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.

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.

Interview with CrimeAttorneys' Own Pal Lengyel-Leahu, Esq.

One of our senior trial attorneys, Pal Lengyel-Leahu, Esq., was recently interviewed regarding his embezzlement practice. Hit the "play" button below to listen.

For the past fourteen years, Pal has tirelessly defended those accused of crimes whose lives appeared at the lowest ebb. He has received accolades from jurors, adversaries and jurists before whom he practiced his craft, litigation. His approach is to amass all of the facts, both good and bad, research every angle, leave no stone unturned.

MP3 File

Embezzlement Articles in Online Newspaper Cover Prevention, Detection and Other Issues Confronted by Businesses Concerned About or Victimized by Employee Theft

The Summit Daily News has recently run a series of helpful articles on embezzlement (note: you may be required to complete a quick and free registration process to access the articles).

A February 5th article discussed strategies for preventing embezzlement at one's place of business by, among other things, establishing controls that forestall dishonest practices, testing the controls to ensure the absence of loopholes, and setting up a good recordkeeping system (preferably with the help of an experienced accountant) to document losses in the event an employee does embezzle funds.

Another article offered examples of common embezzlement schemes such as (i) check kiting, and (ii) lapping (which involves the temporary withholding of receipts for accounts receivable payments).

A third article tells a fictitious story of embezzlement at a medium size business to illustrate the betrayal felt by executives when a trusted employees steals from the company and the conflict that often confronts management after a theft is discovered in terms of reporting the perpetrator to the police.

There are other articles as well (see the links at the bottom of each article).

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

Stephen Linker of RosenfarbWinters has just published the second article in a 3-part series on embezzlement detection and prevention.

This article focuses on 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. Understanding these three factors can help a company establish procedures and systems that prevent embezzlement and help auditors more easily detect embezzlement when it occurs.

Taking factor #2 as an example, here is a list of conditions cited in the article that would increase the perceived opportunity for fraud:

a. Inadequate segregation of duties

b. Failure to inform employees about company rules and about the consequences of violating them

c. Rapid turnover of employees

d. Constantly operating under crisis conditions

e. Absence of mandatory vacations

f. Failure to uniformly and consistently enforce standards and policies or to punish perpetrators.

See the full article here.

Newsletter Article on Embezzlement Detection and Prevention

The forensic accounting firm of RosenfarbWinters (New Jersey, New York) is publishing a 3-article series on embezzlement prevention and detection by Stephen Linker, a Director of the firm. The first article discusses, among other things, a "lapping" scheme uncovered by the author early in his career. As Linker describes it, a "lapping" scheme is an accounts receivable fraud in which an employee such as a bookkeeper steals customers' payments and tries to cover the misappropriations by crediting payments from one customer's account to another customer account. See the full article here.

Article Explores Embezzlement Trends and Statistics

A well-written article recently appearing in the online version of The Post and Courier of Charleston, South Carolina provides an excellent overview of embezzlement trends and statistics. The article also attempts to explain why embezzlement cases are skyrocketing and offers strategies to deter and catch embezzlers.

The article first notes that embezzlement cases have surged in recent years. For example, in 1994, 38 people were charged with embezzlement in South Carolina. By 2003, that number had climbed to 442. Nationally, embezzlement cases increased by 39 percent between 1990 and 2000, according to U.S. Department of Justice statistics.

According to the article, small businesses and nonprofits are hit the hardest. Almost half of all fraud occurs at organizations with fewer than 100 employees, according to a 2004 report by the Association of Certified Fraud Examiners.

Another interesting statistic: only a very small percentage of embezzlers are hardened criminals. In 20 years of investigating white-collar crime as a forensic accountant at Charleston-based Pratt-Thomas Gumb & Co. P.A., Ron Strickland came across only one individual who intended to steal when he took the job, and that person's theft was paying his restitution in another state.

About half of those who commit fraud earn less than $50,000 a year, and most have worked for the victim organization at least five years, according to the Association of Certified Fraud Examiners. Almost half of them are women.

The article offers these tips from experts to deter embezzlement:

  • Require two signatures on each check.
  • Make sure the employee who writes or deposits checks does not balance the bank statements.
  • Review bank statements, in particular checks issued.
  • Be familiar with the company's suppliers.
  • Require employees to take a one- week vacation every year.
  • Set a good example and stress business ethics.

Here are some red flags identified by experts that could signal embezzlement:

  • Unusual drop in profit
  • Disorganized records
  • Missing documents
  • Duplicate payments
  • An employee rewriting records for the sake of "neatness"
  • An employee refusing to take vacations and working excessive overtime
  • An employee refusing a promotion

Read the full article here (note: registration may be required).

Tips For Preventing and Catching Embezzlement of Church Funds

Guidelines from the General Council on Finance and Adminstration for the United Methodist Church has published a list of tips to prevent and catch embezzlement of church funds; see here.

The guidelines note that embezzlement is frequently carried out on a small scale by trusted employees, and churches can be vulnerable because of the high level of trust of all persons. Embezzlers often take advantage of inadequate internal controls in a church organization’s accounting system.

Embezzlement Warning Signs

How can you tell if someone is embezzling funds at your company? Findlaw offers this list of embezzlement warning signs.

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