Embezzlement a common crime that hurts businesses, nonprofits, governments alike

January 5, 2018 9:53:21 AM

Isabelle Altman - [email protected]


A former administrative assistant with the City of Starkville Parks and Recreation department stands accused of embezzlement after authorities say she stole $2,000 from the city while she worked there.


But embezzlement is much more rampant than one administrative assistant in Starkville, District Attorney Scott Colom said. He estimates embezzlement - which he defines as someone who legally possesses funds or assets misappropriating them - is one of the more common property crimes, more frequent than grand larceny and up there with passing bad checks.


Last year, law enforcement in Lowndes County made about one embezzlement arrest per month, including a Columbus Municipal School District employee accused of stealing $45,000 when she worked at Belk and an employee of another company who used a company card to buy gas for his vehicle.



And how the crime is committed varies.


"It ranges from people at Belk letting their friends get merchandise for less than its sale value or even for free to people who are straight stealing cash from the cash deposit at a business," Colom said.


Starkville authorities haven't released much information on the details of Evans' alleged theft, but she was placed on unpaid administrative leave two weeks before her arrest, and she resigned not long after. Herman Peters, head of her department, was fired at a subsequent board of aldermen meeting. Starkville Mayor Lynn Spruill said Evans had worked for the city for at least five years.



Cases large and small


Jeff Read, managing partner at the accounting firm T.E. Lott's Starkville office, has conducted audits at businesses and nonprofits where employers have contacted his firm asking it to look into missing funds.


"Generally what happens is people will steal a little bit and they get away with it, and then they'll steal a little bit more," Read said. "And then they say, 'Oh, I can get away with more.' So it continues to grow, and eventually it gets so big that it's hard not to see. It gets much harder to cover up."


Sometimes it will be up to 10 years before the embezzlers are ever caught, he said.


The most prominent example Read ever heard of involved a comptroller in Illinois who in 2012 pleaded guilty to stealing more than $50 million from the town where she worked -- in what the Federal Bureau of Investigation said at the time was the biggest embezzlement case in U.S. history.


"(By the time she was caught she) had a second home, had a fleet of cars and a standard of living that was way beyond what she was possibly earning in her job," Read said.


Like in Starkville, that incident involved tax dollars being taken from a municipality. But nonprofits as well as large and small businesses can also be victims of employee fraud.


Closer to home, on audits Read or his co-workers have worked on, he knows of administrative assistants who wrote extra checks for themselves knowing their supervisors wouldn't look closely. He even once worked on an audit for an area church which had thrown a large fundraiser and members were confused about why they hadn't raised more money. When Read's company looked into it, they found someone working on the fundraiser had taken some of the money.


Nonprofits like that are particularly vulnerable, he said, especially if there is only one person working to look after the finances.


"You would think people who were working for them had a giver's heart or a server's heart or whatever," Read said. "But what I have found is that some people, if they get a financial burden, will do most anything. Especially if they have an environment that's not well-controlled and they have an opportunity to do it."



An under-reported crime


At bigger companies, where owners don't know all the employees, payroll administrators sometimes create "ghost employees" whose "paychecks" are deposited in a bank account every payroll. Other times, cashiers will take from the cash register by voiding transactions or entering returns into the cash register's system, keeping track of how much they're taking by stacking pennies in the wrong change slots.


"So if they voided a sale for five dollars, they'll put five pennies over in that slot," Read said. "So at the end of the day, they'll pull out the $5 and everything should balance out because they have shorted the register take by $5, so they took the cash."


Small businesses are particularly vulnerable, Read and Colom said, because they often don't have the resources to have regular audits and usually only have one or two people in charge of finances. Sometimes those employees have worked for the business for years, and the owner trusts them.


Which is why, Colom said, he thinks many business owners don't report embezzlement to law enforcement - they're hurt or embarrassed that someone they trusted stole from them.


"As much as it is a violation of stealing money, it's also a violation of trust," Colom said. "There's a need for trust in the business world, and embezzlement can really violate that trust."


He knows of several cases in which a small amount of money was taken and the victims chose not to press charges.


Read agreed embezzlement is likely an underreported crime.


"A lot of times, (the victim says), 'If you'll pay me and get out of here, I won't turn you in,'" he said. "... They just want it to go away. They want the money back."



Embezzlement prevention


For bigger companies, Colom said, there are internal checks designed to catch employees who try to steal. The smaller "Mom and Pop" businesses, as Read termed them, have more difficulty.


"Local businesses, small businesses, have less resources to hire quality control officers and to have regular audits," Colom said.


He recommended business owners do whatever they can to make sure an outside company or accountant does an audit every year. Both he and Read said employers sometimes catch employees by viewing security camera footage.


Read added it's critical that business owners stay abreast of the business' finances. Employees who know the owner is looking over the financials regularly will know they can get caught.


"It's key for the owner to be involved," he said. "Even if they're not there every day, they need to be looking like at the bank statements and reviewing the checks that are clearing the bank. ... (He needs to) see are those his employees, are those the vendors that he normally uses?


"And the other is just looking at your monthly financial information and just seeing what your sales and your expenses are doing," he added. "Most owners have a feel for what the business ought to be doing."