Print |
E-mail to a friend
SPECIAL REPORTS
Number of embezzlement cases increasing
HUNTINGTON -- The most trusted employee could be the greatest threat to the company coffers, according to experts faced with an increasing number of embezzlement cases nationwide.
Giving into the temptation recently meant prison time for three local businesswomen -- an accountant, a bank teller and the branch manager of a credit union.
Fifteen years ago it almost cost Dr. Donald P. Lewis his practice. His office manag
| Click here for a look at embezzlement by the numbers. |
er used a sophisticated scheme to take more than $100,000 from the Cleveland-area oral surgeon.
"She was like my best friend," he said. "I was devastated. All of a sudden I became a victim. Disbelief. Anger. Disorientation. I just couldn't believe it."
The temptation has touched local business and government. Nine people -- eight women and one man -- have used various schemes to fleece at least $2.2 million over the past decade. The most recent case involved $704,606 missing from the Guyan Conservation District. The district's former administrative officer is charged in that case.
Experts say it's just a snapshot of an increasing problem facing employers across the nation, where embezzlement arrests are up 70 percent since 1990.
The crime can happen anywhere workers handle money -- gasoline stations, doctor offices and government agencies. A parent-teacher organization even fell victim in Putnam County.
Experts say embezzlement can start with greed or financial need, but it's often allowed by too much trust and a lack of oversight by the employer. The recipe often results in punishment for the suspect and a sense of betrayal for the boss.
A defense attorney for convicted embezzler Lesa Fuller shared a similar story in April. He described his client as a single mother who made a terrible mistake. It ended with her taking $137,100 from City National Bank in Huntington. She pleaded guilty. She will spend one year and nine months in federal prison.
"She was trying to make ends meet, and she made a bad decision and got caught in a bad situation," said the attorney, John Proctor. "There is no evidence that she set out on some big, sophisticated scheme to rob the bank."
Fuller apologized and asked to avoid prison, saying it would negatively impact her two children.
"I wish I could take it back," she said at sentencing. "I feel so guilty."
U.S. District Judge Robert C. Chambers denied her request, while contrasting her case to that a young mother involved with drugs. He said drugs cause the suspect to be a victim of their own conduct, while Fuller's case victimized the bank and its customers.
The National White Collar Crime Center estimates employee theft can costs $20 to $90 billion annually.
It almost forced Lewis out of business. He recalled scratching his head and considering a loan to cover payroll.
Now, the surgeon treats patients and provides advice for fellow businessmen. He used his misfortune to author two books -- "Employee Embezzlement and Fraud in the Dental Office: Scams, Schemes and Broken Dreams," and "Your Roadmap to Financial Integrity in the Dental Practice: A Teamwork Approach to Fraud Protection and Security."
Typical profile
Lewis said the employee "you trust the most will steal the most."
That could be troubling for businessmen and women, but authorities say it's absolutely true. Most suspects do not have a criminal record, and the position they hold is earned through trust.
"The profile is your best friend," Lewis said. "I hate to say it that way, but these people do not wear a black hat and have a five o'clock shadow."
U.S. Attorney Charles T. Miller said most organizations deal with money, but few employees are trusted with first-hand access to their employer's cash. For example, local cases involved four managers, an agency's administrative officer, a PTO president, a county school treasurer, a personal banker and an accountant.
Financial hardship often pushes someone over the edge. Authorities say most embezzlement rookies see taking money as a short-term loan. They need it for rent, bills, unexpected medical expenses or other items. Sometimes it could be a drug addiction.
"They get braver as it goes along," said Cabell County Sheriff's Detective Mike Rappold.
The complexity of the scheme also demands the embezzler continue his or her activity.
Lewis said offenders may rarely take a sick day, skip vacations and arrive early and leave late from work -- all qualities that might be found in a dedicated employee. He believes his office manager's scheme started with $35.
The lack of a criminal background can lead to quick success in obtaining confessions.
For example, Miller recalled the confession of a bank president's secretary. He said an FBI agent visited the office and asked for the president. His simple visit prompted the woman immediately confess, even though investigators were not aware of her case. The agent was visiting the office concerning another matter.
Authorities said most embezzlers start with a full intent on repaying the short-term loan, but Huntington Police Cpl. Phil Watkins said they lose sight of the scheme.
"They're dumbfounded," he said. "When you confront them with an exact dollar loss, there is almost a surprise. There's almost a shock factor there. You catch them off guard when they realize how much they've actually stolen."
The national trend shows a continued increase in embezzlement arrests, especially among women. There was a 60 percent jump in female arrests between 1991 and 2005, according to the National White Collar Crime Center's posting of FBI data.
Women also are suspects in many of the area's recent cases. Authorities said any disparity could be linked to an increased number of women filling trusted, money-handling positions.
James P. Meade and John Kane, both of the National White Collar Crime Center, said an increase in the number of women suspects could be directly linked to an increase in the number of women in the workplace.
"Embezzlement occurs in all levels of an organization in which there is an opportunity to breach financial trust and such activity is not limited to executive positions," Kane said. "Some research suggests that women in employment with a 'glass ceiling' might commit white collar crimes to compensate for their disadvantaged opportunities."
Problems with oversight
A lack of immediate oversight is a consistent thread in the area's embezzlement cases, according to authorities.
Limited oversight fueled opportunity for Susan Kelly, a branch manager at the Star USA Federal Credit Union. She admitted to taking $81,672. Miller said she added money to customer withdraws -- giving the customer their request and pocketing the rest.
It was a similar story for the West Teays Elementary Parent-Teacher Organization. Dawn R. Compton served as president of the elementary school's PTO, which is located in Hurricane. She simply wrote checks out of the account to embezzle $10,338. She pleaded guilty and awaits sentencing, said Larry Frye, assistant prosecutor in Putnam County.
Compton's scheme was not complex, but Frye said sophistication is not needed when a person has no oversight.
"If there is nobody looking over your shoulder to see how the money is being spent, then you don't have an elaborate scheme," he said.
Lewis and Miller said a lack of oversight is common at doctor offices and other businesses. For example, they said physicians will hand over bookkeeping duties to another person. This allows the doctor to focus on treating patients, but creates a scenario ripe for embezzlement.
"We see this repeatedly -- a person who is placed in a position of trust gets greedy," Miller said. "It's unfortunate."
Miller pointed to Diann Richmond's case as an example. She was an outside accountant who handled payroll, bills and reconciling the bank account for the former Huntington Emergency Physicians Group. She pleaded guilty and admits to stealing $1.17 million over four years by writing checks to a fictitious company.
Some of the tightest regulations can be found at a bank, but Fuller proved it is possible to devise a scheme to embezzle $137,100.
Fuller was a personal banker at City National Bank. The position carries less supervision than that of a regular teller, who is subjected to daily audits and surprise checks every quarter. Fuller took advantage of that trust, according to a bank official who testified in court.
FBI Special Agent Joseph Ciccarelli and Miller said Fuller created fictitious cashier checks to withdraw money from customer accounts. She replaced the funds by taking a larger amount of money from another customer's account. She pocketed the difference.
The scheme worked until Fuller took maternity leave. Miller compared it to a house of cards that eventually collapsed.
Fuller parked her outages in an elderly woman's certificate of deposit and changed that account's address to conceal the transactions. She also took money from her mother's IRA.
'Don't bury your head'
Lewis learned his lesson. Now he shares his story to most anyone who will listen. So far, he said his efforts have helped business uncover $7 million in losses.
Lewis said many employers are too naive and not cynical enough to think someone could steal from them.
"(Those in the medical profession) are terrible businessmen," he said. "I thought that was unique to our profession, but guess what? There's a lot of other businessmen that are terrible businessmen."
Lewis focuses on spreading a message of daily audits trails, internal controls and oversight to fellow business leaders. But he warns, the best procedures will not matter unless the employer pays attention.
"Don't bury your head," he said. "You're the one who's put in position run the business. Do your job.
"If you're a sole business owner, it's definitely your loss. If you're working for a big corporation, it's your job," Lewis added.
Miller and Lewis said many embezzlers will live beyond their means.
Miller said an employee who makes $18,000 annually and drives a $50,000 luxury automobile should prompt some attention. Lewis said taking a "parking lot biopsy" will spot employees who drive nicer automobiles than the boss.
Customers also should be on guard. Investigators said a sewer customer of the Salt Rock Public Service District raised concerns that uncovered $95,286 in missing funds. The customer complained about her check not being processed in a timely manner.
