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Employee Embezzled $200k from Property Management Company

--bookkeeper devised over half dozen theft schemes

A California property management company retained Aho & Associates after the company’s owners grew concerned that a long-time bookkeeper might have embezzled company funds.  After examining the company’s books and computer records, we discovered the bookkeeper had—in what might be a textbook case study of the perils of weak internal controls--devised a multiplicity of fraudulent schemes that cost her employer over $200,000.


The most nefarious scheme involved the bookkeeper obtaining her real estate license at the company’s expense and then creating and operating a competing property management company using a similar name.  Capitalizing on the confusion caused by two similar sounding property management companies, the bookkeeper stole proprietary client data from her employer and diverted existing and new clients to her new business.  The bookkeeper also charged her startup expenses to her employer.


The bookkeeper devised a second scheme for stealing company equipment by duplicating equipment purchases.  As an authorized user of her employer’s company credit card, the bookkeeper was responsible for purchasing office equipment.  When buying expensive items, the bookkeeper would buy a second identical product which she then kept for herself.


In one instance, she purchased multiple identical cell phones along with identical service plans.  She hid the additional purchases on the company’s books by attributing the credit card charges as billing errors.  She also created vague and confusing transaction entries in the company’s books that masked the fact that her employer was paying for additional cell phone service plans.


Along with purchasing duplicative business assets, the bookkeeper created a third scheme where she used her employer’s credit card to purchase construction and maintenance materials and contractor labor for her own house, and then expensed the purchases to client accounts of absentee property owners.


The bookkeeper’s fourth scheme involved her repeatedly overbilling her employer for her own health insurance.  Instead of offering an employer sponsored group health plan, the company traditionally paid the premiums of individual plans arranged by each employee, with payments going directly to the insurer.  Because the bookkeeper was in charge of the company’s accounts payables, she arranged for the company to overpay her own insurance premiums.  Once the payments cleared, she requested refunds for the overpayments which were sent directly to her as the owner of the individually contracted health insurance policy.  Because the policy was not an employer sponsored plan, the bookkeeper was able to cleverly rely on HIPAA privacy regulations that blocked the company from inquiring about the overbillings.


In addition to overbilling her health insurance premiums, the bookkeeper overbilled her own hourly wages, often by nearly 100 percent, and took unauthorized bonuses and retirement account contributions.


The bookkeeper concocted a fifth scheme that involved her purchasing a truck from the company.  One of the bookkeeper’s duties was to prepare payment checks for a loan that the company had previously obtained from a particular bank.  When the bookkeeper arranged to buy the truck from the company, she obtained an auto loan from the same bank.  Later, as the bookkeeper prepared payment checks for the company’s loan, she would change the loan account number on the checks to her own loan account number, thereby diverting the payments toward her auto loan.  The bookkeeper also charged thousands of dollars on the company’s credit cards for the truck’s insurance and maintenance.


A sixth scheme by the bookkeeper involved her billing the company’s Home Depot account to purchase construction materials for a marijuana operation on her property.


In the course of perpetrating these systematic frauds, the bookkeeper often used the company credit card and altered checks to pay for a wide range of personal expenses.


When it became apparent to the bookkeeper that the company had become suspicious, she attempted to selectively destroy incriminating computer data, QuickBooks files, rental logs, spreadsheets, and emails.  She even hired a mobile shredding company to destroy physical documents before abruptly resigning.


Despite her efforts, we compiled an extensive volume of evidence and assisted the company in submitting our findings to the police.  We also helped the company create and implement a robust set of internal controls to reduce its risk of future embezzlements.

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