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Embezzlement vlct v3


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Embezzlement vlct v3

  1. 1. Presentation exclusively for Vermont League of Cities and Towns Mr. Ken Canning, CPCU, Director, Risk Management Services Email: kcanning@vlct.orgOffice: (802) 262-1921Mobile: (802) 373-1806 Fax: (802) 229-2211 Website: By Douglas Babcock, Program Director Mark Renkert, Chair, SMARTVT Christine Sultan, Senior Investigator Michael J. Kipp, CPA, CEO SMARTVT
  2. 2. Business Betrayal Understanding Embezzlement, Prevention and Detection • 2011 Marquet Report on Embezzlement ranked Vermont #1 in the nation for the highest Embezzlement Propensity Factor • U.S. Chamber of Commerce estimates $50+ billion annual lost to Employee theft • 2004 Report to the Nation on Occupational Fraud and Abuse – 6% of annual revenue to Employee theft – Roughly $660 billion annually • Between 60 – 75% percent of employees steal at some point • 1 in 3 businesses bankruptcy are related to employee theft 4/1/2014 © Cygnus Security
  3. 3. Who We Are • Business Management Professionals • CPA’S • Auditors • Bookkeepers • Current / Former Law Enforcement • Trained Embezzlement Investigators 4/1/2014 (c) Cygnus Security
  4. 4. Victims Name Victim Organization Amount Melissa G. King Sandhogs’ Union Local 147 $42,608,232 Arnold Mullen Paul and Phyllis Fireman Foundation $25,000,000 Nancy Saldana Moreno Davis-Lynch Inc. $15,000,000 Donna White John W. Stone Oil Distributor LLC $12,700,000 Charles Antonucci, Sr. US TARP Program $11,200,000 Terry Scott Welch Wachovia Bank $11,200,000 Douglas Ross Zuber Harvard Investments, Inc. $11,000,000 Bernie D. Metz Center Valley Federal Credit Union $8,989,484 Lori Lockman Julian William C. Webb Co. $7,345,050 Chris Orsaris Major Automotive Companies $7,000,000 4/1/2014 © Cygnus Security Marquet International, Ltd. 1 The 2010 Marquet Report On Embezzlement January 11, 2011
  5. 5. Types of Perpetrators • Women are more likely to be major embezzlers than men (62.7% vs. 36.3%). (Cygnus Consulting Note: This depends on the study.) • Men embezzle significantly more than women, on average ($1,811,380 vs. $845,517). • Major embezzlers on average begin their schemes in their early 40s (42.6). • 40 – 49 year olds caused the greatest overall losses while 50 – 59 year olds had the highest average theft by age category ($1.52 million). • By a significant margin, major embezzlers are most likely to be individuals who hold bookkeeping or finance positions within organizations (63.4% of all cases). • Most major embezzlers appear to have been motivated by a desire to live a relatively more lavish lifestyle, rather than driven by financial woes. (2012) 4/1/2014 © Cygnus Security Marquet International, Ltd. 1 The 2010 Marquet Report On Embezzlement January 11, 2011
  6. 6. How do we know? Besides the obvious, money is missing… • Anomalies: Things that make you go, Hmmmm… • Being at work at irregular (unattended) hours • Offers to change the standard way of doing things to personal time, car, resources • Differences between words and actions, pay and lifestyle • Failure to follow, especially a new failure to follow, procedure • Defensiveness • Follow your gut instinct 4/1/2014 © Cygnus Security
  7. 7. Importance of preserving the case • Dollar amount lost determines felony / misdemeanor for most crimes –Not embezzlement • Evidence on computer can be easily erased – Forensic re-creation is possible but takes your computer system out of service for a long time • Direct evidence is always better than circumstantial 4/1/2014 © Cygnus Security
  8. 8. How do we prevent this? – Hiring Practices • Learn interview techniques – – Search “job interview” websites – Background checks • • • • DMV license checks • Court houses – civil and criminal records are public records 4/1/2014 © Cygnus Security
  9. 9. Organizational Policies Decentralize, no one person should have control of a closed system • Diversify, no one person should be the lynch-pin, or pigeon-holed • Accounts receivable, accounts payable, and signing checks are separate functions • Two party checks • Petty cash disbursements are reconciled by someone other than those who have access to the cashbox • Video systems, more than just your “IT person” must have access and be able to conduct audits 4/1/2014 © Cygnus Security
  10. 10. Organizational Policies • Education in understanding the importance of trade secrets – Even small bits of information can hurt if leaked • pricing information • wholesale cost information • Customer lists • Recipes – Programs, technologies, strategies • Mandatory vacations with job coverage • Have an audit system, and use it more than just when you think there is a problem 4/1/2014 © Cygnus Security
  11. 11. Stewardship – Lead by example – Create a positive work environment • Develop controls that allow for trust and team spirit • Have growth opportunities built in – Consider total cost • Lower paid employees are more likely to steal or be less responsible • Paying for related training breeds loyalty • Intangible or side benefits – Allowing employees to use shop after hours with their own materials – Daycare on site or contracted with local provider to provide discount – Hold people accountable Prevent this from happening again 4/1/2014 © Cygnus Security