After An Employee Embezzles…

Ways Fraud is Discovered

Tips for preventing fraud, as well as, the top ways fraud is typically detected.

Embezzlement has been the number one financial crime for the past 30 years.  If an employee embezzles, then the employer has already lost. Of those losses the employer suffers a financial loss, a loss of trust, and additional revenue loss from litigation matters that follow the embezzlement. To avoid embezzlement embarrassment, employers have to move quickly, as the financial impact will likely have a greater effect than was first suspected. The employer has to stop the damage quickly and conduct a fraud examination.  If stockholders are involved then the employer has the responsibility to investigate and recover the losses. If you have an embezzlement issue come up, follow these three steps in order:

Contact Legal Counsel and Your Insurer

Contacting legal counsel is an important first step because sometimes the employee’s rights can be violated even though they were the one who committed the crime. Contact your insurer also because failure to do so could void potential losses from being covered.

Secure Data

A fraud auditor will know what information and data to secure and back up. A good start for an employer is to do the following:

  • Create a mirrored hard drive of the employee computer
  • Secure electronic backups in the network and local drives of original data
  • Secure CDs, disks, thumb drives, etc.
  • Search the offending employee’s desk and office for any sensitive information (review handbook policies with attorney first)

Deal with the Employee

Management should follow their legal counsel’s advice in dealing with the employee as swiftly as possible.

Remember, fraudulent activities are easier to prevent than to detect. Make sure you have a plan in place, and know what to do should fraud occur in your business.

To learn more about preventing fraud in your business, contact Kit Powell

Kit Powell
Certified Fraud Examiner

In The News: Former Assistant Principal Pleads Guilty to Embezzlement

Segregate Duties

Simply segregating duties between various team members can help reduce the chance of fraud occurring.

According to an article in theDetroit Free Press, Samuel Craig, a former assistant principal, was convicted of embezzling more than $36,000 from his union.

Craig was able to embezzle the money in his role as treasurer of his school’s union. He used blank, pre-signed checks, which officials believed would be used to pay bills, for his own use. Additionally, Craig opened a debit card linked to union funds and authorized electronic fund transfers to his personal bank account.

This story highlights the importance of implementing procedures to prevent fraud. Officials should review financial statements regularly, rotate financial duties if possible, and segregate duties to prevent one person from having too much power.

To learn more about fraud in business, read:
Small Businesses & Fraud – What you need to know
Fraud Happens. Learn the Facts.

Source: Former Highland Park assistant principal pleads guilty to embezzling from union by Melanie Scott Dorsey

Don’t Become a Victim of Employee Embezzlement

The professionals at H&S have found that when there is a downturn in the economy there is typically an upturn in white-collar crime. There are many things you can do to prevent fraud from happening in your organization, such as instituting a system of checks and balances.

A simple fraud risk assessment — performed by Kit Powell, Certified Fraud Examiner — will give you a detailed report with recommendations on how to strengthen internal controls to prevent fraudulent activity. Contact Kit today to schedule an appointment for your free fraud risk assessment via phone at 231.924.8035 or email at