Much has been written about the risks associated with employee embezzlement, especially in light of the current state of the economy, employment and the declined financial climate in general. Yet day after day I receive 10-20 new Google alerts of news stories involving embezzlement around the country.
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: