This document discusses embezzlement, including statistics showing that Vermont has the highest embezzlement rate in the US. It provides examples of major embezzlement cases and profiles of common embezzler demographics. The presentation then offers tips for prevention, including thorough hiring practices, organizational policies like separation of financial duties, controls on access to funds and information, mandatory vacations, and audits. It stresses the importance of quickly preserving evidence and suggests creating a positive work environment through training, opportunities, and fair compensation to promote loyalty and accountability.

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: http://www.vlct.org
By Douglas Babcock, Program Director
Mark Renkert, Chair, SMARTVT
Christine Sultan, Senior Investigator
Michael J. Kipp, CPA, CEO SMARTVT

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. Who We Are
• Business Management Professionals
• CPA’S
• Auditors
• Bookkeepers
• Current / Former Law Enforcement
• Trained Embezzlement Investigators
4/1/2014 (c) Cygnus Security

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
www.marquetinternational.com January 11, 2011

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
www.marquetinternational.com January 11, 2011

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
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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
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8. How do we prevent this?
– Hiring Practices
• Learn interview techniques
– http://www.crfonline.org/orc/ca/ca-14.html
– Search “job interview” websites
– Background checks
• http://vcic.vermont.gov/record_checks
• http://vcic.vermont.gov/record_checks/vermont
• https://secure.vermont.gov/DPS/criminalrecords/
• DMV license checks
• Court houses – civil and criminal records are public
records
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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
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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
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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