In reading a magazine article today, I caught myself in a common subconscious habit. While I read the story, along with its facts and casts of characters, my mind simultaneously inserts the facts and names from my own past cases.
While not unusual for the way the wheels in my head turn, it did make me realize that there is still (and really always will be) a need for continuing education in basic fraud, internal control and risk management for ALL size organizations and entities, because, in reality, there are only two categories of people to whom this really is common knowledge—forensic accountants and those who have already been involved in an embezzlement (whether perpetrator or victim).
With that said, I offer the following boiler-plate template for all future embezzlement press releases in order to illustrate how each story—as well as preventative basic fraud prevention techniques and tools—apply to all organizations…or, heaven forbid, to save you time after it happens to you or someone you know:
“It is a story that repeats over and over in businesses around the world. A trusted [employee], over the course of  years, finds a crafty way to “redirect” [company] funds to a personal bank account. By the time the fraud is discovered, losses have climbed into the [hundreds of] thousands of dollars.
Such was the case with [John Smith], of [ABC Corporation], who was recently sentenced to [5 years] for a scheme [he] perpetrated against the company where [he] worked.
According to the county District Attorney, [John Smith] was also sentenced to make restitution in the amount of [$100,000] an estimate of the amount [he] stole between  and . [His] sentence was handed down earlier this month after entering a plea of guilty to  counts of fraud.
As detailed in court records, [he] used the following strategy in [his] embezzlement scheme:
[He] created false and fraudulent [charges] in the company’s [financial] records that appeared to indicate that the money was owed to [the government].
[He] prepared [check] requests for the false [invoices] [he] had created.
[He] fraudulently altered [the payee] before the [check] was actually [cashed], so that [his] own name would appear on the [check] as the [recipient].
The scheme [he] perpetrated (and the length of time it persisted) indicates that [he] must have been given plenty of latitude in accounting responsibilities. As is the case at many small businesses, one can assume there was not a proper level of segregation of duties. In short, [he] was given too much trust in [his] position as [office manager], and there were not adequate controls over [his] responsibilities and access to [financial records and assets].
[His] employer must have had no idea there was a fraudster in their midst. Except that they probably should have had some idea, because a quick Google search on the suspect found some very interesting information—something any employer would want to know about either a prospective or current employee.”
In order to prevent the next boilerplate press release from happening:
- Conduct background checks.
- Develop a written code of ethics.
- Divide bookkeeping and check-signing authority. (a/k/a “If you touch the money, you can’t touch the records”)
- Deliver bank statements unopened to top management.
- Implement a reporting mechanism or hotline.
After all, it’s better to read about embezzlement cases in the news instead of having to write the press release.
Author: Richard C. Gordon, CPA/ABV/CFF, CFE, CGMA, Director of Forensic and Valuation Services