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How to Stop
an Embezzler

A convicted embezzler tells Laurie Owen how he stole from his employers … and how to stop people like him.

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IT WAS SO QUIET you could hear a pin drop in the normally chatty group of jewelers. The presenter spoke quietly, even a bit nervously. His message, however, had everyone in the room mesmerized.

The topic was employee theft, the venue a FIT performance group, and the speaker a convicted embezzler. Although his former employer was not a jeweler, the circumstances of his actions hit close to everyone.

Our speaker shared with the group how he managed to steal $500,000 over the decade he worked for a family-owned food-supply company before he was caught and ultimately sent to prison.

He started as an hourly employee doing odd jobs, then graduated to warehouse worker, and eventually worked his way up to general manager.

During the time he was employed, the company grew from a $5 million to $15 million company. He worked hard, and as the owners trust in him grew, so did his responsibilities.

His stealing started small, with a few supplies out of the warehouse. As he rose up the management ladder, his opportunities and boldness grew. He graduated to creating fake invoices, which in turn, were paid by real company checks.

He was caught by chance, when one of the owners happened to review the accounts payable. One of his fake invoices happened to be on top of the pile. The owner did not recognize the vendor, and curiosity compelled him to learn more. Things started to unravel quickly, and eventually the magnitude of the embezzlement came to light. A conviction resulted in a sentence of four years. The embezzler says he is now a reformed man.

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His key points to the group to prevent a similar occurrence in their businesses:

  • Trust no one; verify and cross check everything.
  • Don’t give any one person too much responsibility.
  • Treat your employees fairly — pay people what they are worth.
  • Stay involved in the business and with your employees.
  • Don’t let anyone else sign checks for you. Don’t use signature stamps.
  • Reduce the number of vendors you deal with to reduce the chance of confusion and abuse.
  • Set a good example. If employees see you taking things (supplies, etc) out of the company, they’ll think it’s OK for them as well.
  • In addition to criminal background checks on prospective employees, do credit checks. Get them to sign over permission to do so on their employment application.
  • Institute a proper division of business functions between preparing checks, receiving payment, making bank deposits, signing checks, opening mail, and bank reconciliation.
  • Have a good, computerized bookkeeping system and competent bookkeeper and outside CPA, who conducts periodic security audits.
  • Know your costs and the benchmarks for your industry so you can spot things that are out of alignment.
  • Educate all employees on the negative impact of theft. Solicit their support of and involvement in the prevention and detection of theft.
  • Don’t give employee advances. Get rid of employees who need them. If they are that close to the edge financially, chances are they will be tempted to steal.
  • If you are a victim of embezzlement, by all means prosecute. But spend your resources on a good credit attorney who will be your best chance of finding where the money went — so you have a chance of getting it back.

Laurie Owen was INSTORE's financial columnist during the first decade of the publication's history.

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