It’s hard to believe a trusted employee would steal, let alone steal from three different organizations. A Pocatello nonprofit was shocked to learn that one of its longtime employees stole more than $100,000 from a program that held funds in trust for people who have trouble managing their finances. The second shockwave came when they learned the employee had two previous embezzlement convictions in Idaho!
Leslie Briggs had the authority to write checks from her employer’s trust accounts to pay rent and other personal bills for clients. Instead of paying their bills, she used $100,000 of client funds to pay personal expenses: her credit card bills, insurance and a home loan.
Her employer was tasked with managing trust funds. It’s bad enough to have someone steal your money, but to steal someone else’s money for which you are responsible – that’s a major blow to an established organization’s reputation!
Trusts have become increasingly popular tools for protecting people who can’t protect themselves. New businesses are cropping up to manage personal funds for the elderly, the homeless and others who have difficulty managing their finances. In other cases, courts appoint guardians and conservators to help those who can no longer manage their affairs.
There is no shortage of vulnerable people who need help; the magical combination of money and vulnerability attracts morally ambiguous helpers like flies to honey. Here are some unfortunate myths that offer experienced and novice embezzlers alike a virtual license to steal:
Myth 1: Background and criminal history checks are unnecessary and cost prohibitive for nonprofit organizations and small employers.
Reality: Briggs’ employer could have avoided this tragedy with a pre-employment background and criminal history check for around $50 – less than a day’s pay. With two strikes against her, a criminal history check at the state level would have sent a giant red flag billowing over Briggs’ employment application, preventing her from being hired for a job where she would be granted access to other people’s money.
Myth 2: Employee dishonesty insurance coverage is a waste of money.
Reality: Once stolen money leaves the office, it’s gone. Long gone. It vanishes in Vegas, buys happy hour rounds, pays for daily dinner for a family of four, finances a cruise, and brings home a new 50-inch plasma television. It finances addictions. It doesn’t go into a savings account awaiting a restitution order.
Even if the victim eventually gets a restitution order, there is little hope an ex-felon will earn enough to pay back even a pittance of the amount taken. Insurance coverage is often the only hope of recovering anything.
Myth 3: Funds held in trust are secure.
Reality: Trust funds are easy marks to embezzlers. Why? Because that’s where the money is. Wherever there is money and lax oversight, there is an opportunity to steal. Just ask Briggs; she siphoned off money for two years before anyone noticed. Without some sort of oversight built into the process, trust funds are one of the easiest places for embezzlers to get a fix for their addiction du jour.
Briggs is now serving a 21-month sentence in a federal prison. Her former employer recouped some of the stolen money through insurance coverage. But what about all the other trust funds being managed in small organizations or through the courts? They need to set up checks and balances, and to build in oversight procedures to assure transparency in all their financial processes. Pre-employment screening and insurance coverage are important tools that help with prevention and recovery. But regular oversight is the best practice in building transparent financial processes.
Trust, but verify.
Denise McClure, CPA, CFE, is a forensic accountant and the owner of Averti Solutions LLC in Boise. She is a frequent author, speaker and trainer on building transparent and accountable financial processes. For more information, visit AvertiSolutions.com or e-mail Denise@AvertiSolutions.com.