I get these “Finance” e-mails and once in a while they have something of interest. In this case I admit this topic is something between a hobby and a professional interest. The many ways people have devised to steal are legion.
Some of these are hard to believe could happen; the Calgary Transit employee who stole over $375,000 would have had to be taking home over $4,000 per month, which is over 800 quarters every day! Somebody should have noticed.
Nonetheless, it is worthwhile to remember there are exposures and to look at our processes and evaluate if we have undue risk. Note the similarities between our process and the last case cited.
Here are seven of the most over-the-top examples that we could find of in-house theft and employee fraud: • $1.2 million in false expenses. David Smith, a former Quest Diagnostics manager, managed to get reimbursed for over $1.2 million in false expenses through a complex web of deception. He set up fake companies, created fake invoices and turned in fake expense reports for payments he’d supposedly made to companies on Quest’s behalf. The FBI eventually caught on, and Smith was sentenced to five years in prison. His undoing? In addition to poorly named fake companies like Environmental Tech and Rep Med Services, Smith’s mailing addresses didn’t match up. Example: Environmental Tech’s address was an entrance ramp to a Tampa freeway. • Security expert finds — and exploits — $1 million hole in company’s internal controls. It’s not an unheard of scenario: A company hires a former “professional” thief as a theft-prevention specialist because of real-life expertise in the security field. In this case, a former embezzler, Barry Webne, was hired at Block Communications, Inc., as a “theft-prevention specialist.” Rather than protection, Webne ended up writing himself checks on company stock — signed with a signature stamp of a co-worker — cashing the checks, then destroying the canceled checks that were returned to the company. He made false entries in the company’s books to cover his actions. Before he was caught, Webne robbed Block of a staggering $1,138,334! • A suspiciously long case of jury duty. Joseph Winstead, a Washington, D.C., postal worker, managed to bilk the USPS out of close to $40,000 in unearned wages over a total of 144 days by claiming he was serving jury duty on an extended federal trial. (The USPS worker fabricated court paperwork to support his reimbursement because he was excused before the deliberations began.) He would’ve gotten away with it if he didn’t try his luck again — three years later. After a supervisor caught on, Winstead plead guilty to fraud — in the same federal courthouse where he claimed to have spent over 100 days fulfilling his civic duties. • Lots of company property goes missing. The proper safeguards are essential to ensure staffers don’t make off with valuable company property such as PCs, laptops, fax machines and … phone books? Instead of delivering phone books, a former Directory Plus employee squirreled away over 100,000 directories over the course of four years. What did she do with all those numbers? She hid her stash in three storage units — taken out in her name. Estimated losses from the missing phone books: Over $500k! • Who counts coins anyway? A former Calgary Transit employee, David Hamilton, pilfered almost $375,000 from his company the old-fashioned way. Over the course of seven years, the former fare counter took coins home with him by hiding them in his bag. That’s an average of $200 per day in quarters, dimes and nickels! • IKEA worker nets $400K in refunds. After mastering the furniture company’s phone and mail-order system, Suraj Samaroo started issuing himself refunds for purchases made by customers. Samaroo would cover up his rampant refunding by altering inventory records. In less than a year, he stole almost $400,000. • Bookkeeper swipes $350K from a bookstore. At an independent bookstore in NC, Bookkeeper Anna Susan Kosak was nabbed for embezzling $348,975. Because Ms. Kosak was the only person to handle the company books, she would write — and cash — checks written out to herself without any oversight.
Of course, employee fraud is no laughing matter. And during times of economic uncertainty, employee theft tends to increase — especially for smaller businesses. Here are four safeguards to keep your company safe. The reasons for employee fraud are many and varied, but there are certain safeguards that can help keep your company safe: 1. Double check finances. Even if you have a trusted bookkeeper, it doesn’t hurt to take another look yourself. From bank statements to signed checks, making sure nothing is amiss can help save a lot of anguish down the road. 2. Beef up security. People steal less when they feel as though others are watching. Installing security cameras around cash-heavy areas in the office is a great way to keep employee theft down. 3. Random audits. Enlisting an outside accountant to come in and periodically perform surprise audits of your books will decrease the chance fraudulent employees have to cover up their tracks. 4. Get staffers involved. Often, employees have a good notion when something is going on in the office but keep silent for fear of retaliation. The more comfortable and safe staffers feel about the reporting process, the more likely they’ll be to help out. One option: Create a system (hot line, email program, etc.) where employees can report suspicious activity anonymously.
