|
No business, large or small, is safe from embezzlement.
No one knows for sure the total cost to business because much
of it is unreported. The National White Collar Crime Center,
a federally funded, nonprofit corporation, says losses from
employee theft range from $20 billion to $90 billion annually.
"Embezzlement is a problem that tends
to become worse when economic conditions worsen," said
Michael J. O'Leary, a former assistant U.S. attorney in charge
of the fraud section in Atlanta and now vice president and
general counsel of Smith & Carson, an intelligence and
security firm in Atlanta.
Embezzlement takes as many forms as there are creative employees.
For example, according to the Georgia
Attorney General's Office, Dianne F. Carter is serving a five-year
sentence at Pulaski State Prison for pilfering $1.5 million
from the state cafeteria cash registers at the James H. "Sloppy"
Floyd Building. Somehow, she found a way to tamper with the
computer records so that no one noticed the missing cash for
years. And R. Wayne Nobles is serving a five-year sentence
at the Clayton County Correctional Institution for stealing
$300,000 worth of postage stamps. He requisitioned checks
from his employer, the University of Georgia, to buy stamps,
and traded them for cash or used them in his own business.
Other examples of internal theft: The bookkeeper
in a medical practice of six physicians skimmed off cash from
patients, doctoring the receipts and falsifying balances.
She siphoned off $28,000 before the doctors noticed. An administrative
assistant created a pool of fictitious vendors, invented invoices
for services rendered and issued checks -- which she cashed,
stealing $1 million over a three-year period.
"White-collar crime has been on the increase
for a long time," said Charles L. "Chuck" Owens,
who worked for the FBI for 25 years, serving as the chief
of the FBI's White Collar Crime Program from 1995 to 1998.
He is now a senior executive with Ernst & Young LLP in
the litigation advisory services practice.
"Our practice is certainly thriving," said Owens,
who works with law firms handling fraud cases or with companies
that are trying to root out fraud.
O'Leary finds that all sizes of companies are
susceptible to embezzlement, but their vulnerabilities vary.
Small companies tend not to have adequate systems of control.
"An individual can be put into positions where there
is relatively little oversight of activities," O'Leary
said.
On the other hand, large companies have internal
controls, but "there are so many transactions going on
that it can facilitate the concealment of fraudulent transactions,"
O'Leary said.
"There have never been more situations
and more opportunities for employees to embezzle from their
companies," said Douglas A. Singleton, a partner with
Waddell, Smith, Magoon & Freeman LLC in Roswell who specializes
in fraud prevention and detection and litigation support.
He is on the board of the Georgia chapter of Certified Fraud
Examiners.
Singleton says embezzlers usually have pressing
financial needs -- often related to drug or gambling addiction,
adultery or medical problems. The embezzler discovers a covert
way to exploit the company. And the embezzler feels entitled
to the company's money, to a self-proclaimed, secret pay raise.
Older embezzlers do the most harm. The Association
of Certified Fraud Examiners reports that losses caused by
those older than 60 are 27 times higher than losses caused
by employees 25 and younger.
What can be done? Certainly, there needs to be a system of
checks and balances. Test it periodically.Invest in independent
audits and thorough background checks of key employees.
It's also important for management "to
set an appropriate example," Owens said. "As we
well know, many senior corporate executives haven't done that,
and that creates a climate where people are more inclined
to take advantage of a situation."
Owens also recommends taking action against
an embezzling employee as a deterrent. However, companies
should investigate the matter discreetly, with professional
help, if possible, so they protect the evidence and the individual's
rights. Most employers learn about embezzlement from their
employees, customers, vendors and anonymous sources. The second
most common method of discovery is pure chance -- stumbling
upon the evidence by accident.
Establishing a fraud hotline can cut losses
by 50 percent. Audits and background checks also reduce fraud
losses, according to the Association of Certified Fraud Examiners.
|
