EMBEZZLEMENT

Steven Cesare, Ph.D.

A meticulous business owner in Texas called me the other day to talk about his company’s growth plan, impressive company culture, and implementation of increasingly mature systems capable of taking his organization to the next level. Planning, hard work, and accountability can still pay off boys and girls!

In a conversation with the business owner, he informed me of a dramatic event occurring in real time at his company. It appears his Controller had embezzled company funds, leaving the business owner feeling shocked, underscored by a visceral sense of betrayal, seeking directional clarity.

His company offers an employee loan program to assist staff during short-term difficulties. True to form, the company has a well-defined process, documented by numerous instances of efficiency, simplicity, and accuracy. Procedurally speaking, a needy employee solicits approval from the owner for a specified loan amount across an agreed-upon time frame. Once approved, the employee repays the load according to the stated load terms. In this case, the employee received a loan for $650. When the loan payment date came due, the employee gave the entire repaid lump sum of $650 in cash to his Department Manager, who in turn gave it to the Controller, with the expectation that she would forward it to the Accounting Clerk who would then take the final step by reconciling the loan payment in the company’s accounting system.

The Controller did not forward the cash repayment to the Accounting Clerk.

She took the $650 home.

For weeks.

Consistent with his detailed nature, the owner was reviewing the accounting system one day and found the loan repayment date had expired, lacking reconciliation. Dutifully, the owner re-traced the process by asking the Department Manager about the employee’s loan status. Surprised by the inquiry, the indignant Manager offered fulsome evidence of when/how he hand-delivered the $650 in cash to the Controller.

Hoping for easy resolution, the owner contacted the Accounting Clerk to see why she had not yet reconciled the employee loan process, given that the Department Manager had received the cash payment from the employee some time ago. Intuitively understanding the implications of the owner’s inquiry, the defensive Accounting Clerk averred she never received the money from the Controller.

The owner now had that empty feeling in the pit of his stomach. You know the feeling. The Controller was a long-time, well-paid, trusted member of the company’s leadership team; seemingly above reproach. It was time to talk with her, in a two-on-one format with a neutral Department Manager serving as the passive witness representing a precautionary element to ensure legal objectivity, fairness, and professionalism.

When confronted with the probative evidence, the Controller admitted to taking the $650 home, offering to give it all back to the owner. No worthy excuse was offered by the Controller to explain her embezzlement.

My two cents: The Controller never thought the business owner would take the time to audit the accounting system. And as such, for the measly amount of only $650, she could easily camouflage her duplicitous transaction with an arcane bookkeeping practice and conceal it from him forever. She underestimated him.

The owner terminated the Controller at which time she cried, pleading for forgiveness; to no avail.

As a testament to the strong company culture, the executive team members publicly acknowledged the owner’s ethical leadership, commitment to truth, and admirable role modeling of the investigation process with poise, focus, and integrity, belying personal history, organizational impact, or emotional duress.

As a capitalist, I naturally suggested the business owner conduct a full-scale forensic audit of the company’s accounting system to verify that no other fiscal inconsistencies had taken place.

Wouldn’t you?

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