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This article by Kathleen McGinn Spring was prepared for the July 17, 2002 edition of U.S. 1 Newspaper. All rights reserved.

Even the Best Employee Can Be Dangerous

The office manager for a busy group of surgeons parked

her Jaguar two blocks from work, where her employers and co-workers

wouldn’t see it. At her post for 20 years, she wielded power over

the rest of the office staff, earning their enmity even as she basked

in the surgeons’ trust. So dependable was she, so very good at her

job, that even after the doctors discovered that she was stealing

from them, they did not want to fire her.

The office manager — let’s call her Madge — is the typical

thieving employee. "These are not your derelict people," Kevin

Hart, an attorney with a specialty in employee theft, says of the

office manager and her ilk. "These are people who are good at

their jobs, who are trusted."

The better the employee, says Hart, the bigger the risk. No company

is immune from these inside saboteurs. "Medical practices, auto

repair shops, banks, you name it," says Hart. Small companies,

big companies — he has seen employee theft in businesses of all

sizes. Often it is someone like Madge, someone who has complete control

over the books, who is the thief. But he has seen cases where the

thief was in sales, top management, or the warehouse.

"Studies show that one-third of all small business failures occur

because of employee theft," says Hart. He gives a free seminar

on the subject on Wednesday, July 24, at 6 p.m. at the offices of

Stark & Stark, where he has been in practice since 1980. Also speaking

is Nicholas L. Truglie, an accountant who has served as an expert

in matters involving white collar crime. Call 609-896-9060 to register.

While Madge is typical in her competence and in her position of confidence,

Hart says her case had some interesting twists. Would her theft —

which amounted to $1.5 million over 10 years — have been uncovered

sooner if the surgeons had brought in an outside accountant?

"They did," Hart says with a chuckle. "That was a wild

one." Turns out that the practice had an accountant, who came

in once a month to check the books. The problem was that he and Madge

were having an affair. Not only did she use the practice’s funds to

purchase a Jaguar for herself, but she also used the surgeons’ money

to put the accountant behind the wheel of a Jaguar of his own.

Madge was tripped up by co-workers, all of whom heartily hated her.

During a lunch break, she left her utility bill lying next to the

company checkbook, from which she was paying it. Spying the evidence,

a co-worker made copies of the bill and the check and mailed them

anonymously to the surgeons.

Their initial response, says Hart, was to give her a warning, keep

her on, and forget about the incident. This, too, he says, is typical.

"Clients ask me if they’ll get their money back," he says.

The answer generally is no. Most thieves quickly spend their ill-gotten

gains. Employers who sue will get a bill from their attorney, and

will spend time on the case, but often will not see their money again.

Despite a typical reluctance to proceed, engendered in part by an

equally typical fear of looking like fools, the surgeons, at Hart’s

urging, did dig deeper. A forensic accountant came in, and discovered

a bank account Madge had set up. The scale of the theft was far greater

than the surgeons initially thought, and they were able to recoup

their losses by quickly seizing the two Jags — and also Madge’s

mortgage-free shore house — and by suing the bank that cashed

her checks for years without adequately investigating the legitimacy

of her account.

Employers who don’t want repeat theft would do well to prosecute any

Madges they uncover, Hart says. Failing to do so sends a strong signal

to other employees that theft will be tolerated. His other strategies

for curtailing employee theft include:

Don’t hire a thief. "Out of 10 employees, one will

be an out-and-out thief," says Hart. This person will arrive on

the job looking for opportunities. He is a natural thief, and no amount

of fair treatment will turn him into a law abiding citizen. The only

protection against these people? "Don’t hire them," says Hart.

Be diligent about doing background checks and checking references.

Screen the thieves out.

Don’t create a thief. While one out of 10 employees may

have larcenous tendencies, another one or two employees are statistically

likely to be angels, says Hart. Leave large bills around on counters,

and they will hurry them back to the safe. These folks will not even

use a company pencil to write down a personal message.

In the middle are the six or seven employees who could go either way.

Madge fell into this group. The first time she took money, she fully

expected to return it. This, says Hart, is typical. Soon she realized

she didn’t have to put the money back, because no one missed it. At

that point, she decided to dip into the company funds again. More

vigilance on the part of her employers might have halted repeated

trips to the till.

Set the values bar high. One way to keep those could-go-either-way

employees straight is to instill honest values throughout the organization.

Don’t boast of cheating clients and expect employees to follow a higher

road. This is especially important now that a number of corporate

leaders stand accused of malfeasance. An already cynical workforce

can reasonably be expected to react to the scandals by loosening their

own moral standards.

Treat employees fairly. "It’s not about money,"

says Hart. The motivation for theft has nothing to do with salary,

but everything to do with respect. Basically honest employees, who

believe that they are being treated fairly and that their complaints

are heard, are unlikely to look for ways to steal from their employers.

Separate financial functions. Accounts receivable and

accounts payable should not be under the control of the same person.

Giving both responsibilities to one person makes it extremely easy

for him to steal from the company.

Use random audits. Despite Madge’s liaison with the company

accountant, having an outside accountant is a good idea. An even better

idea is to have that accountant pop in unexpectedly. Given a little

notice, crooked employees often are smart enough to cover their tracks.

Insist on vacations. Employees who are stealing from their

company do not want anyone else sitting in their office chairs. Fearing

exposure from prying eyes, they often will work year ’round, taking

no time off at all. Insisting that everyone in the office take a vacation

is a good way uncover any wrongdoing.

Avoid repeat incidents. Employers who let thieving employees

go quietly are only increasing the chances that someone else’s recycled

thief will land on their doorstep. Prosecution is time consuming,

but Hart says it’s the right thing to do every time.

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