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June 20, 2002
Businesses Beware: Embezzling Employees Abound
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A lecture offered in a Denver, Colorado, suburb explored the ways in which employees can attack a business and how fraud can be prevented. Phil Parrott, chief deputy district attorney of the Denver District Attorney's Office, was the featured speaker at the presentation.
"If you work at a business agency you will experience employee theft," Parrott said at the meeting. "There's no way to stop it but you can try and prevent it."
Businesses across the country lose $400 billion annually from fraud, Parrott told the Montrose Daily Press. The breakdown is about $9 a day per employee.
"Embezzlers use three things - control, trust and friendship," he said. "These are the weapons of an embezzler. They don't carry guns; they carry pens. They are able to explain away mistakes in the books. They are vicious, and they try to kill the business."
In many cases an embezzler is the least likely suspect, Parrott said. From bank tellers to the "hockey mom" that manages the organization's money, embezzlers often put themselves in a position of trust to manage the money and manipulate the books. Sometimes the embezzler will even develop a strong group of supporters that will cover for them unwittingly, he said.
"Looks and charm do not merit trust," he said, telling the story of a handsome certified public accountant who embezzled more than $900,000 over several years from a business start-up. As a result, the company was destroyed.
Small businesses are at a high risk for fraud because there is often little time for the owner to manage the business, Parrott said. Doctors, lawyers and dentists can be targets because of the close-knit relationship that is created among employees. Also, doctors and lawyers do not enter their profession to manage the business, which can lead to fraudulent practices on the part of dishonest employees.
Parrott suggested that a business owner should set the tone from the top of the company with its managers. If the top managers are not honest the effect will trickle down. A business should also have a written code of ethics, he explained.
One of the easiest ways to combat theft is to check the references of all employees, Parrott said. Inexpensive background checks are available over the Internet.
"I can't tell you how many times people are fired or go to jail and do the same crime [again] because nobody did a background check," another presenter said.
If one person is involved in managing a company's business records and accounts Parrott suggested that the owner regularly review the information. He added that the majority of embezzlement, 95 percent, is done through bank accounts and that simply reviewing records can help save a business.
A new concern that businesses and small towns should be prepared for is identity fraud and theft, he said. It is the fastest growing crime nationwide and worldwide. Identity thieves want records with information that can easily be found in the trash or mail.
Identity theft is leaving the big city and moving into the country, Parrott said, cautioning those with rural mailboxes to get locking mailboxes. He added that those businesses that do fall victim to fraud must be vigilant in their prosecution.
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