Succumbing to Temptation in Church

July 23, 2015  •   Uncategorized  •   1 comment

Having received a number of most positive comments regarding my posts related to business fraud and embezzlement, I shall continue to address these most important issues by again providing a number of factual anecdotes showing how business crime continues to damage all types of organizations and businesses.

Organizations I’m aware of that have been victimized recently by internal fraudsters include banks; real-estate businesses; religious and nonprofit groups; automotive and truck manufacturers; wholesale and retail operations; scouting organizations; kids’ sports leagues; law and accounting offices; beauty salons; childcare facilities; government and law-enforcement agencies; schools and universities; and medical, dental, and healthcare facilities. Have I failed to mention organizations such as your own? If so, just add it to my list as these crimes are happening to every kind of organization across the country! Here’s one example to help show you that no organization or business is immune:

Florida — The U.S. Attorney’s Office reported that on Thursday, July 2, 2015, a trusted church member who also served as business manager, entered a guilty plea to one count of wire fraud for the embezzlement of more than $82,000 from her church. As part of her plea deal this individual agreed to repay $82,838 to the church. While facing a maximum of 20 years in federal prison once her sentencing date arrives this September, her living up to the restitution agreement will likely go a long way in helping to significantly shorten the amount of actual time she will have to serve. You might say, “the devil is in the detail”. Here’s a brief background:

This perpetrator was initially employed as financial secretary for this church in 2007 and was later promoted to business manager. According to court documents, during her seven years of employment, this trusted church member executed a variety of fraudulent acts which included: (1.) payroll manipulation by writing herself 225 duplicate checks. (2.) In April 2013, she enrolled herself and her family in the church’s health insurance plan, which required employees to pay 25 percent of the premium for themselves and 100 percent for their family’s coverage. But this employee didn’t deduct the payments from her paychecks. The loss to the church for this was more than $7,600, according to her plea agreement. (3.) In another dishonest act, she enrolled herself in the church’s employee short-term disability insurance plan, for which employees were responsible for 100 percent of the premiums. Serving as the administrator of this and other insurance plans, she also failed to deduct those premiums from her paychecks, costing the church more than $1,400. (4.) In August 2013, this individual enrolled her son in the church’s daycare program. Although she paid the daycare director using her personal checks, once those checks were turned over to her for deposit into the bank, she removed her checks before making the deposit. This cost the church nearly $3,000. (5.) She also enrolled her family in a healthcare policy without personally paying.

According to an Assistant U.S. Attorney, (6.) this perpetrator did even more damage to the church by manipulating its financial records to make it look like the church was current on paying its federal payroll taxes for its employees. (Since she did not keep that money, this action was not considered part of her criminal wire fraud.)

Over the seven-year period that this embezzlement scheme went unnoticed, these fraudulent acts were only accidentally discovered last year when a $58,000 check for the church’s roof repair was returned for insufficient funds. At that point, the church discovered it had $200,000 less in the account than bookkeeping records showed. One other damaging blow took place when it was also discovered that the church had a $2 million tax liability for unpaid payroll taxes. The church is now negotiating with the IRS, claiming that this shortfall occurred because of misdeeds by the business manager; not the church.

What went wrong? How could such a scheme continue for seven years without drawing some type of suspicion to other employees, church leadership, or auditors? Think about this! Ask yourself what actions would you have taken to prevent or quickly discover this crime.

Even as you read this post, an embezzler 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?

In my next post, we shall take a look at a few simple steps that could have been taken to minimize, if not eliminate, embezzlement schemes such as this. Please join me.