• Trusted Employee Or Secret Embezzler?
  • November 6, 2003 | Author: Talar M. Herculian
  • Law Firm: Fisher & Phillips LLP - Irvine Office
  • Your bookkeeper, "Anna," has been with you for years. She is loyal, hardworking and an asset to the company. She hardly ever takes a vacation and you trust her to take care of all your bookkeeping. You don't know what you would do without Anna. What you also don't know is that Anna's car payments,mortgage payments and credit card payments are all coming from your bottom line - literally!

    Employees embezzle money from their employer for various reasons. Some are short on money and believe that they are just "borrowing." Some think that it is not stealing because they really deserve to be paid more. Others just do it because they can. Whatever the reason for it, the result is the same - financial losses that can be substantial.

    There are several ways that an employer can reduce the risk of becoming a victim of an employee embezzler. First, if employees are treated fairly, it makes it more difficult for them to justify their actions. Consistently applied policies and management training on how to make important personnel decisions can reduce employees' perception of unfairness. Second, be vigilant for signs of potential embezzlement. Extreme financial pressures and signs of drug and/or alcohol abuse are among the factors that increase an employee's motivation to embezzle. Third, ensure that the employee who pays company bills or deposits company receipts is not the same employee responsible for balancing the bank statements. Finally, make sure that all employees in positions at risk for embezzlement take a vacation and have another individual perform their duties in their absence. This will provide for an opportunity to discover unusual transactions. Sometimes, however, the embezzler can sneak past the most vigilant employer. In that case, the employer is not left without recourse and can: (1) file criminal charges, (2) file a civil lawsuit against the employee, and/or (3) submit the loss to its insurance carrier. While filing criminal charges against the employee may lead to the District Attorney's prosecution and potential restitution of stolen funds, the employer typically must present the police or District Attorney with a thoroughly documented file in order to convince them to prosecute. In addition, the employee may often get probation instead of jail time and be permitted to pay restitution in small increments over many years.

    By filing a civil lawsuit against the employee, the employer has an opportunity to recover the stolen money, in addition to setting an example for other employees. Moreover, given the inherently fraudulent nature of the act, punitive damages are a real possibility and may be awarded under the proper circumstances. Depending on the situation, the employer may also be entitled to injunctive relief, including the possibility of freezing the employee's assets, if the stolen funds can be traced. Finally, if the employer has fidelity insurance, it can submit a claim to its insurance carrier for some relief, but there may be a substantial deductible. Every employer should make an effort to combat embezzlement, either before it happens or after the fact. Ignoring the possibility of embezzlement is simply an invitation for the "Annas" in your workforce to continue "borrowing" money.