Maureen Dwyer at Pepper Hamilton Discusses Employee Theft in New Podcast

In a recent podcast published by the law firm of Pepper Hamilton, Maureen Dwyer, an attorney in the firm's Philadelphia office, and member of the firm’s Litigation and Dispute Resolution Department, was interviewed concerning the issue of employee theft. In the 9-minute interview, Dwyer provides recommendations for how companies should handle employee theft. Among other things, Dwyer advises that, when addressing embezzlement, a company needs to be careful not to overstep its bounds and expose itself to liability. Dwyer also covers warning signs of embezzlement, how to conduct an investigation into employee theft once discovered (e.g., conduct an internal investigation or call in external resources; preserving evidence, etc.), when to notify the company's insurance company and the police, and alternative corrective actions. 

Forensic Accounting Firm Rosenfarb Winters Publishes Condensed Version of its Popular 3-Part Series on Embezzlement Detection and Prevention

The forensic accounting firm of Rosenfarb Winters LLC has recently published a condensed version of its popular 3-part series on embezzlement detection and prevention by partner Stephen Linker.

After defining embezzlement, the newly published article discusses the three key factors that determine whether a person will commit fraud. 

The three factors, which comprise the so-called “fraud triangle,” are:

1. perceived pressure facing the person
2. perceived opportunity to commit fraud, and
3. the person’s rationalization, or integrity

The article also reviews characteristics of embezzlers, different types of embezzlement schemes, and the importance of internal controls.

Read the full article here.

Maryland Woman Awaiting Sentencing After Pleading Guilty to Embezzling $250,000

As one of its top stories for 2007, the Carroll County Times, a Maryland newspaper, cited the case of Karen Ann Malinowski, a Maryland woman who is awaiting sentencing after pleading guilty in July to embezzling nearly $250,000 from an elderly resident, Lois Hundertmark, to whom she was providing care.

Malinowski was the third person in Carollo County to be charged with embezzlement in the last two years. Malinowski had been stealing from Hundertmark for more than four years, even after Hundertmark died in 2006. Hundertmark's son alerted authorities to the theft after he noticed the loss of funds.

See the full story here.

Chicago Man Accused of Embezzling $3 Million from American Airlines

The FBI announced earlier this month that Gary M. Aumann, a manager for American Airlines at O'Hare International Airport, was charged with embezzling more than $3 million from the airline to fund a lavish lifestyle that included the purchase of numerous vehicles, riverfront property in Missouri, a 35-foot yacht, and monthly payments to a dancer.

The scheme involved the diversion by Aumann of more than $3 million in "business" toward companies owned by co-defendant Donald Down even though Down's companies, A & D Supplies and Addison Business Supplies, did no work for American. The two simply split the proceeds, according to the charges.

See the full story here.

As Financial Scandals Proliferate, More Colleges Offer Forensic Accounting Courses

The prevalence of massive corporate financial scandals and white-collar crimes such as embezzlement in recent years has increased demand for forensic accountants. Colleges are meeting the demand by starting up courses of study that provide students with a degree or certificate in forensic accounting.

One such institution is Middlesex County College in New Jersey, which began offering a certificate program in forensic accounting this fall.  Richard Ellison, chair of the Department of Accounting and Legal Studies at the county college, described forensic accounting as part accounting and part "detective work" that requires a combination of auditing and investigative skills.

Middlesex's program is patterned on the Forensic Accounting and Fraud Investigation program offered at West Virginia University. WVU's program is among the most highly regarded in the nation.

Utica College in central New York offers a program in Economic Crime Investigation.

Maine Official To Spend 15 Months in Prison for Embezzlement

A 65-year-old former town official in Maine who embezzled more than $46,000 from the town over 10 years will be spending 15 months behind bars after pleading guilty on Friday.

See full story here.

Massachusetts Woman Sentenced for Embezzling Over $1 Million

The District Attorney for the District of Massachusetts announed in late October that Grace Oliver, of Acushnet, Massachusetts, was sentenced to 46 months incarceration on charges of possessing forged securities of a corporation engaged in interstate commerce.

Oliver had earlier pled guilty, on August 6, 2007, to embezzling funds from her employer, Superior Drywall in Westport, where she served as a bookkeeper from January 2004 to December 2006.  Oliver forged 447 company checks payable to herself, as well as her credit card companies, mortgage holders, and others to whom she owed money. Oliver secretly prepared the checks and forged the signature of the company’s principal owner. Oliver deposited some of the checks into her personal bank accounts, others she used to transfer money to her friends and associates. Oliver covered up her scheme entering false payee information into the company’s accounting software, to make it look as if the checks were legitimate. Over the course of the scheme, Oliver embezzled a total of over $1.1 million.

See the full release

Reformed Former White Collar Criminal Offers Excellent Insights Into Preventing Fraud

Auditors, controllers and other financial staff at organizations looking to prevent and detect embezzlement and other fraud would do well to read material appearing on websites and blogs published by reformed white collar criminals. These folks often successfully evaded detection for many years until they were caught, and therefore are "experts" in helping other entities avoid being victimized.

One excellent example is the website and blog of Sam Antar. Antar is the former CFO of defunct electronics retailer Crazy Eddie who helped mastermind one of the largest securities frauds of its time.  A reformed former fraudster (as he calls himself), Antar now writes prolifically on the subject of financial controls and fraud detection. He is a major proponent of Sarbanes-Oxley, and publicly opposes efforts to scale it back.

Antar argues that to effectively combat white collar crime we require:

• Prevention - Strong internal controls reviewed by competent and independent external auditors. Strong internal controls are barriers to crime for criminals. Internal controls help businesses operate more efficiently and effectively too.
• Power - Legislation like Sarbanes Oxley and standards issued by the Public Company Accounting Oversight Board (PCAOB) and the American Institute of Certified Public Accountants (AICPA).
• Professionalism - A better educated, skilled, trained, experienced and independent accounting profession. All efforts at prevention, any legislation, and any standards issued will not be fully effective unless the accounting profession addresses its educational issues.
• Prosecution - Aggressive prosecution of white collar criminals. Such criminals must know that they will be prosecuted for their actions.
• Prison - Strong punishment and accountability for those convicted of white collar crimes. Such criminals must be held fully accountable for their actions.

Final Article in 3-Part Newsletter Series on Embezzlement Prevention and Detection

The final article in the 3-part series by Stephen Linker of the New Jersey-based forensic accounting firm of RosenfarbWinters focuses on methods of detecting whether embezzlement is occurring or has occurred.

The article identifies three steps central to the detection process (which may differ based on factors such as the type of business):

• Identify embezzlement exposures
• Look for symptoms of embezzlement in the exposure areas
• Consider pressures and motivations to commit embezzlement (this last step might be combined with one of the other two steps).

The article goes on to explore each of the above steps in further detail.

Finally, the article discusses the importance of effective "internal controls," which it considers perhaps the most important deterrent to embezzlement.

Read the full article here.

Union Officials Indicted on Federal Embezzlement Charges

The U.S. Attorney for the District of Minnesota recently announced that three former union officials were indicted by a federal grand jury on embezzlement charges. The three had used their financial positions at the union to embezzle union funds for personal use.

See the full release here.