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A thief among us: What to do when an employee is caught stealing

07-24-2017

Data BreachLisa A. Myers, CPA, CFE, MAFF, FCPA, CGMA

A new tale of white-collar crime seems to emerge in the news as frequently as the posts on the POTUS’s Twitter account.

Discovering that a trusted employee is an in-house thief can not only be expensive – but also it can be heart-wrenching.

For most employers, it is also quite shocking — but perhaps it should not be.

The U.S. Chamber of Commerce reported that 75 percent of all employees steal at least once, and, of these, half steal repeatedly.

Statistics show that employee fraud is more common in companies with fewer than 100 employees.  Most employees who steal are disgruntled, stressed-out, living beyond their means, or struggling with drug and gambling problems.

Here are three tips on what to do if you find an employee with their hand in the till:

  1. Assemble an investigative team

Guiding your company’s investigative team should be an attorney, a forensic accountant, and cybersecurity expert. The goal is for this team to work with upper-level management to quickly quantify the extent of the theft and take steps to ensure against similar occurrences.

If the investigation results in a criminal prosecution or civil litigation, only “expert witnesses” can provide testimony to help the jury decide a “fact in issue.”  Experts must have specialized skill, training and experience.

Enter the forensic accountant, who is a specialist in recovering the proceeds of white-collar crime and testifying.  They have experience in collecting and preparing data, analyzing it and drafting a report.

Bonus Tip: Hire your forensic accountant through your attorney, so attorney-client privilege protects all communications. For example, a school district that directly hires a forensic accountant to look at questionable activities could find the reports public under the Right to Know law.

After theft occurs, employers should also notify their insurance carrier immediately. An accountant can quantify the depth of the loss.

  1. Preserve evidence

As part of the investigation, your forensic accountant will want all paper documents, email, text messages, databases, telephone records and more – all preserved in their native format. As you collect information, keep track of the chain of custody to document how everything was maintained.

Make sure all employees have clear instructions to preserve all electronic and paper records and suspend any routine document destruction practices.

  1. Determine what happened

Ultimately, your forensic accountant will produce a report documenting what occurred and safeguards to implement. This report will not have a legal conclusion – like calling an incident theft or fraud or saying someone is guilty – because that falls squarely within the purview of the criminal courts.

In communicating with staff about a wrongdoer, employers should watch for possible retaliation among innocent employees or whistleblowers.

Responding to theft can take the form of a termination or a voluntary repayment agreement. Employers may compel the wrongdoer to admit to the misappropriation and the amount, and agree not to prosecute if the thief quits and repays.

An ounce of prevention

After the fraud is rooted out, a look at prevention is in order.  A breakdown in controls allows the fraud to creep in. After you implement changes, have a forensic accountant conduct periodic reviews. Routine audits can also deter employees from considering any wrongdoing.

A thorough, experienced forensic accountant can help stop fraud and theft in its tracks, and bring justice to trusting employees and clients who have been betrayed by one of their own.

Lisa A. Myers, CPA, CFE, MAFF, FCPA, CGMA, is a principal at Boyer & Ritter LLC and heads the firm’s forensic, litigation support, and consulting group. She was 2016-2017 president of the Pennsylvania Institute of Certified Public Accountants (PICPA). Contact Myers at (717) 761-7210 or lmyers@cpabr.com.

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