Business Owners Get Burned by Sticky Fingers

Posted on March 4, 2010

0


By SARAH E. NEEDLEMAN
Entrepreneur Barbara Wein Allen used to have so much faith in her employees that she would loan them company funds to buy homes, cars and other big expenses. But that changed in 2007 when she determined one had stolen an estimated $250,000 from her firm, Multi-Point Communications Inc., a provider of Web- and audio-conferencing services in Birmingham, Ala.

“I trusted her implicitly,” says Ms. Wein Allen of the alleged thief, an employee who had worked for Multi-Point for more than seven years in a senior finance position.

Many small-business owners say they inherently treat their employees like family and therefore do without strict internal controls, security cameras or other defensive tactics. But fraud experts say the opportunity to steal with ease is simply too tempting for some workers to ignore, especially in bad economies.

“More times than not, it’s the most trusted person in the office who’s perpetrating the fraud,” says James D. Ratley, president of the Association of Certified Fraud Examiners. The Austin, Texas, trade group estimates that employee frauds at businesses with fewer than 100 employees cause a median loss of $200,000 — $57,000 more than the median losses that larger organizations suffer.

Even so, corrupt employees can in some cases go unnoticed for years. Ms. Wein Allen says she only discovered her business had been robbed when the alleged perpetrator took a vacation. A review of the firm’s bookkeeping system showed several dubious expenses had recently been filed and forensic accountants later provided further confirmation of fraud dating back to when the purported thief was hired.

Ms. Wein Allen says alarm bells had never gone off because the money was stolen in small increments and the company, which employs 50 workers, had nevertheless been performing well. “Business was just that much better and we didn’t realize it,” she says.

Of course, instances of fraud can also be spotted instantly. It’s finding out who’s responsible – or proving a suspect guilty – that can delay or prevent owners from taking swift action. [more]

Advertisements