Embezzling Warning: Here’s How Your Workplace May Be At Risk (Post E1)

July 13, 2017  •   embezzlement, Embezzlement and Internal Fraud  •   0 comment

Even as you read this, an embezzling or other internal fraudster may be ripping off your organization. I mean right this minute! But how would you know? That is the question, is it not?

If you believe your operation is not at risk to embezzling, be forewarned these crimes are happening to every kind of organization imaginable! Just read the second paragraph of my June 28th post (Embezzlement: A Multi-Trillion Dollar Crime) and see if your organization’s category is listed . . . if it is not, simply add it to your list; most likely it was accidentally omitted.

As promised in my June 28th post, I am going to pass along much of what I have learned over the years about how embezzling and internal fraud happens and ways that management can prevent or detect these crimes. As for my expertise within this area, please check-out my bio (About The Author) on this website.

Now, let’s get started

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Before we begin, I wish to bring to your attention two points: First, the words embezzling, embezzlement and internal fraud are used interchangeably throughout. Second, I also like to use real-life examples to make my points and show how a simple strategy could have prevented these crimes.

Actual Embezzling Case Histories

The below cases perfectly illustrate the diversity of the embezzlers and victimized organizations:

• A member of the clergy, who prosecutors estimated stole over $1 million during a three-year period from his two rural churches, sentenced to thirteen years in prison.
• A CEO sentenced to fifty-four months in prison for the theft of $2.5 million from a credit union. The sentencing judge placed blame on the defendant for causing the credit union’s demise.
• A state government employee accused of embezzling $11 million of taxpayer money entered a guilty plea to racketeering. The judge sentenced her to twenty-four years in prison and ordered her to pay $10.9 million in restitution.
• A physicians’ group’s billing clerk pled guilty to embezzling $1.174 million from that office over a period of four years. She was sentenced to thirty months in prison, five years’ supervised release, and ordered to repay the $1.174 million in restitution.
• A construction company’s accountant convicted of embezzling $9 million sentenced to four years in prison.
• A director of finance for an educational materials company pled guilty in federal court to charges that he stole nearly $14 million from his former employer and more than $600,000 from the church where he served as a trustee and treasurer. After being sentenced to fifteen years in prison, this perpetrator was ordered to fully repay both entities.

Tip of the Iceberg

Considering just the above six embezzlement cases, is it any wonder that so many honest and reputable public and private organizations are being victimized nationwide? Isn’t it probable that we —the public— are seeing only the tip of the iceberg? As case example after case example throughout this blog series will show, virtually no organization is out of harm’s way when it comes to embezzlement.

Embezzling: Impossible to Measure- but Enormous

Given that embezzlement is prevalent and ongoing – almost certainly happening in hundreds, if not thousands, of businesses throughout the United States every year, the number of people seriously affected or ruined has to be gigantic. Google” the word embezzlement on the Internet and you will likely find over 18 million hits on that word; next, try “bookkeeper arrested embezzlement” and do not be surprised to find more than 130,000 hits on this position alone.
Unreported Offenses: We cannot ignore the fact that a substantial number of embezzlement offenses actually go undetected, and of those schemes discovered, many go unreported because business owners do not want bad publicity, feel sorry for the fraudster, or reach a restitution agreement. In other instances, the operation’s executive declines to pursue criminal prosecution because he/she is aware of the large amount of time required in court while knowing that percentage-wise, only a small number of these thieves actually receive a substantial prison sentence.

Cost of Embezzling and Internal Fraud

The precise costs directly associated with business crime are impossible to measure. However, one very creditable survey (ACFE.com) estimates that U.S. businesses and other organizations lose in the neighborhood of five (5%) percent of revenues annually to embezzlement and internal fraud. On a global scale, this translates to losses of approximately $3.7 TRILLION DOLLARS a year.

What Went Wrong?

Whether the actual dollars lost to embezzlement and internal fraud are in the low or high billions, it is inexcusable to find in case study after case study that virtually all of the schemes exposed in a wide-range of businesses were preventable. It is equally troublesome to discover that just a few financial control breakdowns and management failures allowed the majority of those criminal exploits to continue for several years beyond the fraudster’s initial unlawful act.

Complex Question – Simple Answer

How can such costly illegal acts of embezzlement continue to grow and thrive in our high-tech world of crime fighting today? The answer to this question is really quite simple! I shall address this critical issue in my next post.

Spread the Word About Embezzling

If you haven’t already done so, please forward my blog site (https://jacklhayes.com/blog/) to your business friends and associates. In addition, I particularly encourage any college student taking courses in business management, accounting and/or entrepreneurial studies to also join-in. This is a lesson that must not be ignored.