental employers safeguarding assets from employee theft, risk exists within every organization of every type and size.

Most everyone belongs to some interest group or committee, religious organization, scout troop, club, or sports program.  Each and every entity requires some element of finance, sometimes significant, and other times inconsequential in amount.  However, every single one that exists involves some level of funds entrusted to someone, often a volunteer, to safeguard, maintain, use, track, and report for the sole benefit of the entity, whatever the group’s purpose or mission.

The sampling of headlines above demonstrates that no one exists above suspicion, and therefore building a system on internal controls based upon “trust” constitutes a recipe for potential disaster.  All too often, the person least suspicious, glowing with the illusion of trustworthiness, ends up the same individual who diverts unimaginable amounts of funds, resulting in a financial crisis for the organization.

We’ve issued warnings for years.  The time for you to act is now.  Don’t stand on the sidelines hoping someone else will take action and addresses this issue.  To ensure you, your clients, and your organizations will not fall victim to theft and embezzlement, start today by asking questions about internal controls.

One measure you can take immediately as your first step in this process: review your insurance policies to ensure your company, organization or group carries adequate insurance in the event of theft or embezzlement.  Anything less than $100,000 may prove insufficient given today’s thefts, where amounts reach into the hundreds of thousands and millions of dollars.  Enlist the assistance of your agent to determine your group’s adequacy of coverage.

Given the current economic climate, and the potential for financial fraud, we must remember the words of the late Ronald Reagan: “Trust, but verify.”  As always, remain vigilant.

Here’s a link to an interesting (and tragic) story out of Oklahoma where a convicted embezzler recently murdered her husband, buried his body in the back yard, and planted a flower garden over where he was buried:

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