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Business theft and embezzlement

A Problem You May Not Know You Have


Employee embezzlement – whether via billing fraud, bribery and corruption, check tampering, skimming, theft of inventory, or expense reimbursement fraud – has become a rampant and costly problem for small businesses. Recent data indicate that nearly 32 percent of companies having fewer than 100 employees suffered a median loss of $147,000 as a result of employee fraud, a significantly higher rate than that of larger companies.

When confronted with fraud, the strongest course of action is to investigate the malfeasance diligently and pursue criminal and civil sanctions against the employee. Unfortunately, most small business fraud victims do not report the crime due to embarrassment, privacy concerns, or as a concession in negotiating a restitution agreement.

As a result, the official number of victims and the amount of losses are believed to be significantly understated. Under-reporting also means many perpetrators are never prosecuted, allowing them to jump to other employers who might otherwise discover their criminal behavior through a pre-hire background check.

Profile of a Perpetrator

Perhaps the most shocking aspect of small business fraud is that most perpetrators had been with their companies between one and five years, were college educated, and were employed in the accounting area. Most were first-time offenders.  In short, perpetrators are usually highly trusted, respected employees. They’re often driven to steal by opportunity, motivation, and rationalization.

  • Opportunity, for example, might consist of unsupervised access to information, passwords, register tills, or blank checks. This explains why perpetrators often occupy positions in the accounting or bookkeeping departments.

  • Motivation is best understood as an incentive or pressure compelling the employee to steal. Examples might be a gambling addiction, compulsive spending, onerous child support obligations, or large medical bills or other insurmountable family expenses.

  • Rationalization is the justification an embezzler will make when he attempts to harmonize his illegal act with his personal code of ethics. Red flags can include comments or actions by the employee that project an ends-justify-the-means attitude, or where the employee has a heightened or misplaced sense of entitlement.

We can help

If you suspect your business may have fallen victim to an embezzlement or theft, we can help. Working in tandem with your company's attorneys and trusted key personnel, we can conduct a fraud investigation that will determine the extent of the fraud, create an evidence package, and issue a findings report that can then be acted upon internally or referred to law enforcement.

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