The Expert Podcast

• Discuss the lesser-known but serious issue of corporate embezzlement.
• Example case: A Henderson construction company was swindled out of half a million dollars by a bookkeeper who wrote fake checks and created fictitious companies.
• Key takeaways from the case:
  • The bookkeeper had a criminal record but was hired without a thorough background check.
  • The trusted employee who committed the fraud was involved in the company for years, making the betrayal even harder for the owner to believe.
  • The financial loss was significant, but the bigger challenge was replacing the trusted employee, who had access to critical business information.
  • The fraud scheme involved common tactics, such as creating fake companies or adding ghost employees to the payroll.

• Honest employees will welcome audits and scrutiny. If an employee resists checks or asks why you don’t trust them, it’s a red flag.
• Implementing regular audits and random checks on financial transactions can help prevent embezzlement.
• Understanding the “fraud triangle” is crucial:
  1. Opportunity: The person has the ability to steal.
  2. Need: A financial crisis may push them toward committing fraud.
  3. Justification: The individual finds a way to justify their actions in their mind.

• Cross-check financial transactions to prevent fraud, such as auditing the books or randomly reviewing checks.
• Foster a good corporate culture where employees feel validated and don’t have to justify stealing.
• Break up duties to limit opportunities for fraud, like having multiple people open the mail to spot discrepancies.

• Corporate embezzlement may not be common but can have devastating effects on a company.
• Preventative measures like cross-checking, auditing, and fostering a supportive work culture can reduce the risk of fraud.