Embezzlement Warning Signs
Created by FindLaw's team of legal writers and editors | Last reviewed June 20, 2016
Employee theft is something that no business owner wants to experience. Unfortunately, the culprit is often a trusted employee who has never complained about working overtime and without vacations. Under the law, embezzlement is essentially a theft and can be prosecuted as either a misdemeanor or a felony.
Sound complicated? Here are a few concrete examples to help explain employee theft:
- Overtime: If an employee falsifies his or her time card, such as claiming to have worked overtime when he or she did not, that is embezzlement because the employee falsified his or her time record.
- Siphoning Profits/Cash Embezzlement: This typically happens in a customer service-related business. An employee will take a customer's cash, but never enter the transaction into the register, hence there isn't a paper trail. The cash goes into the pocket of the employee and the business is none the wiser. An attorney who misuses client funds for his or her own personal use can also be just as guilty of embezzlement.
The Girl Scout Case
Yes, even Girl Scouts can be guilty of embezzlement. In 2011, Christa Utt was a Girl Scout troop leader in Oklahoma. Instead of taking the cookies, she decided to keep the profits from the annual cookie sales. Troop leaders became aware of her activities, to the tune of $5,300 and Utt was ultimately convicted.
If you notice a combination of the following warning signs, it will be well worth your while to start investigating.
- There is an unusual drop in your profits.
- Your records are disorganized.
- There are unexplained changes in your accounting records.
- There are unusually large or numerous credits to a particular customer.
- An employee works late, on the weekends and refuses to take vacations.
- An employee's standard of living changes to a degree that is inexplicable based on her salary.
- Documents are missing.
- Bank deposits delayed.
- Customers are complaining about having already paid a bill.
- There are too many increases in past due accounts receivable.
- Check amounts are altered.
- Duplicate payments are made.
- Bank reconciliations have too many outstanding checks.
- Too many payments are being made to individuals with the same name or address.
- Vendors' addresses are the same as an employee's address.
- Bank reconciliations are late.
- Accounts receivable and payable don't balance.
- The petty cash fund is disappearing.
There are several safeguards you can put into place to help ensure your business isn't becoming the victim of employee theft. You can conduct periodic and unannounced audits, perform background checks of all new employees, and keeping paper checks in a secure, locked area are just a few ways you can protect your company.
Getting Legal Help
If you suspect an employee of embezzlement, there are a number of tools at your disposal, including contacting law enforcement. However, a good first step is to speak to an experienced business and commercial law attorney who can help guide you through the often difficult process. Investigating the situation before making accusations is in everyone's best interests.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.