The President and CEO of the Kansas City University of Medicine and Biosciences (KCUMB) was indicted in April 2011 on 24 counts involving embezzlement, tax violations and money laundering.

Karen Peltz, the 63 year old leader of KCUMB allegedly embezzled $1.5 million over 7 years by requesting bogus “leadership stipends” and travel and entertainment reimbursements (a trip to Hawaii and a shopping binge at a Vera Wang boutique.)

Between 2002 and 2009, Peltz allegedly created false executive committee meeting minutes for nonexistent meetings where the only order of business was to authorize  a “leadership stipend” payment to Peltz, typically in $65,000 lump sum payments.

Lesson:

Many high placed organizational leaders are in a position to circumvent internal controls. When establishing transparent and accountable processes, build in checks and balances designed to identify suspicious transactions by organizational leaders. In this case, confirming a large stipend request with a phone call to the secretary of the executive committee might have identified the false bonus authorizations much sooner.

Trust. But verify.