Embezzling from the boss: Not so unusual

From the New Mexico Business Weekly
October 11, 2004 print edition
Dennis Domrzalski, NMBW Staff

Melanie Burns wasn't keeping the closest track of her books and credit card account, but she knew when she looked at her credit card bill this past May that she had never ordered two entertainment books, not for herself nor for the small business that she owns.

Figuring it was a mistake, Burns called the credit card company to complain. The company, however, told here the bill was legitimate. Figuring her bookkeeper had ordered them, Burns picked up the telephone and asked the woman who had given her the authority to order entertainment packs. The woman broke down on the phone and sobbed that Burns, owner of Achievement Galleries, would find other problems with the company's books.

The bookkeeper was right. After a few days of going over the books, Burns realized that her trusted employee had embezzled $45,000 from the six-person firm.

Burns was furious and devastated, but she wasn't alone in her anger and disappointment. The crime of employees embezzling money from their employers is epidemic in Albuquerque, local law enforcement officials say. And business people, particularly those who own small businesses, must do a better job of protecting themselves, they add.

"Embezzlement is rampant. For the first half of the year, when you're looking at financial embezzlement, not including property or vehicles, we've had about 100 cases," says Bernalillo County Sheriff's Detective Charles Asbury. "You're probably looking at 600 to 800 from the city."

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Sergeant Kevin Rowe, of the Albuquerque Police Department's White Collar Crime Unit, says his detectives get 300 to 400 police reports a month alleging white collar crimes, 30 percent of which are strict embezzlements. "Most victims are small businesses, and it is a devastating crime," Rowe says.

Nationally, fraud against employers is a huge problem. According to the Association of Fraud Examiners, all types of occupational fraud against U.S. companies caused $660 billion in losses in 2003.

"The typical U.S. organization loses 6 percent of its annual revenues to fraud," says the Association's most recent fraud report.

So, who is embezzling all of that money? People in a position of trust, say local authorities. "The largest percentage of it is perpetrated by people in a position of trust, and accountants make up a large percentage of the perpetrators," Rowe says. "They know the books. The owner is busy doing the marketing and other things, and that trust is abused."

Burns says the bookkeeper was the only person in her corporate promotions, gifts and awards company who had access to the company's computerized books. That person, whose case remains under investigation by law enforcement authorities, had the run of the company's books.

"She was paying her utility bills, having bottled water sent to her house. She made house payments, insurance payments, ordered $100 gift certificates from various places," Burns says.

How did the bookkeeper manage all of that without Burns knowing? Because Burns wasn't paying the kind of close attention to the company's books that she should have been.

Asbury says that businesses can combat fraud and embezzlement by being more aggressive in trying to prosecute accused employees. Many times, though, they don't. They prefer, instead, to fire the dishonest employee. "We have created our problem because most people would rather just terminate them. It is very important that you just don't terminate someone," Asbury says.

"Background check, background check, background check," Burns advises. "Do them. They might cost a couple of hundred bucks, but they can save you $45,000 in the long run."

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