The secret embezzler

I have a particular dislike for bookkeepers and accountants who commit fraud and embezzle from their employers. The act is vile and the person committing the fraud betrays their employer’s and co-workers’ trust willingly and continually over period of time through lies and deception.

The postcard appearing with this essay was published this past Sunday on the website postsecret.com. Post Secret publishes secrets from people who anonymously share their secrets by sending them on a postcard to the home of Frank Warren in Germantown, Maryland. The postcards published are usually thought provoking. At least during my Sunday morning browsing this postcard caught my attention and provoked my thoughts.

Stealing $193,542.12 without getting caught may seem like an exceptional feat and 23 years is a long time to steal without getting caught, but annually the average amount stolen each year by this person was less than $8,500. I don’t mean to imply the amount stolen isn’t significant but it a person isn’t going to make headlines at this rate. The amount stolen needs to be more dramatic – $193,542 in one year would be dramatic. Besides, undetected theft isn’t a criteria for judging an accountant’s ability and worth to a business. It’s more a criteria for judging a company’s accounting system and working environment.

An honest person generally doesn’t understand the motivation and the psychological makeup of a thief. For them, integrity has been ingrained as one of the highest values a person needs for a good life. However, studies have shown that in the right circumstances, good people will steal.

The most common model to explain why people commit fraud is referred to as the fraud triangle. This model states that for a fraud to occur there must exist situational pressure, an opportunity to steal and conceal the misappropriation of property, and the person committing the fraud can find a way to rationalize their bad behavior.

Situational pressure, or in CSI lingo, the perp’s circumstances, may vary. Gambling losses, drug addiction, and bad financial decisions are a few examples. Rationalization can be as simple as the thief having a feeling of entitlement. However, the opportunity to commit and conceal fraudulent behavior can depend on a business owner’s or manager’s diligence and effort designing accounting and information systems to prevent employee fraud.

Our embezzler for today’s discussion states their responsibility was in accounting. It makes one wonder how many businesses are employing a bookkeeper or an accountant in a position of responsibility and trust who is stealing from the business and successfully concealing their theft? Generally the smaller the business the higher the odds that a dishonest employee will find an opportunity to steal from their employer and conceal the theft. The primary reason for the small business’ higher risk is that all duties of the bookkeeping function is in the hands of a single bookkeeper and therefore the opportunity to conceal their theft is easier. There is little or no oversight of the bookkeepers work. But large businesses have been victims of fraud too. Accountability and internal accounting controls are needed to protect a company’s assets in businesses of every size.

So what should a business owner or manager look for to reduce the risk for employee fraud? Based on characteristics of fraudsters in past cases, you might want to look for the following attributes in people performing you bookkeeping and accounting functions:
The person is likeable.
The person is empathic.
The person is dedicated and doesn’t ever miss work or take days off.
The person is family oriented.
The person is a church goer.
The person passed a background check before you hired them.
The person dresses well.

I think you can get catch my drift. If you have an employee you trust, especially one who opens the mail or receives customer payments, prepares the bank deposit, enters the receipt in the customer’s account, then takes the deposit to the bank, prepares checks for payment to vendors, and in some businesses, the employee is given signature authority on bank accounts, you could have an embezzler working for you. The key word here is trust. Trusted employees have the greatest opportunity to steal and conceal from a business.

If you are beginning to wonder if your business assets could be exposed, you might begin focusing more attention to what happens on the inside of your business. There are certain “tells” that you might look for. Common behaviors of past embezzlers have included employees who live beyond their means or are in financial difficulties or have family issues such as a divorce proceeding or family members with substance abuse problems. An employee who is stingy when sharing information you requested or never wants to take a vacation might indicate they are concealing their misdeeds.

Every business owner or manager responsible for the finance function of a business needs to always be aware of what is happening in their bookkeeping or accounting departments. Sometimes a few simple actions can make a big difference. If you are not doing these activities already, you might consider the taking the time to:
• Sign each check and examine the related invoices and statements that support the payment;
• Review all monthly bank reconciliations and look at large amounts and outstanding checks and deposits;
• Require your bookkeeping to always be current and up to date so you may timely scan the company’s check register, monthly bank statements, and monthly general ledger; and
• Read each line of your monthly financial statements and compare against previous years balances. What trends are you seeing?

There are hundreds of ways people can steal from your company. Embezzlement and fraud by trusted employees is just one of a hundred ways. It is unfortunate that the number of dishonest people in this world are many and given the opportunity and the right circumstances, you or your business could be a victim. Your best defense against fraud and other types of theft is to be proactive in your efforts to prevent theft, listen to the chatter in the office from your most trusted employees to stay up with their life situations, and have a conversation with your outside accountant.

My profile of the author of the postcard that started this conversation? He or she is an average accountant (but poor speller) at best whose success at concealing the theft gave them a feeling they were better than average by use of self-deception. The tone of their declaration claiming their deception demonstrates skill is egotistical and absent of any remorse. He or she is a valueless, unimportant person whose funeral will be attended by a few distant friends and family, one of which will be the boss who never knew the deceased betrayed their trust.

What a sorry way to go through life.