Case Studies

An enterprising bookkeeper created a fictitious vendor, invoiced the business for non-existent products/services and then approved and paid the invoices. The $175,000 scheme continued for almost two years. It was discovered when the owners noticed some suspicious lifestyle changes – a high end motorcycle and a condo on the coast. The owners investigated and discovered the theft. The perpetrator was terminated but was not prosecuted. The bookkeeper was subsequently hired by another local business where a background check was done prior to hire, but it was “clean”.

Lesson

Liviung beyond means is the number one red flag that an employee may be stealing. If confronted, he will often explain it away by saying he took money from his retirement plan, received an inheritance or big tax refund, or his spouse got a raise.

Terminating an embezzler without prosecuting him means future criminal history checks will be clean. There must be a conviction in order to be reported on a criminal history check.

If most embezzlers are first time offenders (see Fraud Statistics), what’s the point of doing a pre-employment background check? Background and criminal history checks are key elements of the hiring due diligence process. Background checks have limitations but they remain valuable tools for employers. Financial pressures are one of the key reasons employees turn to theft, so consider doing a credit check on key employees with access to money and/or the ability to override controls.